THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
------x : In re : Chapter 11 : NEWPAGE CORPORATION, et al., : Case No. 11-12804 (KG) : Debtors.1 : Jointly Administered : ------x
PROPOSED DISCLOSURE STATEMENT FOR DEBTORS’ SECOND AMENDED JOINT CHAPTER 11 PLAN
THIS IS NOT A SOLICITATION OF ACCEPTANCES OR REJECTIONS OF ANY CHAPTER 11 PLAN DESCRIBED HEREIN. ACCEPTANCES OR REJECTIONS OF A CHAPTER 11 PLAN MAY NOT BE SOLICITED UNTIL A DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT. THIS DISCLOSURE STATEMENT HAS BEEN SUBMITTED FOR BANKRUPTCY COURT APPROVAL BUT HAS NOT BEEN APPROVED BY THE BANKRUPTCY COURT.
THE DEBTORS RESERVE THE RIGHT TO AMEND OR SUPPLEMENT THIS PROPOSED DISCLOSURE STATEMENT AT OR BEFORE THE HEARING TO CONSIDER APPROVAL OF THIS DISCLOSURE STATEMENT.2
PROSKAUER ROSE LLP PACHULSKI STANG ZIEHL & JONES Eleven Times Square 919 N. Market Street, 17th Floor New York, New York 10036-8299 P.O. Box 8705 Tel: 212.969.3000 Wilmington, Delaware 19899-8705 (Courier Fax: 212.969.2900 19801) Tel: 302.652.4100
Co-Attorneys for the Debtors Co-Attorneys for the Debtors and Debtors in Possession and Debtors in Possession
Dated: November 5, 2012
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, as applicable, are: Chillicothe Paper Inc. (6154), Escanaba Paper Company (5598), Luke Paper Company (6265), NewPage Canadian Sales LLC (5384), NewPage Consolidated Papers Inc. (8330), NewPage Corporation (6156), NewPage Energy Services LLC (1838), NewPage Group Inc. (2465), NewPage Holding Corporation (6158), NewPage Port Hawkesbury Holding LLC (8330), NewPage Wisconsin System Inc. (3332), Rumford Paper Company (0427), Upland Resources, Inc. (2996), and Wickliffe Paper Company LLC (8293). The Debtors’ corporate headquarters is located at 8540 Gander Creek Drive, Miamisburg, OH 45342.
2 This text box will be removed upon Bankruptcy Court approval of the Disclosure Statement. IMPORTANT INFORMATION
THE BANKRUPTCY CODE REQUIRES THAT THE PARTY PROPOSING A CHAPTER 11 PLAN PREPARE AND FILE A DOCUMENT WITH THE BANKRUPTCY COURT CALLED A “DISCLOSURE STATEMENT.” THIS DOCUMENT IS THE DISCLOSURE STATEMENT FOR THE PLAN DESCRIBED HEREIN. THIS DISCLOSURE STATEMENT INCLUDES CERTAIN EXHIBITS, EACH OF WHICH ARE INCORPORATED INTO THIS DISCLOSURE STATEMENT AS IF SET FORTH IN FULL HEREIN.
[THE BANKRUPTCY COURT HAS REVIEWED THIS DISCLOSURE STATEMENT, AND HAS DETERMINED THAT IT CONTAINS ADEQUATE INFORMATION PURSUANT TO SECTION 1125(b) OF THE BANKRUPTCY CODE AND MAY BE SENT TO YOU TO SOLICIT YOUR VOTE ON THE PLAN.]3
ALL HOLDERS OF CLAIMS ENTITLED TO VOTE ON THE PLAN ARE ENCOURAGED TO READ AND CAREFULLY CONSIDER THIS ENTIRE DISCLOSURE STATEMENT, INCLUDING, BUT NOT LIMITED TO, THE RISK FACTORS CITED HEREIN AND THE PLAN ATTACHED HERETO, BEFORE VOTING TO ACCEPT OR REJECT THE PLAN. SEE SECTION VII “RISK FACTORS AND OTHER FACTORS TO BE CONSIDERED.”
THIS DISCLOSURE STATEMENT CONTAINS STATEMENTS THAT ARE “FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF CERTAIN FEDERAL SECURITIES LAWS. ALL STATEMENTS CONTAINED HEREIN THAT ARE NOT CLEARLY HISTORICAL IN NATURE ARE FORWARD-LOOKING AND THE WORDS “ANTICIPATE,” “BELIEVE,” “COULD,” “EXPECT,” “ESTIMATE,” “FORECAST,” “INTEND,” “POTENTIAL,” “PROJECT,” “TARGET,” AND SIMILAR EXPRESSIONS ARE GENERALLY INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. ALL STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT, OTHER THAN STATEMENTS OF HISTORICAL FACT, INCLUDING STATEMENTS ABOUT THE DEBTORS’ PLANS, STRATEGIES, PROSPECTS, AND EXPECTATIONS REGARDING FUTURE EVENTS AND THE DEBTORS’ FINANCIAL PERFORMANCE, ARE FORWARD- LOOKING STATEMENTS THAT INVOLVE CERTAIN RISKS AND UNCERTAINTIES. WHILE THESE STATEMENTS REPRESENT THE DEBTORS’ CURRENT JUDGMENT ON WHAT THE FUTURE MAY HOLD, AND THE DEBTORS BELIEVE THESE JUDGMENTS ARE REASONABLE UNDER THE CIRCUMSTANCES, THESE STATEMENTS ARE NOT GUARANTEES OF ANY EVENTS OR FINANCIAL RESULTS, AND THE DEBTORS’ ACTUAL RESULTS MAY DIFFER MATERIALLY. THE INFORMATION INCLUDED IN THIS DISCLOSURE STATEMENT, INCLUDING THE FORWARD-LOOKING STATEMENTS, PROJECTIONS OF CERTAIN FINANCIAL DATA FOLLOWING CONSUMMATION OF THE PLAN, AND THE LIQUIDATION ANALYSIS, ARE MADE ONLY AS OF THE DATE OF THIS DISCLOSURE STATEMENT. THE DEBTORS UNDERTAKE NO OBLIGATION TO UPDATE PUBLICLY THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT, INCLUDING ANY FORWARD-LOOKING STATEMENTS, TO REFLECT NEW INFORMATION, FUTURE EVENTS OR OTHERWISE, EXCEPT AS REQUIRED BY LAW. ALL FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, MANY OF WHICH ARE BEYOND THE DEBTORS’ CONTROL, WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE, OR ACHIEVEMENTS TO DIFFER MATERIALLY FROM ANTICIPATED RESULTS, PERFORMANCE, OR ACHIEVEMENTS. THE DEBTORS
3 To be added only after Bankruptcy Court approval of the Disclosure Statement.
ii CANNOT GUARANTEE THAT PROJECTED RESULTS OR EVENTS WILL BE ACHIEVED. FACTORS THAT COULD CAUSE THE DEBTORS’ ACTUAL RESULTS TO BE MATERIALLY DIFFERENT FROM THE DEBTORS’ EXPECTATIONS INCLUDE THOSE FACTORS DESCRIBED HEREIN UNDER SECTION VII “RISK FACTORS AND OTHER FACTORS TO BE CONSIDERED” AND IN DOCUMENTS INCORPORATED HEREIN BY REFERENCE. THE DEBTORS URGE HOLDERS OF CLAIMS AND EQUITY INTERESTS TO CONSIDER THESE FACTORS CAREFULLY IN EVALUATING THE FORWARD-LOOKING STATEMENTS AND NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS.
THE STATEMENTS AND OTHER INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT WERE MADE AS OF THE DATE SET FORTH ON THE COVER PAGE, UNLESS OTHERWISE SPECIFIED. HOLDERS OF CLAIMS AND EQUITY INTERESTS REVIEWING THIS DISCLOSURE STATEMENT SHOULD NOT INFER THAT THE FACTS SET FORTH HEREIN ARE UNCHANGED SINCE THE DATE SET FORTH ON THE COVER PAGE HEREOF. HOLDERS OF CLAIMS ENTITLED TO VOTE ON THE PLAN MUST RELY ON THEIR OWN EVALUATION OF THE DEBTORS AND THEIR OWN ANALYSIS OF THE TERMS OF THE PLAN IN DECIDING WHETHER TO ACCEPT OR REJECT THE PLAN.
THE DEBTORS ARE PROVIDING THE INFORMATION IN THIS DISCLOSURE STATEMENT SOLELY FOR PURPOSES OF SOLICITING HOLDERS OF CLAIMS ENTITLED TO VOTE TO ACCEPT OR REJECT THE PLAN. NOTHING IN THIS DISCLOSURE STATEMENT MAY BE USED BY ANY PERSON FOR ANY OTHER PURPOSE. THE CONTENTS OF THIS DISCLOSURE STATEMENT SHALL NOT BE DEEMED AS PROVIDING ANY LEGAL, FINANCIAL, SECURITIES, TAX, BUSINESS, OR OTHER ADVICE. THE DEBTORS URGE EACH HOLDER OF A CLAIM OR INTEREST TO CONSULT WITH THEIR OWN ADVISORS WITH RESPECT TO ANY SUCH LEGAL, FINANCIAL, SECURITIES, TAX, BUSINESS, OR OTHER ADVICE IN REVIEWING THIS DISCLOSURE STATEMENT AND THE PLAN.
THE DEBTORS HAVE NOT AUTHORIZED ANY PARTY TO GIVE ANY INFORMATION CONCERNING THE PLAN OR THE DEBTORS, OR THE VALUE OF THEIR PROPERTY, OTHER THAN AS SET FORTH IN THIS DISCLOSURE STATEMENT. HOLDERS OF CLAIMS AND EQUITY INTERESTS SHOULD NOT RELY UPON ANY OTHER INFORMATION, REPRESENTATIONS, OR INDUCEMENTS MADE TO OBTAIN ACCEPTANCE OR REJECTION OF THE PLAN.
THIS DISCLOSURE STATEMENT AND THE BANKRUPTCY COURT’S APPROVAL OF THE ADEQUACY OF THIS DISCLOSURE STATEMENT DO NOT CONSTITUTE, AND MAY NOT BE CONSTRUED AS, AN ADMISSION OF FACT, LIABILITY, STIPULATION, OR WAIVER. FURTHER, THE BANKRUPTCY COURT’S APPROVAL OF THE ADEQUACY OF THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE THE BANKRUPTCY COURT’S CONFIRMATION OF THE PLAN.
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY FOREIGN OR STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES DESCRIBED HEREIN OR THIS DISCLOSURE STATEMENT OR OPINED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN. ANY REPRESENTATION TO THE CONTRARY
iii MAY BE A CRIMINAL OFFENSE.
NONE OF THE SECURITIES TO BE ISSUED TO HOLDERS OF ALLOWED CLAIMS PURSUANT TO THE PLAN WILL HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY “BLUE SKY” LAWS, AND SUCH SECURITIES WILL BE ISSUED IN RELIANCE UPON EXEMPTIONS FROM THE SECURITIES ACT AND EQUIVALENT STATE LAWS.
THE DEBTORS RECOMMEND POTENTIAL RECIPIENTS OF NEW HOLDCO COMMON STOCK TO BE ISSUED PURSUANT TO THE PLAN CONSULT THEIR OWN ADVISORS CONCERNING ANY RESTRICTIONS ON HOLDING OR THE TRANSFERABILITY OF SUCH SECURITIES, OR ANY OTHER POTENTIAL CONSEQUENCE OF HOLDING SUCH SECURITIES.
THIS DISCLOSURE STATEMENT SUMMARIZES CERTAIN PROVISIONS OF THE PLAN, CERTAIN OTHER DOCUMENTS, AND CERTAIN FINANCIAL INFORMATION RELATING TO THE DEBTORS. THE DEBTORS BELIEVE THESE SUMMARIES ARE FAIR AND ACCURATE. IN THE EVENT OF ANY INCONSISTENCY OR DISCREPANCY BETWEEN A DESCRIPTION CONTAINED IN THIS DISCLOSURE STATEMENT AND THE TERMS AND PROVISIONS OF THE PLAN OR THE OTHER DOCUMENTS OR FINANCIAL INFORMATION INCORPORATED HEREIN BY REFERENCE, THE PLAN, OR SUCH OTHER DOCUMENTS, AS APPLICABLE, SHALL GOVERN FOR ALL PURPOSES.
THE DEBTORS RESERVE THE RIGHT TO AMEND, MODIFY, OR WITHDRAW THE PLAN AT ANY TIME, IN ACCORDANCE WITH THE TERMS OF THE PLAN AND THE BANKRUTPCY CODE.
iv TABLE OF CONTENTS
I. INTRODUCTION ...... 1
A. Chapter 11: An Overview ...... 3
B. Summary of Key Components of the Chapter 11 Plan...... 3 1. Joint Plan...... 3 2. Treatment of Allowed Claims...... 4 3. Summary of Terms of New Holdco Common Stock...... 5 C. Holders of Claims Entitled to Vote on the Plan...... 5
D. Solicitation and Voting Procedures ...... 7
E. Confirmation Hearing...... 8
II. OVERVIEW OF CLAIMS AND EQUITY INTERESTS TREATED UNDER THE PLAN...... 8
A. No Double Payment of Claims ...... 8
B. Treatment of Unclassified Claims under the Plan (Administrative Expense Claims, Professional Compensation and Reimbursement Claims, and Priority Tax Claims)...... 9 1. Deadline for Filing Certain Administrative Expense Claims...... 9 2. Treatment of Administrative Expense Claims...... 10 3. Treatment of Professional Compensation and Reimbursement Claims...... 10 4. Treatment of Priority Tax Claims...... 10 5. Treatment of DIP Lender Claims...... 11 C. Distributions to and Treatment of Classified Claims and Equity Interests under the Plan ...... 11
III. DESCRIPTION AND HISTORY OF THE COMPANY’S BUSINESSES...... 27
A. Pre-Bankruptcy Business...... 27 1. The Company’s History...... 27 2. The Company’s Business...... 27 B. Reorganized Debtors’ Businesses...... 29
C. Employees...... 29
D. Publicly Available Information...... 30
E. Prepetition Indebtedness...... 30 1. Revolving Credit Facility...... 30 2. First Lien Notes ...... 31 3. Second Lien Notes...... 31 4. Senior Subordinated Unsecured Notes ...... 31
v 5. 2013 PIK Notes...... 31 6. 2015 PIK Notes...... 31 IV. EVENTS LEADING TO THE COMMENCEMENT OF THE CHAPTER 11 CASES...... 32
A. The Debtors’ Operations and Significant Debt Obligations ...... 32
B. Canadian Operations and Settlement and Transition Agreement ...... 33
V. DEBTORS’ CHAPTER 11 CASES ...... 34
A. First Day Orders and Other Postpetition Orders...... 34 1. Case Administration Orders...... 34 2. Waiver of Reporting Requirements ...... 34 3. Business Operations...... 34 4. Protection of NOLs and Other Tax Attributes...... 36 5. Debtor in Possession Financing...... 36 6. Claims Process and Bar Date...... 37 7. Executory Contracts and Unexpired Leases ...... 38 8. Employee Matters...... 38 9. Retention of Debtors’ Professionals ...... 39 10. Exclusivity ...... 40 11. De Minimus Asset Sales...... 40 B. Appointment of Official Committee of Unsecured Creditors...... 40 1. Appointment ...... 40 2. Composition...... 40 3. Retention of Committee Professionals...... 41 C. The Committee’s Motions ...... 42 1. NPPH Discovery Motion...... 42 2. 2004 Motions and Related Discovery...... 42 3. The Committee’s Standing Motion...... 42 D. Litigation and Settlements ...... 43 1. Extension of Time to File Notices of Removal of Civil Actions...... 43 2. Plum Creek...... 43 3. Antitrust Litigation ...... 44 4. PM35...... 45 5. NPWSI Retirement Plan Settlement ...... 46 6. Mediation and Global Settlement ...... 48 VI. THE CHAPTER 11 PLAN ...... 49
A. Corporate Governance and Management of Reorganized Debtors...... 50 1. Reorganized Debtors’ Directors and Officers...... 50 2. Amendment of Governance Documents...... 50 3. Corporate Action...... 50 4. Corporate Authority of the Debtors ...... 50 B. Classification and Treatment of Classified Claims and Equity Interests...... 50
vi C. Consideration to be Paid Under the Plan ...... 56
D. Reservation of “Cramdown” Rights ...... 58
E. Means of Execution of the Plan...... 58 1. Separate Plans...... 58 2. Severability of Plans...... 58 3. Continued Corporate Existence ...... 59 4. Mergers...... 59 5. Corporate Structure...... 59 6. Issuance of Stock of Reorganized NPC and Contribution to New Holdco...... 59 7. Form of Securities to be Issued; Exemption from Registration...... 59 8. Certain Tax Treatment...... 60 9. Exit Financing...... 60 10. Distributions to Holders of Notes ...... 62 11. Preservation of Rights of Action ...... 63 12. The Settlements...... 64 F. The Litigation Trust...... 66 1. Establishment of the Litigation Trust ...... 66 2. Litigation Trust Assets...... 67 3. Funding the Litigation Trust...... 68 4. Distribution of Litigation Trust Net Proceeds ...... 68 5. Protected Parties...... 69 6. The Litigation Trustee and Structure of the Litigation Trust...... 69 7. Taxes...... 70 8. Dissolution...... 71 9. Securities Law Matters ...... 71 10. Potential Committee Litigation Claims ...... 71 G. Voting and Distributions under the Plan...... 72 1. Impaired Classes to Vote ...... 72 2. Acceptance by Class of Claims...... 72 3. Elimination of Vacant Classes...... 72 4. Nonconsensual Confirmation...... 73 5. Distributions under the Plan ...... 73 6. Distribution Record Date...... 75 7. Payments to be Made to Indenture Trustees...... 75 8. Disbursing Agent...... 75 9. Manner of Payment Under the Plan...... 76 10. Payment of Interest on Allowed Claims ...... 76 11. Fractional Dollars; De Minimis Distributions ...... 76 12. Calculation of Distribution of New Holdco Common Stock...... 76 13. Calculation of Distribution of Litigation Trust Interests ...... 76 14. Unclaimed Property ...... 76 15. Time Bar to Cash Payments...... 77 16. Setoffs...... 77 17. Allocation of Plan Distributions Between Principal and Interest ...... 77 H. Treatment of Disputed Claims under the Plan...... 77 1. Objections to Claims; Prosecution of Disputed Claims...... 77 vii 2. Claim Objections and Expunged Claims ...... 78 3. No Distributions Pending Allowance ...... 80 4. Reserve Account for Disputed General Unsecured Claims...... 80 5. Disputed Class 3A Claims ...... 80 6. No Recourse...... 80 7. Distribution to Holders of Allowed Claims Following Disallowance of Disputed Claims...... 81 8. Estimation of Claims ...... 81 I. Executory Contracts and Unexpired Leases ...... 81 1. Assumption and Rejection of Executory Contracts ...... 81 2. Cure of Defaults and Survival of Contingent Claims ...... 82 3. Deadline for Filing Rejection Damage Claims...... 83 4. Indemnification and Reimbursement Obligations ...... 83 5. Existing Compensation and Benefit Programs ...... 83 6. Pension Benefit Guaranty Corporation...... 84 7. Reorganized NPC New Compensation Plans ...... 85 J. Effect of Confirmation...... 85 1. Re-vesting of Assets ...... 85 2. Discharge of Claims...... 86 3. Preservation of Insurance...... 86 4. Injunction Against Claims and Equity Interests ...... 86 5. Terms of Existing Injunctions or Stays...... 87 6. Injunction Against Interference with Plan of Reorganization ...... 87 7. Injunction Regarding Worthless Stock Deduction ...... 87 8. Channeling Injunction...... 88 9. Exculpation...... 88 10. Releases by Debtors...... 89 11. Additional Releases of Releasees ...... 89 12. Releases Pursuant to SEO Settlement Agreement ...... 90 K. Conditions Precedent to Effective Date of the Plan; Implementation Provisions ...... 90 1. Conditions Precedent to the Effective Date of the Plan...... 90 2. Waiver of Conditions Precedent ...... 91 3. Notice of Confirmation of the Plan...... 91 4. Notice of Effective Date of the Plan...... 91 L. Retention of Subject Matter Jurisdiction ...... 91
M. Alternative Plan(s) of Reorganization ...... 93
N. Liquidation under Chapter 7 ...... 93
O. Miscellaneous Provisions...... 95 1. Effectuating Documents and Further Transactions...... 95 2. Withholding and Reporting Requirements ...... 95 3. Exemption from Transfer Taxes ...... 95 4. Expedited Tax Determination...... 95 5. Payment of Statutory Fees ...... 95 6. Post-Confirmation Date Professional Fees and Expenses ...... 96
viii 7. Indenture Trustee Claims...... 96 8. Plan Modifications...... 96 9. Revocation, Withdrawal, or Non-Consummation ...... 97 10. NPPH Sale Proceeds...... 97 11. Cerberus Settlement...... 97 12. Plan Supplement ...... 98 13. Substantial Consummation...... 98 14. Severability ...... 98 15. Governing Law ...... 99 16. Deemed Acts...... 99 17. Binding Effect...... 99 18. Exhibits/Schedules...... 99 19. Notices ...... 99 20. Dissolution of Committee...... 100 21. Payment of Fees and Expenses of the First Lien Notes Trustee...... 100 22. Payment of Fees and Expenses of the Second Lien Group...... 101 23. No Admissions...... 101 24. Time...... 101 25. Section Headings ...... 101 26. Inconsistencies...... 101 VII. RISK FACTORS AND OTHER FACTORS TO BE CONSIDERED...... 101
A. Bankruptcy Risks...... 102 1. Risk of Non-Confirmation of the Plan...... 102 2. Parties in Interest May Object to the Debtors’ Classification of Claims ...... 102 3. Non-Consensual Confirmation ...... 102 4. Risk of Non-Occurrence or Delayed Occurrence of the Effective Date...... 103 5. Certain Tax Consequences of the Plan are Complex and Subject to Substantial Uncertainties ...... 103 6. Undue Delay in the Confirmation of the Plan May Significantly Disrupt Operations of the Debtors...... 103 7. The Chapter 11 Cases may adversely affect the Company’s operations going forward...... 103 8. Certain liabilities will not be fully extinguished as a result of the Confirmation of the Plan by the Bankruptcy Court...... 104 9. Plan Releases May Not be Approved ...... 104 10. Litigation Trust Recoveries and Results are Speculative and Uncertain ...... 104 B. Risks Related to the Capitalization of the Reorganized Debtors ...... 104 1. The Company Will Require Significant Financing to Emerge from the Chapter 11 Cases ...... 104 2. The Plan Exchanges Senior Securities for Equity ...... 104 3. Absence of Trading Market for New Holdco Common Stock ...... 105 4. Holders’ Ability to Sell New Holdco Common Stock...... 105 5. Upon Consummation of the Plan, There May Be Significant Holders of the New Holdco Common Stock ...... 106 6. The New Holdco Common Stock May Be Issued in Odd Lots...... 106 7. Upon Consummation of the Plan, There May Be Restrictions on the Transfer of New Holdco Common Stock by Certain Holders...... 106
ix C. Variance from Estimates and Projections ...... 106 1. Financial Projections...... 107 2. Estimated Recoveries...... 107 3. Liquidation Analysis...... 107 D. Risks Associated with the Business...... 108 1. The Debtors’ Business Plan...... 108 2. Various Operating Factors and General Economic Conditions...... 108 3. The Debtors depend on a small number of customers for a significant portion of their business...... 108 4. Rising postal costs could weaken demand for the Debtors’ paper products...... 109 5. Developments in alternative media could adversely affect the demand for the Debtors’ products...... 109 6. If the Debtors are unable to obtain raw materials, including petroleum- based chemicals, at favorable prices, or at all, it could adversely affect the Debtors’ business, financial condition and results of operations...... 109 7. The Debtors are involved in continuous manufacturing processes with a high degree of fixed costs. Any interruption in the operations of the Debtors’ manufacturing facilities may affect their operating performance...... 110 8. The Debtors’ operations require substantial ongoing capital expenditures, and they may not have adequate capital resources to fund all of their required capital expenditures...... 110 9. Rising energy or chemical prices or supply shortages could adversely affect the Debtors’ business, financial condition and results of operations...... 111 10. The failure of the Debtors’ information technology and other business support systems could have a material adverse effect on the Debtors’ business, financial condition and results of operations...... 111 11. A large percentage of the Debtors’ employees are unionized. Wage increases or work stoppages by the Debtors’ unionized employees may have a material adverse effect on the Debtors’ business, financial condition and results of operations...... 111 12. The Debtors depend on third parties for certain transportation services...... 111 13. The Debtors are subject to various regulations that could impose substantial costs upon them and may adversely affect their operating performance...... 112 14. Demand for Printing and Writing Paper is Subject to General Economic Events and Developments in Alternative Media ...... 112 15. The Markets in Which the Debtors Operate are Highly Competitive and Imports Could Materially Adversely Affect their Business, Financial Condition, and Results of Operations...... 112 VIII. CONFIRMATION OF THE PLAN...... 113
A. Confirmation Hearing...... 113
B. Requirements for Confirmation of the Plan...... 114
C. Feasibility...... 116
x D. Best Interest Tests...... 117
E. Liquidation Analysis...... 117
F. Section 1129(b)...... 118 1. No Unfair Discrimination ...... 118 2. Fair and Equitable Test...... 119 IX. PROJECTIONS ...... 119
A. Introduction...... 119
B. Projections ...... 120
X. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN...... 121
A. Scope and Limitation ...... 121
B. Certain U.S. Federal Income Tax Consequences to the Debtors ...... 122 1. Cancellation of Indebtedness Income ...... 123 2. Annual Section 382 Limitation on Use of NOLs and “Built-In” Losses and Deductions ...... 124 3. Alternative Minimum Tax ...... 126 4. Transfer of Litigation Trust Assets to the Litigation Trust...... 126 C. U.S. Federal Income Tax Considerations for Certain Holders of Claims...... 127 1. Exchange of stock of Reorganized NPC for New Holdco Common Stock...... 127 2. Securities for Tax Purposes ...... 127 3. Holders Receiving Stock in Reorganized NPC or Receiving Stock in Reorganized NPC Plus Cash and/or Litigation Trust Interests...... 128 4. Holders Receiving Litigation Trust Interests and/or Cash...... 129 5. Market Discount, Accrued Interest and Limitation on Capital Losses ...... 129 6. Tax Treatment of the Litigation Trust and Litigation Trust Beneficiaries...... 131 7. Tax Reporting for Assets Allocable to Disputed Claims...... 132 8. Surtax on Unearned Income ...... 132 9. Backup Withholding and Information Reporting ...... 132 D. Importance of Obtaining Professional Tax Assistance...... 133
XI. SECURITIES LAW MATTERS ...... 133
A. Issuance and Resale of New Holdco Common Stock...... 133
B. Legends...... 135
C. Book-Entry; Delivery and Form ...... 136
D. Registration and Listing...... 137
XII. CONCLUSION...... 137
xi xii LIST OF EXHIBITS
Exhibit A Second Amended Joint Plan Exhibit B Disclosure Statement Order Exhibit C Projected Financial Information Exhibit D Liquidation Analysis Exhibit E Valuation Analysis
xiii I. INTRODUCTION
THE FOLLOWING STATEMENTS IN THIS SECTION I ARE QUALIFIED IN THEIR ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS CONTAINED ELSEWHERE IN THIS DISCLOSURE STATEMENT AND IN THE PLAN AND THE EXHIBITS TO EACH.
Pursuant to section 1125 of title 11 of the United States Code (the “Bankruptcy Code”), NewPage Corporation (“NPC”) and certain of its subsidiaries and affiliates that are debtors and debtors in possession (collectively, with NPC, the “Debtors”) in jointly administered cases under chapter 11 of the Bankruptcy Code (the “Chapter 11 Cases”), submit this disclosure statement (the “Disclosure Statement”) to all holders of Claims4 against and Equity Interests in the Debtors in connection with (i) the solicitation of acceptances or rejections of the proposed Debtors’ Second Amended Joint Chapter 11 Plan [Docket No. ____] (the “Plan”), dated [______], 2012, and (ii) the hearing on confirmation of the Plan (the “Confirmation Hearing”) scheduled for [DATE]5 at [TIME] (prevailing Eastern Time). Of the 14 Debtors that commenced Chapter 11 Cases under the Bankruptcy Code, only 12 Debtors are proponents of the proposed Plan. The Plan provides for the Chapter 11 Cases of the Non-Proponent Debtors to be dismissed upon the Effective Date.
To the extent any inconsistencies exist between this Disclosure Statement and the Plan, the Plan will govern.
Attached as Exhibits to this Disclosure Statement are the following documents, each of which is incorporated in full:
The Plan, together with its exhibits (Exhibit A);
Order of the Bankruptcy Court, dated [DATE], approving this Disclosure Statement (the “Disclosure Statement Order”) (Exhibit B);6
Projected Financial Information (Exhibit C);
Liquidation Analysis (Exhibit D); and
Valuation Analysis (Exhibit E).
On August 13, 2012, the Debtors filed the Debtors’ Joint Chapter 11 Plan with the Bankruptcy Court [Docket No. 2152]. On October 5, 2012, the Debtors then filed (i) the Debtors’ First Amended Joint Chapter 11 Plan [Docket No. 2414], (ii) the Proposed Disclosure Statement for Debtors’ First Amended Joint Chapter 11 Plan [Docket No. 2415], and (iii) the Debtors’ Motion for Order (I) Approving Notice of Disclosure Statement Hearing, (II) Approving Disclosure Statement, (III) Fixing Voting Record Date, (IV) Scheduling Plan Confirmation Hearing and Approving Form and Manner of Related Notice and Objection Procedures, (V) Appointing Balloting Agent, (VI) Approving Solicitation
4 Capitalized terms used but not otherwise defined in this Disclosure Statement are as defined in the Plan. 5 References to “[DATE]” and “[TIME]” refer to dates and times that will be added upon Bankruptcy Court approval of the Disclosure Statement. 6 This exhibit will be inserted after Bankruptcy Court approval of the Disclosure Statement.
2783/54832-001 current/30316865v34 11/05/2012 1:01 am Packages and Procedures for the Distribution Thereof, (VII) Approving Forms of Ballots and Voting Procedures, (VIII) Approving Form and Manner of Notices to Non-Voting Plan Classes, (IX) Fixing Voting Deadline, and (X) Approving Vote Tabulation Procedures in accordance with the Debtors’ Amended Motion for Order Pursuant to Federal Rule of Bankruptcy Procedure 3016(b) Extending Time to File Disclosure Statement [Docket No. 2350]. Finally, on [______, 2012], the Debtors filed the Plan and this Disclosure Statement [Docket Nos. ___, respectively]. On [DATE], after notice and a hearing, the Bankruptcy Court issued the Disclosure Statement Order, approving this Disclosure Statement as containing adequate information of a kind, and in sufficient detail, to enable a hypothetical investor typical of the holders of Claims against and Equity Interests in the Debtors to make an informed judgment about the Plan and in voting to accept or reject the Plan. APPROVAL OF THIS DISCLOSURE STATEMENT DOES NOT, HOWEVER, CONSTITUTE A DETERMINATION BY THE BANKRUPTCY COURT AS TO THE FAIRNESS OR MERITS OF THE PLAN.
The Confirmation Hearing may be adjourned or continued from time to time. Therefore, parties in interest should check the online docket at http://www.kccllc.net/NewPage to confirm the latest scheduled date and time of the Confirmation Hearing.
The reorganizing Debtors are furnishing this Disclosure Statement as the proponents of the Plan pursuant to section 1125 of the Bankruptcy Code and in connection with the solicitation of votes to accept or reject the Plan, as it may be amended or supplemented from time to time in accordance with the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”).
This Disclosure Statement describes certain aspects of the Plan, the Debtors’ and their non-debtor affiliates’ operations, their financial condition, including financial projections, as well as other related matters, including the treatment of holders of Claims against and Equity Interests in the Debtors. This Disclosure Statement also describes certain potential federal income tax consequences to Claim holders, voting procedures, and the confirmation process.
A ballot for the acceptance or rejection of the Plan (a “Ballot”) is enclosed with the copy of this Disclosure Statement distributed to the holders of Claims in the Classes that are entitled to vote to accept or reject the Plan. The Ballot includes information regarding the voting deadlines and detailed instructions for voting to accept or reject the Plan. Before voting, each holder of a Claim entitled to vote should read this Disclosure Statement (including the exhibits and documents incorporated by reference) and the instructions accompanying the Ballot. These documents contain, among other things, important information concerning the classification of Claims and Equity Interests for voting purposes and tabulation of votes. No solicitation of votes on the Plan may be made except pursuant to this Disclosure Statement, as it may be amended, and section 1125 of the Bankruptcy Code. In voting on the Plan, the holder of a Claim should rely solely on the information relating to the Debtors contained or incorporated by reference in this Disclosure Statement, the Plan, and the exhibits attached to these documents.
THE PLAN IS THE PRODUCT OF SUBSTANTIAL NEGOTIATIONS AMONG THE DEBTORS, THE FIRST LIEN NOTEHOLDERS, THE COMMITTEE, THE SECOND LIEN NOTEHOLDERS, AND SEO. THE DEBTORS BELIEVE THE PLAN PRESENTS THE MOST ADVANTAGEOUS OUTCOME FOR ALL CREDITORS OF THE DEBTORS AND, THEREFORE, CONFIRMATION OF THE PLAN IS IN THE BEST INTERESTS OF THE DEBTORS AND THEIR ESTATES. THE DEBTORS RECOMMEND THAT YOU VOTE TO ACCEPT THE PLAN.
2 A. Chapter 11: An Overview
The commencement of a chapter 11 case creates a bankruptcy estate comprised of all of the legal and equitable interests of the debtor as of the date of filing of the bankruptcy petition. The Bankruptcy Code provides that the debtor may continue to operate its business and remain in possession of its property as a “debtor in possession.”
Chapter 11 is the principal business restructuring chapter of the Bankruptcy Code. Under chapter 11, a debtor is authorized to restructure its business and financial obligations for the benefit of all economic parties in interest. In addition to permitting the rehabilitation of a debtor, chapter 11 promotes fair treatment for similarly situated claims and similarly situated equity interests with respect to distributions to be made from a debtor’s bankruptcy estate.
The consummation of a chapter 11 plan is the principal objective of a chapter 11 case. A chapter 11 plan sets forth the means for treating claims against and equity interests in a debtor. Confirmation of a chapter 11 plan by the Bankruptcy Court binds the debtor, any issuer of securities under the plan, any person acquiring property under the plan, and any creditor or equity interest holder of a debtor. Subject to certain limited exceptions, the order confirming a plan discharges a debtor from any debt that arose prior to the date of confirmation of the plan and substitutes therefor the obligations specified under the confirmed plan.
Holders of certain claims against and equity interests in a debtor are permitted to vote to accept or reject the plan. Prior to soliciting acceptances of the proposed plan, however, section 1125 of the Bankruptcy Code requires a debtor to prepare a disclosure statement containing adequate information of a kind, and in sufficient detail, to enable a hypothetical investor typical of the holders of claims against and equity interests in the debtor to make an informed judgment about the plan and in voting to accept or reject the plan. The Debtors are submitting this Disclosure Statement to holders of Claims against the Debtors to satisfy the requirements of section 1125 of the Bankruptcy Code.
The Plan proposed by the Debtors includes a separate chapter 11 plan for each of the Debtors other than the Non-Proponent Debtors. If you have a Claim against more than one Debtor and/or different types of Claims classified in different Classes against one Debtor, you are allowed to vote each Claim separately.
B. Summary of Key Components of the Chapter 11 Plan
The Debtors submit the Plan maximizes the value of each Debtor’s estate, and any alternative to confirmation of the Plan would result in significant delays, litigation, lost value, and additional costs.
The Debtors also believe the Plan’s contemplated restructuring is in the best interests of their Creditors. If the Plan were not to be confirmed, the Debtors’ options would be to either file an alternate chapter 11 plan or liquidate under chapter 7 of the Bankruptcy Code.
The following overview summarizes certain key components of the Plan. The overview is qualified in its entirety by the full text of the Plan.
1. Joint Plan
The Plan consists of twelve separate chapter 11 Plans – one Plan for each of the Debtors that will emerge as a reorganized entity. The Plan does not substantively consolidate any Estates. Two
3 Debtors – NewPage Group Inc. (“NPG”) and NewPage Holding Corporation (“NPH”) – are not proposing a chapter 11 plan and intend to dissolve as described in Section 4.5.1 of the Plan. Any reference herein to the “Plan” will be a reference to the separate Plan of each Debtor, as the context requires. The votes to accept or reject the Plan by holders of Claims against a particular Debtor will be tabulated as votes to accept or reject that Debtor’s separate Plan. Distributions under a Debtor’s Plan will be made to the holders of Claims in the Classes identified in that Plan.
The Settlement Parties have engaged in extensive communications regarding the Plan process and alternative plan formulations, and participated in a mediation process in a concerted effort to resolve their existing and potential disputes. These efforts have culminated in the Settlements set forth in the Plan pursuant to which Distributions to Creditors will be made in accordance with their terms.
Under the Plan, the First Lien Noteholders will receive, among other consideration, 100 percent of the equity in the Reorganized Debtors. The Second Lien Noteholders and certain other unsecured creditors (excluding certain trade creditors) will receive their pro rata share of (i) $30 million in cash and (ii) the first $50 million in proceeds that are realized by a Litigation Trust. After the first $50 million received by the Litigation Trust, any additional proceeds received by the Litigation Trust will be shared by the First Lien Noteholders, the Second Lien Noteholders and certain unsecured creditors. For the avoidance of doubt, the First Lien Noteholders will be entitled to receive distributions on account of the foregoing distributions through the enforcement of certain subordination rights and/or their deficiency claim, as provided for in the Plan. Certain trade creditors who agree to provide credit terms as specified in the Plan will receive a 15% recovery on their Claims over a two year period. Consistent with the foregoing, on the Effective Date of the Plan, the Debtors will fund the Litigation Trust with: (i) $40 million in cash (less $500,000 retained by the Debtors for the SEO Professional Fees) that the Debtors had previously allocated to resolving issues related to PM35 located in the Debtors’ Stevens Point, Wisconsin mill, and (ii) the Committee Litigation Claims. In addition, the Debtors will provide $5 million for trust administration expenses, which will be repaid to the Debtors from certain proceeds of the Litigation Trust (other than the initial $40 million cash deposit referenced above). Pursuant to the SEO Settlement Agreement (as defined below), which has the support of the Committee and the Debtors, SEO will be arranging for the transfer on the Effective Date of the Plan to the Debtors ownership of PM35 in return for either a senior secured note in the amount of approximately $16 million or a cash payment of approximately $14 million, as set forth in the SEO Settlement Agreement, and, subject to certain agreed exceptions set forth in the Settlement Agreement, in full settlement and release of any and all Claims or Causes of Action whatsoever from the beginning of the world to the Effective Date, known or unknown, of the Debtors against SEO, its affiliates, and, with respect to issues related to PM35, the other parties to the trust from which NPWSI leases PM35.
2. Treatment of Allowed Claims
On the Effective Date, or as soon as reasonably practicable thereafter, New Holdco will issue the New Holdco Common Stock. Each holder of an Allowed First Lien Notes Claim will receive from the Disbursing Agent on account of its Secured Claim shares of stock of the Reorganized NPC, whereupon each holder will contribute such shares to New Holdco in exchange for each holder’s Pro Rata Share of the Available New Holdco Common Stock, and all new stock of NPC’s Debtor Affiliates having confirmed Plans will be re-issued to their respective parent companies to re-create the same corporate structure that existed on the Commencement Date, or as otherwise directed by those entities.
4 3. Summary of Terms of New Holdco Common Stock
a. New Holdco Common Stock
On the Effective Date, New Holdco will issue, in accordance with the Plan, 1,000,000 shares of New Holdco Common Stock, par value $0.001 per share, for distribution to the holders of Allowed NPC First Lien Notes Claims (in exchange for the stock of Reorganized NPC) and certain senior management employees in accordance with the Reorganized NPC New Compensation Plans (as discussed in Section VI.I.7 below, and the Plan Supplement).
All New Holdco Common Stock issued by New Holdco pursuant to the Plan will be duly authorized and validly issued, fully paid, and nonassessable.
Each holder of New Holdco Common Stock will be entitled to one vote per outstanding share with respect to the election of directors and on all other matters submitted to the vote of the stockholders.
The holders of New Holdco Common Stock will be entitled to receive dividends as may be declared from time to time by the Board of Directors of New Holdco out of funds legally available for dividend payments. In the event of liquidation, dissolution or winding up, after full payment of all liabilities, the holders of New Holdco Common Stock will be entitled to share ratably in any distributions of any remaining assets or the proceeds of those assets. The New Holdco Common Stock will have no preemptive or conversion rights or other subscription rights.
b. Stock Non-Certificated and Exempt from Registration
As discussed in Section XI.A, pursuant to Bankruptcy Code section 1145, the New Holdco Common Stock will be exempt from registration under applicable securities laws, including Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended, or any other applicable non-bankruptcy laws or regulations.
Share of New Holdco Common Stock issued under the Plan will be non-certificated and may be owned or transferred either in book-entry form through the Depository Trust Company (“DTC”) or as otherwise indicated in the Governance Documents. Reorganized NPC does not intend to list the New Holdco Common Stock on a securities exchange, and New Holdco will not participate in making a market (or facilitate making a market) in any such securities.
C. Holders of Claims Entitled to Vote on the Plan
Pursuant to the Bankruptcy Code, only holders of allowed claims or equity interests in classes of claims or equity interests that are impaired and are not deemed to have rejected a proposed chapter 11 plan are entitled to vote to accept or reject a proposed plan. Classes of claims or equity interests in which the holders of claims or equity interests are unimpaired under the plan are presumed to have accepted the plan and are not entitled to vote to accept or reject the plan. Classes of claims or equity interests in which the holders of claims or equity interests will receive no recovery under the plan are deemed to have rejected the plan and are also not entitled to vote to accept or reject the plan.
Holders of Allowed Claims in the following Classes are Unimpaired under the Plan: NPC Class 2, and GD Class 2. Accordingly, holders of Allowed Claims in those Classes are conclusively presumed to have accepted the Plan and are not entitled to vote.
5 Holders of Allowed Claims in the following Classes are Impaired under the Plan and will receive distributions under the Plan: NPC Class 1A, NPC Class 1B, NPC Class 3A, NPC Class 3B, NPC Class 3C, NPC Class 3D, NPC Class 3E, GD Class 1A, GD Class 1B, GD Class 3A, GD Class 3B, GD Class 3C, GD Class 3D and GD Class 3E. Accordingly, holders of Allowed Claims in those Classes are entitled to vote to accept or reject the Plan.
Holders of Claims and Equity Interests in the following Classes are Impaired under the Plan and will neither receive nor retain any property under the Plan in respect of those Claims and Equity Interests: NPC Class 4, NPC Class 5, GD Class 4, and GD Class 5. Accordingly, holders of Claims and Equity Interests in those Classes are conclusively deemed to reject the Plan and are not entitled to vote to accept or reject the Plan.
Section 1126 of the Bankruptcy Code defines “acceptance” of a plan by a class of claims as acceptance by creditors in that class holding at least two-thirds in dollar amount and more than one- half in number of the claims voted for acceptance or rejection of the plan. Thus, acceptance of the Plan by Claims in NPC Class 1A, NPC Class 1B, NPC Class 3A, NPC Class 3B, NPC Class 3C, NPC Class 3D, NPC Class 3E, GD Class 1A, GD Class 1B, GD Class 3A, GD Class 3B, GD Class 3C, GD Class 3D, and GD Class 3E will occur only if at least two-thirds in dollar amount and a majority in number of the holders of Claims in each Class that cast their Ballots vote in favor of acceptance of the Plan. A holder of a Claim in Class 3A may elect on its Ballot to be treated as a Qualified Trade Creditor in NPC Class 3E or GD Class 3E, as applicable. If such holder is eligible to be a Qualified Trade Creditor, the holder’s Class 3A vote will be treated as a vote in Class 3E. As noted above, holders of Claims and Equity Interests in NPC Class 4, NPC Class 5, GD Class 4, and GD Class 5 are conclusively deemed to have rejected the Plan, and holders of Claims in NPC Class 2 and GD Class 2 are conclusively presumed to have accepted the Plan. A vote may be disregarded if the Bankruptcy Court determines, after notice and a hearing, that the acceptance or rejection was not solicited or procured in good faith or in accordance with the applicable provisions of the Bankruptcy Code.
It is important that holders of Claims in NPC Class 1A, NPC Class 1B, NPC Class 3A, NPC Class 3B, NPC Class 3C, NPC Class 3D, NPC Class 3E, GD Class 1A, GD Class 1B, GD Class 3A, GD Class 3B, GD Class 3C, GD Class 3D, and GD Class 3E exercise their right to vote to accept or reject the Plan. EVEN IF YOU DO NOT VOTE TO ACCEPT THE PLAN, YOU MAY BE BOUND BY THE PLAN IF IT IS ACCEPTED BY THE REQUISITE HOLDERS OF CLAIMS IN THE SAME CLASS AS YOUR CLAIM. The amount and number of votes required for acceptance or rejection of the Plan by a Class are computed on the basis of Claims actually voting to accept or reject the Plan. There are no quorum requirements with respect to the number of Claims in a Class that actually vote. Refer to Section VI.G for further information.
If at least one impaired class of claims has accepted a chapter 11 plan (without counting the votes of insiders), section 1129(b) of the Bankruptcy Code permits the confirmation of the plan under certain conditions notwithstanding the rejection of the plan by one or more other impaired classes of claims or equity interests. Under that section, a plan may be confirmed by a bankruptcy court if the plan does not “discriminate unfairly” and is “fair and equitable” with respect to each rejecting class. Refer to Section VI.D for further information.
The Debtors’ determination as to whether to request confirmation of the Plan pursuant to section 1129(b) of the Bankruptcy Code will be announced prior to or at the Confirmation Hearing.
6 D. Solicitation and Voting Procedures
Pursuant to the Disclosure Statement Order, the Bankruptcy Court set [DATE] as the record date for voting on the Plan. Accordingly, only holders of record as of [DATE] otherwise entitled to vote under the Plan will receive a Ballot(s) and may vote on the Plan. To determine whether your Class is entitled to vote on the Plan, refer to the table in Section VI.B below.
If you are entitled to vote, you should carefully review this Disclosure Statement, including the attached exhibits and the instructions accompanying the Ballot. Then, indicate your acceptance or rejection of the Plan by voting for or against the Plan on the enclosed Ballot and return the Ballot in the postage-paid envelope provided. Please read your Ballot carefully and provide all the information requested. If you are a holder of a General Unsecured Claim in NPC Class 3A or GD Class 3A, your Ballot will include the option to be treated as a Qualified Trade Creditor. If you elect to be treated as a Qualified Trade Creditor and you are eligible for such treatment, your vote to accept or reject the Plan will be counted as a vote to accept or reject the Plan in NPC Class 3E or GD Class 3E, as applicable. If you hold Claims in more than one Class and you are entitled to vote Claims in more than one Class, you will receive separate Ballots, each of which must be used for the appropriate Class of Claims against the appropriate Debtor. Please refer to Exhibit B for further information.
If you are a holder of Claims in NPC Class 1A, GD Class 1A, NPC Class 3A, GD Class 3A, NPC Class 3E (as applicable) or GD Class 3E (as applicable), please vote and return your Ballot(s) to the Debtors’ Claims Agent:
NewPageBallot Processing Center c/o Kurtzman Carson Consultants LLC 2335 Alaska Avenue El Segundo, California 90245
If you are the beneficial owner (a “Beneficial Owner”) of Claims in NPC Class 1B, GD Class 1B, NPC Class 3B, GD Class 3B, NPC Class 3C, GD Class 3C, NPC Class 3D, or NPC Class 3D, please vote and return your Ballot(s) to your broker, bank, commercial bank, trust company, dealer, or other agent or nominee (a “Voting Nominee”) to permit your Voting Nominee to complete and return a master ballot (a “Master Ballot”) to the Claims Agent.
If you are the Voting Nominee for Beneficial Owners of Claims in NPC Class 1B, GD Class 1B, NPC Class 3B, GD Class 3B, NPC Class 3C, GD Class 3C, NPC Class 3D, or NPC Class 3D, please summarize the votes cast by Beneficial Owners to accept or reject the Plan as described in your master ballot (a “Master Ballot”), and return your Master Ballot to the Debtors’ Claim Agent at the following address:
NewPageBallot Processing Center c/o Kurtzman Carson Consultants LLC 599 Lexington Avenue, 39th Floor New York, New York 10022
TO BE COUNTED, YOUR BALLOT(S) INDICATING ACCEPTANCE OR REJECTION OF THE PLAN MUST BE RECEIVED BY THE CLAIMS AGENT NO LATER THAN [DATE] AT [TIME] (PREVAILING EASTERN TIME). YOUR BALLOT(S) WILL NOT BE COUNTED IF RECEIVED AFTER THIS DEADLINE. ANY EXECUTED BALLOT RECEIVED THAT DOES NOT INDICATE EITHER AN ACCEPTANCE OR A REJECTION OF THE PLAN WILL NOT BE COUNTED.
7 If the return envelope provided with your Ballot is addressed to your bank or brokerage firm, please allow sufficient time for that firm to process your vote on a master Ballot before the voting deadline on [DATE] at [TIME] (prevailing Eastern Time) (the “Voting Deadline”).
Any Claim in an Impaired Class as to which the Debtors have served an objection or request for estimation at least fifteen (15) days before the Voting Deadline, or that is listed on the Debtors’ schedules of assets and liabilities filed with the Bankruptcy Court as unliquidated, disputed, or contingent and a proof of claim was not (i) filed by the applicable bar date for the filing of proofs of claim established by the Court, or (ii) deemed timely filed by an order of the Court prior to the Voting Deadline is not entitled to vote unless the holder of that Claim has obtained an order of the Bankruptcy Court temporarily allowing the Claim for the purpose of voting on the Plan, to the extent, if any, temporary allowance under the Bankruptcy Rules does not impermissibly conflict with the Bankruptcy Code. The Debtors reserve the right to assert that the temporary allowance of any Claim impermissibly conflicts with the Bankruptcy Code.
If you are a holder of a Claim entitled to vote on the Plan and you did not receive a Ballot, received a damaged Ballot, or lost your Ballot, or if you have any questions concerning the Disclosure Statement, the Plan, or the procedures for voting on the Plan, please contact Kurtzman Carson Consultants LLC (“KCC”) by telephone at (877) 573-3985 or by email at [email protected], or visit the Debtors’ restructuring website:
http://www.kccllc.net/NewPage.
DO NOT RETURN ANY DOCUMENTS WITH YOUR BALLOT(S).
THE DEBTORS BELIEVE ACCEPTANCE OF THE PLAN IS IN THE BEST INTERESTS OF EACH AND EVERY CLASS OF CREDITORS. THE DEBTORS URGE ALL HOLDERS OF IMPAIRED CLAIMS ENTITLED TO VOTE ON THE PLAN TO ACCEPT THE PLAN.
E. Confirmation Hearing
Pursuant to section 1128 of the Bankruptcy Code, the Bankruptcy Court has scheduled the Confirmation Hearing on [DATE] at [TIME] (prevailing Eastern Time), in the United States Bankruptcy Court for the District of Delaware, 824 North Market St., 6th Floor, Courtroom 3, Wilmington, Delaware 19801, before The Honorable Kevin Gross, Chief United States Bankruptcy Judge for the District of Delaware. The Confirmation Hearing may be adjourned from time to time without notice except as given at the Confirmation Hearing or at any subsequent adjourned Confirmation Hearing.
The Bankruptcy Court has ordered that objections, if any, to confirmation of the Plan be filed and served on or before [DATE] at [TIME] (prevailing Eastern Time).
II. OVERVIEW OF CLAIMS AND EQUITY INTERESTS TREATED UNDER THE PLAN
A. No Double Payment of Claims
To the extent that a Claim is Allowed against more than one Debtor’s Estate, there will be only a single recovery on account of that Allowed Claim, but the holder of an Allowed Claim against more than one Debtor may recover distributions from all co-obligor Debtors’ Estates until the holder has received payment in full on the Allowed Claim. No holder of an Allowed Claim will be entitled to
8 receive more than payment in full of its Allowed Claim and each Claim will be administered and treated in the manner provided by the Plan only until payment in full on that Allowed Claim.
B. Treatment of Unclassified Claims under the Plan (Administrative Expense Claims, Professional Compensation and Reimbursement Claims, and Priority Tax Claims)
1. Deadline for Filing Certain Administrative Expense Claims.
The procedures in this Section apply to each holder of an Administrative Expense Claim, other than the holder of:
i. a Claim of a Professional for compensation and reimbursement of costs and expenses, as described in Section 2.3 of the Plan;
ii. a Section 503(b)(9) Claim;
iii. an Administrative Expense Claim that has been Allowed on or before the Effective Date, including pursuant to the Plan;
iv. an Administrative Expense Claim on account of fees and expenses incurred on or after the Commencement Date by ordinary course professionals retained by the Debtors pursuant to an order of the Bankruptcy Court;
v. an Administrative Expense Claim held by a current officer, director or employee of any Debtor for indemnification, contribution, or advancement of expenses pursuant to the Debtor’s certificate of incorporation, by-laws, or similar organizational document;
vi. a Claim for U.S. Trustee statutory fees; and/or
vii. a Claim for Union Advisor Fees.
Other than those holders described above, each holder of an Administrative Expense Claim must file with the Claims Agent by mail or by overnight or hand delivery at the following address:
NewPage Claims Processing Center c/o KCC 2335 Alaska Avenue El Segundo, CA 90245
and must serve on the Debtors or the Reorganized Debtors in accordance with Section 14.16 of the Plan, proof of its Administrative Expense Claim on or before the 60th day after the Effective Date. Each proof of Administrative Expense Claim must include at a minimum (i) the name of each Debtor that is purported to be liable for the Administrative Expense Claim, (ii) the name of the holder of the Administrative Expense Claim, (iii) the amount of the Administrative Expense Claim, (iv) the basis of the Administrative Expense Claim, and (v) supporting documentation for the Administrative Expense Claim. FAILURE TO TIMELY FILE AND SERVE A COMPLETE PROOF OF ADMINISTRATIVE
9 EXPENSE CLAIM IN ACCORDANCE WITH THE PLAN WILL RESULT IN THE ADMINISTRATIVE EXPENSE CLAIM BEING FOREVER BARRED AND DISCHARGED.
2. Treatment of Administrative Expense Claims
Except with respect to Administrative Claims that are Claims of Professionals as set forth in Section 2.3 of the Plan and except to the extent that a holder of an Allowed Administrative Expense Claim agrees to less favorable treatment with the Debtor against whose Estate the Claim is Allowed, each holder of an Allowed Administrative Expense Claim will receive Cash in an amount equal to the Allowed Administrative Expense Claim on, or as soon thereafter as is reasonably practicable, the later of (a) the Effective Date and (b) the date on which the Administrative Expense Claim becomes an Allowed Administrative Expense Claim except that Allowed Administrative Expense Claims representing liabilities incurred in the ordinary course of business by any Debtor or which have been approved pursuant to an order of the Bankruptcy Court will be paid in full and/or performed by the applicable Reorganized Debtor in the ordinary course of business in accordance with the terms and subject to the conditions of any agreements governing, instruments evidencing, or other documents relating to, those liabilities. Notwithstanding the foregoing, the Indenture Trustee Claims will be paid pursuant to Sections 4.8 and 14.7 of the Plan.
3. Treatment of Professional Compensation and Reimbursement Claims
Notwithstanding Sections 2.1 and 2.2 of the Plan, all holders of a Claim for an award of compensation for services rendered or reimbursement of expenses incurred through and including the Effective Date pursuant to sections 503(b)(2), 503(b)(3), 503(b)(4), or 503(b)(5) of the Bankruptcy Code will file their respective final applications for allowances of such compensation and reimbursement by a date no later than the date that is 90 days after the Effective Date or by such other date as may be fixed by the Bankruptcy Court, and if granted such an award by the Bankruptcy Court, the holder will be paid in full in the amount Allowed by the Bankruptcy Court to the extent not previously paid pursuant to a prior order of the Bankruptcy Court (i) on the date on which the Administrative Expense Claim becomes an Allowed Administrative Expense Claim, or as soon thereafter as is reasonably practicable, or (ii) upon such other terms as may be mutually agreed upon between the holder of an Administrative Expense Claim and the Reorganized Debtors.
4. Treatment of Priority Tax Claims
Except to the extent that a holder of an Allowed Priority Tax Claim has been paid by the Estate liable for that Claim prior to the Effective Date or agrees to less favorable treatment, each holder of an Allowed Priority Tax Claim will receive, at the sole option of the applicable Reorganized Debtor and in full and complete satisfaction of any and all liability attributable to that Priority Tax Claim, (a) Cash in an amount equal to the Allowed Priority Tax Claim, (b) a transferable note that provides for equal, semiannual Cash payments equal to the aggregate amount of the Allowed Priority Tax Claim plus interest paid in arrears semiannually at LIBOR (as of the Effective Date) plus 1%, over a period ending not later than five years after the applicable Commencement Date, or (c) any combination of Cash and a note, on the terms provided in subsections (a) and (b), in an aggregate Cash and note principal amount equal to the Allowed Priority Tax Claim. Payment of a Priority Tax Claim will be made on the latest of (i) the Effective Date, (ii) the date on which the Priority Tax Claim becomes an Allowed Priority Tax Claim, and (iii) the date the Allowed Priority Tax Claim is payable under applicable non-bankruptcy law, or, in each case, as soon thereafter as is reasonably practicable. The Debtors reserve the right to prepay any such note in part or in whole at any time without premium or penalty. No holder of an Allowed Priority Tax Claim will be entitled to any payments on account of any pre-Effective Date interest accrued on or
10 penalty arising after the Commencement Date with respect to or in connection with an Allowed Priority Tax Claim.
5. Treatment of DIP Lender Claims
Except to the extent the holder of a DIP Facility Claim agrees to less favorable treatment, on the Effective Date, the DIP Administrative Agent, for the ratable benefit of the DIP Lenders and the DIP Agents, as applicable, will be paid in Cash 100% of the then-outstanding amount, if any, of the DIP Facility Claims. To the extent that any L/C remains undrawn as of the Effective Date, the Debtors will either (i) cause that L/C to be replaced with a letter of credit issued under the exit financing, (ii) collateralize that L/C with Cash in an amount equal to 105% of its face amount, (iii) provide a back-to- back letter of credit to the L/C Issuer on terms and from a financial institution reasonably acceptable to the L/C Issuer, or (iv) provide such other treatment as the Debtors and the L/C Issuer will agree, each in their sole discretion. Contemporaneously with all amounts owing in respect of principal included in the DIP Facility Claims (other than Excluded DIP Obligations), interest accrued thereon to the date of payment and fees, expenses and non-contingent indemnification obligations as required by the DIP Facility and arising prior to the Effective Date being paid in full in Cash (or, in the case of the outstanding L/Cs, being guaranteed by back-to-back letters of credit, or collateralized by Cash, in each case in an amount equal to 105% of the face amount of such outstanding letters of credit or otherwise provided for as set forth above), any and all Liens on and security interests in the Debtors’ (and the Estates’) property held by the DIP Lenders will be deemed released, terminated and extinguished, in each case without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order or rule or the vote, consent, authorization or approval of any Entity, the DIP Credit Agreement will be deemed terminated, and the Debtors’ (and the Reorganized Debtors’) obligations thereunder will be canceled; provided, however, that the Excluded DIP Obligations will survive the Effective Date and will not be discharged or released pursuant to the Plan or the Confirmation Order, notwithstanding any provision hereof or thereof to the contrary, and the payment on such date of the DIP Facility Claims will in no way affect or impair the obligations, duties, and liabilities of the Reorganized Debtors or the rights of the DIP Agents and the DIP Lenders relating to any Excluded DIP Obligations.
C. Distributions to and Treatment of Classified Claims and Equity Interests under the Plan
The following table summarizes the treatment of, and estimated recovery on, Allowed Claims and Equity Interests under the Plan, and identifies those Classes entitled to vote on the Plan based on the rules set forth in the Bankruptcy Code. The summary information reflected in the table is qualified in its entirety by reference to the full text of the Plan. The Plan should be consulted for additional information regarding the distributions thereunder to holders of Claims.
The recovery estimates set forth below are preliminary and are generally based upon information available to the Debtors as of October 15, 2012. The preliminary value of assets and amount of Claims used to calculate the estimated recoveries may be significantly different than the ultimate values collected and the aggregate amount of Allowed Claims. All Claim amounts were estimated by the Debtors. Moreover, the recovery estimates are based on certain assumptions. Therefore, the actual Distributions under the Plan may be substantially higher or lower than the estimated recoveries set forth
11 below.7 See Section VII.C for a discussion of variances from estimates and projections in this Disclosure Statement and Section IX for an overview of the Recovery Analysis.
The Disbursing Agent will make a payment on account of a Disputed Claim only after, and to the extent that, the Disputed Claim becomes an Allowed Claim. All payments to be made in Cash under the Plan will be made, at the election of the Debtors (or their designated Disbursing Agent), by check or automated clearing house transfer.
SUMMARY CHART OF CLASSIFICATION AND TREATMENT OF CLAIMS AND EQUITY INTERESTS UNDER THE PLAN FOR EACH DEBTOR
ESTIMATED ESTIMATED ESTIMATED RECOVERY IF TREATME ENTITLED AMOUNT OF RECOVERY CLASS CONFIRMATION NT TO VOTE ALLOWED UNDER OBJECTION IS CLAIMS SETTLEMENT FILED
NPC PLAN
NPC Class 1A Impaired Yes $0 100.0% N/A – Other Secured Claims
7 The estimated recoveries set forth in the table represent the estimated recovery of each Class under the Plan. To the extent a Creditor is entitled to satisfy all or a portion of its Claim through setoff, offset, or recoupment, that Creditor’s recovery may be higher than reflected in this Disclosure Statement. Underlying Assumptions Regarding Estimated Allowed/Disputed Claim Amounts: The estimated amount of Allowed Claims excludes certain Claims expected to be satisfied or otherwise resolved on or before the Effective Date. For example, cure amounts payable in respect of assumed contracts are excluded, as those Claims will be satisfied in connection with the contract assumption. Further, Claims that are addressed in the Plan as ongoing obligations of the Reorganized Debtors that are not discharged by the Plan are expected to be resolved as of the Effective Date, such as the Pension Benefit Guaranty Corp.’s Claim, USW’s Claims regarding certain collective bargaining agreements, and certain Claims regarding workers compensation – these Claims will not be counted for purposes of calculating the amount to be deposited in the Disputed Claims Reserve. Further, pension liability Claims regarding NewPage Port Hawkesbury Holding LLC are excluded because the Claims (which were meritless) have been waived as a result of the sale of NPPH. Also excluded are the First Lien Notes Deficiency Claims, which are waived under the Plan as to the Settlement Cash and up to the first $50 million of Litigation Trust proceeds.
The Settlement Cash and the Litigation Trust Initial Proceeds shall be distributed among the Debtors (other than the Non-Proponent Debtors) for subsequent pro rata Distribution to each Debtor's (other than the Non-Proponent Debtors’) respective Creditors. The distribution of Settlement Cash and the Litigation Trust Initial Proceeds among the Debtors' (other than the Non-Proponent Debtors’) Estates shall be made in a manner such that Creditors of each Debtor (other than the Non-Proponent Debtors) shall receive approximately the same percentage of their Allowed Claims from the sum of the Settlement Cash and the Litigation Trust Initial Proceeds; provided, however, that if the Bankruptcy Court finds that the foregoing distribution method is contrary to law, then the Settlement Cash will be allocated among the Debtors (other than the Non-Proponent Debtors) based on each Debtor’s (other than the Non- Proponent Debtors’) book value of assets and then, within each Debtor (other than the Non-Proponent Debtors), pro rata to its Creditors.
If the Committee or Second Lien Group files an objection to confirmation of the Plan, the Distribution under the Plan to NPC Class 3A, NPC Class 3C, GD Class 3A, and GD Class 3C may change, as applicable.
12 ESTIMATED ESTIMATED ESTIMATED RECOVERY IF TREATME ENTITLED AMOUNT OF RECOVERY CLASS CONFIRMATION NT TO VOTE ALLOWED UNDER OBJECTION IS CLAIMS SETTLEMENT FILED
NPC Class 1B Impaired Yes $1,601,507,818 56.6% 56.7% – First Lien Notes Claims
NPC Class 2 – Unimpaired No (presumed $0 100.0% N/A Non-Tax to accept) Priority Claims
NPC Class Impaired Yes $29,287,522 5.2%8 2.4%9 3A– General Unsecured Claims
NPC Class 3B Impaired Yes $735,000,000 Unknown N/A –First Lien Notes Deficiency Claims
NPC Class 3C Impaired Yes $1,060,315,839 5.9% 3.9% – Second Lien Notes Claims
NPC Class 3D Impaired Yes $207,884,353 0.2% N/A – Senior Subordinated Unsecured Notes Claims
NPC Class 3E Impaired Yes $21,378,534 15.0% 10 N/A – Qualified Trade Creditor Claims
8 If all holders of General Unsecured Claims decline to elect treatment as Qualified Trade Creditors and remain holders of General Unsecured Claims, then the General Unsecured Claims recovery would be 5.0%, while the Second Lien Notes Claims recovery would be 5.7%.
9 If all holders of General Unsecured Claims decline to elect treatment as Qualified Trade Creditors and remain holders of General Unsecured Claims, then the General Unsecured Claims recovery would be 2.3%, while the First Lien Notes Claims recovery would be 57.9%. Second Lien Notes Claims recovery would be 3.9%.
10 15% of its Allowed Claim over a two year period, in installments no less frequent than four equal semiannual payments (without interest).
13 ESTIMATED ESTIMATED ESTIMATED RECOVERY IF TREATME ENTITLED AMOUNT OF RECOVERY CLASS CONFIRMATION NT TO VOTE ALLOWED UNDER OBJECTION IS CLAIMS SETTLEMENT FILED
NPC Class 4 – Impaired No (deemed $0 0.0% N/A Debtor to reject) Intercompany Claims
NPC Class 5 – Impaired No (deemed $0 0.0% N/A Equity Interests to reject)
CHILLICOTHE PAPER INC. (“CHILLICOTHE”) PLAN
Chillicothe Impaired Yes $0 100.0% N/A Class 1A – Other Secured Claims
Chillicothe Impaired Yes $1,601,507,818 56.5% 57.9% Class 1B – First Lien Notes Guaranty Claims
Chillicothe Unimpaired No (presumed $0 100.0% N/A Class 2 – Non- to accept) Tax Priority Claims
Chillicothe Impaired Yes $0 5.2%1 2.4%2 Class 3A – General Unsecured Claims
Chillicothe Impaired Yes $735,000,000 Unknown N/A Class 3B – First Lien Notes Deficiency Claims
Chillicothe Impaired Yes $1,060,315,839 5.9% 3.9% Class 3C – Second Lien Notes Guaranty Claims
14 ESTIMATED ESTIMATED ESTIMATED RECOVERY IF TREATME ENTITLED AMOUNT OF RECOVERY CLASS CONFIRMATION NT TO VOTE ALLOWED UNDER OBJECTION IS CLAIMS SETTLEMENT FILED
Chillicothe Impaired Yes $207,884,353 0.2% N/A Class 3D – Senior Subordinated Unsecured Notes Guaranty Claims
Chillicothe Impaired Yes $24,160 15.0% 3 N/A Class 3E – Qualified Trade Creditor Claims
Chillicothe Impaired No (deemed $0 0.0% N/A Class 4 – to reject) Debtor Intercompany Claims
Chillicothe Impaired No (deemed $0 0.0% N/A Class 5 – to reject) Equity Interests
ESCANABA PAPER COMPANY (“ESCANABA”) PLAN
Escanaba Class Impaired Yes $0 100.0% N/A 1A – Other Secured Claims
Escanaba Class Impaired Yes $1,601,507,818 56.5% 57.9% 1B – First Lien Notes Guaranty Claims
Escanaba Class Unimpaired No (presumed $0 100.0% N/A 2 – Non-Tax to accept) Priority Claims
Escanaba Class Impaired Yes $10,245 5.2%1 2.4%2 3A – General Unsecured Claims
15 ESTIMATED ESTIMATED ESTIMATED RECOVERY IF TREATME ENTITLED AMOUNT OF RECOVERY CLASS CONFIRMATION NT TO VOTE ALLOWED UNDER OBJECTION IS CLAIMS SETTLEMENT FILED
Escanaba Class Impaired Yes $735,000,000 Unknown N/A 3B – First Lien Notes Deficiency Claims
Escanaba Class Impaired Yes $1,060,315,839 5.9% 3.9% 3C – Second Lien Notes Guaranty Claims
Escanaba Class Impaired Yes $207,884,353 0.2% N/A 3D – Senior Subordinated Unsecured Notes Guaranty Claims
Escanaba Class Impaired Yes $4,839,084 15.0%3 N/A 3E – Qualified Trade Creditor Claims
Escanaba Class Impaired No (deemed $0 0.0% N/A 4 – Debtor to reject) Intercompany Claims
Escanaba Class Impaired No (deemed $0 0.0% N/A 5 – Equity to reject) Interests
LUKE PAPER COMPANY (“LUKE”) PLAN
Luke Class 1A Impaired Yes $0 100.0% N/A – Other Secured Claims
Luke Class 1B Impaired Yes $1,601,507,818 56.5% 57.9% – First Lien Notes Guaranty Claims
Luke Class 2 – Unimpaired No (presumed $0 100.0% N/A Non-Tax to accept) Priority Claims
16 ESTIMATED ESTIMATED ESTIMATED RECOVERY IF TREATME ENTITLED AMOUNT OF RECOVERY CLASS CONFIRMATION NT TO VOTE ALLOWED UNDER OBJECTION IS CLAIMS SETTLEMENT FILED
Luke Class 3A Impaired Yes $97,786 5.2%1 2.4%2 – General Unsecured Claims
Luke Class 3B Impaired Yes $735,000,000 Unknown N/A – First Lien Notes Deficiency Claims
Luke Class 3C Impaired Yes $1,060,315,839 5.9% 3.9% – Second Lien Notes Guaranty Claims
Luke Class 3D Impaired Yes $207,884,353 0.2% N/A – Senior Subordinated Unsecured Notes Guaranty Claims
Luke Class 3E Impaired Yes $5,433,461 15.0% 3 N/A – Qualified Trade Creditor Claims
Luke Class 4 – Impaired No (deemed $0 0.0% N/A Debtor to reject) Intercompany Claims
Luke Class 5 – Impaired No (deemed $0 0.0% N/A Equity Interests to reject)
NEWPAGE CANADIAN SALES, LLC (“NPCS”) PLAN
NPCS Class Impaired Yes $0 100.0% N/A 1A – Other Secured Claims
NPCS Class Impaired Yes $1,601,507,818 56.5% 57.9% 1B – First Lien Notes Guaranty Claims
17 ESTIMATED ESTIMATED ESTIMATED RECOVERY IF TREATME ENTITLED AMOUNT OF RECOVERY CLASS CONFIRMATION NT TO VOTE ALLOWED UNDER OBJECTION IS CLAIMS SETTLEMENT FILED
NPCS Class 2 Unimpaired No (presumed $0 100.0% N/A – Non-Tax to accept) Priority Claims
NPCS Class Impaired Yes $0 5.2%1 2.4%2 3A – General Unsecured Claims
NPCS Class Impaired Yes $735,000,000 Unknown N/A 3B – First Lien Notes Deficiency Claims
NPCS Class Impaired Yes $1,060,315,839 5.9% 3.9% 3C – Second Lien Notes Guaranty Claims
NPCS Class Impaired Yes $207,884,353 0.2% N/A 3D – Senior Subordinated Unsecured Notes Guaranty Claims
NPCS Class 3E Impaired Yes $0 15.0% 3 N/A – Qualified Trade Creditor Claims
NPCS Class 4 Impaired No (deemed $0 0.0% N/A – Debtor to reject) Intercompany Claims
NPCS Class 5 Impaired No (deemed $0 0.0% N/A – Equity to reject) Interests
NEWPAGE CONSOLIDATED PAPERS INC. (“NPCP”) PLAN
NPCP Class Impaired Yes $0 100.0% N/A 1A – Other Secured Claims
18 ESTIMATED ESTIMATED ESTIMATED RECOVERY IF TREATME ENTITLED AMOUNT OF RECOVERY CLASS CONFIRMATION NT TO VOTE ALLOWED UNDER OBJECTION IS CLAIMS SETTLEMENT FILED
NPCP Class Impaired Yes $1,601,507,818 56.5% 57.9% 1B – First Lien Notes Guaranty Claims
NPCP Class 2 Unimpaired No (presumed $0 100.0% N/A – Non-Tax to accept) Priority Claims
NPCP Class Impaired Yes $0 5.2%1 2.4%2 3A – General Unsecured Claims
NPCP Class Impaired Yes $735,000,000 Unknown N/A 3B – First Lien Notes Deficiency Claims
NPCP Class Impaired Yes $1,060,315,839 5.9% 3.9% 3C – Senior Second Lien Notes Guaranty Claims
NPCP Class Impaired Yes $207,884,353 0.2% N/A 3D – Senior Subordinated Unsecured Notes Guaranty Claims
NPCP Class 3E Impaired Yes $0 15.0% 3 N/A – Qualified Trade Creditor Claims
NPCP Class 4 Impaired No (deemed $0 0.0% N/A – Debtor to reject) Intercompany Claims
NPCP Class 5 Impaired No (deemed $0 0.0% N/A – Equity to reject) Interests
NEWPAGE ENERGY SERVICES LLC (“NPES”) PLAN
19 ESTIMATED ESTIMATED ESTIMATED RECOVERY IF TREATME ENTITLED AMOUNT OF RECOVERY CLASS CONFIRMATION NT TO VOTE ALLOWED UNDER OBJECTION IS CLAIMS SETTLEMENT FILED
NPES Class Impaired Yes $0 100.0% N/A 1A – Other Secured Claims
NPES Class 1B Impaired Yes $1,601,507,818 56.5% 57.9% – First Lien Notes Guaranty Claims
NPES Class 2 Unimpaired No (presumed $0 100.0% N/A – Non-Tax to accept) Priority Claims
NPES Class Impaired Yes $0 5.2%1 2.4%2 3A – General Unsecured Claims
NPES Class 3B Impaired Yes $735,000,000 Unknown N/A – First Lien Notes Deficiency Claims
NPES Class 3C Impaired Yes $1,060,315,839 5.9% 3.9% – Second Lien Notes Guaranty Claims
NPES Class Impaired Yes $207,884,353 0.2% N/A 3D – Senior Subordinated Unsecured Notes Guaranty Claims
NPES Class 3E Impaired Yes $0 15.0% 3 N/A – Qualified Trade Creditor Claims
NPES Class 4 Impaired No (deemed $0 0.0% N/A – Debtor to reject) Intercompany Claims
20 ESTIMATED ESTIMATED ESTIMATED RECOVERY IF TREATME ENTITLED AMOUNT OF RECOVERY CLASS CONFIRMATION NT TO VOTE ALLOWED UNDER OBJECTION IS CLAIMS SETTLEMENT FILED
NPES Class 5 Impaired No (deemed $0 0.0% N/A – Equity to reject) Interests
RUMFORD PAPER COMPANY (“RUMFORD”) PLAN
Rumford Class Impaired Yes $0 100.0% N/A 1A – Other Secured Claims
Rumford Class Impaired Yes $1,601,507,818 56.5% 57.9% 1B – First Lien Notes Guaranty Claims
Rumford Class Unimpaired No (presumed $0 100.0% N/A 2 – Non-Tax to accept) Priority Claims
Rumford Class Impaired Yes $3,201,623 5.2%1 2.4%2 3A – General Unsecured Claims
Rumford Class Impaired Yes $735,000,000 Unknown N/A 3B – First Lien Notes Deficiency Claims
Rumford Class Impaired Yes $1,060,315,839 5.9% 3.9% 3C – Second Lien Notes Guaranty Claims
Rumford Class Impaired Yes $207,884,353 0.2% N/A 3D – Senior Subordinated Unsecured Notes Guaranty Claims
Rumford Class Impaired Yes $4,900,936 15.0% 3 N/A 3E – Qualified Trade Creditor Claims
21 ESTIMATED ESTIMATED ESTIMATED RECOVERY IF TREATME ENTITLED AMOUNT OF RECOVERY CLASS CONFIRMATION NT TO VOTE ALLOWED UNDER OBJECTION IS CLAIMS SETTLEMENT FILED
Rumford Class Impaired No (deemed $0 0.0% N/A 4 – Debtor to reject) Intercompany Claims
Rumford Class Impaired No (deemed $0 0.0% N/A 5 – Equity to reject) Interests
NEWPAGE PORT HAWKESBURY HOLDING LLC (“NPPHH”) PLAN
NPPHH Class Impaired Yes $0 100.0% N/A 1A – Other Secured Claims
NPPHH Class Impaired Yes $1,601,507,818 56.5% 57.9% 1B – First Lien Notes Guaranty Claims
NPPHH Class Unimpaired No (presumed $0 100.0% N/A 2 – Non-Tax to accept) Priority Claims
NPPHH Class Impaired Yes $0 5.2%1 2.4%2 3A – General Unsecured Claims
NPPHH Class Impaired Yes $735,000,000 Unknown N/A 3B – First Lien Notes Deficiency Claims
NPPHH Class Impaired Yes $1,060,315,839 5.9% 3.9% 3C – Second Lien Notes Guaranty Claims
NPPHH Class Impaired Yes $207,884,353 0.2% N/A 3D – Senior Subordinated Unsecured Notes Guaranty Claims
22 ESTIMATED ESTIMATED ESTIMATED RECOVERY IF TREATME ENTITLED AMOUNT OF RECOVERY CLASS CONFIRMATION NT TO VOTE ALLOWED UNDER OBJECTION IS CLAIMS SETTLEMENT FILED
NPPHH Class Impaired Yes $0 15.0% 3 N/A 3E – Qualified Trade Creditor Claims
NPPHH Class Impaired No (deemed $0 0.0% N/A 4 – Debtor to reject) Intercompany Claims
GD Class 5 – Impaired No (deemed $0 0.0% N/A Equity Interests to reject)
23 UPLAND RESOURCES INC. (“UPLAND”) PLAN
Upland Class Impaired Yes $0 100.0% N/A 1A – Other Secured Claims
Upland Class Impaired Yes $1,601,507,818 56.5% 57.9% 1B – First Lien Notes Guaranty Claims
Upland Class 2 Unimpaired No (presumed $0 100.0% N/A – Non-Tax to accept) Priority Claims
Upland Class Impaired Yes $0 5.2%1 2.4%2 3A – General Unsecured Claims
Upland Class Impaired Yes $735,000,000 Unknown N/A 3B – First Lien Notes Deficiency Claims
Upland Class Impaired Yes $1,060,315,839 5.9% 3.9% 3C – Second Lien Notes Guaranty Claims
Upland Class Impaired Yes $207,884,353 0.2% N/A 3D – Senior Subordinated Unsecured Notes Guaranty Claims
Upland Class Impaired Yes $0 15.0% 3 N/A 3E – Qualified Trade Creditor Claims
Upland Class 4 Impaired No (deemed $0 0.0% N/A – Debtor to reject) Intercompany Claims
Upland Class 5 Impaired No (deemed $0 0.0% N/A – Equity to reject) Interests
24 WICKLIFFE PAPER COMPANY LLC (“WICKLIFFE”) PLAN
Wickliffe Class Impaired Yes $0 100.0% N/A 1A – Other Secured Claims
Wickliffe Class Impaired Yes $1,601,507,818 56.5% 57.9% 1B – First Lien Notes Guaranty Claims
Wickliffe Class Unimpaired No (presumed $0 100.0% N/A 2 – Non-Tax to accept) Priority Claims
Wickliffe Class Impaired Yes $37,349 5.2%1 2.4%2 3A – General Unsecured Claims
Wickliffe Class Impaired Yes $735,000,000 Unknown N/A 3B – First Lien Notes Deficiency Claims
Wickliffe Class Impaired Yes $1,060,315,839 5.9% 3.9% 3C – Second Lien Notes Guaranty Claims
Wickliffe Class Impaired Yes $207,884,353 0.2% N/A 3D – Senior Subordinated Unsecured Notes Guaranty Claims
Wickliffe Class Impaired Yes $7,574,539 15.0% 3 N/A 3E – Qualified Trade Creditor Claims
Wickliffe Class Impaired No (deemed $0 0.0% N/A 4 – Debtor to reject) Intercompany Claims
Wickliffe Class Impaired No (deemed $0 0.0% N/A 5 – Equity to reject) Interests
25 NPWSI PLAN
NPWSI Class Impaired Yes $0 100.0% N/A 1A – Other Secured Claims
NPWSI Class Impaired Yes $1,601,507,818 56.5% 57.9% 1B – First Lien Notes Guaranty Claims
NPWSI Class 2 Unimpaired No (presumed $0 100.0% N/A – Non-Tax to accept) Priority Claims
NPWSI Class Impaired Yes $31,393,931 5.2%1 3.7%11 3A – General Unsecured Claims
NPWSI Class Impaired Yes $735,000,000 Unknown N/A 3B – First Lien Notes Deficiency Claims
NPWSI Class Impaired Yes $1,060,315,839 5.9% 3.9% 3C – Second Lien Notes Guaranty Claims
NPWSI Class Impaired Yes $207,884,353 0.2% N/A 3D – Senior Subordinated Unsecured Notes Guaranty Claims
NPWSI Class Impaired Yes $13,499,880 15.0% 3 N/A 3E – Qualified Trade Creditor Claims
NPWSI Class 4 Impaired No (deemed $0 0.0% N/A – Debtor to reject) Intercompany Claims
11 If all holders of General Unsecured Claims decline to elect treatment as Qualified Trade Creditors and remain holders of General Unsecured Claims, then the NPWSI General Unsecured Claims recovery would be 3.6%, while the First Lien Notes Claims recovery would be 57.9%. Second Lien Notes Claims recovery would be 3.9%.
26 NPWSI Class 5 Impaired No (deemed $0 0.0% N/A – Equity to reject) Interests
III. DESCRIPTION AND HISTORY OF THE COMPANY’S BUSINESSES
A. Pre-Bankruptcy Business
1. The Company’s History
The Debtors and their non-debtor subsidiaries and affiliates (collectively, the “Company”) comprise the largest coated paper manufacturer in North America based on production capacity. One of the Debtors’ paper mills has its roots in the West Virginia Paper Company (a/k/a the West Virginia Pulp & Paper Company, and later, MeadWestvaco Corporation) that was established in 1888 by William Luke along the Potomac River in Maryland and West Virginia. On May 2, 2005, the printing and writing papers business of MeadWestvaco was acquired by NewPage. The acquisition was financed through a series of debt financings described in more detail below.
Post-acquisition, the Company was comprised of five pulp and paper manufacturing mills in Kentucky, Maine, Maryland, Michigan, and Ohio. In April 2006, the Company sold its carbonless operations located in Ohio to P.H. Glatfelter Company, and in 2007, the Company purchased the North American paper-making operations of Stora Enso Oyj (“SEO”), which included mills in Minnesota, Wisconsin, and Nova Scotia, Canada. In connection with the acquisition, SEO acquired 11,251,326 shares of the equity in NPG. NPG owns 100% of the common stock of NPH, which in turn owns 100% of the common stock of NPC. NPC is the Company’s primary operating subsidiary and directly and indirectly owns the other Debtors and various other affiliated non-debtor entities. NPC’s subsidiary Debtors own and operate the various paper mills in the United States. Non-debtor subsidiary NewPage Port Hawkesbury Corp. (“NPPH”) owns and operates the paper mill in Nova Scotia, Canada.12 NPPH was restructured and sold to an unrelated third party in the CCAA Proceedings and is now operating as Port Hawkesbury Paper Inc.
2. The Company’s Business
Headquartered in Miamisburg, Ohio, the Debtors’ mills primarily produce coated paper, which is typically used for magazines, magazine covers and inserts, corporate annual reports, high-end advertising brochures, direct mail advertising, coated labels, catalogs, and textbooks. While the Company also manufactures supercalendered paper, uncoated paper, and specialty labels,13 coated paper represented approximately 74% of its net sales for the twelve months ended June 30, 2012. Approximately 90% of the Company’s sales are within the United States.
a. Manufacturing
The Company operates 16 papermaking machines at eight paper mills located in Kentucky, Maine, Maryland, Michigan, Minnesota, and Wisconsin with distribution centers near major print markets. As of June 30, 2012, the Company had a production capacity of approximately 3.5 million
12 NPPH commenced proceedings under Canada’s Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, in the Supreme Court of Nova Scotia, in Halifax, Nova Scotia, on September 9, 2011 (the “CCAA Proceedings”).
13 See below for a description of these different types of paper.
27 short tons (one short ton equals 2,000 pounds) of paper, including approximately 2.9 million short tons of coated paper, approximately 400,000 short tons of uncoated paper, and approximately 200,000 short tons of specialty paper.
Paper production requires three primary inputs: pulp (wood reduced to its paper-making form), water, and various chemicals. The primary sources for pulp used in paper production are timber and its byproducts, such as wood chips. The Company maintains a policy of obtaining wood produced by trained loggers in compliance with sustainable forestry principles, and produces most of its own pulp from wood logs and wood chips purchased locally. Although the Company purchases limited amounts of pulp directly from other mills, most of the Company’s pulp is produced in-house at its various mills. Excess pulp produced at the Company mills is sold to third parties in the United States and internationally.
Once wood has been reduced to pulp, it is then bleached and refined to adjust the length and surface area of the pulp fibers. The pulp is then mixed with other materials, including clay, calcium carbonate, and starch, and is uniformly distributed onto a continuous screen to extract water and form a web. The web is further pressed between large rollers and dried with steam to remove the remaining water. If the paper is to be coated, it is passed through coating machines where latex-based coatings are applied. The paper is then wound onto large rolls and is eventually shipped in its roll form or cut into sheets and delivered to merchants, printers, and end-users.
Water and chemicals are used in virtually every step of the papermaking process. The Company’s primary water supply is derived from local lakes or rivers, which require applicable licenses and permits for its usage. Various chemicals are used throughout the pulping, bleaching, and paper- making process. These chemical products are purchased by the Company from various suppliers.
Because paper production is also energy intensive, the Company generates power at most of its facilities using by-products of the manufacturing process to off-set its need to procure energy from outside sources. Of the energy produced by the Company, most of it is used internally. The Company typically produces approximately 50% of its energy requirements by burning biomass-related fuels, some of which are by-products of paper production, including black liquor, wood waste, and bark. For the balance of its energy needs, the Company either purchases its energy directly from third parties (principally electricity or steam) or purchases various energy-related products from outside suppliers, including natural gas, fuel oil, petroleum coke, tire-derived fuel, coal, and wood waste to generate electricity and steam.
One of the Debtors’ non-debtor affiliates, Consolidated Water Power Co. (“CWPCo”), provides electricity to the Debtors’ mills located in central Wisconsin. CWPCo has 33.3 megawatts of generating capacity on 39 generators located in five hydroelectric plants on the Wisconsin River. CWPCo is a regulated public utility and also provides electricity to a small number of residential, light commercial, and light industrial customers.
b. Primary Products
As noted, the Company’s paper products include coated paper, supercalendered paper, and specialty paper.
Coated Paper: Coated paper is paper coated with certain chemical compounds to enhance gloss, smoothness, and surface qualities, such as ink absorption. Coated paper consists of both coated freesheet and coated groundwood. Coated freesheet papers comprised 68% of the coated paper produced by the Company for the twelve months ended June 20, 2012, and is typically used for printing
28 higher-end brochures, annual reports, and yearbooks, among other things. Coated groundwood paper comprised 32% of the coated paper produced by the Company for the twelve months ended June 30, 2012. Generally lighter, less expensive, and not as bright as coated freesheet paper, coated groundwood paper is typically used in catalogs and magazines, among other things.
Supercalendered Paper: Supercalendered paper is uncoated paper pressed to give it a gloss and smoothness similar to coated paper. The Company primarily produces supercalendered paper for magazines, catalogs, advertisements, inserts, and flyers.
Specialty Paper: Specialty paper is primarily used in producing labels and packaging for other products, including food wrappers and packaging, glass and plastic bottle labels, and technical labels used by shipping industries.
c. Sales, Marketing, and Distribution
The Company sells paper products primarily in the United States and Canada, using three sales channels: (a) direct sales, which consist of sales made directly to end-use customers (primarily large companies such as publishers, printers, and retailers); (b) merchant sales, which consist of sales made to paper merchants and brokers, who in turn sell to end-use customers; and (c) specialty sales, which consist of sales made to packaging and label manufacturers.
As part of its distribution chain, the Company owns and leases space in a number of warehouses and uses third parties to ship its products by truck and rail.
B. Reorganized Debtors’ Businesses
The Debtors plan to continue their businesses after emergence from these Chapter 11 Cases. To that end, the Debtors have developed a post-confirmation business plan with the intent of increasing sales and profitability.
Significant risks are inherent in the Debtors’ ability to achieve their business plan. All holders of Claims and Equity Interests should carefully read and consider fully the “Important Information” section at the front of this Disclosure Statement and Section VII, “Risk Factors and Other Factors to be Considered.”
C. Employees
As of the date of this Disclosure Statement, the Debtors employ approximately 6,000 individuals located at NPC’s headquarters in Miamisburg, Ohio, at the eight domestic mill locations, and in various sales offices and other locations throughout the United States. Approximately 70% of the Debtors’ employees are represented by labor unions, including the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL- CIO/CLC (the “USW”); the International Brotherhood of Electrical Workers; the International Association of Machinists and Aerospace Workers; the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada; the Teamsters, Chauffeurs, Warehousemen and Helpers; and the Office & Professional Employees’ International Union (together with their respective local unions, the “Unions”). Pursuant to a Memorandum of Agreement ratified by the Unions on June 4, 2012, the Debtors consensually modified their collective bargaining agreements, subject to approval by the Bankruptcy Court. A motion seeking that approval is pending in the Bankruptcy Court. Pursuant to the Plan, the Debtors intend to assume the collective bargaining agreements, as modified, as of the Effective Date.
29 D. Publicly Available Information
Certain historical financial and other information about NPC can be found in, among other publicly available sources, (i) the Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed by NPC with the U.S. Securities and Exchange Commission (the “SEC”) on February 17, 2011; (ii) the Quarterly Report on Form 10-Q for the period ended March 31, 2011, filed by NPC with the SEC on May 12, 2011; and (iii) the Quarterly Report on Form 10-Q for the period ended June 30, 2011, filed by NPC with the SEC on August 15, 2011. The documents are available at http://investors.newpagecorp.com/sec-filings. Documents filed by NPC with the SEC may be read at and copied from the SEC’s Public Reading Room located at 450 Fifth Street, N.W., Washington D.C. 20549. Information on the operation of the Public Reading Room may be obtained by calling the SEC at 1-800- SEC-0300. The SEC also maintains an Internet site (www.sec.gov) through which reports and other information regarding NPC and its subsidiaries may be accessed.
The Debtors’ monthly operating reports are available on the Bankruptcy Court’s Electronic Case Filing System, which can be found at www.deb.uscourts.gov, the official website for the Bankruptcy Court.14 See Section VII for important information that should be considered when reviewing the Debtors’ financial information.
E. Prepetition Indebtedness
1. Revolving Credit Facility
NPC was the borrower under a Revolving Credit and Guaranty Agreement, dated as of December 21, 2007 (as amended, the “Senior Secured Revolver”) with various lenders (the “Revolver Lenders”). Each of the Debtors (other than NPG) and NPPH were guarantors under the Senior Secured Revolver (collectively, the “Revolver Guarantors”). As of June 30, 2011, the Senior Secured Revolver had a total commitment of $500 million, of which there was $131 million of borrowings (excluding L/C’s) outstanding and $101 million in L/C’s issued but undrawn. Amounts outstanding under the Senior Secured Revolver bore interest at a rate per annum equal to either (i) the base rate plus 2.5%, or (ii) LIBOR plus 3.5%. NPC and each of the Revolver Guarantors granted the Revolver Lenders a first priority security interest in, and lien against, present and future cash, deposit accounts, accounts receivable, inventory, and intercompany debt (the “ABL Collateral”) to secure their obligations under the Senior Secured Revolver.
On the Commencement Date, the Debtors filed the Debtors’ Motion for Interim and Final Orders Pursuant to 11 U.S.C. Sections 361, 362, 363, and 364: (i) Authorizing Debtors to (a) Obtain Post-Petition Financing, and (b) Grant Senior Liens, Junior Liens, and Superpriority Administrative Expense Priority; (ii) Approving Use of Cash Collateral; (iii) Granting Adequate Protection to Certain Prepetition Secured Parties; (iv) Scheduling a Final Hearing; and (iv) Granting Related Relief [Docket No. 19] (the “DIP Motion”). The DIP Motion, among other things, sought approval to repay in full the borrowings and other obligations existing under the Senior Secured Revolver simultaneously with the initial borrowing under the DIP Credit Agreement and deem the L/C’s outstanding under the Senior Secured Revolver to have been issued and/or provided (as applicable) under the DIP Credit Agreement. On October 5, 2011, the Bankruptcy Court issued a final order approving the DIP Motion and authorizing the Debtors to enter into the DIP Credit Agreement [Docket No. 310] (the “DIP Order”). The obligations under the Senior Secured Revolver were fully satisfied as of September 8, 2011. As discussed in Section V.A.5 below, the Committee appealed the DIP Order and this appeal will be dismissed as part of the Settlement.
14 The Debtors’ monthly operating reports are also available at http://kccllc.net/NewPage.
30 2. First Lien Notes
NPC is also the issuer of $1.77 billion in face amount of 11.375% senior secured first lien notes due 2014 (the “First Lien Notes”) pursuant to an indenture dated as of September 30, 2009, among NPC, as issuer, Bank of New York Mellon, as indenture trustee, the Guarantor Debtors and NPWSI. The obligations of NPC and each of the Guarantor Debtors and NPWSI under the First Lien Notes are secured by a first-priority lien against substantially all their respective assets (the “Fixed Collateral”) other than the ABL Collateral, and by a second priority lien on the ABL Collateral.
3. Second Lien Notes
NPC is also the issuer of the second lien notes consisting of (i) approximately $806 million in face amount of 10% fixed rate senior secured second lien notes (the “Second Lien Fixed Rate Notes”), pursuant to an indenture dated as of May 2, 2005, among NPC, as issuer, Wilmington Trust, National Association, as successor indenture trustee, the Guarantor Debtors, and NPWSI and (ii) approximately $225 million in face amount of floating rate senior secured second lien notes (the “Second Lien Floating Rate Notes,” and together with the Second Lien Fixed Rate Notes, the “Second Lien Notes”), pursuant to an indenture, dated as of May 2, 2005, among NPC, as issuer, Wilmington Trust, National Association, as successor indenture trustee, the Guarantor Debtors, and NPWSI. The Second Lien Notes matured on May 1, 2012.
The obligations of NPC and each of the Guarantor Debtors and NPWSI under the Second Lien Notes are secured by a second-priority lien on the Fixed Collateral. The Second Lien Notes are subject to a lien subordination in favor of the First Lien Notes, and are senior in right of payment to the Senior Subordinated Unsecured Notes.
4. Senior Subordinated Unsecured Notes
NPC is also the issuer of the 12% senior unsecured subordinated notes due 2013 (the “Senior Subordinated Unsecured Notes”) pursuant to an indenture, dated as of May 2, 2005, among NPC, as issuer, HSBC Bank USA, National Association, as successor indenture trustee, the Guarantor Debtors, and NPWSI. The Senior Subordinated Unsecured Notes have an outstanding balance of approximately $200 million. The Senior Subordinated Unsecured Notes are subordinated in right of payment to the First Lien Notes and Second Lien Notes.
5. 2013 PIK Notes
NPH is the issuer of floating rate senior unsecured paid-in-kind notes due 2013 (the “2013 PIK Notes”) pursuant to an indenture, dated as of May 2, 2005, between NPH, as issuer, and U.S. Bank, National Association, as successor indenture trustee. The 2013 PIK Notes have a current balance outstanding of approximately $228 million. The 2013 PIK Notes are unsecured and not guaranteed by any of the Debtors.
6. 2015 PIK Notes
In connection with the 2007 Acquisition, NPG issued to SEO approximately $200 million in aggregate principal amount of floating rate senior unsecured paid-in-kind notes due 2015 (the “2015 PIK Notes”), pursuant to an indenture dated as of December 21, 2007, between NPG, as issuer, and Deutsche Bank Trust Company Americas, as successor indenture trustee. The 2015 PIK Notes have a current outstanding balance of approximately $270 million and mature on December 21, 2015. The 2015 PIK Notes are unsecured and are not guaranteed by any of the Debtors.
31 IV. EVENTS LEADING TO THE COMMENCEMENT OF THE CHAPTER 11 CASES
A. The Debtors’ Operations and Significant Debt Obligations
Several factors contributed to the commencement of these Chapter 11 Cases. As with any business, the Debtors’ financial performance depends primarily on the demand for their products and the prices at which they can be sold. In the last few years, the Debtors experienced a significant decline in the North American demand for coated paper, which has impacted many of the markets for the Debtors’ key products. The North American paper industry is cyclical and prices for paper, like other cyclical products, are largely affected by the relation of demand to available supply. The North American coated paper demand is primarily driven by advertising and print media usage. In particular, the demand for certain grades of coated paper is affected by spending on catalogue and promotional materials by retailers and spending on magazine advertising, which affects the number of printed pages in magazines. The “great recession” and accelerated digital substitution have resulted in a general decrease in both advertising spending and magazine/catalog circulation, as well as an overall decline in the demand for coated paper, the Debtors’ primary product. Negative trends in advertising, increases in the use of electronic data transmission and storage, continued expansion of the Internet as a medium for numerous advertising and marketing applications, an increased demand for electronic reading material, and increased postal rates, have also contributed to substantial demand decline and volatility in the pulp and paper industry.
In addition, despite the decline in North American demand, foreign imports from Europe and Asia, driven by similar overcapacity in their own markets, continued to have a negative impact on North American coated paper producers. This led to significant levels of market-related downtime and temporary shutdowns, especially during 2008 and 2009. Accordingly, from January 2008 through December 2011, mills and machines comprising the paper industry throughout North America with gross coated paper capacity of more than 3 million tons were closed or re-aligned to produce other types of paper.
Finally, the rising costs of raw materials, including significant increases in energy, fuel and chemicals costs, also negatively impacted the Debtors’ financial performance, liquidity and stability. Wood prices are affected directly by the cost of wood in the Debtors’ regional locations and indirectly by the effect of higher fuel costs on logging and transportation of timber to the Debtors’ facilities. While the Debtors have fiber supply agreements in place that ensure a portion of their wood requirements, purchases under these agreements are typically at market rates. The prices of market pulp and chemicals have also fluctuated significantly. Pulp prices fluctuate due to changes in worldwide consumption of pulp, pulp capacity additions, expansions or curtailments affecting the supply of pulp, changes in inventory levels by pulp consumers (which affect short-term demand) and pulp producer cost changes related to wood availability and environmental issues. Certain chemicals used in the papermaking process are petroleum- based and also fluctuate with the price of crude oil.
Pulp and paper manufacturing is energy intensive. While the Debtors produce a large portion of their energy requirements from burning wood waste and other byproducts of the paper manufacturing process, during 2011, the Debtors generated only approximately 50% of their energy requirements from these sources. The remaining energy (consisting of electricity and fuels, primarily natural gas, fuel oil, and coal) was purchased from third-party suppliers. Crude oil and other energy costs remain volatile.
Notwithstanding the significant reduction in coated paper demand and increased input costs, the Debtors were able to significantly improve performance during the first half of 2011, generating significant levels of EBITDA and cash flow, through a combination of increased prices and operational
32 streamlining. However, the Debtors’ operational improvements were insufficient to offset the higher inflation and lower demand for coated paper products. With the Debtors’ cash position already significantly constrained, negative press regarding the Debtors’ ability to refinance its maturing debt obligations caused vendors to significantly slash trade terms or to switch to pay in advance or cash on delivery — adding additional stress to the Debtors’ already precarious cash situation resulting from their high debt service.
By the second quarter of 2011, as a result of the above factors, the Debtors’ liquidity position became severely constrained, and the Debtors began to consider various restructuring alternatives. The Debtors retained Lazard Frères & Co. (“Lazard”) to analyze and determine whether an out-of-court restructuring of the Debtors’ balance sheet would be possible. At that time, Lazard considered various options to improve the Debtors’ liquidity and debt positions, including increasing the borrowing capacity under the Debtors’ Senior Secured Revolver and refinancing certain debt obligations. Lazard’s efforts were met with a general market unwillingness to provide the Debtors with additional financing or to increase the Debtors’ borrowing base. The lack of market interest in an out-of-court restructuring, coupled with the Debtors’ increasing needs to service, and in the near term refinance the majority of, their long-term debt obligations, were important factors influencing the Debtors’ conclusion that an out-of-court restructuring was increasingly unlikely.
Accordingly, after considering all available options, the Debtors determined that their burdensome long-term debt obligations were impeding their ability to continue the strides in operational improvements they had been making in 2011. Having concluded that seeking chapter 11 relief would be in their best interests, as well as those of their creditors and other parties in interest, the Debtors commenced these Chapter 11 Cases.
B. Canadian Operations and Settlement and Transition Agreement
NPPH had been operating cash flow negative for some time, incurring operating losses of approximately $4 million per month, due to the same declining market demand for NPPH’s paper products and rising input costs that adversely impacted the Debtors. The relative value of the Canadian dollar to the U.S. dollar further exacerbated the impact on NPPH. Accordingly, during the year prior its commencement of Canadian restructuring proceedings, NPPH had examined various restructuring alternatives, including the potential marketing and sale of its Canadian business operations. As negotiations surrounding a potential sale ensued, NPPH’s performance continued to decline. Ultimately, NPPH determined to implement a process for an orderly shutdown of its operations, while at the same time preserving its assets for a potential sale as a going concern. During this period, NPC continued to support NPPH operations with both administrative and financial services in the ordinary course to bridge it to a potential sale, notwithstanding NPPH’s declining performance.
On August 22, 2011, NPPH announced it had scheduled planned down-time for its mill, targeting the shutdown of its newsprint paper production on September 10, 2011, and its supercalendered paper production on September 16, 2011. NPPH intended to maintain its paper making machines in “hot idle” post-September 16, 2011, allowing for the substantial shutdown of the manufacturing facilities of NPPH, but continuing to maintain the machines to facilitate start-up, support a future sale process, and preserve their value.
In connection with the planned down-time for NPPH and eventual “hot idle” state, NPC determined it was appropriate to provide certain services to NPPH to assist NPPH with the closure of its mill, maintenance of its machines, and realization of its outstanding accounts receivable, and to resolve complex issues surrounding disputed ownership of certain accounts receivable and inventory. Accordingly, on September 1, 2011, NPC and NPPH entered into a Settlement and Transition Agreement
33 (the “Settlement Agreement”), which provided, among other things, for NPC to pay $25 million (the “Settlement Funds”) in settlement of certain potential disputes over certain accounts receivable and inventory existing on, or arising after, September 2, 2011. In addition, NPC was required to pay certain amounts necessary for NPPH to continue operations pending a sale or wind-down process. The Settlement Agreement further contemplated that NPC and NPPH would each provide limited administrative and other services during a transition period. By order dated September 9, 2011, the Canadian court approved the Settlement Agreement. The Settlement Agreement was disclosed to the Bankruptcy Court upon commencement of these Chapter 11 Cases. [Docket No. 3]. The Settlement Agreement was the subject of the Committee’s investigation, and was resolved as part of the Settlement. See further discussion below, at Section V.C.3.
V. DEBTORS’ CHAPTER 11 CASES
After carefully reviewing and exploring their alternatives and after implementing numerous cost-saving strategies, the Debtors concluded an orderly reorganization of their obligations under chapter 11 was the best of all available strategic options to maximize value for their creditors, shareholders, and other parties in interest.
On September 7, 2011, each of the Debtors commenced voluntary cases for relief under chapter 11 of the Bankruptcy Code. Shortly after the Commencement Date, the Bankruptcy Court approved certain “first day” orders designed to minimize the disruption of the Debtors’ business operations and to facilitate their Chapter 11 Cases.
A. First Day Orders and Other Postpetition Orders
1. Case Administration Orders
Upon the commencement of these Chapter 11 Cases, the Bankruptcy Court issued certain orders facilitating the administration of these Chapter 11 Cases. These orders (i) directed joint administration of the Chapter 11 Cases of the Debtors, (ii) established interim compensation procedures for professionals, (iii) authorized the Debtors or their agent, KCC, to act as agent for the clerk of the Bankruptcy Court in noticing all matters customarily noticed by the clerk pursuant to the Bankruptcy Code, and (iv) enforced the Bankruptcy Code’s automatic stay and anti-discrimination provisions [Docket Nos. 55, 301, 61, and 56, respectively].
2. Waiver of Reporting Requirements
On September 20, 2011, the Debtors filed a motion requesting waiver of certain reporting requirements under Rule 2015.3 of the Bankruptcy Rules for non-debtor subsidiaries or affiliates [Docket No. 163]. The motion was approved on a final basis by an agreed order entered by the Bankruptcy Court on November 9, 2011 [Docket No. 516].
3. Business Operations
a. Cash Management
On September 8, 2011, the Bankruptcy Court authorized the Debtors to (i) maintain their existing cash management system, (ii) maintain existing bank accounts, (iii) maintain existing investment practices with financial institutions, and (iv) maintain existing business forms [Docket No. 57].
34 b. Taxes
On September 8, 2011, the Bankruptcy Court authorized the Debtors to (i) pay certain accrued and outstanding prepetition sales, use, franchise, and real and personal property taxes, and such other similar taxes as the Debtors deem necessary, and (ii) pay fees for licenses, permits, and other similar charges and assessments, including any penalties and interest thereon, to various taxing authorities. In connection with this, the Bankruptcy Court authorized banks and other financial institutions to honor and process checks and transfers related to these payments [Docket No. 62].
c. Insurance
On September 8, 2011, the Bankruptcy Court authorized (i) the Debtors to (a) continue their insurance programs and pay, in their sole discretion, any prepetition insurance obligations, (b) renew any insurance policies, and (c) enter into new insurance programs as the terms of the existing programs expire, and (ii) banks and financial institutions to process, honor, and pay all checks and electronic fund transfers relating to the foregoing [Docket No. 63].
d. Utilities
On September 8, 2011, the Bankruptcy Court entered an interim order (i) prohibiting the Debtors’ utility providers from altering, refusing, or discontinuing utility services to the Debtors, (ii) approving the Debtors’ proposed form of adequate assurance, and (iii) establishing procedures for resolving objections thereto by utility providers. [Docket No. 75]. All objections to the interim order were ultimately resolved. A final order granting the requested relief was entered by the Bankruptcy Court on October 4, 2011, and two supplemental final orders, each resolving certain additional objections, were entered on November 9, 2011, and December 21, 2011 [Docket Nos. 299, 515, and 777, respectively].
e. Shippers, Warehousemen, Subcontractors, and Technicians
On September 8, 2011, the Bankruptcy Court authorized (i) the Debtors to pay certain prepetition claims of shippers, warehousemen, subcontractors, and technicians, and (ii) banks and financial institutions to receive, process, honor, and pay all checks and electric fund transfers relating to these payments [Docket No. 60].
f. Critical Vendors
On September 8, 2011, the Bankruptcy Court authorized (i) the Debtors to pay the prepetition claims of certain critical vendors, and (ii) banks and financial institutions to process, honor, and pay all checks and electronic fund transfers relating to the foregoing (the “Critical Vendor Order”) [Docket No. 58].
g. Customer Programs
On September 8, 2011, the Bankruptcy Court entered an order (i) authorizing the Debtors, subject to their business discretion and in their sole judgment, to perform and honor their prepetition obligations under certain customer programs, and continue the customer programs in the ordinary course of business, and (ii) authorizing banks and financial institutions to process, honor, and pay all checks and electric fund transfers relating to these payments (the “Customer Programs Order”) [Docket No. 59]. The Customer Programs Order was amended on October 11, 2011 to reflect oversight provisions requested by the Committee [Docket No. 335]. On February 7, 2011, the Bankruptcy Court
35 entered an order supplementing the amount the Debtors are authorized to spend in connection with the Customer Programs [Docket No. 1059].
h. Reclamation
On October 4, 2011, the Bankruptcy Court issued a final order (i) establishing procedures for reconciling claims arising under section 546(c) of the Bankruptcy Code (the “Reclamation Claims”) asserted by vendors and suppliers, (ii) authorizing, but not directing, the Debtors to return certain goods purchased prior to the Commencement Date, and (iii) prohibiting third parties from interfering with the delivery of the Debtors’ goods. [Docket No. 300].
After a review of asserted Reclamation Claims, on January 5, 2012, the Debtors filed the Notice of Debtors’ Report of Reclamation Claims (the “Reclamation Notice”), listing all asserted Reclamation Claims and amounts, along with the Debtors’ determination of their validity or invalidity. [Docket No. 851]. To the extent parties with claims included in the Reclamation Notice did not object, those claims were deemed valid and allowed, disallowed, or otherwise treated in accordance with the Reclamation Notice without further order of the Bankruptcy Court. The Debtors received sixteen (16) objections to the Reclamation Notice. Several of these objections have been resolved as a result of payments approved by the Bankruptcy Court under other circumstances, including pursuant to the Critical Vendor Order and the assumption of executory contracts. Any allowed Reclamation Claims against the Debtors will be included in NPC and GD Class 3A General Unsecured Claims, as applicable, and are entitled to share in the Settlement Cash Distribution and Litigation Trust proceeds as provided in the Plan.
4. Protection of NOLs and Other Tax Attributes
On the Commencement Date, the Debtors filed a motion seeking to establish procedures with respect to (i) the ownership, acquisition, and disposition of beneficial interests in equity securities in NPG and claims against the Debtors, and (ii) any holder of 50-percent or more of the stock of NPG intending to take a worthless securities deduction under section 165(g) of the Internal Revenue Code of 1986, as amended, with respect to that stock. [Docket No. 14]. By order issued October 4, 2011, the motion was approved on a final basis [Docket No. 307].
5. Debtor in Possession Financing
On the Commencement Date, the Debtors filed a motion seeking authorization to (i) enter into a debtor in possession financing facility, (ii) grant senior liens, junior liens, and superpriority administrative expense claims, (iii) use cash collateral, (iv) provide “adequate protection” to certain prepetition secured parties, and (v) pay, in the Debtors’ discretion, certain amounts in respect of interest, fees, and expenses [Docket No. 19]. By order issued on September 9, 2011, the motion was approved on an interim basis [Docket No. 102].
On October 5, 2011, the Bankruptcy Court issued the final DIP Order which, inter alia, (i) authorized NPC to obtain post-petition financing up to the aggregate principal amount of $600 million, (ii) authorized all the other Debtors to guarantee and be jointly and severally obligated to pay NPC’s obligations in connection with the post-petition financing, (iii) authorized the Debtors to execute and enter into documents related to the post-petition financing, and to perform such other and further acts as may be required in connection with those documents, (iv) granted adequate protection to the Bank of New York as collateral trustee, (v) authorized the Debtors to use cash collateral, (vi) approved certain stipulations by the Debtors as set forth in the DIP Order with respect to certain pre-petition agreements, First Lien Notes agreements, and Second Lien Notes agreements, and the liens and security interests arising therefrom, (vii) granted superpriority administrative expense claims to the DIP Lenders; the DIP
36 Agents; Barclays Capital, the investment banking division of Barclays Bank, as syndication agent; and the holders of Banking Services Obligations15 and Designated Hedging Obligations, and (viii) limited the Debtors’ right to surcharge costs and expenses of preserving or disposing of the collateral securing the obligations as described in the DIP Order [Docket No. 310].
On October 18, 2011, the Committee appealed the portion of the DIP Order that prohibited charging estate expenses against the Collateral of the First Lien Noteholders, Second Lien Noteholders, Notes Collateral Trustees, or Indenture Trustees [Docket No. 358]. The Debtors, First Lien Noteholders and Second Lien Noteholders have opposed the appeal. The appeal is fully briefed and currently pending before the United States District Court for the District of Delaware. The Plan provides that this appeal will be dismissed as part of the Settlements.
6. Claims Process and Bar Date
a. Schedules and Statements
On December 8 and 9, 2011, each of the Debtors filed with the Bankruptcy Court its statement of financial affairs (the “SOFAs”) and schedules of assets and liabilities (the “Schedules”). On June 6, 2012, the Debtors filed certain supplements and amendments to SOFA questions 3b and 3c to reflect, among other things, payments made to certain affiliates of SEO. On June 26, 2012, the Debtors filed certain amendments to Schedule G to reflect additional information that became available to the Debtors after the initial Schedules were filed. On October 23, 2012, the Debtors filed supplements to SOFA question 4a and Schedule F for Debtor NPWSI to reflect information concerning the Antitrust Litigation pending against NPWSI as further described in Section V.D.3 of this Disclosure Statement.
b. Bar Date
On December 13, 2011, the Bankruptcy Court issued an order (the “Bar Date Order”) pursuant to Bankruptcy Rule 3003(c)(3) establishing deadlines for filing proofs of claim against the Debtors [Docket No. 716]. The Bar Date Order fixed February 3, 2012, at 5:00 p.m. (prevailing Pacific Time) as the deadline for proofs of claim filed by any person or entity other than a governmental unit, and March 5, 2012, at 5:00 p.m. (prevailing Pacific Time) as the deadline for proofs of claim filed by any governmental unit.
c. Section 503(b)(9) Claims
Within the first few months of the Chapter 11 Cases, 12 claimants filed motions (the “Section 503(b)(9) Motions”) seeking immediate allowance and/or payment of claims arising under section 503(b)(9) of the Bankruptcy Code (the “Section 503(b)(9) Claims”). Section 503(b)(9) of the Bankruptcy Code provides a creditor with an administrative expense for “the value of any goods received by the debtor within 20 days before the commencement of the case . . . in which the goods have been sold to the debtor in the ordinary course of the debtor’s business.” The Debtors objected to each of the Section 503(b)(9) Motions.
On November 22, 2011, the Debtors filed a motion seeking to establish procedures for the assertion and resolution of Section 503(b)(9) Claims (the “Section 503(b)(9) Procedures”) [Docket
15 For this subsection V.A.5 only, capitalized terms used but not otherwise defined in this subsection or in the Plan are as defined in the DIP Credit Agreement.
37 No. 557]. On December 16, 2011, the Bankruptcy Court entered an order approving the Section 503(b)(9) Procedures [Docket No. 746].
Also on December 16, 2011, the Bankruptcy Court entered an order (i) denying all but one of the Section 503(b)(9) Motions, and (ii) deeming all but one of the Section 503(b)(9) Motions as a proof of claim to be administered in accordance with the Section 503(b)(9) Procedures (the “December 16 Order”) [Docket No. 747]. The Section 503(b)(9) Motion not included in the December 16 Order was resolved through a separate order on January 11, 2012 [Docket No. 878].
Pursuant to the Section 503(b)(9) Procedures and the December 16 Order, the Debtors filed notices on December 28, 2011 and January 30, 2012 identifying (i) Section 503(b)(9) Claims that were the subject of Section 503(b)(9) Motions, (ii) the amount, if any, the Debtors determined to be valid for each such claim, and (iii) any amount the Debtors disputed for each such claim. Three objections were filed to the January 30 notice. Two of those objections have been resolved by stipulation.
On June 1, 2012, the Debtors filed a further notice identifying (i) the balance of timely filed Section 503(b)(9) Claims not listed in the December or the January notices or resolved by separate order, (ii) the amount, if any, the Debtors determined to be valid for each claim, and (iii) the amount, if any, the Debtors disputed for each claim. The Debtors received 17 timely objections. Three of those objections have been withdrawn and six have been resolved by stipulation. The Debtors are in the process of resolving the remaining objections.
7. Executory Contracts and Unexpired Leases
Section 365 of the Bankruptcy Code grants the Debtors the power, subject to the approval of the Bankruptcy Court, to assume or reject executory contracts and unexpired leases (collectively, “Executory Contracts”).
Section 365(d)(4)(A) provides that unexpired leases of nonresidential real property under which a debtor is the lessee are deemed rejected if not assumed by the debtor by the earlier of (a) 120 days from the petition date (subject to extension of up to 90 additional days for cause), or (b) the date of entry of the confirmation order. On December 13, 2011, the Bankruptcy Court issued an order, pursuant to section 365(d)(4)(B)(i) of the Bankruptcy Code, extending the deadline by which the Debtors must assume or reject unexpired leases for nonresidential real property for 90 days, through and including April 4, 2012 [Docket No. 707]. On March 28, 2012, the Bankruptcy Court issued an order authorizing the Debtors to (i) assume 60 of these unexpired leases of nonresidential real property, (ii) assume two additional ones as modified, and (iii) extend the deadline under section 365(d)(4)(A) of the Bankruptcy Code for three more [Docket No. 1351].
During the Chapter 11 Cases, the Bankruptcy Court issued other orders authorizing the rejection or assumption of various Executory Contracts pursuant to section 365 of the Bankruptcy Code.
8. Employee Matters
a. Wages, Compensation, and Employee Benefits
As of the Commencement Date, the Debtors employed approximately 6,000 individuals located at NPC’s headquarters in Miamisburg, Ohio, the eight domestic mill locations, and in various sales offices and other locations throughout the United States. Prior to the Commencement Date and in the ordinary course of their business, the Debtors established for their workforce various benefit plans, policies, and programs including (i) medical insurance, prescription drug coverage, dental insurance,
38 vision insurance, life and accidental death and dismemberment insurance, long- and short-term disability insurance, travel accident insurance, and an employee assistance program, (ii) retiree benefits, (iii) vacation policies, (iv) retirement and savings plan, (v) flexible spending and health savings account, (vi) an executive MBA program, (vii) automobile and homeowner insurance programs, (viii) long-term care insurance, (ix) a critical illness insurance program, and (x) other benefits.
On September 8, 2011, the Bankruptcy Court issued an order authorizing the Debtors to (i) pay prepetition employee obligations, including prepetition employee benefits, and to continue to honor the programs under which those obligations and benefits arise in the ordinary course, and (ii) authorize financial institutions to honor and process related checks and transfers [Docket No. 77].
b. Short-Term Incentive Plan
On November 22, 2011, the Debtors filed a motion seeking (i) approval of the short-term incentive plan (the “STIP”) component of the Debtors’ proposed Executive Incentive Program (the “EIP”) for certain insider participants, and (ii) authorization of payments under the STIP [Docket No. 560]. On December 13, 2011, the Bankruptcy Court entered an order approving the STIP [Docket No. 706].
c. Long-Term Incentive Plan
On November 14, 2011, the Debtors presented the long-term incentive plan (the “LTIP”), the second and final component of the EIP, to the professional advisors for Committee, an ad hoc group of First Lien Noteholders, and the Second Lien Group.
On January 25, 2012, the Debtors filed a motion seeking approval of the LTIP and authorization of payments under the LTIP [Docket No. 952]. By order dated March 5, 2012, the Bankruptcy Court approved the LTIP [Docket No. 1232].
9. Retention of Debtors’ Professionals
On September 20, 2011, the Debtors filed with the Bankruptcy Court applications seeking an order authorizing the Debtors to retain Dewey & LeBoeuf LLP and Pachulski Stang Ziehl & Jones as their chapter 11 co-counsel [Docket Nos. 173 and 171, respectively]. On October 4, 2011, the Bankruptcy Court entered orders approving these retentions [Docket Nos. 303 and 304]. On June 13, 2012, the Debtors filed an application to substitute Proskauer Rose LLP as chapter 11 co-attorneys for the Debtors effective May 14, 2012, as the attorneys previously associated with Dewey ended their affiliation with the firm, and became members of, or associated with, Proskauer [Docket No. 1766]. On July 5, 2012, the Bankruptcy Court entered an order approving the substitution [Docket No. 1934].
During these Chapter 11 Cases, the Debtors have also obtained orders approving the retention of (i) FTI Consulting Inc., as financial advisors, (iv) Lazard Frères & Co. LLC, as investment banker and financial advisor, (v) Deloitte Tax LLP, as tax and accounting services provider, (vi) Deloitte Financial Advisory Services LLP, as bankruptcy and emergence accounting services provider, (vii) Hewitt Associates LLC, d/b/a Aon Hewitt, as compensation consultants, (viii) Ciardi Ciardi & Astin, as special conflict counsel, and (ix) PricewaterhouseCoopers LLP, as independent auditor and accountant.
Upon the Commencement Date, the Bankruptcy Court also authorized the retention of various ordinary course professionals, subject to certain retention procedures. The Debtors have retained numerous additional ordinary course professionals pursuant to this order.
39 10. Exclusivity
Pursuant to sections 1121(b) and 1121(c)(3) of the Bankruptcy Code, the initial period during which the Debtors held the exclusive right to file a chapter 11 plan was set to expire on January 5, 2012, and the period during which the Debtors could solicit votes in favor of the plan was set to expire on March 5, 2012 (together, the “Exclusive Periods”). On December 23, 2011, the Debtors filed a motion in the Bankruptcy Court to extend the Exclusive Periods [Docket No. 795]. By order dated January 11, 2012, the Bankruptcy Court extended the Debtors’ Exclusive Periods through and including May 4, 2012, and July 3, 2012, respectively [Docket No. 879]. By further order dated June 22, 2012, the Exclusive Periods were extended through and including September 4, 2012 and October 31, 2012, respectively [Docket No. 1865]. By further order dated October 16, 2012, the Bankruptcy Court extended the Exclusive Periods through and including January 2, 2013 and February 28, 2013, respectively [Docket No. 2467].
11. De Minimus Asset Sales
On December 13, 2011, the Bankruptcy Court issued an order approving certain procedures proposed by the Debtors to effectuate the sale and abandonment of certain assets of de minimus value (the “De Minimus Procedures”) [Docket No. 708]. In January 2012, pursuant to the De Minimus Procedures, the Debtors (i) sold approximately two acres of land and certain improvements thereon located at Beryl, Mineral County, West Virginia, including all easements, rights-of-way, and other appurtenances to the land, (ii) sold 41 small lots in and around Luke, Maryland, and (iii) abandoned certain raw materials, other than wood, located at NPPH’s mill. In April 2012, pursuant to the De Minimus Procedures, the Debtors abandoned equipment related to certain wells. In September 2012, pursuant to the De Minimus Procedures, the Debtors sold 11.746 acres of land and an access easement on 4.36 acres of land located at the Debtors’ mill in Escanaba, Michigan.
B. Appointment of Official Committee of Unsecured Creditors
1. Appointment
On September 22, 2011, the acting United States Trustee for the District of Delaware, Region 3 (the “U.S. Trustee”), pursuant to her authority under section 1102 of the Bankruptcy Code, appointed the Committee in these Chapter 11 Cases.
2. Composition
The Committee currently consists of the following members:
HSBC Bank USA, National Association Deutsche Bank Trust Company Americas Attn: Diane Scott Attn: Rodney Gaughan 10 East 40th Street, 14th Floor 100 Plaza One New York, NY 10016 6th Floor Tel: (212) 525-1358 Mail Stop JCY03-0699 Fax: (212) 252-1366 Jersey City, NJ 07311-3901 Tel: (201) 593-4016 Fax: (732) 380-2345
40 US Bank National Association United Steelworkers Attn: Timothy Sandell Attn: David Jury 60 Livingston Avenue Five Gateway Center, Room 807 Saint Paul, MN 55107 Pittsburgh, PA 15222 Tel: (651) 495-3959 Tel: (412) 562-2545 Fax: (651) 495-8100 Fax: (412) 562-2574
Pension Benefit Guaranty Corporation OMNOVA Solutions Inc. Attn: Adi Berger Attn: Chet Fox 1200 K. Street NW 175 Ghent Road Washington, DC 20005 Fairlawn, OH 44333 Tel: (202) 326-4070 Tel: (330) 869-4270 Fax: (202) 842-2643 Fax: (330) 869-4210
PIRINATE Consulting Group, LLC National Starch LLC Attn: Eugene I. Davis Attn: Lawrence Karr 5 Canoe Brook Drive 10 Finderne Avenue Livingston, NJ 07039 Bridgewater, NJ 08807 Tel: (973) 533-9027 Tel: (908) 685-5069 Fax: (973) 533-1843
3. Retention of Committee Professionals
The Bankruptcy Court has authorized the Committee to retain the following professionals: (i) Paul Hastings LLP, as co-chapter 11 attorneys; (ii) Young Conaway Stargatt & Taylor, LLP, as co-chapter 11 attorneys; (iii) Alvarez & Marsal North America, LLC (“Alvarez & Marsal”), as financial advisors; and (iv) Moelis & Company LLC (“Moelis”), as investment banker.
On November 1, 2011, the Debtors objected to the Committee’s retention of Alvarez & Marsal and Moelis and sought denial of the applications [Docket No. 428]. Alternatively, the Debtors requested the Bankruptcy Court to restrict the Committee to employing a single financial advisor, and condition the approval upon the elimination of requested completion fees. An ad hoc group of First Lien Noteholders (the “Ad Hoc Group of First Lien Noteholders”) joined the Debtors’ objection, and the Second Lien Group filed a limited joinder [Docket Nos. 430 and 434, respectively]. On December 1, 2011, the Bankruptcy Court entered an order denying the retentions of Alvarez & Marsal and Moelis [Docket Nos. 605 and 606, respectively]. On December 6, 2011, the Committee sought reconsideration of these orders [Docket No. 623]. The Debtors opposed this reconsideration, and the Ad Hoc Group of First Lien Noteholders joined the objection [Docket Nos. 680 and 694, respectively]. On December 27, 2011, the Bankruptcy Court entered orders granting the Committee’s motion for reconsideration and authorizing the retentions of Alvarez & Marsal and Moelis [Docket Nos. 796 and 797]. In so authorizing the retentions, the Bankruptcy Court approved the requested completion fee on an interim basis only.
On May 15, 2012, the Committee filed an application to retain Quinn Emanuel Urquhart & Sullivan, LLP (“Quinn”), as conflicts counsel for the Standing Motion [Docket No. 1589] (see discussion at C.3 below). On June 1, 2012, the Debtors filed a limited response to the application on the basis that the application did not explain how Quinn will be compensated given the DIP Order’s preclusion of the use of any borrowings, collateral, or cash collateral to investigate, initiate or prosecute certain avoidance actions [Docket No. 1683]. The First Lien Notes Trustee joined in the Debtors’ limited response [Docket No. 1688]. By order dated June 26, 2012 [Docket No. 1878], the Bankruptcy Court approved the retention of Quinn as conflicts counsel for the Standing Motion and preserved the rights of
41 the First Lien Noteholders to assert that any payment to Quinn violates the DIP Order and may be subject to disgorgement to the extent it does not comply with paragraph 27 of the DIP Order.
C. The Committee’s Motions
1. NPPH Discovery Motion
On October 27, 2011, the Committee filed a motion requesting the Bankruptcy Court to direct the Debtors, Ernst & Young Inc. (“Ernst & Young”), Cassels Brock & Blackwell LLP (“Cassels Brock”), Cerberus, and JPMorgan Chase Bank, N.A. (“JPMorgan Chase”) to produce documents in connection with certain prepetition transfers between the Debtor and NPPH, including transfers pursuant to the Settlement and Transition Agreement (the “NPPH Discovery Motion”) [Docket No. 409]. The Debtors, JPMorgan Chase, and Cerberus each objected to the NPPH Discovery Motion, and the Ad Hoc Group of First Lien Noteholders and Second Lien Group joined the Debtors’ objection. Ernst & Young wrote a letter to the Bankruptcy Court opposing a discovery order as it would pertain to Ernst & Young and their client, the monitor appointed in the CCAA Proceedings. By order dated December 13, 2011, the Bankruptcy Court granted the NPPH Discovery Motion to a limited extent with regard to the Debtors and adjourned the NPPH Discovery Motion with respect to Ernst & Young, JPMorgan Chase, and Cassels Brock [Docket No. 719]. The Bankruptcy Court issued a separate order (i) adjourning the hearing on the NPPH Discovery Motion as to Cerberus and the Rule 2004 Motion (as defined below), and (ii) requiring Cerberus to produce responsive, non-privileged documents requested on a rolling basis [Docket Nos. 718 (withdrawn) and 771].
2. 2004 Motions and Related Discovery
Starting in early December, 2011, the Committee began propounding a series of discovery requests seeking information related to the 2007 Acquisition and the refinancing of the debt associated with the 2007 Acquisition in 2009 (the “2009 Refinancing”). These requests included several motions filed pursuant to Bankruptcy Rule 2004 against the Debtors, Cerberus, SEO, and the First Lien Notes Trustee (the “Rule 2004 Motions”). By the end of April, 2012, following a series of objections and motions to compel, most of the Rule 2004 Motions had been resolved by Bankruptcy Court-approved stipulations narrowing the proposed terms and scope of discovery. In addition to the Rule 2004 Motions, the Committee also made a number of informal requests for discovery from additional parties, including Hilco Enterprise Valuation Services, Wells Fargo, Credit Suisse, Goldman Sachs, UBS, and American Appraisal Associates, Inc. Ultimately, the Committee received more than a million pages of documents in response to its requests.
3. The Committee’s Standing Motion
On May 4, 2012, the Committee filed a motion seeking derivative standing to prosecute certain alleged fraudulent transfer claims on behalf of the Debtors’ estates (the “Standing Motion”) [Docket No. 1530]. Along with the Standing Motion, the Committee submitted a draft complaint (the “Complaint”) setting out 21 separate counts against multiple parties, including members of both the First Lien Noteholders and the Second Lien Noteholders, among others (collectively, the “Defendants”). The majority of these counts sought to avoid and recover the liens granted and obligations incurred in connection with the 2007 Acquisition and the 2009 Refinancing, on a theory of constructive fraudulent conveyance. The Complaint also sought to avoid the payment of the Settlement Funds to NPPH based on a theory of actual fraud, and to recover them from the alleged beneficiaries of the transfer. Several parties filed objections to the Standing Motion, including the Debtors and three of the principal Defendants (Goldman Sachs Credit Partners, L.P., the Indenture Trustee for the First Lien Noteholders, and Wells Fargo Capital Finance) [Docket Nos. 1739, 1745, 1749, and 1764]. The objections were all premised on
42 contentions that granting the Committee standing to prosecute its claims would not benefit the estate due to (i) the harm it would cause to the Debtors’ business relationships, and (ii) the waste that would result from permitting litigation of meritless claims to proceed. On June 22, 2012, the Bankruptcy Court held a status conference on the Standing Motion, at which it further continued the status conference on the Standing Motion until July 12, 2012, to give the parties more time to confer and try to make progress formulating a consensual proposed chapter 11 plan. These disputes have been resolved by the Settlement proposed in the Plan. See summary Section V.D below.
D. Litigation and Settlements
1. Extension of Time to File Notices of Removal of Civil Actions
On December 9, 2012, the Bankruptcy Court entered an order extending the time by which the Debtors must file notices of removal of civil actions and proceedings to which the Debtors are or may become parties (the “Removal Deadline”) through and including April 4, 2012 [Docket No. 682]. On April 24, 2012, and September 5, 2012, the Bankruptcy Court entered further orders extending the Removal Deadline through and including August 2, 2012 and November 30, 2012, respectively [Docket Nos. 1452 and 2246, respectively].
2. Plum Creek
On November 23, 2011, Plum Creek Marketing, Inc. (“Plum Creek”) filed a motion (the “Plum Creek Motion”) seeking approval to issue a notice of termination pursuant to a fiber supply agreement between Plum Creek and Escanaba Paper (the “FSA”) and to terminate the FSA effective December 31, 2011 [Docket No. 571]. On December 2, 2011, the Bankruptcy Court entered an order approving a tolling agreement entered into by Plum Creek and the Debtors in which, among other things, the parties agreed to use the December 13, 2011 omnibus hearing as a status conference to establish dates for discovery and responding to each other’s pleadings [Docket No. 613]. On December 7, 2011, the Debtors filed a cross-motion for an order (i) approving the assumption and assignment of the FSA by Escanaba Paper to non-debtor Escanaba Wood Supply Inc., (ii) fixing the cure amount related to the assumption of the FSA, and (iii) approving Escanaba Paper’s entry into a related wood supply agreement with Escanaba Wood Supply Inc. (the “Cross-Motion”) [Docket No. 633].
On March 28, 2012, the Bankruptcy Court entered an order (i) approving a settlement between the Debtors and Plum Creek (the “Plum Creek Settlement”), (ii) authorizing the assumption of the FSA, as modified, and (iii) authorizing the Debtors to pay the cure amounts in respect of the assumption of the FSA [Docket No. 1350]. Pursuant to the Plum Creek Settlement, the Debtors agreed to (i) assume the FSA, as modified by the Second Amendment and Restated Fiber Supply Agreement, dated as of March 9, 2012, (ii) satisfy the FSA cure amount, (iii) designate Plum Creek as a critical vendor within the meaning of the Critical Vendor Order, and (iv) satisfy certain prepetition amounts due for log deliveries made by Plum Creek to the Debtors’ mills in Wisconsin under a separate contract with NPWSI. On May 1, 2012, Plum Creek filed a notice withdrawing with prejudice the Plum Creek Motion, and on May 14, 2012, the Debtors filed a notice withdrawing with prejudice the Cross-Motion [Docket Nos. 1510 and 1573, respectively]. Upon satisfaction of the requirements of the Plum Creek Settlement, any scheduled claims of Plum Creek and/or any of its affiliates were deemed satisfied and the Debtors and Plum Creek have no further obligations under the tolling agreement referenced above or the FSA as in effect prior to the March 9 amendment and restatement. The respective obligations of the Debtors and Plum Creek are governed by the terms of the FSA as amended and restated March 9, 2012, in addition to the following: (1) Biomass Sale Agreement, dated June 18, 2012, between Plum Creek and Escanaba Paper Company, as amended by that certain Amendment 1, dated July 9, 2012, between Plum Creek and Escanaba Paper Company; (2) Log Sale Agreement, between Plum Creek and Escanaba Paper Company,
43 dated July 9, 2012; (3) Log Sale Agreement, between Plum Creek and NPWSI, dated September 28, 2012; (4) Critical Vendor Agreement, dated March 7, 2012, between Plum Creek and NPWSI; and (5) Letter Agreement, dated November 15, 2005, between Plum Creek, Plum Creek Timberlands, L.P., Plum Creek Land Company, and Escanaba Paper Company.
3. Antitrust Litigation
On November 12, 2004, the Judicial Panel on Multidistrict Litigation transferred several actions filed against Debtor NewPage Wisconsin System Inc., f/k/a Stora Enso North America Corp. (“NPWSI”) and certain other non-Debtor paper manufacturers (together with NPWSI, the “Defendants”), to the United States District Court for the District of Connecticut (the “Connecticut District Court”) and consolidated them as In re Publication Paper Antitrust Litigation, Docket No. 3:04-md-1631 (SRU) (the “Antitrust Litigation”). On May 26, 2009, as subsequently amended on March 5, 2010, the Connecticut District Court certified a plaintiff class (as amended, the “Plaintiff Class”) in the Antitrust Litigation, consisting of persons who directly purchased certain types of paper (referred to as “Publication Paper” for purposes of the Antitrust Litigation) from the Defendants in the United States during the period between October 1, 2002 to and including September 30, 2003. The Plaintiff Class is seeking treble damages and injunctive relief under the United States antitrust laws as remedies for the Defendants' alleged participation in a combination and conspiracy to fix, raise, maintain and/or stabilize the prices of Publication Paper in the United States. On December 14, 2010, the Connecticut District Court granted summary judgment in the Antitrust Litigation in favor of Defendants Stora Enso Oyj and NPWSI. On August 6, 2012, the Court of Appeals for the Second Circuit (the “Second Circuit”) vacated the Connecticut District Court's summary judgment ruling as to NPWSI, affirmed the Connecticut District Court’s summary judgment ruling as to Stora Enso Oyj and remanded the matter to the Connecticut District Court (the “Second Circuit Decision”). As a result the Antitrust Litigation is currently pending before the Connecticut District Court.
On October 19, 2012, the Plaintiff Class and the Debtors entered into a stipulation (the “Stipulation”) allowing the Plaintiff Class to file a Class Proof of Claim (the “Class Proof of Claim”) solely with respect to the Plaintiff Class’ claims in the Antitrust Litigation within 30 days of the Bankruptcy Court’s approving the Stipulation. The Stipulation further provided for limited modification of the automatic stay as to NPWSI, solely to permit the Antitrust Litigation to proceed in the Connecticut District Court, the Second Circuit and the United States Supreme Court, as may be applicable, to the extent specified in the Stipulation and reserved the rights of the Plaintiff Class with respect to claims, if any, against any non-Debtor . The Bankruptcy Court approved the Stipulation by Order dated October 26, 2012 [Doc. No. 2557].
To the extent any judgment is ultimately entered by the Connecticut District Court against NPWSI in favor of the Plaintiff Class, and such judgment becomes final (including any applicable appellate review), the Plaintiff Class will file notice of such judgment against NPWSI in the Bankruptcy Court; but the Plaintiff Class shall not take further actions with respect to enforcement of such judgment against the Debtors (other than in the Bankruptcy Court with respect to the Class Proof of Claim filed in the Chapter 11 Cases, which Class Proof of Claim shall be deemed allowed as a general unsecured claim against NPWSI in accordance with such judgment that becomes final and treated in accordance with the provisions of any confirmed plan of NPWSI). Pursuant to the SEO Settlement Agreement any amounts the Debtors would otherwise be required to distribute under the Plan to the holders of the Class proof of Claim will be paid by SEO into the Litigation Trust.
44 4. PM35
Paper Machine 35 (“PM35”) is a specialty coated paper producing machine located at the Debtors’ paper mill in Stevens Point, Wisconsin and is leased to NPWSI, as successor to Consolidated Papers, Inc. (the “Lessee”), pursuant to a 1997 sale and leaseback transaction (the “PM35 Sale/Leaseback”). On December 23, 1997, Wilmington Trust Company (“WTC”), in its capacity as owner trustee (the “Owner Trustee”) of a trust (the “Trust”), purchased PM35 and leased the real property on which PM35 is located (as amended from time to time, the “Ground Lease”) from the Lessee. WTC leased PM35 back to the Lessee and simultaneously effectuated a sublease of the real property beneath it (as amended from time to time, the “PM35 Lease”). The PM35 Sale/Leaseback was financed by WTC through (i) the issuance of debt in the form of indenture certificates (the “Indenture Certificates”) pursuant to the Trust Indenture and Security Agreement (CPI 1997), dated as of December 23, 1997 (as amended from time to time, the “Trust Indenture”), with Wells Fargo Bank Northwest, N.A. (“Wells Fargo,” as successor to First Security Bank, National Association, the “Indenture Trustee”), and (ii) an investment by Daimler Capital Services, LLC (as successor to Chrysler Capital Corporation, the “Owner Participant”) in the beneficial interest in the Trust. Amounts payable under the Indenture Certificates are secured by (1) a first priority security interest in PM35 granted by the Owner Trustee against the Lessee, (2) an assignment of the PM35 Lease and all amounts payable thereunder, and (3) an assignment of the Owner Trustee’s rights under the Ground Lease and the other operative documents with respect to the PM35 Sale/Leaseback. Valid, perfected precautionary UCC financing statements continue to be in place as of the date hereof for the benefit of the Owner Trustee (and as its assignees until the indebtedness under the Trust Indenture has been paid in full, the Indenture Trustee) with respect to PM35.
When SEO acquired the Lessee in 2000, the Lessee’s name changed to Stora Enso North America Corporation. On November 15, 2002, SEO guaranteed the Lessee’s obligations under the PM35 Lease (as amended from time to time, the “PM35 Guaranty”). Following the 2007 Acquisition, the PM35 Guaranty remained in place, with SEO as guarantor. SEO is now the sole holder of 100% of the Indenture Certificates. Wells Fargo Bank Northwest, N.A. continues to act as Indenture Trustee under the Trust Indenture. Additionally, SEO believes it is subrogated in full to all privileges and rights of the Owner Participant and the Owner asserts has agreed to cooperate with and assist SEO in enforcing such subrogation rights. Wilmington Trust Company continues to act as Owner Trustee with respect to the Trust. NPWSI pays semiannual rent under the PM35 Lease, and the proceeds are used, until the indebtedness under the Trust Indenture has been paid in full, to pay amounts due on the Indenture Certificates.
On February 2, 2012, four proofs of claim were filed against NPWSI asserting claims arising from the PM35 Lease; two by WTC [Claim Nos. 2222 and 2234] (the “WTC Claims”), one by Wells Fargo [Claim No. 2323] (the “Wells Fargo Claim”), and one by SEO [Claim No. 2084] (the “SEO Claim”). In March, the Committee filed objections to both the WTC Claims [Docket No. 1307] and the Wells Fargo Claim [Docket No. 1331] (the “PM35 Claims Objections”), in which it argued that the PM35 Lease should be recharacterized as a financing agreement. The Second Lien Group joined in both PM35 Claims Objections [Docket Nos. 1332, 1416].
On April 18, 2012, two responses to the PM35 Claims Objections were filed, one by the Debtors [Docket No. 1423], and the other jointly by Wells Fargo, WTC, and SEO [Docket No. 1421] (collectively, the “PM35 Responses”). The PM35 Responses asserted that the relief sought by the Committee was required to be brought through an adversary proceeding and that the Committee lacked standing to bring such an action. On April 23, 2012, the Committee filed a reply [Docket No. 1440].
On June 21, 2012, the Bankruptcy Court issued an Order dismissing the PM35 Claims Objections, without prejudice, as procedurally improper [Docket No. 1844] (the “June 21 Order”). The
45 Bankruptcy Court explained that allowing the Committee to prosecute its objections would disrupt the Debtors’ active negotiations of the PM35 issues. Nevertheless, on June 22, 2012, the Committee filed a Motion for an Order seeking derivative standing to commence and prosecute certain claims on behalf of the Debtors’ estates, including an action against WTC and others to recharacterize the PM35 lease as a financing arrangement and to declare the defendants’ interests in PM35 unperfected [Docket No. 1862]. At the June 22, 2012 hearing the Court continued the hearing date and objection deadline for that motion to a date and time to be determined.
Following the June 21 Order, the Debtors and SEO renewed negotiations regarding the purchase and sale of PM35. Efforts to reach a more global settlement delayed progress. Ultimately, after participating in Court-ordered mediation sessions in September 2012, the Debtors and SEO agreed upon terms for a comprehensive settlement to be reflected in the Settlement Agreement, attached as Exhibit 8.5 to the Plan, between, inter alia, the Debtors and SEO, effective as of the Effective Date (the “SEO Settlement Agreement”).
A summary of the terms included in the SEO Settlement Agreement is as follows: (i) NPWSI will purchase PM35 for a sum equal to the PM35 Net Purchase Price, and SEO will cause PM35 to be sold to the Debtors, with representations and warranties (a) as to the absence of liens, claims, interests or encumbrances, including the release of the lien of the PM35 trust indenture, a set forth in the SEO Settlement Agreement (other than those created by the Debtors or Reorganized Debtors, if any, in favor of parties other than the Trust Parties), and (b) that the Owner Trustee has the same title to PM35 as was conveyed to it by the predecessors in interest of NPWSI, (ii) the SEO Released Parties shall be released from any and all Claims or Causes of Action whatsoever from the beginning of the world to the Effective Date, known or unknown, including, without limitation, those arising from or related to the PM35 Sale/Leaseback, the 2007 Acquisition, and SEO’s ownership of the 2015 PIK Notes or Equity Interests of NPG, including any and all indemnity claims under the transaction documents with respect to the 2007 Acquisition, subject solely to certain agreed exceptions under and to the extent set forth in the SEO Settlement Agreement, (iii) SEO shall waive the SEO Unsecured Claims, (iv) the Litigation Trust shall pay the SEO Professional Fees, (v) the PM35 Operative Documents shall be terminated without liability to the Debtors, (vi) the Debtors’ executory contracts with Corenso North America Corp. (“Corenso”) and Thiele Kaolin Company (“TKC”) shall be assumed and the cure amounts previously agreed to by the Debtors, Corenso and TKC paid, and the contracts shall be included in Schedule 8.1(E) of the Plan Supplement, (vii) the Trust Parties shall be released from any and all Claims or Causes of Action arising from or related to the PM35 Sale/Leaseback, from the beginning of the world to the Effective Date, known or unknown, and (viii) the NewPage Released Parties (as defined in the SEO Settlement Agreement) shall be released by SEO Wells Fargo, and WTC as set forth in the SEO Settlement Agreement; provided, however, that notwithstanding the foregoing, nothing herein shall operate as a release or discharge of the SEO Released Parties’, Trust Parties’, Debtors’ or Reorganized Debtors’ agreements, promises, covenants, settlements, duties, obligations, representations and warranties set forth in the SEO Settlement Agreement. This summary is qualified in its entirety by reference to the provisions of the SEO Settlement Agreement. For the avoidance of doubt, in the event of any inconsistency between any description of the terms and conditions of the SEO Settlement in the Plan or Disclosure Statement and the SEO Settlement Agreement, the provisions of the SEO Settlement Agreement shall govern and control in all respects.
5. NPWSI Retirement Plan Settlement
NPWSI maintains a Retiree Health Plan (the “NPWSI Plan”) for union retirees age 65 or older (the “Union Retirees”). In September 2009, NPWSI announced it would amend the NPWSI Plan to reduce starting January 1, 2010 the subsidies it pays towards Union Retirees’ health care coverage and eliminate the subsidies completely by January 1, 2012.
46 On December 24, 2009, the USW and certain individual plaintiffs commenced an action (the “Ohio Action”) in the United States District Court for the Southern District of Ohio against NPC and NPC’s Welfare Benefit Program alleging the subsidy reductions and termination violated the Labor Management Relations Act and the Employee Retirement Income Security Act. The District Court subsequently dismissed the Ohio Action and denied the plaintiffs’ motion for leave to amend their pleadings to add NPWSI and the NPWSI Plan as parties, whereupon the plaintiffs appealed the dismissal to the United States Court of Appeals for the Sixth Circuit (Case No. 10-4306) (the “Ohio Appeal”). The Ohio Appeal has been held in abeyance since the Commencement Date.
On January 29, 2010, NPWSI and the NPWSI Plan commenced an action (the “Wisconsin Action”) (Case No. 10-00041) in the United States District Court of the Western District of Wisconsin, at Madison against the USW and certain individual defendants seeking a declaratory judgment that the subsidy reductions and termination did not violate applicable law. The District Court subsequently dismissed the Wisconsin Action, whereupon NPWSI and the NPWSI Plan appealed the dismissal to the United States Court of Appeals for the Seventh Circuit (the “Seventh Circuit”) (Case No. 10-2887). On July 12, 2011, the Seventh Circuit reversed the District Court’s judgment and remanded the Wisconsin Action to the District Court for further proceedings. The action was stayed as of the Commencement Date.
To resolve the foregoing actions and related issues concerning the Debtor’s retiree benefit obligations under section 1114 of the Bankruptcy Code during the pendency of the Chapter 11 Cases, NPWSI, the NPWSI Plan, NPC, and NPC’s Welfare Benefit Program, on the one hand (together, the “NewPage Parties”) and the USW, certain individual Union Retirees, and certain other unions, on the other hand (together, the “Retiree Representatives”) entered into a Settlement Agreement and Mutual Release (the “1114 Settlement”), subject to Bankruptcy Court approval. Under the 1114 Settlement:
• NPWSI will (i) continue to provide the retiree healthcare subsidy in effect on December 31, 2011 to those participants enrolled in the NPWSI Plan as of January 1, 2012 up to the Effective Date (the “NPWSI Subsidy Retirees”), and (ii) reimburse the NPWSI Subsidy Retirees for any premiums they paid during that period on account of NPWSI’s temporary elimination of the subsidy, to the extent those premiums would have been reimbursed by NPWSI absent the temporary elimination.
• On the Effective Date, NPWSI will make lump sum payments of $1,000 to each then-living participant who participated in the NPWSI Plan during 2011, who was eligible to be enrolled in the NPWSI Plan for 2012, but who elected not to enroll (the “NPWSI Terminated Participants”) and $500 to each then-living participant who participated in the NPWSI Plan as of December 31, 2009 and was not enrolled in the NPWSI Plan as of January 1, 2012, other than NPWSI Terminated Participants (the “NPWSI Lump Sum Retirees”).
• The NPWSI Subsidy Retirees, the NPWSI Terminated Participants, and the NPWSI Lump Sum Retirees will be entitled to file a claim, through their respective unions, for an amount equal to the balance of the retiree healthcare subsidy that would have been paid through the Confirmation Date to those retirees had NPWSI not amended as of January 1, 2010 the NPWSI Plan to reduce and eliminate the subsidies (with the amount of the claim to be reduced by payments received under the 1114 Settlement).
• Once a Bankruptcy Court order approving the 1114 Settlement has become final, NPC, NPC’s Welfare Benefit Program, and the plaintiffs in the Ohio Action will jointly file a stipulation dismissing the Ohio Appeal, with prejudice, and NPWSI, the NPWSI Plan, and the Wisconsin Defendants will jointly file a stipulation dismissing the Wisconsin Action, with prejudice. NPWSI’s payment
47 obligations under the 1114 Settlement will be conditioned upon dismissal of the Ohio Appeal and Wisconsin Action, with prejudice.
• The NewPage Parties and the Retiree Representatives will each release the other and their representatives from claims relating to the reduction and termination of the subsidies paid towards the Union Retirees’ healthcare coverage or the NewPage Parties’ retiree benefit obligations under section 1114 of the Bankruptcy Code during the pendency of the Chapter 11 Cases.
6. Mediation and Global Settlement
On August 14, 2012, the Court issued an Order Appointing Mediator [Docket No. 2155] whereby the Honorable Robert D. Drain was appointed as a mediator to assist in resolving certain issues and impediments relating to the formulation and confirmation of a chapter 11 plan (the “Mediation”). The first round of the Mediation took place on September 4, 2012. As certain parties had made progress towards a consensual resolution, another day of Mediation was scheduled for September 14, 2012.
After the second round of Mediation, a global Settlement was reached among the Debtors, the First Lien Noteholders, the Second Lien Noteholders, the Committee, and SEO (the “Settlement Parties”), as reflected in the Plan and the SEO Settlement Agreement. The salient points of the global Settlement are as follows and are qualified in all respects by the Plan itself:
(i) $30 million in Cash will be distributed Pro Rata to Second Lien Noteholders and the holders of General Unsecured Claims. The First Lien Noteholders will waive their deficiency claims with respect to the $30 million distribution, but will maintain rights arising from subordination provisions in the Senior Subordinated Notes Indenture to the extent provided in the Plan;
(ii) A Litigation Trust will be established to pursue Committee Litigation Claims, which means (a) all claims pursuant to section 547 of the Bankruptcy Code other than (i) claims against Cerberus, and (ii) claims whose prosecution would create a material net detriment to the business of the Reorganized Debtors, (b) if the Bankruptcy Court does not approve a settlement propounded prior to confirmation of the Plan between the Debtors’ estates and Cerberus, or does not approve an amended settlement that may be propounded prior to the Effective Date if the first settlement is not approved, Causes of Action against Cerberus, and Causes of Action against other entities, if any, that Cerberus claims is liable for contribution or similar relief (other than claims against any Releasee, and (c) objections to Disputed General Unsecured Claims;
(iii) The First Lien Noteholders will waive their deficiency claim against the Litigation Trust proceeds up to approximately $50 million (but will not waive their negotiated recovery from the holders of Senior Subordinated Notes arising from subordination provision in the Senior Subordinated Notes Indenture). Any proceeds above $50 million will be shared with the First Lien Noteholders, the Second Lien Noteholders, and the holders of General Unsecured Claims as provided in the Plan;
(iv) The Litigation Trust will initially be funded with $5 million for fees and expenses of administering the Litigation Trust. Subject to item (v) below, the Debtors will fund this amount in return for a non-interest bearing note to Reorganized NPC for the amount of its funding that will be payable from recoveries other than pursuant to item (vi) below. If any of the $5 million remains after the conclusion of litigation, the excess funds will be returned to the Reorganized Debtors to the extent necessary to pay off any outstanding amounts owing under the Litigation Trust Note;
48 (v) If a settlement is reached with Cerberus, the proceeds will be applied to funding the Litigation Trust, reducing the Debtors’ funding obligation;
(vi) A settlement between the Debtors, SEO, and the other Trust Parties on the terms set forth in the SEO Settlement Agreement;
(vii) Qualified Trade Creditors will receive a recovery of 15% in cash over a period of two years (without interest) if they will extend the Debtors trade credit that meets the requirements in the Plan;
(viii) The amended collective bargaining agreements will be assumed and the pension plans will be continued. A previously negotiated settlement of the Unions’ Claims under section 1114 of the Bankruptcy Code will be presented for Bankruptcy Court approval;
(ix) The fees of the Indenture Trustees for the Unsecured Notes and the Senior Subordinated Unsecured Notes will be paid by the Debtors, up to $1.5 million in the aggregate;
(x) The indenture trustee for the Senior Subordinated Unsecured Notes shall receive the Senior Subordinated Unsecured Notes Settlement Payment free and clear of any subordination or turnover obligation to any other constituency, including, without limitation, the First Lien Note Trustee, the First Lien Noteholders, the Second Lien Note Trustee, and the Second Lien Noteholders.
(xi) The indenture trustee for the 2013 PIK Notes shall receive the 2013 PIK Notes Settlement Payment free and clear of any subordination or turnover obligation to any other constituency, including, without limitation, the First Lien Note Trustee, the First Lien Noteholders, the Second Lien Note Trustee, and the Second Lien Noteholders.
(xii) Professional fees of the Committee, the First Lien Notes Trustee, the Second Lien Notes Trustee, and the Second Lien Group will continue to be paid by the Debtors. Union’s Professional fees (up to $775,000) will be paid by the Debtors. Professional fees of SEO (up to $500,000) will be paid by the Debtors or the Reorganized Debtors, as applicable, on the Effective Date solely from a $500,000 holdback from the $40 million that the Debtors are otherwise allocating to the Litigation Trust, subject to the limitations described in the Plan’s definition of the term “SEO Professional Fees”; and
(xiii) Releases will be granted to, each in their capacity as such, the Debtors’ directors, officers and employees (other than those who are or were affiliated with Cerberus), the First Lien Noteholders, the Committee and its members, the Second Lien Noteholders, the Second Lien Group and its members, each Indenture Trustee, the SEO Released Parties, and the Trust Parties. All releases as to the SEO Released Parties and the Trust Parties will be governed by the SEO Settlement Agreement.
VI. THE CHAPTER 11 PLAN
The Plan is annexed as Exhibit A and forms a part of this Disclosure Statement. The summary of the Plan set forth below is qualified in its entirety by reference to the provisions of the Plan.
Statements as to the rationale underlying the treatment of Claims and Equity Interests under the Plan are not intended to, and will not, waive, compromise, or limit any rights, claims, or causes of action if the Plan is not confirmed.
49 A. Corporate Governance and Management of Reorganized Debtors
1. Reorganized Debtors’ Directors and Officers
The number and members of the Boards of Directors of New Holdco and the Reorganized Debtors will be set forth in the New Holdco Documents and Governance Documents, as applicable. The names of the members of the Boards of Directors and initial officers of New Holdco and the Reorganized Debtors will be identified in Schedule 9.1 of the Plan Supplement and in all respects satisfactory to the First Lien Notes Trustee. Each of the members of each Board of Directors and each officer will serve in accordance with applicable non-bankruptcy law.
2. Amendment of Governance Documents
The respective Governance Documents of the Debtors will be amended as of the Effective Date to be substantially in the form of the Reorganized Debtors’ certificate of incorporation and bylaws, as applicable, attached to the Plan as Schedules 9.2A and 9.2B of the Plan Supplement. The Governance Documents will contain provisions prohibiting the issuance of non-voting equity securities by the Reorganized Debtors that are corporations, as required by section 1123(a)(6) of the Bankruptcy Code (subject to further amendment as permitted by applicable law), and effectuating the provisions of the Plan, in each case without further action by the equityholders or the board of directors (or similar governing body) of the Debtors or the Reorganized Debtors.
3. Corporate Action
On the Effective Date, the adoption of the New Holdco Documents and the Reorganized Debtors’ respective amended Governance Documents will be authorized and approved in all respects, in each case without further action under applicable law, regulation, order, or rule, including any action by the equityholders or the board of directors (or similar governing body) of the Debtors or the Reorganized Debtors. All other matters provided under the Plan involving the organizational structure of the Reorganized Debtors or corporate action by the Reorganized Debtors will be deemed to have occurred, be authorized, and will be in effect without requiring further action under applicable law, regulation, order, or rule, including any action by the equityholders or the board of directors (or similar governing body) of the Debtors or the Reorganized Debtors.
4. Corporate Authority of the Debtors
On the Effective Date, or as soon as reasonably practicable thereafter, the Reorganized Debtors may take all actions as may be necessary or appropriate to effect any transaction described in, approved by, contemplated by, or necessary or appropriate to effectuate the Plan, including (i) causing the Disbursing Agent to make Distributions under the Plan, (ii) the execution and delivery of appropriate agreements or other documents of merger, consolidation, conversion, or reorganization containing terms that are consistent with the terms of the Plan and that satisfy the requirements of applicable law, (iii) the execution and delivery of appropriate instruments of transfer, assignment, assumption, or delegation of any property, right, liability, duty, or obligation on terms consistent with the terms of the Plan, and (iv) the execution and filing of Governance Documents with the appropriate governmental authorities pursuant to applicable law.
B. Classification and Treatment of Classified Claims and Equity Interests
Pursuant to sections 1122 and 1123 of the Bankruptcy Code, Claims and Equity Interests (other than Claims arising under sections 507(a)(2), 507(a)(3), or 507(a)(8) of the Bankruptcy Code,
50 which Claims do not require classification pursuant to section 1123(a) of the Bankruptcy Code and are receiving the treatment set forth in Article II of the Plan) are classified for all purposes, including, without limitation, voting, confirmation, and distribution pursuant to the Plan, as set forth in the Plan. A Claim or Equity Interest will be deemed classified in a particular Class only to the extent that the Claim or Equity Interest falls within the description of that Class, and will be deemed classified in a different Class to the extent that any remainder of the Claim or Equity Interest qualifies within the description of the different Class. A Claim or Equity Interest is Allowed in a Class if it has not been paid or otherwise settled prior to the Effective Date, and satisfies the definition of a Claim or Equity Interest that is Allowed.
CLASS TREATMENT ENTITLED TO VOTE
NPC PLAN
NPC Class 1A – On the Effective Date, unless any holder of an NPC Class 1A is Impaired by the Other Secured Allowed Other Secured Claim agrees to a less NPC Plan. Each holder of an Claims advantageous treatment, NPC at its option will Allowed NPC Class 1A Claim is distribute to each holder of an Allowed Other entitled to vote to accept or reject the Secured Claim (i) Cash in an amount equal to NPC Plan. that Allowed Other Secured Claim, (ii) Cash in an amount equal to the proceeds realized from the sale of the Collateral securing that Allowed Other Secured Claim, less the actual costs and expenses of disposing of that Collateral, or (iii) the Collateral securing that Allowed Other Secured Claim.
NPC Class 1B – On the Effective Date, each holder of an NPC Class 1B is Impaired by the First Lien Notes Allowed NPC First Lien Notes Claim will (A) NPC Plan. Each holder of an Claims receive from the Disbursing Agent on account Allowed NPC Class1B Claim is of its Secured Claim its Pro Rata Share of (x) entitled to vote to accept or reject the the outstanding shares of stock of Reorganized NPC Plan. NPC, which shares will then be exchanged for such holder’s Pro Rata Share of the Available New Holdco Common Stock pursuant to Section 4.5.2 of the Plan, and all new stock of New Holdco’s Debtor Affiliates (other than Reorganized NPC), provided that all New Holdco’s Debtor Affiliates (other than Reorganized NPC) having confirmed Plans will issue new shares of stock or interests to their respective parent companies to re-create the same organizational corporate structure that existed on the Commencement Date, or as otherwise directed by such Entity(ies), (y) subject to the First Lien Notes Subordination Turnover Cap, the Distributions in respect of the Subordination Turnover delivered to the First Lien Notes Trustee pursuant to Section 3.3.7(b)(B) of the Plan, and (z) the First Lien Notes Cash, and (B) be
51 CLASS TREATMENT ENTITLED TO VOTE released from all claims and Causes of Action, including those assertable in respect of the 2007 Acquisition and 2009 Refinancing (see Section 4.10(a) of the Plan).
NPC Class 2 – On the Effective Date, each holder of an NPC Class 2 is Unimpaired by the Non-Tax Allowed NPC Non-Tax Priority Claim will NPC Plan. Pursuant to section Priority Claims receive Cash in an amount equal to the 1126(f) of the Bankruptcy Code, Allowed amount of its Claim. NPC Class 2 and each holder of an Allowed NPC Class 2 Claim are conclusively presumed to have accepted the NPC Plan and therefore the holders of Allowed NPC Class 2 Claims are not entitled to vote to accept or reject the NPC Plan.
NPC Class 3A– On the Effective Date, each holder of an NPC Class 3A is Impaired by the General Allowed NPC General Unsecured Claim will NPC Plan. Each holder of an Unsecured receive from the Disbursing Agent on account Allowed NPC Class 3A Claim is Claims of its General Unsecured Claim (without entitled to vote to accept or reject the duplication) its Pro Rata Share of the NPC Plan. (A) Settlement Cash and (B) NPC Class 3A Litigation Trust Interests.
NPC Class 3B – On the Effective Date, each holder of an NPC Class 3B is Impaired by the First Lien Notes Allowed NPC First Lien Notes Deficiency NPC Plan. Each holder of an Deficiency Claim will receive from the Disbursing Agent Allowed NPC Class 3B Claim is Claims on account of its First Lien Notes Deficiency entitled to vote to accept or reject the Claim its Pro Rata Share of the NPC Class 3B NPC Plan. Litigation Trust Interests.
NPC Class 3C – On the Effective Date, each holder of an NPC Class 3C is Impaired by the Second Lien Allowed NPC Second Lien Notes Claim will NPC Plan. Each holder of an Notes Claims (A) receive from the Disbursing Agent on Allowed NPC Class 3C Claim is account of its Second Lien Notes Claim its entitled to vote to accept or reject the Pro Rata Share of (x) the Settlement Cash, (y) NPC Plan. the NPC Class 3C Litigation Trust Interests and (z) Distributions in respect of the Subordination Turnover delivered to the Second Lien Notes Trustee pursuant to Section 3.3.7(b)(B) of the Plan, subject to the First Lien Notes Subordination Turnover Cap and (B) be released from Causes of Action as set forth in Section 4.10(b) of the Plan.
NPC Class 3D – (A) On the Effective Date, each holder of an NPC Class 3D is Impaired by the Senior Allowed NPC Senior Subordinated Unsecured NPC Plan. Each holder of an Subordinated Notes Claim will receive from the Disbursing Allowed NPC Class 3D Claim is
52 CLASS TREATMENT ENTITLED TO VOTE Unsecured Agent on account of its Senior Subordinated entitled to vote to accept or reject the Notes Claims Unsecured Notes Claim its Pro Rata Share of NPC Plan. (x) the Settlement Cash and (y) the NPC Class 3D Litigation Trust Interests.
(B) Notwithstanding the foregoing, on the Effective Date, and thereafter as applicable, the Disbursing Agent will distribute to each of (i) the First Lien Notes Trustee (for the benefit of the holders of Allowed First Lien Notes Claims in NPC Class 1B), subject to the First Lien Notes Subordination Turnover Cap, and (ii) the Second Lien Notes Trustee (for the benefit of the holders of Allowed Second Lien Notes Claims in NPC Class 3C), a Pro Rata Share of the (x) Settlement Cash and (y) Litigation Trust proceeds otherwise distributable to each holder of an Allowed NPC Senior Subordinated Unsecured Notes Claim, until the holders of such Claims have been paid in full.
NPC Class 3E – (A) Commencing on the Effective Date, each NPC Class 3E is Impaired by the Qualified Trade holder of an Allowed NPC Qualified Trade NPC Plan. Each holder of an Creditor Claims Creditor Claim will receive from the Allowed NPC Class 3E Claim that Disbursing Agent on account of its Qualified elects treatment on the NPC Class Trade Creditor Claim (without duplication), 3A Ballot as a Qualified Trade 15% of its Allowed Claim over a two year Creditor or otherwise agrees to the period, in installments no less frequent than same in writing and is eligible to be a four equal semiannual payments (without Qualified Trade Creditor will have its interest). vote to accept or reject the NPC Plan counted in NPC Class 3E. (B) If at any time after the Effective Date a NPC Qualified Trade Creditor ceases to qualify as a NPC Qualified Trade Creditor, the Reorganized Debtors shall direct the Disbursing Agent to cease making any further payments to such Entity under Section 3.3.8(b)(A) of the Plan.
(C) If at any time after the Effective Date the Reorganized Debtors elect to cease doing further business with a NPC Qualified Trade Creditor (other than as a result of a breach or default by that NPC Qualified Trade Creditor), the Disbursing Agent shall continue to make the payments required under Section 3.3.8(b)(A) of the Plan, notwithstanding that
53 CLASS TREATMENT ENTITLED TO VOTE election.
NPC Class 4 – No holder of an Allowed NPC Debtor NPC Class 4 is Impaired by the NPC Debtor Intercompany Claim will receive any Plan. Pursuant to section 1126(g) of Intercompany Distribution under the NPC Plan. the Bankruptcy Code, NPC Class 4 is Claims deemed to have rejected the NPC Plan and, therefore, the holders of Allowed NPC Class 4 Claims are not entitled to vote to accept or reject the NPC Plan.
NPC Class 5 – On the Effective Date, (i) all instruments NPC Class 5 is Impaired by the NPC Equity Interests evidencing a NPC Class 5 Equity Interest will Plan. Pursuant to section 1126(g) of be deemed canceled and (ii) the NPC Class 5 the Bankruptcy Code, NPC Class 5 is Equity Interests will be deemed extinguished, deemed to have rejected the NPC each without further action under any Plan and, therefore, the holders of applicable agreement, law, regulation or rule. Allowed NPC Class 5 Claims are not No holder of a NPC Class 5 Equity Interest entitled to vote to accept or reject the will receive or retain any property under the NPC Plan. NPC Plan.
GD PLANS
GD Class 1A – On the Effective Date, unless any holder of an GD Class 1A is Impaired by the Other Secured Allowed Other Secured Claim agrees to a less applicable GD Plan. Each holder of Claims advantageous treatment, at its option, the an Allowed GD Class 1A Claim applicable Guarantor Debtor will distribute to against an applicable Guarantor each holder of an Allowed Other Secured Debtor is entitled to vote to accept or Claim (i) Cash in an amount equal to the reject the applicable GD Plan. Allowed Other Secured Claim, (ii) Cash in an amount equal to the proceeds realized from the sale of the Collateral securing the Allowed Other Secured Claim, less the actual costs and expenses of disposing of that Collateral, or (iii) the Collateral securing the Allowed Other Secured Claim.
GD Class 1B – On the Effective Date, each holder of an GD Class 1B is Impaired by the GD First Lien Notes Allowed GD First Lien Notes Guaranty Claim Plan. Each holder of an Allowed GD Guaranty Claims will receive on account of its Claim against Class 1B Claim is entitled to vote to the applicable Guarantor Debtor the accept or reject the applicable GD Distributions and treatments set forth in Plan. Section 3.3.2(b) of the Plan.
GD Class 2 – On the Effective Date, each holder of an GD Class 2 is Unimpaired by the Non-Tax Allowed GD Non-Tax Priority Claim will applicable GD Plan. Pursuant to Priority Claims receive Cash in an amount equal to the section 1126(f) of the Bankruptcy Allowed amount of its Claim. Code, GD Class 2 and each holder of
54 CLASS TREATMENT ENTITLED TO VOTE an Allowed GD Class 2 Claim against an applicable Guarantor Debtor are conclusively presumed to have accepted the applicable GD Plan and, therefore, the holders of Allowed GD Class 2 Claims are not entitled to vote to accept or reject the applicable GD Plan.
GD Class 3A – On the Effective Date, each holder of an GD Class 3A is Impaired by the GD General Allowed GD General Unsecured Claim will Plan. Each holder of an Allowed GD Unsecured receive from the Disbursing Agent on account Class 3A Claim is entitled to vote to Claims of its General Unsecured Claim (without accept or reject the applicable GD duplication) its Pro Rata Share of the Plan. (A) Settlement Cash; and (B) GD Class 3A Litigation Trust Interests.
GD Class 3B – On the Effective Date, each holder of an GD Class 3B is Impaired by the GD First Lien Notes Allowed GD First Lien Notes Deficiency Plan. Each holder of an Allowed GD Deficiency Claim will receive on account of its Claim Class 3B Claim is entitled to vote to Claims against the applicable Guarantor Debtor the accept or reject the applicable GD Distributions and treatment set forth in Plan. Section 3.3.5(b) of the Plan.
GD Class 3C – On the Effective Date, each holder of an GD Class 3C is Impaired by the GD Second Lien Allowed GD Second Lien Notes Guaranty Plan. Each holder of an Allowed GD Notes Guaranty Claim will receive on account of its Claim Class 3C Claim is entitled to vote to Claims against the applicable Guarantor Debtor the accept or reject the applicable GD Distributions and treatment set forth in Plan. Section 3.3.6(b) of the Plan.
GD Class 3D – On the Effective Date, each holder of an GD Class 3D is Impaired by the GD Senior Allowed GD Senior Subordinated Unsecured Plan. Each holder of an Allowed GD Subordinated Notes Guaranty Claim will receive on account Class 3D Claim is entitled to vote to Unsecured of its Claim against the applicable Guarantor accept or reject the applicable GD Notes Guaranty Debtor the Distributions and treatment set Plan. Claims forth in Section 3.3.7(b) of the Plan.
GD Class 3E – (A) Commencing on the Effective Date, each GD Class 3E is Impaired by the GD Qualified Trade holder of an Allowed GD Qualified Trade Plan. Each holder of an Allowed GD Creditor Claims Creditor Claim will receive from the Class 3E Claim that elects treatment Disbursing Agent on account of its Qualified on the GD Class 3A Ballot as a Trade Creditor Claim (without duplication), Qualified Trade Creditor or 15% of its Allowed Claim over a two year otherwise agrees to the same in period, in installments no less frequent than writing and is eligible to be a four equal semiannual payments (without Qualified Trade Creditor will have its interest). vote to accept or reject the applicable
55 CLASS TREATMENT ENTITLED TO VOTE GD Plan counted in GD Class 3E. (B) If at any time after the Effective Date a GD Qualified Trade Creditor ceases to qualify as a NPC Qualified Trade Creditor, the Reorganized Debtors shall direct the Disbursing Agent to cease making any further payments to such Entity under Section 3.4.8(b)(A) of the Plan.
(C) If at any time after the Effective Date the Reorganized Debtors elect to cease doing further business with a GD Qualified Trade Creditor (other than as a result of a breach or default by that GD Qualified Trade Creditor), the Disbursing Agent shall continue to make the payments required under Section 3.3.8(b)(A) of the Plan, notwithstanding that election.
GD Class 4 – No holder of an Allowed GD Debtor GD Class 4 is Impaired by the GD Debtor Intercompany Claim will receive any Plan. Pursuant to section 1126(g) of Intercompany Distribution under the applicable GD Plan. the Bankruptcy Code, GD Class 4 is Claims deemed to have rejected the applicable GD Plan and, therefore, the holders of Allowed GD Class 4 Claims are not entitled to vote to accept or reject the applicable GD Plan.
GD Class 5 – On the Effective Date, (i) all instruments GD Class 5 is Impaired by the Equity Interests evidencing a GD Class 5 Equity Interest will applicable GD Plan. Pursuant to be deemed cancelled and (ii) the GD Class 5 section 1126(g) of the Bankruptcy Equity Interests will be deemed extinguished, Code, GD Class 5 is deemed to have each without further action under any rejected the applicable GD Plan and, applicable agreement, law, regulation or rule. therefore, the holders of Allowed GD No holder of a GD Class 5 Equity Interest will Class 5 Claims are not entitled to receive or retain any property under the vote to accept or reject the applicable applicable GD Plan. GD Plan.
C. Consideration to be Paid Under the Plan
The Proponent Debtors, in consultation with First Lien Noteholders, considered various alternatives for a post-emergence capital structure for the Reorganized Debtors. After performing detailed analyses of these alternatives, the Proponent Debtors concluded that an issuance of New Holdco Common Stock created the optimal capital structure. Each holder of an Allowed NPC First Lien Notes Claim will ultimately receive on account of its Secured Claim its Pro Rata Share of the Available New Holdco Common Stock. By issuing to the First Lien Noteholders the New Holdco Common Stock in
56 exchange for the First Lien Notes Claims, the Reorganized Debtors will substantially reduce their debt load.
As set forth in Section II.B above, all Allowed Administrative Expense Claims, professional compensation, reimbursement claims, DIP Lender Claims, and Non-Priority Tax Claims will be paid in full in Cash under the Plan. All Allowed Priority Tax Claims will receive the treatment and consideration required by the Bankruptcy Code.
On the Effective Date, or as soon as reasonably practicable thereafter, the existing common stock of NPC and NPC’s Debtor Affiliates will be canceled and extinguished, and New Holdco will issue its stock to those holders of Allowed Claims entitled to receive such stock. Each holder of an Allowed First Lien Notes Claim will receive from the Disbursing Agent on account of its Secured Claim its Pro Rata Share of the stock of Reorganized NPC, and will then contribute such shares to New Holdco in exchange for such holder’s Pro Rata Share of Available New Holdco Common Stock, and all new stock of NPC and NPC’s Debtor Affiliates having confirmed Plans will be re-issued to their respective parent companies to re-create the same corporate structure that existed on the Commencement Date, or as otherwise directed by those entities.
The Second Lien Noteholders and certain other holders of General Unsecured Claims will receive their Pro Rata Share of the $30 million in Settlement Cash. The First Lien Noteholders waive their entitlement to a Pro Rata Share of the Settlement Cash, except indirectly through exercise of their contractual subordination rights against holders of the Senior Subordinated Unsecured Notes, subject to the First Lien Notes Subordination Turnover Cap.
The first $400,000 otherwise payable to the Second Lien Notes Trustee pursuant to the Plan shall be retained fifty percent by the indenture trustee for the Senior Subordinated Unsecured Notes Claims for further Distribution to the holders of those claims in NPC Class 3D, and fifty percent by the indenture trustee for the 2013 PIK Notes for further Distribution to holders of the 2013 PIK Note Claims. This component is in partial settlement of the issues raised in the Committee’s Standing Motion discussed in Section V(C)(3) above, which the indenture trustee for the Senior Subordinated Unsecured Notes believes that if successful, could have resulted in payment in full of both the Senior Subordinated Unsecured Notes and the 2013 PIK Notes.
Each Litigation Trust Beneficiary will be entitled to a Distribution of its Pro Rata Share of the net Litigation Trust proceeds; provided, however, that the First Lien Notes Trustee shall waive its entitlement to a Pro Rata Share of the Litigation Trust proceeds allocable to the First Lien Notes Deficiency Claims, up to the first $50 million of Litigation Trust proceeds realized; thereafter, the First Lien Notes Trustee shall be entitled to participate in Distributions of Litigation Trust proceeds as set forth in the Plan. Moreover, each holder of an Allowed Second Lien Notes Claims, General Unsecured Claims and Senior Subordinated Unsecured Claims in each of the NPC and GD Plans will receive its Pro Rata Share of the Settlement Cash (all as applicable under Sections 1.2.92 and 4.10 of the Plan); provided, however, that the First Lien Noteholders will maintain rights arising from subordination provisions in the Senior Subordinated Notes Indenture, based on a negotiated recovery.
Further, each holder of a General Unsecured Claim in NPC Class 3A or GD Class 3A that elects to be treated as a NPC Class 3D or GD Class 3D Qualified Trade Creditor may indicate this preference on its Ballot. If the Debtors determine that such holder is not eligible to be a Qualified Trade Creditor a notice will be sent to such holder and the holder will be treated as a holder of a General Unsecured Claim. If a holder elects to be treated as a Qualified Trade Creditor and the Debtors determine that the holder is eligible for such treatment, the holder will be treated as a Qualified Trade Creditor and will receive 15% of its Allowed Claim (without interest) over the course of 2 years (in payments no
57 less frequent than 4 semiannual installments as will be determined by the Reorganized Debtors). Any holder that elects on its Ballot to be treated as a Qualified Trade Creditor will be deemed to have agreed in writing to the terms indicated in Section 1.2.138 of the Plan. Please note that a claimant’s election to be treated as a Qualified Trade Creditor (assuming the election is accepted by the Debtors) will not serve to protect the claimant from potential avoidance actions that may be brought by the Litigation Trust against the claimant. If after the Effective Date a holder that was deemed to be an NPC or GD Qualified Trade Creditor fails to fulfill the requirements set forth in Section 1.2.138 of the Plan, the Reorganized Debtors shall direct the Disbursing Agent to cease making any further payments to such holder under Section 3.3.8(b)(A) of the Plan. If after the Effective Date the Reorganized Debtors elect to cease doing further business with a NPC or GD Qualified Trade Creditor (other than as a result of a breach or default by that NPC or GD Qualified Trade Creditor), the Disbursing Agent shall continue to make the payments to the Qualified Trade Creditor as required under Section 3.3.8(b)(A) of the Plan, notwithstanding that election.
For a discussion of estimated recoveries under the Plan, please see the chart in Section II.C above.
D. Reservation of “Cramdown” Rights
If at least one class of Impaired claims votes to accept the Plan (without counting the votes of insiders), the Bankruptcy Code permits the Bankruptcy Court to confirm a chapter 11 plan over the objection of any class of claims or equity interests as long as the standards in Bankruptcy Code section 1129(b) are met. This power to confirm a plan over dissenting classes— often referred to as “cramdown”— is an important part of the reorganization process. It assures no single group (or multiple groups) of claims or interests can block a restructuring that otherwise meets the requirements of the Bankruptcy Code and is in the interests of the other constituents in the case.
The Debtors reserve the right to seek confirmation of the Plan, notwithstanding the rejection of the Plan by any Class entitled to vote. If one or more Classes votes to reject the Plan, the Debtors may request the Bankruptcy Court to rule the Plan meets the requirements specified in section 1129(b) of the Bankruptcy Code with respect to the rejecting Class or Classes. The Debtors will also seek such a ruling with respect to each Class that is deemed to reject the Plan.
E. Means of Execution of the Plan
1. Separate Plans
For purposes of voting on the Plan and receiving Distributions under the Plan, votes will be tabulated separately for each Debtor’s Plan and Distributions will be made to each separate Class as provided in that Debtor’s Plan, as set forth in Article III of the Plan. Except as otherwise provided in the Plan, Distributions in respect of Allowed Claims against the Estate of a particular Debtor will be calculated based upon the value of the assets of that particular Debtor’s Estate. A Claim against multiple Debtors, to the extent Allowed against each respective Debtor, will be treated as a separate Claim against each such Debtor for all purposes (including, but not limited to, voting and Distributions).
2. Severability of Plans
A failure to confirm any one or more of the Debtor’s Plans will not affect other Plans confirmed by the Bankruptcy Court, but the Debtors reserve the right to withdraw any and all Plans from confirmation if any one or more Plan(s) is not confirmed.
58 3. Continued Corporate Existence
Subject to the restructuring transactions contemplated by the Plan, each Debtor, other than NPG, NPH, NewPage Port Hawkesbury Holding LLC (“NPPHH”), and NewPage Canadian Sales LLC (“NPCS”) will continue to exist after the Effective Date as a separate entity, with all powers of a corporation or limited liability company, as the case may be, under applicable law in the jurisdiction in which that Debtor is incorporated or otherwise formed and pursuant to its Governance Documents in effect prior to the Effective Date, except to the extent the Governance Documents are amended and restated or otherwise revised pursuant to Section 4.4 and Section 9.2 of the Plan, to comply with Bankruptcy Code section 1123(a)(6), or otherwise, without prejudice to any right to terminate its existence (whether by merger or otherwise) under applicable law after the Effective Date. The continued existence, operation and ownership of Affiliates of the Debtors that are not Debtors in the Chapter 11 Cases is a material component of the Debtors’ businesses and, as set forth in the restructuring transactions, all of the Debtors’ Equity Interests and other property interests in those non-debtor Affiliates will re-vest in the applicable Reorganized Debtor or its successor on the Effective Date, subject to the transactions contemplated in Section 4.5.2 of the Plan.
4. Mergers
On the Effective Date, (i) NPPHH will merge into NewPage Consolidated Papers Inc. (“NPCPI”) (with NPCPI as the surviving Entity), and (ii) NPCS will either merge into NPWSI (with NPWSI as the surviving Entity) or dissolve post-Effective Date, at the option of the Reorganized Debtors.
5. Corporate Structure
On or before the Confirmation Date, the Debtors will form New Holdco. After completion of the steps set forth in Section 4.5.2 of the Plan, New Holdco will hold 100% of the outstanding shares of Reorganized NPC. Reorganized NPC will continue to exist as the intermediate holding company of the Reorganized Debtors and their Affiliates. New Holdco’s Debtor Affiliates having confirmed Plans will issue new shares of stock to their respective parent companies to re-create the same organizational structure that existed on the Commencement Date, or as otherwise directed by those entities. Upon the Effective Date, the Chapter 11 Cases of the Non-Proponent Debtors will be dismissed and all Claims, rights against or interests in the Non-Proponent Debtors’ Estates will be extinguished. Each Non-Proponent Debtor will be dissolved pursuant to the applicable law of its respective state of organization, to be effective upon the filing of the necessary documentation with the appropriate state agencies in such state, which will not occur until at least one day after the Effective Date.
6. Issuance of Stock of Reorganized NPC and Contribution to New Holdco
On the Effective Date, Reorganized NPC will issue its stock to the holders of the First Lien Notes Claims, and then such holders will contribute such shares of stock of Reorganized NPC to New Holdco in exchange for the New Holdco Common Stock.
7. Form of Securities to be Issued; Exemption from Registration
Unless otherwise agreed to by the Reorganized Debtors, all shares of New Holdco Common Stock will be non-certificated. In reliance upon Bankruptcy Code section 1145(a), at the time of issuance, none of the securities issued in connection with the Plan will be registered under Section 5 of the Securities Act of 1933, as amended, or any state or local law requiring registration for the offer or sale of securities. In addition, none of the securities issued in connection with the Plan will be listed on a
59 securities exchange. New Holdco will not participate in making a market (or facilitate making a market) in any such securities.
8. Certain Tax Treatment
a. Net Operating Loss Treatment
Section 382(l)(5) of the Tax Code contemplates an exception to the general rule of Section 382(a) of the Tax Code. To the extent such exception is available, NPC will, in consultation with the First Lien Notes Trustee, determine on or before the date that such election is due whether it intends to utilize the exception in Section 382(l)(5) of the Tax Code or it intends to elect out of the exception.
b. PM35 Tax Reporting
For U.S. federal income tax purposes the Debtors shall report the PM35 purchase price as the PM35 Net Purchase Price, plus the $40 million of Litigation Trust proceeds realized under the SEO Settlement Agreement.
9. Exit Financing16
In April of 2012, the Debtors’ advisors began soliciting potential exit lenders in regards to a stand-alone plan of reorganization for the Debtors. Eight different investment banks were brought into the process in regards to exit financing options. Each of the investment banks were provided with the Debtors’ business plan in June of 2012, as well as follow-up diligence meetings with the Debtors to formulate views on the potential exit financing structure as well as the amount of debt that the Debtors would be able to access from the capital markets. The Debtors and Lazard asked each of the investment banks to provide both a low leverage term sheet and a high leverage term sheet by early July of 2012. Seven of the eight investment banks provided preliminary non-binding term sheets to the Debtors in regards to exit financing. The exit financing term sheets all provided for an undrawn asset back revolving facility of $300 million to $400 million with a first lien on current assets. In addition, the term sheets provided for a term loan facility or senior note secured by a first lien on all other assets of the Debtors.
The Debtors and a group of financial institutions (the “Lending Parties”) are currently finalizing the terms of the Debtors’ exit financing facility (the “Exit Facility”). On the Effective Date of the Plan, the Reorganized Debtors intend to enter into an Exit Facility comprised of a $500 million term facility and a $350 million revolving facility. Subject to certain exceptions, the term facility will be secured by a first priority lien in the long-term assets of the Reorganized Debtors including the stock of Reorganized NPC and a second priority lien in the current assets of the Reorganized Debtors. Conversely, subject to certain exceptions, the revolving facility will be secured by a first priority lien in the current assets of the Reorganized Debtors and a second priority lien in the long-term assets of the Reorganized Debtors.
The reorganized Debtors will use the proceeds of the Exit Facility to fund distributions under the Plan, including repayment of the DIP Facility Claims arising under the DIP Credit Agreement, payment of cash distributions pursuant to the Plan, and funding the Reorganized Debtors’ post-emergence working capital needs. On October 29, 2012, the Debtors filed a motion for an order authorizing the Debtors to (a) enter into (i) an exit financing commitment letter (including all exhibits and attachments
16 Any capitalized terms used in this Section that are not otherwise defined in this Disclosure Statement have the meanings ascribed to them in the Commitment Letter.
60 thereto, the “Commitment Letter”) relating to the Debtors’ proposed exit financing consisting of a term loan facility and revolving facility and (ii) the fee letters relating to these proposed exit facilities (the “Term Facility Fee Letter” and “Revolving Facility Fee Letters”, respectively, and collectively, the “facility,” and together with the Commitment Letter, the “Exit Financing Documents”) regarding the Debtors’ proposed exit financing facilities (the “Exit Facilities”), (b) perform their obligations under the Exit Financing Documents, including without limitation, their obligations to incur and pay fees, indemnities, costs and expenses as provided in the Exit Financing Documents and (c) file the Fee Letters under seal.
Nevertheless, the Plan provides that, subject to, and upon the occurrence of, the Effective Date, and without further notice to or order or other approval of the Bankruptcy Court, act or action under applicable law, regulation, order or rule or the vote, consent, authorization or approval of any person or entity (including the Boards of Directors of the Debtors or the Reorganized Debtors), except for the Confirmation Order and as otherwise required by the Exit Financing Documents, the Reorganized Debtors shall, and are authorized to, enter into and perform and receive the proceeds of the Exit Financing, and to execute and deliver the Exit Financing Documents, in each case consistent with the terms of the Plan and the Exit Commitment Letter or otherwise on terms and conditions acceptable to the Exit Financing Arrangers and the Reorganized Debtors; provided, however, that the provision(s) of the Confirmation Order and the Plan Documents, including but not limited to the Plan, Plan Supplement and any amendment, modification or supplement thereto, shall be subject to the approval of the Exit Financing Arrangers only to the extent such provisions materially adversely affect any of the rights and interest of any or all of the Term Administrative Agent, the Revolving Administrative Agent and the Lenders in their capacities as such (as determined in good faith by the Arrangers). Confirmation of the Plan shall be deemed (i) approval of the Exit Financing, the Exit Financing Documents, and all transactions contemplated thereby, including, without limitation, any supplemental or additional syndication of the Exit Financing, and all actions to be taken, undertakings to be made, and obligations to be incurred by the Reorganized Debtors in connection therewith, including the payment of all fees, indemnities, and expenses provided for therein, and (ii) authorization of the Reorganized Debtors to enter into and execute the Exit Financing Documents and such other documents as the Exit Financing Arrangers may require to effectuate the Exit Financing, subject to such modifications as the Reorganized Debtors and the Exit Financing Arrangers may mutually agree are necessary or appropriate to effectuate the Exit Financing. The Exit Financing Documents shall constitute legal, valid, binding and authorized obligations of the Reorganized Debtors, enforceable in accordance with their terms. The financial accommodations to be extended pursuant to the Exit Financing Documents are being extended, and shall be deemed to have been extended, in good faith, for legitimate business purposes, are reasonable, shall not be subject to recharacterization for any purposes whatsoever, and shall not constitute preferential transfers or fraudulent conveyances under the Bankruptcy Code or any other applicable non-bankruptcy law. On the Effective Date, all of the Liens and security interests to be granted in accordance with the Exit Financing Documents (i) shall be deemed to be approved, (ii) shall be legal, binding and enforceable Liens on, and security interests in, the collateral granted thereunder in accordance with the terms of the Exit Financing Documents, (iii) shall be deemed perfected on the Effective Date, subject only to such Liens and security interests as may be permitted under the Exit Financing Documents, and (iv) shall not be subject to recharacterization or equitable subordination for any purposes whatsoever and shall not constitute preferential transfers or fraudulent conveyances under the Bankruptcy Code or any applicable non-bankruptcy law. The Reorganized Debtors and the persons and entities granting such Liens and security interests are authorized to make all filings and recordings, and to obtain all governmental approvals and consents necessary to establish and perfect such Liens and security interests under the provisions of the applicable state, provincial, federal, or other law (whether domestic or foreign) that would be applicable in the absence of the Plan and the Confirmation Order (it being understood that perfection shall occur automatically by virtue of the entry of the Confirmation Order and any such filings, recordings, approvals and consents shall not be required), and will thereafter cooperate to make all other
61 filings and recordings that otherwise would be reasonably necessary under applicable law to give notice of such Liens and security interests to third parties. To the extent that the DIP Agents, the First Lien Notes Trustee, the Second Lien Notes Trustee, or the holders of any Secured Claim (including, without limitation, the DIP Lenders, the holders of First Lien Notes and the holders of Second Lien Notes) or any agent for any such holders, has filed or recorded publicly any Liens and/or security interests to secure any Secured Claim, then as soon as practicable on or after the Effective Date, the DIP Agents, the First Lien Note Trustee, the Second Lien Notes Trustee or the holder of any Secured Claim (or the agent for such holder), as the case may be, shall take any and all steps reasonably requested by any or all of the Debtors, the Reorganized Debtors, the Exit Financing Arrangers and the administrative agents under the Exit Financing that are necessary to cancel and/or extinguish such publicly-filed Liens and/or security interests, in each case all costs and expenses in connection therewith to be paid by the Debtors or Reorganized Debtors. Notwithstanding anything to the contrary in the Confirmation Order or this Plan, the Bankruptcy Court’s retention of jurisdiction shall not govern any disputes or claims arising or asserted under, or any enforcement action or rights or remedies taken or exercised in connection with, the Exit Financing Documents after the Effective Date.
10. Distributions to Holders of Notes
a. Cancellation of Existing Securities and Agreements
On the Effective Date, the Equity Interests of NPC and the Guarantor Debtors will be cancelled and extinguished, any document, agreement, or instrument evidencing any Claim or Equity Interest against a Debtor (other than any Claim or Equity Interest that is Unimpaired by the Plan pursuant to section 1124 of the Bankruptcy Code) will be deemed cancelled without further act or action under any applicable agreement, law, regulation, order, or rule, and the obligations of that Debtor under those documents, agreements, or instruments will be discharged; provided, however, notwithstanding the foregoing, any indenture or other agreement that governs the rights of the holder of a Claim will continue in effect solely for purposes of (a) allowing that holder to receive Distributions under the Plan and (b) allowing and preserving the rights of such indenture trustee to (i) make distributions in satisfaction of Allowed noteholder Claims, (ii) exercise its Indenture Trustee Charging Liens against any such distributions, (iii) seek compensation and reimbursement from those noteholders for any fees and expenses incurred in making such distributions, and (iv) allowing an Indenture Trustee to enforce the subordination provisions contained in an indenture.
b. Delivery and Surrender
Each holder of any certificated Note will surrender such Note to the relevant Indenture Trustee, or, at the option of the relevant Indenture Trustee, be deemed to have surrendered such Note. No Distribution hereunder will be made to or on behalf of any such Note holder unless and until such Note is received by the relevant Indenture Trustee, if required by the first sentence of Section 4.8.2 of the Plan, or the loss, theft or destruction of such Note is established to the satisfaction of the relevant Indenture Trustee, including requiring such holder (i) to submit a lost instrument affidavit and an indemnity bond, and (ii) to hold the Debtors and the relevant Indenture Trustee harmless in respect of such Note and any Distributions made in respect thereof. Upon compliance with Section 4.8.2 of the Plan by a holder of any Note, such holder will, for all purposes under the Plan, be deemed to have surrendered such note. Any such holder that fails to surrender such Note or satisfactorily explain its non-availability to the relevant Indenture Trustee within 18 months of the Effective Date will be deemed to have no further Claim against the Debtors or their property or the relevant Indenture Trustee in respect of such Claim and will not participate in any Distribution hereunder. If such unclaimed Distributions are held by the relevant
62 Indenture Trustee after eighteen months, the Distribution that would otherwise have been made to such holder will be distributed by the relevant Indenture Trustee to all holders who have surrendered such Notes to such Indenture Trustee or satisfactorily explained their non-availability to the relevant Indenture Trustee by such date.
c. Payment of First Lien Notes Cash
The Debtors will be authorized to fund the Distribution of First Lien Notes Cash with the cash on their balance sheet and the proceeds of the Term Facility (as defined in the Exit Commitment Letter), and to make the Distribution of First Lien Notes Cash. On the Effective Date, the Debtors will distribute the First Lien Notes Cash to the First Lien Notes Trustee for the benefit of the holders of First Lien Notes Claims. The Distribution of First Lien Notes Cash will be funded with cash on the Debtors’ balance sheet and the proceeds of the Term Facility, such that, after taking into consideration the proceeds of the Term Facility, and the making of the Distribution of First Lien Notes Cash to the holders of First Lien Notes Claims and other distributions pursuant to this Plan, the pro forma unrestricted cash balance of the Reorganized Debtors (without giving effect to any draw of revolving loans under the Exit Facilities) upon emergence (after taking into account any such Distribution to the holders of First Lien Notes Claims and other Distributions pursuant to this Plan) will be $20 million (provided that cash shall not be deemed restricted for purposes hereof solely as a result of being on deposit in an account subject to a control agreement in favor of the Revolving Administrative Agent in favor of the lenders party to the revolving loans under the Exit Facilities).
11. Preservation of Rights of Action
Except to the extent the Preserved Rights are expressly and specifically released, transferred to the Litigation Trust pursuant to the terms and conditions set forth in Section 1.2.92 of the Plan, or otherwise treated in connection with the Plan, the Confirmation Order, or any settlement agreement approved during the Chapter 11 Cases, in accordance with section 1123(b) of the Bankruptcy Code:
a. The Preserved Rights will remain assets of and vest in the Reorganized Debtors, whether or not related litigation is pending on the Effective Date, and whether or not any Preserved Rights have been listed or referred to in the Plan, the Schedules, or any other document filed with the Bankruptcy Court;
b. Neither the Debtors nor the Reorganized Debtors waive, relinquish, or abandon (nor will they be estopped or otherwise precluded from asserting) any Preserved Rights: (i) whether or not Preserved Rights have been listed or referred to in the Plan, the Schedules, or any other document filed with the Bankruptcy Court, (ii) whether or not Preserved Rights are currently known to the Debtors, and (iii) whether or not a defendant in any litigation relating to Preserved Rights filed a proof of claim in the Chapter 11 Cases, filed a notice of appearance or any other pleading or notice in the Chapter 11 Cases, voted to accept or reject the Plan, or received or retained any consideration under the Plan; and
c. (i) The Reorganized Debtors may commence, prosecute, defend against, settle, and realize upon any Preserved Rights in their sole discretion, in accordance with what is in the best interests, and for the benefit, of the Reorganized Debtors, (ii) any recoveries realized by the Reorganized Debtors from the assertion of any Preserved Rights will be the sole property of the Reorganized Debtors, and (iii)
63 to the extent necessary, the Reorganized Debtors will be deemed representatives of their former Estates under section 1123(b) of the Bankruptcy Code.
12. The Settlements
As part of the Settlements effectuated pursuant to the Plan, on the Effective Date, the Litigation Trust shall be established, as set forth in more detail in Article V of the Plan. The following releases, waivers and/or rights are provided pursuant to the Plan Settlements and the SEO Settlement Agreement, which shall be deemed to occur on the Effective Date:
a. First Lien Noteholders. The First Lien Notes Trustee, and the First Lien Noteholders, will: (i) not object to the Distribution of the Settlement Cash and waive their entitlement to a Pro Rata Share of the same (except indirectly through exercise of their contractual subordination rights against the holders of the Senior Subordinated Unsecured Notes as set forth in the Plan and subject to the First Lien Notes Subordination Turnover Cap); (ii) waive and release all Adequate Protection Claims assertable by the First Lien Noteholders; (iii) be released from any and all claims and Causes of Action assertable against them or their affiliates, including claims and Causes of Action arising from or related to the 2007 Acquisition and the 2009 Refinancing; (iv) have their Claims Allowed in the amounts set forth in the Plan; (v) maintain their contractual subordination rights against holders of the Senior Subordinated Unsecured Notes pursuant to the Senior Subordinated Notes Indenture subject to the terms of the Plan and the Settlements; (vi) receive the First Lien Notes Cash; and (vii) participate in Distributions from the Litigation Trust as provided in Section 5.5 of the Plan.
b. Second Lien Noteholders. The Second Lien Notes Trustee and the Second Lien Noteholders will: (i) waive and release all Adequate Protection Claims assertable by the Second Lien Noteholders; (ii) be released from all claims and Causes of Action assertable against them or their affiliates, including claims and Causes of Action arising from or related to the 2007 Acquisition; (iii) have their Claims Allowed in the amounts as set forth in the Plan; (iv) maintain their contractual subordination rights against the holders of the Senior Subordinated Unsecured Notes pursuant to the Senior Subordinated Notes Indenture, subject to the First Lien Notes Subordination Turnover Cap; (v) receive a Pro Rata Share of the Settlement Cash (including indirectly through the exercise of their contractual subordination rights against the holders of the Senior Subordinated Notes); and (vi) participate in the Distributions from the Litigation Trust as provided in Section 5.5 of the Plan.
c. Other Constituents. (i) The indenture trustees for the Unsecured Notes will be paid their reasonable fees and expenses, subject to Section 14.7 of the Plan; (ii) the Union Advisors Fees will be reimbursed, and the Debtors’ modified collective bargaining agreements and modified retiree benefit agreements with the USW will be implemented; and NPWSI Retirement Plan Settlement with the Unions will be implemented; (iii) certain holders of General Unsecured Claims will have the opportunity to be treated as Qualified Trade Creditors; (iv) the Claims or Causes of Action arising from or related to the 2007 Acquisition, 2009 Refinancing or the PM35 Sale/Leaseback that the Committee has or could have investigated, asserted, or sought standing to assert against any Releasee will be discontinued, waived, and fully released; (v) the Committee’s appeal of the DIP
64 Order, currently pending in the District Court, will be withdrawn with prejudice on the Effective Date without further notice or order and the Committee shall cooperate in signing such documents as are reasonable or necessary to have the dismissal with prejudice of the appeal reflected on the Bankruptcy Court and District Court’s dockets; (vi) the indenture trustee for the Senior Subordinated Unsecured Notes Claims will receive the Senior Subordinated Unsecured Notes Settlement Payment free and clear of any subordination or turnover to any other constituency (including, without limitation, the First Lien Notes Trustee and the holders of Allowed First Lien Notes Claims, and the Second Lien Notes Trustee and the holders of Allowed Second Lien Notes Claims) on account of dismissal and releases of the Claims and Causes of Action set forth in Section 4.10(c)(iv) of the Plan; (vii) the indenture trustee for the 2013 PIK Notes will receive the 2013 PIK Notes Settlement Payment free and clear of any subordination or turnover to any other constituency (including, without limitation, the First Lien Notes Trustee and the holders of Allowed First Lien Notes Claims, and the Second Lien Notes Trustee and the holders of Allowed Second Lien Notes Claims) on account of dismissal and releases of the Claims and Causes of Action set forth in Section 4.10(c)(iv) of the Plan; and (viii) the unsecured creditors shall benefit from the releases of the Adequate Protection Claims, the First Lien Noteholders’ waiver of their Pro Rata Share of the Settlement Cash (except indirectly through exercise of the First Lien Noteholders’ contractual subordination rights against the holders of the Senior Subordinated Unsecured Notes as set forth in the Plan), and the First Lien Noteholders’ waiver of their Pro Rata Share of the first $50 million of distributable net recoveries from the Litigation Trust (except indirectly through exercise of the First Lien Noteholders’ contractual subordination rights against the holders of the Senior Subordination Unsecured Notes as set forth in the Plan). The Settlement Cash and Litigation Trust Initial Proceeds will be distributed among the Debtors (other than the Non- Proponent Debtors) for subsequent pro rata Distribution to each Debtor’s (other than the Non-Proponent Debtors’) respective Creditors. The distribution of Settlement Cash and the Litigation Trust Initial Proceeds among the Debtors’ (other than the Non-Proponent Debtors’) Estates will be made in a manner such that Creditors of each Debtor (other than the Non-Proponent Debtors) will receive approximately the same percentage of their Allowed Claims from the sum of the Settlement Cash and the Litigation Trust Initial Proceeds; provided, however, that if the Bankruptcy Court finds that the foregoing distribution method is contrary to law, then the Settlement Cash will be allocated among the Debtors (other than the Non-Proponent Debtors) based on each Debtor’s (other than the Non-Proponent Debtors’) book value of assets and then, within each Debtor (other than the Non-Proponent Debtors), pro rata to its Creditors. d. SEO. (i) A summary of the terms of the SEO Settlement Agreement is as follows: (i) NPWSI will purchase PM35 for a sum equal to the PM35 Net Purchase Price, and SEO will cause PM35 to be sold to the Debtors, with representations and warranties (a) as to the absence of liens, claims, interests or encumbrances, including the release of the lien of the PM35 trust indenture, a set forth in the SEO Settlement Agreement (other than those created by the Debtors or Reorganized Debtors, if any, in favor of parties other than the Trust Parties), and (b) that the Owner Trustee has the same title to PM35 as was conveyed to it by the predecessors in interest of NPWSI, (ii) the SEO Released Parties will be released from any and all Claims or Causes of Action whatsoever from the
65 beginning of the world to the Effective Date, known or unknown, including, without limitation, those arising from or related to the PM35 Sale/Leaseback, the 2007 Acquisition, and SEO’s ownership of the 2015 PIK Notes or Equity Interests of NPG, including any and all indemnity claims under the transaction documents with respect to the 2007 Acquisition, subject solely to certain agreed exceptions under and to the extent set forth in the SEO Settlement Agreement, (iii) the SEO Unsecured Claims will be waived on the closing of the SEO Settlement Agreement, (iv) the Debtors or the Reorganized Debtors, as applicable, will pay the SEO Professional Fees on the Effective Date (subject to Section 1.2.61 of the Plan) solely from the $500,000 holdback of the $40 million that the Debtors are otherwise allocating to the Litigation Trust provided, however, that if any of the retained $500,000 remains after payment in full of the SEO Professional Fees, the Debtors or Reorganized Debtors shall remit such excess Cash to the Litigation Trust, (v) the PM35 Operative Documents will be terminated without liability to the Debtors, (vi) the Debtors’ executory contracts with Corenso North America Corp. (“Corenso”) and Thiele Kaolin Company (“TKC”) will be assumed and the cure amounts previously agreed to by the Debtors, Corenso and TKC paid, and the contracts will be included in Schedule 8.1(E) of the Plan Supplement, (vii) the Trust Parties will be released from any and all Claims or Causes of Action arising from or related to the PM35 Sale/Leaseback, from the beginning of the world to the Effective Date, known or unknown, and (viii) the Debtors will be released by SEO and the Trust Parties as set forth in the SEO Settlement Agreement; provided, however, that notwithstanding the foregoing, nothing herein shall operate as a release or discharge of the SEO Released Parties’, the Trust Parties’, the Debtors’ or Reorganized Debtors’ agreements, promises, covenants, settlements, duties, obligations, representations and warranties set forth in or arising under the SEO Settlement Agreement. This summary is qualified in its entirety by reference to the provisions of the SEO Settlement Agreement. For the avoidance of doubt, in the event of any inconsistency between any description of the terms and conditions of the Plan or this Disclosure Statement and the SEO Settlement Agreement, the provisions of the SEO Settlement Agreement shall govern and control in all respects.
e. If a party in interest (as defined in section 1109(b) of the Bankruptcy Code) objects to any of the Settlements or the SEO Settlement Agreement, the objection will be heard as part of the Confirmation Hearing. If no objection to the Settlements or the SEO Settlement Agreement is filed or if an objection is filed and overruled, the Plan and the SEO Settlement Agreement will effectuate the terms of the Settlements, and the Confirmation Order shall specifically approve each of the Settlements and the SEO Settlement Agreement under Bankruptcy Rule 9019.
F. The Litigation Trust
1. Establishment of the Litigation Trust
On the Effective Date, the Litigation Trust shall be established pursuant to the Litigation Trust Agreement for the purpose of (i) administering the Litigation Trust Assets (including the prosecution of the Committee Litigation Claims for the benefit of the Litigation Trust Beneficiaries), (ii) evaluating and prosecuting (a) objections to Disputed General Unsecured Claims and (b) Committee
66 Litigation Claims, provided that for the avoidance of doubt, the Litigation Trustee may objection under section 502(d) of the Bankruptcy Code to any Claim of any Entity or transferee that is the subject of a Committee Litigation Claim, and (iii) making all Distributions on account of Litigation Trust Interests or Settlement Cash as provided for under this Plan. The Litigation Trust Agreement shall be included in the Plan Supplement. As set forth in Section 5.8.2 of the Plan, the Litigation Trust is intended to qualify as a liquidating trust pursuant to Treasury Regulation section 301.7701-4(d). Except with respect to the initial Litigation Trust Funding (to be repaid to Reorganized NPC as provided in Section 5.4 of the Plan), none of the Debtors or Reorganized Debtors shall have any liability for any cost or expense of the Litigation Trust.
2. Litigation Trust Assets
On the Effective Date, in accordance with Section 1141 of the Bankruptcy Code, all of the Litigation Trust Assets, shall automatically vest in the Litigation Trust, free and clear of all Claims and Equity Interests for the benefit of the Litigation Trust Beneficiaries; provided, however, that the Committee Litigation Claims set forth in Section 1.2.28 of the Plan shall vest in the Litigation Trust only if and when the conditions set forth therein occur. If an amended settlement referenced in Section 1.2.28(b) of the Plan is propounded and the Bankruptcy Court denies its approval, the Causes of Action in Section 1.2.28(b) shall be deemed transferred to the Litigation Trust upon entry of the Bankruptcy Court’s order denying approval unless a stay pending appeal is granted to the Debtors, Reorganized Debtors, or Cerberus. Nothing herein shall waive or prejudice the rights of any entity against whom any claims, Causes of Action, or objections are brought.
Subject to the provisions below, the Litigation Trust, acting through the Litigation Trustee, will be authorized to exercise and perform the rights, powers, and duties held by the Estates, including, under section 1123(b)(3) of the Bankruptcy Code, with respect to the Litigation Trust Assets, and will be the sole party authorized to take control of, supervise, and manage the Litigation Trust Assets and prosecute or settle the Committee Litigation Claims.
Prior to and after the Effective Date of the Plan, the Debtors and Reorganized Debtors shall continue to provide the Committee and Litigation Trustee reasonable access to their books and records to prosecute the claims, Causes of Action, and objections transferred to the Litigation Trust.
(a) To the extent, if any, that the Committee or Litigation Trustee contends the Debtors or Reorganized Debtors are not providing sufficient data, the Bankruptcy Court shall determine such dispute.
(b) The Debtors and the Reorganized Debtors shall be entitled to appropriate confidentiality protections for any and all proprietary data requested by the Committee or Litigation Trustee.
(c) To the extent, if any, that the Committee or Litigation Trustee requests data consisting of privileged material or attorneys’ work product, such data will be produced to the Committee or Litigation Trustee unless the Debtors or Reorganized Debtors (i) assert that production of such data would impair an applicable privilege or (ii) disagree whether the privilege or work product protection may be waived by the Committee or Litigation Trustee, taking into account the policies underlying the privileges and work product doctrine. In the event of such dispute, either party may request that the Bankruptcy Court resolve such dispute.
67 In no circumstance shall the Litigation Trustee be the representative of any Reorganized Debtor and the Litigation Trustee shall use best efforts to conspicuously show that the Litigation Trustee represents a trust that should not be confused with the Reorganized Debtors.
(a) The Litigation Trustee shall have no power over the books and records of the NewPage estates beyond the rights granted herein;
(b) In no circumstance shall the Litigation Trustee be authorized or contend it is authorized to incur liability on behalf of the Debtors’ estates or the Reorganized Debtors, and any and all liability incurred by the Litigation Trustee, whether for expenses of prosecution, payment of sanctions, or otherwise, shall be the exclusive liability of the Litigation Trust and not the liability of the Debtors’ Estates or the Reorganized Debtors.
(c) The Litigation Trustee shall be a party in interest in respect of the claims, Causes of Action, and objections it prosecutes, and to the extent, if any, the Litigation Trustee attempts to appear in other matters, its standing and party-in-interest status shall be subject to determination by the Bankruptcy Court after hearing any and all objections, if any, from the Reorganized Debtors and other litigants.
Nothing herein obligates or bars the Reorganized Debtors to take or not to take positions in litigation propounded by the Litigation Trustee, which positions support or oppose the Litigation Trustee’s position, and nothing herein precludes current and former officers, directors, and employees of the Debtors and Reorganized Debtors from providing testimony in such litigation regardless of the impact of such testimony.
The Litigation Trustee will establish one or more Disputed Claim Reserves on account of Disputed Claims, the Holders of which would be entitled to Litigation Trust Interests or Settlement Cash were such Disputed Claim ultimately Allowed. The Litigation Trustee may, for U.S. Federal income tax purposes (and, to the extent permitted by law, for state and local income tax purposes), (i) make an election pursuant to Treasury Regulation section 1.468B-9 to treat the Disputed Claim Reserve as a “disputed ownership fund” within the meaning of that section, (ii) allocate taxable income or loss to the Disputed Claim Reserve, with respect to any given taxable year (but only for the portion of the taxable year with respect to which such Claims are Disputed Claims), and (iii) distribute assets from the Disputed Claim Reserve as, when, and to the extent, such Disputed Claims either become Allowed or are otherwise resolved, as more fully set out in Article VII of the Plan.
3. Funding the Litigation Trust
On the Effective Date, the Litigation Trust Funding shall be deposited in the Litigation Trust and the Litigation Trust shall issue the Litigation Trust Note to Reorganized NPC. If at the conclusion of the litigation related to the Committee Litigation Claims there remains any unused portion of the Litigation Trust Funding, the excess funds shall be returned to Reorganized NPC and be applied to any amounts then outstanding on the Litigation Trust Note.
4. Distribution of Litigation Trust Net Proceeds
The Litigation Trust Initial Proceeds and other proceeds of the Committee Litigation Claims (if any) shall constitute Litigation Trust proceeds and be distributed to the Litigation Trust Beneficiaries as follows:
68 Each Litigation Trust Beneficiary shall be entitled to a Distribution of its Pro Rata Share of the Litigation Trust proceeds; provided, however, that the First Lien Notes Trustee shall waive its entitlement to a Pro Rata Share of the Litigation Trust proceeds allocable to the First Lien Notes Deficiency Claims, up to the first $50 million of Litigation Trust proceeds realized; thereafter, the First Lien Notes Trustee shall be entitled to participate in Distributions of Litigation Trust proceeds on account of the NPC Class 3B Litigation Trust Interests. For the avoidance of doubt, the Litigation Trust Initial Proceeds will be distributed directly to the Litigation Trust Beneficiaries on the Effective Date.
For the avoidance of doubt, the Subordination Turnover shall be distributed to the First Lien Notes Trustee and the Second Lien Notes Trustee, until the holders of the First Lien Notes Claims and Second Lien Notes Claims have been paid in full; provided, however, that (i) the portion of the Subordination Turnover delivered to the First Lien Notes Trustee shall be subject to the First Lien Notes Subordination Turnover Cap in accordance with the terms of the Plan, (ii) any amounts realized in excess of the First Lien Notes Subordination Turnover Cap that would otherwise be allocable to the First Lien Notes Trustee shall be distributed pro rata to the holders of the Second Lien Notes Claims, and (iii) the portion of the Subordination Turnover delivered to the Second Lien Notes Trustee shall be subject to the First Lien Notes Subordination Turnover Cap.
5. Protected Parties
The Litigation Trust shall not pursue any claims or Causes of Action against any Entities other than those defendants to the claims, Causes of Action, and objections described in Section 1.2.28 of the Plan. The Litigation Trust will not bring claims, Causes of Action, or objections against any Releasee, including any party released under the SEO Settlement Agreement.
6. The Litigation Trustee and Structure of the Litigation Trust
The Litigation Trust shall be managed and operated by the Litigation Trustee, who shall be appointed on the Effective Date. The Litigation Trustee shall have the functions, duties and rights provided in the Litigation Trust Agreement, subject to the limitations set forth in Article V of the Plan. No Litigation Trust Beneficiary shall have any consultation or approval rights whatsoever in respect of management and operation of the Litigation Trust. The initial Litigation Trustee shall be Pirinate Consulting Group LLC.
The Litigation Trust Agreement shall, among other things, contain provisions with respect to the (i) responsibilities of the Litigation Trustee, (ii) procedures for the removal or resignation of the Litigation Trustee, (iii) termination of the Litigation Trustee’s duties, (iv) scope of the Reorganized Debtors’ cooperation with the Liquidation Trustee and its advisors, consistent with Article V of the Plan, (v) protection of confidential information provided by the Reorganized Debtors to the Litigation Trustee, and (vi) other administrative mechanics of the Litigation Trust’s operations.
The Litigation Trust will have authority to retain any counsel, financial advisors, claims agent, auditors, or such other professionals as it deems appropriate at all times, provided they are all paid by the Litigation Trust and not the Reorganized Debtors, and provided they do not have conflicts with the Reorganized Debtors. Paul Hastings LLP, Quinn Emanuel Urquhart & Sullivan, LLP and ASK LLP shall be deemed not to have conflicts with the Reorganized Debtors. The Litigation Trust may select any of the foregoing professionals in its sole discretion, and prior employment in any capacity in the Debtors’ bankruptcy cases on behalf of the Debtors, their estates, the Committee, or any creditors shall not preclude the Litigation Trust’s retention of such professionals. The Litigation Trust Beneficiaries’ interests in the Litigation Trust shall be uncertificated and transferable, subject to applicable law, provided that, no transfer, assignment or other disposition of a Litigation Trust Interest may be effected if
69 such transfer would require the Litigation Trust to comply with the registration and reporting requirements of the Securities Exchange Act of 1934, as amended, or the Investment Company Act of 1940, as amended. Any and all costs, expenses, adverse judgments, sanctions, and other financial obligations imposed against the Litigation Trust shall be solely the liabilities of the Litigation Trust and not of the Reorganized Debtors or any other Entity. The Litigation Trust, as of the Effective Date, without further notice or order, shall be enjoined from asserting any and all claims against the Reorganized Debtors, any other Releasee or any other party released under the SEO Settlement Agreement, the Cerberus Entities (if their settlement with the Debtors’ Estates is approved and the approval order is not reversed or a stay order granted that grants the Litigation Trust claims to propound), or the respective properties or interests in properties of any of the foregoing parties. If such Cerberus Entities settlement is ultimately reversed by a Final Order, the claims will then transfer to the Litigation Trust.
In addition to reimbursement for actual out-of-pocket expenses incurred by the Litigation Trustee, the Litigation Trustee shall be entitled to receive reasonable compensation for services rendered on behalf of the Litigation Trust on terms to be set forth in the Litigation Trust Agreement. All such compensation and reimbursement shall be paid from the Litigation Trust with Litigation Trust Assets. The Reorganized Debtors shall have no liability therefor.
7. Taxes
a. Transfer Taxes.
Any transfer of the Litigation Trust Assets to the Litigation Trust shall be exempt from any stamp, real estate transfer, mortgage reporting, sales, use or other similar tax to the extent permitted under section 1146(a) of the Bankruptcy Code.
b. Federal Income Tax Treatment of the Litigation Trust.
The Litigation Trust will be established for the sole purpose of distributing any recoveries from the Committee Litigation Claims, in accordance with Treasury Regulation section 301.7701-4(d) and Revenue Procedure 94-45, with no objective to continue or engage in the conduct of a trade or business. The Litigation Trust is intended to qualify as a liquidating trust for U.S. federal income tax purposes. The transfer of each of the Litigation Trust Assets to the Litigation Trust shall be treated for U.S. federal income tax purposes as: (a) a transfer of the Litigation Trust Assets to the Litigation Trust Beneficiaries and, to the extent Litigation Trust Assets are allocable to Disputed Claims, to any Disputed Claims Reserve, followed by (b) the transfer by such Litigation Trust Beneficiaries of the Litigation Trust Assets (other than the Litigation Trust Assets allocable to the Disputed Claims Reserve) to the Litigation Trust in exchange for Litigation Trust Interests. Consistent therewith, all parties must treat the Litigation Trust as a grantor trust of which the Litigation Trust Beneficiaries, and, to the extent Litigation Trust Assets are allocable to Disputed Claims, the Disputed Claims Reserve, are the owners and grantors. Subject to the terms of the Litigation Trust Agreement, the Litigation Trustee will determine the fair market value of the Litigation Trust Assets as soon as possible after the Effective Date, and the Litigation Trust Beneficiaries and the Litigation Trustee must consistently use this valuation for all U.S. federal income tax purposes, including for determining gain, loss or tax basis.
c. Federal Income Tax Treatment of the Disputed Claims Reserve.
Absent definitive guidance from the IRS or a contrary determination by a court of competent jurisdiction, if pursuant to Section 5.3 of the Plan, the Litigation Trustee elects to treat the Disputed Claims Reserve as a “disputed ownership fund,” the Disbursing Agent shall (i) treat the
70 Disputed Claims Reserve as a disputed ownership fund for U.S. federal income tax purposes within the meaning of Treasury Regulations section 1.468B-9(b)(1) and (ii) to the extent permitted by applicable law, report consistently with the foregoing characterization for U.S. federal, state and local income tax purposes. Consistent therewith, all parties shall report, for income tax purposes, consistently with the foregoing.
8. Dissolution
The Litigation Trust shall be dissolved no later than five years from the Effective Date, unless the Bankruptcy Court, upon motion made within the six month period prior to such fifth anniversary (and, in the event of further extension, at least six months prior to the end of the preceding extension), determines that a fixed period extension (together with any prior extensions, without a favorable letter ruling from the Internal Revenue Service that any further extension would not adversely affect the status of the Litigation Trust as a liquidating trust for federal income tax purposes) is necessary to facilitate or complete the recovery on and liquidation of the Litigation Trust Assets; provided that in no event shall the term of the Litigation Trust be extended beyond 10 years.
Upon dissolution of the Litigation Trust, any remaining Cash on hand (excluding any unused portion of the Litigation Trust Funding that shall be used to pay off the outstanding balance of the Litigation Trust Note) and other assets, with the exception of any Committee Litigation Claims, will be distributed to the Litigation Trust Beneficiaries in accordance with the Litigation Trust Agreement. Upon the dissolution of the Litigation Trust, all remaining Committee Litigation Claims shall be deemed void and abandoned and no Litigation Trust Beneficiary shall have any right, title or interest in or to any such Preserved Cause of Action.
9. Securities Law Matters
To the extent the interests in the Litigation Trust are deemed to be “securities,” the issuance of such interests under the Plan are exempt, pursuant to section 1145 of the Bankruptcy Code, from registration under the Securities Act of 1933, as amended, and any applicable state and local laws requiring registration for the offer or sale of securities.
10. Potential Committee Litigation Claims
The Committee Litigation Claims mean (a) all claims pursuant to section 547 of the Bankruptcy Code other than (i) claims against the Cerberus Entities, and (ii) any claim whose prosecution would create a material net detriment to the business of the Reorganized Debtors, which claims shall be determined in good faith by the Debtors, the Committee and the First Lien Notes Steering Committee (and in consultation with the Second Lien Group) and, after using best efforts, listed in Exhibit 1.2.28 of the Plan, which Exhibit shall be filed under seal and shall not be amended, modified or supplemented without the express consent (which consent shall not be unreasonably withheld) of the Debtors, the First Lien Notes Steering Committee and the Committee (and in consultation with the Second Lien Group), (b) if the Bankruptcy Court does not approve a settlement propounded prior to confirmation of the Plan between the Debtors’ estates and the Cerberus Entities, or does not approve an amended settlement that may be propounded prior to the Effective Date if the first settlement is not approved, Causes of Action against the Cerberus Entities, and Causes of Action against other Entities, if any, that the Cerberus Entities claim are liable for contribution, indemnification or similar relief (other than claims against any Releasee), and (c) objections to Disputed General Unsecured Claims. If an amended settlement is propounded under sub-section 1.2.28(b) of the Plan prior to the Effective Date, the Debtors and Reorganized Debtors shall use their best efforts to cause the motion to approve the amended settlement to be heard and decided as expeditiously as the Bankruptcy Court can accommodate. For the avoidance of
71 doubt, Committee Litigation Claims shall not include any claims or Causes of Action against the SEO Released Parties or the Trust Parties, or any other Releasee. Certain transactions that occurred prior to the Petition Date may have given rise to preference actions under section 547 of the Bankruptcy Code. Section 547 of the Bankruptcy Code permits a debtor (or representative of a debtor, which in this case is the Litigation Trustee) to avoid and receive certain prepetition payments and other transfers made by the debtor to or for the benefit of a creditor in respect of an antecedent debt, if such transfer (i) was made when the debtor was insolvent and (ii) enabled the creditor to receive more than it would receive in a hypothetical liquidation of the debtor under Chapter 7 of the Bankruptcy Code where the transfer had not been made. Transfers made to a creditor that was not an “insider” of the debtor are subject to these provisions generally only if the payment was made within 90 days prior to the debtor’s filing a petition under chapter 11 of the Bankruptcy Code (the “Preference Period”). Under section 547 of the Bankruptcy Code, certain defenses, in addition to the solvency of the debtor at the time of the transfer and the lack of preferential effect of the transfer, are available to a creditor from which a preference recovery is sought. Among other defenses, a debtor may not recover a payment if such payment was made, and the related obligation was incurred, in the ordinary course of business of both the debtor and the creditor. The debtor has the initial burden of demonstrating the existence of all the elements of a preference and is presumed to be insolvent during the Preference Period. The creditor has the initial burden of proof as to the aforementioned defenses. The Litigation Trust may be able to recover proceeds on account of such actions for the Litigation Trust Beneficiaries.
For a description of potential claims against Cerberus, see Section VI.O.11 hereof.
G. Voting and Distributions under the Plan
1. Impaired Classes to Vote
Except to the extent a Class of Claims or Equity Interests is deemed to reject the Plan, each holder of a Claim or Equity Interest in an Impaired Class as of the Voting Record Date will be entitled to vote to accept or reject the Plan as provided in such order as is entered by the Bankruptcy Court establishing procedures with respect to the solicitation and tabulation of votes to accept or reject the Plan, or any other order(s) of the Bankruptcy Court.
2. Acceptance by Class of Claims
An Impaired Class of Claims will have accepted a Plan if the Plan is accepted by at least two-thirds in dollar amount and more than one-half in number of the Allowed Claims of that Class that have voted to accept or reject the Plan. Unimpaired Classes are presumed to accept the Plan.
If no holders of Claims in an Impaired Class who are entitled to vote to accept or reject the Plan have cast Ballots to accept or reject the Plan, on or before the Voting Deadline, such Class shall be deemed to have voted to accept the Plan.
3. Elimination of Vacant Classes
A Class will be eliminated from the Plan if there are no Claims in that Class because (i) no Claim in that Class is known by the Debtors, (ii) no proof of claim asserting a Claim in that Class has been filed, (iii) any proof of claim asserting a Claim in that Class has been disallowed in its entirety by an order of the Bankruptcy Court or such other court of competent jurisdiction, (iv) any proof of claim asserting a Claim in that Class has been re-classified as a Claim in another Class or against another Debtor, or (v) any proof of claim asserting a Claim in that Class has been withdrawn by the party
72 asserting that Claim or otherwise removed by agreement of that party and the applicable Debtor or by Final Order of the Court.
4. Nonconsensual Confirmation
a. Cramdown.
With respect to each Impaired Class of Claims that is deemed to reject the Plan in accordance with section 1126(g) of the Bankruptcy Code, the Debtors will request that the Bankruptcy Court confirm the Plan in accordance with section 1129(b) of the Bankruptcy Code. To the extent any other Impaired Class fails to accept any Plan in accordance with section 1126(a) of the Bankruptcy Code and Section 6.2 of the Plan, the Debtor whose Plan was not so accepted will have the right to request that the Bankruptcy Court confirm the Plan in accordance with section 1129(b) of the Bankruptcy Code and/or amend the Plan.
b. Effect of Plan Rejection on Distributions.
If the Committee and/or the Second Lien Group files an objection to confirmation of the Plan, then NPC Class 3A and/or NPC Class 3C, and GD Class 3A and/or GD Class 3C, as applicable, will be entitled only to Distributions from unencumbered assets after taking into account the full legal entitlements of other claimants with claims against the same estates. In calculating the Distributions for the affected Class from Settlement Cash, Litigation Trust proceeds or other unencumbered assets, the waiver of the First Lien Notes Deficiency Claims, the First Lien Notes Subordination Turnover Cap, and the First Lien Noteholders’ Adequate Protection Claims will not apply (and if such Adequate Protection Claims are Allowed, they will be paid out of the Distributions otherwise payable to the affected Class(es)). The amount representing the difference between (i) the recovery that NPC Class 3A or NPC Class 3C, or GD Class 3A or GD Class 3C would otherwise receive if the Committee and/or the Second Lien Group, as applicable, do not object to confirmation o the Plan, and (ii) the recovery that such Classes would otherwise receive if the Committee and/or Second Lien Group do object to confirmation of the Plan will be paid to the First Lien Notes Trustee (for the benefit of the First Lien Noteholders). [The corresponding provision in the Plan will be deleted, as applicable, if the Second Lien Group and/or the Committee agrees not to object to confirmation of the Plan.]
5. Distributions under the Plan
One of the key concepts under the Bankruptcy Code is that only “allowed” claims and equity interests may receive distributions under a chapter 11 plan. This term is used throughout the Plan and the descriptions below. In general, an “allowed” claim or an “allowed” equity interest simply means that the debtor agrees, or in the event of a dispute, that the bankruptcy court determines, that the claim or interest, and the amount thereof, is in fact a valid obligation of the debtor.
An Allowed Claim is (i) any Claim that has been listed by the Debtor in its Schedules, as amended from time to time in accordance with Bankruptcy Rule 1009, as liquidated in amount and not disputed or contingent and for which no contrary proof of claim has been filed provided, however, that the Debtors shall not amend their Schedules after the hearing on the Disclosure Statement, but shall retain the right to seek approval from the Bankruptcy Court to allow additional Claims against the Estates, (ii) any Claim expressly allowed by the Plan, (iii) any timely filed Claim that is not disputed or as to which no objection to allowance has been timely interposed in accordance with Section 6.1 of the Plan or such other period of limitation fixed by the Bankruptcy Code, the Bankruptcy Rules, or the Bankruptcy Court, (iv) any Claim that is compromised, settled, or otherwise resolved pursuant to the authority granted to the Reorganized Debtors pursuant to the Plan, or (v) any Claim that has been Allowed by Final Order, except
73 that (1) Claims allowed solely for the purpose of voting to accept or reject the Plan pursuant to an order of the Bankruptcy Court under Bankruptcy Rule 3018(a) will not be considered Allowed, (2) unless otherwise specified in the Plan or by order of the Bankruptcy Court, an Allowed Administrative Expense Claim or Allowed Claim will not for any purpose under the Plan include interest on that Administrative Expense Claim or Claim from and after the Commencement Date, unless interest is expressly provided for in the Plan, and (3) an Allowed Claim will not include any Claim subject to disallowance in accordance with section 502(d) of the Bankruptcy Code.
Whenever any Distribution to be made pursuant to the Plan will be due on a day other than a Business Day, the Distribution will instead be made, without interest, on the immediately succeeding Business Day, but will be deemed to have been made on the date due. The Distributions will be made to the holders of Allowed Claims as of the Distribution Record Date and the Reorganized Debtors, and subject to the transfer of any Litigation Trust Interests in accordance with the terms of Litigation Trust Agreement, the Litigation Trustee, will have no obligation to recognize any transfer of a Claim occurring after the Distribution Record Date.
a. Distribution Deadlines.
Any Distribution to be made by a Disbursing Agent pursuant to a Plan will be deemed to have been timely made if made in accordance with the Distributions specified in Article III of the Plan. No interest will accrue or be paid with respect to any Distribution as a consequence of the Distribution not having been made on the Effective Date or any other Distribution Date.
b. Treatment of New Holdco Common Stock.
The New Holdco Common Stock will be non-certificated and issued in book-entry form. If any Distribution of the stock of Reorganized NPC is undeliverable it will be exchanged for New Holdco Common Stock in accordance with Section 4.5.2 of the Plan; if the resulting New Holdco Common Stock is undeliverable, then at the expiration of one year from the Effective Date the undeliverable Distributions will be deemed unclaimed property and will be treated in accordance with Section 6.13 of the Plan.
c. Undisbursed New Holdco Common Stock.
If a legal impediment exists to the issuance or distribution of all or a portion of any New Holdco Common Stock or stock of Reorganized NPC under the Plan to any holder of an Allowed First Lien Notes Claim, or if Reorganized NPC is advised in writing by any such holder that a legal impediment exists to the acquisition by the holder of those securities, whether as a result of any legal requirements, conditions, approvals, or otherwise, the securities that would otherwise be distributable to the holder in accordance with the Plan but for the legal impediment will instead be issued on the Effective Date, to the Disbursing Agent, to be held pursuant to the terms and conditions of the Plan provided that the Disbursing Agent will not exercise any voting rights with respect to these securities, and in the case of stock of Reorganized NPC, the Disbursing Agent will exchange such stock for New Holdco Common Stock on behalf of such holder. From and after the Effective Date, up to and until the undisbursed securities are released pursuant to the terms of the Plan, the Disbursing Agent will be the registered holder of these securities. When the applicable legal impediment to the acquisition of undisbursed securities has been resolved as evidenced by delivery of written notice by the holder to the Disbursing Agent and New Holdco, which notice will include a description of such resolution on which the Disbursing Agent and New Holdco will be entitled to rely, the undisbursed securities will be delivered to the holder no later than the next Distribution Date in accordance with the terms and conditions of the Plan. In any other instance, these securities will be delivered at such time as New Holdco determines in its sole discretion that any
74 legal impediment to the issuance and delivery of those securities has been resolved. If the applicable legal impediment to the issuance and delivery of undisbursed securities to a holder has not been satisfactorily resolved in the foregoing manner within one year after the Effective Date, New Holdco will direct the Disbursing Agent to cooperate in good faith with the affected holder to sell the undisbursed securities and distribute the proceeds to the holder.
d. Distributions of Litigation Trust Interests.
The Litigation Trustee shall be responsible for the Distribution of Litigation Trust Interests, but the Litigation Trust Interests shall be recorded in book-entry form only. The Litigation Trust Interests shall not be certificated or issued in registered form. If any Distribution on account of Litigation Trust Interests to a Litigation Trust Beneficiary is undeliverable, then at the expiration of one (1) year from the Effective Date, the undeliverable Distributions shall be deemed unclaimed property and shall be treated in accordance with Section 6.13 of the Plan.
e. Responsibility for Transfers and Distributions.
The Disbursing Agent will be responsible for Distributions required by the Plan.
6. Distribution Record Date
As of the close of business on the Distribution Record Date, the Debtors, the Reorganized Debtors, and the Indenture Trustees shall have no obligation to recognize any transfer of any noteholder’s Claim occurring after the close of business on the Distribution Record Date, and shall instead be entitled to recognize and deal for all purposes under the Plan with only those holders of record as of the close of business on the Distribution Record Date.
7. Payments to be Made to Indenture Trustees
The Distributions to be made under the Plan to the holders of Allowed Notes Claims shall be made to the relevant Indenture Trustees. Subject to the satisfaction of the requirements in Section 4.8.2 of the Plan (to the extent applicable), the applicable Indenture Trustee shall distribute to each holder its Pro Rata Share of the applicable Distribution, subject to the rights of the Indenture Trustees to assert their Indenture Trustee Charging Liens against such Distributions.
8. Disbursing Agent
Except as set forth above, all Distributions under the Plan will be made by the Reorganized Debtors, the Litigation Trust Disbursing Agent, or their designated Disbursing Agent (as applicable). Subject to Bankruptcy Rule 9010, Distributions in respect of Allowed Claims will be made by the Disbursing Agent to the holder of each such Allowed Claim at the address of the holder as listed on the Schedules as of the Distribution Record Date, unless the Debtors or, on and after the Effective Date, the Reorganized Debtors have been notified in writing of a change of address, including, without limitation, by the timely filing of a proof of claim by the holder that provides an address for the holder different from the address reflected on the Schedules. If any Distribution to a holder is returned as undeliverable, the Disbursing Agent will use reasonable efforts to determine the current address of that holder, but no Distribution to that holder will be made unless and until the Disbursing Agent has determined the then current address of that holder, at which time such Distribution will be made to that holder without interest; provided, however, that, at the expiration of one year from the Effective Date such undeliverable Distributions will be deemed unclaimed property and will be treated in accordance with Section 6.13 of the Plan.
75 9. Manner of Payment Under the Plan
Unless the Entity receiving a payment agrees otherwise, any payment in Cash to be made by the applicable Disbursing Agent will be made by check drawn on a domestic bank or by automated clearing house transfer.
10. Payment of Interest on Allowed Claims
Unless otherwise specifically provided by the Plan, the Confirmation Order or any other order of the Bankruptcy Court, post-petition interest will not accrue and will not be paid on Allowed Claims.
11. Fractional Dollars; De Minimis Distributions
Notwithstanding any other provision of the Plan, Cash payments of fractions of dollars will not be made. Whenever any Distribution to a holder of a Claim or Litigation Trust Beneficiary would otherwise call for Distribution of Cash in a fractional dollar amount, the actual Distribution of Cash will be rounded to the nearest whole dollar (up or down), with half dollars (or less) being rounded down. The Disbursing Agent will not be required to make any Cash payment of less than $50 with respect to any Claim or Litigation Trust Interest unless a written request therefor is made to the applicable Disbursing Agent not later than one year after the Effective Date.
12. Calculation of Distribution of New Holdco Common Stock
No fractional shares of New Holdco Common Stock will be issued or distributed under the Plan. Whenever any Distribution to a holder of a Claim would otherwise call for a Distribution which would result in such holder holding a fraction of a share of New Holdco Common Stock, the actual Distribution of shares will be rounded to the nearest whole number of shares (up or down), with half shares (or less) being rounded down. The total number of shares of New Holdco Common Stock to be issued pursuant to the Plan to the holders entitled to receive shares will be adjusted as necessary to account for the rounding provided in the Plan. No consideration will be provided in lieu of fractional shares rounded down.
13. Calculation of Distribution of Litigation Trust Interests
No fractional Litigation Trust Interests shall be issued or distributed under the Plan. Whenever any Distribution to a Litigation Trust Beneficiary would otherwise call for Distribution of a fraction of a Litigation Trust Interest, the actual Distribution of such Litigation Trust Interests shall be rounded to the nearest whole number of shares (up or down), with half shares (or less) being rounded down. No consideration shall be provided in lieu of fractional Litigation Trust Interests rounded down.
14. Unclaimed Property
All Distributions under the Plan unclaimed for a period of one year after the applicable Distribution Date will be deemed unclaimed property under section 347(b) of the Bankruptcy Code and will vest in the applicable Reorganized Debtor or Litigation Trust, as applicable, and any entitlement of any holder of a Claim or Litigation Trust Beneficiary to those Distributions will be extinguished and forever barred and, with respect to unclaimed Distributions from the Litigation Trust, such Distributions shall be reallocated to the other Litigation Trust Beneficiaries in accordance with the terms of the Litigation Trust Agreement and the Plan.
76 15. Time Bar to Cash Payments
Checks issued by a Disbursing Agent in respect of any Distribution of Cash made on account of Allowed Claims or Litigation Trust Interests will be null and void if not negotiated within 90 days from and after the date of issuance thereof. Requests for re-issuance of any check will be made directly to the applicable Disbursing Agent by the holder of the Allowed Claim or Litigation Trust Interest, as applicable, with respect to which the check originally was issued. Any claim in respect of a voided check will be made on or before the later of (i) the first anniversary of the Distribution, or (ii) 90 days after the date of issuance if the check represents a final Distribution. After that date, all remaining Claims in respect of voided checks will be discharged and forever barred and the applicable Reorganized Debtor or Litigation Trust, as applicable, will retain all related monies as unclaimed property under Section 6.13 of the Plan.
16. Setoffs
The Reorganized Debtors may, but will not be required to, pursuant to applicable bankruptcy or non-bankruptcy law, set off against any Allowed Claim and the related Distributions to be made pursuant to the Plan (before any Distribution is made on account of the Claim), the claims, rights, and Causes of Action of any nature that the Estates or the Reorganized Debtors hold against the holder of that Allowed Claim. Neither the failure to effect such a setoff nor the allowance of any Claim under the Plan will constitute a waiver or release by the Debtors or the Reorganized Debtors of any claims, rights and Causes of Action that the Debtors or the Reorganized Debtors may possess against the Claim holder, provided, that no setoffs shall be permitted against any holders of the First Lien Notes or Second Lien Notes or that would violate the SEO Settlement Agreement.
17. Allocation of Plan Distributions Between Principal and Interest
To the extent that an Allowed Claim entitled to a Distribution under the Plan is comprised of indebtedness and accrued but unpaid interest, the distribution will be allocated first to the principal amount of the Claim (as determined for U.S. federal income tax purposes) and then, to the extent the consideration exceeds the principal amount of the Claim, to accrued but unpaid interest.
H. Treatment of Disputed Claims under the Plan
1. Objections to Claims; Prosecution of Disputed Claims
A Disputed Claim is a Claim that is neither an Allowed Claim nor a Disallowed Claim, and is (i) a Claim, proof of which was filed, or an Administrative Expense Claim or other unclassified Claim, which is the subject of a dispute under the Plan or as to which Claim a Debtor has interposed or may interpose a timely objection and/or a request for estimation in accordance with section 502(c) of the Bankruptcy Code and Bankruptcy Rule 3018 or other applicable law, which dispute, objection and/or request for estimation has not been withdrawn or determined by a Final Order, and/or (ii) any Claim, proof of which was required to be filed by order of the Bankruptcy Court, but as to which a proof of claim was not timely or properly filed.
A Claim for which a proof of claim has been filed but that is listed on the Debtors’ schedules of assets and liabilities as unliquidated, disputed, or contingent, and which has not yet been resolved by the parties or by the Bankruptcy Court is a Disputed Claim. If a holder of a Claim has filed a proof of claim that is inconsistent with the Claim as listed on the Debtors’ schedules, the Claim is a Disputed Claim to the extent of the difference between the amount set forth in the proof of claim and the
77 amount scheduled by the Debtors. Any Claim for which the Debtors have, or any party in interest has interposed (or may interpose) a timely objection is a Disputed Claim.
Unless other Claims objection procedures previously approved by the Bankruptcy Court require otherwise, the Debtors or Reorganized Debtors (except after the Effective Date as to General Unsecured Claims) will object to the allowance of Claims with respect to which the Debtors or Reorganized Debtors dispute liability in whole or in part. Unless resolved by settlement between the applicable Debtor and the holder of a Claim, all objections filed and prosecuted by the Debtors or Reorganized Debtors will be litigated to Final Order by the Debtors or Reorganized Debtors, as applicable. From and after the Effective Date, objections to General Unsecured Claims shall be filed and prosecuted by the Litigation Trustee and the Litigation Trustee shall have the sole authority to settle all pending or future objections to General Unsecured Claims. For the avoidance of doubt, the Litigation Trust will pay all fees, costs, and expenses incurred by the Litigation Trustee and its professionals in connection with filing and prosecuting objections to General Unsecured Claims. In addition, any and all costs, expenses, adverse judgments, sanctions, and other financial obligations imposed against the Litigation Trust shall be solely the liabilities of the Litigation Trust and not of the Reorganized Debtors or any other Entity, and the Litigation Trust will reimburse the Reorganized Debtors for reasonable fees, costs and expenses incurred in facilitating the Litigation Trustee’s prosecution and/or settlement of General Unsecured Claims objections, such as the Reorganized Debtors’ legal fees and travel expenses attendant thereto. Notwithstanding anything to the contrary herein, the Reorganized Debtors and the Litigation Trustee will coordinate in good faith with respect to the prosecution or settlement of any Claims for which classification as a General Unsecured Claim or other type of Claim is in dispute. Nothing herein grants to the Litigation Trust any power to bind the Reorganized Debtors and/or their affiliates in any way whatsoever.
Unless otherwise provided in the Plan or ordered by the Bankruptcy Court, all objections to Claims will be served and filed on or before 360 days after the Effective Date, as may be extended before or after the running of the 360 days by order of the Bankruptcy Court after notice and a hearing.
2. Claim Objections and Expunged Claims
The Debtors have filed twenty-two omnibus objections to proofs of claim (the “Claim Objections”).
On April 17, 2012, the Debtors filed two nonsubstantive omnibus objections to certain proofs of claim that were (i) late filed [Docket No. 1411] (the “First Omnibus Objection”); and (ii) (a) late filed, (b) amended and superseded, (c) duplicative, or (d) without supporting documentation [Docket No. 1412] (the “Second Omnibus Objection”). Also on April 17, 2012, the Debtors filed two substantive omnibus objections to certain proofs of claim that were duplicative of debt claims [Docket Nos. 1413 & 1414] (the “Third Omnibus Objection” and the “Fourth Omnibus Objection”). On May 15, 2012, the Bankruptcy Court entered orders granting the relief requested in the Third Omnibus Objection and the Fourth Omnibus Objection [Docket Nos. 1585 & 1586]. On May 17, 2012, the Bankruptcy Court entered orders granting the relief requested in the First and Second Omnibus Objections [Docket Nos. 1604 & 1605]. On May 25, 2012, a claimant filed a motion to vacate the Second Omnibus Objection as to certain claims [Docket No. 1658]. On June 12, 2012, an amended order was entered by the Bankruptcy Court with respect to the First Omnibus Objection [Docket No. 1753], and, on July 2, 2012, an amended order was entered by the Bankruptcy Court with respect to the Second Omnibus Objection [Docket No. 1924].
On May 22, 2012, the Debtors filed two nonsubstantive omnibus objections to certain proofs of claim that were (i) (a) late filed, (b) amended and superseded, (c) duplicative, or (d) without supporting documentation [Docket No.1634] (the “Fifth Omnibus Objection”); and (ii) filed against the
78 wrong Debtor [Docket No. 1635] (the “Sixth Omnibus Objection”). Also on May 22, 2012, the Debtors filed a substantive omnibus objection to certain proofs of claim for which the asserted Debtor had no liability [Docket No. 1636] (the “Seventh Omnibus Objection”). On June 20, 2012, the Bankruptcy Court entered orders granting the relief requested in the Fifth, Sixth, and Seventh Omnibus Objections [Docket Nos. 1827-29]. On June 28, 2012, an amended order was entered by the Bankruptcy Court with respect to the Seventh Omnibus Objection.
On June 8, 2012, the Debtors filed a substantive objection to certain proofs of claim that asserted an alleged obligation of NPPH [Docket No. 1730] (the “Eighth Omnibus Objection”). On July 5, 2012, the Bankruptcy Court issued an order approving the Eighth Omnibus Objection and the relief requested therein [Docket No. 1935].
On July 10, the Debtors filed three nonsubstantive omnibus objections to certain proofs of claim that were (i) (a) late filed, (b) amended and superseded, or (c) duplicative [Docket No. 1958] (the “Ninth Omnibus Objection”); or (ii) filed against the wrong Debtor [Docket Nos. 1959-60] (the “Tenth Omnibus Objection” and the “Eleventh Omnibus Objection”). Also on July 10, the Debtors filed two substantive omnibus objections to certain proofs of claim that were (i) (a) asserted against a Debtor which had no liability for such claim, (b) duplicative of debt claims, or (c) misclassified [Docket No. 1961] (the “Twelfth Omnibus Objection”); and (ii) overstated [Docket No. 1962] (the “Thirteenth Omnibus Objection”). On August 7, 2012, the Bankruptcy Court entered orders granting the relief requested in the Ninth, Tenth, Eleventh, Twelfth, and Thirteenth Omnibus Objections [Docket Nos. 2106-10].
On August 10, 2012, the Debtors filed two substantive omnibus objections to certain proofs of claim that were (i) (a) overstated or (b) overstated and filed against the wrong Debtor [Docket No. 2137] (the “Fourteenth Omnibus Objection”); and (ii) (a) asserted against a Debtor which had no liability for such claim, (b) duplicative of debt claims, (c) misclassified, or (d) misclassified and filed against the wrong Debtor [Docket No. 2138] (the “Fifteenth Omnibus Objection”). Also on August 10, 2012, the Debtors filed two nonsubstantive omnibus objections to certain proofs of claim that were (i) filed against the wrong Debtor [Docket No. 2139] (the “Sixteenth Omnibus Objection”); or (ii) (a) filed against the wrong Debtor, (b) late filed, or (c) amended and superseded [Docket No. 2140] (the “Seventeenth Omnibus Objection”).
On September 14, 2012, the Debtors filed (i) one nonsubstantive omnibus objection to certain proofs of claim that were (a) late filed, (b) amended and superseded, (c) duplicative, or (d) filed against the wrong Debtor [Docket No. 2327] (the “Eighteenth Omnibus Objection”); and (ii) one substantive objection to certain proofs of claim that (a) were duplicative of debt claims, (b) asserted an alleged obligation of NPPH, (c) were overstated, (d) were overstated and filed against the wrong Debtor, or (e) were misclassified and filed against the wrong Debtor [Docket No. 2328] (the “Nineteenth Omnibus Objection”).
On October 26, 2012, the Debtors filed (i) one nonsubstative omnibus objection to certain proofs of claim that were (a) late filed, (b) amended and superseded, (c) duplicative, (d) without supporting documentation, or (e) filed against the wrong Debtor [Docket No. 2559] (the “Twentieth Omnibus Objection”); (ii) one substantive objection to certain proofs of claim that were (a) asserted obligations for which the Debtors had no liability, (b) misclassified, (c) misclassified and overstated, (d) overstated, (e) overstated and filed against the wrong Debtor, and (f) asserted obligations by taxing authorities for which the Debtors had no liability [Docket No. 2560] (the “Twenty-First Omnibus Objection”); and (iii) one substantive objection to certain proofs of claim that arose from asserted mechanics’ lien claims [Docket No. 2561] (the “Twenty-Second Omnibus Objection”).
79 3. No Distributions Pending Allowance
Except as provided in Section 7.3 of the Plan, and notwithstanding any other provision in the Plan, if any portion of a Claim is a Disputed Claim, no Distribution will be made on account of any portion of the Claim unless and until the Disputed Claim becomes an Allowed Claim. No interest will be paid on account of Disputed Claims that later become Allowed except to the extent that payment of interest is required under section 506(b) of the Bankruptcy Code.
4. Reserve Account for Disputed General Unsecured Claims
On and after the Effective Date, the Disputed Claims Reserve will hold Cash and Litigation Trust Interests in an aggregate amount sufficient to pay all holders of Disputed General Unsecured Claims the Distributions of Cash and Litigation Trust Interests they would have been entitled to receive under the Plan if all their General Unsecured Claims had been Allowed Claims on the Effective Date, net of any taxes imposed on the Disputed Claims Reserve or otherwise payable by the Disputed Claims Reserve. The Cash to be held in the Disputed Claims Reserve will be held and deposited by the Litigation Trust Disbursing Agent in a segregated interest-bearing reserve account (or accounts, as may be determined by the Litigation Trust Disbursing Agent). Distributions reserved on account of any Disputed Claim will be distributed to the extent it becomes an Allowed Claim so the holder thereof receives the Distributions it would have received had it been Allowed on the Effective Date, net of any taxes imposed on or otherwise payable by the Disputed Claims Reserve. Distributions on account of a Claim that becomes an Allowed Claim after the Effective Date will be made on the next Distribution Date following (i) the entry of an order or judgment of the Bankruptcy Court or other applicable court of competent jurisdiction (including any appeal) allowing any Disputed Claim that has become a Final Order, (ii) the withdrawal of any objection to the Disputed Claim, or (iii) a settlement, compromise, or other resolution of the Disputed Claim.
The Debtors estimate that as of the Effective Date, the aggregate amount of the Disputed Claims will be approximately $100,000,000. Based upon the Recovery Analysis and the Debtors’ review of the Claims against each Debtor, the Debtors estimate they will need to set aside approximately $6 million of Cash, notes or other consideration to the Disputed Claims Reserve for purposes of reserving for Distribution to the Disputed Claims to the extent the Disputed Claims become Allowed Claims.
5. Disputed Class 3A Claims
A holder of a Disputed NPC Class 3A or GD Class 3A Claim who is precluded from voting on the Plan and does not receive a Ballot on which to elect treatment as a Qualified Trade Creditor may instead elect to have its NPC or GD Class 3A Claim treated under the Plan as a Qualified Trade Claim upon the Allowance of all or a portion of such Claim if (i) the holder notifies the Claims Agent, (ii) obtains from the Claims Agent and completes the form entitled “Credit Terms For Consideration As Qualified Trade Creditor”, and returns the form to the Claims Agent, and (iii) otherwise meets the requirements of a Qualified Trade Creditor in Section 1.2.138 of the Plan.
6. No Recourse
Notwithstanding that the Allowed amount of any particular Disputed Claim is reconsidered under the applicable provisions of the Bankruptcy Code and the Bankruptcy Rules or is Allowed in an amount for which after application of the payment priorities established by the Plan there is insufficient value to provide a recovery equal to that received by other holders of Allowed Claims in the applicable Class, no holder of that Claim will have recourse against the Disbursing Agent, the Debtors, the Reorganized Debtors, the Litigation Trust, the Litigation Trustee, or any of their respective
80 professionals, consultants, attorneys, advisors, officers, directors, or members or their successors or assigns, or any of their respective property. However, nothing in the Plan will modify any right of a holder of a Claim under section 502(j) of the Bankruptcy Code. THE BANKRUPTCY COURT’S ENTRY OF AN ORDER ESTIMATING CLAIMS MAY LIMIT THE DISTRIBUTION TO BE MADE ON THE DISPUTED CLAIM, REGARDLESS OF THE AMOUNT FINALLY ALLOWED ON ACCOUNT OF THE DISPUTED CLAIM.
7. Distribution to Holders of Allowed Claims Following Disallowance of Disputed Claims
Subject to the minimum Distribution limitations set forth in Section 1.2.50 of the Plan, on each Distribution Date following the Effective Date, Distributions held in the Disputed Claims Reserve on account of Disputed General Unsecured Claims that are Disallowed will be redistributed, net of any taxes imposed on the Disputed Claims Reserve or otherwise payable by the Disputed Claims Reserve, to each holder of Litigation Trust Interests in accordance with the terms of the Litigation Trust Agreement. Each holder will receive Cash and/or Litigation Trust Interests reflecting the increase of the holders’ Pro Rata Share resulting from the disallowance of Disputed General Unsecured Claims since the previous Distribution Date and the release from the Disputed Claims reserve of the Cash and/or Litigation Trust Interests accorded to such Disallowed Claims for redistribution to the holders of Litigation Trust Interests as set forth in the Litigation Trust Agreement. Any Distributions made on a Distribution Date following the Effective Date will be made in the same manner as provided in Section 6.5 of the Plan in respect of Effective Date Distributions.
8. Estimation of Claims
The Debtors and/or the Reorganized Debtors, with respect to all Claims other than General Unsecured Claims, and the Litigation Trustee, with respect to General Unsecured Claims, may at any time request that the Bankruptcy Court estimate for final Distribution purposes any contingent, unliquidated or Disputed Claim pursuant to section 502(c) of the Bankruptcy Code or other applicable law, regardless of whether the Debtors or the Reorganized Debtors previously objected to that Claim or whether the Bankruptcy Court has ruled on the objection, and the Bankruptcy Court will retain subject matter jurisdiction to consider any request to estimate any Claim at any time, including during the pendency of any related appeal. Unless otherwise provided in an order of the Bankruptcy Court, if the Bankruptcy Court estimates any contingent, unliquidated or Disputed Claim, the estimated amount will constitute either the Allowed amount of the Claim or a maximum limitation on the Claim, as determined by the Bankruptcy Court. If the estimate constitutes the maximum limitation on a Claim, the Debtors, the Reorganized Debtors, or the Litigation Trustee, as the case may be, may elect to pursue supplemental proceedings to object to any ultimate allowance of that Claim. The foregoing is not intended to limit the rights granted by section 502(j) of the Bankruptcy Code. All of the forgoing Claims objections, estimation and resolution procedures are cumulative and not exclusive of one another.
I. Executory Contracts and Unexpired Leases
1. Assumption and Rejection of Executory Contracts
Each Executory Contract that has not expired by its own terms on or prior to the Confirmation Date, and which has not been assumed, assumed and assigned, assumed as modified, or rejected with the approval of the Bankruptcy Court, or which is not the subject of a motion to assume, assume and assign, assume as modified, or reject as of the Confirmation Date, will be:
81 (a) If listed on Schedule 8.1(A) of the Plan Supplement, deemed rejected by the Debtors on the Confirmation Date and the entry of the Confirmation Order by the Bankruptcy Court will constitute approval of the rejection pursuant to sections 365(a) and 1123 of the Bankruptcy Code.
(b) If listed on Schedule 8.1(B) of the Plan Supplement, deemed assumed by the Debtors on the Confirmation Date and the entry of the Confirmation Order by the Bankruptcy Court will constitute approval of the assumption pursuant to sections 365(a) and 1123 of the Bankruptcy Code.
(c) If listed on Schedule 8.1(C) of the Plan Supplement, deemed assumed as modified by the Debtors on the Confirmation Date and the entry of the Confirmation Order by the Bankruptcy Court will constitute approval of the assumption as modified pursuant to sections 365(a) and 1123 of the Bankruptcy Code.
(d) If listed on Schedule 8.1(D) of the Plan Supplement, deemed assumed and assigned by the Debtors on the Confirmation Date and the entry of the Confirmation Order by the Bankruptcy Court will constitute approval of the assumption and assignment pursuant to sections 365(a) and 1123 of the Bankruptcy Code.
(e) If listed on Schedule 8.1(E) of the Plan Supplement, deemed assumed, rejected, or terminated consistent with the treatment contemplated by the SEO Settlement Agreement.
(f) If not set forth on Schedules 8.1(A)-(E) of the Plan Supplement, deemed assumed by the Debtors and the Plan will constitute a motion to assume that Executory Contract.
Each Executory Contract assumed will include any modifications, amendments, supplements, or restatements to that Executory Contract. Entry of the Confirmation Order by the Clerk of the Bankruptcy Court will constitute approval of the assumptions pursuant to section 365(a) of the Bankruptcy Code and a finding by the Bankruptcy Court that each assumed Executory Contract is in the best interest of the Debtors, their Estates, and all parties in interest in the Chapter 11 Cases. The Debtors reserve the right at any time prior to the Effective Date to amend Schedules 8.1(A)-(E) of the Plan to delete an Executory Contract listed on those Schedules, transfer an Executory Contract from one Schedule to another, or to add an Executory Contract not previously listed on any of the Schedules, thus changing the treatment accorded to that Executory Contract. The Debtors will provide notice to the affected non-debtor counterparties to the Executory Contract of (i) the proposed assumption, assumption as modified, assumption and assignment, or rejection of that Executory Contract, (ii) any related cure amounts related to a proposed assumption, and (iii) any amendments made to Schedules 8.1(A)-(E) of the Plan. Nothing in Section 8.1 of the Plan will constitute an admission by a Debtor or Reorganized Debtor that any contract or lease is an Executory Contract or that a Debtor or Reorganized Debtor has any liability thereunder.
2. Cure of Defaults and Survival of Contingent Claims
Except as may otherwise be agreed to by the parties, on or before the 30th day after the Effective Date, each non-debtor party to an Executory Contract that objects to a proposed cure amount must file an objection. Absent a timely objection, the payment of the proposed cure amount in respect of an Executory Contract will cure any undisputed defaults under an Executory Contract assumed by the Debtors pursuant to the Plan in accordance with section 365(b) of the Bankruptcy Code, and all contingent reimbursement or indemnity Claims in respect of that Executory Contract will be discharged
82 upon entry of the Confirmation Order. All disputed cure amounts will be paid either within 30 days of the entry of a Final Order determining the amount, if any, or as may otherwise be agreed to by the Reorganized Debtors and non-debtor counterparty.
3. Deadline for Filing Rejection Damage Claims
If the rejection of an Executory Contract by the Debtors pursuant to Section 8.1 of the Plan results in damages to the non-debtor party to that Executory Contract, any claim for damages will be forever barred and will not be enforceable against the Debtors, the Reorganized Debtors, the Litigation Trust of the Litigation Trustee or their respective properties, agents, successors, or assigns unless a proof of claim is filed with the Claims Agent or with the Bankruptcy Court and served upon the Debtors (or Reorganized Debtors) and, if after the Effective Date, the Litigation Trustee on or before 30 days after the latest to occur of (i) the Confirmation Date, and (ii) the date of entry of an order by the Bankruptcy Court authorizing rejection of the Executory Contract.
4. Indemnification and Reimbursement Obligations
For purposes of the Plan, the obligations of the Debtors to indemnify and reimburse persons who are or were directors, officers, or employees of any of the Debtors prior to or on the Commencement Date or at any time thereafter against and for any claims, liabilities, or other obligations (including fees and expenses incurred by the Board of Directors of any of the Debtors, or the members, officers, or employees thereof, in connection with the Chapter 11 Cases) pursuant to Governance Documents, codes of regulations, applicable state law, specific agreement or any combination of the foregoing, will survive confirmation of the Plan, remain unaffected by the Plan, and not be discharged in accordance with section 1141 of the Bankruptcy Code, irrespective of whether indemnification or reimbursement is owed in connection with an event occurring before, on, or after the Commencement Date. In furtherance of the foregoing, the Reorganized Debtors will maintain insurance for the benefit of those directors, officers and employees at levels no less favorable than those existing as of the date of entry of the Confirmation Order for a period of no less than six years following the Effective Date.
5. Existing Compensation and Benefit Programs
Except as provided in Section 8.1 of the Plan, the Debtors’ existing collective bargaining agreements (as modified), health care plans (including medical plans, dental plans, vision plans, prescription plans, health savings accounts and spending accounts), retiree benefit programs and settlements with respect to such retiree benefit programs, defined contribution plans, severance plans, discretionary bonus plans, performance-based incentive plans, long-term incentive plans, retention plans, workers’ compensation programs and life, disability, accidental death and dismemberment, directors and officers liability, and other insurance plans are treated as Executory Contracts under the Plan and will, on the Effective Date be deemed assumed by the Debtors in accordance with sections 365(a) and 1123(b)(2) of the Bankruptcy Code. Schedule 8.5 to the Plan Supplement will list the agreements, plans, programs and other documents described in the preceding sentence. On and after the Effective Date, all Claims submitted for payment in accordance with the foregoing benefit programs, whether submitted prepetition or postpetition, will be processed and paid in the ordinary course of business of the applicable Reorganized Debtors, in a manner consistent with the terms and provisions of those benefit programs. Notwithstanding any other provision of the Plan, the cure obligations, if any, related to the assumption of each of the collective bargaining agreements or modified collective bargaining agreements, will be satisfied by the applicable Reorganized Debtors by payment, in the ordinary course, of all obligations arising under the collective bargaining agreements or modified collective bargaining agreements, including, but not limited to, grievances, grievance settlements, and arbitration awards. All Proofs of Claim filed by the USW and other unions (other than any proof of claim filed pursuant to Section 5 of the
83 NPWSI Retirement Plan Settlement) shall be considered satisfied by the agreement and obligation of the Reorganized Debtors to assume the applicable collective bargaining agreements and cure any defaults thereunder in the ordinary course as provided in the Plan. Notwithstanding any other provision of this paragraph, any obligation resolved by the NPWSI Retirement Plan Settlement shall be satisfied by compliance with the terms of the NPWSI Retirement Plan Settlement.
The NewPage Cash Balance Plan for Non-Bargained Employees shall not be modified or affected by any provision of the Plan and shall be continued in the ordinary course of business after the Effective Date in accordance with its terms. The NewPage Retirement Plan for Bargained Hourly Employees will not be modified (absent Union consent) or affected by any provision of the Plan and will be continued in the ordinary course of business after the Effective Date in accordance with its terms and any modifications thereto pursuant to Union consent.
The Debtors or the Reorganized Debtors shall satisfy the minimum funding standards pursuant to 26 U.S.C. §§ 412, 430, and 29 U.S.C. § 1082, 1083 and be liable for the payment of PBGC premiums in accordance with 29 U.S.C. §§ 1306 and 1307 subject to any and all applicable rights and defenses of the Debtors, and administer the Pension Plans in accordance with the provisions of ERISA and the Internal Revenue Code. In the event that the Pension Plans terminate after the Effective Date, the Reorganized Debtors and each of its controlled group members will be responsible for the liabilities imposed by Title IV of ERISA.
Nothing in these Chapter 11 Cases, the Confirmation Order, the Plan, the Bankruptcy Code (including section 1141 thereof), or any document filed in these Chapter 11 Cases will in any way be construed to discharge, release, limit, or relieve the Debtors or any other party, in any capacity, from any liability or responsibility with respect to the Pension Plans or any other defined benefit pension plan under any law, governmental policy, or regulatory provision. The PBGC and the Pension Plans will not be enjoined or precluded from enforcing such liability or responsibility by any of the provisions of any plan of reorganization, confirmation order, Bankruptcy Code, or any document filed in these Chapter 11 Cases. For the treatment of the Pension Plans, which will be continued in the ordinary course of business, see Section VI.I.6 below.
6. Pension Benefit Guaranty Corporation
The Pension Benefit Guaranty Corporation (“PBGC”) is a wholly owned United States government corporation, and an agency of the United States, that administers the defined benefit pension plan termination insurance program under Title IV of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1301-1461, as amended, (2006 & Supp. IV 2010). When pension plan covered by Title IV terminates with insufficient assets to pay promised benefits, PBGC generally becomes trustee of the pension plan, supplements the terminated plan’s assets with its insurance funds, and, subject to certain statutory limitations, pays to the plan’s participants their benefits. See 29 U.S.C. §§ 1321-1322, 1342, 1361.
The Debtors are either the contributing sponsor or member of the contributing sponsor’s controlled group with respect to the NewPage Retirement Plan for Bargained Hourly Employees and the NewPage Cash Balance Plan for Non-Bargained Employees (collectively “Pension Plans”).17 The
17 A group of trades or business under common control, referred to as a “controlled group,” includes, for example, a parent and its 80% owned subsidiaries. Another example includes brother-sister groups of trades or business under common control. See 29 U.S.C. § 1301(14)(A), (B); 26 U.S.C. § 414(b), (c); 26 C.F.R. §§ 1.414(b)-1, 1.414(c)-1, 1.414(c)-2.
84 Pension Plans are single-employer defined benefit plans insured by the PBGC and covered by Title IV of ERISA. The Pension Plans have a total of 13,212 participants.
PBGC filed eight proofs of claim against the Debtors for their joint and several liability relating to the Pension Plans. In accordance with the Order Approving Stipulation By And Among The Debtors And The Pension Benefit Guaranty Corporation [Docket No. 915], a single proof of claim was deemed to constitute the filing of a proof of claim against each and every Debtor in the Chapter 11 Cases.
Specifically, the PBGC filed Claims for: 1) the estimated amount of the Pension Plans’ unfunded benefit liabilities totaling approximately $658,900,000.00; 2) the unliquidated amount of unpaid minimum funding contributions owed to the Pension Plans; 3) the unliquidated amount of shortfall and waiver amortization charges; and 4) the unliquidated insurance premiums. PBGC’s claims assert priority under sections 503(b)(1)(B) and 507(a)(1),(4) and (8) of the Bankruptcy Code. Upon termination of the Pension Plans, the Debtors and any non-debtor controlled group member would become jointly and severally liable to PBGC for the Pension Plans’ unfunded benefit liabilities and any unpaid minimum funding contributions. PBGC will withdraw its claims upon the Plan’s Effective Date, provided that the Debtors’ confirmed Plan provides for continued maintenance of the Pension Plans.
The Pension Plans shall not be modified (absent Union consent for modification of NewPage Retirement Plan for Bargained Hourly Employees ) or affected by any provision of the Plan and shall be continued after the Effective Date in accordance with their terms and any modifications thereto pursuant to Union consent. The Debtors or the Reorganized Debtors shall satisfy the minimum funding standards pursuant to 26 U.S.C. §§ 412, 430, and 29 U.S.C. § 1082, 1083 and be liable for the payment of PBGC premiums in accordance with 29 U.S.C. §§ 1306 and 1307 subject to any and all applicable rights and defenses of the Debtors, and administer the Pension Plans in accordance with the provisions of ERISA and the Internal Revenue Code. In the event that the Pension Plans terminate after the Effective Date, the Reorganized Debtors and each of its controlled group members will be responsible for the liabilities imposed by Title IV of ERISA.
Nothing in these Chapter 11 Cases, the confirmation order, the Plan, the Bankruptcy Code (and section 1141 thereof), or any other document filed in these Chapter 11 Cases shall in any way be construed to discharge, release, limit, or relieve the Debtors or any other party, in any capacity, from any liability or responsibility with respect to the Pension Plans or any other defined benefit pension plan under any law, governmental policy, or regulatory provision. PBGC and the Pension Plans shall not be enjoined or precluded from enforcing such liability or responsibility by any of the provisions of any plan of reorganization, confirmation order, Bankruptcy Code, or any other document filed in these Chapter 11 Cases.
7. Reorganized NPC New Compensation Plans
On the Effective Date, the Reorganized NPC New Compensation Plans established by the Reorganized Debtors will be executed and become effective, and the beneficiaries under those plans will be governed by their terms. The Management Incentive Plan (“MIP”) Summary Term Sheet will be attached to the Plan Supplement.
J. Effect of Confirmation
1. Re-vesting of Assets
Upon the Effective Date, pursuant to sections 1141(b) and (c) of the Bankruptcy Code, all property of the Estates will vest in the applicable Reorganized Debtors free and clear of all Claims, Liens,
85 Encumbrances, charges, and other interests created prior to the Effective Date, except as provided in the Plan and the Plan Documents (and for avoidance of doubt, excluding the Lien and security interest grants pursuant to the Exit Financing Documents), including in respect of the Litigation Trust Assets transferred to the Litigation Trust. From and after the Effective Date, the Reorganized Debtors may operate their businesses and may use, acquire, and dispose of property free of any restrictions of the Bankruptcy Code or the Bankruptcy Rules in all respects as if they never sought protection under the Bankruptcy Code, except as provided in the Plan.
2. Discharge of Claims
Except as provided in the Plan, upon the Effective Date, all Claims and Equity Interests will be discharged to the fullest extent provided by section 1141 of the Bankruptcy Code.
3. Preservation of Insurance
The discharge and release of the Debtors as provided in the Plan and the Plan Documents (including, without limitation, the Exit Financing Documents), and the re-vesting of property in the Reorganized Debtors, will not diminish or impair the enforceability of any insurance policies that may cover Claims against any Debtor or other Entity.
4. Injunction Against Claims and Equity Interests
Except as otherwise provided in the Plan, the Confirmation Order or any other applicable order of the Bankruptcy Court, all entities who have held, hold or may hold Claims or Equity Interests are permanently enjoined, from and after the Effective Date, from (i) commencing or continuing in any manner any action or other proceeding of any kind on any Equity Interest, Claim or Cause of Action discharged, released or waived pursuant to the Plan or the SEO Settlement Agreement against the Debtors, the other Releasees, the Estates, the Reorganized Debtors, or their respective properties or interests in properties, (ii) enforcing, attaching, collecting or recovering by any manner or means of any judgment, award, decree or order relating to a Equity Interest, Claim or Cause of Action discharged, released, or waived pursuant to the Plan or the SEO Settlement Agreement against the Debtors, the other Releasees, the Estates, the Reorganized Debtors, or their respective properties or interests in properties, (iii) creating, perfecting, or enforcing any Encumbrance or Lien of any kind securing a Claim or other debt, liability, or Equity Interest or Cause of Action discharged, released or waived pursuant to the Plan or the SEO Settlement Agreement against the Debtors and the other Releasees, the Estates, the Reorganized Debtors, or their respective property or interests in property, and (iv) effectuating a recoupment, setoff or subrogation with respect to any Claim or Equity Interest discharged pursuant to the Plan, against any obligation due from the Debtors and the other Releasees, the Estates, the Reorganized Debtors or against their respective property or interests in property, except to the extent provided, permitted, or preserved by sections 553, 555, 556, 559, or 560 of the Bankruptcy Code or pursuant to the common law, and not discharged, released or waived pursuant to the Plan or SEO Settlement Agreement, exercising any right of recoupment, setoff or subrogation against any obligation due from the Debtors, the Reorganized Debtors, the other Releasees or against their respective property or interests in property, with respect to any Equity Interest, Claim or Cause of Action that is discharged, released or waived pursuant to the Plan or the SEO Settlement Agreement. To clarify the foregoing, nothing in the Plan or Confirmation Order shall impair any offset and/or recoupment right of the United States of America or any agency or instrumentality thereof, provided that the United States’ preserved offset rights do not include the right to offset any postpetition claim of the Reorganized Debtors for amounts owed to
86 them by the United States of America against any discharged prepetition claim of the United States of America for amounts owed to it by the Debtors.
5. Terms of Existing Injunctions or Stays
Unless otherwise provided in the Plan, all injunctions or stays provided for in the Chapter 11 Cases pursuant to sections 105 or 362 of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, will remain in full force and effect until the later of the Effective Date and the date indicated in the applicable order.
6. Injunction Against Interference with Plan of Reorganization
Pursuant to sections 1142 and 105 of the Bankruptcy Code, from and after the Effective Date, all holders of Claims and Equity Interests and other parties in interest, along with their respective current or former employees, agents, officers, directors, principals and Affiliates shall be enjoined from taking any actions to interfere with the implementation or consummation of the Plan, except for actions allowed to attain legal review.
7. Injunction Regarding Worthless Stock Deduction
Unless otherwise ordered by the Bankruptcy Court (including because the Bankruptcy Court determines that no injunction is necessary to protect the tax attributes of the Debtors or the Reorganized Debtors), any person or group of persons constituting a “fifty percent shareholder” of NPGI, NPHC, or NPC within the meaning of section 382(g)(4)(D) of the Tax Code shall be permanently enjoined from claiming a worthless stock deduction with respect to any Equity Interest in NPGI, NPHC, or NPC held by that person(s) or group (or otherwise treating the Equity Interest in NPG as worthless for U.S. federal income tax purposes) for any taxable year of that person(s) or group ending on or prior to the Effective Date.
Under section 382(g)(4)(D) of the Tax Code, if Cerberus or any other person who owned 50 percent or more of the stock of NPGI, NPHC, or NPC within the previous three years (a “50-percent shareholder”) takes a worthless stock deduction with respect to such stock in such person’s tax year, and holds the stock at the close of such tax year, then such person will be treated as (i) having not held such stock prior to its immediately following tax year and (ii) acquiring such stock on the first day of such immediately following tax year.
As a practical consequence, this means that if Cerberus or any other 50-percent shareholder takes a worthless stock deduction on or before the Effective Date, there is a substantial risk that the Debtors will experience an “ownership change” for purposes of section 382 of the Tax Code prior to the Effective Date. If an ownership change under section 382 of the Tax Code were to occur prior to the Effective Date, the likely result is that the Reorganized Debtors would not be able to use sufficient amounts of net operating losses, capital loss carryforwards, tax credit carryforwards, or other similar beneficial tax attributes to offset income or gains in any future tax years—and thus, the Reorganized Debtors would likely be subject to a substantial increase in their future tax liability.
The injunction preventing any “50-percent shareholder” from taking a worthless stock deduction for a tax year ending on or prior to the Effective Date with respect to Equity Interests in NPGI, NPHC, or NPC, therefore, minimizes the risk that the Debtors suffer an “ownership change” prior to the Effective Date, allows the Debtors to preserve their valuable
87 beneficial tax attributes for use by the Reorganized Debtors, and reduces the expected future tax liability for the Reorganized Debtors.
Cerberus has agreed to consent to the injunction set forth in Section 10.7 of the Plan in connection with the settlement to be propounded for approval prior to confirmation of the Plan. Cerberus has not advised the Debtors whether it would consent to, or object to, such injunction in the absence of the settlement. If Cerberus were to object to such injunction, there can be no assurance that such injunction would be approved by the Bankruptcy Court or withstand any subsequent appeal. Thus far, only the United States Court of Appeals for the Second Circuit has ruled that taking a worthless stock deduction is subject to the automatic stay, and there can be no assurance the United States Court of Appeals for the Third Circuit, or the United States Supreme Court would agree. The Committee contends that no injunction is necessary to protect the tax attributes of the Debtors or the Reorganized Debtors.
8. Channeling Injunction.
Any and all actions against present or former officers, directors, or stockholders of the Debtors, or against affiliates of any such persons or Entities in such capacities, shall be brought solely in the Bankruptcy Court or any Delaware State courts, subject to all such courts’ powers to abstain.
9. Exculpation.
As of and subject to the occurrence of the Confirmation Date, the Debtors, the Committee and each of the Committee’s members, the First Lien Notes Trustee, the First Lien Notes Steering Committee and its members, the Second Lien Notes Trustee, the members of the Second Lien Group, the Exit Financing Group, and each of their current or former Affiliates, agents, shareholders, directors, officers, members, employees, and advisors, or attorneys to any of the foregoing (collectively, the “Exculpated Parties”) shall be deemed to have (i) negotiated and proposed the Plan in good faith, and not by any means forbidden by law (ii) solicited acceptances of the Plan in good faith and in compliance with the applicable provisions of the Bankruptcy Code, including section 1125(a) and (e) of the Bankruptcy Code, and any applicable non-bankruptcy law, rule, or regulation governing the adequacy of disclosure in connection with the solicitation, and (iii) participated in good faith and in compliance with the applicable provisions of the Bankruptcy Code in the offer and issuance of securities under the Plan, and therefore are not, and on account of the offer, issuance and solicitation will not be, liable at any time for any violation of any applicable law, rule, or regulation governing the solicitation of acceptances or rejections of the Plan or the offer and issuance of any securities under the Plan. None of the Exculpated Parties shall have or incur any liability to any Entity for any claims, rights, obligations, suits, damages, causes of action, remedies, liabilities, defenses and counterclaims whatsoever, held by the Debtors or assertable on behalf of their Estates, or the Reorganized Debtors, or derivative of the Debtors’, their Estates’ or the Reorganized Debtors’ rights, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity, or otherwise, in any way relating to the Debtors, the Estates, the Debtors in Possession, the Chapter 11 Cases, the Plan, the subject matter of, or the transactions or events giving rise to, any Claim or Equity Interest, the treatment of any Claim or Equity Interest under the Plan, the business or contractual arrangements between any Debtor and any other Releasee, any negotiations regarding or concerning the Plan and the ownership, management and operation of the Debtors and the Reorganized Debtors, the negotiation and consummation of the Exit Financing, the purchase, sale or rescission of the purchase or sale of any security, claim or interest of the Debtors, the Debtors in Possession or their Estates, or any act or omission,
88 transaction, agreement, event or other occurrence taking place on or after the Commencement Date and on or before the Effective Date. The foregoing shall not operate as a waiver of or release from any claims, rights, obligations, suits, damages, causes of action, remedies, liabilities, defenses, and counterclaims arising as a result of any gross negligence, willful misconduct, or actual fraud by an Exculpated Party (other than a Debtor).
10. Releases by Debtors
As of the Effective Date, the Debtors and the Reorganized Debtors release, waive and discharge all of the other Releasees (other than the SEO Released Parties and Trust Parties, whose release is as set forth in the SEO Settlement Agreement) from any and all claims, obligations, rights, suits damages, causes of action, remedies, liabilities, defenses and counterclaims whatsoever, held by the Debtors or their Estates, assertable on behalf of the Debtors or their Estates, or derivative of the Debtors’, or their Estates’ rights, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity, or otherwise, in any way relating to the Debtors, the Debtors in Possession, the Chapter 11 Cases, the Disclosure Statement, the Plan, the subject matter of, or the transactions or events giving rise to, any Claim or Equity Interest that is treated under the Plan, the treatment of any Claim or Equity Interest under the Plan, the business or contractual arrangements between any Debtor and any other Releasee, any negotiations regarding or concerning the Plan and the ownership, management and operation of the Debtors, the negotiation and consummation of the Exit Financing, the purchase, sale or rescission of the purchase or sale of any security, claim or interest of the Debtors, or their Estates, or any act or omission, transaction, agreement, event or other occurrence taking place on or before the Effective Date. Notwithstanding the Preserved Rights preserved in Section 4.9 of the Plan, the Releasees (other than the SEO Released Parties and Trust Parties, whose release is as set forth in the SEO Settlement Agreement) shall be released from all Preserved Rights except for (i) claims, obligations, rights, suits, damages, causes of action, remedies, liabilities, defenses and counterclaims arising as a result of any Releasee’s gross negligence, willful misconduct, or actual fraud and (ii) any remedies, liabilities, or causes of action arising out of any express contractual obligation owing by any Releasee to any Debtor or any reimbursement obligation owing by any Releasee to any Debtor with respect to a loan or advance made by any of the Debtors to that Releasee. For the avoidance of doubt, nothing in Section 10.10 of the Plan shall qualify or limit the release of the SEO Released Parties or the Trust Parties, whose release is as set forth in the SEO Settlement Agreement.
11. Additional Releases of Releasees
Subject to the terms of the release opt-out provision in the Ballots except as set forth in the proviso in Section 10.11 of the Plan), as of the Effective Date, each holder of a Claim against the Debtors (including each person who, directly or indirectly, is entitled to receive a distribution under the Plan, and each person entitled to receive a distribution from an attorney, agent, indenture trustee, or securities intermediary), shall be deemed to forever release, waive and discharge all Releasees from any and all claims, rights, obligations, suits, damages, causes of action, remedies, liabilities, defenses and counterclaims, whether direct or derivative, liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity or otherwise, in any way relating to the Debtors, the Debtors in Possession, the Chapter 11 Cases, the Disclosure Statement, the Plan, the subject matter of, or the transactions or events giving rise to, any Claim or Equity Interest that is treated under the Plan, the treatment of any Claim or Equity Interest under the Plan, the business or contractual arrangements between any Debtor and any other Releasee, any negotiations regarding or concerning the Plan and the ownership, management and operation
89 of the Debtors, the negotiation and consummation of the Exit Financing, the purchase, sale or rescission of the purchase or sale of any security, claim or interest of the Debtors, the Debtors in Possession or their Estates, or any act or omission, transaction, agreement, event or other occurrence taking place on or before the Effective Date. The foregoing release shall not operate as a waiver of or release from any claims, rights, obligations, suits, damages, causes of action, remedies, liabilities, defenses, and counterclaims arising as a result of any gross negligence, willful misconduct or actual fraud by a Releasee (other than the Debtor); provided, however, that the release opt-out provision in the Ballots will not apply to claims against non-debtors indemnified by the Reorganized Debtors.
12. Releases Pursuant to SEO Settlement Agreement
The Debtors and the Reorganized Debtors release the SEO Released Parties and the Trust Parties upon the satisfaction of the closing conditions set forth in Sections 1 and 9 of the SEO Settlement Agreement.
K. Conditions Precedent to Effective Date of the Plan; Implementation Provisions
1. Conditions Precedent to the Effective Date of the Plan
The occurrence of the Effective Date and the substantial consummation of the Plan are subject to satisfaction of the following conditions precedent, and the Effective Date will not occur, and the Plan will be of no force and effect, unless and until each of the following conditions precedent is satisfied:
i. The Bankruptcy Court has issued the Confirmation Order;
ii. The Confirmation Order has been entered on the docket for at least 14 days, or such shorter period as may be approved by the Bankruptcy Court pursuant to Bankruptcy Rule 3020(e), without being reversed, stayed or enjoined;
iii. The Confirmation Order and all agreements and instruments that are Exhibits to the Plan or included in the Plan Supplement are in a form reasonably acceptable to the Debtors and the First Lien Notes Steering Committee (other than the SEO Settlement Agreement, which is deemed to be in a form acceptable to the Debtors and the First Lien Notes Steering Committee); provided, however, that if the Confirmation Order effects a change to the terms of the Plan that materially adversely affects any Distributions to or material rights of (a) the Committee, its members or holders of General Unsecured Claims, (b) the Second Lien Group, its members or the Second Lien Noteholders, or (c) the SEO Released Parties or the Trust Parties, then those terms in the Confirmation Order must be reasonably acceptable to each of the Committee, the Second Lien Group, and SEO respectively (as applicable);
iv. The Confirmation Order is in full force and effect; and
v. The conditions precedent to the effectiveness of the Exit Financing has been satisfied or waived by the parties thereto, the Reorganized Debtors have access to the Exit Financing, and all fees and expenses payable under the Exit Financing Documents have been paid, without the need to file a fee application with the Bankruptcy Court.
90 2. Waiver of Conditions Precedent
To the extent practicable and legally permissible, the conditions precedent in Section 11.1 of the Plan may be waived, in whole or in part, by the Debtors, subject to the consent of the First Lien Notes Steering Committee not to be unreasonably withheld; provided, however, that if such waiver(s) materially adversely affects any Distributions to or material rights of (a) the Committee, its members or holders of General Unsecured Claims, (b) the Second Lien Group, its members or the Second Lien Noteholders or (c) the SEO Released Parties and/or the Trust Parties, then the Committee, the Second Lien Group, and/or the SEO Released Parties or the Trust Parties, as applicable, must also consent to the waiver of such condition, which consent shall not be unreasonably withheld or delayed. Any such waiver of a condition precedent may be effected at any time by filing with the Bankruptcy Court a notice that is executed by the Debtors, after consultation with, or with the consent of, the First Lien Notes Steering Committee, the Committee, the Second Lien Group, and/or SEO, as applicable.
3. Notice of Confirmation of the Plan
Notice of entry of the Confirmation Order will be provided by the Debtors as required by Bankruptcy Rule 3020(c)(2) and any applicable local rules of the Bankruptcy Court.
4. Notice of Effective Date of the Plan
Notice of the Effective Date will be provided by the Debtors in the same manner provided with respect to notice of entry of the Confirmation Order, and any applicable local rules of the Bankruptcy Court.
L. Retention of Subject Matter Jurisdiction
Pursuant to Section 12.1 of the Plan, on and after the Effective Date, to the fullest extent allowed under applicable law, the Bankruptcy Court and the District Court will retain subject matter jurisdiction and retain all exclusive jurisdiction they have over any matter arising under the Bankruptcy Code, arising in or related to the Chapter 11 Cases or the Plan, or that relates to the following:
i. to interpret, enforce, and administer the terms of the Plan, the Plan Documents (including annexes and exhibits), and the Confirmation Order;
ii. to resolve any matters related to the assumption, assignment, or rejection of any Executory Contract and to hear, determine and, if necessary, liquidate, any related Claims, including with respect to any cure amount;
iii. to enter such orders as may be necessary or appropriate to implement or consummate the Plan and all contracts, instruments, releases, and other agreements or documents created in connection with the Plan;
iv. to determine any and all motions, adversary proceedings, applications, and contested or litigated matters that may be pending on the Effective Date or that, pursuant to the Plan, may be instituted by the Reorganized Debtors after the Effective Date including any claims to recover assets for the benefit of the Estates, except for matters waived or released under the Plan;
v. to ensure that Distributions to holders of Allowed Claims are accomplished as provided in the Plan;
91 vi. to hear and determine any timely objections to Administrative Expense Claims or to proofs of claim, both before and after the Effective Date, including any objections to the classification of any Claim, and to allow, disallow, determine, liquidate, classify, estimate or establish the priority of or secured or unsecured status of any Claim in whole or in part;
vii. to enter and implement such orders as may be appropriate if the Confirmation Order is for any reason stayed, revoked, modified, reversed or vacated;
viii. to issue such orders in aid of execution of the Plan, to the extent authorized by section 1142 of the Bankruptcy Code;
ix. to consider any modifications of the Plan to cure any defect or omission or reconcile any inconsistency in any order of the Bankruptcy Court, including the Confirmation Order;
x. to hear and determine applications for allowances of compensation and reimbursement of expenses of Professionals under sections 330 and 331 of the Bankruptcy Code and any other fees and expenses authorized to be paid or reimbursed under the Plan;
xi. to hear and determine disputes arising in connection with or relating to the Plan or the interpretation, implementation, or enforcement of the Plan or the extent of any Entity’s obligations incurred in connection with or released under the Plan;
xii. to issue injunctions, enter and implement other orders or take such other actions as may be necessary or appropriate to restrain interference by any Entity with consummation or enforcement of the Plan;
xiii. to recover all assets of the Debtors and property of the Estates, wherever located;
xiv. to resolve any Disputed Claims;
xv. to determine the scope of any discharge of any Debtor under the Plan or the Bankruptcy Code;
xvi. to determine any other matters that may arise in connection with or are related to the Plan, the Disclosure Statement, the Confirmation Order or any contract, instrument, release or other agreement or document created in connection with the Plan or the Disclosure Statement, including any of the Plan Documents; xvii. to hear and determine all matters arising under the Litigation Trust Agreement or relating to the Litigation Trust; xviii. to the extent that Bankruptcy Court approval is required, to consider and act on the compromise and settlement of any Claim or cause of action by or against the Estates;
xix. to hear and determine any other matters that may be set forth in the Plan, the Confirmation Order, or that may arise in connection with the Plan or the Confirmation Order;
92 xx. to hear and determine any proceeding that involves the validity, application, construction, or enforceability of, or that may arise in connection with, the Plan or the Confirmation Order or any other Order entered by the Bankruptcy Court during the Chapter 11 Cases;
xxi. to hear and determine matters concerning state, local and federal taxes in accordance with sections 346, 505, and 1146 of the Bankruptcy Code (including the expedited determination of tax under section 505(b) of the Bankruptcy Code);
xxii. to hear any other matter or for any purpose specified in the Confirmation Order that is not inconsistent with the Bankruptcy Code;
xxiii. to enter a final decree closing the Chapter 11 Cases; and
xxiv. to hear and determine any matter arising out of or relating to the SEO Settlement Agreement.
If the Bankruptcy Court or District Court abstains from exercising, or declines to exercise, jurisdiction or is otherwise without jurisdiction over any matter arising out of or relating to the Chapter 11 Cases, Article XI of the Plan will have no effect upon and will not control, prohibit, or limit the exercise of jurisdiction by any other court having competent jurisdiction with respect to that matter; provided that with respect to matters arising out of or relating to the SEO Settlement Agreement, such alternative jurisdiction shall be solely as provided for under the SEO Settlement Agreement.
M. Alternative Plan(s) of Reorganization
The Debtors have evaluated other reorganization alternatives to the Plan. After evaluating those alternatives, the Debtors have concluded the Plan, assuming its confirmation and successful implementation, will fairly treat holders of Claims. If the Plan is not confirmed, the Debtors could remain in chapter 11 for a significantly longer period. Should this occur, the Debtors could continue to operate their businesses and manage their properties as Debtors in Possession, but would remain subject to the restrictions imposed by the Bankruptcy Code. Moreover, the Debtors (whether individually or collectively) or any other party in interest could attempt to formulate and propose a different plan or plans. This would likely take considerable time and likely would result in an increase in the operating and other administrative expenses of these Chapter 11 Cases.
N. Liquidation under Chapter 7
If no chapter 11 plan can be confirmed, then the Debtors’ cases may be converted to cases under chapter 7 of the Bankruptcy Code, whereby a trustee would be elected or appointed to liquidate the assets of the Debtors for distribution to the holders of Claims in accordance with the strict priority scheme established by the Bankruptcy Code.
Under chapter 7, the cash amount available for distribution to the holders of Claims would consist of the proceeds resulting from the disposition of the assets of the Debtors, augmented by the cash held by the Debtors at the time of the commencement of the liquidation cases. The cash amount would be reduced by the costs and expenses of the liquidation and by such additional administrative and priority claims as may result from the termination of the Debtors’ businesses and the use of chapter 7 for the purposes of liquidation.
93 The Liquidation Analysis attached as Exhibit D presents the Debtors’ determination of the hypothetical liquidation value of their business if a chapter 7 trustee were appointed and charged with winding down the estates. Under a chapter 7 liquidation, it is assumed that the trustee would sell all of the Debtor’s major assets or surrender them to the respective lien holders, and the cash proceeds, net of liquidation related costs, would then be distributed to creditors in accordance with relevant law.
The Liquidation Analysis assumes conversion of the Debtors’ chapter 11 cases to chapter 7 liquidation cases on November 30, 2012 (the “Conversion Date”). On the Conversion Date, it is assumed that the Bankruptcy Court would appoint one chapter 7 trustee (the “Trustee”) to oversee the liquidation of the estates. The Liquidation Analysis is based on each of the Debtors’ unaudited assets and liabilities as of March 31, 2012. The Liquidation Analysis assumes a liquidation of all of the Debtors’ assets including (i) cash and equivalents, (ii) accounts receivables, (iii) inventories, (iv) property, plant, and equipment, (v) intangibles, and (vi) other assets. The Liquidation Analysis assumes that the Trustee does not possess the financial or operational resources to continue to operate NewPage for the extended period required to conduct a going-concern sales process. As a result, the Trustee is assumed to allow each mill to conduct normal operations for two months until the WARN period expires. After the WARN period expires, the Trustee is assumed to immediately conduct a sales process for the Escanaba and Wisconsin Rapids mills as well as an orderly liquidation process for the Luke, Rumford, Wickliffe, Biron, Duluth, and Stevens Point mills on an expedited basis. Both the sale of marketable assets and the orderly liquidation of certain mills of the estate is assumed to occur over a period of seven months. These activities are assumed to take place concurrently.
The Debtors submit the Liquidation Analysis demonstrates the Plan satisfies the best interest of creditors test under Bankruptcy Code section 1129(a)(7) and, under the Plan, each holder of an Allowed Claim in a Class of Claims that is Impaired,18 will receive value not less than the amount the holder would receive in a chapter 7 liquidation. Further, the Debtors believe that pursuant to chapter 7 of the Bankruptcy Code, holders of Equity Interests would receive no distributions.
The determination of the hypothetical proceeds from, and costs of the liquidation of the Debtors’ assets, is an uncertain process involving the extensive use of estimates and assumptions that, although considered reasonable by the Debtors, are inherently subject to significant business, and economic uncertainties and contingencies beyond the control of the Debtors. Inevitably, some assumptions in the Liquidation Analysis would not materialize in an actual chapter 7 liquidation and unanticipated events and circumstances could affect the ultimate results in an actual chapter 7 liquidation. The Debtors prepared the Liquidation Analysis for the sole purpose of establishing a reasonable good- faith estimate of the proceeds that would be generated if the Debtors’ assets were liquidated in accordance with chapter 7 of the Bankruptcy Code upon conversion of these Chapter 11 Cases. The Liquidation Analysis is not intended and should not be used for any other purpose. The underlying financial information in the Liquidation Analysis was not compiled or examined by any independent accountants. No independent appraisals were conducted in preparing the Liquidation Analysis. Accordingly, while deemed reasonable based on the facts currently available, neither the Debtors nor their advisors make any representations or warranties that the actual results would or would not approximate the estimates and assumptions represented in the Liquidation Analysis.
18 [Sections II.C.2 and VI.B] of this Disclosure Statement identify the Classes of Claims and Equity Interests that are Impaired.
94 O. Miscellaneous Provisions
1. Effectuating Documents and Further Transactions
Each officer of the Reorganized Debtors is authorized, in accordance with his or her authority under the resolutions of the applicable Board of Directors, to execute, deliver, file, or record such contracts, instruments, releases, indentures, and other agreements or documents and take such action as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan.
2. Withholding and Reporting Requirements
The Disbursing Agent will comply with all applicable withholding and reporting requirements imposed by any federal, state, or local taxing authority in connection with Distributions under the Plan, and all Distributions under the Plan will be subject to those withholding or reporting requirements. Notwithstanding the above, each holder of an Allowed Claim that is to receive a Distribution under the Plan will have the sole and exclusive responsibility for the satisfaction and payment of any tax obligations imposed by any governmental unit, including income, withholding, and other tax obligations, on account of the Distribution. Any party issuing any instrument or making any Distribution under the Plan has the right, but not the obligation, to refrain from making a Distribution until the Allowed Claim holder has made arrangements satisfactory to the issuing or disbursing party for payment of any such tax obligations.
3. Exemption from Transfer Taxes
Pursuant to section 1146(a) of the Bankruptcy Code, the issuance, transfer or exchange of the New Holdco Common Stock pursuant to the Plan or any of the Plan Documents, the creation of any mortgage, deed of trust, or other security interest, the making or assignment of any lease or sublease, or the making, delivery, filing or recording of any deed or other instrument of transfer under, in furtherance of, or in connection with the Plan or any of the Plan Documents (including, for this purpose in connection with the organization documents relating to the Reorganized Debtors, the Exit Financing, and the other documents relating to the transactions described in the Plan) will not be subject to any stamp, real estate transfer, mortgage recording, Uniform Commercial Code filing or recording tax or other similar tax or government assessment. All filing or recording officers (or any other Person with authority over any of the foregoing), wherever located any by whomever appointed, are hereby directed to comply with the requirements of section 1146(c) of the Bankruptcy Code, to forego the collection of any such tax or governmental assessment, and to accept for filing and recordation any of the foregoing instruments or other documents without the payment of any such tax or governmental assessment.
4. Expedited Tax Determination
The Reorganized Debtors are entitled to an expedited determination of taxes under section 505(b) of the Bankruptcy Code for all returns filed for, or on behalf of, the Debtors for any and all taxable periods ending after the Commencement Date through and including the Effective Date.
5. Payment of Statutory Fees
All fees payable pursuant to section 1930 of title 28 of the United States Code will be paid on the earlier of when due or the Effective Date, or as soon thereafter as practicable. From and after the Effective Date, the Debtors will be liable for and will pay the fees under 28 U.S.C. section 1930 asserted against the Debtors’ estates under 28 U.S.C. Section 1930 until entry of a final decree closing the
95 Case. In addition, the Debtors shall file post confirmation quarterly reports or any pre-confirmation monthly operating reports not filed as of the Confirmation Hearing in conformity with the U.S. Trustee guidelines, until entry of an order closing or converting the cases. The U.S. Trustee shall not be required to file a request for payment of the quarterly fees, which shall be deemed an administrative claim against the Debtors and their estates.
6. Post-Confirmation Date Professional Fees and Expenses
The Reorganized Debtors will, in the ordinary course of business and without the necessity for any approval by the Bankruptcy Court, pay the reasonable fees and expenses of their professionals incurred from and after the Effective Date.
7. Indenture Trustee Claims
The Reorganized Debtors will pay the Indenture Trustee Claims in Cash in immediately available funds (i) on the Effective Date in respect of outstanding invoices submitted on or prior to the 10th business day immediately preceding the Effective Date, and (ii) within 10 business days following receipt by the Reorganized Debtors of the applicable invoice, in respect of invoices submitted after the 10th Business Day immediately preceding the Effective Date, but only if and to the extent the applicable Indenture Trustee provides reasonable and customary detail along with or as part of all invoices submitted in support of its Claim to the attorneys for the Reorganized Debtors and the United States Trustee. Any payment by the Debtors or the Reorganized Debtors to the Indenture Trustees for the Unsecured Notes and the Senior Subordinated Unsecured Notes Claims in respect of their Indenture Trustee Claims shall be capped at an aggregate of $1.5 million. The Reorganized Debtors will have the right to file objections to any Indenture Trustee Claim based upon a “reasonableness” standard within 10 days after receipt of the invoices and supporting documentation. Any disputed amount will be subject to the jurisdiction of, and resolution by, the Bankruptcy Court. If an objection is timely filed to an Indenture Trustee Claim, the Bankruptcy Court will hold a hearing on notice to determine the reasonableness of the Claim. Upon payment of an Indenture Trustee Claim in full or in accordance with (i) the second sentence of Section 14.7 of the Plan or (ii) a final non-appealable order of the Bankruptcy Court, the applicable Indenture Trustee will be deemed to have released its Indenture Trustee Charging Lien.
8. Plan Modifications
Prior to the Confirmation Date, the Debtors, in their sole discretion, may amend, modify or supplement the terms and provisions of the Plan (including the treatment of Claims or Equity Interests under any Plan), in the manner provided for by section 1127 of the Bankruptcy Code or as otherwise permitted by law, without additional disclosure pursuant to section 1125 of the Bankruptcy Code, except as the Bankruptcy Code may otherwise direct, but no material amendments, modifications or supplements shall be made to the Plan or the Plan Documents absent consent of the First Lien Notes Trustee, which consent shall not be unreasonably withheld; notwithstanding the foregoing, to the extent any modification or amendment to the Plan materially adversely affects the Distributions to or material rights of (i) the Second Lien Noteholders, the Second Lien Group and/or its members, (ii) the holders of General Unsecured Claims, the Committee and/or its members, (iii) the SEO Released Parties or the Trust Parties, then the Debtors must seek the consent of the Second Lien Group, the Committee, the SEO Released Parties or the Trust Parties, as applicable, to any such amendment, modification, or supplement. After the Confirmation Date, so long as it does not materially adversely affect the treatment of Claims or Equity Interests under the Plan, the Debtors may institute proceedings in the Bankruptcy Court and District Court to remedy any defect or omission or reconcile any inconsistencies in the Plan or the Confirmation Order with respect to such matters as may be necessary to carry out the purposes and effects of the Plan.
96 Notwithstanding anything to the contrary in the Plan, the Debtors reserve the right to revoke or withdraw the Plan at any time prior to the Confirmation Date.
9. Revocation, Withdrawal, or Non-Consummation
If any Plan is revoked or withdrawn prior to the Confirmation Date, or if any Plan does not become effective for any reason whatsoever, then that Plan will be deemed null and void. In that event, nothing in the Plan will be deemed to constitute a waiver or release of any Claims against the applicable Debtor or to prejudice in any manner the rights of the other Debtors or any other entity in any further proceedings with respect to that Debtor.
If the Effective Date does not occur with respect to a Debtor’s Plan, the parties will be returned to the position they would have held with respect to the applicable Debtor had the Confirmation Order not been entered, and nothing in that Plan, the Disclosure Statement, any of the Plan Documents, or any pleading filed or statement made in the Bankruptcy Court with respect to that Plan or the Plan Documents will be deemed to constitute an admission or waiver of any sort or in any way limit, impair, or alter the rights of any Entity with respect to that Debtor.
10. NPPH Sale Proceeds
On the Effective Date, the Notes Collateral Trustee will be authorized to distribute to the First Lien Noteholders the Guaranteed US Noteholders Pool, as defined in the Amended and Restated Plan of Compromise and Arrangement of NewPage Port Hawkesbury Corp., a non-debtor affiliate.
11. Cerberus Settlement.
The Debtors and Cerberus have negotiated a settlement agreement (the “Cerberus Settlement Agreement”). As part of the mediation led by Judge Drain, the Settlement Parties agreed the Cerberus Settlement Agreement should be removed from the Plan, and approval of the Cerberus Settlement Agreement should instead be sought through a motion pursuant to Bankruptcy Rule 9019 (the “9019 Motion”), the settlement parties further agreed that the 9019 Motion would be heard prior to commencement of the confirmation hearing. The Committee has advised the Debtors it intends to object to the Cerberus Settlement Agreement.
After taking discovery that commenced December 2, 2011 and has continued to date, the Committee has asserted Cerberus and its affiliates and agents are liable to the Debtors’ estates for (i) avoidance actions against Cerberus pursuant to sections 547, 548, and 550 of the Bankruptcy Code; (ii) trading in securities of the Debtors; (iii) breaches of fiduciary duties of loyalty and care; and (iv) aiding and abetting breaches of such duties (collectively, the “Estates’ Alleged Causes of Action”). At the telephonic hearing held on October 22, 2012, the Committee also conceded on the record that it would object to the Cerberus settlement regardless of its terms.
Cerberus vehemently denies all the Estates’ Alleged Causes of Action. Inter alia, Cerberus argues that any payments it received prior to the Commencement Date from the Debtors are not avoidable as preferential or fraudulent transfers as such payments were made in the ordinary course of business in respect of services providing reasonably equivalent value. Further, Cerberus maintains that any trading in securities of the Debtors was conducted in strict compliance with its rigorous compliance procedures and no trades were ever motivated, in whole or in part, by material nonpublic information.
The Debtors requested that the Committee provide descriptions of all claims and Causes of Action the Committee contends exist against Cerberus so that the Debtors could provide full
97 disclosure of any such material claims. Despite such request, the Committee declined to provide any information other than the list of Estates’ Alleged Causes of Action set forth above.
The Cerberus Settlement Agreement will resolve all the Estates’ Alleged Causes of Action and will provide the Debtors with valuable benefits and certainty. As noted in Section X.B of the Disclosure Statement, the NewPage Consolidated Group’s estimated NOL carryforwards as of December 31, 2011, were approximately $2.8 billion. If Cerberus sells a sufficient amount of its NPG stock or claims a worthless securities deduction regarding its NPG stock in an effort to realize certain tax benefits, however, the value of the Debtors’ NOL carryforwards will be severely diminished or eliminated entirely. While the Debtors have established procedures and included an injunction in the Plan that may ultimately enjoin Cerberus from affecting the value of the Debtors’ NOL carryforwards, there remains substantial legal uncertainty whether such procedures or such injunction will ultimately be upheld. The Cerberus Settlement Agreement will ensure the Debtors’ valuable NOL carryforwards will not be negatively impacted.
Generally, the Cerberus Settlement Agreement is comprised of the following five components: (i) a payment by Cerberus of $1.5 million to Reorganized NewPage within 10 business days after an order approving the Cerberus Settlement Agreement becomes a Final Order no longer subject to appeal or certiorari proceedings; (ii) if filed, Cerberus’ withdrawal of its notice of intent to transfer its NPG stock and its withdrawal of its request for adequate protection of the value of its tax benefit if it is enjoined from effectuating such transfer; (iii) Cerberus’ consent to injunctions enjoining it from selling its NPG stock or claiming a worthless securities deduction regarding its NPG stock; (iv) the release of all Cerberus’ Claims against the Debtors, whether known or unknown, whether materialized or not yet materialized, through the Effective Date; and (v) the release of Cerberus from any and all claims as defined in section 101(5) of the Bankruptcy Code and demands whatsoever, through the Effective Date, whether known or unknown.
As the Court’s decision regarding the Cerberus Settlement Agreement may affect the Debtors feasibility analysis and business plan, the Settlement Parties also agreed as part of the mediated settlement that the 9019 Motion should be heard immediately prior to the Confirmation Hearing. The Debtors have also retained the right to propose an amended Cerberus Settlement Agreement, if necessary, until the Effective Date of the Plan.
12. Plan Supplement
A substantially final form of the documents to be included in the Plan Supplement will be filed with the clerk of the Bankruptcy Court and posted to the website of the Claims Agent, http://www.kccllc.net/NewPage, as they become available, but no later than 5 days prior to the last date by which holders of Impaired Claims may vote to accept or reject the Plan. Upon its filing, the Plan Supplement may be inspected in the office of the clerk of the Bankruptcy Court during normal court hours.
13. Substantial Consummation
On the Effective Date, the Plan will be deemed to be substantially consummated under sections 1101 and 1127(b) of the Bankruptcy Code.
14. Severability
If, prior to the Confirmation Date, any term or provision of the Plan or any of the Plan Documents will be held by the Bankruptcy Court to be invalid, void or unenforceable, the Bankruptcy
98 Court, with the written consent of the Debtors, and the First Lien Notes Trustee, will have the power to alter and interpret that term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of that term or provision, and the term or provision will then be applicable as altered or interpreted. Notwithstanding any such holding, alteration or interpretation, the remainder of the terms and provisions of the Plan or the Plan Documents will remain in full force and effect and will in no way be affected, impaired or invalidated; notwithstanding the foregoing, to the extent any alteration or interpretation of any term or provision of the Plan or any of the Plan Documents materially and adversely affects (i) holders of Second Lien Notes Claims, the Second Lien Group or its members, (ii) SEO, the SEO Released Parties or the Trust Parties, or (iii) the Committee or its members, then the Debtors will be required to obtain the written consent with respect thereto of the applicable parties listed in the foregoing clauses (i), (ii), and/or (iii) in Section 14.11 of the Plan, not to be unreasonably withheld, delayed or conditioned. The Confirmation Order will constitute a judicial determination and will provide that each term and provision of the Plan and the Plan Documents, as it may have been altered or interpreted in accordance with the foregoing, is valid and enforceable pursuant to its terms.
15. Governing Law
Except to the extent that the Bankruptcy Code or other federal law is applicable, or to the extent that an exhibit hereto or document contained in the Plan Supplement provides otherwise, the rights, duties and obligations arising under the Plan will be governed by, and construed and enforced in accordance with, the Bankruptcy Code and the laws of the State of New York, without giving effect to principles of conflicts of laws that would result in the application of the laws of another jurisdiction.
16. Deemed Acts
Whenever an act or event is expressed under the Plan to have been deemed done or to have occurred, it will be deemed to have been done or to have occurred without any further act by any party, by virtue of the Plan and the Confirmation Order.
17. Binding Effect
The Plan will be binding upon and inure to the benefit of the Debtors, the holders of Claims and Equity Interests and their respective successors and assigns, including the Reorganized Debtors.
18. Exhibits/Schedules
All exhibits and schedules to the Plan, including the Plan Supplement, are incorporated into and are part of the Plan as if set forth in full in the Plan.
19. Notices
All notices, requests, and demands to or upon the Debtors or the Reorganized Debtors to be effective will be in writing, including by facsimile transmission, and, unless otherwise expressly provided in the Plan, will be deemed to have been duly given or made when actually delivered or, in the case of notice by facsimile transmission, when received and telephonically confirmed, addressed as follows:
99 NewPage Corporation 8540 Gander Creek Drive Miamisburg, OH 45342 Attention: Douglas K. Cooper, Esq. Fax: 937.242.9459
With a copy to:
Proskauer Rose LLP Eleven Times Square New York, New York 10036 Attention: Martin J. Bienenstock, Esq. Judy G.Z. Liu, Esq. Philip M. Abelson , Esq. Fax: 212.969.2900
-and-
Pachulski Stang Ziehl & Jones 919 N. Market Street, 17th Floor., P.O. Box 8705 Wilmington, Delaware, 19899-8705(Courier 19801) Attention: Laura Davis Jones, Esq. Michael R. Seidl, Esq. Timothy P. Cairns, Esq. Fax: 302.652.4400
20. Dissolution of Committee
On the Effective Date, the Committee will dissolve, except that following the Effective Date, the Committee will continue to have standing and a right to be heard with respect to (i) Claims and/or applications for compensation by Professionals and requests for allowance of Administrative Expense Claims for substantial contribution pursuant to section 503(b)(3)(D) of the Bankruptcy Code, (ii) any appeals commenced by the Committee prior to the Effective Date of an order approving a settlement propounded between the Debtors’ Estates and the Cerberus Entities, and (iii) any appeals of the Confirmation Order that remain pending as of the Effective Date to which the Committee is a party. Upon the dissolution of the Committee, (i) the current and former members of the Committee and their respective officers, employees, counsel, advisors, and agents, will be released and discharged of and from all further authority, duties, responsibilities, and obligations related to and arising from and in connection with the Chapter 11 Cases other than their obligations to maintain the confidentiality of all data received from the Debtors that is not otherwise public, and (ii) the retention or employment of the Committee’s respective attorneys, accountants, and other agents will terminate.
21. Payment of Fees and Expenses of the First Lien Notes Trustee
Following submission to the Reorganized Debtors and the Committee of invoices for reasonable and documented fees and expenses (the “First Lien Advisor Fees”) incurred by (i) Milbank, Tweed, Hadley & McCloy LLP, as counsel, (ii) Blackstone Advisory Partners LP (“Blackstone”), as financial advisor, (iii) Emmet, Marvin & Martin, LLP, as counsel, (iv) Morris, Nichols, Arsht & Tunnell LLP, as local Delaware counsel, and (v) Bennett Jones LLP, as Canadian counsel, the Reorganized
100 Debtors and the Committee shall review these submissions, and subject to any objections of the reviewing parties that may arise (and further subject to the rights of the Entities in the foregoing clauses (i)-(v) to oppose the Committee’s objection on any ground, including standing), the Reorganized Debtors shall pay the First Lien Advisor Fees within 5 Business Days. For the avoidance of doubt and in accordance with the terms of the DIP Order, the First Lien Advisor Fees shall include Blackstone’s transaction fee as set forth in its engagement letter dated August 8, 2011, which shall be paid by the Debtors on the Effective Date. All amounts distributed and paid to the foregoing parties pursuant to the Plan and the DIP Order shall not be subject to setoff, recoupment, reduction nor allocation of any kind.
22. Payment of Fees and Expenses of the Second Lien Group
Following submission to the Reorganized Debtors and the Committee of invoices for reasonable and documented fees and expenses (the “Second Lien Advisor Fees”) incurred by (i) Akin Gump Strauss Hauer & Feld LLP, as counsel, (ii) Blank Rome LLP, as local Delaware counsel, (iii) Houlihan Lokey Capital, Inc., as financial advisor (“Houlihan Lokey”), and (iv) Goodmans, as Canadian counsel to the Second Lien Group, the Reorganized Debtors and the Committee shall review these submissions and, subject to any objections of the reviewing parties that may arise (and further subject to the rights of the Entities in the foregoing clauses (i)-(iv) to oppose the Committee’s objection on any ground, including standing), the Reorganized Debtors shall pay the Second Lien Advisor Fees within 5 Business Days. For the avoidance of doubt and in accordance with the terms of the DIP Order, the Second Lien Advisor Fees shall include Houlihan Lokey’s transaction fee, as set forth in its engagement letter dated as of July 15, 2011, which shall be paid by the Debtors on the Effective Date. All amounts distributed and paid to the foregoing parties pursuant to the Plan and the DIP Order shall not be subject to setoff, recoupment, reduction nor allocation of any kind.
23. No Admissions
Notwithstanding anything in the Plan or any Plan Document to the contrary, nothing in the Plan or any Plan Document will be deemed as an admission by any Debtor or any other party with respect to any matter set forth in the Plan or any Plan Document, including any liability on any Claim.
24. Time
Bankruptcy Rule 9006 will apply in computing any period of time prescribed or allowed by the Plan, unless otherwise set forth in the Plan or determined by the Bankruptcy Court.
25. Section Headings
The section headings contained in the Plan are for reference purposes only and will not affect in any way the meaning or interpretation of the Plan.
26. Inconsistencies
To the extent of any inconsistencies between the information contained in the Disclosure Statement and the Plan, the terms and provisions contained in the Plan will govern.
VII. RISK FACTORS AND OTHER FACTORS TO BE CONSIDERED
PRIOR TO VOTING TO ACCEPT OR REJECT THE PLAN, HOLDERS OF IMPAIRED CLAIMS ENTITLED TO VOTE ON THE PLAN SHOULD READ AND
101 CAREFULLY CONSIDER EACH OF THE FACTORS SET FORTH BELOW, AS WELL AS OTHER INFORMATION SET FORTH IN THIS DISCLOSURE STATEMENT AND THE DOCUMENTS DELIVERED WITH AND/OR INCORPORATED BY REFERENCE IN THIS DISCLOSURE STATEMENT.
THE RISKS AND UNCERTAINTIES DESCRIBED BELOW SHOULD NOT BE REGARDED AS CONSTITUTING THE ONLY RISKS INVOLVED IN CONNECTION WITH THE PLAN AND ITS IMPLEMENTATION.
A. Bankruptcy Risks
1. Risk of Non-Confirmation of the Plan
The Debtors cannot ensure they will receive the requisite Plan acceptances to confirm the Plan. Even if the Debtors receive the requisite Plan acceptances, the Debtors cannot ensure the Bankruptcy Court will confirm the Plan. The adequacy of this Disclosure Statement or the balloting procedures and results may be challenged as not being in compliance with the Bankruptcy Code, and even if the Bankruptcy Court determines the Disclosure Statement and the balloting procedures and results are appropriate, the Bankruptcy Court could still decline to confirm the Plan if it finds that any of the statutory requirements for confirmation have not been met. Section 1129 of the Bankruptcy Code sets forth the requirements for confirmation and requires, among other things: (i) a finding by a bankruptcy court that a plan “does not discriminate unfairly” and is “fair and equitable” with respect to any non- accepting classes; (ii) confirmation is not likely to be followed by a liquidation or a need for further reorganization; and (iii) the value of the distributions to non-accepting holders of claims and interests within a particular class under the plan will not be less than the value of distributions those holders would receive if the debtors were liquidated under chapter 7 of the Bankruptcy Code. Although the Debtors believe the Plan satisfies all of these requirements, there can be no assurance the Bankruptcy Court will reach the same conclusion. In particular, the Plan embodies various settlements and compromises and there can be no assurance the Bankruptcy Court will approve those settlements and compromises as part of the confirmation of the Plan. Moreover, there can be no assurance that modifications to the Plan will not be required for confirmation or that the modifications will not necessitate the re-solicitation of votes.
2. Parties in Interest May Object to the Debtors’ Classification of Claims
Section 1122 of the Bankruptcy Code provides that a chapter 11 plan may place a claim or an interest in a particular class only if the claim or interest is substantially similar to the other claims or interests in the class. The Debtors believe the classification of Claims and Equity Interests under the Plan complies with the Bankruptcy Code requirements. There is no assurance, however, that the Bankruptcy Court will reach the same conclusion, which could delay or prevent the confirmation of the Plan.
3. Non-Consensual Confirmation
If an Impaired Class of Claims does not accept the Plan, the Bankruptcy Court may nonetheless confirm the Plan at the Debtors’ request if at least one Impaired Class has accepted the Plan (the acceptance being determined without including the vote of any “insider” in that Impaired Class), and as to each Impaired Class that has not accepted the Plan, if the Bankruptcy Court determines that the Plan “does not discriminate unfairly” and is “fair and equitable” with respect to the rejecting Impaired Classes. The Debtors believe the Plan satisfies these requirements.
102 4. Risk of Non-Occurrence or Delayed Occurrence of the Effective Date
Although the Debtors believe the Effective Date will occur soon after the Confirmation Date and following satisfaction of any applicable conditions precedent, there can be no assurance as to the timing of the Effective Date.
5. Certain Tax Consequences of the Plan are Complex and Subject to Substantial Uncertainties
Some of the material consequences of the Plan regarding United States federal income taxes are described in Section X. The U.S. federal income tax consequences of the Plan are complex and are subject to substantial uncertainties, including by reason of dependence on certain factual determinations. The Debtors have not requested, and do not expect to request, a ruling from the IRS with respect to any of the tax aspects of the Plan, and the discussion of certain U.S. federal income tax consequences of the Plan in Section X below is not binding upon the IRS. Thus, no assurances can be given that the IRS would not assert, or that a court would not sustain, a position different from any discussed in this Disclosure Statement, resulting in U.S. federal income tax consequences substantially different from those discussed in this Disclosure Statement. In addition, the Debtors have not requested, and do not expect to request, an opinion of counsel with respect to any of the tax aspects of the Plan.
For a more detailed discussion of certain U.S. federal income tax consequences and risks related to the Plan, including positions the Debtors intend to take with respect to certain tax issues, please see Section X.
6. Undue Delay in the Confirmation of the Plan May Significantly Disrupt Operations of the Debtors
The impact of a continuation of the Chapter 11 Cases on the Debtors’ operations and business cannot be accurately predicted or quantified. Continuation of the Chapter 11 Cases over a protracted period could adversely affect the Debtors’ operations and relationships with their vendors, customers, regulators, and employees. Also, transactions outside the ordinary course of business are subject to the prior approval of the Bankruptcy Court, which may limit the Company’s ability to respond timely to certain events or take advantage of certain opportunities. If confirmation of the Plan is substantially delayed, the result would include, among other things, increases in costs, professional fees, and similar expenses. In addition, prolonged Chapter 11 Cases may make it more difficult to retain management and other key personnel.
7. The Chapter 11 Cases may adversely affect the Company’s operations going forward
The fact that the Company has been subject to the Chapter 11 Cases may adversely affect the Company’s operations going forward, including its ability to negotiate favorable terms from suppliers and hedging counterparties and to attract and retain customers. The failure to obtain favorable terms and retain customers could adversely affect the Company’s profitability and financial condition and performance.
103 8. Certain liabilities will not be fully extinguished as a result of the Confirmation of the Plan by the Bankruptcy Court
While most of the Debtors’ current liabilities will be discharged upon emergence from the Chapter 11 Cases, a number of obligations may remain in effect following the Effective Date. Various agreements and liabilities will remain in place, such as certain employee benefit and pension obligations, and other contracts that, even if modified during the Chapter 11 Cases, will still subject the Debtors to substantial obligations and liabilities. 9. Plan Releases May Not be Approved
There is no assurance the Plan releases, as provided in Article IX of the Plan and as described in this Disclosure Statement, will be granted. Failure of the Bankruptcy Court to grant this relief may result in a chapter 11 plan that differs from the Plan.
10. Litigation Trust Recoveries and Results are Speculative and Uncertain
The success of the Litigation Trustee in pursuing the Committee Litigation Claims is speculative and uncertain. Litigation may be complex and involve significant delay. Furthermore, even if successful in prosecuting the Committee Litigation Claims, in some cases, the Litigation Trustee may encounter difficulty in collection of recoveries. Recoveries by the Litigation Trustee are an important part of the consideration being distribution to the Litigation Trust Beneficiaries under the Plan, but success by the Litigation Trustee cannot be guaranteed.
B. Risks Related to the Capitalization of the Reorganized Debtors
1. The Company Will Require Significant Financing to Emerge from the Chapter 11 Cases
On the Effective Date, after giving effect to the transactions contemplated by the Plan, the Reorganized Debtors will have incurred approximately $500 million of term debt and will have access to a $400 million revolving credit facility, both of which will be secured indebtedness as part of the exit financing. Significant amounts of cash flow will be dedicated to making payments of interest on this indebtedness. The Debtors expect the Reorganized Debtors will be able to satisfy their obligations as they become due in the ordinary course of business.
The Reorganized Debtors’ ability to make payments on their obligations is dependent upon their ability to generate cash in the future. There can be no assurance the Reorganized Debtors will be able to generate sufficient cash flow from operations or that future borrowings, if needed, will be available to enable the Reorganized Debtors to pay their obligations or to fund their other liquidity needs.
2. The Plan Exchanges Senior Securities for Equity
If the Plan is confirmed, holders of certain Claims will receive New Holdco Common Stock. Thus, in agreeing to the Plan, holders of these Claims will be consenting to the exchange of their interests in senior debt, which has, among other things, a stated interest rate, a maturity date, and a liquidation preference over equity securities, for New Holdco Common Stock, which will be subordinated to all future non-equity based Claims.
104 3. Absence of Trading Market for New Holdco Common Stock
The New Holdco Common Stock will not be listed on any national securities exchange and, as a result, no level of liquidity in the market can be ensured. Accordingly, no assurance can be given that a holder of those securities will be able to sell them in the future or as to the price at which any sale might occur. If a holder of the securities is able to sell them in the future, the sale would have to qualify for an available exemption from registration under the Securities Act and under equivalent state securities or “blue sky” laws. Additionally, if a holder of the securities is able to sell them in the future, the price of the securities could be higher or lower than the value ascribed to them in this Disclosure Statement, depending upon many factors, including whether a market exists for these securities, industry conditions, and the performance of and investor expectations for, the Reorganized Debtors.
For a more detailed discussion of securities law matters, please see Section XI.
4. Holders’ Ability to Sell New Holdco Common Stock
The valuation analysis used to determine the value of New Holdco Common Stock was based upon the estimated value of the Reorganized Debtors’ operations on a going concern basis plus the estimated cash balance at the assumed Effective Date of November 30, 2012. The valuation analysis was not intended to represent the trading value of the New Holdco Common Stock in public or private markets.
Factors that may cause fluctuations in the price of New Holdco Common Stock include:
i. changes in the Reorganized Debtors’ and their subsidiaries’ operating performance;
ii. prevailing interest rates;
iii. conditions in the financial markets;
iv. anticipated holding period of securities received by prepetition creditors;
v. developments in the Reorganized Debtors’ industry and economic conditions generally;
vi. changes in the prospects or financial performance of companies engaged in similar businesses;
vii. changes in, or new interpretations or applications of, laws and regulations applicable to the Reorganized Debtors’ business;
viii. significant sales of New Holdco Common Stock;
ix. the availability of an active trading market for the New Holdco Common Stock;
x. speculation in the press or investment community regarding the Reorganized Debtors’ business, officers, employees, or facts or events that may directly or indirectly affect their business;
xi. Reorganized Debtors’ capital structure, including amount of indebtedness;
105 xii. Reorganized Debtors’ dividend policy;
xiii. investor perception of Reorganized Debtors’;
xiv. lack of ability to market New Holdco Common Stock; and
xv. other factors which generally influence the price of securities.
5. Upon Consummation of the Plan, There May Be Significant Holders of the New Holdco Common Stock
Upon consummation of the Plan, certain holders of Claims may hold shares of New Holdco Common Stock representing a substantial percentage of the outstanding shares of the New Holdco Common Stock. If individual holders of Claims obtain a sufficiently sizeable position of New Holdco Common Stock, those holders could be in a position to influence the outcome of actions requiring shareholder approval, including, among other things, the election of board members. This concentration of ownership could also facilitate or hinder a negotiated change of control of New Holdco and, consequently, impact the value of the New Holdco Common Stock. Furthermore, the possibility that one or more holders of a significant number of shares of the New Holdco Common Stock may sell all or a large portion of its shares of the New Holdco Common Stock in a short period of time may adversely affect the trading prices of the New Holdco Common Stock. 6. The New Holdco Common Stock May Be Issued in Odd Lots
Holders of certain Allowed Claims may receive odd lot distributions (i.e., less than 100 shares or units) of New Holdco Common Stock under the Plan. Holders may find it more difficult to dispose of odd lots in the marketplace and may face increased brokerage charges in connection with a disposition. 7. Upon Consummation of the Plan, There May Be Restrictions on the Transfer of New Holdco Common Stock by Certain Holders
Holders of New Holdco Common Stock issued pursuant to the Plan who are deemed to be “underwriters” as defined in section 1145(b) of the Bankruptcy Code, and those holders who are deemed to be “affiliates” or “control persons” within the meaning of the Securities Act and the rules promulgated thereunder, will be unable to freely transfer or to sell their New Holdco Common Stock except pursuant to (a) “ordinary trading transactions” by a holder that is not an “issuer” within the meaning of section 1145(b), (b) an effective registration of the securities under the Securities Act and under equivalent state securities or “blue sky” laws, or (c) pursuant to the provisions of Rule 144 or Regulation S under the Securities Act or another available exemption from the registration requirements of the Securities Act. C. Variance from Estimates and Projections
The estimated recoveries and projections set forth in this Disclosure Statement are highly speculative and based on information available at the time each analysis was prepared. ACTUAL RESULTS WILL VARY AND MAY VARY MATERIALLY FROM THOSE REFLECTED IN THIS DISCLOSURE STATEMENT. Refer to the entirety of this Section VII for a discussion of potential risks and variances.
106 1. Financial Projections
The Debtors have prepared the projections set forth in Exhibit C (and incorporated into the estimated creditor recoveries included in this Disclosure Statement) based on certain assumptions they believe are reasonable under the circumstances. An overview of the assumptions underlying the financial projections is described in Section IX of this Disclosure Statement and a more detailed description of the assumptions is set forth in Exhibit C. The projections have not been compiled or examined by independent accountants. The Debtors make no representations regarding the accuracy of the projections for the Reorganized Debtors or the ability of the Reorganized Debtors to achieve forecasted results. Many of the assumptions underlying the projections are subject to significant uncertainties.
The Reorganized Debtors’ performance over the long term is inherently uncertain, especially in today’s economic climate and rapidly-changing technology. Preparing financial projections that predict results for more than a year into the future requires the application of many subjective assumptions that are subject to variation and fluctuation, in many cases for reasons beyond the control of the preparer. It is difficult to estimate how the current economic climate or continued digital substitution will affect the demand for the Company’s products and the costs of the raw materials and chemicals needed for production. Based on their analysis of the current demand in the North American paper industry, however, the Debtors believe their performance will be sufficient to fulfill their obligations under the Plan.
Inevitably, some assumptions will not materialize, and unanticipated events and circumstances may affect the Reorganized Debtors’ ultimate financial results. Therefore, the actual results achieved will vary from the forecasts, and the variations may be material. In evaluating the Plan, holders of Claims are urged to examine carefully all of the assumptions underlying the financial projections.
2. Estimated Recoveries
The recovery estimates set forth in this Disclosure Statement are based on various estimates and assumptions set forth in the table in Section II. For example, if the estimated amount of Allowed Claims relied upon to calculate the estimated recoveries ultimately varies significantly from the actual amount of Allowed Claims, actual recoveries on Claims will vary significantly as well. Similarly, as the estimated amount of Allowed Claims is based upon information available to the Debtors as of October 5, 2012, the actual results may vary significantly as Claims are Allowed, Disallowed, or otherwise resolved over time.
In deciding whether to vote to accept or reject the Plan, holders of Claims must make their own determination as to the reasonableness of the assumptions and the reliability of the projected recoveries and should consult with their own advisors.
The Recovery Analysis should be read in conjunction with the assumptions, qualifications, and explanations set forth in this Disclosure Statement, including in the Sections titled “Description and History of the Company’s Businesses,” “The Chapter 11 Plan,” “Risk Factors and Other Factors to be Considered,” and “Certain United States Federal Income Tax Consequences of the Plan.” See Sections III, VI, VII, and X.
3. Liquidation Analysis
The Debtors have prepared the Liquidation Analysis attached as Exhibit D based on certain assumptions that they believe are reasonable under the circumstances. Those assumptions the
107 Debtors consider significant are described in the Liquidation Analysis. The underlying financial information in the Liquidation Analysis was not compiled or examined by any independent accountants. No independent appraisals were conducted in preparing the Liquidation Analysis. Accordingly, while deemed reasonable based on the facts currently available, neither the Debtors nor their advisors make any representations or warranties that the actual results would or would not approximate the estimates and assumptions represented in the Liquidation Analysis.
The determination of the costs of, and proceeds from, the hypothetical liquidation of the Debtors’ assets in a chapter 7 case is an uncertain process involving the extensive use of estimates and assumptions that, although considered reasonable by the Debtors, are inherently subject to significant business, economic, and competitive uncertainties and contingencies beyond the control of the Debtors, their management, and their advisors. Inevitably, some assumptions in the Liquidation Analysis would not materialize in an actual chapter 7 liquidation, and unanticipated events and circumstances could affect the ultimate results in an actual chapter 7 liquidation.
D. Risks Associated with the Business
1. The Debtors’ Business Plan
As described in Section III.B of this Disclosure Statement, the Debtors plan to continue producing coated paper, supercalendered paper, uncoated paper, and specialty labels and packaging (the “Post-Confirmation Business Plan”). The success of the Post-Confirmation Business Plan depends partially on market conditions beyond the control of the Debtors. While the Debtors believe that the Post- Confirmation Business Plan sets forth strategies for success, the potential recoveries of the Debtors’ creditors remain subject to a number of material risks, including those summarized below.
2. Various Operating Factors and General Economic Conditions
The Company’s businesses are sensitive to a number of economic conditions and other factors such as (i) the price of raw materials, (ii) the price of electricity, (iii) foreign imports of competing products, (iv) the demand for coated paper, and (v) other economic conditions that may affect demand for the Debtors’ other products. Any one or more of these economic conditions can affect the Debtors’ sales, operating costs, and other aspects of the Debtors’ businesses.
Changes in the general business and economic conditions in the North American paper industry may negatively affect earnings and sales growth. General economic changes and changes in technology may also affect the demand for, among other things, advertising spending and magazine/catalog circulation, which could affect sales and earnings.
The Debtors’ ability to achieve profitability may be affected by, among other things: (i) the demand for paper products produced by the Debtors; (ii) the number of foreign imports of paper products; (iii) advertising spending; (iv) magazine/catalog circulation; (v) electronic readers and other devices; (vi) postal rates; (vii) the cost of raw materials; (viii) energy costs; (ix) fuel costs; and (x) chemical costs.
3. The Debtors depend on a small number of customers for a significant portion of their business.
The Debtors’ two largest customers accounted for 23% of 2011 net sales. The Debtors’ ten largest customers accounted for approximately 40% of 2011 net sales. The loss of, or significant reduction in orders from, any of these customers or other customers could have a material adverse effect
108 on the Debtors’ business, financial condition and results of operations, as could significant customer disputes regarding shipments, price, quality or other matters.
Furthermore, the Debtors extend trade credit to certain of their customers to facilitate the purchase of their products and rely on their creditworthiness and ability to obtain credit from lenders. Accordingly, a bankruptcy or a significant deterioration in the financial condition of any of the Debtors’ significant customers could have a material adverse effect on the Debtors’ business, financial condition and results of operations, due to a reduction in purchases, a longer collection cycle or an inability to collect accounts receivable.
4. Rising postal costs could weaken demand for the Debtors’ paper products.
A significant portion of the Debtors’ paper is used in periodicals, catalogs, fliers, and other promotional materials. Many of these materials are distributed through the mail. Future increases in the cost of postage could reduce the frequency of mailings, reduce the number of pages in advertising materials, or cause advertisers to use alternate methods to distribute their advertising materials. Any of the foregoing could decrease the demand for the Debtors’ products, which could materially adversely affect the Debtors’ business, financial condition, and results of operations.
5. Developments in alternative media could adversely affect the demand for the Debtors’ products.
Trends in advertising, electronic data transmission, and storage and the internet could have adverse effects on traditional print media, including the Debtors’ products and those of their customers, but neither the timing nor the extent of those trends can be predicted with certainty. The Debtors’ magazine and catalog publishing customers may increasingly use, and compete with businesses that use, other forms of media and advertising and electronic data transmission and storage, particularly the internet, instead of paper made by the Debtors. As the use of these alternatives grows, demand for the Debtors’ paper products could decline. In addition, electronic formats for textbooks could cause demand to decline for paper textbooks.
6. If the Debtors are unable to obtain raw materials, including petroleum- based chemicals, at favorable prices, or at all, it could adversely affect the Debtors’ business, financial condition and results of operations.
The Debtors have no significant timber holdings and purchase wood, chemicals and other raw materials from third parties. The Debtors may experience shortages of raw materials or be forced to seek alternative sources of supply. If the Debtors are forced to seek alternative sources of supply, they may not be able to do so on terms as favorable as the current terms or at all. The prices for many chemicals, especially petroleum-based chemicals, have had significant fluctuations over the past several years. Chemical prices have historically been and are expected to continue to be volatile. In addition, chemical suppliers that use petroleum-based products in the manufacture of their chemicals may, due to a supply shortage, ration the amount of chemicals available to the Debtors or the Debtors may not be able to obtain the chemicals they need at favorable prices, if at all. Chemical suppliers also may be adversely affected by, among other things, hurricanes and other natural disasters. Certain specialty chemicals that the Debtors purchase are available only from a small number of suppliers. The Debtors may experience additional cost pressures if merger and acquisition activity occurs among their major chemical suppliers. If any of the Debtors’ major chemical suppliers were to cease operations or cease doing business with the Debtors, they may be unable to obtain these chemicals at favorable prices, if at all.
109 In addition, wood prices are dictated largely by demand. The primary source for wood fiber is timber. Environmental litigation and regulatory developments have caused, and may cause in the future, significant reductions in the amount of timber available for commercial harvest in Canada and the United States. In addition, future domestic or foreign legislation, litigation advanced by aboriginal groups, litigation concerning the use of timberlands, the protection of threatened or endangered species, the promotion of forest biodiversity and the response to and prevention of catastrophic wildfires and campaigns or other measures by environmental activists could also affect timber supplies. Availability of harvested timber may further be limited by factors such as fire and fire prevention, insect infestation, disease, ice and wind storms, drought, floods and other natural and man-made causes, thereby reducing supply and increasing prices. The Debtors buy wood chips from lumber producers as a byproduct of their lumber production. Declines in their business conditions could affect the availability and price of wood chips.
Any disruption in the supply of chemicals, wood or other inputs could affect the Debtors’ ability to meet customer demand in a timely manner and could harm the Debtors’ reputation. As the Debtors have limited ability to pass-through increases in their costs to their customers absent increases in market prices for our products, material increases in the cost of the Debtors’ raw materials could have a material adverse effect on their business, financial condition, and results of operations.
7. The Debtors are involved in continuous manufacturing processes with a high degree of fixed costs. Any interruption in the operations of the Debtors’ manufacturing facilities may affect their operating performance.
The Debtors’ seek to run their paper machines and pulp mills on a nearly continuous basis for maximum efficiency. Any unplanned plant downtime at any of the Debtors’ paper mills results in unabsorbed fixed costs that negatively affect their results of operations. Due to the extreme operating conditions inherent in some of the Debtors’ manufacturing processes, they may incur unplanned business interruptions from time to time and, as a result, may not generate sufficient cash flow to satisfy their operational needs. In addition, many of the geographic areas where the Debtors’ production is located and where they conduct business may be affected by natural disasters, including snow storms, tornadoes, forest fires and flooding. These natural disasters could disrupt the operation of the Debtors’ mills, which could have a material adverse effect on the Debtors’ business, financial condition and results of operations. Furthermore, during periods of weak demand for paper products or periods of rising costs, the Debtors may need to schedule market-related downtime, which could have a material adverse effect on their financial condition and results of operations.
8. The Debtors’ operations require substantial ongoing capital expenditures, and they may not have adequate capital resources to fund all of their required capital expenditures.
The Debtors’ business is capital intensive, and they incur capital expenditures on an ongoing basis to maintain their equipment and comply with environmental laws and regulations, as well as to enhance the efficiency of their operations. The Debtors expect to spend approximately $125 million in 2013 on capital expenditures. The Debtors anticipate that cash generated from operations will be sufficient to fund their operating needs and capital expenditures for the foreseeable future. If they require additional funds to fund their capital expenditures, however, the Debtors may not be able to obtain them on favorable terms, or at all. If the Debtors cannot maintain or upgrade their facilities and equipment as they require or to ensure environmental compliance, it could have a material adverse effect on the Debtors’ business, financial condition, and results of operations.
110 9. Rising energy or chemical prices or supply shortages could adversely affect the Debtors’ business, financial condition and results of operations.
Although a significant portion of the Debtors’ energy requirements is satisfied by steam produced as a byproduct of their manufacturing process, the Debtors purchase natural gas, coal, and electricity to run their mills. Any significant energy or chemical shortage or significant increase in the Debtors’ energy or chemical costs in circumstances where they cannot raise the price of their products due to market conditions could have a material adverse effect on the Debtors’ business, financial condition and results of operations. Furthermore, the Debtors are required to post letters of credit or other financial assurance obligations with certain of their energy and other suppliers, which could limit their financial flexibility. Additionally, the Debtors have experienced some fuel surcharges (primarily diesel fuel) by suppliers, distributors, and freight carriers. If suppliers, distributors, or freight carriers impose or increase fuel surcharges, and the Debtors are not able to pass these costs through to their customers, they could have a material adverse effect on the Debtors’ business, financial condition, and results of operations.
In addition, an outbreak or escalation of hostilities between the United States and any foreign power and, in particular, events in the Middle East, or weather events such as hurricanes, could result in a real or perceived shortage of oil or natural gas, which could result in an increase in energy or chemical prices.
10. The failure of the Debtors’ information technology and other business support systems could have a material adverse effect on the Debtors’ business, financial condition and results of operations.
The Debtors’ ability to effectively monitor and control their operations depends to a large extent on the proper functioning of their information technology and other business support systems. If the Debtors’ information technology and other business support systems were to fail it could have a material adverse effect on their business, financial condition, and results of operations.
11. A large percentage of the Debtors’ employees are unionized. Wage increases or work stoppages by the Debtors’ unionized employees may have a material adverse effect on the Debtors’ business, financial condition and results of operations.
The Debtors may become subject to material cost increases or additional work rules imposed by agreements with labor unions. This could increase expenses in absolute terms and as a percentage of net sales. In addition, work stoppages or other labor disturbances may occur in the future. Any of these factors could negatively affect the Debtors’ business, financial condition, and results of operations.
12. The Debtors depend on third parties for certain transportation services.
The Debtors rely primarily on third parties for transportation of their products to customers and transportation of their raw materials to the Debtors, in particular, by train and truck. If any of the Debtors’ third-party transportation providers fail to deliver the Debtors’ products in a timely manner, they may be unable to sell them at full value. Similarly, if any of the Debtors’ transportation providers fail to deliver raw materials to the Debtors in a timely manner, they may be unable to manufacture products on a timely basis. Shipments of products and raw materials may be delayed due to weather conditions, labor strikes, or other events. Any failure of a third-party transportation provider to deliver raw materials or products in a timely manner could harm the Debtors’ reputation, negatively affect
111 their customer relationships, and have a material adverse effect on their business, financial condition, and results of operations. In addition, the Debtors’ ability to deliver products on a timely basis could be adversely affected by the lack of adequate availability of transportation services, especially rail capacity, whether because of work stoppages or otherwise. Additionally, the Debtors have experienced some fuel surcharges (primarily diesel fuel) by suppliers, distributors, and freight carriers. If suppliers, distributors, or freight carriers impose or increase fuel surcharges, and the Debtors are not able to pass these costs through to customers, they could have a material adverse effect on the Debtors’ business, financial condition, and results of operations.
13. The Debtors are subject to various regulations that could impose substantial costs upon them and may adversely affect their operating performance.
The Debtors’ operations are subject to a wide range of federal, state, provincial and local general and industry-specific environmental, health and safety laws and regulations, including those relating to air emissions, wastewater discharges, solid and hazardous waste management and disposal and site remediation. Compliance with these laws and regulations is a significant factor in the Debtors’ business and they may be subject to increased scrutiny and enforcement actions by regulators as a result of changes in federal or state administrations. The Debtors have made, and will continue to make, significant expenditures to comply with these requirements. Significant expenditures also could be required for compliance with any future laws or regulations relating to climate change, greenhouse gas emissions, cap-and-trade or other emissions. In addition, the Debtors handle and dispose of wastes arising from their mill operations and operate a number of landfills to handle that waste. While the Debtors believe, based upon current information, they are currently in substantial compliance with all applicable environmental laws and regulations, the Debtors could be subject to potentially significant fines, penalties or criminal sanctions for failure to comply.
14. Demand for Printing and Writing Paper is Subject to General Economic Events and Developments in Alternative Media
General economic conditions have had an adverse effect on the demand for the Debtors’ products since the second half of 2008. North American printing and writing paper demand is primarily driven by advertising and print media usage. In particular, the demand for certain grades of coated paper is affected by spending on catalog and promotional materials by retailers and spending on magazine advertising, which affects the number of printed pages in magazines. Starting in the second half of 2008, advertising and print media usage declined due to general economic conditions, as advertisers reduced spending on print advertising and publications ceased operations. Although advertising and print media usage began to increase during the second half of 2010 and initial months of 2011, demand dropped significantly in 2011 due to lower advertising spend in a soft economy coupled with a shift to electronic media (both content and advertising). This downward trend is projected to persist through the forward period. The combination of decreasing demand, coupled with limited capacity actions taken in the market have resulted in flat or declining pricing over the last twelve month period. If the capacity and demand imbalance continues, it could have a material adverse effect on the Debtors’ business, financial condition, and results of operations.
15. The Markets in Which the Debtors Operate are Highly Competitive and Imports Could Materially Adversely Affect their Business, Financial Condition, and Results of Operations.
The Debtors’ business is highly competitive. Competition is based largely on price. The Debtors compete with numerous North American paper manufacturers. They also face competition from foreign producers, some of which the Debtors believe are lower cost producers than they are. Foreign
112 overcapacity could result in an increase in the supply of paper products available in the North American market.
In addition, the following factors will affect the Debtors’ ability to compete:
product availability; the quality of the Debtors’ products; breadth of product offerings; the Debtors’ ability to maintain plant efficiencies and high operating rates and thus lower their average manufacturing costs per ton; the Debtors’ ability to provide customer service that meets customer requirements and their ability to distribute their products on time; costs to comply with environmental laws and regulations; the Debtors’ ability to produce products that meet customer requirements for the use of sustainable forestry principles, recycled content and environmentally friendly energy sources; and the availability or cost of chemicals, wood, energy and other raw materials and labor. Furthermore, some of the Debtors’ competitors have greater financial and other resources than they do or may be better positioned than they are to compete for certain opportunities.
VIII. CONFIRMATION OF THE PLAN
A. Confirmation Hearing
Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court, after appropriate notice, to hold a hearing on confirmation of a Plan. The Bankruptcy Court has ordered the hearing on confirmation of the Plan will begin at [TIME], on [DATE] (prevailing Eastern Time), before the Honorable Kevin Gross, United States Chief Bankruptcy Judge, 824 North Market Street, 6th Floor, Courtroom 3, Wilmington, Delaware 19801. The Confirmation Hearing may be adjourned from time to time by the Bankruptcy Court without further notice except for an announcement of the adjourned date made at the Confirmation Hearing or any subsequent adjourned Confirmation Hearing.
The Plan will not constitute a valid and binding contract between the Debtors and their Creditors unless and until the Bankruptcy Court has issued a Final Order confirming the Plan. The Bankruptcy Court must hold a confirmation hearing before deciding whether to confirm the Plan.
Section 1128(b) of the Bankruptcy Code provides that any party in interest may object to confirmation of a Plan. Any objection to confirmation of the Plan must be in writing, must conform to the Federal Rules of Bankruptcy Procedure, must set forth the name of the objector, the nature and amount of Claims or Equity Interests held or asserted by the objector against the Debtor, the basis for the objection and the specific grounds therefore, and must be filed with the Bankruptcy Court, with a copy to chambers, together with proof of service thereof, and served upon and received no later than [TIME]. (prevailing Eastern Time) on [DATE], by (i) attorneys to the Debtors, (a) Proskauer Rose LLP, Eleven Times Square, New York, New York 10036 (Attn: Martin J. Bienenstock, Esq., Judy G.Z. Liu, Esq., and Philip M. Abelson, Esq.), and (b) Pachulski Stang Ziehl & Jones, 919 N. Market Street, 17th Floor, P.O.
113 Box 8705, Wilmington, Delaware 19899 (Attn: Laura Davis Jones, Esq., Michael R. Seidl, Esq., and Timothy P. Cairns, Esq.); (ii) the U.S. Trustee, 844 King Street, Suite 2207, Lockbox 35, Wilmington Delaware 19801 (Attn: David Klauder, Esq.); (iii) attorneys to the Committee, (a) Paul Hastings LLP, 75 East 55th Street, New York, New York 10022 (Attn: Luc A. Despins, Esq., and Leslie A. Plaskon, Esq.), (b) Paul Hastings LLP, 875 15th Street, N.W., Washington DC 20005 (Attn: Robert E. Winter, Esq.), (c) Quinn Emanuel Urquhart & Sullivan LLP, 51 Madison Avenue, 22nd Floor, New York, New York 10010 (Attn: Susheel Kirpalani, Esq., and Benjamin I. Finestone, Esq.), and (d) Young Conaway Stargatt & Taylor, LLP, The Brandywine Building, 17th Floor, 1000 West Street, Wilmington, Delaware 19899 (Attn: James L. Patton Jr., Esq. and M. Blake Cleary, Esq.); (iv) attorneys for the First Lien Indenture Trustee, Milbank Tweed Hadley & McCloy LLP, 1 Chase Manhattan Plaza, New York, New York 10005 (Attn: Dennis F. Dunne, Esq., Andrew LeBlanc, Esq., Evan R. Fleck, Esq., and Samuel A. Khalil, Esq.); and (v) attorneys for the Second Lien Group, Akin Gump Strauss Hauer & Feld LLP, One Bryant Park, New York, New York 10036 (Attn: Ira S. Dizengoff, Esq. and Philip Dublin, Esq.). Objections to confirmation of the Plan are governed by Rule 9014 of the Federal Rules of Bankruptcy Procedure.
UNLESS AN OBJECTION TO CONFIRMATION IS TIMELY SERVED AND FILED, IT MAY NOT BE CONSIDERED BY THE BANKRUPTCY COURT.
B. Requirements for Confirmation of the Plan
At the Confirmation Hearing, the Bankruptcy Court will determine whether the Plan satisfies the requirements for confirmation listed in section 1129 of the Bankruptcy Code. If the Bankruptcy Court determines those requirements are satisfied, it will enter an order confirming the Plan. As set forth in section 1129(a) of the Bankruptcy Code, the requirements for confirmation are as follows:
1. The plan complies with the applicable provisions of the Bankruptcy Code.
2. The proponent of the plan complies with the applicable provisions of the Bankruptcy Code.
3. The plan has been proposed in good faith and not by any means forbidden by law.
4. Any payment made or to be made by the proponent of the plan, by the debtor, or by a person issuing securities or acquiring property under the plan, for services or for costs and expenses in, or in connection with, the case, or in connection with the plan and incident to the case, has been approved by, or is subject to the approval of, the Bankruptcy Court as reasonable.
5. a. The proponent of the plan has disclosed:
(1) the identity and affiliations of any individual proposed to serve, after confirmation of the plan, as a director, officer, or voting trustee of the debtor, an affiliate of the debtor participating in a joint plan with the debtor, or a successor to the debtor under the plan; and
(2) the appointment to, or continuance in, the office of the individual, is consistent with the interests of creditors and equity security holders and with public policy.
114 b. The proponent of the plan has disclosed the identity of any insider that will be employed or retained by the reorganized debtor, and the nature of any compensation for the insider.
6. Any governmental regulatory commission with jurisdiction, after confirmation of the plan, over the rates of the debtor has approved any rate change provided for in the plan, or the rate change is expressly conditioned on that approval.
7. With respect to each impaired class of claims or interests:
a. Each holder of a claim or interest of the class has
(1) accepted the plan; or
(2) will receive or retain under the plan on account of the claim or interest property of a value, as of the effective date of the plan, that is not less than the amount the holder would so receive or retain if the debtor were liquidated under chapter 7 of the Bankruptcy Code on that date; or
b. If a class elects treatment under section 1111(b)(2) of the Bankruptcy Code, then notwithstanding section 506(a) of this title, such claim is a secured claim to the extent that such claim is allowed.
8. With respect to each class of claims or interests:
c. The class has accepted the plan; or
d. The class is not impaired under the plan.
9. Except to the extent that the holder of a particular claim has agreed to a different treatment of the claim, the plan provides that:
e. With respect to a claim of a kind specified in section 507(a)(2) or 507(a)(3) of the Bankruptcy Code, on the effective date of the plan, the holder of the claim will receive on account of the claim cash equal to the allowed amount of the claim;
f. With respect to a class of claims of a kind specified in section 507(a)(1), 507(a)(4), 507(a)(5), 507(a)(6), or 507(a)(7) of the Bankruptcy Code, each holder of a claim of the class will receive:
(1) if the class has accepted the plan, deferred cash payments of a value, as of the effective date of the plan, equal to the allowed amount of the claim; or
(2) if the class has not accepted the plan, cash on the effective date of the plan equal to the allowed amount of the claim; and
g. With respect to a claim of a kind specified in section 507(a)(8) of the Bankruptcy Code, the holder of a claim will receive on account of the
115 claim regular installment payments in cash of a total value, as of the effective date of the plan, equal to the allowed amount of the claim, over a period ending not later than 5 years after the date of the order for relief in the case, and in a manner not less favorable than the most favored nonpriority unsecured claim provided for by the plan.
h. With respect to a secured claim that would otherwise meet the description of an unsecured claim of a governmental unit under section 507(a)(8), but for the secured status of that claim, the holder of that claim will receive on account of that claim, cash payments, in the same manner and over the same period, as prescribed above in the preceding subparagraph.
10. If a class of claims is impaired under the plan, at least one class of claims that is impaired has accepted the plan, determined without including acceptances of the plan by any insider holding a claim in the class.
11. Confirmation of the plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor or any successor to the debtor under the plan, unless a liquidation or reorganization is proposed in the plan.
12. All fees payable under 28 U.S.C. § 1930, as determined by the Bankruptcy Court at the hearing on confirmation of the plan, have been paid or the plan provides for the payment of those fees on the effective date of the plan.
13. The plan provides for the continuation after its effective date of payment of all retiree benefits, as that term is defined in section 1114 of the Bankruptcy Code, at the level established pursuant to subsection (e)(1)(B) or (g) of section 1114, at any time prior to confirmation of the plan, for the duration of the period the debtor has obligated itself to provide the benefits.
14. All transfers of property under the plan shall be made in accordance with any applicable provisions of nonbankruptcy law that govern the transfer of property by a corporation or trust that is not a moneyed, business, or commercial corporation or trust.
The Debtors believe the Plan satisfies all of the statutory requirements of chapter 11 of the Bankruptcy Code, the Debtors have complied or will have complied with all of the requirements of chapter 11, and the Plan is proposed in good faith.
C. Feasibility
The Bankruptcy Code requires that a debtor demonstrate confirmation of a plan is not likely to be followed by liquidation or the need for further financial reorganization not proposed in the plan. The Debtors believe the Plan satisfies the financial feasibility requirement imposed by the Bankruptcy Code, as evidenced by the financial projections of future performance of the Company, as set forth in Exhibit C to this Disclosure Statement, “Projected Financial Information.” At the Confirmation Hearing, the Bankruptcy Court will determine whether the Plan is feasible.
116 D. Best Interest Tests
As described above, the Bankruptcy Code requires that each holder of an Impaired Claim or Equity Interest either (i) accepts the Plan or (ii) receives or retains under the Plan property of a value, as of the Effective Date, not less than the value the holder would receive if the Debtors were liquidated under chapter 7 of the Bankruptcy Code on that date.
The first step in determining whether this test has been satisfied is to determine the dollar amount that would be generated from the liquidation of the Debtors’ assets and properties in the context of a chapter 7 liquidation case. The gross amount of Cash that would be available for satisfaction of Claims would be the sum of the proceeds resulting from the disposition of the unencumbered assets and properties of the Debtors, augmented by any unencumbered Cash held by the Debtors at the time of the commencement of the liquidation case.
The next step is to reduce that gross amount by the costs and expenses of the chapter 7 liquidation itself and by such additional administrative and priority Claims that are projected to result from the liquidation of the Debtors under a hypothetical chapter 7 case. Any remaining net Cash would be allocated to creditors and stockholders in strict payment priority in accordance with section 726 of the Bankruptcy Code. Finally, the present value of those allocations (taking into account the time necessary to accomplish the liquidation) is compared to the value of the property proposed to be distributed under the Plan on the Effective Date.
The Debtors’ costs of liquidation under chapter 7 would include the fees payable to a trustee in bankruptcy, as well as those fees that might be payable to attorneys and other professionals that the trustee might engage. Other liquidation costs include the expenses incurred during the Chapter 11 Cases and allowed in the chapter 7 case, such as compensation for attorneys, financial advisors, appraisers, accountants, and other professionals for the Debtors, as well as other compensation Claims.
The foregoing types of Claims, costs, expenses, fees, and other similar charges that may arise in a liquidation case would be paid in full from the liquidation proceeds before the balance of those proceeds would be made available to pay pre-chapter 11 Claims.
The Debtors’ liquidation analysis is an estimate of the proceeds that may be generated as a result of a hypothetical chapter 7 liquidation of the Debtors. The analysis is based on a number of significant assumptions that are described below. The liquidation analysis does not purport to be a valuation of the Debtors’ assets and is not necessarily indicative of the values that may be realized in an actual liquidation.
E. Liquidation Analysis
As noted above, the Debtors believe that under the Plan all holders of Impaired Claims will receive property with a value not less than the value the holder would receive in a liquidation of the Debtors under chapter 7 of the Bankruptcy Code. The Debtors’ belief is based primarily on (i) consideration of the effects a chapter 7 liquidation would have on the ultimate proceeds available for distribution to holders of Impaired Claims, including (a) the increased costs and expenses of a liquidation under chapter 7 arising from fees payable to a chapter 7 trustee and professional advisors to the trustee, (b) the erosion in value of assets in a chapter 7 case in the context of the rapid liquidation required under chapter 7 and the “forced sale” atmosphere that would prevail, (c) the adverse effects on the Debtors’ businesses as a result of the departure of key employees and the loss of customers, (d) the substantial increases in Claims, such as estimated contingent Claims, which would be satisfied on a priority basis or on parity with the holders of Impaired Claims of the Chapter 11 Cases, (e) the reduction of value
117 associated with a chapter 7 trustee’s limited operation of the Debtors’ businesses, and (f) the substantial delay in distributions to the holders of Impaired Claims and Equity Interests that would likely ensue in a chapter 7 liquidation, and (ii) the liquidation analysis prepared by the Debtors’ management, which is attached as Exhibit D (the “Liquidation Analysis”). Note that items (e) and (f) in clause (i) of the previous sentence assume a chapter 7 trustee would obtain approval to maintain and wind down the Debtors’ businesses and the transition period for a chapter 7 trustee to take over administration of the Chapter 11 Cases would delay distributions to holders of Claims.
In preparing the Liquidation Analysis, the Debtors’ management analyzed the ability of the Debtors to meet their obligations assuming a conversion to a chapter 7 proceeding, and subsequent liquidation of the Debtors’ and Affiliates’ assets, and estimated the potential recoveries to the holders of Claims against each Debtor in this scenario.
The Debtors believe any liquidation analysis is speculative, as such an analysis necessarily is premised on assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which would be beyond the control of the Debtors. Thus, there can be no assurance as to values that would be realized in a chapter 7 liquidation, nor can there be any assurance the Bankruptcy Court will accept the Debtors’ conclusions or concur with their assumptions in making its determinations under section 1129(a)(7) of the Bankruptcy Code.
For example, the Liquidation Analysis necessarily contains an estimate of the amount of Claims that will ultimately become Allowed Claims. This estimate is based solely upon the Debtors’ review of their books and records as of September 2012 and the Debtors’ estimates as to additional Claims that may be filed in the Chapter 11 Cases or that would arise in the event of a conversion of the case from chapter 11 to chapter 7. No order or finding has been issued by the Bankruptcy Court or any other court estimating or otherwise fixing the amount of Claims at the projected-amounts of Allowed Claims set forth in the Liquidation Analysis. The estimate of Allowed Claims set forth in the Liquidation Analysis should not be relied on for any other purpose, including any determination of the value of any distribution to be made on account of those Claims under the Plan.
To the extent confirmation of the Plan requires the establishment of amounts for the chapter 7 liquidation value of the Debtors, funds available to pay Claims, and the reorganization value of the Debtors, the Bankruptcy Court will determine those amounts at the Confirmation Hearing. Accordingly, the annexed Liquidation Analysis is provided solely to disclose to holders the effects of a hypothetical chapter 7 liquidation of the Debtors, subject to the assumptions set forth in the Liquidation Analysis.
F. Section 1129(b)
The Bankruptcy Court may confirm a plan over the rejection or deemed rejection of the plan by a class of claims or equity interests if the plan “does not discriminate unfairly” and is “fair and equitable” with respect to that class.
1. No Unfair Discrimination
This test applies to Classes of Claims or Equity Interests that are of equal priority (i.e., a horizontal test) and are receiving different treatment under the Plan. The test does not require that the treatment be the same or equivalent, only that the treatment not be “unfair.” The Debtors believe the Plan satisfies the “no unfair discrimination” test.
118 2. Fair and Equitable Test
This test applies to Classes of different priority and status (i.e., a vertical test) and includes the general requirement that no Class of Claims receives more than 100% of the Allowed amount of the Claims in that Class. As to the treatment that must be afforded to each rejecting Class, the test sets different standards, depending on the type of Claims or Equity Interests in that Class:
Secured Claims. Each holder of an Impaired Secured Claim must either (i) retain its Liens on the property, to the extent of the Allowed amount of its Secured Claim and receive deferred Cash payments having a value, as of the effective date, of at least the Allowed amount of the Claim, or (ii) have the right to credit bid the amount of its Claim if its collateral security is sold and retain its Liens against the net proceeds of the sale, or (iii) receive the “indubitable equivalent” of its Allowed Secured Claim.
Unsecured Claims. Either (i) each holder of an Impaired General Unsecured Claim must receive or retain under the Plan property of a value equal to the amount of its Allowed Claim, or (ii) the holders of Claims and Equity Interests that are junior to the Claims of the dissenting Class must not receive any property under the Plan.
Equity Interests. Either (i) each Equity Interest holder must receive or retain under the Plan property of a value equal to the greater of (a) the fixed liquidation preference or redemption price, if any, of the stock and (b) the value of the stock, or (ii) the holders of interests that are junior to the Equity Interests of the dissenting Class must not receive or retain any property under the Plan.
The Debtors reserve the right to seek confirmation of the Plan, notwithstanding the rejection of the Plan by any Class entitled to vote. If one or more Classes votes to reject the Plan, the Debtors may request the Bankruptcy Court to rule the Plan meets the requirements specified in section 1129(b) of the Bankruptcy Code with respect to the rejecting Class or Classes. The Debtors will also seek such a ruling with respect to each Class that is deemed to reject the Plan.
IX. PROJECTIONS
A. Introduction
This section discusses projections for the Reorganized Debtors (as successors to the Debtors) based on information available at the time of the preparation of this Disclosure Statement.
The projections assume an Effective Date of November 30, 2012, with Allowed Claims treated in accordance with the provisions set forth in the Plan. It is not expected that a minor delay in the Effective Date (one to two months) would have a material impact on the projections. Expenses incurred as a result of the Chapter 11 Cases are assumed to be paid on the Effective Date.
It is important to note the projections described below may differ from actual performance and are highly dependent on significant assumptions concerning the future operations of the Reorganized Debtors. These assumptions include the performance of certain lines of business, the value of assets, and market conditions. Please refer to Section VII for a discussion of many of the factors that could have a material effect on the information provided in this section.
119 B. Projections
In connection with their development of the Plan and to determine feasibility of the Plan, the Debtors’ management analyzed the ability of the Reorganized Debtors to meet its post-bankruptcy obligations with sufficient liquidity and capital resources to conduct its businesses. Management also developed a business plan for the Debtors post-bankruptcy and prepared certain projections of the Reorganized Debtors’ operating profit, cash flow and certain other items based on its detailed operating forecast for 2012, which includes actual results through September 2012, as well as a longer-term forecast for the period from January 1, 2013 to December 31, 2016. These projections, summarized below, are based upon assumptions to reflect the terms of the Plan, and certain subsequent events and additional assumptions, including those set forth below (as adjusted, the “Financial Projections”).
The Financial Projections included in Exhibit C assume the successful implementation of the Plan and consist of the following unaudited projected financial information: (i) projected balance sheet for November 30, 2012 (which was developed based on the Debtors’ September 30, 2012 balance sheet as adjusted for the Plan and management’s projected results of operations and cash flows over the projection period), and each successive year end between December 31, 2012, and December 31, 2016; (ii) projected statements of income for each successive twelve-month period between January 1, 2012, and December 31, 2016; and (iii) a projected consolidated cash flow for each successive twelve-month period between January 1, 2012, and December 31, 2016. The Financial Projections should be reviewed in conjunction with the assumptions, notes, and qualifications included in Exhibit C.
NPC does not, as a matter of course, publish its business plans, strategies, projections, anticipated financial positions, or projected results of operations. Accordingly, the Debtors do not anticipate that they will, and disclaim any obligation, to (i) furnish updated business plans or projections, including financial projections, to holders of Claims or Equity Interests after the confirmation date, except as required by the Plan, or (ii) otherwise make that information public. Financial Projections that NPC may prepare in the future in connection with other purposes may differ materially from those contained in this Disclosure Statement.
The Debtors’ management prepared the Financial Projections with the assistance of their professionals. The projections are presented solely for the purpose of providing “adequate information” under section 1125 of the Bankruptcy Code to enable the holders of Claims entitled to vote under the Plan to make an informed judgment about the Plan and should not be used or relied upon for any other purpose. Holders of Claims should not rely on the Financial Projections as a representation or guarantee of future performance. Although every effort was made to be accurate and the Debtors consider them reasonable when taken as a whole, the Financial Projections are only an estimate, and the assumptions and estimates underlying the Financial Projections are subject to significant business, economic and competitive uncertainties beyond the Debtors’ control. The actual financial results of the Reorganized Debtors may differ materially from the Financial Projections. In addition, the uncertainties which are inherent in the Financial Projections increase for later years in the projection period, due to increased difficulty associated with forecasting levels of economic activity and expected performance at more distant points in the future. Consequently, the projected information included in this Disclosure Statement should not be regarded as a representation by the Debtors or their advisors, or any other person, that the projected results will actually be achieved. The Debtors caution that no representations can be made or are made as to the accuracy or completeness of the Financial Projections or to the Reorganized Debtors’ ability to achieve the projected results. Some assumptions inevitably will prove incorrect. Moreover, events and circumstances occurring subsequent to the date on which the Debtors prepared these projections may be different from those assumed or, alternatively, may have been unanticipated, and thus the occurrence of these events may affect financial results in either a material adverse or material beneficial manner.
120 The Debtors’ independent accountants have neither examined nor compiled the accompanying financial information and, accordingly, do not express an opinion or provide any form of assurance with respect thereto. Further, the Financial Projections were not prepared to comply with the guidelines for prospective financial statements published by the American Institute of Certified Public Accountants or the Financial Accounting Standards Board and do not purport to represent the application of or compliance with generally accepted accounting principles.
In deciding whether to vote to accept or reject the Plan, holders of Claims must make their own determinations as to the reasonableness of the assumptions and the reliability of the projections and should consult with their own advisors.
The Financial Projections should be read in conjunction with the assumptions, qualifications, and explanations set forth in this Disclosure Statement, including in the Sections titled “Description and History of the Company’s Businesses,” “The Chapter 11 Plan,” “Risk Factors and Other Factors to be Considered,” and “Certain United States Federal Income Tax Consequences of the Plan.” See Sections III, VI, VII, and X. The Financial Projections should also be read in conjunction with the assumptions, qualifications, and explanations set forth in Exhibit C.
X. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
A. Scope and Limitation
The following discussion summarizes certain U.S. federal income tax consequences of the implementation of the Plan to certain Debtors and holders of Claims. It does not, however, summarize the U.S. federal income tax consequences to such holders of the ownership and disposition of the New Holdco Common Stock. Holders of Claims should consult their own independent tax advisors regarding the consequences of the ownership and disposition of New Holdco Common Stock.
This discussion is based on the Tax Code, Treasury Regulations promulgated thereunder, judicial decisions, and published administrative rules and pronouncements of the Internal Revenue Service (the “IRS”), each as in effect on the date hereof. Legislative, judicial, or administrative changes or interpretations enacted or promulgated after the date hereof could alter or modify the discussion set forth below with respect to the U.S. federal income tax consequences of the Plan. Any such changes or interpretations may be retroactive and could significantly affect the U.S. federal income tax consequences described herein.
This discussion does not address the U.S. federal income tax consequences to holders of Claims who (a) are unimpaired or otherwise entitled to payment in full in Cash on the Effective Date under the Plan or (b) are otherwise not entitled to vote under the Plan. The discussion also does not address the U.S. federal income tax consequences related to the Claim of a holder that is itself a Debtor, or non-debtor Affiliate. Moreover, the discussion assumes that each holder of a Claim holds such Claims only as “capital assets” within the meaning of section 1221 of the Tax Code, and the various debt and other arrangements to which the Debtors and Reorganized Debtors are or will be parties will be respected for U.S. federal income tax purposes in accordance with their form.
The U.S. federal income tax consequences of the Plan are complex and are subject to substantial uncertainties. The Debtors have not requested, and do not expect to request, a ruling from the IRS with respect to any of the tax aspects of the Plan, and the discussion set forth below of certain U.S. federal income tax consequences of the Plan is not binding upon the IRS. Thus, no assurance can be
121 given that the IRS would not assert, or that a court would not sustain, a position different from any discussed herein, resulting in U.S. federal income tax consequences to the Debtors, holders of Claims, or both that are substantially different from those discussed herein. The Debtors have not requested, and do not expect to request, an opinion of counsel with respect to any of the tax aspects of the Plan, and no opinion is given by this Disclosure Statement.
This discussion does not apply to a holder of a Claim that is not a “United States person,” as such term is defined in the Tax Code. Moreover, this discussion does not address U.S. federal taxes other than income taxes or any state, local, or non-U.S. tax consequences of the Plan, nor does it purport to address all aspects of U.S. federal income taxation that may be relevant to United States persons in light of their individual circumstances or to United States persons that may be subject to special tax rules, such as persons who are related to the Debtors within the meaning of the Tax Code, broker-dealers, banks, mutual funds, insurance companies, financial institutions, small business investment companies, regulated investment companies, tax-exempt organizations, pass-through entities, beneficial owners of pass-through entities, subchapter S corporations, employees, persons whose Claims relate to the provision of services or who otherwise received their Claims as compensation, persons who hold Claims or who will hold New Holdco Common Stock as part of a straddle, hedge, conversion transaction, or other integrated investment, persons using a mark to market method of accounting, and holders of Claims who are themselves in bankruptcy.
If a partnership or other pass-through entity is a holder, the tax treatment of any partner or other owner of such entity generally will depend upon the status of the partner (or other owner) and the activities of the entity. Partners (or other owners) of pass-through entities that are holders should consult their own independent tax advisors regarding the tax consequences of the Plan.
THE FOLLOWING SUMMARY OF CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES PERTAINING TO A HOLDER OF A CLAIM. ALL HOLDERS OF CLAIMS ARE URGED TO CONSULT THEIR OWN INDEPENDENT TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL, NON-U.S. INCOME, ESTATE, GIFT, AND OTHER TAX CONSEQUENCES OF THE PLAN.
IRS CIRCULAR 230 DISCLOSURE: TO ENSURE COMPLIANCE WITH REQUIREMENTS IMPOSED BY THE IRS, EACH HOLDER IS HEREBY NOTIFIED THAT (A) ANY DISCUSSION OF U.S. FEDERAL TAX ISSUES IN THIS DISCLOSURE STATEMENT IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON BY HOLDERS, FOR PURPOSES OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON SUCH HOLDERS UNDER THE TAX CODE; (B) SUCH DISCUSSION IS WRITTEN TO SUPPORT THE PROMOTION OF THE PLAN; AND (C) EACH HOLDER OF A CLAIM SHOULD SEEK ADVICE BASED ON SUCH HOLDER’S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.
B. Certain U.S. Federal Income Tax Consequences to the Debtors
For U.S. federal income tax purposes, NPC is a member of an affiliated group of corporations that files a single consolidated U.S. federal income tax return, of which NPG is the common parent (the “NewPage Consolidated Group”). The Debtors are members of the NewPage Consolidated Group or are disregarded or pass-through entities for U.S. federal income tax purposes wholly or substantially owned by members of the NewPage Consolidated Group. For U.S. federal income tax purposes, the NewPage Consolidated Group’s estimated NOL carryforwards as of December 31, 2011,
122 were approximately $2.8 billion. The amount of these NOLs and other losses remains subject to audit and adjustment by the IRS. If the Plan is approved, then on the Effective Date, NPC will cease to be a member of the NewPage Consolidated Group and will become a member of a new affiliated group of corporations, which affiliated group will include all of the former members of the NewPage Consolidated Group other than NPG and NPH, and the common parent of which will be New Holdco (such new affiliated group of corporations, the “New Holdco Consolidated Group”). The New Holdco Consolidated Group will generally inherit the tax attributes of the NewPage Consolidated Group, other than the tax attributes allocable to NPG and NPH.
As discussed below, it is anticipated that a substantial portion of the losses and other tax attributes of the NewPage Consolidated Group will be utilized or eliminated in connection with the implementation of the Plan. The use of remaining losses by the New Holdco Consolidated Group to offset future taxable income could be subject to significant limitation. In addition, the tax basis of the assets held by certain members of the New Holdco Consolidated Group may be reduced in connection with implementation of the Plan.
1. Cancellation of Indebtedness Income
Generally, a corporation will recognize cancellation of indebtedness income (“COD Income”) upon satisfaction of its outstanding indebtedness for total consideration less than the amount of such indebtedness. A corporation will not, however, be required to include any amount of COD Income in gross income if the corporation is a debtor under the jurisdiction of a court in a case under chapter 11 of the Bankruptcy Code and the discharge of debt occurs pursuant to that proceeding (the “108(a) Bankruptcy Exception”). Instead, as a consequence of such exclusion, the debtor must reduce its tax attributes by the amount of COD Income excluded from gross income. In general, tax attributes are reduced in the following order: (a) NOLs, (b) general business and minimum tax credit carryforwards, (c) capital loss carryforwards, (d) the basis of the debtor’s assets, and (e) foreign tax credit carryforwards.
If a debtor with excluded COD Income is a member of a consolidated group, Treasury Regulations address the application of the rules for the reduction of tax attributes (the “Consolidated Attribute Reduction Rules”). The Consolidated Attribute Reduction Rules are applied separately to each member of a consolidated group that realizes COD Income that is excluded from income. The Consolidated Attribute Reduction Rules generally provide that the tax attributes attributable to the member with excluded COD Income are reduced first, including the member’s tax basis in its assets (which include the stock of subsidiaries). If the member reduces its basis in the stock of a subsidiary that is a member of the consolidated group, corresponding reductions must be made to the subsidiary’s tax attributes, including the subsidiary’s basis in its assets, thus the tax attributes of one member may be required to be reduced in respect of the excluded COD Income of another member. If there is any remaining excluded COD Income following the reduction of the tax attributes of a member with excluded COD Income, the excess excluded COD Income of such member reduces the remaining consolidated tax attributes of the group. If the amount of excluded COD Income exceeds the available consolidated tax attributes of the group, such excess is permanently excluded from income. Generally, any required attribute reduction is determined after the consolidated group has determined its taxable income (or loss) for the taxable year in which the COD Income is incurred.
Multiple members of the NewPage Consolidated Group, including NPC, expect to incur COD Income as a result of the Plan. The amount of COD Income will depend on, among other things, the fair market value of the stock of Reorganized NPC and the fair market value of New Holdco Common Stock, which may not be determined until after the Effective Date of the Plan. In addition, the treatment of the Litigation Trust may affect the amount of COD Income recognized by members of the NewPage Consolidated Group. Pursuant to the 108(a) Bankruptcy Exception, the members of the NewPage
123 Consolidated Group will not include COD Income in gross income. Instead, the members of the NewPage Consolidated Group will be required to reduce their tax attributes in accordance with the Consolidated Attribute Reduction Rules after determining the taxable income (or loss) of the NewPage Consolidated Group for the taxable year of discharge.
Under the Consolidated Attribute Reduction Rules, each member of the NewPage Consolidated Group will apply its excluded COD Income to reduce its NOLs and, if necessary, other tax attributes, including such member’s tax basis in its assets. To the extent that the amount of excluded COD Income results in a reduction in the basis of the stock of members of the NewPage Consolidated Group, the Consolidated Attribute Reduction Rules require these members to reduce their tax attributes accordingly, including, among other things, the tax basis in their assets.
The extent, if any, to which NOLs and other tax attributes remain following the application of the Consolidated Attribute Reduction Rules will depend on a number of factors, including the amount of COD Income, and the exact amount of any COD Income that will be realized by the Debtors will not be determinable until the consummation of the Plan.
2. Annual Section 382 Limitation on Use of NOLs and “Built-In” Losses and Deductions
a. Limitation on NOLs and Other Tax Attributes
Under section 382 of the Tax Code, if a “loss corporation” (generally, a corporation with NOLs and/or built-in losses) undergoes an “ownership change,” the amount of its pre-ownership change NOLs (the “Pre-Change Losses”) that may be utilized to offset future taxable income generally is subject to an annual limitation (the “Annual Section 382 Limitation”). Similar rules apply to the corporation’s capital loss carryforwards and tax credits.
Reorganized NPC’s issuance of its stock, and the exchange of such stock for New Holdco Common Stock, pursuant to the Plan is expected to result in an ownership change of the New Holdco Consolidated Group for purposes of section 382 of the Tax Code. Accordingly, the New Holdco Consolidated Group’s Pre-Change Losses should be subject to the Annual Section 382 Limitation. This limitation applies in addition to, and not in lieu of, any other limitation that may already or in the future be in effect and the attribute reduction that may result from COD Income.
b. General Section 382 Limitation
In general, the amount of the Annual Section 382 Limitation is equal to the product of (1) the fair market value of the stock of the loss corporation (or, in the case of a consolidated group, generally the stock of the common parent) immediately before the ownership change (with certain adjustments) and (2) the “long-term tax-exempt rate” (as defined for purposes of section 382 of the Tax Code) in effect for the month in which the ownership change occurs (for example, 3.01% for an ownership change that occurs during October 2012). For a corporation (or consolidated group) in bankruptcy that undergoes an ownership change pursuant to a confirmed bankruptcy plan of reorganization, there may not be any Annual Section 382 Limitation if certain conditions are met (see Section X.B.2.d, below). If the corporation (or consolidated group) elects out of such treatment, or if the conditions described below are not met, then the stock value for purposes of the limitation is generally determined immediately after (rather than before) the ownership change.
Any unused portion of the Annual Section 382 Limitation generally may be carried forward, thereby increasing the Annual Section 382 Limitation in the subsequent taxable year. However,
124 if the corporation (or consolidated group) does not continue its historic business or use a significant portion of its assets in a business for two years after the ownership change, the Annual Section 382 Limitation is reduced to zero. In addition, if a redemption or other corporate contraction occurs in connection with the ownership change of the loss corporation (or consolidated group), or if the loss corporation (or consolidated group) has substantial nonbusiness assets, the Annual Section 382 Limitation is reduced to take the redemption, other corporate contraction, or nonbusiness assets into account.
Furthermore, if the corporation (or consolidated group) undergoes a second ownership change, the second ownership change may result in a lesser (but never a greater) Annual Section 382 Limitation with respect to any losses that existed at the time of the first ownership change.
c. Built-in Gains and Losses
If a loss corporation (or consolidated group) has a “net unrealized built-in loss” at the time of the ownership change, then any built-in losses or deductions recognized during the following five years (up to the amount of the original net unrealized built-in loss) generally will be treated as a Pre- Change Loss subject to the Annual Section 382 Limitation. Conversely, if the loss corporation (or consolidated group) has a “net unrealized built-in gain” at the time of the ownership change, then any built-in gains recognized during the following five years (up to the amount of the original net unrealized built-in gain) will increase the Annual Section 382 Limitation in the year recognized.
d. Special Bankruptcy Exceptions
Section 382(l)(5) of the Tax Code provides an exception to the application of the Annual Section 382 Limitation when a corporation is under the jurisdiction of a bankruptcy court in a title 11 case (the “382(l)(5) Bankruptcy Exception”). This exception generally applies where (1) shareholders of a debtor immediately before an ownership change and (2) qualified creditors (generally, historic creditors) of the debtor, in respect of their interests and claims, receive stock with at least 50 percent of the voting power and value of all the stock of the reorganized debtor. Under the 382(l)(5) Bankruptcy Exception, a debtor’s Pre-Change Losses are not limited on an annual basis but, instead, are required to be reduced by the amount of any interest deductions claimed during the three taxable years preceding the effective date of the reorganization, and during the part of the taxable year before and including the reorganization, in respect of all debt converted into stock in the reorganization (the “Interest Reduction Rule”). Moreover, if the 382(l)(5) Bankruptcy Exception applies, a second ownership change of the debtor within a two-year period after the bankruptcy plan of reorganization generally will cause the debtor to forfeit all its unused NOLs that were incurred before the second ownership change. The 382(l)(5) Bankruptcy Exception applies to a debtor unless the debtor affirmatively elects out of its application.
If a debtor in bankruptcy is not eligible for the 382(l)(5) Bankruptcy Exception or elects out of the exception, a special rule under section 382(l)(6) of the Tax Code will apply for purposes of determining the Annual Section 382 Limitation. Under this special rule, the Annual Section 382 Limitation will be calculated by reference to the lesser of (1) the value of the debtor’s stock (with certain adjustments) immediately after the ownership change (as opposed to immediately before the ownership change, as described above) or (2) the value of the debtor’s assets (determined without regard to liabilities) immediately before the ownership change.
e. Application of Section 382 to NPC
The Debtors have not yet determined whether or not the 382(l)(5) Bankruptcy Exception is applicable. Should the 382(l)(5) Bankruptcy Exception be applicable, the Debtors have not yet determined whether or not to seek to have the 382(l)(5) Bankruptcy Exception apply to the ownership
125 change arising from the consummation of the Plan or to elect out of it because, depending on the application of the Interest Reduction Rule, it may substantially reduce the New Holdco Consolidated Group’s NOLs.
If the 382(l)(5) Bankruptcy Exception does not apply, or the Debtors elect out of it, the New Holdco Consolidated Group expects that the use of NOLs after the Effective Date of the Plan will be subject to limitation based on the rules discussed above (other than the 382(l)(5) Bankruptcy Exception), but taking into account the special rule under section 382(l)(6) of the Tax Code.
Whether the 382(l)(5) Bankruptcy Exception applies or not, the New Holdco Consolidated Group may be required to pay U.S. federal income taxes, despite the fact that taxable income may not exceed its otherwise available NOLs, due to the application of the Annual Section 382 Limitation, the application of the Alternative Minimum Tax rules (as discussed below at XI.B.3), or both.
Certain aspects of the law pertaining to the Annual Section 382 Limitation rules discussed above are unclear and depend on, among other things, factual determinations that may not be able to be made as of the Effective Date. As a result, there is substantial uncertainty with respect to the Annual Section 382 Limitation of the New Holdco Consolidated Group, and there can be no assurance that the limitation will not be significantly lower than anticipated.
In addition, if there were an ownership change prior to the Effective Date, the Annual Section 382 Limitation resulting from the implementation of the Plan might result in a lesser (but not a greater) limitation with respect to losses that existed at the time of the first ownership change.
3. Alternative Minimum Tax
In general, a federal alternative minimum tax (“AMT”) is imposed on a corporation’s alternative minimum taxable income (“AMTI”) each year at a 20% rate to the extent that such tax exceeds the corporation’s regular federal income tax for such year. AMTI is generally equal to regular taxable income with certain adjustments. For purposes of computing AMTI, certain tax deductions and other beneficial allowances are modified or eliminated. In particular, even though a corporation may otherwise be able to offset all of its taxable income for regular tax purposes by available NOLs, only 90% of a corporation’s AMTI generally may be offset by available alternative tax NOLs.
In addition, if a corporation or consolidated group undergoes an ownership change within the meaning of section 382 of the Tax Code and has a net unrealized built-in loss at the time of such change, the corporation’s or consolidated group’s aggregate basis in its assets would be reduced for certain AMT purposes to reflect the fair market value of such assets as of the date of the ownership change.
Any AMT that a corporation pays generally will be allowed as a nonrefundable credit against its regular federal income tax liability in future years when the corporation is not subject to the AMT. Any unused credit is carried forward indefinitely.
4. Transfer of Litigation Trust Assets to the Litigation Trust
Pursuant to the Plan, on the Effective Date, the Debtors will transfer the Litigation Trust Assets to the Litigation Trust on behalf of the Litigation Trust Beneficiaries. The Debtors intend to treat the transfer of the Litigation Trust Assets to the Litigation Trust as a transfer of such assets to the Litigation Trust Beneficiaries followed by a transfer of the assets by the Litigation Trust Beneficiaries to the Litigation Trust in exchange for Litigation Trust Interests.
126 C. U.S. Federal Income Tax Considerations for Certain Holders of Claims
The following discussion describes certain U.S. federal income tax consequences of the transactions contemplated by the Plan to certain holders of Claims. Holders of Claims should consult their own independent tax advisors for information that may be relevant to their particular situation and circumstances and the particular tax consequences of the transactions contemplated by the Plan.
The U.S. federal income tax consequences to a holder (including the character, timing and amount of income, gain or loss recognized) will depend on, among other factors: (a) the manner in which the holder acquired the Claim; (b) the length of time the holder has held the Claim; (c) whether the holder acquired the Claim at a discount; (d) whether the holder has taken a bad debt deduction with respect to the Claim (or any portion thereof) in current or prior years; (e) whether the holder has previously included in taxable income accrued but unpaid interest with respect to the Claim; and (g) the holder’s method of accounting.
Pursuant to the Plan, each holder of a Claim against the Debtors (a “NPC Holder”) may receive distributions of one or more of the following: Cash, stock of Reorganized NPC (which will then be contributed to New Holdco in exchange for New Holdco Common Stock) and Litigation Trust Interests in exchange for such Claims. For U.S. federal income tax purposes, a NPC Holder should realize gain or loss (if any) equal to the difference between the holder’s amount realized with respect to the exchange of its Claim and the holder’s adjusted tax basis in its Claim. Subject to the discussion of accrued interest in Section X.C.5.b below, a NPC Holder’s amount realized should include (a) the fair market value of the New Holdco Common Stock, (b) the fair market value of the holder’s allocable share of the Litigation Trust Assets and (d) the Cash distribution received by the NPC Holder.
The recognition of gain realized by a NPC Holder may be affected by the installment method of reporting gain. This discussion assumes that such method either is not available with respect to the holder’s exchange of its Claim or, if available, the holder elects out of such method. NPC Holders should consult their tax advisors regarding the availability and application of (and, if available, the election out of) the installment method of reporting gain that may be recognized with respect to their Claims.
The recognition of gain or loss realized by a NPC Holder also may be affected by whether the holder’s Claim constitutes a “security” for U.S. federal income tax purposes.
1. Exchange of stock of Reorganized NPC for New Holdco Common Stock
Pursuant to the Plan, any holder of a Claim that receives stock of Reorganized NPC in satisfaction of all or a part of such holder’s Claim shall exchange such stock for such holder’s Pro Rata Share of New Holdco Common Stock. Such an exchange, whether or not any Claim is a “security” for U.S. federal income tax purposes, should be a nontaxable exchange of stock under the Tax Code. As such, a holder should not recognize any gain or loss on this exchange, and the tax basis each holder has in the stock of Reorganized NPC should equal the basis such holder has in the New Holdco Common Stock received in exchange for the stock of Reorganized NPC. Each NPC Holder should consult its own independent tax advisor to determine the likely tax consequences of the contribution of stock of Reorganized NPC for New Holdco Common Stock.
2. Securities for Tax Purposes
Whether a debt instrument constitutes a “security” for U.S. federal income tax purposes is determined based on all of the facts and circumstances. Certain authorities have held that one factor to
127 be considered is the length of the initial term of the debt instrument. These authorities have held that an initial term of less than five years is evidence that the instrument is not a security; whereas, an initial term of ten years or more is evidence that it is a security. Numerous factors other than the term of an instrument could be taken into account in determining whether a debt instrument is a security, including whether repayment is secured, the degree of subordination of the instrument, the creditworthiness of the obligor, whether the holders have the right to vote or otherwise participate in the management of the obligor, whether the instrument is convertible into an equity interest of the obligor, whether payments of interest are fixed, variable, or contingent, and whether such payments are made on a current basis or are accrued.
Each NPC Holder should consult its own independent tax advisor to determine whether the debt underlying its Claim constitutes a security for U.S. federal income tax purposes.
If NPC determines that a recapitalization has occurred as a result of the Plan (in other words, if Claims which constitute securities for U.S. federal income tax purposes are exchanged for stock of Reorganized NPC), then New Holdco or NPC will report the occurrence of such recapitalization to the IRS on its tax return for the taxable year of the exchange. (See Section X.C.9, below).
3. Holders Receiving Stock in Reorganized NPC or Receiving Stock in Reorganized NPC Plus Cash and/or Litigation Trust Interests
a. Claims Constituting Securities
If the debt underlying a holder’s Claim constitutes a security in NPC, the exchange of the Claim may qualify as a recapitalization or other nonrecognition transaction for U.S. federal income tax purposes. In such case, a NPC Holder that realizes a loss on the exchange would not be permitted to recognize the loss, nor would such NPC Holder be permitted to recognize a “bad debt” or “worthless security” deduction with respect to such Claim, in whole or in part.
If a Claim is exchanged for only stock in Reorganized NPC in a recapitalization, a NPC Holder should not recognize gain on the transaction for U.S. federal income tax purposes.
However, if a Claim is exchanged for stock in Reorganized NPC, plus Cash and/or Litigation Trust Interests in a recapitalization, a NPC Holder that realizes gain on the exchange generally should recognize gain, for U.S. federal income tax purposes, equal to the lesser of (1) the amount of gain realized and (2) the fair market value of the consideration received other than stock in Reorganized NPC (“Boot”).
The character of such recognized gain as capital gain or as ordinary income should depend on, among other things, the application of the “market discount” rules (see Section X.C.5.a below). In addition, as discussed in Section X.C.5.b below, a NPC Holder may recognize ordinary income to the extent that a portion of the consideration received in exchange for a Claim is treated as received in satisfaction of accrued but untaxed interest on the Claim. If recognized gain is capital gain, it generally would be long-term capital gain if the holder held its Claim for more than one year at the time of the exchange.
The NPC Holder’s tax basis in the stock of Reorganized NPC that it receives in exchange for its Claim, and therefore the tax basis in the New Holdco Common Stock that it receives in exchange for such stock of Reorganized NPC, generally should equal the sum of (1) the holder’s tax basis in the Claim and (2) the amount of gain recognized on the exchange, reduced by the fair market value of the Boot received. This basis is allocated among the shares of Reorganized NPC stock received, and thus
128 will be allocated among the shares of New Holdco Common Stock received in exchange for such Reorganized NPC stock. The NPC Holder generally should have a holding period for the New Holdco Common Stock that includes the holding period of the Claim. These basis and holding period results may vary if the Reorganized NPC stock received in exchange for such holder’s Claim is treated as received in satisfaction of accrued but untaxed interest.
b. Claims Not Constituting Securities
If the debt underlying a holder’s Claim does not constitute a security, the exchange of the Claim for the consideration received would likely be treated as a taxable exchange for U.S. federal income tax purposes. A NPC Holder generally should recognize the gain or loss realized on the exchange. The character of such recognized gain or loss as capital gain or loss or as ordinary income or loss should depend, among other things, on the application of the market discount rules, and a holder may recognize ordinary income to the extent that a portion of the consideration received in exchange for a Claim is treated as received in satisfaction of accrued but untaxed interest on the Claim. If recognized gain is capital gain, it generally would be long-term capital gain if the holder held its Claim for more than one year at the time of the exchange. In general, a NPC Holder’s basis in the property received should equal the fair market value of the property as of the Effective Date and a holder’s holding period for the property received should begin on the day following the Effective Date.
Each NPC Holder should consult its own independent tax advisor regarding whether (and the extent to which) the exchange of a Claim qualifies as a recapitalization or other nonrecognition transaction and, whether or not it so qualifies, the tax consequences to such holder of the exchange of a Claim for the consideration received by the NPC Holder under the Plan.
4. Holders Receiving Litigation Trust Interests and/or Cash
If a Claim is exchanged for only Litigation Trust Interests and/or Cash, such exchange should be treated as a taxable exchange for U.S. federal income tax purposes. A NPC Holder generally should recognize the gain or loss realized on the exchange.
The character of such recognized gain as capital gain or as ordinary income should depend on, among other things, the application of the “market discount” rules (see Section X.C.5.a below). In addition, as discussed in Section X.C.5.b below, a NPC Holder may recognize ordinary income to the extent that any portion of the Litigation Trust Interests received in exchange for a Claim is treated as received in satisfaction of accrued but untaxed interest on the Claim. If recognized gain is capital gain, it generally would be long-term capital gain if the holder held its Claim for more than one year at the time of the exchange.
A Litigation Trust Beneficiary’s tax basis in the Litigation Trust Interests received should equal their fair market value as of the Effective Date. A holder’s holding period for the Litigation Trust Interests should begin on the day following the Effective Date.
5. Market Discount, Accrued Interest and Limitation on Capital Losses
a. Market Discount
The market discount provisions of the Tax Code may apply to certain NPC Holders. In general, a debt obligation acquired by a holder in the secondary market is considered to be acquired with market discount as to that holder if its stated redemption price at maturity (or, in the case of a debt
129 obligation having OID, its adjusted issue price) exceeds, by more than a statutory de minimus amount, the tax basis of the debt obligation in the holder’s hands immediately after its acquisition.
Any gain recognized by a NPC Holder on the exchange of a Claim that was acquired with market discount should be treated as ordinary income to the extent of the market discount that accrued thereon (unless the holder elected to include market discount in income as it accrued). In the case of an exchange of a Claim that qualifies as a recapitalization, any accrued market discount remaining on the Claim which has not been recognized as ordinary income as described in the previous sentence likely should be carried over to the property received therefor. In the case of stock of Reorganized NPC, the accrued market discount carried over should further carry over to the New Holdco Common Stock received in exchange for such stock of Reorganized NPC, and should recharacterize the gain recognized on the disposition of such stock as ordinary income to the extent of such carried-over market discount. NPC Holders with accrued market discount with respect to their Claims should consult their own independent tax advisors as to the application of the market discount rules in view of their particular circumstances.
b. Accrued Interest
A portion of any stock of Reorganized NPC or Cash received in exchange for a Claim may be treated as received in exchange for interest accrued but untaxed on the Claim. To the extent that any portion of the consideration received by a holder is attributable to accrued but untaxed interest, the holder will recognize ordinary income if the holder has not previously included the accrued interest in income. Conversely, a NPC Holder generally should recognize a loss to the extent any accrued interest was previously included in income and is not paid in full.
A holder’s tax basis in any stock of Reorganized NPC treated as received in exchange for accrued but untaxed interest (if any) generally will be equal to the fair market value of such stock of Reorganized NPC as of the Effective Date. The holding period of such stock of Reorganized NPC, which will also be the holding period of the New Holdco Common Stock received in exchange for such stock of Reorganized NPC, generally will begin on the day following the Effective Date.
The Plan provides that all amounts paid on a Claim that includes both principal and accrued but unpaid interest will be allocated first to the principal amount owing and only to interest to the extent the recovery exceeds the principal. There can be no assurance that the IRS will agree with such treatment. Each NPC Holder should consult its tax advisor regarding the proper allocation of the consideration received under the Plan.
c. Limitations on Use of Capital Losses
Holders of Claims who recognize capital losses as a result of the distributions under the Plan may be subject to limits on their use of such capital losses. For noncorporate holders, capital losses may be used to offset any capital gains (without regard to holding period) plus ordinary income to the extent of the lesser of (1) $3,000 ($1,500 for married individuals filing separate returns) or (2) the excess of the capital losses over the capital gains. Noncorporate holders may carry over unused capital losses and apply them to capital gains and a portion of their ordinary income for an unlimited number of years. For corporate holders, losses from the sale or exchange of capital assets may only be used to offset capital gains. Corporate holders may only carry over unused capital losses for the five years following the capital loss year, but are allowed to carry back unused capital losses to the three years preceding the capital loss year.
130 6. Tax Treatment of the Litigation Trust and Litigation Trust Beneficiaries
The Litigation Trust is intended to qualify as a “liquidating trust” for U.S. federal income tax purposes. In general, a liquidating trust is not a separate taxable entity, but rather is treated for U.S. federal income tax purposes as a “grantor trust” (i.e., a pass-through type entity). However, merely establishing a trust as a liquidating trust does not ensure that it will be treated as a grantor trust for U.S. federal income tax purposes. The IRS, in Revenue Procedure 94-45, 1994-2 C.B. 684, set forth the general criteria for obtaining an IRS ruling as to the grantor trust status of a liquidating trust under a chapter 11 plan. The Litigation Trust has been structured with the intention of complying with such general criteria. Pursuant to the Plan, and in conformity with Revenue Procedure 94-45, all parties (including, without limitation, the Debtors, the Litigation Trustee, and the Litigation Trust Beneficiaries) are required to treat, for U.S. federal income tax purposes, the Litigation Trust as a grantor trust of which the Litigation Trust Beneficiaries are the owners and grantors, in addition, all parties will report all tax items relating to the Litigation Trust in a manner entirely consistent with the Plan. The following discussion assumes that the Litigation Trust will be respected as a grantor trust for U.S. federal income tax purposes. However, no ruling has been requested from the IRS and no opinion of counsel has been requested concerning the tax status of the Litigation Trust as a grantor trust. Accordingly, there can be no assurance that the IRS would not take a contrary position. If the IRS were to challenge successfully the classification of the Litigation Trust, the U.S. federal income tax consequences to the Litigation Trust, the Litigation Trust Beneficiaries and the Debtors could vary from those discussed herein (including the potential for an entity-level tax on income of the Litigation Trust).
Pursuant to the Plan, the Litigation Trust Assets are treated, for U.S. federal income tax purposes, as having been transferred directly to the holders of the respective Claims in satisfaction of their Claims (with each holder receiving an undivided interest in such assets in accord with their economic interests in such assets), followed by the transfer by the Litigation Trust Beneficiaries to the Litigation Trust of such assets in exchange for Litigation Trust Interests. Accordingly, all parties must treat the Litigation Trust as a grantor trust of which the Litigation Trust Beneficiaries are the owners and grantors, and treat the Litigation Trust Beneficiaries as the direct owners of an undivided interest in the assets of the Litigation Trust, consistent with their economic interests therein, for all U.S. federal income tax purposes.
Pursuant to the Plan, as soon as possible after the Effective Date, the Litigation Trustee will in good faith value the Litigation Trust Assets, and such valuation will be binding on all parties to the Litigation Trust. The valuation will be made available, from time to time, as relevant for tax reporting purposes.
Allocations of taxable income of the Litigation Trust among the Litigation Trust Beneficiaries shall be determined by reference to the manner in which an amount of cash equal to such taxable income would be distributed (were such cash permitted to be distributed at such time) if, immediately prior to such deemed distribution, the Litigation Trust had distributed all its assets to the Litigation Trust Beneficiaries, adjusted for prior taxable income and loss and taking into account all prior and concurrent distributions from the Litigation Trust. Similarly, taxable loss of the Litigation Trust shall be allocated by reference to the manner in which an economic loss would be borne immediately after a liquidating distribution of the remaining assets of the Litigation Trust. All allocations of taxable income and loss shall be made pursuant to the terms of the Litigation Trust Agreement.
Taxable income or loss allocated to a beneficiary of a Litigation Trust Interest will be treated as income or loss with respect to such beneficiary’s undivided interest in the Litigation Trust Assets, and not as income or loss with respect to its prior Claim. The character of any income and the character and ability to use any loss will depend on the particular situation of the Litigation Trust
131 Beneficiary. The U.S. federal income tax obligations of a Litigation Trust Beneficiary with respect to its Litigation Trust Interest are not dependent on the Litigation Trust distributing any cash or other proceeds. Thus, a beneficiary may incur a U.S. federal income tax liability with respect to its allocable share of Litigation Trust income even if the Litigation Trust does not make a concurrent distribution to the beneficiary. In general, a distribution of cash by the Litigation Trust will not be separately taxable to a beneficiary since the beneficiary is already regarded for federal income tax purposes as owning the underlying assets (and was taxed at the time the cash was earned or received by the Litigation Trust).
The Litigation Trustee will file with the IRS returns for the Litigation Trust as a grantor trust pursuant to Treasury Regulation section 1.671-4(a). The Litigation Trustee will annually send to each Litigation Trust Beneficiary a separate statement regarding the receipts and expenditures of the Litigation Trust as relevant for U.S. federal income tax purposes and will instruct all such beneficiaries to use such information in preparing their U.S. federal income tax returns or to forward the appropriate information to such beneficiary’s underlying beneficial holders with instructions to utilize such information in preparing their U.S. federal income tax returns.
7. Tax Reporting for Assets Allocable to Disputed Claims
Subject to definitive guidance from the IRS or a court of competent jurisdiction to the contrary (including the receipt by the Disbursing Agent of an IRS private letter ruling if the Disbursing Agent so requests one, or the receipt of an adverse determination by the IRS upon audit if not contested by the Disbursing Agent), the Disbursing Agent will (A) elect to treat any assets allocable to, or retained on account of, Disputed Claims (i.e., the Disputed Claim Reserve) as a “disputed ownership fund” governed by Treasury Regulation section 1.468B-9, and (B) to the extent permitted by applicable law, report consistently with the foregoing for state and local income tax purposes.
Accordingly, the Disputed Claim Reserve will be subject to tax annually on a separate entity basis on any net income earned with respect to the assets in such reserve, and all distributions from such reserve (which distributions will be net of the related expenses of the reserve) will be treated as received by holders in respect of their Claims as if distributed by the Debtors. All parties (including, without limitation, the Debtors, the Disbursing Agent and holders of Disputed Claims) will be required to report for tax purposes consistently with the foregoing.
8. Surtax on Unearned Income
Legislation enacted in 2010 will require certain NPC Holders who are individuals, estates or trusts to pay a 3.8% surtax on, among other things, dividends on the New Holdco Common Stock, and capital gains from the sale, exchange, redemption, retirement, redemption or other taxable disposition of the New Holdco Common Stock. This legislation would apply for taxable years beginning after December 31, 2012. NPC Holders should consult their own independent tax advisors regarding the effect, if any, of this legislation on their ownership and disposition of the New Holdco Common Stock.
9. Backup Withholding and Information Reporting
Certain payments, including certain distributions pursuant to the Plan, payments of dividends, if any, on the New Holdco Common Stock and the proceeds from the sale, exchange, redemption, retirement or other taxable disposition of the New Holdco Common Stock may be subject to information reporting to the IRS. Moreover, such reportable payments may be subject to backup withholding unless the taxpayer: (i) comes within certain exempt categories and, when required, demonstrates this fact or (ii) provides a correct taxpayer identification number and certifies under penalty of perjury that the taxpayer identification number is correct and that the taxpayer is not subject to backup
132 withholding because of a failure to report all dividend and interest income. NPC and any “significant holder” of Claims, defined as a holder of securities in NPC with a tax basis of $1 million or more, that believes the exchange is a recapitalization qualifying as a reorganization, are required, pursuant to Treasury Regulations, to include a statement with their tax returns for the taxable year of the exchange setting forth information, as specified in the Treasury Regulations, pertaining to the reorganization. Backup withholding is not an additional tax but merely an advance payment, which may be refunded to the extent it results in an overpayment of tax and the appropriate information is timely supplied to the IRS.
A holder should consult its own independent tax advisors regarding the application of information reporting and backup withholding rules in their particular situations, the availability of an exemption therefrom, and the procedure for obtaining such an exemption, if applicable.
D. Importance of Obtaining Professional Tax Assistance
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE PLAN AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX PROFESSIONAL. THE ABOVE DISCUSSION IS FOR INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. THE TAX CONSEQUENCES ARE IN MANY CASES UNCERTAIN AND MAY VARY DEPENDING ON A HOLDER’S INDIVIDUAL CIRCUMSTANCES. ACCORDINGLY, HOLDERS SHOULD CONSULT THEIR OWN INDEPENDENT TAX ADVISORS ABOUT THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES OF THE PLAN.
XI. SECURITIES LAW MATTERS
Section 1145 of the Bankruptcy Code provides certain exemptions from the securities registration requirements of federal and state securities laws with respect to the distribution of securities under a chapter 11 plan. Specifically, section 1145(a)(1) of the Bankruptcy Code generally exempts from registration under the Securities Act the offer or sale of a debtor’s securities under a chapter 11 plan if the securities are offered or sold in exchange for a claim against, or an equity interest in, such debtor, or if the securities are offered or sold principally in such exchange and partly for cash. Accordingly, in connection with the Plan, pursuant to section 1145 of the Bankruptcy Code, and except as provided in subsection (b) thereof, the issuance of the shares of New Holdco Common Stock issued pursuant to the Plan will be exempt from registration under the Securities Act, and other applicable non-bankruptcy laws or regulations.
A. Issuance and Resale of New Holdco Common Stock
The issuance of the stock of Reorganized NPC and New Holdco Common Stock under the Plan is being made pursuant to the exemption available under section 1145 of the Bankruptcy Code. Subsequent transfers of the New Holdco Common Stock by holders thereof that are not “underwriters,” as defined in section 2(a)(11) of the Securities Act and in the Bankruptcy Code, will be exempt from federal and state securities registration requirements under various provisions of the Securities Act, the Bankruptcy Code, and state securities laws.
Section 1145(a) of the Bankruptcy Code generally exempts from those registration requirements the issuance of securities if the following conditions are satisfied:
133 i. the securities are issued or sold under a chapter 11 plan by (1) a debtor, (ii) one of its affiliates participating in a joint plan with the debtor, or (iii) a successor to a debtor under the plan, and
ii. the securities are issued entirely in exchange for a claim against or interest in the debtor or affiliate, or are issued principally in such exchange and partly for cash or property.
The Proponent Debtors believe the exchange of stock of Reorganized NPC for Claims against the Proponent Debtors, and the exchange of stock of Reorganized NPC for New Holdco Common Stock, under the circumstances provided in the Plan satisfies the requirements of section 1145(a) of the Bankruptcy Code. In reliance upon these exemptions, the offer and sale of the stock of Reorganized NPC and New Holdco Common Stock would not require registration under the Securities Act.
The New Holdco Common Stock to be issued pursuant to the Plan will be deemed to have been issued in a public offering under the Securities Act and, therefore, may be resold by any holder without registration under the Securities Act pursuant to the exemption provided by section 4(1) of the Securities Act, unless the holder is an “underwriter” with respect to those securities, as that term is defined in section 1145(b)(1) of the Bankruptcy Code, or a statutory underwriter, as described below. In addition, the securities generally may be resold by holders without registration under state securities or “blue sky” laws pursuant to various exemptions provided by the respective laws of the individual states. There are certain exceptions to those exemptions, however, and holders of New Holdco Common Stock are advised to consult with their own counsel as to the availability of an exemption from registration under federal securities laws and any relevant state securities laws in any given instance and as to any applicable requirements or conditions to the availability thereof. If the New Holdco Common Stock is not covered by section 1145 of the Bankruptcy Code, the New Holdco Common Stock will be considered “restricted securities” as defined by Rule 144 promulgated under the Securities Act, and may not be resold under the Securities Act and applicable state securities laws, absent an effective registration statement under the Securities Act or pursuant to an applicable exemption from registration, including Rule 144 promulgated under the Securities Act. Recipients of the New Holdco Common Stock are advised to consult with their own legal advisors as to the applicability of section 1145 to the New Holdco Common Stock and the availability of any exemption from registration under federal and state law if that section 1145 is not applicable to the New Holdco Common Stock.
Section 1145(b)(1) of the Bankruptcy Code defines “underwriter” for purposes of the Securities Act as one who (i) purchases a claim or interest with a view to distribution of any security to be received in exchange for the claim or interest, (ii) offers to sell securities issued under a plan for the holders of those securities, (iii) offers to buy securities issued under a plan from persons receiving those securities, if the offer to buy is made with a view to distribution of those securities and under an agreement made in connection with the plan, with the consummation of the plan, or with the offer or sale of securities under the plan, or (iv) is an issuer of the securities within the meaning of section 2(a)(11) of the Securities Act.
The reference contained in section 1145(b)(1)(D) of the Bankruptcy Code to section 2(a)(11) of the Securities Act purports to include as statutory underwriters all persons who, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with, an issuer of securities. “Control” (as defined in Rule 405 under the Securities Act) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise. Accordingly, an officer or director of a reorganized debtor or its successor under a plan of reorganization may be deemed to be a “control person” of the debtor or successor, particularly if the management position or
134 directorship is coupled with ownership of a significant percentage of the voting securities of the issuer. Additionally, the legislative history of section 1145 of the Bankruptcy Code provides that a creditor who receives at least 10% of the voting securities of an issuer under a plan of reorganization will be presumed to be a statutory underwriter within the meaning of section 1145(b)(1) of the Bankruptcy Code. Persons who believe they may be statutory underwriters as defined in section 1145(b)(1) of the Bankruptcy Code are advised to consult with their own counsel concerning the availability of the exemptions from registration provided by Rule 144 or Regulation S.
Resales of the New Holdco Common Stock by persons deemed to be statutory underwriters would not be exempted by section 1145 of the Bankruptcy Code from registration under the Securities Act or other applicable law. Under certain circumstances, holders of New Holdco Common Stock deemed to be “underwriters” may be entitled to resell their securities pursuant to the limited safe harbor resale provisions of Rule 144 and Regulation S under the Securities Act, to the extent available, and in compliance with applicable state and foreign securities laws. Generally, Rule 144 of the Securities Act provides that persons who are affiliates of an issuer who resell securities will not be deemed to be underwriters if certain conditions are met. These conditions include the requirement that current public information with respect to the issuer be available, a limitation as to the amount of securities that may be sold in any three-month period, the requirement that the securities be sold in a “brokers transaction” or in a transaction directly with a “market maker” and that notice of the resale be filed with the SEC. The Proponent Debtors cannot assure, however, that adequate current public information will exist with respect to any issuer of New Holdco Common Stock and therefore, that the safe harbor provisions of Rule 144 of the Securities Act will be available.
IN VIEW OF THE COMPLEX, SUBJECTIVE NATURE OF THE QUESTION OF WHETHER A RECIPIENT OF SECURITIES MAY BE AN UNDERWRITER OR AN AFFILIATE OF THE REORGANIZED DEBTORS, THE PROPONENT DEBTORS MAKE NO REPRESENTATIONS CONCERNING THE RIGHT OF ANY PERSON TO TRADE IN SECURITIES TO BE DISTRIBUTED PURSUANT TO THE PLAN. ACCORDINGLY, THE PROPONENT DEBTORS RECOMMEND THAT POTENTIAL RECIPIENTS OF SECURITIES CONSULT THEIR OWN COUNSEL CONCERNING WHETHER THEY MAY FREELY TRADE SUCH SECURITIES.
B. Legends
The New Holdco Common Stock will be evidenced by global certificates which will be held through DTC. Any shares of New Holdco Common Stock that are deemed to be “restricted securities” will bear a legend substantially in the form below:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED, AT THE COMPANY’S DISCRETION, BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR AND/OR CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO IT TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE RESTRICTIONS SHALL APPLY UNTIL THIS SECURITY MAY BE
135 RESOLD BY THE HOLDER WITHOUT RESTRICTION PURSUANT TO RULE 144 UNDER THE SECURITIES ACT.
C. Book-Entry; Delivery and Form
[The New Holdco Common Stock will be deposited with, or on behalf of, DTC or any successor thereto, as depositary, and registered in the name of Cede & Co., its nominee.
Purchases of the New Holdco Common Stock under DTC’s book-entry system must be made by or through direct participants, which will receive a credit for the New Holdco Common Stock on the records of DTC. The ownership interest of each actual purchaser of the New Holdco Common Stock, referred to as the “beneficial owner,” is in turn to be recorded on the participants’ records. Beneficial owners will not receive written confirmation from DTC of their purchase, but beneficial owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings from the direct participant or indirect participant through which the beneficial owner entered into the transaction. Transfers of ownership interests in the New Holdco Common Stock will be effected only through entries made on the books of participants acting on behalf of beneficial owners. Beneficial owners will not receive certificates representing their ownership interests in the New Holdco Common Stock, except if use of the book-entry system for the New Holdco Common Stock is discontinued. The laws of some states require that certain purchasers of securities take physical delivery of those securities in definitive form. Such limits and such laws may impair the ability to own, transfer or pledge beneficial interests in the New Holdco Common Stock.
To facilitate subsequent transfers, all New Holdco Common Stock deposited by participants with DTC are registered in the name of DTC’s nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the New Holdco Common Stock with DTC and their registration in the name of Cede & Co. or such other DTC nominee effects no change in beneficial ownership. DTC has no knowledge of the actual beneficial owners of the New Holdco Common Stock. DTC’s records reflect only the identity of the direct participants to whose accounts the New Holdco Common Stock is credited, which may or may not be the beneficial owners. The participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to participants, by direct participants to indirect participants, and by direct participants and indirect participants to beneficial owners, will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Redemption notices will be sent to DTC.
In those cases where a vote is required, neither DTC nor Cede & Co. (nor any other DTC nominee) will itself consent or vote with respect to New Holdco Common Stock, unless authorized by a direct participant in accordance with DTC’s procedures. Under its usual procedures, DTC mails an omnibus proxy to the Reorganized Debtors as soon as possible after the record date. The omnibus proxy assigns Cede & Co.’s consenting or voting rights to those direct participants to whose accounts the shares of New Holdco Common Stock are credited on the record date (identified in a listing attached to the omnibus proxy).
Payments on the New Holdco Common Stock will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit direct participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the
136 Reorganized Debtors on the relevant payment date in accordance with their respective holdings shown on DTC’s records. Payments by participants to beneficial owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of the participant and not of DTC nor its nominee or the Reorganized Debtors, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments to Cede & Co. (or such nominee as may be requested by an authorized representative of DTC) are the Reorganized Debtors’ responsibility, disbursement of those payments to direct participants is the responsibility of DTC, and disbursement of the payments to the beneficial owners is the responsibility of direct and indirect participants.
The information in this section concerning DTC and DTC’ s book-entry system has been obtained from sources that the Proponent Debtors believe are reliable, but the Proponent Debtors take no responsibility for the accuracy thereof. The Proponent Debtors have no responsibility for the performance by DTC or its participants of their respective obligations as described in this Disclosure Statement or under the rules and procedures governing their respective operations.]
D. Registration and Listing
Upon emergence, the New Holdco Common Stock will not be required to be registered under the Exchange Act, and will not be listed on any securities exchange. No trading market for the New Holdco Common Stock currently exists, and the Proponent Debtors do not expect one to develop.
XII. CONCLUSION
The Debtors believe the Plan is in the best interests of all creditors and urge the holders of Impaired Claims to vote to accept the Plan and to evidence the acceptance by timely returning their Ballots marked to accept the Plan.
Dated: November 5, 2012
[SIGNATURE PAGES IMMEDIATELY FOLLOW]
137
LIST OF EXHIBITS
Exhibit A Joint Plan Exhibit B Disclosure Statement Order Exhibit C Projected Financial Information Exhibit D Liquidation Analysis Exhibit E Valuation Analysis
2 EXHIBIT A
Joint Plan
3
THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
------x : In re : Chapter 11 : NEWPAGE CORPORATION, et al., : Case No. 11-12804 (KG) : Debtors.1 : Jointly Administered : ------x
DEBTORS’ SECOND AMENDED JOINT CHAPTER 11 PLAN
PROSKAUER ROSE LLP PACHULSKI STANG ZIEHL & JONES Eleven Times Square 919 N. Market Street, 17th Floor New York, NY 10036-8299 P.O. Box 8705 Tel: 212.969.3000 Wilmington, Delaware 19899-8705 (Courier Fax: 212.969.2900 19801) Tel: 302.652.4100
Co-Attorneys for the Debtors Co-Attorneys for the Debtors and Debtors in Possession and Debtors in Possession
Dated: November 4, 2012
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, as applicable, are, Chillicothe Paper Inc. (6154), Escanaba Paper Company (5598), Luke Paper Company (6265), NewPage Canadian Sales LLC (5384), NewPage Consolidated Papers Inc. (8330), NewPage Corporation (6156), NewPage Energy Services LLC (1838), NewPage Group Inc. (2465), NewPage Holding Corporation (6158), NewPage Port Hawkesbury Holding LLC (8330), NewPage Wisconsin System Inc. (3332), Rumford Paper Company (0427), Upland Resources, Inc. (2996), and Wickliffe Paper Company LLC (8293). The Debtors’ corporate headquarters is located at 8540 Gander Creek Drive, Miamisburg, OH 45342.
29766749v43 DEBTORS’ SECOND AMENDED JOINT CHAPTER 11 PLAN
THE JOINT CHAPTER 11 PLAN CONTAINS 12 SEPARATE PLANS
Please refer to the Disclosure Statement for a discussion of, among other things, the Debtors’ history, businesses, assets, results of operations, and projections of future operations, as well as a summary and description of this Plan and certain related matters.
This Joint Chapter 11 Plan consists of twelve separate chapter 11 Plans – one Plan for each of the Debtors that will emerge as a reorganized entity. This Plan does not substantively consolidate any Estates. Two Debtors – NewPage Group Inc. and NewPage Holding Corporation – are not proposing a chapter 11 plan and intend to dissolve as described in Section 4.5.1 of the Plan. Any reference herein to the “Plan” shall be a reference to the separate Plan of each Debtor, as the context requires. The votes to accept or reject a Plan by holders of Claims against a particular Debtor shall be tabulated as votes to accept or reject that Debtor’s separate Plan. Distributions under a Debtor’s Plan will be made to the holders of Claims in the Classes identified in that Plan.
The Settlement Parties have engaged in extensive communications regarding the Plan process and alternative plan formulations and participated in a mediation process in a concerted effort to resolve their existing and potential disputes. These efforts have culminated in the Settlements set forth in this Plan pursuant to which Distributions to Creditors shall be made in accordance with their terms.
ALL HOLDERS OF CLAIMS ARE ENCOURAGED TO READ THIS PLAN AND THE DISCLOSURE STATEMENT CAREFULLY AND IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT ANY DEBTOR’S PLAN.
ARTICLE I
DEFINITIONS
1.1 Scope of Defined Terms. For purposes of this Plan, except as expressly provided or unless the context otherwise requires, capitalized terms not otherwise defined shall have the meanings in Section 1.2 of this Plan. Unless the context otherwise requires, any capitalized term used and not defined in this Plan, that is defined in the Bankruptcy Code, shall have the meaning ascribed in the Bankruptcy Code.
1.2 Definitions.
1.2.1 2007 Acquisition means the acquisition by NPC of 100% of the stock of Stora Enso North America, Inc. from SEO, effectuated on December 21, 2007.
2 29766749v43 1.2.2 2009 Refinancing means the September 30, 2009 issuance of the First Lien Notes, used to satisfy certain term loan indebtedness incurred by the Debtors in the 2007 Acquisition.
1.2.3 2013 PIK Notes means the floating rate senior unsecured PIK notes due 2013, issued pursuant to an indenture, dated as of May 2, 2005, between NPHC, as issuer, and U.S. Bank National Association, as successor trustee, having an outstanding principal balance as of the Commencement Date of $229,040,774.
1.2.4 2013 PIK Notes Settlement Payment means a Distribution in Cash to the indenture trustee for the 2013 PIK Notes, for the benefit of the holders of the 2013 PIK Notes, in an amount equal to $200,000, which (together with the Senior Subordinated Unsecured Notes Settlement Payment) shall be funded by the first $400,000 of Subordination Turnover otherwise payable to the Second Lien Notes Trustee.
1.2.5 2015 PIK Notes means the senior unsecured PIK notes due 2015, issued pursuant to an indenture, dated as of December 21, 2007, between NPGI, as issuer, and Deutsche Bank Trust Company Americas, as successor trustee, having an outstanding principal balance as of the Commencement Date of $269,201,522.
1.2.6 Adequate Protection Claim means a claim (if any) of the First Lien Noteholders and/or Second Lien Noteholders arising under section 507(b) of the Bankruptcy Code and section 15 of the DIP Order.
1.2.7 Administrative Expense Claim means (i) any Claim constituting a cost or expense of administration of any Estate under sections 503(b), 507(a)(2) and 507(b) of the Bankruptcy Code during the period from the Commencement Date up to and including the Effective Date, including any Claim for compensation and reimbursement of expenses of Professionals arising during the period from and after the Commencement Date and prior to the Effective Date to the extent Allowed by Final Order of the Bankruptcy Court under sections 328, 330, 331, or 503(b) of the Bankruptcy Code or otherwise in accordance with the provisions of this Plan, whether fixed before or after the Effective Date, (ii) a Section 503(b)(9) Claim, and (iii) any fees or charges assessed against an Estate pursuant to section 1930 of chapter 123 of title 28 of the United States Code.
1.2.8 Affiliate has the meaning set forth in section 101(2) of the Bankruptcy Code.
1.2.9 Allowed means, with reference to any Claim, (i) any Claim that has been listed by any Debtor in its Schedules, as amended from time to time in accordance with Bankruptcy Rule 1009, as liquidated in amount and not disputed, not contingent and not unliquidated and for which no contrary proof of Claim has been timely filed; provided, however, that the Debtors shall not amend their Schedules after the hearing on the Disclosure Statement, but shall retain the right to seek approval from the Bankruptcy Court to allow additional Claims against the Estates, (ii) any Claim expressly allowed by this Plan, (iii) any timely filed proof of Claim that is not disputed or as to which no objection to allowance has been timely interposed in accordance with Section 7.1 of this Plan or such other period of limitation fixed by the
3 29766749v43 Bankruptcy Code, the Bankruptcy Rules, or the Bankruptcy Court, (iv) any Claim that is compromised, settled, or otherwise resolved pursuant to the authority granted to the Reorganized Debtors pursuant to this Plan, or (v) any Claim that has been Allowed by Final Order, except that (x) Claims allowed solely for the purpose of voting to accept or reject this Plan pursuant to an order of the Bankruptcy Court under Bankruptcy Rule 3018(a) shall not be considered Allowed, (y) unless otherwise specified in this Plan or by order of the Bankruptcy Court, an Allowed Administrative Expense Claim or Allowed Claim shall not for any purpose under this Plan include interest on that Administrative Expense Claim or Claim from and after the Commencement Date, unless interest is expressly provided for in this Plan, (3) an Allowed Claim shall not include any Claim subject to disallowance in accordance with section 502(d) of the Bankruptcy Code.
1.2.10 Available New Holdco Common Stock means the aggregate percentage of New Holdco Common Stock available for Distribution, net of the MIP Stock Percentage.
1.2.11 Ballot means the form distributed to each holder of an Impaired Claim entitled to vote to accept or reject a Plan, on which form the holder may cast its vote in respect of this Plan in accordance with the Plan and the procedures governing the solicitation process, and which must be actually received by the Claims Agent on or before the Voting Deadline in order to be counted.
1.2.12 Bankruptcy Code means title 11 of the United States Code, as now in effect or as hereafter amended, to the extent applicable to the Chapter 11 Cases.
1.2.13 Bankruptcy Court means the United States Bankruptcy Court for the District of Delaware, and such other court having original and exclusive subject matter jurisdiction over the Chapter 11 Cases pursuant to 28 U.S.C. § 1334(a).
1.2.14 Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure, as promulgated by the United States Supreme Court pursuant to section 2075 of title 28 of the United States Code, and any local rules of the Bankruptcy Court, as amended from time to time and applicable to the Chapter 11 Cases.
1.2.15 Board of Directors means the board of directors of each of the Debtors or Reorganized Debtors, as applicable, as they may exist from time to time.
1.2.16 Business Day means a day other than a Saturday, a Sunday or any other day on which commercial banks in New York, New York are required or authorized to close by law or executive order.
1.2.17 Cash means the lawful currency of the United States of America.
1.2.18 Causes of Action means any and all prepetition actions, claims, proceedings, and causes of action, that were not time barred and became property of any of the Debtors' estates on the Commencement Date or the proceeds of which would become property of any of the Debtors' estates pursuant to chapter 5 of the Bankruptcy Code, whether known, unknown, reduced to judgment, not reduced to judgment, liquidated, unliquidated, foreseen or unforeseen, in law or equity, including any causes of action for recharacterization or
4 29766749v43 subordination. If the Litigation Trust brings a time-barred claim, the defendant(s) against which the claims(s) are brought shall have standing to raise the time bar and the fact that the claim(s) were not transferred to the Litigation Trust.
1.2.19 Cerberus Entities means any or all of the following: (i) Cerberus Operations and Advisory Company, LLC; Cerberus Partners, L.P.; and Cerberus Capital Management, LP; and any affiliates of the foregoing Entities; (ii) any current or former director, officer, member of management, and other employee of any Debtor who is or was an employee, officer or otherwise affiliated with any Cerberus Entity; and (iii) any attorney, advisor or consultant of a Cerberus Entity identified in sub-clauses (i) and (ii).
1.2.20 Chapter 11 Cases means the cases commenced under chapter 11 of the Bankruptcy Code by the Debtors, styled In re NewPage Corporation, et al., Chapter 11 Case No. 11-12804 (KG) (Jointly Administered), currently pending before the Bankruptcy Court.
1.2.21 Claim means a “claim,” as defined in section 101(5) of the Bankruptcy Code, against an Estate, whether or not asserted, whether or not the facts of or legal bases therefor are known or unknown, and specifically including any rights under sections 502(g), 502(h), or 502(i) of the Bankruptcy Code, any claim of a derivative nature, any potential or unmatured claim, and any other contingent claim.
1.2.22 Claims Agent means Kurtzman Carson Consultants, LLC, the agent of the Clerk of the Bankruptcy Court appointed by the Bankruptcy Court, or any successor agent as may be similarly appointed.
1.2.23 Class means a category of Claims or Equity Interests set forth in Article III of this Plan.
1.2.24 Co-Collateral Agents means JPMorgan Chase Bank, N.A. and Wells Fargo Capital Finance, LLC.
1.2.25 Collateral means any property or interest in property of any Estate subject to an unavoidable Lien securing the payment or performance of a Claim.
1.2.26 Commencement Date means September 7, 2011, the date on which the Debtors commenced the Chapter 11 Cases.
1.2.27 Committee means the statutory committee of creditors appointed pursuant to section 1102(a) of the Bankruptcy Code in the Chapter 11 Cases.
1.2.28 Committee Litigation Claims means (a) all claims pursuant to section 547 of the Bankruptcy Code other than (i) claims against the Cerberus Entities, and (ii) any claim whose prosecution would create a material net detriment to the business of the Reorganized Debtors, which claims shall be determined in good faith by the Debtors, the Committee and the First Lien Notes Steering Committee (and in consultation with the Second Lien Group), and, after using best efforts, listed in Exhibit 1.2.28 of the Plan, which Exhibit shall be filed under seal and shall not be amended, modified or supplemented without the express consent (which consent shall not be unreasonably withheld) of the Debtors, the First Lien Notes Steering
5 29766749v43 Committee and the Committee (and in consultation with the Second Lien Group), (b) if the Bankruptcy Court does not approve a settlement propounded prior to confirmation of the Plan between the Debtors’ estates and the Cerberus Entities, or does not approve an amended settlement that may be propounded prior to the Effective Date if the first settlement is not approved, Causes of Action against the Cerberus Entities, and Causes of Action against other Entities, if any, that the Cerberus Entities claim are liable for contribution, indemnification or similar relief (other than claims against any Releasee), and (c) objections to Disputed General Unsecured Claims. If an amended settlement is propounded under sub-section 1.2.28(b) prior to the Effective Date, the Debtors and Reorganized Debtors shall use their best efforts to cause the motion to approve the amended settlement to be heard and decided as expeditiously as the Bankruptcy Court can accommodate. For the avoidance of doubt, Committee Litigation Claims shall not include any claims or Causes of Action against the SEO Released Parties or the Trust Parties, or any other Releasee.
1.2.29 Confirmation Date means the date on which the Confirmation Order is entered on the docket of the Bankruptcy Court in the Chapter 11 Cases.
1.2.30 Confirmation Hearing means the hearing to consider confirmation of this Plan in accordance with section 1128 of the Bankruptcy Code, as such hearing may be adjourned or continued from time to time.
1.2.31 Confirmation Order means the order(s) of the Bankruptcy Court confirming this Plan.
1.2.32 Creditor means any Entity holding a Claim.
1.2.33 Debtor Intercompany Claim means a Claim by the Estate of a Debtor against another Debtor.
1.2.34 Debtors means, collectively, the Debtors listed in footnote 1 of this Plan, including the Non-Proponent Debtors, unless the context otherwise requires.
1.2.35 Debtors in Possession means the Debtors in their capacity as debtors in possession pursuant to sections 1101(1) and 1107(a) of the Bankruptcy Code.
1.2.36 DIP Administrative Agent means JPMorgan Chase, Bank N.A.
1.2.37 DIP Agents means the Co-Collateral Agents together with the DIP Administrative Agent.
1.2.38 DIP Agents Claims means the Claims for reasonable fees and expenses, including attorneys’ fees, incurred by the DIP Agents during the Chapter 11 Cases.
1.2.39 DIP Credit Agreement means the $600 million debtor in possession postpetition financing agreement (as amended, restated, supplemented or otherwise modified from time to time, including all related documents), by and among the Debtors, the DIP Agents, and the DIP Lenders, approved by the DIP Order.
6 29766749v43 1.2.40 DIP Facility means the debtor in possession financing facility approved by the DIP Order and established pursuant to the DIP Credit Agreement.
1.2.41 DIP Lenders means collectively, lenders party to the DIP Credit Agreement from time to time, each in their capacity as a lender.
1.2.42 DIP Facility Claims means any Claims arising under, derived from, or based upon, the DIP Facility, including the DIP Agents Claims.
1.2.43 DIP Order means Final Order (I) Authorizing Debtors (A) to Obtain Post-Petition Financing Pursuant to 11 U.S.C. §§ 105, 361, 362, 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1) and 364(e) and (B) to Utilize Cash Collateral Pursuant to 11 U.S.C. § 363 and (II) Granting Adequate Protection to Pre-Petition Secured Parties Pursuant to 11 U.S.C. §§ 361, 362, 363 and 364, dated October 5, 2011, which order is currently subject to an appeal pending in the District Court [Docket No. 310].
1.2.44 Disallowed Claim means a Claim that is disallowed in its entirety by an order of the Bankruptcy Court or another court of competent jurisdiction, as the case may be.
1.2.45 Disbursing Agent means, as applicable, (i) the Reorganized Debtors, or any authorized agent of the Reorganized Debtors chosen by the Reorganized Debtors to make or facilitate Distributions pursuant to the Plan, or (ii) the Litigation Trust Disbursing Agent.
1.2.46 Disclosure Statement means the disclosure statement for this Plan, as amended, supplemented, or modified from time to time, including all exhibits and schedules thereto and references therein that relate to the Plan, if and as approved by the Bankruptcy Court in accordance with section 1125 of the Bankruptcy Code.
1.2.47 Disputed Claim means a Claim that is not an Allowed Claim or a Disallowed Claim, and is (i) a Claim, proof of which was filed, or an Administrative Expense Claim or other unclassified Claim, which is the subject of a dispute or as to which Claim a Debtor or Litigation Trustee (after the Effective Date, solely with respect to the General Unsecured Claims) has interposed or may interpose a timely objection and/or a request for estimation in accordance with section 502(c) of the Bankruptcy Code and Bankruptcy Rule 3018 or other applicable law, which dispute, objection, and/or request for estimation has not been withdrawn or determined by a Final Order, and/or (ii) any Claim, proof of which was required to be filed by order of the Bankruptcy Court, but as to which a proof of claim was not timely or properly filed.
1.2.48 Disputed Claim Reserve means a reserve established and maintained under this Plan in a segregated, interest bearing account (or accounts) into which the Litigation Trust Disbursing Agent will deposit sufficient Cash from the Litigation Trust Assets to make Distributions to all holders of Disputed General Unsecured Claims entitled to Distributions in accordance with the provisions of this Plan and the Litigation Trust Agreement, to the extent such Disputed Claims become Allowed Claims, as described in Article VII of this Plan. The Disputed Claim Reserve shall also include a ledger maintained by the Litigation Trustee with respect to Litigation Trust Interests allocable to Disputed Claims.
7 29766749v43 1.2.49 Distribution means a payment in Cash, or distribution of Litigation Trust Interests, New Holdco Common Stock, or shares of stock of Reorganized NPC (which shares are exchanged for New Holdco Common Stock pursuant to Section 4.5.2 of this Plan), as applicable, made by the applicable Disbursing Agent to the holder of an Allowed Claim on account of such Allowed Claim pursuant to the terms and provisions of this Plan and the Litigation Trust Agreement, as applicable.
1.2.50 Distribution Date means the Effective Date, and each June 30 and December 31 thereafter (to the extent necessary to distribute Cash released from the Disputed Claims Reserve as a result of the allowance, disallowance or reduction of Disputed Claims). If the aggregate value of the applicable Distribution to be made on any such date is less than (i) $500,000 with respect to Distributions of the Litigation Trust Interests (or Cash on account thereof) and Settlement Cash or (ii) $2 million, with respect to all other Distributions, the Distribution may, at the discretion of the applicable Disbursing Agent, be withheld until the next Distribution Date; unless the Distribution (a) is to be made to the holder of a Claim Allowed since the immediately preceding Distribution Date, or (b) is the final Distribution to be made under this Plan, such minimum Distribution limitation shall not apply, and the Disbursing Agent shall make the Distribution notwithstanding that the aggregate value of the Distribution may be less than the minimum Distribution limitation.
1.2.51 Distribution Record Date means the record date for the purpose of making Distributions under this Plan, which date shall be the date the Confirmation Order is entered by the Bankruptcy Court.
1.2.52 District Court means the United States District Court for the District of Delaware.
1.2.53 Effective Date means a Business Day selected by the Debtors that is on or after the date by which the conditions precedent to the effectiveness of this Plan specified in Section 11.1 of this Plan have been satisfied or waived in accordance with Section 11.2 of this Plan.
1.2.54 Encumbrance means, with respect to any asset, a mortgage, Lien, pledge, charge, security interest, assignment, or encumbrance of any kind or nature in respect of such asset (including any conditional sale or other title retention agreement, any security agreement, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction).
1.2.55 Entity means an individual, a corporation, a general partnership, a limited partnership, a limited liability company, a limited liability partnership, an association, a joint stock company, a joint venture, an estate, a trust, an unincorporated organization, a governmental unit or any subdivision thereof, including the United States Trustee, or any other entity.
1.2.56 Equity Interest means any equity interest or related proxy, in any of the Debtors represented by duly authorized, validly issued and outstanding shares of preferred stock or common stock, stock appreciation rights, membership interests, partnership interests, or any
8 29766749v43 other instrument evidencing a present ownership interest, inchoate or otherwise, in any of the Debtors, or right to convert into such an equity interest or acquire any equity interest of the Debtors, whether or not transferable, or an option, warrant or right, contractual or otherwise, to acquire any such interest, which was in existence prior or on the Commencement. For the avoidance of doubt, an Equity Interest shall not include or pertain to any new equity interest issued pursuant to this Plan.
1.2.57 ERISA means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto.
1.2.58 Estate means the estate of each Debtor as created under section 541 of the Bankruptcy Code.
1.2.59 Excluded DIP Obligations means all of the Debtors’ contingent or unliquidated payment obligations (including indemnification and expense reimbursement obligations) under the DIP Facility, to the extent that any such obligations have not been paid in full in cash on the Effective Date.
1.2.60 Executory Contract means a contract or unexpired lease to which one or more of the Debtors is a party and which is subject to assumption, assumption as modified, assumption and assignment, or rejection under section 365 of the Bankruptcy Code at the election of the Debtors.
1.2.61 Exit Commitment Letter means the commitment letter (including each Annex thereto) dated as of October 29, 2012, by and among Goldman Sachs Lending Partners LLC, JPMorgan Chase Bank, N.A., Barclays Bank PLC, Wells Fargo Bank, National Association, UBS Loan Finance LLC and J.P. Morgan Securities LLC, NewPage Corporation and those of its subsidiaries party thereto.
1.2.62 Exit Financing means the Facilities contemplated by, and as defined in, the Exit Commitment Letter.
1.2.63 Exit Financing Arrangers means, collectively, the Term Facility Arrangers, the Revolving Facility Arrangers and any other Commitment Parties, each as defined in the Exiting Financing Commitment Letter.
1.2.64 Exit Financing Documents means the documents governing the Exit Financing, which shall be in form and substance reasonably satisfactory to the First Lien Notes Trustee.
1.2.65 Exit Financing Group means the Exit Financing Arrangers and the lenders, administrative agents, collateral agents and any other agents under the Exit Financing.
1.2.66 Final Order means an order or judgment of the Bankruptcy Court or any other court of competent jurisdiction as to which the time to appeal, petition for certiorari, or move for re-argument or rehearing has expired and as to which no appeal, petition for certiorari, or other proceedings for re-argument or rehearing are then pending; or as to which any right to
9 29766749v43 appeal, petition for certiorari, reargue, or rehear has been waived in writing in form and substance satisfactory to the Reorganized Debtors and the party affected thereby.
1.2.67 First Lien Noteholders means the holders of the First Lien Notes.
1.2.68 First Lien Notes means the senior secured first lien notes bearing interest at the rate of 11.375% per annum, issued pursuant to the First Lien Notes Indenture, and having an outstanding principal balance as of the Commencement Date of $1.7 billion.
1.2.69 First Lien Notes Cash means a Distribution of Cash to the holders of the First Lien Notes Claims, in accordance with Sections 3.3.2(b) and 4.8.3 of the Plan, such that, after taking into consideration the proceeds of the Term Facility (as defined in the Exit Commitment Letter) and the making of the Distribution of First Lien Notes Cash to the holders of First Lien Notes Claims and other Distributions pursuant to this Plan, the pro forma unrestricted cash balance of the Reorganized Debtors (without giving effect to any draw of revolving loans under the Exit Facilities) upon emergence (after taking into account any such Distribution to the holders of First Lien Notes Claims and other Distributions pursuant to this Plan) will be $20 million; (provided that cash shall not be deemed restricted for purposes hereof solely as a result of being on deposit in an account subject to a control agreement in favor of the Revolving Administrative Agent in favor of the lenders party to the revolving loans under the Exit Facilities).
1.2.70 First Lien Notes Claims means all Claims against the Estate of NPC, arising under the First Lien Notes and the First Lien Notes Indenture, which, solely for purposes of this Plan, shall be Allowed in the aggregate amount of $1.7 billion.
1.2.71 First Lien Notes Deficiency Claims means the unsecured portion of the First Lien Notes Claims and unsecured portion of the First Lien Notes Guaranty Claims, as determined pursuant to section 506(a) of the Bankruptcy Code, which Claims are included in NPC Class 3B and GD 3B, which shall be Allowed in the aggregate amount of $735 million.
1.2.72 First Lien Notes Guaranty Claims means the Claims arising from the Guarantor Debtors’ respective guaranties of the First Lien Notes Claims, which, solely for purposes of this Plan, shall be Allowed in the aggregate amount of $1.7 billion.
1.2.73 First Lien Notes Indenture means the indenture dated as of September 30, 2009, among NPC, as issuer, the First Lien Notes Trustee, and the Guarantor Debtors, and all of the documents and instruments relating thereto, as amended, supplemented, modified or restated from time to time.
1.2.74 First Lien Notes Steering Committee means a committee formed by certain holders of First Lien Notes, as identified in Exhibit 1.2.74 of this Plan.
1.2.75 First Lien Notes Subordination Turnover Cap means a Distribution to the First Lien Notes Trustee from the Subordination Turnover of (i) $3.0 million, from Distributions to the holders of Senior Subordinated Unsecured Notes Claims from the Settlement Cash ($30 million) and the Litigation Trust Initial Proceeds; (ii) a share of the Litigation Trust proceeds, of up to $600,000, realized in excess of the Litigation Trust Initial Proceeds and up to
10 29766749v43 $50 million, which share is based upon a deficiency Claim of $735 million; and (iii) a share of the Litigation Trust proceeds realized in excess of $50 million, which share is based upon the First Lien Notes Claim of $1.7 billion; for avoidance of doubt, any amounts otherwise distributable to the First Lien Notes Trustee from the Subordination Turnover that exceed the First Lien Notes Subordination Turnover Cap under clauses (i) and (ii) above shall be distributed pro rata to the holders of Second Lien Notes Claims.
1.2.76 First Lien Notes Trustee means The Bank of New York Mellon, as Indenture Trustee and collateral trustee under the First Lien Notes Indenture.
1.2.77 GAAP means generally accepted accounting principles, established by the Financial Accounting Standards Board.
1.2.78 GD Class means a Class of Claims or Equity Interests in a GD Plan.
1.2.79 GD Class 3A Litigation Trust Interests means beneficial interests in the Litigation Trust granted to holders of Allowed GD Class 3A Claims (General Unsecured Claims), which shall entitle such holders to a Pro Rata Share of net proceeds of the Litigation Trust (subject to the First Lien Notes Subordination Turnover Cap).
1.2.80 GD Plan means the Plan proposed by a Guarantor Debtor.
1.2.81 General Unsecured Claim means any Claim against one or more of the Debtors, other than (i) Administrative Expense Claims, (ii) Priority Tax Claims, (iii) Non-Tax Priority Claims, (iv) Debtor Intercompany Claims, (v) Secured Claims, (vi) First Lien Notes Claims; (vii) First Lien Notes Deficiency Claims; (viii) First Lien Notes Guaranty Claims; (ix) Second Lien Notes Claims, (x) Second Lien Notes Guaranty Claims, (xi) Senior Subordinated Unsecured Notes Claims, (xii) Senior Subordinated Unsecured Notes Guaranty Claims, (x) Qualified Trade Creditor Claims, and (xiii) Unsecured Notes Claims. Except as excluded in the preceding sentence, General Unsecured Claims include (a) any Claim arising from the rejection of an Executory Contract under section 365 of the Bankruptcy Code and (b) any Claim arising from the provision of goods or services to the Debtors prior to the Commencement Date, including the Claims of commercial trade Creditors that are not Section 503(b)(9) Claims.
1.2.82 Governance Documents means any certificate of incorporation, bylaws, certificate of formation, limited liability company operating agreement, partnership agreement, or any other formation and organizational documents of the Debtors in effect as of the Commencement Date, as amended in accordance with Sections 4.4 and 9.2 of this Plan, substantially in the form contained in Schedules 9.2(A-C) to the Plan Supplement and in all respects in form and substance satisfactory to the Debtors and/or Reorganized Debtors and the First Lien Notes Trustee.
1.2.83 Guarantor Debtors means Chillicothe Paper Inc., Escanaba Paper Company, Luke Paper Company, NewPage Canadian Sales, LLC, NewPage Consolidated Papers Inc., NewPage Energy Services LLC, Rumford Paper Company, NewPage Port Hawkesbury Holding LLC, NewPage Wisconsin System Inc., Upland Resources Inc., and Wickliffe Paper Company LLC.
11 29766749v43 1.2.84 Impaired means “impaired” within the definition of section 1124 of the Bankruptcy Code.
1.2.85 Indenture Trustees means (i) the First Lien Notes Trustee; (ii) the Second Lien Notes Trustee; (iii) HSBC Bank USA, National Association, as indenture trustee under the indenture governing the Senior Unsecured Subordinated Notes; (iv) U.S. Bank National Association, as successor trustee under the indenture governing the 2013 PIK Notes; and (v) Deutsche Bank Trust Company Americas, as successor trustee under the indenture governing the 2015 PIK Notes, each of the foregoing solely in their capacity as such.
1.2.86 Indenture Trustee Charging Lien means any Lien or other priority in payment arising prior to the Effective Date to which an Indenture Trustee is entitled pursuant to an indenture, against distributions to be made to noteholders under an indenture, for payment of any Indenture Trustee Claims.
1.2.87 Indenture Trustee Claims means the Claims for reasonable fees and expenses, disbursements and indemnity claims, including attorneys’ fees and agent fees, expenses and disbursements, incurred by the Indenture Trustees whether prepetition or postpetition and whether prior to or after consummation of the Plan, the payment of which is subject to the cap provided for in Section 14.7 of this Plan.
1.2.88 L/C means any letter of credit issued under the DIP Credit Agreement.
1.2.89 L/C Issuer means the issuer of an L/C under the DIP Credit Agreement.
1.2.90 Lien means any charge against or interest in any Collateral securing payment of a debt or performance of an obligation.
1.2.91 LIBOR means, the one-month rate appearing on Reuters Page LIBOR01 (or on any successor or substitute page of that service, or any successor to or substitute service, providing rate quotations comparable to those currently provided by Reuters on that page for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of the applicable one-month period, as the rate for Dollar deposits with a maturity comparable to that one-month period. If a current LIBOR rate is not then available then the “LIBOR” for that one-month period shall be the rate at which Dollar deposits of $5,000,000 and for a maturity comparable to the one-month period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior commencement of such one month period.
1.2.92 Litigation Trust means the trust established pursuant to Article [V] of this Plan to, among other things, pursue the Committee Litigation Claims on behalf of and for the benefit of the Litigation Trust Beneficiaries and to distribute Litigation Trust Interests, the Settlement Cash, the Litigation Trust Initial Proceeds and the net proceeds realized from the Committee Litigation Claims in accordance with Article III, Section 4.10 and Article V of this Plan.
12 29766749v43 1.2.93 Litigation Trust Agreement means the trust agreement governing the Litigation Trust, substantially in the form contained in Schedule 1.2.93 to the Plan Supplement and in all respects in form and substance satisfactory to the First Lien Notes Trustee, the Second Lien Group, the Committee and the Debtors.
1.2.94 Litigation Trust Assets means the Committee Litigation Claims, the Litigation Trust Funding, the Litigation Trust Initial Proceeds, and any other assets (including the Settlement Cash) acquired by the Litigation Trust on or after the Effective Date pursuant to the Litigation Trust Agreement or the Plan; provided, however, that if any of the retained $500,000 remains after payment in full of the SEO Professional Fees, the Debtors or Reorganized Debtors shall remit such excess Cash to the Litigation Trust.
1.2.95 Litigation Trust Beneficiaries means, without duplication, the holders of the Litigation Trust Interests.
1.2.96 Litigation Trust Disbursing Agent means the Litigation Trustee, or any authorized agent of the Litigation Trust chosen by the Litigation Trustee to make or facilitate Distributions from the Litigation Trust or the Disputed Claim Reserve.
1.2.97 Litigation Trust Funding means Cash in the amount of $5 million, less (i) any settlement payments that are paid to the Litigation Trust by the Cerberus Entities prior to the Effective Date, and (ii) the aggregate amount of any professional fees, costs and expenses incurred by the Committee in connection with any discovery requests made or pursued after September 14, 2012, in connection with the Committee’s investigation of claims or Causes of Action against the Cerberus Entities, which Cash is to be deposited in the Litigation Trust on the Effective Date to fund administrative fees and expenses of the Litigation Trust. For the avoidance of doubt, no deductions against the $5 million Cash shall be made for any Professional fees, costs and expenses the Committee may incur in connection with (i) interposing an objection to any proposed settlement with the Cerberus Entities, or (ii) conducting limited discovery in respect of the potential tax related effects on the Debtors’ net operating loss carry-forwards if the Cerberus Entities were to take a worthless stock deduction or seek to dispose of its Equity Interests in the Debtors.
1.2.98 Litigation Trust Initial Proceeds means Cash in the amount of $40 million (less $500,000 retained by the Debtors for the SEO Professional Fees) to be deposited by the Debtors into the Litigation Trust; provided, however, that if any of the retained $500,000 remains after payment in full of the SEO Professional Fees, the Debtors or Reorganized Debtors shall remit such excess Cash to the Litigation Trust.
1.2.99 Litigation Trust Interests means the NPC Class 3A Litigation Trust Interests, the NPC Class 3B Litigation Trust Interests, the NPC Class 3C Litigation Trust Interests, the NPC Class 3D Litigation Trust Interests and the GD Class 3A Litigation Trust Interests.
1.2.100 Litigation Trust Note means a non-interest bearing note, in form and substance reasonably acceptable to the Reorganized Debtors, the First Lien Notes Steering Committee, the Committee and the Second Lien Group in the amount of the Litigation Trust
13 29766749v43 Funding. After the Effective Date, the note shall be repaid from the proceeds of the Committee Litigation Claims as and when received by the Litigation Trust (other than from the Litigation Trust Initial Proceeds), prior to any additional Distributions of Litigation Trust proceeds.
1.2.101 Litigation Trustee means the person or entity, solely in the capacity as trustee of the Litigation Trust, approved by the Bankruptcy Court as part of the Confirmation Order and appointed to administer the Litigation Trust in accordance with the terms and provisions of the Litigation Trust Agreement. The initial Litigation Trustee shall be Pirinate Consulting Group LLC, Litigation Trustee for the Chapter 11 Estates of NewPage Corporation.
1.2.102 MIP Stock Percentage means the aggregate percentage of New Holdco Common Stock to be issued on the Effective Date to the participants under the Reorganized NPC New Compensation Plans.
1.2.103 New Holdco means a Delaware “for profit” company to be formed as a holding company to hold 100% of the outstanding shares of Reorganized NPC.
1.2.104 New Holdco Common Stock means the common stock of New Holdco, par value $0.001 per share, to be issued by New Holdco on the Effective Date.
1.2.105 New Holdco Documents means any certificate of incorporation, bylaws, certificate of formation, limited liability company operating agreement, partnership agreement, or any other formation and organizational documents of New Holdco, substantially in the form contained in the Plan Supplement and in all respects in form and substance satisfactory to the Debtors and/or Reorganized Debtors and the First Lien Notes Trustee.
1.2.106 Non-Proponent Debtors means NPGI and NPHC.
1.2.107 Non-Tax Priority Claim means any Claim against a Debtor or its Estate, other than an Administrative Expense Claim, Priority Tax Claim, or an Adequate Protection Claim to the extent that it is entitled to priority in payment in accordance with sections 507(a)(4), (5), (6), (7) or (8), or 507(b) of the Bankruptcy Code.
1.2.108 Notes means the (i) First Lien Notes, (ii) Second Lien Notes, and (iii) Senior Subordinated Unsecured Notes, and (iv) 2013 PIK Notes.
1.2.109 Notes Collateral Trustee means The Bank of New York Mellon, in its capacity as collateral trustee under each of (i) the Priority Lien Debt Pledge and Security Agreement, dated as of December 21, 2007 and (ii) the Parity Lien Debt Pledge and Security Agreement, dated as of May 2, 2005.
1.2.110 NPC means NewPage Corporation.
1.2.111 NPC Class 3A Litigation Trust Interests means beneficial interests in the Litigation Trust granted to holders of Allowed NPC Class 3A Claims (General Unsecured Claims), which shall entitle such holders to a Pro Rata Share of net proceeds of the Litigation Trust (subject to the First Lien Notes Subordination Turnover Cap).
14 29766749v43 1.2.112 NPC Class 3B Litigation Trust Interests means beneficial interests in the Litigation Trust granted to holders of Allowed NPC Class 3B Claims (First Lien Note Deficiency Claims), which shall entitle such holders to a Pro Rata Share of Litigation Trust proceeds realized in excess of $50 million (which, for the avoidance of doubt, shall include the Litigation Trust Initial Proceeds, and referenced in Section 5.4 of this Plan), which share is allocable to the First Lien Notes Deficiency Claim of $735 million.
1.2.113 NPC Class 3C Litigation Trust Interests means beneficial interests in the Litigation Trust granted to holders of Allowed NPC Class 3C Claims (Second Lien Note Claims), which shall entitle such holders to a Pro Rata Share of net proceeds of the Litigation Trust (subject to the First Lien Notes Subordination Turnover Cap), which share is allocable to the Second Lien Notes Claims of $1.061 billion.
1.2.114 NPC Class 3D Litigation Trust Interests means beneficial interests in the Litigation Trust granted to holders of Allowed NPC Class 3D Claims (Senior Subordinated Unsecured Note Claims), which shall entitle such holders to a Pro Rata Share of net proceeds of the Litigation Trust; provided that, on the Effective Date, and thereafter as applicable, the Disbursing Agent shall distribute to each of (i) the First Lien Notes Trustee (for the benefit of the holders of Allowed First Lien Notes Claims in NPC Class 3B), and (ii) the Second Lien Notes Trustee (for the benefit of the holders of Allowed Second Lien Notes Claims in NPC Class 3C), a Pro Rata Share of the (x) Settlement Cash and (y) Litigation Trust proceeds otherwise distributable to each holder of an Allowed NPC Senior Subordinated Unsecured Notes Claim, until the holders of the First Lien Notes Claims and Second Lien Note Claims have been paid in full; provided, however that the Distributions to the First Lien Notes Trustee (for the benefit of the holders of Allowed First Lien Notes Claims in NPC Class 3B) shall be subject to the First Lien Notes Subordination Turnover Cap.
1.2.115 NPCPI means NewPage Consolidated Papers Inc.
1.2.116 NPCS means NewPage Canadian Sales LLC.
1.2.117 NPGI means NewPage Group Inc.
1.2.118 NPHC means NewPage Holding Corporation.
1.2.119 NPPHH means NewPage Port Hawkesbury Holding LLC.
1.2.120 NPWSI means NewPage Wisconsin System Inc.
1.2.121 NPWSI Retirement Plan Settlement means the modified retiree benefit plan agreement between the Debtors and the USW to be implemented as of the Effective Date, as described in Section V.D.4 of the Disclosure Statement.
1.2.122 Other Secured Claim means a Secured Claim other than a First Lien Notes Claim, First Lien Notes Guaranty Claim, Second Lien Notes Claim, Second Lien Notes Guaranty Claim, and DIP Facility Claims.
1.2.123 PBGC means the Pension Benefit Guaranty Corporation.
15 29766749v43 1.2.124 Pension Plans means the NewPage Retirement Plan for Bargained Hourly Employees and the NewPage Cash Balance Plan for Non-Bargained Employees.
1.2.125 Plan means, as applicable, each and all of the chapter 11 plans of the Debtors, collectively, as set forth in this Second Amended Joint Chapter 11 Plan including all annexed exhibits and schedules and the Plan Documents, as amended, modified, or supplemented from time to time in accordance with the terms and provisions of this Plan.
1.2.126 Plan Documents means all documents, attachments, schedules, and exhibits related to this Plan, including the documents contained in the Plan Supplement, each of which shall be in form and substance satisfactory to the First Lien Notes Trustee.
1.2.127 Plan Supplement means the supplement to this Plan containing the exhibits and schedules to this Plan that are not served with the approved Disclosure Statement upon holders of Claims and Equity Interests in connection with the solicitation of votes to accept or reject this Plan, which shall be filed with the Bankruptcy Court no later than 5 days prior to the Voting Deadline, and each document contained therein shall be in form and substance satisfactory to the First Lien Notes Trustee; provided however, that the identity of any person proposed to serve as a director or officer of the Reorganized Debtors and any insider to be employed or retained by the Reorganized Debtors shall be disclosed prior to the Confirmation Hearing.
1.2.128 PM35 means paper machine No. 35, operated by NPWSI at its Stevens Point, Wisconsin mill.
1.2.129 PM35 Lease means the Lease Agreement (CPI 1997) dated as of December 23, 1997, between Wilmington Trust Company (not in its individual capacity but solely as Owner Trustee, as defined in the SEO Settlement Agreement), as Lessor, and NPWSI (successor to Consolidated Papers, Inc.), as Lessee (as amended, supplemented, modified or restated from time to time).
1.2.130 PM35 Net Purchase Price means the purchase price for PM35 to be included in the SEO Settlement Agreement, which, for purposes of this Plan, means either (as determined in accordance with the provisions of the SEO Settlement Agreement) (i) the SEO Secured Note (as defined in the SEO Settlement Agreement) in the aggregate principal amount of $16,395,530.31, to be delivered to SEO on the Effective Date; or (ii) $13,895,530.31 in Cash, payable to SEO on the Effective Date; provided, however, that if the Effective Date has not occurred on or prior to December 31, 2012, the principal amount of the SEO Secured Note or the Cash amount, as the case may be, shall increase by $600,000 per month from and after January 1, 2013; provided, further, that if NPWSI elects, at is option, to make any scheduled rent payments on or after January 1, 2013, under the PM35 Lease, then the amount of such rent payment(s) received by SEO shall be deducted from the principal amount of the SEO Secured Note or the Cash amount, as the case may be.
1.2.131 PM35 Operative Documents means the documents arising from and related to the PM35 Sale/Leaseback, including but not limited to the PM35 Lease, the PM35 Participation Agreement, the Trust Agreement, the Bill of Sale, any Replacement Lease, the
16 29766749v43 Lease Certificate of Acceptance, the Trust Indenture, the Indenture Certificates, the Tax Indemnity Agreement, the Ground Lease, the Memorandum of Ground Lease, the Leasehold Mortgage, the Joint Operating Agreement and the Support Agreement, each and collectively as defined in the SEO Settlement Agreement.
1.2.132 PM35 Participation Agreement means the Participation Agreement (CPI 1997) dated as of December 23, 1997, among NPWSI (successor to Consolidated Papers, Inc., as Lessee), Wilmington Trust Company (not in its individual capacity but solely as Owner Trustee), Wells Fargo Bank Northwest, N.A. (as successor to First Security Bank, National Association, as Indenture Trustee), the institutions named on Schedule I attached thereto (and their permitted successors and assigns), and Daimler Capital Services LLC (as successor to Chrysler Capital Corporation, as Owner Participant) (as amended, supplemented, modified or restated from time to time).
1.2.133 PM35 Sale/Leaseback means the transaction memorialized by (i) the PM35 Lease, (ii) the PM35 Participation Agreement, (ii) the other PM35 Operative Documents, and all attendant documentation memorializing the transaction.
1.2.134 Preserved Rights means, collectively, any and all rights, claims, Causes of Action, defenses, and counterclaims of or accruing to the Debtors or their Estates, as preserved in Section 4.9 of this Plan; for the avoidance of doubt, Preserved Rights shall not include any rights, claims, Causes of Action, defenses or counterclaims transferred to the Litigation Trust in accordance with Section 1.2.28 of this Plan, or released under the SEO Settlement Agreement or under this Plan.
1.2.135 Priority Tax Claim means any Claim of a governmental unit against an Estate entitled to priority in payment under sections 502(i) and 507(a)(8) of the Bankruptcy Code.
1.2.136 Pro Rata Share means, on any Distribution Date, with respect to an Allowed Claim against an Estate, the percentage represented by a fraction (i) the numerator of which shall be an amount equal to the holder’s Claim against the Estate, and (ii) the denominator of which shall be an amount equal to the aggregate amount of Allowed, Disputed and estimated Claims in the same Class as such Claim, against the Estate, except in cases where Pro Rata is used in reference to multiple Classes, in which case Pro Rata means the proportion that such holder’s Claim in a particular class bears to the aggregate amount of all Allowed, Disputed and estimated Claims in such multiple Classes.
1.2.137 Professional means any professional employed or to be compensated pursuant to sections 327, 328, 330, 331, 503(b), or 1103 of the Bankruptcy Code.
1.2.138 Qualified Trade Creditor means a trade creditor of any Debtor that (i) is a holder of a General Unsecured Claim, (ii) prior to the Effective Date, agrees in writing by making an election on its Ballot to (x) continue to provide substantially the same type and quantity of goods and/or services to the applicable Reorganized Debtor(s) as it provided prior to the Commencement Date for a minimum of two years after the Effective Date at the same prices or at other pricing and terms satisfactory to the Reorganized Debtors, and (y) provide for a
17 29766749v43 minimum of two years after the Effective Date unsecured trade credit to the applicable Reorganized Debtor(s) on payment terms no less favorable than the greater of (a) net 45 days and (b) the maximum trade terms that trade creditor made available to the applicable Debtor(s) during the 12 months prior to the Commencement Date, and (iii) continues to perform its obligations under the agreement described in clause (ii) above.
1.2.139 Qualified Trade Creditor Claims means any Claim of a Qualified Trade Creditor against one or more of the Debtors.
1.2.140 Releasees means each of the Entities, solely in the respective capacities indicated, but regardless of whether or not such Entity currently has such capacity: (i) any Debtor, (ii) a holder of First Lien Notes or Second Lien Notes, (iii) the Steering Committee of the holders of the First Lien Notes and each of its members, (iv) the Second Lien Group and each of its members, (v) the Committee and each of its members, (vi) the SEO Released Parties, (vii) the Trust Parties, (viii) a DIP Lender, a DIP Agent, or any other party released under the Final DIP Order, (ix) a member of the Exit Financing Group, (x) an Indenture Trustee, (xi) an arranger, underwriter, lender, initial purchaser, noteholder, syndication agent, book runner, deal manager, administrative agent, collateral agent and other agent with respect to the 2009 Refinancing or any indebtedness (including, without limitation, any interest rate, commodity or other hedge or derivative transactions) incurred by the Debtors in connection with the 2007 Acquisition, (xii) the Debtors’ financial advisor in connection with the 2007 Acquisition or the 2009 Refinancing, and (xiii) all affiliates, directors, officers, members of management, other employees, partners, agents, consultants, advisors, attorneys, and other Professionals representing any of the foregoing in their respective specified capacities (other than any current or former director, officer, member of management, and other employee of any Debtor who is or was an employee, officer or otherwise affiliated with any Cerberus Entity, and any attorney, advisor or consultant representing any Cerberus Entity); provided, however, that to the extent any of the foregoing Entities is entitled to a broader release under the terms of the applicable Settlement, as set forth in Sections 4.10, 5.6, and 10.12 of this Plan, the scope of release in such Settlement shall govern. For the avoidance of doubt, no Cerberus Entity, regardless of whether it otherwise qualifies as a Releasee under sub-clauses (i)-(xiii) shall be a Releasee unless the settlement with the Cerberus Entities is approved by a Final Order. For example, and without limiting in any way the preceding sentence, the fact that a Cerberus Entity may have been a holder of First Lien Notes or Second Lien Notes shall not make such Cerberus Entity a Releasee.
1.2.141 Reorganized Debtor means from and after the Effective Date, a Debtor listed in footnote 1 of this Plan, other than (i) the Non-Proponent Debtors, (ii) NewPage Port Hawkesbury Holding LLC and (iii) NewPage Canadian Sales LLC, or any successor thereto.
1.2.142 Reorganized NPC means NPC, from and after the Effective Date, or any successor thereto.
1.2.143 Reorganized NPC New Compensation Plans means [ ], which plans shall be effective as of the Effective Date, and copies of which plans are to be included in Schedule 1.2.143 of the Plan Supplement.
18 29766749v43 1.2.144 Schedules means, unless otherwise specified, the respective schedules of assets and liabilities, the list of holders of Equity Interests, and the statements of financial affairs filed by the Debtors in accordance with section 521 of the Bankruptcy Code and the Bankruptcy Rules, as such schedules and statements have been or may be supplemented or amended.
1.2.145 Second Lien Group means an ad hoc group of certain unaffiliated investors who are holders of Second Lien Notes, as identified in Exhibit 1.2.145 of this Plan.
1.2.146 Second Lien Noteholders means the holders of the Second Lien Notes.
1.2.147 Second Lien Notes means (i) the senior secured second lien notes bearing interest at the rate of 10.000% per annum, having an outstanding principal balance as of the Commencement Date of $806,000,000; and (ii) the senior secured second lien floating rate notes, having an outstanding principal balance as of the Commencement Date of $225,000,000, issued pursuant to the Second Lien Notes Indenture.
1.2.148 Second Lien Notes Claims means the Claims against the Estate of NPC arising under the Second Lien Notes and the Second Lien Notes Indenture, which, solely for purposes of this Plan, shall be Allowed in the aggregate amount of $1.061 billion.
1.2.149 Second Lien Notes Guaranty Claims means the Claims against the Estates of the Guarantor Debtors arising from the guaranty of the obligations under the Second Lien Notes provided by each of the Guarantor Debtors, which, solely for purposes of this Plan, shall be Allowed in the aggregate amount of [$1.061 billion].
1.2.150 Second Lien Notes Indenture means the indenture dated as of May 2, 2005, among NPC, as issuer, the Second Lien Notes Trustee, the Guarantor Debtors, and all of the documents and instruments relating thereto, as amended, supplemented, modified or restated from time to time.
1.2.151 Second Lien Notes Litigation Trust Distribution means, solely for purposes of calculating distribution proceeds of the Litigation Trust, the distributions made to the Second Lien Notes Trustee pursuant to (i) the Subordination Turnover and (ii) the proceeds allocable to the Second Lien Notes Claims, each based upon a Claim of $1.061 billion.
1.2.152 Second Lien Notes Trustee means Wilmington Trust, National Association, as Indenture Trustee.
1.2.153 Section 503(b)(9) Claim means a Claim against a Debtor arising under section 503(b)(9) of the Bankruptcy Code for payment of goods received by such Debtor within 20 days prior to the Commencement Date.
1.2.154 Secured Claim means any Claim (i) which is, to the extent reflected in the Schedules or in a proof of claim, validly and unavoidably secured by a Lien to the extent of the value of the Collateral securing the Claim, as determined in accordance with section 506(a) of the Bankruptcy Code; or (ii) that is based on a valid, unavoidable setoff right in accordance with sections 506(a) and 553 of the Bankruptcy Code.
19 29766749v43 1.2.155 Senior Subordinated Notes Indenture means the indenture dated as of May 2, 2005, among NPC, as issuer, HSBC Bank USA, National Association, as indenture trustee, and the Guarantor Debtors, and all of the documents and instruments relating thereto, as amended, supplemented, modified, or restated from time to time.
1.2.156 Senior Subordinated Unsecured Notes means the senior subordinated unsecured notes bearing interest at the rate of 12.000% per annum, issued pursuant to the Senior Subordinated Notes Indenture and having an outstanding principal balance as of the Commencement Date of $200,000,000.
1.2.157 Senior Subordinated Unsecured Notes Claims means Claims against the Estate of NPC, arising under the Senior Subordinated Unsecured Notes and the Senior Subordinated Notes Indenture.
1.2.158 Senior Subordinated Unsecured Notes Guaranty Claims means the Claims against the Estates of the Guarantor Debtors arising from the guaranty of the obligations under the Senior Subordinated Unsecured Notes provided by each of the Guarantor Debtors.
1.2.159 Senior Subordinated Unsecured Notes Settlement Payment means a Distribution in Cash to the indenture trustee for the Senior Subordinated Unsecured Notes, for the benefit of the holders of Senior Subordinated Unsecured Notes Claims, in an amount equal to $200,000, which (together with the 2013 PIK Notes Settlement Payment) shall be funded by the first $400,000 of the Subordination Turnover otherwise payable to the Second Lien Notes Trustee.
1.2.160 SEO means Stora Enso Oyj, the holder of (i) 11,251,326 shares of the Equity Interest in NPGI, the parent company of NPHC, which in turn holds 100% of the Equity Interests in NPC, (ii) 100% of the 2015 PIK Notes, (iii) 100% of the Indenture Certificates (as defined in the SEO Settlement Agreement) outstanding under the PM35 Sale/Leaseback, and (iv) rights of subrogation in full to Daimler Capital Services LLC (as successor to Chrysler Capital Corporation), the Owner Participant under the PM35 Sale/Leaseback.
1.2.161 SEO Professional Fees means the reasonable legal and financial advisory fees and expenses SEO has incurred or may incur, or that Wilmington Trust Company (not in its individual capacity but solely as Owner Trustee under the PM35 Sale/Leaseback) or Wells Fargo Bank Northwest, N.A. (as successor to First Security Bank, National Association, as indenture trustee under the PM35 Sale/Leaseback) have incurred or may incur in connection with the preparation for and participation in the Settlements mediation sessions and the negotiation, preparation, execution and prosecution of the SEO Settlement Agreement, Plan and Disclosure Statement, through the Effective Date, up to $500,000, which fees and expenses shall be documented with reasonably detailed invoices submitted to the Debtors and the Committee for review, subject to any objections that may be interposed by such reviewing parties within three Business Days after the submission of the invoices (and if any such objections are interposed, they shall be determined by the Bankruptcy Court, subject to the right to appeal), and such fees and expenses shall be paid by the Debtors or the Reorganized Debtors, as applicable, on the Effective Date solely from a $500,000 holdback from the $40 million the Debtors are otherwise allocating to the Litigation Trust under this Plan. If any such invoices are submitted to the
20 29766749v43 Debtors and the Committee less than three Business Days prior the Effective Date, then such fees or expenses may be paid after the Effective Date within three Business Days of the submission of such invoices (subject to the same rights to interpose objections). SEO Professional Fees shall not include (i) any success or completion fees, and (ii) more than $50,000 of fees or expenses of Wells Fargo Bank Northwest, N.A., in its capacity as indenture trustee, or Wilmington Trust Company, in its capacity as Owner Trustee.
1.2.162 SEO Released Parties means SEO and its affiliates (including for the avoidance of doubt, Corenso North America Corp. and Thiele Kaolin Company), together with their subsidiaries, divisions, branches, units, affiliates, parents, successors, predecessors and assigns, and the current and former agents, servants, officers, directors, shareholders, employees, attorneys, auditors, professionals and representatives of each of them.
1.2.163 SEO Settlement Agreement means the fully executed Settlement Agreement, attached as Exhibit 1.2.163 to this Plan (which Exhibit 1.2.163 shall be distributed with the Plan and Disclosure Statement prior to any hearing scheduled for approval of the Disclosure Statement), between, inter alia, the Debtors and SEO, effective as of the Effective Date, that sets forth the terms and conditions for the treatment of the PM35 Sale/Leaseback in these Chapter 11 Cases and the settlement of any and all known and unknown claims, counterclaims, defenses and Causes of Action of the Debtors and Reorganized Debtors against the SEO Released Parties and the Trust Parties, including, without limitation, claims, counterclaims, defenses or Causes of Action arising from or related to the PM35 Sale/Leaseback and the 2007 Acquisition, subject to certain specified exceptions.
1.2.164 SEO Unsecured Claims means, solely for purposes of this Plan and the SEO Settlement Agreement, Allowed General Unsecured Claims assertable by SEO against the Estates of each of NPWSI and NPCPI, in the amount of $120,000,000 as of the Voting Record Date; provided, however, that such Claims shall be waived pursuant to the SEO Settlement Agreement on the closing of the SEO Settlement Agreement.
1.2.165 Settlements means the proposed settlements of various disputes between and among the Settlement Parties described in Section 4.10 of this Plan.
1.2.166 Settlement Cash means a Distribution in Cash, without duplication, to holders of Claims in NPC Class 3A, NPC Class 3C, NPC Class 3D, and GD Class 3A, GD Class 3C and GD Class 3D of their Pro Rata Share of $30 million (but subject to the First Lien Notes Subordination Turnover Cap).
1.2.167 Settlement Parties means the parties which have negotiated one or more of the Settlements, including (i) the First Lien Notes Trustee and the First Lien Notes Steering Committee, (ii) the Committee and its members, (iii) certain members of the Second Lien Group, and (iv) SEO.
1.2.168 Subordination Turnover means the Distributions of Settlement Cash and Litigation Trust proceeds otherwise distributable to the holders of Senior Subordinated Unsecured Notes Claims that are turned over to the First Lien Notes Trustee and the Second Lien Notes Trustee in accordance with Sections 3.3.7(b)(B) and 3.4.7(b) of this Plan.
21 29766749v43 1.2.169 Tax Code means the Internal Revenue Code of 1986, title 26 of the United States Code, as amended from time to time.
1.2.170 Treasury Regulations means the Treasury regulations (including temporary Treasury regulations) promulgated by the United States Department of Treasury with respect to the Tax Code or other United States federal tax statutes.
1.2.171 Trust Parties means, with respect to the PM35 Sale/Leaseback, Wilmington Trust Company, as Owner Trustee; Wells Fargo Bank Northwest, N.A. (as successor to First Security Bank, National Association) as Indenture Trustee; collectively, the institutions named in the schedule attached to the Participation Agreement, together with their permitted successors or assigns, as Lenders; and Daimler Capital Services LLC (as successor to Chrysler Capital Corporation), as Owner Participant, and each of the foregoing parties’ affiliates, together with their subsidiaries, divisions, branches, units, affiliates, parents, successors, predecessors, and assigns, and the current and former agents, servants, officers, directors, shareholders, employees, attorneys, auditors, professionals, and representatives, of each of them.
1.2.172 Unimpaired means with respect to any Class of Claims, that it is not Impaired within the meaning of section 1124 of the Bankruptcy Code.
1.2.173 Union Advisors Fees means the professional fees and expenses incurred by the USW as (i) described in the Debtors’ Motion Pursuant to Sections 363(b) and 105(a) of The Bankruptcy Code for Order Authorizing Payment of Certain Professional Fees and Expenses of the United Steelworkers, dated June 1, 2012 [Docket No.1685], and (ii) approved by order entered October 16, 2012 [Docket No. 2465], which aggregate fees and expenses are capped at $775,000.
1.2.174 Unions means USW; the International Brotherhood of Electrical Workers; the International Association of Machinists and Aerospace Workers; the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada; the Teamsters, Chauffeurs, Warehousemen and Helpers; and the Office & Professional Employees’ International Union (together with their respective local unions) which represent a majority of the Debtors’ employee workforce.
1.2.175 Unsecured Notes means, collectively, the 2013 PIK Notes and the 2015 PIK Notes.
1.2.176 USW means the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL- CIO/CLC, representing approximately 70% of the Debtors’ employee workforce.
1.2.177 Voting Deadline means the deadline established by the Bankruptcy Court for returning Ballots.
1.2.178 Voting Record Date means the date established by the Bankruptcy Court to determine which claimants are entitled to vote on the Plan.
22 29766749v43 1.3 Rules of Construction. Unless otherwise expressly provided:
(a) Article, section, and exhibit references in this Plan are to articles, sections and exhibits of and to this Plan and schedule references in this Plan are to schedules to the Plan Supplement;
(b) References to dollars are to the lawful currency of the United States of America;
(c) References to Claims against the Debtors refer to Claims against the Estates of the Debtors;
(d) The word “including” and similar words means “including without limitation”;
(e) References to “on the Effective Date” means on, or as soon thereafter as is practicable after, the Effective Date;
(f) Unless otherwise states, the words “herein,” “hereof,” and “thereto” refer to the Plan in its entirety rather than to a particular portion of the Plan;
(g) Captions and headings in the Plan are inserted for convenience of reference only and are not intended to be a part of or to affect the interpretation hereof; and
(h) The rules of construction contained in section 102 of the Bankruptcy Code shall apply to the construction of this Plan.
ARTICLE II
TREATMENT OF UNCLASSIFIED CLAIMS (ADMINISTRATIVE EXPENSE CLAIMS, PROFESSIONAL COMPENSATION AND REIMBURSEMENT CLAIMS, AND PRIORITY TAX CLAIMS)
2.1 Filing and Payment of Administrative Claims.
2.1.1 Deadline for Filing Certain Administrative Expense Claims. Each holder of an Administrative Expense Claim, other than the holder of:
(a) a Claim of a Professional for compensation and reimbursement of costs and expenses, as described in Section [2.3] below;
(b) a Section 503(b)(9) Claim;
(c) an Administrative Expense Claim that has been Allowed on or before the Effective Date, including pursuant to this Plan;
23 29766749v43 (d) an Administrative Expense Claim on account of fees and expenses incurred on or after the Commencement Date by ordinary course professionals retained by the Debtors pursuant to an order of the Bankruptcy Court;
(e) an Administrative Expense Claim held by a current officer, director or employee of any Debtor for indemnification, contribution, or advancement of expenses pursuant to such Debtor’s certificate of incorporation, by-laws, or similar organizational document;
(f) a Claim for U.S. Trustee statutory fees; and/or
(g) a Claim for Union Advisor Fees must file with the Claims Agent by mail or by overnight or hand delivery at the following address:
NewPage Claims Processing Center c/o KCC 2335 Alaska Avenue El Segundo, CA 90245 and serve on the Debtors or the Reorganized Debtors in accordance with Section 14.16 of this Plan, proof of its Administrative Expense Claim on or before the 60th day after the Effective Date. Each proof of Administrative Expense Claim must include at a minimum (i) the name of each Debtor that is purported to be liable for the Administrative Expense Claim, (ii) the name of the holder of the Administrative Expense Claim, (iii) the amount of the Administrative Expense Claim, (iv) the basis of the Administrative Expense Claim, and (v) supporting documentation for the Administrative Expense Claim. FAILURE TO TIMELY FILE AND SERVE A COMPLETE PROOF OF ADMINISTRATIVE EXPENSE CLAIM IN ACCORDANCE WITH THIS PLAN SHALL RESULT IN THE ADMINISTRATIVE EXPENSE CLAIM BEING FOREVER BARRED AND DISCHARGED.
2.2 Treatment of Administrative Expense Claims. Except with respect to Administrative Claims that are Claims of Professionals as set forth in Section 2.3 below and except to the extent that a holder of an Allowed Administrative Expense Claim agrees to less favorable treatment with the Debtor against whose Estate the Claim is Allowed, each holder of an Allowed Administrative Expense Claim shall receive Cash in an amount equal to the Allowed Administrative Expense Claim on, or as soon thereafter as is reasonably practicable, the later of (a) the Effective Date and (b) the date on which such Administrative Expense Claim becomes an Allowed Administrative Expense Claim except that Allowed Administrative Expense Claims representing liabilities incurred in the ordinary course of business by any Debtor or which have been approved pursuant to an order of the Bankruptcy Court shall be paid in full and/or performed by the applicable Reorganized Debtor in the ordinary course of business in accordance with the terms and subject to the conditions of any agreements governing,
24 29766749v43 instruments evidencing, or other documents relating to, such liabilities. Notwithstanding the foregoing, the Indenture Trustee Claims shall be paid pursuant to Sections 4.8 and 14.7 of the Plan.
2.3 Professional Compensation and Reimbursement Claims. Notwithstanding Sections 2.1 and 2.2 of this Plan, all holders of a Claim for an award of compensation for services rendered or reimbursement of expenses incurred through and including the Effective Date pursuant to sections 503(b)(2), 503(b)(3), 503(b)(4), or 503(b)(5) of the Bankruptcy Code shall file their respective final applications for allowances of such compensation and reimbursement by a date no later than the date that is 90 days after the Effective Date or by such other date as may be fixed by the Bankruptcy Court, and if granted such an award by the Bankruptcy Court, each such holder shall be paid in full in such amount as Allowed by the Bankruptcy Court to the extent not previously paid pursuant to a prior order of the Bankruptcy Court (i) on the date on which the Administrative Expense Claim becomes an Allowed Administrative Expense Claim, or as soon thereafter as is reasonably practicable, or (ii) upon such other terms as may be mutually agreed upon between the holder of an Administrative Expense Claim and the Reorganized Debtors.
2.4 Priority Tax Claims. Except to the extent that a holder of an Allowed Priority Tax Claim has been paid by the Estate liable for that Claim prior to the Effective Date or agrees to less favorable treatment, each holder of an Allowed Priority Tax Claim shall receive, at the sole option of the applicable Reorganized Debtor and in full and complete satisfaction of any and all liability attributable to that Priority Tax Claim, (a) Cash in an amount equal to the Allowed Priority Tax Claim, (b) a transferable note that provides for equal, semiannual Cash payments equal to the aggregate amount of the Allowed Priority Tax Claim plus interest paid in arrears semiannually at LIBOR (as of the Effective Date) plus 1%, over a period ending not later than five years after the applicable Commencement Date, or (c) any combination of Cash and a note, on the terms provided in subsections (a) and (b), in an aggregate Cash and note principal amount equal to the Allowed Priority Tax Claim. Payment of a Priority Tax Claim will be made on the latest of (i) the Effective Date, (ii) the date on which the Priority Tax Claim becomes an Allowed Priority Tax Claim, and (iii) the date the Allowed Priority Tax Claim is payable under applicable non-bankruptcy law, or, in each case, as soon thereafter as is reasonably practicable. The Debtors reserve the right to prepay any such note in part or in whole at any time without premium or penalty. No holder of an Allowed Priority Tax Claim shall be entitled to any payments on account of any pre-Effective Date interest accrued on or penalty arising after the Commencement Date with respect to or in connection with an Allowed Priority Tax Claim.
2.5 DIP Facility Claims. Except to the extent that a holder of a DIP Facility Claim agrees to less favorable treatment, on the Effective Date, the DIP Administrative Agent, for the ratable benefit of the DIP Lenders and the DIP Agents, as applicable, shall be paid in Cash 100% of the then-outstanding amount, if any, of the DIP Facility Claims. To the extent that any L/C remains undrawn as of the Effective Date, the Debtors shall either (i) cause that L/C to be replaced with a letter of credit issued under the Exit Financing, (ii) collateralize that L/C with Cash in an amount equal to 105% of its face amount, (iii) provide a back-to-back letter of credit to the L/C Issuer on terms and from a financial institution reasonably acceptable to the L/C Issuer, or (iv) provide such other treatment as the Debtors and the L/C Issuer shall agree, each in their sole discretion. Contemporaneously with all amounts owing in respect of principal
25 29766749v43 included in the DIP Facility Claims (other than Excluded DIP Obligations), interest accrued thereon to the date of payment and fees, expenses and non-contingent indemnification obligations as required by the DIP Facility and arising prior to the Effective Date being paid in full in Cash (or, in the case of the outstanding L/Cs, being guaranteed by back-to-back letters of credit, or collateralized by Cash, in each case in an amount equal to 105% of the face amount of such outstanding letters of credit or otherwise provided for as set forth above), any and all Liens on and security interests in the Debtors’ (and the Estates’) property held by the DIP Lenders shall be deemed released, terminated and extinguished, in each case without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order or rule or the vote, consent, authorization or approval of any Entity, the DIP Credit Agreement shall be deemed terminated, and the Debtors’ (and the Reorganized Debtors’) obligations thereunder shall be canceled; provided, however, that the Excluded DIP Obligations shall survive the Effective Date and shall not be discharged or released pursuant to this Plan or the Confirmation Order, notwithstanding any provision hereof or thereof to the contrary, and the payment on such date of the DIP Facility Claims shall in no way affect or impair the obligations, duties, and liabilities of the Reorganized Debtors or the rights of the DIP Agents and the DIP Lenders relating to any Excluded DIP Obligations.
ARTICLE III
CLASSIFICATION AND TREATMENT OF CLASSIFIED CLAIMS AND EQUITY INTERESTS
3.1 General Notes on Classification and Treatment of Classified Claims and Equity Interests. Pursuant to sections 1122 and 1123 of the Bankruptcy Code, Claims and Equity Interests (other than Claims arising under sections 507(a)(2), 507(a)(3), or 507(a)(8) of the Bankruptcy Code, which Claims do not require classification pursuant to section 1123(a) of the Bankruptcy Code and are receiving the treatment set forth in Article II) are classified for all purposes, including, without limitation, voting, confirmation, and distribution pursuant to this Plan, as set forth in this Plan. A Claim or Equity Interest shall be deemed classified in a particular Class only to the extent that the Claim or Equity Interest falls within the description of that Class, and shall be deemed classified in a different Class to the extent that any remainder of the Claim or Equity Interest qualifies within the description of the different Class. A Claim or Equity Interest is Allowed in a Class if it has not been paid or otherwise settled prior to the Effective Date, and satisfies the definition of a Claim or Equity Interest that is Allowed.
26 29766749v43 3.2 Summary of Classification and Treatment of Classified Claims and Equity Interests.
Class Treatment Entitled to Vote
NPC PLAN NPC Class 1A – Other Secured Impaired Yes Claims
NPC Class 1B – First Lien Notes Impaired Yes Claims
NPC Class 2 – Non-Tax Priority Unimpaired No (presumed to accept) Claims
NPC Class 3A– General Unsecured Impaired Yes Claims
NPC Class 3B–First Lien Notes Impaired Yes Deficiency Claims
NPC Class 3C –Second Lien Notes Impaired Yes Claims
NPC Class 3D – Senior Impaired Yes Subordinated Unsecured Notes Claims
NPC Class 3E – Qualified Trade Impaired Yes Creditor Claims
NPC Class 4 – Debtor Intercompany Impaired No (deemed to reject) Claims
NPC Class 5 – Equity Interests Impaired No (deemed to reject)
GUARANTOR DEBTOR PLANS
GD Class 1A – Other Secured Impaired Yes Claims
GD Class 1B – First Lien Notes Impaired Yes Guaranty Claims
GD Class 2 – Non-Tax Priority Unimpaired No (presumed to accept) Claims
27 29766749v43 Class Treatment Entitled to Vote GD Class 3A – General Unsecured Impaired Yes Claims
GD Class 3B–First Lien Notes Impaired Yes Deficiency Claims
GD Class 3C – Second Lien Notes Impaired Yes Guaranty Claims
GD Class 3D – Senior Subordinated Impaired Yes Unsecured Notes Guaranty Claims
GD Class 3E – Qualified Trade Impaired Yes Creditor Claims
GD Class 4 – Debtor Intercompany Impaired No (deemed to reject) Claims
GD Class 5 – Equity Interests Impaired No (deemed to reject)
3.3 NPC Plan
3.3.1 NPC Class 1A – Other Secured Claims
(a) Classification: NPC Class 1A consists of all Other Secured Claims against NPC.
(b) Treatment: On the Effective Date, unless any holder of an Allowed Other Secured Claim agrees to a less advantageous treatment, NPC at its option shall distribute to each holder of an Allowed Other Secured Claim (i) Cash in an amount equal to such Allowed Other Secured Claim, (ii) Cash in an amount equal to the proceeds realized from the sale of the Collateral securing such Allowed Other Secured Claim, less the actual costs and expenses of disposing of such Collateral, or (iii) the Collateral securing such Allowed Other Secured Claim.
(c) Voting: NPC Class 1A is Impaired by the NPC Plan. Each holder of an Allowed NPC Class 1A Claim is entitled to vote to accept or reject the NPC Plan.
3.3.2 NPC Class 1B – First Lien Notes Claims
(a) Classification: NPC Class 1B consists of all First Lien Notes Claims against NPC that are Secured Claims.
28 29766749v43 (b) Treatment: On the Effective Date, each holder of an Allowed NPC First Lien Notes Claim shall (A) receive from the Disbursing Agent on account of its Secured Claim its Pro Rata Share of (x) the outstanding shares of stock of Reorganized NPC, which shares shall then be exchanged for such holder’s Pro Rata Share of the Available New Holdco Common Stock pursuant to Section 4.5.2 of this Plan, and all new stock of New Holdco’s Debtor Affiliates, (other than Reorganized NPC), provided that all New Holdco’s Debtor Affiliates (other than Reorganized NPC) having confirmed Plans shall issue new shares of stock or interests to their respective parent companies to re-create the same organizational corporate structure that existed on the Commencement Date, or as otherwise directed by such Entity(ies), (y) subject to the First Lien Notes Subordination Turnover Cap, the Distributions in respect of the Subordination Turnover delivered to the First Lien Notes Trustee pursuant to Section 3.3.7(b)(B) of this Plan, and (z) the First Lien Notes Cash, and (B) be released from all claims and Causes of Action, including those assertable in respect of the 2007 Acquisition and 2009 Refinancing (see Section 4.10(a) of this Plan).
(c) Voting: NPC Class 1B is Impaired by the NPC Plan. Each holder of an Allowed NPC Class 1B Claim is entitled to vote to accept or reject the NPC Plan.
3.3.3 NPC Class 2 – Non-Tax Priority Claims
(a) Classification: NPC Class 2 consists of all Non-Tax Priority Claims against NPC.
(b) Treatment: On the Effective Date, each holder of an Allowed NPC Non-Tax Priority Claim shall receive Cash in an amount equal to the Allowed amount of its Claim.
(c) Voting: NPC Class 2 is Unimpaired by the NPC Plan. Pursuant to section 1126(f) of the Bankruptcy Code, NPC Class 2 and each holder of an Allowed NPC Class 2 Claim are conclusively presumed to have accepted the NPC Plan and therefore the holders of Allowed NPC Class 2 Claims are not entitled to vote to accept or reject the NPC Plan.
3.3.4 NPC Class 3A – General Unsecured Claims
(a) Classification: NPC Class 3A consists of all General Unsecured Claims against NPC.
(b) Treatment: On the Effective Date, each holder of an Allowed NPC General Unsecured Claim shall receive from the Disbursing Agent
29 29766749v43 on account of its General Unsecured Claim (without duplication) its Pro Rata Share of the (A) Settlement Cash and (B) NPC Class 3A Litigation Trust Interests.
(c) Voting: NPC Class 3A is Impaired by the NPC Plan. Each holder of an Allowed NPC Class 3A Claim is entitled to vote to accept or reject the NPC Plan.
3.3.5 NPC Class 3B – First Lien Notes Deficiency Claims
(a) Classification: NPC Class 3B consists of the First Lien Notes Deficiency Claim against NPC.
(b) Treatment: On the Effective Date, each holder of an Allowed NPC First Lien Notes Deficiency Claim shall receive from the Disbursing Agent on account of its First Lien Notes Deficiency Claim its Pro Rata Share of the NPC Class 3B Litigation Trust Interests.
(c) Voting: NPC Class 3B is Impaired by the NPC Plan. Each holder of an Allowed NPC Class 3B Claim is entitled to vote to accept or reject the NPC Plan.
3.3.6 NPC Class 3C – Second Lien Notes Claims
(a) Classification: NPC Class 3C consists of all Second Lien Notes Claims against NPC.
(b) Treatment: On the Effective Date, each holder of an Allowed NPC Second Lien Notes Claim shall (A) receive from the Disbursing Agent on account of its Second Lien Notes Claim its Pro Rata Share of (x) the Settlement Cash, (y) the NPC Class 3C Litigation Trust Interests and (z) Distributions in respect of the Subordination Turnover delivered to the Second Lien Notes Trustee pursuant to Section 3.3.7(b)(B) of this Plan, subject to the First Lien Notes Subordination Turnover Cap and (B) be released from Causes of Action as set forth in Section 4.10(b) of this Plan.
(c) Voting: NPC Class 3C is Impaired by the NPC Plan. Each holder of an Allowed NPC Class 3C Claim is entitled to vote to accept or reject the NPC Plan.
3.3.7 NPC Class 3D – Senior Subordinated Unsecured Notes Claims
(a) Classification: NPC Class 3D consists of all Senior Subordinated Unsecured Notes Claims against NPC.
30 29766749v43 (b) Treatment: (A) On the Effective Date, each holder of an Allowed NPC Senior Subordinated Unsecured Notes Claim shall receive from the Disbursing Agent on account of its Senior Subordinated Unsecured Notes Claim its Pro Rata Share of (x) the Settlement Cash and (y) the NPC Class 3D Litigation Trust Interests.
(B) Notwithstanding the foregoing, on the Effective Date, and thereafter as applicable, the Disbursing Agent shall distribute to each of (i) the First Lien Notes Trustee (for the benefit of the holders of Allowed First Lien Notes Claims in NPC Class 1B), subject to the First Lien Notes Subordination Turnover Cap, and (ii) the Second Lien Notes Trustee (for the benefit of the holders of Allowed Second Lien Notes Claims in NPC Class 3C), a Pro Rata Share of the (x) Settlement Cash and (y) Litigation Trust proceeds otherwise distributable to each holder of an Allowed NPC Senior Subordinated Unsecured Notes Claim, until the holders of such Claims have been paid in full.
(c) Voting: NPC Class 3D is Impaired by the NPC Plan. Each holder of an Allowed NPC Class 3D Claim is entitled to vote to accept or reject the NPC Plan.
3.3.8 NPC Class 3E – Qualified Trade Creditor Claims
(a) Classification: NPC Class 3E consists of all Qualified Trade Creditor Claims against NPC.
(b) Treatment: (A) Commencing on the Effective Date, each holder of an Allowed NPC Qualified Trade Creditor Claim shall receive from the Disbursing Agent on account of its Qualified Trade Creditor Claim (without duplication), 15% of its Allowed Claim over a two year period, in installments no less frequent than four equal semiannual payments (without interest).
(B) If at any time after the Effective Date a NPC Qualified Trade Creditor ceases to qualify as a NPC Qualified Trade Creditor, the Reorganized Debtors shall direct the Disbursing Agent to cease making any further payments to such Entity under Section 3.3.8(b)(A) of this Plan.
(C) If at any time after the Effective Date the Reorganized Debtors elect to cease doing further business with a NPC Qualified Trade Creditor (other than as a result of a breach or default by that NPC Qualified Trade Creditor), the Disbursing Agent shall continue to make the payments required under Section 3.3.8(b)(A) of this Plan, notwithstanding that election.
31 29766749v43 (c) Voting: NPC Class 3E is Impaired by the NPC Plan. Each holder of an Allowed NPC Class 3E Claim that elects treatment on the NPC Class 3A Ballot as a Qualified Trade Creditor or otherwise agrees to the same in writing and is eligible to be a Qualified Trade Creditor will have its vote to accept or reject the NPC Plan counted in NPC Class 3E.
3.3.9 NPC Class 4 – Debtor Intercompany Claims
(a) Classification: NPC Class 4 consists of all Debtor Intercompany Claims against NPC.
(b) Treatment: No holder of an Allowed NPC Debtor Intercompany Claim shall receive any Distribution under the NPC Plan.
(c) Voting: NPC Class 4 is Impaired by the NPC Plan. Pursuant to section 1126(g) of the Bankruptcy Code, NPC Class 4 is deemed to have rejected the NPC Plan and, therefore, the holders of Allowed NPC Class 4 Claims are not entitled to vote to accept or reject the NPC Plan.
3.3.10 NPC Class 5 – Equity Interests
(a) Classification: NPC Class 5 consists of all Equity Interests in NPC.
(b) Treatment: On the Effective Date, (i) all instruments evidencing a NPC Class 5 Equity Interest shall be deemed canceled and (ii) the NPC Class 5 Equity Interests shall be deemed extinguished, each without further action under any applicable agreement, law, regulation or rule. No holder of a NPC Class 5 Equity Interest shall receive or retain any property under the NPC Plan.
(c) Voting: NPC Class 5 is Impaired by the NPC Plan. Pursuant to section 1126(g) of the Bankruptcy Code, NPC Class 5 is deemed to have rejected the NPC Plan and, therefore, the holders of Allowed NPC Class 5 Claims are not entitled to vote to accept or reject the NPC Plan.
3.4 GD Plans
3.4.1 GD Class 1A – Other Secured Claims
(a) Classification: GD Class 1A consists of all Other Secured Claims against the applicable Guarantor Debtor.
(b) Treatment: On the Effective Date, unless any holder of an Allowed Other Secured Claim agrees to a less advantageous
32 29766749v43 treatment, at its option, the applicable Guarantor Debtor shall distribute to each holder of an Allowed Other Secured Claim (i) Cash in an amount equal to the Allowed Other Secured Claim, (ii) Cash in an amount equal to the proceeds realized from the sale of the Collateral securing the Allowed Other Secured Claim, less the actual costs and expenses of disposing of that Collateral, or (iii) the Collateral securing the Allowed Other Secured Claim.
(c) Voting: GD Class 1A is Impaired by the applicable GD Plan. Each holder of an Allowed GD Class 1A Claim against an applicable Guarantor Debtor is entitled to vote to accept or reject the applicable GD Plan
3.4.2 GD Class 1B – First Lien Notes Guaranty Claims
(a) Classification: GD Class 1B consists of all First Lien Notes Guaranty Claims against the applicable Guarantor Debtor that are Secured Claims.
(b) Treatment: On the Effective Date, each holder of an Allowed GD First Lien Notes Guaranty Claim shall receive on account of its Claim against the applicable Guarantor Debtor the Distributions and treatments set forth in Section 3.3.2(b) of this Plan.
(c) Voting: GD Class 1B is Impaired by the GD Plan. Each holder of an Allowed GD Class 1B Claim is entitled to vote to accept or reject the applicable GD Plan.
3.4.3 GD Class 2 – Non-Tax Priority Claims
(a) Classification: GD Class 2 consists of all Non-Tax Priority Claims against the applicable Guarantor Debtor.
(b) Treatment: On the Effective Date, each holder of an Allowed GD Non-Tax Priority Claim shall receive Cash in an amount equal to the Allowed amount of its Claim.
(c) Voting: GD Class 2 is Unimpaired by the applicable GD Plan. Pursuant to section 1126(f) of the Bankruptcy Code, GD Class 2 and each holder of an Allowed GD Class 2 Claim against an applicable Guarantor Debtor are conclusively presumed to have accepted the applicable GD Plan and, therefore, the holders of Allowed GD Class 2 Claims are not entitled to vote to accept or reject the applicable GD Plan.
33 29766749v43 3.4.4 GD Class 3A – General Unsecured Claims
(a) Classification: GD Class 3A consists of all General Unsecured Claims against the applicable Guarantor Debtor.
(b) Treatment: On the Effective Date, each holder of an Allowed GD General Unsecured Claim shall receive from the Disbursing Agent on account of its General Unsecured Claim (without duplication) its Pro Rata Share of the (A) Settlement Cash; and (B) GD Class 3A Litigation Trust Interests.
(c) Voting: GD Class 3A is Impaired by the GD Plan. Each holder of an Allowed GD Class 3A Claim is entitled to vote to accept or reject the applicable GD Plan.
3.4.5 GD Class 3B – First Lien Notes Deficiency Claim
(a) Classification: GD Class 3B consists of the First Lien Notes Deficiency Claims against the applicable Guarantor Debtor.
(b) Treatment: On the Effective Date, each holder of an Allowed GD First Lien Notes Deficiency Claim shall receive on account of its Claim against the applicable Guarantor Debtor the Distributions and treatment set forth in Section 3.3.5(b) of this Plan.
(c) Voting: GD Class 3B is Impaired by the GD Plan. Each holder of an Allowed GD Class 3B Claim is entitled to vote to accept or reject the applicable GD Plan.
3.4.6 GD Class 3C – Second Lien Notes Guaranty Claims
(a) Classification: GD Class 3C consists of all Second Lien Notes Guaranty Claims against the applicable Guarantor Debtor.
(b) Treatment: On the Effective Date, each holder of an Allowed GD Second Lien Notes Guaranty Claim shall receive on account of its Claim against the applicable Guarantor Debtor the Distributions and treatment set forth in Section 3.3.6(b) of this Plan.
(c) Voting: GD Class 3C is Impaired by the GD Plan. Each holder of an Allowed GD Class 3C Claim is entitled to vote to accept or reject the applicable GD Plan.
3.4.7 GD Class 3D – Senior Subordinated Unsecured Notes Guaranty Claims
(a) Classification: GD Class 3D consists of all Senior Subordinated Unsecured Notes Guaranty Claims against the applicable Guarantor Debtor.
34 29766749v43 (b) Treatment: On the Effective Date, each holder of an Allowed GD Senior Subordinated Unsecured Notes Guaranty Claim shall receive on account of its Claim against the applicable Guarantor Debtor the Distributions and treatment set forth in Section 3.3.7(b) of this Plan.
(c) Voting: GD Class 3D is Impaired by the GD Plan. Each holder of an Allowed GD Class 3D Claim is entitled to vote to accept or reject the applicable GD Plan.
3.4.8 GD Class 3E – Qualified Trade Creditors
(a) Classification: GD Class 3E consists of all Qualified Trade Creditors Claims against the applicable Guarantor Debtor.
(b) Treatment: (A) Commencing on the Effective Date, each holder of an Allowed GD Qualified Trade Creditor Claim shall receive from the Disbursing Agent on account of its Qualified Trade Creditor Claim (without duplication), 15% of its Allowed Claim over a two year period, in installments no less frequent than four equal semiannual payments (without interest).
(B) If at any time after the Effective Date a GD Qualified Trade Creditor ceases to qualify as a NPC Qualified Trade Creditor, the Reorganized Debtors shall direct the Disbursing Agent to cease making any further payments to such Entity under Section 3.4.8(b)(A) of this Plan.
(C) If at any time after the Effective Date the Reorganized Debtors elect to cease doing further business with a GD Qualified Trade Creditor (other than as a result of a breach or default by that GD Qualified Trade Creditor), the Disbursing Agent shall continue to make the payments required under Section 3.3.8(b)(A) of this Plan, notwithstanding that election.
(c) Voting: GD Class 3E is Impaired by the GD Plan. Each holder of an Allowed GD Class 3E Claim that elects treatment on the GD Class 3A Ballot as a Qualified Trade Creditor or otherwise agrees to the same in writing and is eligible to be a Qualified Trade Creditor will have its vote to accept or reject the applicable GD Plan counted in GD Class 3E.
3.4.9 GD Class 4 – Debtor Intercompany Claims
(a) Classification: GD Class 4 consists of all Debtor Intercompany Claims against the applicable Guarantor Debtor.
35 29766749v43 (b) Treatment: No holder of an Allowed GD Debtor Intercompany Claim shall receive any Distribution under the applicable GD Plan.
(c) Voting: GD Class 4 is Impaired by the GD Plan. Pursuant to section 1126(g) of the Bankruptcy Code, GD Class 4 is deemed to have rejected the applicable GD Plan and, therefore, the holders of Allowed GD Class 4 Claims are not entitled to vote to accept or reject the applicable GD Plan.
3.4.10 GD Class 5 – Equity Interests
(a) Classification: GD Class 5 consists of all Equity Interests in the applicable Guarantor Debtor.
(b) Treatment: On the Effective Date, (i) all instruments evidencing a GD Class 5 Equity Interest shall be deemed cancelled and (ii) the GD Class 5 Equity Interests shall be deemed extinguished, each without further action under any applicable agreement, law, regulation or rule. No holder of a GD Class 5 Equity Interest shall receive or retain any property under the applicable GD Plan.
(c) Voting: GD Class 5 is Impaired by the applicable GD Plan. Pursuant to section 1126(g) of the Bankruptcy Code, GD Class 5 is deemed to have rejected the applicable GD Plan and, therefore, the holders of Allowed GD Class 5 Claims are not entitled to vote to accept or reject the applicable GD Plan.
ARTICLE IV
MEANS OF EXECUTION OF PLAN
4.1 Separate Plans. For purposes of voting on this Plan and receiving Distributions under this Plan, votes will be tabulated separately for each Debtor’s Plan and Distributions will be made to each separate Class as provided in that Debtor’s Plan, as set forth in Article III of this Plan. Except as otherwise provided in the Plan, Distributions in respect of Allowed Claims against the Estate of a particular Debtor shall be calculated based upon the value of the assets of that particular Debtor’s Estate. A Claim against multiple Debtors, to the extent Allowed against each respective Debtor, shall be treated as a separate Claim against each such Debtor for all purposes (including, but not limited to, voting and Distributions).
4.2 No Double Payment of Claims. To the extent that a Claim is Allowed against more than one Debtor’s Estate, there shall be only a single recovery on account of that Allowed Claim, but the holder of an Allowed Claim against more than one Debtor may recover distributions from all co-obligor Debtors’ Estates until the holder has received payment in full on the Allowed Claim. No holder of an Allowed Claim shall be entitled to receive more than
36 29766749v43 payment in full of its Allowed Claim and each Claim shall be administered and treated in the manner provided by this Plan only until payment in full on that Allowed Claim.
4.3 Severability of Plans. A failure to confirm any one or more of the Debtor’s Plans shall not affect other Plans confirmed by the Bankruptcy Court, but the Debtors reserve the right to withdraw any and all Plans from confirmation if any one or more Plan(s) is not confirmed.
4.4 Continued Corporate Existence.
4.4.1 Subject to the restructuring transactions contemplated by this Plan, each Debtor, other than NPGI, NPHC, NPPHH and NPCS will continue to exist after the Effective Date as a separate entity, with all powers of a corporation, limited liability company, or partnership, as the case may be, under applicable law in the jurisdiction in which that Debtor is incorporated or otherwise formed and pursuant to its certificate of incorporation and bylaws or other Governance Documents in effect prior to the Effective Date, except to the extent the certificate of incorporation and bylaws or other Governance Documents are amended and restated or otherwise revised pursuant to this Section 4.4 and Section 9.2 of this Plan, to comply with Bankruptcy Code section 1123(a)(6), or otherwise, without prejudice to any right to terminate its existence (whether by merger or otherwise) under applicable law after the Effective Date. The continued existence, operation and ownership of Affiliates of the Debtors that are not Debtors in the Chapter 11 Cases is a material component of the Debtors’ businesses and, as set forth in the restructuring transactions, all of the Debtors’ Equity Interests and other property interests in those non-debtor Affiliates will re-vest in the applicable Reorganized Debtor or its successor on the Effective Date, subject to the transactions contemplated in Section 4.5.2 of this Plan.
4.4.2 Mergers. On the Effective Date, (i) NPPHH shall merge into NPCPI, (with NPCPI as the surviving Entity) and (ii) NPCS shall either merge into NPWSI (with NPWSI as the surviving Entity) or dissolve post-Effective Date, at the option of the Reorganized Debtors.
4.5 Formation and Corporate Structure.
4.5.1 Corporate Structure. On or before the Confirmation Date, the Debtors shall form New Holdco. After completion of the steps set forth in Section 4.5.2 of this Plan, New Holdco shall hold 100% of the outstanding shares of Reorganized NPC. Reorganized NPC will continue to exist as the intermediate holding company of the Reorganized Debtors and their Affiliates. New Holdco’s Debtor Affiliates having confirmed Plans shall issue new shares of stock to their respective parent companies to re-create the same organizational structure that existed on the Commencement Date, or as otherwise directed by such Entity(ies). Upon the Effective Date, the Chapter 11 Cases of the Non-Proponent Debtors shall be dismissed and all Claims, rights against or interests in the Non-Proponent Debtors’ Estates shall be extinguished. Each Non-Proponent Debtor shall be dissolved pursuant to the applicable law of its respective state of organization, to be effective upon the filing of the necessary documentation with the appropriate state agencies in such state which shall not occur until at least one day after the Effective Date.
37 29766749v43 4.5.2 Issuance of Stock of Reorganized NPC and Contribution to New Holdco. On the Effective Date, Reorganized NPC shall issue its stock to the holders of the First Lien Notes Claims, and then such holders shall contribute such shares of stock of Reorganized NPC to New Holdco in exchange for the New Holdco Common Stock.
4.6 Form of Securities to be Issued; Exemption from Registration. Unless otherwise agreed to by the Reorganized Debtors, all shares of New Holdco Common Stock will be non- certificated. In reliance upon Bankruptcy Code section 1145(a), at the time of issuance, none of the securities issued in connection with this Plan will be registered under Section 5 of the Securities Act of 1933, as amended, or any state or local law requiring registration for the offer or sale of securities. In addition, none of the securities issued in connection with this Plan will be listed on a securities exchange. New Holdco will not participate in making a market (or facilitate making a market) in any such securities.
4.7 Certain Tax Treatment. (a) Net Operating Loss Treatment: Section 382(l)(5) of the Tax Code contemplates an exception to the general rule of Section 382(a) of the Tax Code. To the extent such exception is available, NPC will, in consultation with the First Lien Notes Trustee, determine on or before the date that such election is due whether it intends to utilize the exception in Section 382(l)(5) of the Tax Code or it intends to elect out of the exception; (b) PM35 Tax Reporting: for U.S. federal income tax purposes the Debtors shall report the PM35 purchase price as the PM35 Net Purchase Price, plus the $40 million of Litigation Trust proceeds realized under the SEO Settlement Agreement.
4.8 Distributions to Holders of Notes.
4.8.1 Cancellation of Existing Securities and Agreements. On the Effective Date, the Equity Interests of NPC and the Guarantor Debtors will be cancelled and extinguished, any document, agreement, or instrument evidencing any Claim or Equity Interest against a Debtor (other than any Claim or Equity Interest that is Unimpaired by this Plan pursuant to section 1124 of the Bankruptcy Code) shall be deemed cancelled without further act or action under any applicable agreement, law, regulation, order, or rule, and the obligations of that Debtor under those documents, agreements, or instruments shall be discharged; provided, however, notwithstanding the foregoing, any indenture or other agreement that governs the rights of the holder of a Claim shall continue in effect solely for purposes of (a) allowing that holder to receive Distributions under this Plan and (b) allowing and preserving the rights of such indenture trustee to (i) make distributions in satisfaction of Allowed noteholder Claims, (ii) exercise its Indenture Trustee Charging Liens against any such distributions, (iii) seek compensation and reimbursement from those noteholders for any fees and expenses incurred in making such distributions, and (iv) allowing an Indenture Trustee to enforce the subordination provisions contained in an indenture.
4.8.2 Delivery and Surrender. Each holder of any certificated Note shall surrender such Note to the relevant Indenture Trustee, or, at the option of the relevant Indenture Trustee, be deemed to have surrendered such Note. No Distribution hereunder shall be made to or on behalf of any such Note holder unless and until such Note is received by the relevant Indenture Trustee, if required by the first sentence of this Section 4.8.2, or the loss, theft or destruction of such Note is established to the satisfaction of the relevant Indenture Trustee,
38 29766749v43 including requiring such holder (i) to submit a lost instrument affidavit and an indemnity bond, and (ii) to hold the Debtors and the relevant Indenture Trustee harmless in respect of such Note and any Distributions made in respect thereof. Upon compliance with this Section 4.8.2 by a holder of any Note, such holder shall, for all purposes under this Plan, be deemed to have surrendered such note. Any such holder that fails to surrender such Note or satisfactorily explain its non-availability to the relevant Indenture Trustee within 18 months of the Effective Date shall be deemed to have no further Claim against the Debtors or their property or the relevant Indenture Trustee in respect of such Claim and shall not participate in any Distribution hereunder. If such unclaimed Distributions are held by the relevant Indenture Trustee after eighteen months, the Distribution that would otherwise have been made to such holder shall be distributed by the relevant Indenture Trustee to all holders who have surrendered such Notes to such Indenture Trustee or satisfactorily explained their non-availability to the relevant Indenture Trustee by such date.
4.8.3 Payment of First Lien Notes Cash. The Debtors shall be authorized to fund the Distribution of First Lien Notes Cash with the cash on their balance sheet and the proceeds of the Term Facility (as defined in the Exit Commitment Letter), and to make the Distribution of First Lien Notes Cash. On the Effective Date, the Debtors shall distribute the First Lien Notes Cash to the First Lien Notes Trustee for the benefit of the holders of First Lien Notes Claims. The Distribution of First Lien Notes Cash shall be funded with cash on the Debtors’ balance sheet and the proceeds of the Term Facility, such that, after taking into consideration the proceeds of the Term Facility, and the making of the Distribution of First Lien Notes Cash to the holders of First Lien Notes Claims and other Distributions pursuant to this Plan, the pro forma unrestricted cash balance of the Reorganized Debtors (without giving effect to any draw of revolving loans under the Exit Facilities) upon emergence (after taking into account any such Distribution to the holders of First Lien Notes Claims and other Distributions pursuant to this Plan) will be $20 million (provided that cash shall not be deemed restricted for purposes hereof solely as a result of being on deposit in an account subject to a control agreement in favor of the Revolving Administrative Agent in favor of the lenders party to the revolving loans under the Exit Facilities).
4.9 Preservation of Rights of Action. Except to the extent the Preserved Rights are expressly and specifically released, transferred to the Litigation Trust pursuant to the terms and conditions set forth in Section 1.2.28 of this Plan, or otherwise treated in connection with this Plan, the Confirmation Order, or any settlement agreement approved during the Chapter 11 Cases, in accordance with section 1123(b) of the Bankruptcy Code:
(a) The Preserved Rights shall remain assets of and vest in the Reorganized Debtors, whether or not related litigation is pending on the Effective Date, and whether or not the Preserved Rights have been listed or referred to in this Plan, the Schedules, or any other document filed with the Bankruptcy Court;
(b) Neither the Debtors nor the Reorganized Debtors waive, relinquish, or abandon (nor shall they be estopped or otherwise precluded from asserting) any Preserved Rights: (i) whether or not the Preserved Rights have been listed or referred to in this Plan, the Schedules, or any other
39 29766749v43 document filed with the Bankruptcy Court, (ii) whether or not the Preserved Rights are currently known to the Debtors, and (iii) whether or not a defendant in any litigation relating to the Preserved Rights filed a proof of claim in the Chapter 11 Cases, filed a notice of appearance or any other pleading or notice in the Chapter 11 Cases, voted to accept or reject this Plan, or received or retained any consideration under this Plan; and
(c) (i) The Reorganized Debtors may commence, prosecute, defend against, settle, and realize upon any Preserved Rights in their sole discretion, in accordance with what is in the best interests, and for the benefit, of the Reorganized Debtors, (ii) any recoveries realized by the Reorganized Debtors from the assertion of any Preserved Rights will be the sole property of the Reorganized Debtors, and (iii) to the extent necessary, the Reorganized Debtors will be deemed representatives of their former Estates under section 1123(b) of the Bankruptcy Code.
4.10 The Settlements. As part of the Settlements effectuated pursuant to the Plan, on the Effective Date, the Litigation Trust shall be established, as set forth in more detail in Article V below. The following releases, waivers and/or rights are provided pursuant to the Plan Settlements and the SEO Settlement Agreement, which shall be deemed to occur on the Effective Date:
(a) First Lien Noteholders. The First Lien Notes Trustee and the First Lien Noteholders shall: (i) not object to the Distribution of the Settlement Cash and waive their entitlement to a Pro Rata Share of the same (except indirectly through exercise of their contractual subordination rights against the holders of the Senior Subordinated Unsecured Notes as set forth in this Plan and subject to the First Lien Notes Subordination Turnover Cap; (ii) waive and release all Adequate Protection Claims assertable by the First Lien Noteholders; (iii) be released from any and all claims and Causes of Action assertable against them or their affiliates, including claims and Causes of Action arising from or related to the 2007 Acquisition and the 2009 Refinancing; (iv) have their Claims Allowed in the amounts set forth in the Plan; (v) maintain their contractual subordination rights against holders of the Senior Subordinated Unsecured Notes pursuant to the Senior Subordinated Notes Indenture subject to the terms of this Plan and the Settlements; (vi) receive the First Lien Notes Cash; and (vii) participate in Distributions from the Litigation Trust as provided in Section 5.5 of this Plan.
(b) Second Lien Noteholders. The Second Lien Notes Trustee and the Second Lien Noteholders shall: (i) waive and release all Adequate Protection Claims assertable by the Second Lien Noteholders; (ii) be released from all claims and Causes of Action assertable against them or their affiliates, including claims and Causes of Action arising from or related to the 2007 Acquisition; (iii) have their Claims Allowed in the amounts as set forth in the Plan; (iv) maintain their contractual subordination rights against the
40 29766749v43 holders of the Senior Subordinated Unsecured Notes pursuant to the Senior Subordinated Notes Indenture, subject to the First Lien Notes Subordination Turnover Cap; (v) receive a Pro Rata Share of the Settlement Cash (including indirectly through the exercise of their contractual subordination rights against the holders of the Senior Subordinated Notes); and (vi) participate in the Distributions from the Litigation Trust as provided in Section 5.5 of this Plan.
(c) Other Constituents. (i) The indenture trustees for the Unsecured Notes shall be paid their reasonable fees and expenses, subject to Section 14.7 of this Plan; (ii) the Union Advisors Fees shall be reimbursed, and the Debtors’ modified collective bargaining agreements and NWPSI Retirement Plan Settlement with the Unions shall be implemented; (iii) certain holders of General Unsecured Claims shall have the opportunity to be treated as Qualified Trade Creditors; (iv) the Claims or Causes of Action arising from or related to the 2007 Acquisition, 2009 Refinancing or the PM35 Sale/Leaseback that the Committee has or could have investigated, asserted, or sought standing to assert against any Releasee shall be discontinued, waived, and fully released; (v) the Committee’s appeal of the DIP Order, currently pending in the District Court, shall be withdrawn with prejudice on the Effective Date without further notice or order and the Committee shall cooperate in signing such documents as are reasonable or necessary to have the dismissal with prejudice of the appeal reflected on the Bankruptcy Court and District Court’s dockets; (vi) the indenture trustee for the Senior Subordinated Unsecured Notes Claims shall receive the Senior Subordinated Unsecured Notes Settlement Payment free and clear of any subordination or turnover to any other constituency (including, without limitation, the First Lien Notes Trustee and the holders of Allowed First Lien Notes Claims, and the Second Lien Notes Trustee and the holders of Allowed Second Lien Notes Claims) on account of dismissal and releases of the Claims and Causes of Action set forth in Section 4.10(c)(iv) herein; (vii) the indenture trustee for the 2013 PIK Notes shall receive the 2013 PIK Notes Settlement Payment free and clear of any subordination or turnover to any other constituency (including, without limitation, the First Lien Notes Trustee and the holders of Allowed First Lien Notes Claims, and the Second Lien Notes Trustee and the holders of Allowed Second Lien Notes Claims) on account of dismissal and releases of the Claims and Causes of Action set forth in Section 4.10(c)(iv) herein; and (viii) the unsecured creditors shall benefit from the releases of the Adequate Protection Claims, the First Lien Noteholders’ waiver of their Pro Rata Share of the Settlement Cash (except indirectly through exercise of the First Lien Noteholders’ contractual subordination rights against the holders of the Senior Subordinated Unsecured Notes as set forth in this Plan), and the First Lien Noteholders’ waiver of their Pro Rata Share of the first $50 million of distributable net recoveries from the Litigation Trust (except indirectly through exercise of the First Lien Noteholders’ contractual subordination
41 29766749v43 rights against the holders of the Senior Subordinated Unsecured Notes as set forth in this Plan). The Settlement Cash and the Litigation Trust Initial Proceeds shall be distributed among the Debtors (other than the Non- Proponent Debtors) for subsequent pro rata Distribution to each Debtor's (other than the Non-Proponent Debtors’) respective Creditors. The distribution of Settlement Cash and the Litigation Trust Initial Proceeds among the Debtors' (other than the Non-Proponent Debtors’) Estates shall be made in a manner such that Creditors of each Debtor (other than the Non-Proponent Debtors) shall receive approximately the same percentage of their Allowed Claims from the sum of the Settlement Cash and the Litigation Trust Initial Proceeds; provided, however, that if the Bankruptcy Court finds that the foregoing distribution method is contrary to law, then the Settlement Cash will be allocated among the Debtors (other than the Non-Proponent Debtors) based on each Debtor’s (other than the Non-Proponent Debtors’) book value of assets and then, within each Debtor (other than the Non-Proponent Debtors), pro rata to its Creditors.
(d) SEO. A summary of the terms of the SEO Settlement Agreement is as follows: (i) NPWSI shall purchase PM35 for a sum equal to the PM35 Net Purchase Price, and SEO shall cause PM35 to be sold to the Debtors, with representations and warranties (a) as to the absence of liens, claims, interests or encumbrances, including the release of the lien of the PM35 trust indenture, as set forth in the SEO Settlement Agreement (other than those created by the Debtors or Reorganized Debtors, if any, in favor of parties other than the Trust Parties), and (b) that the Owner Trustee has the same title to PM35 as was conveyed to it by the predecessors in interest of NPWSI, (ii) the SEO Released Parties shall be released from any and all Claims or Causes of Action whatsoever from the beginning of the world to the Effective Date, known or unknown, including, without limitation, those arising from or related to the PM35 Sale/Leaseback, the 2007 Acquisition, and SEO’s ownership of the 2015 PIK Notes or Equity Interests of NPG, including any and all indemnity claims under the transaction documents with respect to the 2007 Acquisition, subject solely to certain agreed exceptions under and to the extent set forth in the SEO Settlement Agreement, (iii) the SEO Unsecured Claims shall be waived on the closing of the SEO Settlement Agreement, (iv) the Debtors or the Reorganized Debtors, as applicable, shall pay the SEO Professional Fees on the Effective Date (subject to Section 1.2.61 of this Plan) solely from the $500,000 holdback of the $40 million that the Debtors are otherwise allocating to the Litigation Trust, (v) the PM35 Operative Documents shall be terminated without liability to the Debtors, (vi) the Debtors’ executory contracts with Corenso North America Corp. (“Corenso”) and Thiele Kaolin Company (“TKC”) shall be assumed and the cure amounts previously agreed to by the Debtors, Corenso and TKC paid, and the contracts shall be included in Schedule 8.1(E) of the Plan Supplement, (vii) the Trust Parties shall be released from any and all Claims or Causes
42 29766749v43 of Action arising from or related to the PM35 Sale/Leaseback, from the beginning of the world to the Effective Date, known or unknown, and (viii) the Debtors shall be released by SEO and the Trust Parties as set forth in the SEO Settlement Agreement; provided, however, that notwithstanding the foregoing, nothing herein shall operate as a release or discharge of the SEO Released Parties’, the Trust Parties’, the Debtors’ or Reorganized Debtors’ agreements, promises, covenants, settlements, duties, obligations, representations and warranties set forth in or arising under the SEO Settlement Agreement. This summary is qualified in its entirety by reference to the provisions of the SEO Settlement Agreement. For the avoidance of doubt, in the event of any inconsistency between any description of the terms and conditions of the SEO Settlement in this Plan and the SEO Settlement Agreement, the provisions of the SEO Settlement Agreement shall govern and control in all respects.
(e) If a party in interest (as defined in section 1109(b) of the Bankruptcy Code) objects to any of the Settlements or the SEO Settlement Agreement, such objection shall be heard as part of the Confirmation Hearing. If no objection to the Settlements or the SEO Settlement Agreement is filed or if an objection is filed and overruled, this Plan and the SEO Settlement Agreement shall effectuate the terms of the Settlements, and the Confirmation Order shall specifically approve each of the Settlements and the SEO Settlement Agreement under Bankruptcy Rule 9019.
4.11 Exit Financing2. Subject to, and upon the occurrence of, the Effective Date, and without further notice to or order or other approval of the Bankruptcy Court, act or action under applicable law, regulation, order or rule or the vote, consent, authorization or approval of any person or entity (including the Boards of Directors of the Debtors or the Reorganized Debtors), except for the Confirmation Order and as otherwise required by the Exit Financing Documents, the Reorganized Debtors shall, and are authorized to, enter into and perform and receive the proceeds of the Exit Financing, and to execute and deliver the Exit Financing Documents, in each case consistent with the terms of the Plan and the Exit Commitment Letter or otherwise on terms and conditions acceptable to the Exit Financing Arrangers and the Reorganized Debtors; provided, however, that the provision(s) of the Confirmation Order and the Plan Documents, including but not limited to the Plan, Plan Supplement and any amendment, modification or supplement thereto, shall be subject to the approval of the Exit Financing Arrangers only to the extent such provisions materially adversely affect any of the rights and interest of any or all of the Term Administrative Agent, the Revolving Administrative Agent and the Lenders in their capacities as such (as determined in good faith by the Arrangers). Confirmation of the Plan shall be deemed (i) approval of the Exit Financing, the Exit Financing Documents, and all transactions contemplated thereby, including, without limitation, any supplemental or additional syndication of the Exit Financing, and all actions to be taken, undertakings to be made, and obligations to be incurred by the Reorganized Debtors in connection therewith, including the payment of all fees,
2 Any capitalized terms used in this Section 4.11 that are not otherwise defined in this Plan have the meanings ascribed to them in the Exit Commitment Letter.
43 29766749v43 indemnities, and expenses provided for therein, and (ii) authorization of the Reorganized Debtors to enter into and execute the Exit Financing Documents and such other documents as the Exit Financing Arrangers may require to effectuate the Exit Financing, subject to such modifications as the Reorganized Debtors and the Exit Financing Arrangers may mutually agree are necessary or appropriate to effectuate the Exit Financing. The Exit Financing Documents shall constitute legal, valid, binding and authorized obligations of the Reorganized Debtors, enforceable in accordance with their terms. The financial accommodations to be extended pursuant to the Exit Financing Documents are being extended, and shall be deemed to have been extended, in good faith, for legitimate business purposes, are reasonable, shall not be subject to recharacterization for any purposes whatsoever, and shall not constitute preferential transfers or fraudulent conveyances under the Bankruptcy Code or any other applicable non-bankruptcy law. On the Effective Date, all of the Liens and security interests to be granted in accordance with the Exit Financing Documents (i) shall be deemed to be approved, (ii) shall be legal, binding and enforceable Liens on, and security interests in, the collateral granted thereunder in accordance with the terms of the Exit Financing Documents, (iii) shall be deemed perfected on the Effective Date, subject only to such Liens and security interests as may be permitted under the Exit Financing Documents, and (iv) shall not be subject to recharacterization or equitable subordination for any purposes whatsoever and shall not constitute preferential transfers or fraudulent conveyances under the Bankruptcy Code or any applicable non-bankruptcy law. The Reorganized Debtors and the persons and entities granting such Liens and security interests are authorized to make all filings and recordings, and to obtain all governmental approvals and consents necessary to establish and perfect such Liens and security interests under the provisions of the applicable state, provincial, federal, or other law (whether domestic or foreign) that would be applicable in the absence of the Plan and the Confirmation Order (it being understood that perfection shall occur automatically by virtue of the entry of the Confirmation Order and any such filings, recordings, approvals and consents shall not be required), and will thereafter cooperate to make all other filings and recordings that otherwise would be reasonably necessary under applicable law to give notice of such Liens and security interests to third parties. To the extent that the DIP Agents, the First Lien Notes Trustee, the Second Lien Notes Trustee, or the holders of any Secured Claim (including, without limitation, the DIP Lenders, the holders of First Lien Notes and the holders of Second Lien Notes) or any agent for any such holders, has filed or recorded publicly any Liens and/or security interests to secure any Secured Claim, then as soon as practicable on or after the Effective Date, the DIP Agents, the First Lien Note Trustee, the Second Lien Notes Trustee or the holder of any Secured Claim (or the agent for such holder), as the case may be, shall take any and all steps reasonably requested by any or all of the Debtors, the Reorganized Debtors, the Exit Financing Arrangers and the administrative agents under the Exit Financing that are necessary to cancel and/or extinguish such publicly-filed Liens and/or security interests, in each case all costs and expenses in connection therewith to be paid by the Debtors or Reorganized Debtors. Notwithstanding anything to the contrary in the Confirmation Order or this Plan, the Bankruptcy Court’s retention of jurisdiction shall not govern any disputes or claims arising or asserted under, or any enforcement action or rights or remedies taken or exercised in connection with, the Exit Financing Documents after the Effective Date.
44 29766749v43 ARTICLE V THE LITIGATION TRUST
5.1 Establishment of the Litigation Trust. On the Effective Date, the Litigation Trust shall be established pursuant to the Litigation Trust Agreement for the purpose of (i) administering the Litigation Trust Assets (including the prosecution of the Committee Litigation Claims for the benefit of the Litigation Trust Beneficiaries), (ii) evaluating and prosecuting (a) objections to Disputed General Unsecured Claims and (b) Committee Litigation Claims, provided that for the avoidance of doubt, the Litigation Trustee may object under section 502(d) of the Bankruptcy Code to any Claim of any Entity or transferee that is the subject of a Committee Litigation Claim, and (iii) making all Distributions on account of Litigation Trust Interests or Settlement Cash as provided for under this Plan. The Litigation Trust Agreement shall be included in the Plan Supplement. As set forth in Section 5.8.2 below, the Litigation Trust is intended to qualify as a liquidating trust pursuant to Treasury Regulation section 301.7701-4(d). Except with respect to the initial Litigation Trust Funding (to be repaid to Reorganized NPC as provided in Section [5.4] of this Plan), none of the Debtors or Reorganized Debtors shall have any liability for any cost or expense of the Litigation Trust.
5.2 Litigation Trust Assets. On the Effective Date, in accordance with Section 1141 of the Bankruptcy Code, all the Litigation Trust Assets, shall automatically vest in the Litigation Trust, free and clear of all Claims and Equity Interests for the benefit of the Litigation Trust Beneficiaries; provided, however, that the Committee Litigation Claims set forth in Section 1.2.28(b) of this Plan shall vest in the Litigation Trust only if and when the conditions set forth therein occur. If an amended settlement referenced in Section 1.2.28(b) of this Plan is propounded and the Bankruptcy Court denies its approval, the Causes of Action in Section 1.2.28(b) shall be deemed transferred to the Litigation Trust upon entry of the Bankruptcy Court’s order denying approval unless a stay pending appeal is granted to the Debtors, Reorganized Debtors, or Cerberus. Nothing herein shall waive or prejudice the rights of any entity against whom any claims, Causes of Action, or objections are brought
5.2.1 Subject to the provisions below, the Litigation Trust, acting through the Litigation Trustee, shall be authorized to exercise and perform the rights, powers, and duties held by the Estates, including under section 1123(b)(3) of the Bankruptcy Code, with respect to the Litigation Trust Assets, and shall be the sole party authorized to take control of, supervise, and manage the Litigation Trust Assets and prosecute or settle the Committee Litigation Claims.
5.2.2 Prior to and after the Effective Date of the Plan, the Debtors and Reorganized Debtors shall continue to provide the Committee and Litigation Trustee reasonable access to their books and records to prosecute the claims, Causes of Action, and objections transferred to the Litigation Trust.
(a) To the extent, if any, that the Committee or Litigation Trustee contends the Debtors or Reorganized Debtors are not providing sufficient data, the Bankruptcy Court shall determine such dispute.
45 29766749v43 (b) The Debtors and the Reorganized Debtors shall be entitled to appropriate confidentiality protections for any and all proprietary data requested by the Committee or Litigation Trustee.
(c) To the extent, if any, that the Committee or Litigation Trustee requests data consisting of privileged material or attorneys’ work product, such data shall be produced to the Committee or Litigation Trustee unless the Debtors or Reorganized Debtors (i) assert that production of such data would impair an applicable privilege or (ii) disagree whether the privilege or work product protection may be waived by the Committee or Litigation Trustee, taking into account the policies underlying the privileges and work product doctrine. In the event of such dispute, either party may request that the Bankruptcy Court resolve such dispute.
5.2.3 In no circumstance shall the Litigation Trustee be the representative of any Reorganized Debtor and the Litigation Trustee shall use best efforts to conspicuously show that the Litigation Trustee represents a trust that should not be confused with the Reorganized Debtors.
(a) The Litigation Trustee shall have no power over the books and records of the NewPage estates beyond the rights granted herein;
(b) In no circumstance shall the Litigation Trustee be authorized or contend it is authorized to incur liability on behalf of the Debtors’ estates or the Reorganized Debtors, and any and all liability incurred by the Litigation Trustee, whether for expenses of prosecution, payment of sanctions, or otherwise, shall be the exclusive liability of the Litigation Trust and not the liability of the Debtors’ Estates or the Reorganized Debtors.
(c) The Litigation Trustee shall be a party in interest in respect of the claims, Causes of Action, and objections it prosecutes, and to the extent, if any, the Litigation Trustee attempts to appear in other matters, its standing and party-in-interest status shall be subject to determination by the Bankruptcy Court after hearing any and all objections, if any, from the Reorganized Debtors and other litigants.
5.2.4 Nothing herein obligates or bars the Reorganized Debtors to take or not to take positions in litigation propounded by the Litigation Trustee, which positions support or oppose the Litigation Trustee’s position, and nothing herein precludes current and former officers, directors, and employees of the Debtors and Reorganized Debtors from providing testimony in such litigation regardless of the impact of such testimony.
5.3 Disputed Claims Reserve. The Litigation Trustee shall establish one or more Disputed Claim Reserves on account of Disputed Claims, the Holders of which would be entitled to Litigation Trust Interests or Settlement Cash were such Disputed Claim ultimately Allowed. The Litigation Trustee may, for U.S. Federal income tax purposes (and, to the extent permitted by law, for state and local income tax purposes), (i) make an election pursuant to Treasury
46 29766749v43 Regulation section 1.468B-9 to treat the Disputed Claim Reserve as a “disputed ownership fund” within the meaning of that section, (ii) allocate taxable income or loss to the Disputed Claim Reserve, with respect to any given taxable year (but only for the portion of the taxable year with respect to which such Claims are Disputed Claims), and (iii) distribute assets from the Disputed Claim Reserve as, when, and to the extent, such Disputed Claims either become Allowed or are otherwise resolved, as more fully set out in Article VII below.
5.4 Funding the Litigation Trust. On the Effective Date, the Litigation Trust Funding shall be deposited in the Litigation Trust and the Litigation Trust shall issue the Litigation Trust Note to Reorganized NPC. If at the conclusion of the litigation related to the Committee Litigation Claims there remains any unused portion of the Litigation Trust Funding, the excess funds shall be returned to Reorganized NPC and be applied to any amounts then outstanding on the Litigation Trust Note.
5.5 Distribution of Litigation Trust Net Proceeds. The Litigation Trust Initial Proceeds and other proceeds of the Committee Litigation Claims (if any) shall constitute Litigation Trust proceeds and be distributed to the Litigation Trust Beneficiaries as follows:
5.5.1 Each Litigation Trust Beneficiary shall be entitled to a Distribution of its Pro Rata Share of the Litigation Trust proceeds; provided, however, that the First Lien Notes Trustee shall waive its entitlement to a Pro Rata Share of the Litigation Trust proceeds allocable to the First Lien Notes Deficiency Claims, up to the first $50 million of Litigation Trust proceeds realized; thereafter, the First Lien Notes Trustee shall be entitled to participate in Distributions of Litigation Trust proceeds on account of the NPC Class 3B Litigation Trust Interests. For the avoidance of doubt, the Litigation Trust Initial Proceeds will be distributed directly to the Litigation Trust Beneficiaries on the Effective Date.
5.5.2 For the avoidance of doubt, the Subordination Turnover shall be distributed to the First Lien Notes Trustee and the Second Lien Notes Trustee, until the holders of the First Lien Notes Claims and Second Lien Notes Claims have been paid in full; provided, however, that (i) the portion of the Subordination Turnover delivered to the First Lien Notes Trustee shall be subject to the First Lien Notes Subordination Turnover Cap in accordance with the terms of this Plan, (ii) any amounts realized in excess of the First Lien Notes Subordination Turnover Cap that would otherwise be allocable to the First Lien Notes Trustee shall be distributed pro rata to the holders of the Second Lien Notes Claims, and (iii) the portion of the Subordination Turnover delivered to the Second Lien Notes Trustee shall be subject to the First Lien Notes Subordination Turnover Cap.
5.6 Protected Parties. The Litigation Trust shall not pursue any claims or Causes of Action against any Entities other than those defendants to the claims, Causes of Action, and objections described in Section 1.2.28 of this Plan. The Litigation Trust shall not bring claims, Causes of Action, or objections against any Releasee, including any party released under the SEO Settlement Agreement.
47 29766749v43 5.7 The Litigation Trustee and Structure of the Litigation Trust.
5.7.1 The Litigation Trust shall be managed and operated by the Litigation Trustee, who shall be appointed on the Effective Date. The Litigation Trustee shall have the functions, duties and rights provided in the Litigation Trust Agreement, subject to the limitations set forth in Article V of the Plan. No Litigation Trust Beneficiary shall have any consultation or approval rights whatsoever in respect of management and operation of the Litigation Trust.
5.7.2 The Litigation Trust Agreement shall, among other things, contain provisions with respect to the (i) responsibilities of the Litigation Trustee, (ii) procedures for the removal or resignation of the Litigation Trustee, (iii) termination of the Litigation Trustee’s duties, (iv) scope of the Reorganized Debtors’ cooperation with the Liquidation Trustee and its advisors, consistent with Article V of this Plan, (v) protection of confidential information provided by the Reorganized Debtors to the Litigation Trustee and (vi) other administrative mechanics of the Litigation Trust’s operations.
5.7.3 The Litigation Trust will have authority to retain any counsel, financial advisors, claims agent, auditors, or such other professionals as it deems appropriate at all times, provided they are all paid by the Litigation Trust and not the Reorganized Debtors, and provided they do not have conflicts with the Reorganized Debtors. Paul Hastings LLP, Quinn Emanuel Urquhart & Sullivan, LLP and ASK LLP shall be deemed not to have conflicts with the Reorganized Debtors. The Litigation Trust may select any of the foregoing professionals in its sole discretion, and prior employment in any capacity in the Debtors’ bankruptcy cases on behalf of the Debtors, their estates, the Committee, or any creditors shall not preclude the Litigation Trust’s retention of such professionals. The Litigation Trust Beneficiaries’ interests in the Litigation Trust shall be uncertificated and transferable, subject to applicable law, provided that no transfer, assignment or other disposition of a Litigation Trust Interest may be effected if such transfer would require the Litigation Trust to comply with the registration and reporting requirements of the Securities Exchange Act of 1934, as amended, or the Investment Company Act of 1940, as amended. Any and all costs, expenses, adverse judgments, sanctions, and other financial obligations imposed against the Litigation Trust shall be solely the liabilities of the Litigation Trust and not of the Reorganized Debtors or any other Entity. The Litigation Trust, as of the Effective Date, without further notice or order, shall be enjoined from asserting any and all claims against the Reorganized Debtors, any other Releasee, any other party released under the SEO Settlement Agreement, the Cerberus Entities (if their settlement with the Debtors’ Estates is approved and the approval order is not reversed or a stay order granted that grants the Litigation Trust claims to propound), or the respective properties or interests in properties of any of the foregoing parties. If such Cerberus Entities settlement is ultimately reversed by a Final Order, the claims will then transfer to the Litigation Trust.
5.7.4 In addition to reimbursement for actual out-of-pocket expenses incurred by the Litigation Trustee, the Litigation Trustee shall be entitled to receive reasonable compensation for services rendered on behalf of the Litigation Trust on terms to be set forth in the Litigation Trust Agreement. All such compensation and reimbursement shall be paid from the Litigation Trust with Litigation Trust Assets. The Reorganized Debtors shall have no liability therefor.
48 29766749v43 5.8 Taxes.
5.8.1 Transfer Taxes. Any transfer of the Litigation Trust Assets to the Litigation Trust shall be exempt from any stamp, real estate transfer, mortgage reporting, sales, use or other similar tax to the extent permitted under section 1146(a) of the Bankruptcy Code.
5.8.2 Federal Income Tax Treatment of the Litigation Trust. The Litigation Trust will be established for the sole purpose of distributing any recoveries from the Committee Litigation Claims, in accordance with Treasury Regulation section 301.7701-4(d) and Revenue Procedure 94-45, with no objective to continue or engage in the conduct of a trade or business. The Litigation Trust is intended to qualify as a liquidating trust for U.S. federal income tax purposes. The transfer of each of the Litigation Trust Assets to the Litigation Trust shall be treated for U.S. federal income tax purposes as: (a) a transfer of the Litigation Trust Assets to the Litigation Trust Beneficiaries and, to the extent Litigation Trust Assets are allocable to Disputed Claims, to any Disputed Claims Reserve, followed by (b) the transfer by such Litigation Trust Beneficiaries of the Litigation Trust Assets (other than the Litigation Trust Assets allocable to the Disputed Claims Reserve) to the Litigation Trust in exchange for Litigation Trust Interests. Consistent therewith, all parties must treat the Litigation Trust as a grantor trust of which the Litigation Trust Beneficiaries, and, to the extent Litigation Trust Assets are allocable to Disputed Claims, the Disputed Claims Reserve, are the owners and grantors. Subject to the terms of the Litigation Trust Agreement, the Litigation Trustee will determine the fair market value of the Litigation Trust Assets as soon as possible after the Effective Date, and the Litigation Trust Beneficiaries and the Litigation Trustee must consistently use this valuation for all U.S. federal income tax purposes, including for determining gain, loss or tax basis.
5.8.3 Federal Income Tax Treatment of the Disputed Claims Reserve. Absent definitive guidance from the IRS or a contrary determination by a court of competent jurisdiction, if pursuant to Section 5.3 of this Plan the Litigation Trustee elects to treat the Disputed Claims Reserve as a “disputed ownership fund” the Disbursing Agent shall (i) treat the Disputed Claims Reserve as a disputed ownership fund for U.S. federal income tax purposes within the meaning of Treasury Regulations section 1.468B-9(b)(1) and (ii) to the extent permitted by applicable law, report consistently with the foregoing characterization for U.S. federal, state and local income tax purposes. Consistent therewith, all parties shall report, for income tax purposes, consistently with the foregoing.
5.9 Dissolution.
5.9.1 The Litigation Trust shall be dissolved no later than five years from the Effective Date, unless the Bankruptcy Court, upon motion made within the six-month period prior to such fifth anniversary (and, in the event of further extension, at least six months prior to the end of the preceding extension), determines that a fixed period extension (together with any prior extensions, without a favorable letter ruling from the Internal Revenue Service that any further extension would not adversely affect the status of the Litigation Trust as a liquidating trust for federal income tax purposes) is necessary to facilitate or complete the recovery on and liquidation of the Litigation Trust Assets; provided that in no event shall the term of the Litigation Trust be extended beyond 10 years.
49 29766749v43 5.9.2 Upon dissolution of the Litigation Trust, any remaining Cash on hand (excluding any unused portion of the Litigation Trust Funding that shall be used to pay off the outstanding balance of the Litigation Trust Note) and other assets, with the exception of any Committee Litigation Claims, will be distributed to the Litigation Trust Beneficiaries in accordance with the Litigation Trust Agreement. Upon the dissolution of the Litigation Trust, all remaining Committee Litigation Claims shall be deemed void and abandoned and no Litigation Trust Beneficiary shall have any right, title or interest in or to any such Preserved Cause of Action.
5.10 Securities Law Matters. To the extent the interests in the Litigation Trust are deemed to be “securities,” the issuance of such interests under this Plan are exempt, pursuant to section 1145 of the Bankruptcy Code, from registration under the Securities Act of 1933, as amended, and any applicable state and local laws requiring registration for the offer or sale of securities.
ARTICLE VI
VOTING AND DISTRIBUTIONS UNDER THE PLAN
6.1 Impaired Classes to Vote. Except to the extent a Class of Claims or Equity Interests is deemed to have rejected this Plan, each holder of a Claim or Equity Interest in an Impaired Class as of the Voting Record Date shall be entitled to vote to accept or reject this Plan as provided in such order as is entered by the Bankruptcy Court establishing procedures with respect to the solicitation and tabulation of votes to accept or reject this Plan, or any other order or orders of the Bankruptcy Court.
6.2 Acceptance by Class of Claims.
6.2.1 An Impaired Class of Claims shall have accepted a Plan if the Plan is accepted by at least two-thirds (2/3) in dollar amount and more than one-half (1/2) in number of the Allowed Claims of such Class that have voted to accept or reject the Plan. Unimpaired Classes are presumed to have accepted the Plan.
6.2.2 If no holders of Claims in an Impaired Class who are entitled to vote to accept or reject this Plan have cast Ballots to accept or reject the Plan on or before the Voting Deadline, such Class shall be deemed to have voted to accept this Plan.
6.3 Elimination of Vacant Classes. Any Class of Claims or Equity Interests that does not have a Claim or Equity Interest as of the date of the Confirmation Hearing shall be deemed eliminated from this Plan for all purposes.
6.4 Nonconsensual Confirmation.
6.4.1 Cramdown. With respect to each Impaired Class of Claims that is deemed to reject the Plan in accordance with section 1126(g) of the Bankruptcy Code, the Debtors will request that the Bankruptcy Court confirm the Plan in accordance with section
50 29766749v43 1129(b) of the Bankruptcy Code. To the extent any other Impaired Class fails to accept any Plan in accordance with section 1126(a) of the Bankruptcy Code and Section 6.2 of this Plan, each Debtor whose Plan was not so accepted may request that the Bankruptcy Court confirm its Plan in accordance with section 1129(b) of the Bankruptcy Code and retains the right to amend its Plan to provide a confirmable treatment of the applicable Class consistent with such section.
6.4.2 Effect of Plan Rejection on Distributions. If the Committee and/or the Second Lien Group files an objection to confirmation of the Plan, then NPC Class 3A and/or NPC Class 3C, or GD Class 3A and/or GD Class 3C, as applicable, shall be entitled only to Distributions from unencumbered assets after taking into account the full legal entitlements of other claimants with claims against the same assets. In calculating the Distributions for the affected Class from Settlement Cash, Litigation Trust proceeds or other unencumbered assets, the waiver of the First Lien Notes Deficiency Claims, the First Lien Notes Subordination Turnover Cap, and the waiver of the First Lien Noteholders’ Adequate Protection Claims shall not apply (and if such Adequate Protection Claims are Allowed, they shall be paid out of the Distributions otherwise payable to the affected Class(es)). The amount representing the difference between (i) the recovery that NPC Class 3A or NPC Class 3C, or GD Class 3A or GD Class 3C would otherwise receive if the Committee and/or the Second Lien Group, as applicable, do not object to confirmation of the Plan, and (ii) the recovery that such Classes would otherwise receive if the Committee and/or Second Lien Group do object to confirmation of the Plan shall be paid to the First Lien Notes Trustee (for the benefit of the First Lien Noteholders). [This provision will be deleted, as applicable, if the Second Lien Group and/or the Committee agrees to support the Disclosure Statement and Plan, and not object to confirmation].
6.5 Distributions Under the Plan. Whenever any Distribution to be made pursuant to this Plan shall be due on a day other than a Business Day, the Distribution shall instead be made, without interest, on the immediately succeeding Business Day, but shall be deemed to have been made on the date due. The Distributions shall be made to the holders of Allowed Claims as of the Distribution Record Date and the Reorganized Debtors, and subject to the transfer of any Litigation Trust Interests in accordance with the terms of the Litigation Trust Agreement, the Litigation Trustee, shall have no obligation to recognize any transfer of a Claim occurring after the Distribution Record Date.
(a) Distribution Deadlines. Any Distribution to be made by a Disbursing Agent pursuant to a Plan shall be deemed to have been timely made if made in accordance with the Distributions specified in Article III of this Plan. No interest shall accrue or be paid with respect to any Distribution as a consequence of the Distribution not having been made on the Effective Date or any other Distribution Date.
(b) Treatment of New Holdco Common Stock. The New Holdco Common Stock shall be non-certificated and issued in book-entry form. If any Distribution of the stock of Reorganized NPC is undeliverable it shall be exchanged for New Holdco Common Stock in accordance with Section 4.5.2 of this Plan; if the resulting New Holdco Common Stock is undeliverable, then at the expiration of one year from the Effective Date
51 29766749v43 the undeliverable Distributions shall be deemed unclaimed property and shall be treated in accordance with Section 6.13 of this Plan.
(c) Undisbursed New Holdco Common Stock. If a legal impediment exists to the issuance or distribution of all or a portion of any New Holdco Common Stock or stock of Reorganized NPC under this Plan to any holder of an Allowed First Lien Notes Claim, or if Reorganized NPC is advised in writing by a holder that a legal impediment exists to the acquisition by that holder of those securities, whether as a result of any legal requirements, conditions, approvals, or otherwise, the securities that would otherwise be distributable to the holder in accordance with this Plan but for such legal impediment shall instead be issued on the Effective Date, to the Disbursing Agent, to be held pursuant to the terms and conditions of this Plan provided that the Disbursing Agent shall not exercise any voting rights with respect to these securities, and in the case of stock of Reorganized NPC, the Disbursing Agent shall exchange such stock for New Holdco Common Stock pursuant to Section 4.5.2 of this Plan on behalf of such holder. From and after the Effective Date, up to and until the undisbursed securities are released pursuant to the terms of this Plan, the Disbursing Agent shall be the registered holder of these securities. When the applicable legal impediment to the acquisition of undisbursed securities has been resolved as evidenced by delivery of written notice by the holder to the Disbursing Agent and New Holdco, which notice shall include a description of such resolution on which the Disbursing Agent and New Holdco shall be entitled to rely, the undisbursed securities shall be delivered to the holder no later than the next Distribution Date in accordance with the terms and conditions of this Plan. In any other instance, these securities shall be delivered at such time as New Holdco determines in its sole discretion that any legal impediment to the issuance and delivery of those securities has been resolved. If the applicable legal impediment to the issuance and delivery of undisbursed securities to a holder has not been satisfactorily resolved in the foregoing manner within one year after the Effective Date, New Holdco will direct the Disbursing Agent to cooperate in good faith with the affected holder to sell the undisbursed securities and distribute the proceeds to the holder.
(d) Distributions of Litigation Trust Interests. The Litigation Trustee shall be responsible for the Distribution of Litigation Trust Interests, but the Litigation Trust Interests shall be recorded in book-entry form only. The Litigation Trust Interests shall not be certificated or issued in registered form. If any Distribution on account of Litigation Trust Interests to a Litigation Trust Beneficiary is undeliverable, then at the expiration of one year from the Effective Date, the undeliverable Distributions shall be deemed unclaimed property and shall be treated in accordance with Section 6.13 of this Plan.
52 29766749v43 (e) Responsibility for Transfers and Distributions. The Disbursing Agent shall be responsible for Distributions required by this Plan.
6.6 Distribution Record Date. As of the close of business on the Distribution Record Date, the Debtors, the Reorganized Debtors, and the Indenture Trustees shall have no obligation to recognize any transfer of any noteholder’s Claim occurring after the close of business on the Distribution Record Date, and shall instead be entitled to recognize and deal for all purposes under this Plan with only those holders of record as of the close of business on the Distribution Record Date.
6.7 Payments to be Made to Indenture Trustees. The Distributions to be made under the Plan to the holders of Allowed Notes Claims shall be made to the relevant Indenture Trustees. Subject to the satisfaction of the requirements in Section 4.8.2 of this Plan (to the extent applicable), the applicable Indenture Trustee shall distribute to each holder its Pro Rata Share of the applicable Distribution, subject to the rights of the Indenture Trustees to assert their Indenture Trustee Charging Liens against such Distributions.
6.8 Manner of Payment Under the Plan. Unless the Entity receiving a payment agrees otherwise, any payment in Cash to be made by the applicable Disbursing Agent shall be made by check drawn on a domestic bank or by automated clearing house transfer.
6.9 Payment of Interest on Allowed Claims. Unless otherwise specifically provided by this Plan, the Confirmation Order or any other order of the Bankruptcy Court, post-petition interest shall not accrue and shall not be paid on Allowed Claims.
6.10 Fractional Dollars; De Minimis Distributions. Notwithstanding any other provision of this Plan, Cash payments of fractions of dollars shall not be made. Whenever any Distribution to a holder of a Claim or Litigation Trust Beneficiary would otherwise call for Distribution of Cash in a fractional dollar amount, the actual Distribution of such Cash shall be rounded to the nearest whole dollar (up or down), with half dollars (or less) being rounded down. The Disbursing Agent shall not be required to make any Cash payment of less than $50 with respect to any Claim or Litigation Trust Interest unless a written request therefor is made to the applicable Disbursing Agent not later than one year after the Effective Date.
6.11 Calculation of Distribution of New Holdco Common Stock. No fractional shares of New Holdco Common Stock shall be issued or distributed under this Plan. Whenever any Distribution to a holder of a Claim would otherwise call for a Distribution which would result in such holder holding a fraction of a share of New Holdco Common Stock, the actual Distribution of shares shall be rounded to the nearest whole number of shares (up or down), with half shares (or less) being rounded down. The total number of shares of New Holdco Common Stock to be issued pursuant to this Plan to the holders entitled to receive such shares shall be adjusted as necessary to account for the rounding provided in this Plan. No consideration shall be provided in lieu of fractional shares rounded down.
6.12 Calculation of Distribution of Litigation Trust Interests. No fractional Litigation Trust Interests shall be issued or distributed under this Plan. Whenever any Distribution to a Litigation Trust Beneficiary would otherwise call for Distribution of a fraction of a Litigation
53 29766749v43 Trust Interest, the actual Distribution of such Litigation Trust Interests shall be rounded to the nearest whole number of shares (up or down), with half shares (or less) being rounded down. No consideration shall be provided in lieu of fractional Litigation Trust Interests rounded down.
6.13 Unclaimed Property. All Distributions under this Plan unclaimed for a period of one year after the applicable Distribution Date shall be deemed unclaimed property under section 347(b) of the Bankruptcy Code and shall vest in the applicable Reorganized Debtor or Litigation Trust, as applicable, and any entitlement of any holder of any Claim or Litigation Trust Beneficiary to those Distributions shall be extinguished and forever barred and, with respect to unclaimed Distributions from the Litigation Trust, such Distributions shall be reallocated to the other Litigation Trust Beneficiaries in accordance with the terms of the Litigation Trust Agreement and this Plan.
6.14 Time Bar to Cash Payments. Checks issued by a Disbursing Agent in respect of any Distribution of Cash made on account of Allowed Claims or Litigation Trust Interests shall be null and void if not negotiated within 90 days from and after the date of issuance thereof. Requests for re-issuance of any check shall be made directly to the applicable Disbursing Agent by the holder of the Allowed Claim or Litigation Trust Interest, as applicable, with respect to which such check originally was issued. Any Claim in respect of a voided check shall be made on or before the later of (i) the first anniversary of the Distribution, or (ii) 90 days after the date of issuance if the check represents a final Distribution. After that date, all remaining Claims in respect of voided checks shall be discharged and forever barred and the applicable Reorganized Debtor or Litigation Trust, as applicable, shall retain all related monies as unclaimed property under Section 6.13.
6.15 Setoffs. The Reorganized Debtors may, but shall not be required to, pursuant to applicable bankruptcy or non-bankruptcy law, set off against any Allowed Claim and the related Distributions to be made pursuant to this Plan (before any Distribution is made on account of the Claim), the claims, rights, and Causes of Action of any nature that the Estates or the Reorganized Debtors hold against the holder of that Allowed Claim. Neither the failure to effect such a setoff nor the allowance of any Claim under this Plan shall constitute a waiver or release by the Debtors or the Reorganized Debtors of any claims, rights and Causes of Action that the Debtors or the Reorganized Debtors may possess against the Claim holder, provided, that no setoffs shall be permitted against any holders of the First Lien Notes or Second Lien Notes or that would violate the SEO Settlement Agreement.
6.16 Allocation of Plan Distributions Between Principal and Interest. To the extent that an Allowed Claim entitled to a Distribution under this Plan is comprised of indebtedness and accrued but unpaid interest, the distribution shall be allocated first to the principal amount of the Claim (as determined for U.S. federal income tax purposes) and then, to the extent the consideration exceeds the principal amount of the Claim, to accrued but unpaid interest.
54 29766749v43 ARTICLE VII
TREATMENT OF DISPUTED CLAIMS UNDER THE PLAN
7.1 Objections to Claims; Prosecution of Disputed Claims.
7.1.1 Unless other Claims objection procedures previously approved by the Bankruptcy Court require otherwise, the Debtors or Reorganized Debtors (except after the Effective Date as to General Unsecured Claims) shall object to the allowance of Claims with respect to which the Debtors or Reorganized Debtors dispute liability in whole or in part. Unless resolved by settlement between the applicable Debtor and the holder of a Claim, all objections filed and prosecuted by the Debtors or Reorganized Debtors shall be litigated to Final Order by the Debtors or Reorganized Debtors, as applicable. From and after the Effective Date, objections to General Unsecured Claims shall be filed and prosecuted by the Litigation Trustee and the Litigation Trustee shall have the sole authority to settle all pending or future objections to General Unsecured Claims. For the avoidance of doubt, the Litigation Trust shall pay all fees, costs, and expenses incurred by the Litigation Trustee and its professionals in connection with filing and prosecuting objections to General Unsecured Claims. In addition, any and all costs, expenses, adverse judgments, sanctions, and other financial obligations imposed against the Litigation Trust shall be solely the liabilities of the Litigation Trust and not of the Reorganized Debtors or any other Entity, and the Litigation Trust shall reimburse the Reorganized Debtors for reasonable fees, costs and expenses incurred in facilitating the Litigation Trustee’s prosecution and/or settlement of General Unsecured Claims objections, such as the Reorganized Debtors’ legal fees and travel expenses attendant thereto. Notwithstanding anything to the contrary herein, the Reorganized Debtors and the Litigation Trustee shall coordinate in good faith with respect to the prosecution or settlement of any Claims for which classification as a General Unsecured Claim or other type of Claim is in dispute. Nothing herein grants to the Litigation Trust any power to bind the Reorganized Debtors and/or their affiliates in any way whatsoever.
7.1.2 Unless otherwise provided in this Plan or ordered by the Bankruptcy Court, all objections to Claims shall be served and filed on or before 360 days after the Effective Date, as may be extended before or after the running of the 360 days by order of the Bankruptcy Court after notice and a hearing.
7.2 No Distributions Pending Allowance. Except as provided in Section 7.3, and notwithstanding any other provision in this Plan, if any portion of a Claim is a Disputed Claim, no Distribution shall be made on account of any portion of the Claim unless and until the Disputed Claim becomes an Allowed Claim. No interest shall be paid on account of Disputed Claims that later become Allowed except to the extent that payment of interest is required under section 506(b) of the Bankruptcy Code.
7.3 Reserve Account for Disputed General Unsecured Claims. On and after the Effective Date, the Disputed Claims Reserve shall hold Cash and Litigation Trust Interests in an aggregate amount sufficient to pay all holders of Disputed General Unsecured Claims the Distributions of Cash and Litigation Trust Interests they would have been entitled to receive under this Plan if all their General Unsecured Claims had been Allowed Claims on the Effective Date, net of any taxes imposed on the Disputed Claims Reserve or otherwise payable by the
55 29766749v43 Disputed Claims Reserve. The Cash to be held in the Disputed Claims Reserve shall be held and deposited by the Litigation Trust Disbursing Agent in a segregated interest-bearing reserve account (or accounts, as may be determined by the Litigation Trust Disbursing Agent). Distributions reserved on account of any Disputed Claim shall be distributed to the extent it becomes an Allowed Claim so the holder thereof receives the Distributions it would have received had it been Allowed on the Effective Date, net of any taxes imposed on or otherwise payable by the Disputed Claims Reserve. Distributions on account of a Claim that becomes an Allowed Claim after the Effective Date shall be made on the next Distribution Date following (i) the entry of an order or judgment of the Bankruptcy Court or other applicable court of competent jurisdiction (including any appeal) allowing any Disputed Claim that has become a Final Order, (ii) the withdrawal of any objection to the Disputed Claim, or (iii) a settlement, compromise, or other resolution of the Disputed Claim.
7.4 Disputed Class 3A Claims. A holder of a Disputed NPC Class 3A or GD Class 3A Claim who is precluded from voting on the Plan and does not receive a Ballot on which to elect treatment as a Qualified Trade Creditor may instead elect to have its NPC or GD Class 3A Claim treated under the Plan as a Qualified Trade Claim upon the Allowance of all or a portion of such Claim if (i) the holder notifies the Claims Agent, (ii) obtains from the Claims Agent and completes the form entitled “Credit Terms For Consideration As Qualified Trade Creditor”, and returns the form to the Claims Agent, and (iii) otherwise meets the requirements of a Qualified Trade Creditor in Section 1.2.138 of this Plan.
7.5 No Recourse. Notwithstanding that the Allowed amount of any particular Disputed Claim is reconsidered under the applicable provisions of the Bankruptcy Code and the Bankruptcy Rules or is Allowed in an amount for which after application of the payment priorities established by this Plan there is insufficient value to provide a recovery equal to that received by other holders of Allowed Claims in the applicable Class, no holder of such Claim shall have recourse against the Disbursing Agent, the Debtors, the Reorganized Debtors, the Litigation Trust, the Litigation Trustee, or any of their respective professionals, consultants, attorneys, advisors, officers, directors, or members or their successors or assigns, or any of their respective property. However, nothing in this Plan shall modify any right of a holder of a Claim under section 502(j) of the Bankruptcy Code. THE BANKRUPTCY COURT’S ENTRY OF AN ORDER ESTIMATING CLAIMS MAY LIMIT THE DISTRIBUTION TO BE MADE ON THE DISPUTED CLAIM, REGARDLESS OF THE AMOUNT FINALLY ALLOWED ON ACCOUNT OF THE DISPUTED CLAIM.
7.6 Distribution to Holders of Allowed Claims Following Disallowance of Disputed Claims. Subject to the minimum Distribution limitations set forth in Section 1.2.49 of this Plan, on each Distribution Date following the Effective Date, Distributions held in the Disputed Claims Reserve on account of Disputed General Unsecured Claims that are Disallowed shall be redistributed, net of any taxes imposed on the Disputed Claims Reserve or otherwise payable by the Disputed Claims Reserve, to each holder of Litigation Trust Interests in accordance with the terms of the Litigation Trust Agreement. Each holder shall receive Cash and/or Litigation Trust Interests reflecting the increase of the holders’ Pro Rata Share resulting from the disallowance of Disputed General Unsecured Claims since the previous Distribution Date and the release from the Disputed Claims reserve of the Cash and/or Litigation Trust Interests accorded to such Disallowed Claims for redistribution to the holders of Litigation Trust Interests as set forth in the
56 29766749v43 Litigation Trust Agreement. Any Distributions made on a Distribution Date following the Effective Date shall be made in the same manner as provided in Section 6.5 of this Plan in respect of Effective Date Distributions.
7.7 Estimation of Claims. The Debtors and/or the Reorganized Debtors, with respect to all Claims other than General Unsecured Claims, and the Litigation Trustee, with respect to General Unsecured Claims, may at any time request that the Bankruptcy Court estimate for final Distribution purposes any contingent, unliquidated or Disputed Claim pursuant to section 502(c) of the Bankruptcy Code or other applicable law, regardless of whether the Debtors or the Reorganized Debtors previously objected to that Claim or whether the Bankruptcy Court has ruled on the objection, and the Bankruptcy Court will retain subject matter jurisdiction to consider any request to estimate any Claim at any time, including during the pendency of any related appeal. Unless otherwise provided in an order of the Bankruptcy Court, if the Bankruptcy Court estimates any contingent, unliquidated or Disputed Claim, the estimated amount shall constitute either the Allowed amount of the Claim or a maximum limitation on the Claim, as determined by the Bankruptcy Court. If the estimate constitutes the maximum limitation on a Claim, the Debtors, the Reorganized Debtors, or the Litigation Trustee, as the case may be, may elect to pursue supplemental proceedings to object to any ultimate allowance of that Claim. The foregoing is not intended to limit the rights granted by section 502(j) of the Bankruptcy Code. All of the forgoing Claims objections, estimation and resolution procedures are cumulative and not exclusive of one another.
ARTICLE VIII
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
8.1 Assumption and Rejection of Executory Contracts. Each Executory Contract that has not expired by its own terms on or prior to the Confirmation Date, and which has not been assumed, assumed and assigned, assumed as modified, or rejected with the approval of the Bankruptcy Court, or which is not the subject of a motion to assume, assume and assign, assumed as modified, or reject as of the Confirmation Date, shall be:
(a) If listed on Schedule 8.1(A) of the Plan Supplement, deemed rejected by the Debtors on the Confirmation Date and the entry of the Confirmation Order by the Bankruptcy Court shall constitute approval of such rejection pursuant to sections 365(a) and 1123 of the Bankruptcy Code.
(b) If listed on Schedule 8.1(B) of the Plan Supplement, deemed assumed by the Debtors on the Confirmation Date and the entry of the Confirmation Order by the Bankruptcy Court shall constitute approval of the assumption pursuant to sections 365(a) and 1123 of the Bankruptcy Code.
(c) If listed on Schedule 8.1(C) of the Plan Supplement, deemed assumed as modified by the Debtors on the Confirmation Date and the entry of the Confirmation Order by the Bankruptcy Court shall constitute approval of
57 29766749v43 the assumption as modified pursuant to sections 365(a) and 1123 of the Bankruptcy Code.
(d) If listed on Schedule 8.1(D) of the Plan Supplement, deemed assumed and assigned by the Debtors on the Confirmation Date and the entry of the Confirmation Order by the Bankruptcy Court shall constitute approval of the assumption and assignment pursuant to sections 365(a) and 1123 of the Bankruptcy Code.
(e) If listed on Schedule 8.1(E) of the Plan Supplement, deemed assumed, rejected,or terminated consistent with the treatment contemplated by the SEO Settlement Agreement.
(f) If not set forth on Schedules 8.1(A)-(E) of the Plan Supplement, deemed assumed by the Debtors and this Plan shall constitute a motion to assume that Executory Contract.
Each Executory Contract assumed shall include any modifications, amendments, supplements, or restatements to that Executory Contract. Entry of the Confirmation Order by the Clerk of the Bankruptcy Court shall constitute approval of the assumptions pursuant to section 365(a) of the Bankruptcy Code and a finding by the Bankruptcy Court that each assumed Executory Contract is in the best interest of the Debtors, their Estates, and all parties in interest in the Chapter 11 Cases. The Debtors reserve the right at any time prior to the Effective Date to amend Schedules 8.1(A)-(E) to delete an Executory Contract listed on those Schedules, transfer an Executory Contract from one Schedule to another, or to add an Executory Contract not previously listed on any of the Schedules, thus changing the treatment accorded to that Executory Contract. The Debtors shall provide notice to the affected non-debtor counterparties to the Executory Contract of (i) the proposed assumption, assumption as modified, assumption and assignment, or rejection of that Executory Contract, (ii) any related cure amounts related to a proposed assumption, and (iii) any amendments made to Schedules 8.1(A)-(E). Nothing in this Section 8.1 shall constitute an admission by a Debtor or Reorganized Debtor that any contract or lease is an Executory Contract or that a Debtor or Reorganized Debtor has any liability thereunder.
8.2 Cure of Defaults and Survival of Contingent Claims. Except as may otherwise be agreed to by the parties, on or before the 30th day after the Effective Date, each non-debtor party to an Executory Contract that objects to a proposed cure amount must file an objection. Absent a timely objection, the payment of the proposed cure amount in respect of an Executory Contract shall cure any undisputed defaults under an Executory Contract assumed by the Debtors pursuant to this Plan in accordance with section 365(b) of the Bankruptcy Code, and all contingent reimbursement or indemnity Claims in respect of such Executory Contract shall be discharged upon entry of the Confirmation Order. All disputed cure amounts shall be paid either within 30 days of the entry of a Final Order determining the amount, if any, or as may otherwise be agreed to by the Reorganized Debtors and non-debtor counterparty.
8.3 Deadline for Filing Rejection Damage Claims. If the rejection of an Executory Contract by the Debtors pursuant to Section 8.1 of this Plan results in damages to the non-debtor
58 29766749v43 party to that Executory Contract, any claim for damages shall be forever barred and shall not be enforceable against the Debtors, the Reorganized Debtors, the Litigation Trust or the Litigation Trustee or their respective properties, agents, successors, or assigns unless a proof of claim is filed with the Claims Agent or with the Bankruptcy Court and served upon the Debtors (or Reorganized Debtors) and, if after the Effective Date, the Litigation Trustee on or before 30 days after the latest to occur of (i) the Confirmation Date, and (ii) the date of entry of an order by the Bankruptcy Court authorizing rejection of the Executory Contract.
8.4 Indemnification and Reimbursement Obligations. For purposes of this Plan, the obligations of the Debtors to indemnify and reimburse persons who are or were directors, officers, or employees of any of the Debtors prior to or on the Commencement Date or at any time thereafter against and for any claims, liabilities, or other obligations (including fees and expenses incurred by the Board of Directors of any of the Debtors, or the members, officers, or employees thereof, in connection with the Chapter 11 Cases) pursuant to Governance Documents, codes of regulations, applicable state law, specific agreement or any combination of the foregoing, shall survive confirmation of this Plan, remain unaffected by this Plan, and not be discharged in accordance with section 1141 of the Bankruptcy Code, irrespective of whether indemnification or reimbursement is owed in connection with an event occurring before, on, or after the Commencement Date. In furtherance of the foregoing, the Reorganized Debtors shall maintain insurance for the benefit of such directors, officers and employees at levels no less favorable than those existing as of the date of entry of the Confirmation Order for a period of no less than six years following the Effective Date.
8.5 Existing Compensation and Benefit Programs. Except as provided in Section 8.1 of this Plan, the Debtors’ existing collective bargaining agreements (as modified), health care plans (including medical plans, dental plans, vision plans, prescription plans, health savings accounts and spending accounts), retiree benefit programs and settlements with respect to such retiree benefit programs, defined contribution plans, severance plans, discretionary bonus plans, performance-based incentive plans, long-term incentive plans, retention plans, workers’ compensation programs and life, disability, accidental death and dismemberment, directors and officers liability, and other insurance plans are treated as Executory Contracts under this Plan and shall, on the Effective Date be deemed assumed by the Debtors in accordance with sections 365(a) and 1123(b)(2) of the Bankruptcy Code. Schedule 8.5 to the Plan Supplement shall list the agreements, plans, programs and other documents described in the preceding sentence. On and after the Effective Date, all Claims submitted for payment in accordance with the foregoing benefit programs, whether submitted prepetition or postpetition, shall be processed and paid in the ordinary course of business of the applicable Reorganized Debtors, in a manner consistent with the terms and provisions of those benefit programs. Notwithstanding any other provision of this Plan, the cure obligations, if any, related to the assumption of each of the collective bargaining agreements or modified collective bargaining agreements, shall be satisfied by the applicable Reorganized Debtors by payment, in the ordinary course, of all obligations arising under the collective bargaining agreements or modified collective bargaining agreements, including, but not limited to, grievances, grievance settlements, and arbitration awards. All Proofs of Claim filed by the USW and other unions (other than any proof of claim filed pursuant to Section 5 of the NPWSI Retirement Plan Settlement) shall be deemed satisfied by the agreement and obligation of the Reorganized Debtors to assume the applicable collective bargaining agreements and cure any defaults thereunder in the ordinary course as provided
59 29766749v43 herein. Notwithstanding any other provision of this paragraph, any obligation resolved by the NPWSI Retirement Plan Settlement shall be satisfied by compliance with the terms of the NPWSI Retirement Plan Settlement. For the treatment of the Pension Plans, which will be continued by the Reorganized Debtors in the ordinary course of business, see Sections 8.5.1 and 8.5.2 of this Plan.
8.5.1 The NewPage Cash Balance Plan for Non-Bargained Employees shall not be modified or affected by any provision of the Plan and shall be continued in the ordinary course of business after the Effective Date in accordance with its terms. The NewPage Retirement Plan for Bargained Hourly Employees shall not be modified (absent Union consent) or affected by any provision of the Plan and shall be continued in the ordinary course of business after the Effective Date in accordance with its terms and any modifications thereto pursuant to Union consent.
8.5.2 The Debtors or the Reorganized Debtors shall satisfy the minimum funding standards pursuant to 26 U.S.C. §§ 412, 430, and 29 U.S.C. § 1082, 1083 and be liable for the payment of PBGC premiums in accordance with 29 U.S.C. §§ 1306 and 1307 subject to any and all applicable rights and defenses of the Debtors, and administer the Pension Plans in accordance with the provisions of ERISA and the Internal Revenue Code. In the event that the Pension Plans terminate after the Effective Date, the Reorganized Debtors and each of its controlled group members will be responsible for the liabilities imposed by Title IV of ERISA.
8.5.3 Nothing in these Chapter 11 Cases, the Confirmation Order, the Plan, the Bankruptcy Code (including section 1141 thereof), or any document filed in these Chapter 11 Cases shall in any way be construed to discharge, release, limit, or relieve the Debtors or any other party, in any capacity, from any liability or responsibility with respect to the Pension Plans or any other defined benefit pension plan under any law, governmental policy, or regulatory provision. The PBGC and the Pension Plans shall not be enjoined or precluded from enforcing such liability or responsibility by any of the provisions of any plan of reorganization, confirmation order, Bankruptcy Code, or any document filed in these Chapter 11 Cases.
8.6 Reorganized NPC New Compensation Plans. On the Effective Date, the Reorganized NPC New Compensation Plans established by the Reorganized Debtors shall be executed and become effective, and the beneficiaries under those plans shall be governed by their terms.
ARTICLE IX
CORPORATE GOVERNANCE AND MANAGEMENT OF REORGANIZED DEBTORS
9.1 Reorganized Debtors’ Directors and Officers. The number and members of the Boards of Directors of New Holdco and the Reorganized Debtors will be set forth in the New Holdco Documents and Governance Documents, as applicable. The names of the members of the Boards of Directors and initial officers of New Holdco and the Reorganized Debtors shall be identified in Schedule 9.1 of the Plan Supplement and in all respects satisfactory to the First Lien
60 29766749v43 Notes Trustee. Each of the members of each Boards of Directors and each officer shall serve in accordance with applicable non-bankruptcy law.
9.2 Amendment of Governance Documents. The respective Governance Documents of the Debtors shall be amended as of the Effective Date to be substantially in the form of the Reorganized Debtors’ certificate of incorporation, bylaws and limited liability company agreement, as applicable, attached as Schedules 9.2A, 9.2B, and 9.2C of the Plan Supplement. The Governance Documents shall contain provisions (i) prohibiting the issuance of non-voting equity securities by the Reorganized Debtors that are corporations, as required by section 1123(a)(6) of the Bankruptcy Code (subject to further amendment as permitted by applicable law), and (ii) effectuating the provisions of this Plan, in each case without further action by the equityholders or the board of directors (or similar governing body) of the Debtors or the Reorganized Debtors.
9.3 Corporate Action. On the Effective Date, the adoption of the New Holdco Documents and the Reorganized Debtors’ respective amended Governance Documents shall be authorized and approved in all respects, in each case without further action under applicable law, regulation, order, or rule, including any action by the equityholders or the board of directors (or similar governing body) of the Debtors or the Reorganized Debtors. All other matters provided under this Plan involving the organizational structure of the Reorganized Debtors or corporate action by the Reorganized Debtors shall be deemed to have occurred, be authorized, and shall be in effect without requiring further action under applicable law, regulation, order, or rule, including any action by the equityholders or the board of directors (or similar governing body) of the Debtors or the Reorganized Debtors.
9.4 Corporate Authority of the Debtors. On the Effective Date, or as soon as reasonably practicable thereafter, the Reorganized Debtors may take all actions as may be necessary or appropriate to effect any transaction described in, approved by, contemplated by, or necessary or appropriate to effectuate this Plan, including (i) causing the Disbursing Agent to make Distributions under this Plan, (ii) the execution and delivery of appropriate agreements or other documents of merger, consolidation, conversion, or reorganization containing terms that are consistent with the terms of this Plan and that satisfy the requirements of applicable law, (iii) the execution and delivery of appropriate instruments of transfer, assignment, assumption, or delegation of any property, right, liability, duty, or obligation on terms consistent with the terms of this Plan, and (iv) the execution and filing of Governance Documents with the appropriate governmental authorities pursuant to applicable law.
ARTICLE X
EFFECT OF CONFIRMATION
10.1 Re-vesting of Assets. Upon the Effective Date, pursuant to sections 1141(b) and (c) of the Bankruptcy Code, all property of the Estates shall vest in the applicable Reorganized Debtors free and clear of all Claims, Liens, Encumbrances, charges, and other interests created prior to the Effective Date, except as provided in this Plan and the Plan Documents (and for
61 29766749v43 avoidance of doubt, excluding the Lien and security interest grants pursuant to the Exit Financing Documents), including in respect of the Litigation Trust Assets transferred to the Litigation Trust. From and after the Effective Date, the Reorganized Debtors may operate their businesses and may use, acquire, and dispose of property free of any restrictions of the Bankruptcy Code or the Bankruptcy Rules in all respects as if they never sought protection under the Bankruptcy Code, except as provided in this Plan.
10.2 Discharge of Claims. Except as provided in this Plan and the Plan Documents (including, without limitation, the Exit Financing Documents), upon the Effective Date, all Claims and Equity Interests shall be discharged to the fullest extent provided by section 1141 of the Bankruptcy Code.
10.3 Preservation of Insurance. The discharge and release of the Debtors as provided in this Plan, and the re-vesting of property in the Reorganized Debtors, shall not diminish or impair the enforceability of any insurance policies that may cover Claims against any Debtor or other Entity.
10.4 Injunction Against Claims and Equity Interests. Except as otherwise provided in this Plan, the Confirmation Order or any other applicable order of the Bankruptcy Court, all Entities who have held, hold or may hold Claims or Equity Interests are permanently enjoined, from and after the Effective Date, from (i) commencing or continuing in any manner any action or other proceeding of any kind on any Equity Interest, Claim or Cause of Action discharged, released or waived pursuant to the Plan or the SEO Settlement Agreement against the Debtors, the other Releasees, the Estates, the Reorganized Debtors, or their respective properties or interests in properties, (ii) enforcing, attaching, collecting or recovering by any manner or means of any judgment, award, decree or order relating to any Equity Interest, Claim or Cause of Action discharged, released or waived pursuant to the Plan or the SEO Settlement Agreement against the Debtors, the other Releasees, the Estates, the Reorganized Debtors, or their respective properties or interests in properties, (iii) creating, perfecting, or enforcing any Encumbrance or Lien of any kind securing a Claim or other debt, liability, or Equity Interest or Cause of Action discharged, released or waived pursuant to the Plan or the SEO Settlement Agreement against the Debtors and the other Releasees, the Estates, the Reorganized Debtors, or their respective property or interests in property, and (iv) except to the extent provided, permitted, or preserved by sections 553, 555, 556, 559, or 560 of the Bankruptcy Code or pursuant to the common law, and not discharged, released or waived pursuant to the Plan or SEO Settlement Agreement, exercising any right of recoupment, setoff or subrogation against any obligation due from the Debtors, the other Releasees, the Estates, the Reorganized Debtors or against their respective property or interests in property, with respect to any Equity Interest, Claim or Cause of Action that is discharged, released or waived pursuant to the Plan or the SEO Settlement Agreement. To clarify the foregoing, nothing in the Plan or Confirmation Order shall impair any offset and/or recoupment right of the United States of America or any agency or instrumentality thereof, provided that the United States’ preserved offset rights do not include the right to offset any postpetition claim of the Reorganized Debtors for amounts owed to them by the United States of America against any discharged
62 29766749v43 prepetition claim of the United States of America for amounts owed to it by the Debtors.
10.5 Term of Existing Injunctions or Stays. Unless otherwise provided in this Plan, all injunctions or stays provided for in the Chapter 11 Cases pursuant to sections 105 or 362 of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the later of the Effective Date and the date indicated in such applicable order.
10.6 Injunction Against Interference With Plan. Pursuant to sections 1142 and 105 of the Bankruptcy Code, from and after the Effective Date, all holders of Claims and Equity Interests and other parties in interest, along with their respective current or former employees, agents, officers, directors, principals and Affiliates shall be enjoined from taking any actions to interfere with the implementation or consummation of this Plan, except for actions allowed to attain legal review.
10.7 Injunction Regarding Worthless Stock Deduction. Unless otherwise ordered by the Bankruptcy Court (including because the Bankruptcy Court determines that no injunction is necessary to protect the tax attributes of the Debtors or the Reorganized Debtors), any person or group of persons constituting a “fifty percent shareholder” of NPGI, NPHC, or NPC within the meaning of section 382(g)(4)(D) of the Tax Code shall be permanently enjoined from claiming a worthless stock deduction with respect to any Equity Interest in NPGI, NPHC, or NPC held by that person(s) or group (or otherwise treating the Equity Interest in NPGI, NPHC, or NPC as worthless for U.S. federal income tax purposes) for any taxable year of that person(s) or group ending on or prior to the Effective Date.
10.8 Channeling Injunction. Any and all actions against present or former officers, directors, or stockholders of the Debtors, or against affiliates of any such persons or Entities in such capacities, shall be brought solely in the Bankruptcy Court or any Delaware State courts, subject to all such courts’ powers to abstain.
10.9 Exculpation. As of and subject to the occurrence of the Confirmation Date, the Debtors, the Committee and each of the Committee’s members, the First Lien Notes Trustee, the First Lien Notes Steering Committee and its members, the Second Lien Notes Trustee, the members of the Second Lien Group, the Exit Financing Group, and each of their current or former Affiliates, agents, shareholders, directors, officers, members, employees, and advisors, or attorneys to any of the foregoing (collectively, the “Exculpated Parties”) shall be deemed to have (i) negotiated and proposed this Plan in good faith, and not by any means forbidden by law (ii) solicited acceptances of this Plan in good faith and in compliance with the applicable provisions of the Bankruptcy Code, including section 1125(a) and (e) of the Bankruptcy Code, and any applicable non-bankruptcy law, rule, or regulation governing the adequacy of disclosure in connection with the solicitation, and (iii) participated in good faith and in compliance with the applicable provisions of the Bankruptcy Code in the offer and issuance of securities under this Plan, and therefore are not, and on account of the offer, issuance and solicitation will not be, liable at any time for any violation of any applicable law, rule, or regulation governing the solicitation of
63 29766749v43 acceptances or rejections of this Plan or the offer and issuance of any securities under this Plan. None of the Exculpated Parties shall have or incur any liability to any Entity for any claims, rights, obligations, suits, damages, causes of action, remedies, liabilities, defenses and counterclaims whatsoever, held by the Debtors, the Reorganized Debtors or assertable on behalf of their Estates, or the Reorganized Debtors, or derivative of the Debtors’, their Estates’ or the Reorganized Debtors’ rights, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity, or otherwise, in any way relating to the Debtors, the Estates, the Debtors in Possession, the Chapter 11 Cases, this Plan, the subject matter of, or the transactions or events giving rise to, any Claim or Equity Interest, the treatment of any Claim or Equity Interest under this Plan, the business or contractual arrangements between any Debtor and any other Releasee, any negotiations regarding or concerning this Plan and the ownership, management and operation of the Debtors and the Reorganized Debtors, the negotiation and consummation of the Exit Financing, the purchase, sale or rescission of the purchase or sale of any security, claim or interest of the Debtors, the Debtors in Possession or their Estates, or any act or omission, transaction, agreement, event or other occurrence taking place on or after the Commencement Date and on or before the Effective Date. The foregoing shall not operate as a waiver of or release from any claims, rights, obligations, suits, damages, causes of action, remedies, liabilities, defenses, and counterclaims arising as a result of any gross negligence, willful misconduct, or actual fraud by an Exculpated Party (other than a Debtor).
10.10 Releases by Debtors. As of the Effective Date, the Debtors and the Reorganized Debtors release, waive and discharge all of the other Releasees (other than the SEO Released Parties and Trust Parties, whose release is as set forth in the SEO Settlement Agreement), from any and all claims, obligations, rights, suits damages, causes of action, remedies, liabilities, defenses and counterclaims whatsoever, held by the Debtors or their Estates, assertable on behalf of the Debtors or their Estates, or derivative of the Debtors’, or their Estates’ rights, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity, or otherwise, in any way relating to the Debtors, the Debtors in Possession, the Chapter 11 Cases, the Disclosure Statement, this Plan, the subject matter of, or the transactions or events giving rise to, any Claim or Equity Interest that is treated under this Plan, the treatment of any Claim or Equity Interest under this Plan, the business or contractual arrangements between any Debtor and any other Releasee, any negotiations regarding or concerning this Plan and the ownership, management and operation of the Debtors, the negotiation and consummation of the Exit Financing, purchase, sale or rescission of the purchase or sale of any security, claim or interest of the Debtors, or their Estates, or any act or omission, transaction, agreement, event or other occurrence taking place on or before the Effective Date. Notwithstanding the Preserved Rights preserved in Section 4.9 of this Plan, the Releasees (other than the SEO Released Parties and Trust Parties, whose release is as set forth in the SEO Settlement Agreement), shall be released from all Preserved Rights except for (i) claims, obligations, rights, suits, damages, causes of action, remedies, liabilities, defenses and counterclaims arising as a result of any Releasee’s gross negligence, willful misconduct, or actual fraud and (ii) any remedies, liabilities, or causes of action arising out of any express contractual
64 29766749v43 obligation owing by any Releasee to any Debtor or any reimbursement obligation owing by any Releasee to any Debtor with respect to a loan or advance made by any of the Debtors to that Releasee. For the avoidance of doubt, nothing in this Section 10.10 shall qualify or limit the release of the SEO Released Parties or the Trust Parties, whose release is as set forth in the SEO Settlement Agreement.
10.11 Additional Releases of Releasees. Subject to the terms of the release opt-out provision in the Ballots (except as set forth in the proviso below), as of the Effective Date, each holder of a Claim against the Debtors (including each person who, directly or indirectly, is entitled to receive a distribution under this Plan, and each person entitled to receive a distribution via an attorney, agent, indenture trustee, or securities intermediary), shall be deemed to forever release, waive and discharge all Releasees from any and all claims, rights, obligations, suits, damages, causes of action, remedies, liabilities, defenses and counterclaims, whether direct or derivative, liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity or otherwise, in any way relating to the Debtors, the Debtors in Possession, the Chapter 11 Cases, the Disclosure Statement, this Plan, the subject matter of, or the transactions or events giving rise to, any Claim or Equity Interest that is treated under this Plan, the treatment of any Claim or Equity Interest under this Plan, the business or contractual arrangements between any Debtor and any other Releasee, any negotiations regarding or concerning this Plan and the ownership, management and operation of the Debtors, the negotiation and consummation of the Exit Financing, the purchase, sale or rescission of the purchase or sale of any security, claim or interest of the Debtors, the Debtors in Possession or their Estates, or any act or omission, transaction, agreement, event or other occurrence taking place on or before the Effective Date. The foregoing release shall not operate as a waiver of or release from any claims, rights, obligations, suits, damages, causes of action, remedies, liabilities, defenses, and counterclaims arising as a result of any gross negligence, willful misconduct or actual fraud by a Releasee (other than a Debtor); provided, however, that the release opt- out provision in the Ballots shall not apply to claims against non-debtors indemnified by the Reorganized Debtors.
10.12 Releases Pursuant to SEO Settlement Agreement. The Debtors and the Reorganized Debtors release the SEO Released Parties and the Trust Parties upon the satisfaction of the closing conditions set forth in Sections 1 and 9 of the SEO Settlement Agreement.
ARTICLE XI
CONDITIONS PRECEDENT TO EFFECTIVE DATE OF THE PLAN; IMPLEMENTATION PROVISIONS
11.1 Conditions Precedent to Effective Date of the Plan. The occurrence of the Effective Date and the substantial consummation of this Plan are subject to satisfaction of the following conditions precedent, and the Effective Date shall not occur, and this Plan shall be of no force and effect, unless and until each of the following conditions precedent is satisfied:
65 29766749v43 (a) The Bankruptcy Court shall have issued the Confirmation Order;
(b) The Confirmation Order shall have been entered on the docket for at least 14 days, or such shorter period as may be approved by the Bankruptcy Court pursuant to Bankruptcy Rule 3020(e), without being reversed, stayed or enjoined;
(c) The Confirmation Order and all agreements and instruments that are Exhibits to this Plan or included in the Plan Supplement shall be in a form reasonably acceptable to the Debtors and the First Lien Notes Steering Committee (other than the SEO Settlement Agreement, which is deemed to be in a form acceptable to the Debtors and the First Lien Notes Steering Committee); provided, however, that if the Confirmation Order effects a change to the terms of the Plan that materially adversely affects any Distributions to or material rights of (a) the Committee, its members or holders of General Unsecured Claims, (b) the Second Lien Group, its members or the Second Lien Noteholders, or (c) the SEO Released Parties or the Trust Parties, then those terms in the Confirmation Order must be reasonably acceptable to each of the Committee, the Second Lien Group, and SEO, respectively (as applicable).
(d) The Confirmation Order shall be in full force and effect; and
(e) The conditions precedent to the effectiveness of the Exit Financing shall have been satisfied or waived by the parties thereto, the Reorganized Debtors shall have access to the Exit Financing, and all fees and expenses payable under the Exit Financing Documents shall have been paid, without the need to file a fee application with the Bankruptcy Court.
11.2 Waiver of Conditions Precedent. To the extent practicable and legally permissible, the conditions precedent in Section [11.1] of this Plan may be waived, in whole or in part, by the Debtors, subject to the consent of the First Lien Notes Steering Committee not to be unreasonably withheld; provided, however, that if such waiver(s) materially adversely affects any Distributions to or material rights of (a) the Committee, its members or holders of General Unsecured Claims, (b) the Second Lien Group, its members or the Second Lien Noteholders, then the Committee and/or the Second Lien Group, and/or (c) the SEO Released Parties or the Trust Parties, as applicable, must also consent to the waiver of such condition, which consent shall not be unreasonably withheld or delayed. Any such waiver of a condition precedent may be effected at any time by filing with the Bankruptcy Court a notice that is executed by the Debtors, after consultation with, or with the consent of, the First Lien Notes Steering Committee, the Committee, the Second Lien Group, and/or SEO, as applicable.
11.3 Notice of Confirmation of the Plan. Notice of entry of the Confirmation Order shall be provided by the Debtors as required by Bankruptcy Rule 3020(c)(2) and any applicable local rules of the Bankruptcy Court.
66 29766749v43 11.4 Notice of Effective Date of the Plan. Notice of the Effective Date shall be provided by the Debtors in the same manner provided with respect to notice of entry of the Confirmation Order, and any applicable local rules of the Bankruptcy Court.
ARTICLE XII
RETENTION OF SUBJECT MATTER JURISDICTION
12.1 Retention of Jurisdiction. To the fullest extent allowed under applicable law, the Bankruptcy Court and the District Court shall retain subject matter jurisdiction and retain all exclusive jurisdiction they have over any matter arising under the Bankruptcy Code, arising in or related to the Chapter 11 Cases or this Plan, or that relates to the following:
(a) to interpret, enforce, and administer the terms of this Plan, the Plan Documents (including annexes and exhibits), and the Confirmation Order;
(b) to resolve any matters related to the assumption, assignment, or rejection of any Executory Contract and to hear, determine and, if necessary, liquidate, any related Claims, including with respect to any cure amount;
(c) to enter such orders as may be necessary or appropriate to implement or consummate this Plan and all contracts, instruments, releases, and other agreements or documents created in connection with this Plan;
(d) to determine any and all motions, adversary proceedings, applications, and contested or litigated matters that may be pending on the Effective Date or that, pursuant to this Plan, may be instituted by the Reorganized Debtors after the Effective Date including any claims to recover assets for the benefit of the Estates, except for matters waived or released under this Plan;
(e) to ensure that Distributions to holders of Allowed Claims are accomplished as provided in this Plan;
(f) to hear and determine any timely objections to Administrative Expense Claims or to proofs of claim, both before and after the Effective Date, including any objections to the classification of any Claim, and to allow, disallow, determine, liquidate, classify, estimate or establish the priority of or secured or unsecured status of any Claim in whole or in part;
(g) to enter and implement such orders as may be appropriate if the Confirmation Order is for any reason stayed, revoked, modified, reversed or vacated;
(h) to issue such orders in aid of execution of this Plan, to the extent authorized by section 1142 of the Bankruptcy Code;
67 29766749v43 (i) to consider any modifications of this Plan to cure any defect or omission or reconcile any inconsistency in any order of the Bankruptcy Court, including the Confirmation Order;
(j) to hear and determine applications for allowances of compensation and reimbursement of expenses of Professionals under sections 330 and 331 of the Bankruptcy Code and any other fees and expenses authorized to be paid or reimbursed under this Plan;
(k) to hear and determine disputes arising in connection with or relating to this Plan or the interpretation, implementation, or enforcement of this Plan or the extent of any Entity’s obligations incurred in connection with or released under this Plan;
(l) to issue injunctions, enter and implement other orders or take such other actions as may be necessary or appropriate to restrain interference by any Entity with consummation or enforcement of this Plan;
(m) to recover all assets of the Debtors and property of the Estates, wherever located;
(n) to resolve any Disputed Claims;
(o) to determine the scope of any discharge of any Debtor under this Plan or the Bankruptcy Code;
(p) to determine any other matters that may arise in connection with or are related to this Plan, the Disclosure Statement, the Confirmation Order or any contract, instrument, release or other agreement or document created in connection with this Plan or the Disclosure Statement, including any of the Plan Documents;
(q) to hear and determine all matters arising under the Litigation Trust Agreement or relating to the Litigation Trust;
(r) to the extent that Bankruptcy Court approval is required, to consider and act on the compromise and settlement of any Claim or cause of action by or against the Estates;
(s) to hear and determine any other matters that may be set forth in this Plan, the Confirmation Order, or that may arise in connection with this Plan or the Confirmation Order;
(t) to hear and determine any proceeding that involves the validity, application, construction, or enforceability of, or that may arise in connection with, this Plan or the Confirmation Order or any other Order entered by the Bankruptcy Court during the Chapter 11 Cases;
68 29766749v43 (u) to hear and determine matters concerning state, local and federal taxes in accordance with sections 346, 505, and 1146 of the Bankruptcy Code (including the expedited determination of tax under section 505(b) of the Bankruptcy Code);
(v) to hear any other matter or for any purpose specified in the Confirmation Order that is not inconsistent with the Bankruptcy Code;
(w) to enter a final decree closing the Chapter 11 Cases; and
(x) to hear and determine any matter arising out of or relating to the SEO Settlement Agreement.
12.2 Abstention and Other Courts. If the Bankruptcy Court or District Court abstains from exercising, or declines to exercise, jurisdiction or is otherwise without jurisdiction over any matter arising out of or relating to the Chapter 11 Cases, this Section [12.2] shall have no effect upon and shall not control, prohibit, or limit the exercise of jurisdiction by any other court having competent jurisdiction with respect to that matter.
ARTICLE XIII
MODIFICATION, REVOCATION, OR WITHDRAWAL OF THE PLAN
13.1 Plan Modifications. Prior to the Confirmation Date, the Debtors, in their sole discretion, may amend, modify or supplement the terms and provisions of this Plan (including the treatment of Claims or Equity Interests under any Plan), in the manner provided for by section 1127 of the Bankruptcy Code or as otherwise permitted by law, without additional disclosure pursuant to section 1125 of the Bankruptcy Code, except as the Bankruptcy Code may otherwise direct, but no material amendments, modifications or supplements shall be made to this Plan or the Plan Documents absent consent of the First Lien Notes Trustee, which consent shall not be unreasonably withheld; notwithstanding the foregoing, to the extent any modification or amendment to the Plan materially adversely affects the Distributions to or material rights of (i) the Second Lien Noteholders, the Second Lien Group and/or its members, (ii) the holders of General Unsecured Claims, the Committee and/or its members, (iii) the SEO Released Parties or the Trust Parties, then the Debtors must seek the consent of the Second Lien Group, the Committee, the SEO Released Parties or the Trust Parties, as applicable, to any such amendment, modification or supplement. After the Confirmation Date, so long as it does not materially adversely affect the treatment of Claims or Equity Interests under this Plan, the Debtors may institute proceedings in the Bankruptcy Court and District Court to remedy any defect or omission or reconcile any inconsistencies in this Plan or the Confirmation Order with respect to such matters as may be necessary to carry out the purposes and effects of this Plan. Notwithstanding anything to the contrary herein, the Debtors reserve the right to revoke or withdraw this Plan at any time prior to the Confirmation Date.
69 29766749v43 13.2 Revocation, Withdrawal, or Non-Consummation.
13.2.1 If any Plan is revoked or withdrawn prior to the Confirmation Date, or if any Plan does not become effective for any reason whatsoever, then that Plan shall be deemed null and void. In that event, nothing in this Plan shall be deemed to constitute a waiver or release of any Claims against the applicable Debtor or to prejudice in any manner the rights of the other Debtors or any other Entity in any further proceedings with respect to such Debtor.
13.2.2 If the Effective Date does not occur with respect to a Debtor’s Plan, the parties shall be returned to the position they would have held with respect to the applicable Debtor had the Confirmation Order not been entered, and nothing in that Plan, the Disclosure Statement, any of the Plan Documents, or any pleading filed or statement made in the Bankruptcy Court with respect to that Plan or the Plan Documents shall be deemed to constitute an admission or waiver of any sort or in any way limit, impair, or alter the rights of any Entity with respect to such Debtor.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1 Effectuating Documents and Further Transactions. Each officer of the Reorganized Debtors is authorized, in accordance with his or her authority under the resolutions of the applicable Board of Directors, to execute, deliver, file, or record such contracts, instruments, releases, indentures, and other agreements or documents and take such action as may be necessary or appropriate to effectuate and further evidence the terms and conditions of this Plan.
14.2 Withholding and Reporting Requirements. The Disbursing Agent shall comply with all applicable withholding and reporting requirements imposed by any federal, state, or local taxing authority in connection with Distributions under this Plan, and all Distributions under this Plan shall be subject to any those withholding or reporting requirements. Notwithstanding the above, each holder of an Allowed Claim that is to receive a Distribution under this Plan shall have the sole and exclusive responsibility for the satisfaction and payment of any tax obligations imposed by any governmental unit, including income, withholding, and other tax obligations, on account of the Distribution. Any party issuing any instrument or making any Distribution under this Plan has the right, but not the obligation, to refrain from making a Distribution until the Allowed Claim holder has made arrangements satisfactory to such issuing or disbursing party for payment of any such tax obligations.
14.3 Exemption from Transfer Taxes. Pursuant to section 1146(a) of the Bankruptcy Code, the issuance, transfer or exchange of the New Holdco Common Stock pursuant to this Plan or any of the Plan Documents, the creation of any mortgage, deed of trust, or other security interest, the making or assignment of any lease or sublease, or the making, delivery, filing or recording of any deed or other instrument of transfer under, in furtherance of, or in connection with this Plan or any of the Plan Documents (including, for this purpose in connection with the organization documents relating to the Reorganized Debtors, the Exit Financing, and the other
70 29766749v43 documents relating to the transactions described in this Plan) shall not be subject to any stamp, real estate transfer, mortgage recording, Uniform Commercial Code filing or recording tax or other similar tax or government assessment. All filing or recording officers (or any other Person with authority over any of the foregoing), wherever located and by whomever appointed, are hereby directed to comply with the requirements of section 1146(c) of the Bankruptcy Code, to forego the collection of any such tax or governmental assessment, and to accept for filing and recordation any of the foregoing instruments or other documents without the payment of any such tax or governmental assessment.
14.4 Expedited Tax Determination. The Reorganized Debtors are entitled to an expedited determination of taxes under section 505(b) of the Bankruptcy Code for all returns filed for, or on behalf of, the Debtors for any and all taxable periods ending after the Commencement Date through and including the Effective Date.
14.5 Payment of Statutory Fees. All fees payable pursuant to section 1930 of title 28 of the United States Code shall be paid on the earlier of when due or the Effective Date, or as soon thereafter as practicable. From and after the Effective Date, the Debtors shall be liable for and shall pay the fees under 28 U.S.C. section 1930 assessed against the Debtors' estates under 28 U.S.C. section 1930 until entry of a final decree closing the Case. In addition, the Debtors shall file post confirmation quarterly reports or any pre-confirmation monthly operating reports not filed as of the Confirmation Hearing in conformity with the U.S. Trustee guidelines, until entry of an order closing or converting the cases. The U.S. Trustee shall not be required to file a request for payment of the quarterly fees, which shall be deemed an administrative claim against the Debtors and their estates.
14.6 Post-Confirmation Date Professional Fees and Expenses. The Reorganized Debtors shall, in the ordinary course of business and without the necessity for any approval by the Bankruptcy Court, pay the reasonable fees and expenses of their professionals incurred from and after the Effective Date.
14.7 Indenture Trustee Claims. The Reorganized Debtors shall pay the Indenture Trustee Claims in Cash in immediately available funds (i) on the Effective Date in respect of outstanding invoices submitted on or prior to the 10th business day immediately preceding the Effective Date, and (ii) within 10 business days following receipt by the Reorganized Debtors of the applicable invoice, in respect of invoices submitted after the 10th Business Day immediately preceding the Effective Date, but only if and to the extent the applicable Indenture Trustee provides reasonable and customary detail along with or as part of all invoices submitted in support of its Claim to the attorneys for the Reorganized Debtors and the United States Trustee. Any payment by the Debtors or the Reorganized Debtors to the Indenture Trustees for the Unsecured Notes and the Senior Subordinated Unsecured Notes Claims in respect of their Indenture Trustee Claims shall be capped at an aggregate of $1.5 million. The Reorganized Debtors shall have the right to file objections to any Indenture Trustee Claim based upon a “reasonableness” standard within 10 days after receipt of the invoices and supporting documentation. Any disputed amount shall be subject to the jurisdiction of, and resolution by, the Bankruptcy Court. If an objection is timely filed to an Indenture Trustee Claim, the Bankruptcy Court shall hold a hearing on notice to determine the reasonableness of such Claim. Upon payment of an Indenture Trustee Claim in full or in accordance with (i) the second
71 29766749v43 sentence of this Section 14.7 or (ii) a final non-appealable order of the Bankruptcy Court, the applicable Indenture Trustee will be deemed to have released its Indenture Trustee Charging Lien.
14.8 NPPH Sale Proceeds. On the Effective Date, the Notes Collateral Trustee shall be authorized to distribute to the First Lien Noteholders the Guaranteed US Noteholder Pool, as defined in the Amended and Restated Plan of Compromise and Arrangement of NewPage Port Hawkesbury Corp., a non-debtor affiliate.
14.9 Plan Supplement. A substantially final form of the documents to be included in the Plan Supplement shall be filed with the clerk of the Bankruptcy Court and posted to the website of the Claims Agent, http://www.kccllc.net/NewPage, as they become available, but no later than 5 days prior to the last date by which holders of Impaired Claims may vote to accept or reject this Plan. Upon its filing, the Plan Supplement may be inspected in the office of the clerk of the Bankruptcy Court during normal court hours.
14.10 Substantial Consummation. On the Effective Date, this Plan shall be deemed to be substantially consummated under sections 1101 and 1127(b) of the Bankruptcy Code.
14.11 Severability. If, prior to the Confirmation Date, any term or provision of this Plan or any of the Plan Documents shall be held by the Bankruptcy Court to be invalid, void or unenforceable, the Bankruptcy Court, with the written consent of the Debtors, and the First Lien Notes Trustee, shall have the power to alter and interpret that term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of that term or provision, and the term or provision shall then be applicable as altered or interpreted. Notwithstanding any such holding, alteration or interpretation, the remainder of the terms and provisions of this Plan or the Plan Documents shall remain in full force and effect and shall in no way be affected, impaired or invalidated; notwithstanding the foregoing, to the extent any alteration or interpretation of any term or provision of the Plan or any of the Plan Documents materially and adversely affects (i) holders of Second Lien Notes Claims, the Second Lien Group or its members, (ii) SEO, the SEO Released Parties or the Trust Parties, or (iii) the Committee or its members, then the Debtors shall be required to obtain the written consent with respect thereto of the applicable parties listed in the foregoing clauses (i), (ii) and/or (iii) in this Section 14.11, not to be unreasonably withheld, delayed or conditioned. The Confirmation Order shall constitute a judicial determination and shall provide that each term and provision of this Plan and the Plan Documents, as it may have been altered or interpreted in accordance with the foregoing, is valid and enforceable pursuant to its terms.
14.12 Governing Law. Except to the extent that the Bankruptcy Code or other federal law is applicable, or to the extent that an exhibit hereto or document contained in the Plan Supplement provides otherwise, the rights, duties and obligations arising under this Plan shall be governed by, and construed and enforced in accordance with, the Bankruptcy Code and the laws of the State of New York, without giving effect to principles of conflicts of laws that would result in the application of the laws of another jurisdiction.
72 29766749v43 14.13 Deemed Acts. Whenever an act or event is expressed under this Plan to have been deemed done or to have occurred, it shall be deemed to have been done or to have occurred without any further act by any party, by virtue of this Plan and the Confirmation Order.
14.14 Binding Effect. This Plan shall be binding upon and inure to the benefit of the Debtors, the holders of Claims and Equity Interests and their respective successors and assigns, including the Reorganized Debtors.
14.15 Exhibits/Schedules. All exhibits and schedules to this Plan, including the Plan Supplement, are incorporated into and are part of this Plan as if set forth in full in this Plan.
14.16 Notices. All notices, requests, and demands to or upon the Debtors or the Reorganized Debtors to be effective shall be in writing, including by facsimile transmission, and, unless otherwise expressly provided in this Plan, shall be deemed to have been duly given or made when actually delivered or, in the case of notice by facsimile transmission, when received and telephonically confirmed, addressed as follows:
NewPage Corporation 8540 Gander Creek Drive Miamisburg, OH 45342 Attention: Douglas K. Cooper, Esq. Fax: 937.242.9459
With a copy to:
Proskauer Rose LLP Eleven Times Square New York, New York 10036 Attention: Martin J. Bienenstock, Esq. Judy G.Z. Liu, Esq. Philip M. Abelson, Esq. Fax: 212.969.2900
-and-
Pachulski Stang Ziehl & Jones 919 N. Market Street, 17th Floor., P.O. Box 8705 Wilmington, Delaware, 19899-8705(Courier 19801) Attention: Laura Davis Jones, Esq. Michael R. Seidl, Esq. Timothy P. Cairns, Esq. Fax: 302.652.4400
14.17 Dissolution of Committee. On the Effective Date, the Committee shall dissolve, except that following the Effective Date, the Committee will continue to have standing and a right to be heard with respect to (i) Claims and/or applications for compensation by Professionals and requests for allowance of Administrative Expense Claims for substantial contribution
73 29766749v43 pursuant to section 503(b)(3)(D) of the Bankruptcy Code, (ii) any appeals commenced by the Committee prior to the Effective Date of an order approving a settlement propounded between the Debtors’ Estates and the Cerberus Entities, and (iii) any appeals of the Confirmation Order that remain pending as of the Effective Date to which the Committee is a party. Upon the dissolution of the Committee, (i) the current and former members of the Committee and their respective officers, employees, counsel, advisors, and agents, shall be released and discharged of and from all further authority, duties, responsibilities, and obligations related to and arising from and in connection with the Chapter 11 Cases other than their obligations to maintain the confidentiality of all data received from the Debtors that is not otherwise public, and (ii) the retention or employment of the Committee’s respective attorneys, accountants, and other agents shall terminate.
14.18 Payment of Fees and Expenses of the First Lien Notes Trustee. Following submission to the Reorganized Debtors and the Committee of invoices for reasonable and documented fees and expenses (the “First Lien Advisor Fees”) incurred by (i) Milbank, Tweed, Hadley & McCloy LLP, as counsel, (ii) Blackstone Advisory Partners LP (“Blackstone”), as financial advisor, (iii) Emmet, Marvin & Martin, LLP, as counsel, (iv) Morris, Nichols, Arsht & Tunnell LLP, as local Delaware counsel, and (v) Bennett Jones LLP, as Canadian counsel, the Reorganized Debtors and the Committee shall review these submissions, and subject to any objections of the reviewing parties that may arise (and further subject to the rights of the Entities in the foregoing clauses (i)-(v) to oppose the Committee’s objections on any ground, including standing), the Reorganized Debtors shall pay the First Lien Advisor Fees within 5 Business Days. For the avoidance of doubt and in accordance with the terms of the DIP Order, the First Lien Advisor Fees shall include Blackstone’s transaction fee as set forth in its engagement letter dated August 8, 2011, which shall be paid by the Debtors on the Effective Date. All amounts distributed and paid to the foregoing parties pursuant to the Plan and the DIP Order shall not be subject to setoff, recoupment, reduction nor allocation of any kind.
14.19 Payment of Fees and Expenses of the Second Lien Group. Following submission to the Reorganized Debtors and the Committee of invoices for reasonable and documented fees and expenses (the “Second Lien Advisor Fees”) incurred by (i) Akin Gump Strauss Hauer & Feld LLP, as counsel, (ii) Blank Rome LLP, as local Delaware counsel, (iii) Houlihan Lokey Capital, Inc., as financial advisor (“Houlihan Lokey”), and (iv) Goodmans, as Canadian counsel to the Second Lien Group, the Reorganized Debtors and the Committee shall review these submissions and, subject to any objections of the reviewing parties that may arise (and further subject to the rights of the Entities in the foregoing clauses (i)-(iv) to oppose the Committee’s objections on any ground, including standing), the Reorganized Debtors shall pay the Second Lien Advisor Fees within 5 Business Days. For the avoidance of doubt and in accordance with the terms of the DIP Order, the Second Lien Advisor Fees shall include Houlihan Lokey’s transaction fee as set forth in its engagement letter dated as of July 15, 2011, which shall be paid by the Debtors on the Effective Date. All amounts distributed and paid to the foregoing parties pursuant to the Plan and the DIP Order shall not be subject to setoff, recoupment, reduction nor allocation of any kind.
14.20 No Admissions. Notwithstanding anything in this Plan or any Plan Document to the contrary, nothing in this Plan or any Plan Document shall be deemed as an admission by any
74 29766749v43 Debtor or any other party with respect to any matter set forth in this Plan or any Plan Document, including any liability on any Claim.
14.21 Time. Bankruptcy Rule 9006 will apply in computing any period of time prescribed or allowed by this Plan, unless otherwise set forth in this Plan or determined by the Bankruptcy Court.
14.22 Section Headings. The section headings contained in this Plan are for reference purposes only and shall not affect in any way the meaning or interpretation of this Plan.
14.23 Inconsistencies. To the extent of any inconsistencies between the information contained in the Disclosure Statement and this Plan, the terms and provisions contained in this Plan shall govern.
Dated: November 4, 2012
[SIGNATURE PAGES IMMEDIATELY FOLLOW]
75 29766749v43
EXHIBITS TO THE PLAN
Exhibit 1.2.28 Committee Litigation Claims Protected Parties
Exhibit 1.2.74 List of Members of the First Lien Notes Steering Committee
Exhibit 1.2.145 List of Members of the Second Lien Group
Exhibit 1.2.163 SEO Settlement Agreement
29766749v43 EXHIBIT 1.2.28
Committee Litigation Claims Protected Parties
(TO BE FILED UNDER SEAL)
29766749v43 EXHIBIT 1.2.74
First Lien Notes Steering Committee Members
BlackRock, Inc.
The Capital Group Companies
Centerbridge Partners, L.P.
Fidelity Management & Research Company
Franklin Mutual Advisers, LLC
Franklin Templeton Investments
Goldman, Sachs & Co.
J.P. Morgan Asset Management
Oaktree Capital Management, LLC
Western Asset Management Company
29766749v43 EXHIBIT 1.2.145
Second Lien Group Members
29766749v43 EXHIBIT 1.2.163
SEO Settlement Agreement
29766749v43 SCHEDULES TO THE PLAN SUPPLEMENT
Schedule 1.2.93 Litigation Trust Agreement
Schedule 1.2.143 Reorganized NPC New Compensation Plans
Schedule 8.1 Lists of Certain Executory Contracts Assumed and Rejected under the Plan
Schedule 8.5 Settlement Agreement and Mutual Release
Schedule 9.1 Members of Boards of Directors and Initial Officers of NewHoldCo and Each Reorganized Debtor
Schedule 9.2A Form of Reorganized Debtors’ Certificate of Incorporation
Schedule 9.2B Form of Reorganized Debtors’ Bylaws
Schedule 9.2C Form of Reorganized Debtors’ Limited Liability Company Agreements
Schedule X Insiders to be Employed by Reorganized Debtors and Nature of Compensation of Insiders
29766749v43 EXHIBIT B
Disclosure Statement Order (To Be Added)
2783/54832-001 current/30316865v34 11/05/2012 1:01 am EXHIBIT C
Projected Financial Information
2783/54832-001 current/30316865v34 11/05/2012 1:01 am EXHIBIT D
Liquidation Analysis
2783/54832-001 current/30316865v34 11/05/2012 1:01 am EXHIBIT E
Valuation Analysis