0000893220-95-000500.txt : 19950816
0000893220-95-000500.hdr.sgml : 19950816
ACCESSION NUMBER: 0000893220-95-000500
CONFORMED SUBMISSION TYPE: 8-K
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 19950804
ITEM INFORMATION: Other events
FILED AS OF DATE: 19950804
SROS: NONE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: COLUMBIA GAS SYSTEM INC
CENTRAL INDEX KEY: 0000022099
STANDARD INDUSTRIAL CLASSIFICATION: 4923
IRS NUMBER: 131594808
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 8-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-01098
FILM NUMBER: 95558909
BUSINESS ADDRESS:
STREET 1: 20 MONTCHANIN RD
CITY: WILMINGTON
STATE: DE
ZIP: 19807
BUSINESS PHONE: 3024295000
8-K
1
FORM 8-K, THE COLUMBIA GAS SYSTEM, INC.
1
FORM 8-K
--------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
--------------
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event Reported) August 4, 1995
--------------
THE COLUMBIA GAS SYSTEM, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-1098 13--1594808
- ---------------------------- ----------- -------------------
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
20 Montchanin Road, Wilmington, Delaware 19807
-----------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (302) 429-5000
--------------
2
Item 5. Other Events
The following information concerning material filed with the United
States Bankruptcy Court for the District of Delaware is provided:
Amended Plan of Reorganization of The Columbia Gas System, Inc., dated
July 27, 1995
Disclosure Statement pursuant to Section 1125 of the Bankruptcy Code
for the Plan of Reorganization of The Columbia Gas System, Inc., dated
July 27, 1995
Amended Plan of Reorganization of Columbia Gas Transmission
Corporation dated July 17, 1995
Disclosure Statement pursuant to Section 1125 of the Bankruptcy Code
for the Amended Plan of Reorganization of Columbia Gas Transmission
Corporation dated July 17, 1995
3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
The Columbia Gas System, Inc.
-----------------------------
(Registrant)
By /s/ R. E. Lowe
-----------------------------
R.E. Lowe
Vice President and
Controller
Date: August 4, 1995
4
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- ----------------------------------x
IN RE: : CHAPTER 11
: CASE NO. 91-803 (HSB)
THE COLUMBIA GAS SYSTEM, INC. :
:
DEBTOR. :
- ----------------------------------x
THIRD AMENDED PLAN OF REORGANIZATION OF
THE COLUMBIA GAS SYSTEM, INC.
RESPECTFULLY SUBMITTED,
STROOCK & STROOCK & LAVAN
LEWIS KRUGER
ROBIN E. KELLER
SEVEN HANOVER SQUARE
NEW YORK, NEW YORK 10004-2696
(212) 806-5400
CRAVATH, SWAINE & MOORE
JOHN F. HUNT
JOHN E. BEERBOWER
825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019-7475
(212) 474-1000
YOUNG, CONAWAY, STARGATT & TAYLOR
JAMES L. PATTON, JR.
11TH FLOOR - RODNEY SQUARE NORTH
P.O. BOX 391
WILMINGTON, DELAWARE 19899-0391
(302) 571-6600
CO-COUNSEL FOR
THE COLUMBIA GAS SYSTEM, INC.
DATED: JULY 27, 1995
5
TABLE OF CONTENTS
Page
----
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
I. DEFINED TERMS, RULES OF INTERPRETATION,
COMPUTATION OF TIME AND GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1. "Administrative Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. "Administrative Fee Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. "Allowed" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. "Assumed Executory Contract Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. "Auction Note Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6. "Avoidance Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
7. "Bank Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
8. "Bankruptcy Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
9. "Bankruptcy Court" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
10. "Bankruptcy Rules" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
11. "Bar Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
12. "Bar Date Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
13. "Bid Notes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
14. "Board of Directors" and "Board" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
15. "Borrowed Money Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
16. "Borrowed Money Instruments" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
17. "Business Day" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
18. "Calendar Quarter" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
19. "Canada Sale Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
20. "Cash Collateral Orders" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
21. "Cash Consideration" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
22. "Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
23. "Class" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
24. "Class Action" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
25. "Class Action Settlement Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
26. "CNR" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
27. "Columbia" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
28. "Columbia Canada" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
29. "Columbia Customer Guaranty" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
30. "Columbia Guaranty" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
31. "Columbia Omnibus Settlement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
32. "Columbia Secured Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
33. "Commercial Paper" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
34. "Common Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
35. "Confirmation" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
36. "Confirmation Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
37. "Confirmation Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
38. "Contributors" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
39. "Creditor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
40. "Creditors' Committee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
41. "Customer Settlement Proposal" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
42. "D&O Insurance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
43. "Debentures" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
44. "DECS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6
Page
----
45. "Deficiency Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
46. "Derivative Action" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
47. "DIP Facility" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
48. "DIP Facility Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
49. "Disbursing Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
50. "Disbursing Agent Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
51. "Disclosure Statement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
52. "Disputed" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
53. "District Court" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
54. "Effective Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
55. "Equity Committee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
56. "ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
57. "Estate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
58. "Fee Examiner" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
59. "FERC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
60. "FERC Gas Tariff" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
61. "File" or "Filed" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
62. "Final Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
63. "First Issue Security" or "Issue A" . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
64. "First Mortgage Bonds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
65. "$500 Million Credit Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
66. "HCA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
67. "Hold Harmless Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
68. "Holder" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
69. "Indemnity Agreements" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
70. "Indenture Trustee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
71. "Intercompany Claims" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
72. "Intercompany Claims Litigation" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
73. "Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
74. "Inventory Loan Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
75. "Investment Grade" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
76. "IRS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
77. "IRS Closing Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
78. "IRS Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
79. "IRS Settlement Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
80. "Issue" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
81. "Kotaneelee Escrow" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
82. "Ledger Closing Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
83. "LESOP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
84. "LESOP Action" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
85. "LESOP Action Claims" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
86. "LESOP Action Settlement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
87. "LESOP Debentures" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
88. "LESOP Guaranty" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
89. "LESOP Indenture" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
90. "LESOP Indenture Trustee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
91. "LESOP Indenture Trustee Claim Amount" . . . . . . . . . . . . . . . . . . . . . . . . . 19
92. "LESOP Trust" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
93. "LESOP Thrift Plan Trustee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
94. "LIBOR" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(ii)
7
Page
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95. "Liquidation Value" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
96. "Medium Term Notes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
97. "Miscellaneous Administrative Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . 20
98. "Mutual Release" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
99. "New Indenture" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
100. "New Indenture Trustee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
101. "New Indenture Securities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
102. "New Preferred Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
103. "1961 Indenture" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
104. "Non-Borrowed Money Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
105. "Omnibus Orders" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
106. "Opt-out Election" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
107. "Opt-out Form" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
108. "Opt-out Securities Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
109. "PBGC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
110. "Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
111. "Petition Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
112. "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
113. "Plan Mailing Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
114. "Post-Petition Operational Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
115. "Pricing Formulae" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
116. "Priority Tax Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
117. "Professional" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
118. "Professional Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
119. "Pro-Rata Share" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
120. "Rate Swap Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
121. "Record Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
122. "Recordation Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
123. "Releasee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
124. "Reliance Group" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
125. "Reorganization Case" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
126. "Reorganized Columbia" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
127. "Reorganized TCO" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
128. "Retirement Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
129. "Schedule of Liabilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
130. "SEC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
131. "Securities Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
132. "Setoff Funds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
133. "Setoff Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
134. "Settlement Fund" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
135. "$750 Million Credit Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
136. "Stipulation of Dismissal With Prejudice" . . . . . . . . . . . . . . . . . . . . . . . 25
137. "Stipulation of Settlement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
138. "Stockholder" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
139. "Stock Value" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
140. "Supplemental Bar Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
141. "Supplemental Bar Date Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
142. "Supplemental Proof of Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
143. "Surrender Instruments" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
144. "TCO" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(iii)
8
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----
145. "TCO Committees" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
146. "TCO Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
147. "TCO Proceeding" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
148. "Term Loan Facility" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
149. "Unclaimed Distribution" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
150. "Unclassified Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
151. "Undertaking" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
152. "U.S. Trustee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
153. "U.S. Trustee's Fee Claims" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
154. "Voting Deadline" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
155. "Working Capital Facility" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
B. Rules of Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
C. Computation of Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
D. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
II. UNCLASSIFIED CLAIMS AND
CLASSES OF CLAIMS AND INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
A. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
B. Unclassified Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
1. Administrative Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
a. Professional Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
b. Post-Petition Operational Claims . . . . . . . . . . . . . . . . . . . . . . . . 31
c. Assumed Executory Contract Claims . . . . . . . . . . . . . . . . . . . . . . . . 31
d. U.S. Trustee's Fee Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
e. Miscellaneous Administrative Claims . . . . . . . . . . . . . . . . . . . . . . . 31
2. Priority Tax Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
C. Classes of Claims and Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1. Class 1 - DIP Facility Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2. Class 2 - Non-Borrowed Money Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3. Class 3 - Borrowed Money Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
a. Class 3.1 - Borrowed Money Convenience Claims . . . . . . . . . . . . . . . . . . 33
b. Class 3.2 - Other Borrowed Money Claims . . . . . . . . . . . . . . . . . . . . . 33
4. Class 4 - Securities Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5. Class 5 - Intercompany Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6. Class 6 - Assumed Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
a. Class 6.1 - Indemnity Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 34
b. Class 6.2 - Pension Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
c. Class 6.3 - Shawmut Guaranty Claim . . . . . . . . . . . . . . . . . . . . . . . 35
7. Class 7 - Opt-out Securities Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8. Class 8 - Interests in Columbia Common Stock . . . . . . . . . . . . . . . . . . . . . . 35
III. TREATMENT OF CLAIMS AND INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
A. Treatment of Unclassified Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
1. Administrative Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
a. Professional Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
b. Post-Petition Operational Claims . . . . . . . . . . . . . . . . . . . . . . . . 36
c. Assumed Executory Contract Claims . . . . . . . . . . . . . . . . . . . . . . . 36
d. U.S. Trustee's Fee Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
e. Miscellaneous Administrative Claims . . . . . . . . . . . . . . . . . . . . . . . 37
(iv)
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2. Priority Tax Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
B. Treatment of Classified Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
1. Class 1 - DIP Facility Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2. Class 2 - Non-Borrowed Money Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3. Class 3 - Borrowed Money Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
a. Class 3.1 - Borrowed Money Convenience Claims . . . . . . . . . . . . . . . . . . 42
b. Class 3.2 - Other Borrowed Money Claims . . . . . . . . . . . . . . . . . . . . . 42
4. Class 4 - Securities Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5. Class 5 - Intercompany Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
C. Treatment of Assumed Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
1. Class 6.1 - Indemnity Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
2. Class 6.2 - Pension Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3. Class 6.3 - Shawmut Guaranty Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
D. Treatment of Class 7 - Opt-out Securities Claims . . . . . . . . . . . . . . . . . . . . . . . . . 47
E. Treatment of Class 8 - Interests in Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 48
IV. PROVISIONS GOVERNING DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
A. Transactions On the Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
B. Distributions on Unclassified Claims and Claims in Classes 1, 2 and 6 . . . . . . . . . . . . . . 51
C. Distributions on Classes 3.1 and 3.2 Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
1. Ledger Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
2. Surrender of Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
3. Cancellation of Surrender Instruments and Termination of Debt Obligations . . . . . . . . 54
4. Distributions of Cash, New Debt Instruments, Preferred Stock and DECS . . . . . . . . . . 55
5. Cash in Lieu of Fractional Shares; Rounding of New Indenture Securities . . . . . . . . . 56
D. Reorganized Columbia or Third Party as Disbursing Agent for Claims . . . . . . . . . . . . . . . . 58
E. Costs of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
F. Delivery of Distributions; Unclaimed Distributions . . . . . . . . . . . . . . . . . . . . . . . . 58
1. Delivery of Distributions in General . . . . . . . . . . . . . . . . . . . . . . . . . . 58
2. Unclaimed Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
G. Means of Cash Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
H. Setoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
I. Effective Date Payments or Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
J. Limit on Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
K. Continuation of Certain Retirement, Workers' Compensation and Long-Term Disability Benefits . . . 64
V. MEANS FOR IMPLEMENTATION OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
A. Continued Corporate Existence and Vesting of Assets in Reorganized Columbia . . . . . . . . . . . 64
B. Corporate Governance, Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
1. Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
(v)
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2. Directors and Officers of Reorganized Columbia . . . . . . . . . . . . . . . . . . . . . 66
3. Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
4. Voting Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
C. Preservation of Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
D. Release of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
E. Columbia's Funding Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
F. Derivative Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
G. Columbia Omnibus Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
H. LESOP Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
I. Class Action Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
VI. BAR DATES; PROCEDURES FOR ESTABLISHING ALLOWED CLAIMS
AND FOR RESOLVING DISPUTED CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
A. Bar Date for Objections to Non-Administrative Claims . . . . . . . . . . . . . . . . . . . . . . . 73
B. Bar Dates for Certain Administrative Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
1. Professional Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
2. Bar Date for Administrative Claims Arising From Rejection of Executory Contracts or
Unexpired Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
3. Non-Ordinary Course Administrative Claims . . . . . . . . . . . . . . . . . . . . . . . . 74
C. Authority to Prosecute Objections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
VII. TREATMENT OF EXECUTORY CONTRACTS AND
UNEXPIRED LEASES; ADDITIONAL BAR DATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
A. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
B. Payments Related to Assumption of Executory Contracts and Unexpired Leases . . . . . . . . . . . . 76
C. Bar Date for Rejection Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
D. Executory Contracts and Unexpired Leases Entered Into and Other Obligations Incurred After
the Petition Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
VIII. CONDITIONS PRECEDENT TO CONFIRMATION
AND CONSUMMATION OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
A. Conditions to Confirmation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
B. Conditions to Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
C. Waiver of Conditions to Confirmation or Effective Date . . . . . . . . . . . . . . . . . . . . . . 81
D. Effect of Non-Occurrence of Conditions to Effective Date . . . . . . . . . . . . . . . . . . . . . 83
E. Failure of Plan to Become Effective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
IX. CONFIRMABILITY AND SEVERABILITY
OF THE PLAN AND CRAMDOWN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
A. Confirmability and Severability of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
B. Cramdown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
(vi)
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X. DISCHARGE, RELEASES, SETTLEMENT OF CLAIMS AND INJUNCTION . . . . . . . . . . . . . . . . . . . . . . . . . 85
A. Discharge of Claims and Termination of Interests . . . . . . . . . . . . . . . . . . . . . . . . . 85
B. Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
C. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
D. Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
E. Intercompany Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
XI. RETENTION OF JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
XII. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
A. Dissolution of the Creditors' Committee and the Equity Committee . . . . . . . . . . . . . . . . . 96
B. Modification of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
2. Amendments of Certain Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
C. Revocation of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
D. Severability of Plan Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
E. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
F. Service of Documents on Columbia or Reorganized Columbia . . . . . . . . . . . . . . . . . . . . . 100
G. Payment and Withholding of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
CONFIRMATION REQUEST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
(vii)
12
EXHIBITS
Exhibits Description
- -------- -----------
Exhibit A Restated Certificate of
Incorporation
Exhibit B New Indenture
Exhibit C Certificate of Designation of the New Preferred Stock
Exhibit D Certificate of Designation of the DECS
Exhibit E Executory Contracts of Columbia
Exhibit F Pricing Formulae
Exhibit G Calculations of Allowed Claims and of Post-Petition
Interest Recognitions for Class 3.2 Claims (Initial
Calculations Only on LESOP Claims)
Exhibit H Calculation of Post-Petition
Interest on the Columbia
Secured Claim
Exhibit I Mutual Release
Exhibit J Hold Harmless Agreement
Exhibit K Undertaking With Respect to Post-Settlement Securities-
Related Liabilities
(viii)
13
INTRODUCTION
The Columbia Gas System, Inc. ("Columbia") proposes the following
third amended plan of reorganization (the "Plan"). This Plan amends the plan
of reorganization Filed by Columbia on April 17, 1995, the first amended plan
of reorganization Filed by Columbia on June 13, 1995 and the second amended
plan of reorganization Filed by Columbia on July 17, 1995.
For a discussion of Columbia's history, businesses, properties,
results of operations and projections for future operations and for a summary
and analysis of the Plan and related matters, reference should be made to the
Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code for the
Third Amended Plan of Reorganization of The Columbia Gas System, Inc. Dated
July 27, 1995 (the "Disclosure Statement"), Filed by Columbia with the
Bankruptcy Court. Columbia is the proponent of the Plan within the meaning of
section 1129 of the Bankruptcy Code.
ALL HOLDERS OF CLAIMS AGAINST AND INTERESTS IN COLUMBIA SHOULD READ
THE PLAN AND THE DISCLOSURE STATEMENT IN THEIR ENTIRETY BEFORE VOTING TO
ACCEPT OR REJECT THE PLAN.
14
I. DEFINED TERMS, RULES OF INTERPRETATION,
COMPUTATION OF TIME AND GOVERNING LAW
A. DEFINED TERMS
As used in the Plan, the capitalized terms below have the following
meanings. Any term used in the Plan that is not defined herein, but that is
used in the Bankruptcy Code or the Bankruptcy Rules, shall have the meaning
assigned to that term in the Bankruptcy Code or the Bankruptcy Rules.
1. "ADMINISTRATIVE CLAIM" means a Claim for costs and expenses
of administration allowed under sections 503, 507(a)(1), 507(b) or 1114(e)(2)
of the Bankruptcy Code, as more fully described in Section II.B.1,
"Administrative Claims."
2. "ADMINISTRATIVE FEE ORDER" means the Administrative Order
under sections 105(a) and 331 of the Bankruptcy Code Establishing Procedures
for Interim Compensation and Reimbursement of Expenses for all Professionals
entered in the Reorganization Case by the Bankruptcy Court on November 15,
1991, as subsequently amended or supplemented.
3. "ALLOWED" when used with respect to a Claim, means a Claim
against Columbia:
a. which has been scheduled as undisputed, not
contingent and liquidated in the Schedule of Liabilities, and as to which no
proof of claim or objection has been timely Filed;
b. as to which a proof of claim has been timely Filed
and either:
i. no objection thereto has been timely
Filed; or
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ii. the Claim has been allowed (but only to
the extent allowed) by a Final Order; or
c. which is a Professional Claim for which a fee award
amount has been approved by a Final Order.
4. "ASSUMED EXECUTORY CONTRACT CLAIM" means a Claim described in
Section II.B.1.c.
5. "AUCTION NOTE DEBT" means any debt arising pursuant to
Section 2.03 of the $500 Million Credit Agreement.
6. "AVOIDANCE CLAIM" means a claim which a trustee, debtor in
possession or appropriate party-in-interest may assert under section 542, 544,
545, 547, 548, 549, 550 or 551 of the Bankruptcy Code.
7. "BANK AGENT" means Morgan Guaranty Trust Company of New York,
in its capacity as agent under and pursuant to the provisions of the $500
Million Credit Agreement and the $750 Million Credit Agreement, respectively.
8. "BANKRUPTCY CODE" means title 11 of the United States Code,
Section Section 101 et seq., as now in effect or as the same may hereafter be
amended.
9. "BANKRUPTCY COURT" means the United States Bankruptcy Court
for the District of Delaware or, if such court ceases to exercise jurisdiction
over the Reorganization Case, the court or adjunct thereof that exercises
jurisdiction over the Reorganization Case.
10. "BANKRUPTCY RULES" means, collectively, the Federal Rules of
Bankruptcy Procedure and the Local Bankruptcy Rules for
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16
the District of Delaware, as now in effect or as the same may from time to
time hereafter be amended.
11. "BAR DATE" means any applicable date by which proofs of claim
must have been or, in the future, must be, Filed, as established by the Bar
Date Order or the Plan.
12. "BAR DATE ORDER" means, collectively, the orders of the
Bankruptcy Court establishing Bar Dates by which proofs of claim must have
been, or in the future must be, Filed against the Estate, including the Order
Establishing Bar Date for Filing Proofs of Claim entered by the Bankruptcy
Court on December 13, 1991 and the Confirmation Order.
13. "BID NOTES" means, collectively, the promissory notes,
described in clauses (i) through (v) below, issued by Columbia to the
respective payees named therein, to evidence borrowings from such payees, to
wit: (i) Promissory Note dated June 22, 1988 payable to the order of Bank of
Montreal; (ii) Promissory Note dated June 22, 1988 payable to the order of
Continental Illinois National Bank and Trust Company of Chicago; (iii)
Promissory Note dated March 20, 1991 payable to the order of First City, Texas
- - Houston, N.A.; (iv) Promissory Note dated June 22, 1988 payable to the order
of Morgan Guaranty Trust Company of New York; and (v) Promissory Note dated
January 19, 1990 payable to the order of The Toronto-Dominion Bank.
14. "BOARD OF DIRECTORS" AND "BOARD" mean the board of directors
of Columbia.
15. "BORROWED MONEY CLAIM" means any Claim classified in Class
3.1 or Class 3.2 of the Plan.
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17
16. "BORROWED MONEY INSTRUMENTS" means, collectively, the Bid
Notes, the Commercial Paper, the Debentures, the LESOP Debentures, the Medium
Term Notes, any notes issued pursuant to the $500 Million Credit Agreement and
any notes issued pursuant to the $750 Million Credit Agreement.
17. "BUSINESS DAY" means any day which is not a Saturday, a
Sunday or a day which in Wilmington, Delaware, Charleston, West Virginia or
New York, New York is a legal holiday or a day on which banking institutions
are authorized or required by law or other government action to close.
18. "CALENDAR QUARTER" means a three (3) month period ending on
any March 31, June 30, September 30 or December 31, provided that the first
Calendar Quarter shall be deemed to be the period commencing on the Effective
Date and ending on the first day that is (x) the last day of such a three (3)
month period and (y) more than sixty days after the Effective Date.
19. "CANADA SALE AGREEMENT" means that certain Share Sale and
Purchase Agreement between Columbia and Anderson Exploration Ltd., dated as of
November 25, 1991, and approved by the Bankruptcy Court pursuant to an order
dated December 31, 1991.
20. "CASH COLLATERAL ORDERS" means the final orders of the
Bankruptcy Court, dated July 31, 1991 and August 23, 1991, which respectively
authorize TCO to use the cash collateral pledged by TCO to Columbia pursuant
to the Inventory Loan Agreements and the Indenture of Mortgage and Deed of
Trust securing the First Mortgage Bonds and grant to Columbia and certain
other secured
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parties certain replacement liens and security interests in TCO's assets.
21. "CASH CONSIDERATION" means the amount of cash, if any, to be
included in the consideration to be paid by Columbia, in accordance with the
provisions of the Plan, in satisfaction of Class 3.2 Claims (exclusive of any
cash to be paid pursuant to the provisions of Section IV.C.5), determined in
the manner described in Section III.B.3.b.
22. "CLAIM" means, as against Columbia,
a. a right to payment, whether or not such right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured; or
b. a right to an equitable remedy for breach of performance
if such breach gives rise to a right to payment, whether or not such right to
an equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured.
23. "CLASS" means a class of Claims or Interests.
24. "CLASS ACTION" means that certain consolidated action styled
and numbered In re Columbia Gas Securities Litigation, Consol. C.A. No. 91-
357, pending before the District Court.
25. "CLASS ACTION SETTLEMENT DOCUMENTS" means the Stipulation of
Settlement, the agreements entered into in connection therewith or pursuant
hereto or thereto and the orders of the District Court in the Class Action in
furtherance thereof.
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26. "CNR" means Columbia Natural Resources, Inc., a Texas
corporation.
27. "COLUMBIA" means The Columbia Gas System, Inc., a Delaware
corporation.
28. "COLUMBIA CANADA" means the entity known on the date of the
Canada Sale Agreement as Columbia Gas Development of Canada, Ltd., a Canadian
corporation, which was the subject of that agreement.
29. "COLUMBIA CUSTOMER GUARANTY" means Columbia's guaranty of (a)
the financial integrity of the Customer Settlement Proposal and (b) the
payment of distributions on account of those claims against TCO arising from
TCO's obligation to make refunds, including applicable interest thereon,
pursuant to regulations or orders of FERC, or any order of a court of
competent jurisdiction on appeal of an order of FERC, or the terms of the FERC
Gas Tariffs, to customer creditors of TCO, substantially all of which are
classified in the TCO Plan as "Class 3.2 Claims", and to the Gas Research
Institute, if Class 3.2 has voted to accept the TCO Plan and such customer
creditors and the Gas Research Institute have either voted in favor of the TCO
Plan or have executed the Waiver Agreement, as that term is defined in the TCO
Plan, prior to such plan's effective date, and the TCO Plan becomes effective
in accordance with the terms of the TCO Plan. Specifically, Columbia has
agreed (i) that the Customer Settlement Proposal will not be "retraded" with
TCO's customer-creditors so as to reduce the financial benefits of the
settlement to them, (ii) that the financial benefits of the Customer
Settlement Proposal
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will not be adversely affected by virtue of any subsequent settlement reached
with other parties in either the TCO Proceeding or the Reorganization Case,
and (iii) that Columbia and TCO will include the Customer Settlement Proposal
and Columbia's guaranty in their respective plans of reorganization. The
foregoing guaranty does not apply to any modification imposed on the Customer
Settlement Proposal or on the TCO Plan or the Columbia Plan incorporating the
Customer Settlement Proposal by the action of any judicial or regulatory
authority.
30. "COLUMBIA GUARANTY" means the guaranty by Columbia and
Reorganized Columbia of the full and prompt payment by TCO and Reorganized TCO
of any and all distributions required to be made under the TCO Plan, other
than payments in respect of post-petition operational liabilities incurred by
TCO in the ordinary course of business during the pendency of the TCO
Proceeding and class 4 claims under the TCO Plan.
31. "COLUMBIA OMNIBUS SETTLEMENT" means Columbia's agreement,
conditioned on the TCO Plan becoming effective without any modification that
is not consented to by Columbia, to facilitate the prompt emergence of TCO and
Columbia from their respective Chapter 11 proceedings by (i) assisting TCO to
monetize the TCO Plan which is estimated to provide for value to be
distributed to TCO's creditors of approximately $3.9 billion (in the event of
100% acceptance of the settlement offers to TCO's producer and other creditors
embodied in the TCO Plan), which distribution, in the case of third party
creditors, will be substantially in cash, (ii) providing a guaranty of payment
of
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distributions to TCO's creditors as provided under the TCO Plan (excluding
assumed obligations), (iii) providing the Columbia Customer Guaranty, (iv)
consenting to the assumption by Reorganized TCO of certain pre-petition
environmental claims of governmental agencies and certain other claims against
TCO, and (v) accepting new secured debt securities of Reorganized TCO (rather
than cash) for a portion of the Columbia Secured Claim and contributing the
balance of the Columbia Secured Claim to Reorganized TCO's equity, in
consideration for (a) the retention by Columbia of the equity of Reorganized
TCO, (b) the settlement of litigation over the liquidation of the producer,
customer and certain other claims against TCO, and (c) a settlement of the
claims raised or which could have been raised in the Intercompany Claims
Litigation among Columbia, CNR, TCO, the creditors' committee and the
customers' committee appointed in the TCO Proceeding and all other claims and
disputes between TCO's creditors and Columbia and various other claims and
disputes between TCO's creditors and TCO, as provided in the TCO Plan (other
than claims arising in the normal course of business subsequent to the
Petition Date between creditors of TCO and TCO or Columbia).
32. "COLUMBIA SECURED CLAIM" means, as of the Effective Date, the
aggregate of:
a. (i) the unpaid principal owing as of the Petition Date in
respect of the First Mortgage Bonds, (ii) the unpaid principal and accrued and
unpaid interest owing as of the Petition Date in respect of the Inventory
Financing Agreement and (iii) the
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interest on all such unpaid principal and interest from the Petition Date to
the Effective Date, calculated for purposes of this Plan in the manner
described in Exhibit H;
b. all amounts to which Columbia is entitled under the Cash
Collateral Orders, including post-petition interest as allowed by the
Bankruptcy Court; and
c. all amounts to which Columbia is entitled for reasonable
fees, costs and charges approved by the Bankruptcy Court under section 506 of
the Bankruptcy Code.
33. "COMMERCIAL PAPER" means the Commercial Paper Master Note,
dated October 5, 1990, and any evidence of the debt of Columbia which was
originally issued pursuant thereto as "commercial paper" (as that term is
commonly understood in the financial markets).
34. "COMMON STOCK" means the class of common stock presently
authorized for issuance by Columbia.
35. "CONFIRMATION" means the entry of the Confirmation Order on
the docket of the Bankruptcy Court.
36. "CONFIRMATION DATE" means the date on which the Bankruptcy
Court enters the Confirmation Order on its docket.
37. "CONFIRMATION ORDER" means the order of the Bankruptcy Court
confirming the Plan pursuant to section 1129 of the Bankruptcy Code.
38. "CONTRIBUTORS" has the meaning set forth in Section III.B.4.
39. "CREDITOR" means
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a. a Person that has a Claim against Columbia that arose at
the time of or before the Petition Date; or
b. a Person that has a Claim against the Estate of a kind
specified in sections 502(g), 502(h) or 502(i) of the Bankruptcy Code.
40. "CREDITORS' COMMITTEE" means the Official Committee of
Unsecured Creditors appointed in the Reorganization Case pursuant to section
1102 of the Bankruptcy Code.
41. "CUSTOMER SETTLEMENT PROPOSAL" means the terms and agreements
embodied in the Stipulation and Agreement, dated April 17, 1995, filed by TCO
with FERC.
42. "D&O INSURANCE" means those certain insurance policies which
provide coverage to Columbia and others for, among other things, liabilities
in connection with directors and officers of Columbia, TCO and any other
subsidiary of Columbia.
43. "DEBENTURES" mean the debt instruments, other than the Medium
Term Notes, issued pursuant to the 1961 Indenture.
44. "DECS" means the shares of Dividend Enhanced Convertible
Preferred Stock(TM) to be issued by Reorganized Columbia under the Plan
pursuant to a certificate of designation substantially in the form of Exhibit
D, the terms of which will be as described in the Disclosure Statement.
45. "DEFICIENCY CLAIM" means the amount, if any, by which the
Allowed amount of the DIP Facility Claim exceeds the value of the collateral
securing the DIP Facility Claim as determined by the Bankruptcy Court.
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46. "DERIVATIVE ACTION" means those certain consolidated actions
captioned as In re Columbia Gas System, Inc. Derivative Litigation, Consol.
C.A. No. 12159, currently pending before the Chancery Court of the State of
Delaware in and for New Castle County.
47. "DIP FACILITY" means that certain Secured Revolving Credit
Agreement, dated as of August 20, 1991, among Columbia, the financial
institutions party thereto and Chemical Bank, as successor to Manufacturers
Hanover Trust Company, as agent, as amended or restated from time to time.
48. "DIP FACILITY CLAIM" means the Claim arising from the DIP
Facility.
49. "DISBURSING AGENT" means (i) Columbia or Reorganized
Columbia, in each case in its capacity as a disbursing agent under the Plan,
or (ii) any third-party designated to act as a disbursing agent under the
Plan, in its capacity as such disbursing agent.
50. "DISBURSING AGENT AGREEMENT" means any agreement for
disbursing agent services to be entered into between Columbia or Reorganized
Columbia and a third-party Disbursing Agent, as the same may be amended from
time to time.
51. "DISCLOSURE STATEMENT" has the meaning set forth in the
"Introduction" to this Plan.
52. "DISPUTED" when used with respect to a Claim, means a Claim
that is not an Allowed Claim and that has not been barred or otherwise
disallowed or discharged. If an objection is timely Filed or deemed timely
Filed and relates to the allowance of only
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a portion of a Claim, such Claim shall be a Disputed Claim to the extent of
the portion of such Claim to which such objection relates.
53. "DISTRICT COURT" means the United States District Court for
the District of Delaware or, with respect to the Intercompany Claims
Litigation, the court that exercises jurisdiction over such litigation.
54. "EFFECTIVE DATE" means the first Business Day that is at
least eleven (11) days after the Confirmation Date and on which (a) no stay of
the Confirmation Order is in effect and (b) all conditions to the Effective
Date set forth in Section VIII.B have been satisfied or, if waivable, waived.
55. "EQUITY COMMITTEE" means the Official Committee of Equity
Security Holders appointed in the Reorganization Case pursuant to section 1102
of the Bankruptcy Code.
56. "ERISA" means the Employee Retirement Security Act of 1974,
as amended.
57. "ESTATE" means the estate created for Columbia in the
Reorganization Case pursuant to section 541 of the Bankruptcy Code.
58. "FEE EXAMINER" means the fee examiner appointed by the
Bankruptcy Court pursuant to the Bankruptcy Court's January 8, 1992 Order
Retaining Examiner on Fees and Expenses.
59. "FERC" means the Federal Energy Regulatory Commission.
60. "FERC GAS TARIFF" means the documents filed by TCO with, and
in force from time to time pursuant to procedures established by, FERC setting
forth the rates at and the
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26
conditions under which TCO renders natural gas-related services to its
customers.
61. "FILE" OR "FILED" means file or filed in the Reorganization
Case with the Bankruptcy Court, or in the case of proofs of claim, (a) file or
filed with Poorman-Douglas Corporation, the claims agent designated by order
of the Bankruptcy Court dated December 13, 1991, or (b) deemed so filed
pursuant to section 1111(a) of the Bankruptcy Code.
62. "FINAL ORDER" means an order or judgment entered by the
Bankruptcy Court or other court of competent jurisdiction which has not been
reversed, vacated or stayed, and as to which the time to appeal or seek
certiorari has expired with no appeal or petition for certiorari having been
timely taken or filed, or as to which any appeal that has been or may be taken
or any petition for certiorari that has been or may be filed has been resolved
by the highest court to which the order or judgment was appealed or from which
certiorari was sought.
63. "FIRST ISSUE SECURITY" OR "ISSUE A" means any of the New
Indenture Securities maturing by its terms in less than six years from the
Effective Date.
64. "FIRST MORTGAGE BONDS" means those certain bonds, designated
Series A, B, D, E and F, issued pursuant to and secured by the Indenture of
Mortgage and Deed of Trust, dated as of August 30, 1985, made by TCO in favor
of Wilmington Trust Company as Trustee, as amended or restated from time to
time.
65. "$500 MILLION CREDIT AGREEMENT" means that certain $500
Million Amended and Restated Credit Agreement, dated as of
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September 17, 1990, among Columbia, the banks listed therein and Morgan
Guaranty Trust Company of New York, as agent, as amended or restated from time
to time.
66. "HCA" means the Public Utility Holding Company Act of 1935,
as amended, 15 U.S.C. Section Section 79, et seq.
67. "HOLD HARMLESS AGREEMENT" means the hold harmless agreement,
substantially in the form of Exhibit J, to be entered into by Columbia with
each of the defendants to the Class Action (or persons similarly situated) who
are or were directors or officers of Columbia or TCO.
68. "HOLDER" means the holder of a Claim or Interest and, when
used in conjunction with a Class or type of Claim or Interest, means a holder
of a Claim or Interest in such Class or of such type.
69. "INDEMNITY AGREEMENTS" means (i) that certain Agreement for
Sale and Purchase of Corporate Stock of Columbia Gas of West Virginia, Inc.
and for Sale and Purchase of Promissory Notes of Columbia Gas of West
Virginia, Inc., dated as of February 23, 1984, by and between Columbia and
Allegheny & Western Energy Corporation, (ii) that certain Letter Agreement for
Sale of Columbia Gas of New York, Inc. and Purchase of Long-Term and Short-
Term Debt and Sale of Columbia Gas of New York, Inc., dated as of August 13,
1990, by and between Columbia and New York State Electric & Gas Corporation,
and (iii) that certain Mutual Release and Settlement Agreement and Gas
Purchase and Sale Agreement, dated as of September 6, 1989, by and between
Columbia and Weirton Steel Corporation.
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70. "INDENTURE TRUSTEE" means Marine Midland Bank, as successor
trustee to Morgan Guaranty Trust Company of New York, under the 1961
Indenture.
71. "INTERCOMPANY CLAIMS" means the claims and causes of action
asserted against Columbia and CNR in the Intercompany Claims Litigation and
any claims and causes of action against Columbia or CNR arising out of the
same or similar facts and circumstances.
72. "INTERCOMPANY CLAIMS LITIGATION" means the litigation against
Columbia and CNR on behalf of TCO by the creditors' committee and the
customers' committee appointed in the TCO Proceeding in the complaints styled
and numbered Columbia Gas Transmission Corporation v. The Columbia Gas System,
Inc. and Columbia Natural Resources, Inc., Adv. No. A92-35, filed on March 19,
1992 and May 26, 1992, pending before the District Court.
73. "INTEREST" means the rights of the Stockholders as holders of
shares of Common Stock (other than Securities Action Claims).
74. "INVENTORY LOAN AGREEMENT" means that certain Inventory
Financing Agreement, dated as of June 19, 1985, between TCO and Columbia, and
the related Security Agreement, dated June 19, 1985, between TCO and
Wilmington Trust Company, as each such agreement may have been amended from
time to time.
75. "INVESTMENT GRADE" means, when used in respect of a security,
that such security has been rated higher than Ba1 and BB+ by Moody's Investors
Service, Inc. and Standard & Poor's Ratings Group, respectively.
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76. "IRS" means the United States Internal Revenue Service.
77. "IRS CLOSING AGREEMENT" means the Department of the
Treasury - Internal Revenue Service Agreement As To Final Determination of Tax
Liability, which is attached as Exhibit A to the IRS Settlement Agreement.
78. "IRS ORDER" means the Order of the Bankruptcy Court, dated
October 12, 1994, approving the IRS Settlement Agreement.
79. "IRS SETTLEMENT AGREEMENT" means that certain Stipulation and
Order of Settlement of Proofs of Claim Filed by the IRS, dated October 12,
1994, by and between the IRS and Columbia, including the IRS Closing
Agreement.
80. "ISSUE" means, when referring to the New Indenture
Securities, any tranche of such New Indenture Securities having identical
maturity dates.
81. "KOTANEELEE ESCROW" means that certain escrow established
pursuant to the Canada Sale Agreement as security for the indemnification by
Columbia of Anderson Exploration Ltd. with respect to certain representations
and warranties included, and certain litigation referenced, in the Canada Sale
Agreement.
82. "LEDGER CLOSING DATE" has the meaning set forth in Section
IV.C.1.
83. "LESOP" means the leveraged employee stock ownership portion
of the Employees' Thrift Plan of Columbia Gas System, as Amended and Restated
Effective April 1, 1990, as the same may have been or may be amended or
restated from time to time.
84. "LESOP ACTION" means that certain action styled and numbered
The First National Bank of Boston, Trustee v. The
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Columbia Gas System, Inc., C.A. No. 94-230, pending before the Bankruptcy
Court.
85. "LESOP ACTION CLAIMS" means the Claims arising or which could
have arisen under the LESOP Action.
86. "LESOP ACTION SETTLEMENT" has the meaning set forth in
Section V.H.
87. "LESOP DEBENTURES" means those certain amortizing debentures
issued pursuant to the LESOP Indenture.
88. "LESOP GUARANTY" means Columbia's subordinated guaranty, set
forth in Article X of the LESOP Indenture, of the repayment of the LESOP
Debentures.
89. "LESOP INDENTURE" means that certain Indenture, dated as of
October 3, 1989, among the Employees' Thrift Plan of Columbia Gas System
Trust, Columbia and The First National Bank of Boston, as successor indenture
trustee, as the same may have been or may be amended or restated from time to
time.
90. "LESOP INDENTURE TRUSTEE" means The First National Bank of
Boston in its capacity as successor trustee under the LESOP Indenture.
91. "LESOP INDENTURE TRUSTEE CLAIM AMOUNT" has the meaning set
forth in Section V.H.
92. "LESOP TRUST" means the Employees' Thrift Plan of Columbia
Gas System Trust established in connection with the LESOP pursuant to the
Trust Agreement dated as of October 17, 1991 between Columbia and the LESOP
Thrift Plan Trustee (which succeeded the Master Savings Plan Trust Agreement,
dated as of March 14, 1990, between Columbia and Bankers Trust Company).
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93. "LESOP THRIFT PLAN TRUSTEE" means First Fidelity Bank, N.A.,
in its capacity as trustee under the LESOP Trust.
94. "LIBOR" means, with respect to any date, the "London
Interbank Offered Rate" for deposits of six months as such term is quoted by
IDD Information Services (as referenced in Dow Jones News Retrieval, a service
of Dow Jones & Company, Inc.), with respect to such date, provided, however,
that LIBOR with respect to any date that is not a Business Day shall mean
LIBOR for the next succeeding Business Day.
95. "LIQUIDATION VALUE" means (i) with respect to a share of the
DECS, the weighted average of the trading prices of all trades on the New York
Stock Exchange of shares of Common Stock for the five consecutive trading days
ending on the fifth trading day prior to the Effective Date and (ii) with
respect to a share of New Preferred Stock, $25.00.
96. "MEDIUM TERM NOTES" means the debt issued by Columbia
pursuant to the thirty-fifth, thirty-sixth and thirty-seventh supplemental
indentures, dated as of August 18, 1989, November 30, 1989 and June 6, 1990,
respectively, to the 1961 Indenture.
97. "MISCELLANEOUS ADMINISTRATIVE CLAIM" means a Claim described
in Section II.B.1.e.
98. "MUTUAL RELEASE" means the mutual release substantially in
the form of Exhibit I.
99. "NEW INDENTURE" means the indenture, substantially in the
form attached as Exhibit B (including the form of supplement for the New
Indenture Securities), to be entered into by Columbia
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and the New Indenture Trustee as of the Effective Date, pursuant to which the
New Indenture Securities are to be issued.
100. "NEW INDENTURE TRUSTEE" means the Person that is the
indenture trustee under the New Indenture.
101. "NEW INDENTURE SECURITIES" means those certain debt
instruments to be issued under the Plan by Columbia on the Effective Date
under and in accordance with the terms of the New Indenture, the terms of
which will be as described in the Disclosure Statement.
102. "NEW PREFERRED STOCK" means the shares of new preferred stock
to be issued by Reorganized Columbia in connection with the Plan pursuant to a
certificate of designation substantially in the form of Exhibit C, the terms
of which will be as described in the Disclosure Statement.
103. "1961 INDENTURE" means that certain Indenture, dated as of
June 1, 1961, as the same may from time to time have been amended or
supplemented, between Columbia and Marine Midland Bank, as successor trustee
to Morgan Guaranty Trust Company of New York.
104. "NON-BORROWED MONEY CLAIM" means a Claim classified as a
Class 2 Claim in the Plan.
105. "OMNIBUS ORDERS" mean the Final Orders of the Bankruptcy
Court, dated December 15, 1992 and January 25, 1993, authorizing Columbia to
pay, without the need for prior Bankruptcy Court approval, the fees of certain
professionals retained in the ordinary course of business by Columbia.
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106. "OPT-OUT ELECTION" has the meaning set forth in Section
III.B.4.
107. "OPT-OUT FORM" means a form approved by the District Court
for submission by a Holder of a Securities Claim to evidence its exercise of
the Opt-out Election.
108. "OPT-OUT SECURITIES CLAIM" means a Securities Claim the
Holder of which has exercised the Opt-Out Election in compliance with the
requirements of the Class Action Settlement Documents.
109. "PBGC" means the Pension Benefit Guaranty Corporation.
110. "PERSON" means a natural person, or any legal entity or
organization including, without limitation, any corporation, partnership
(general or limited), limited liability company, business trust,
unincorporated organization or association, joint stock company, trust,
association, governmental body (or any agency, instrumentality or political
subdivision thereof), or any other entity.
111. "PETITION DATE" means July 31, 1991.
112. "PLAN" means this Third Amended Plan of Reorganization of
Columbia and all exhibits, attachments and schedules annexed hereto or
referenced herein, as the same may be amended, modified or supplemented by or
with the consent of Columbia.
113. "PLAN MAILING DATE" means that date set by order of the
Bankruptcy Court as the date for the mailing of the Plan to Holders of Claims
and Interests for purposes of voting thereon.
114. "POST-PETITION OPERATIONAL CLAIM" means a Claim described in
Section II.B.1.b.
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115. "PRICING FORMULAE" means the pricing methodologies described
in Exhibit F.
116. "PRIORITY TAX CLAIM" means a Claim described in Section
II.B.2.
117. "PROFESSIONAL" means any professional employed in the
Reorganization Case pursuant to sections 327 or 1103 of the Bankruptcy Code,
any professional employed by Columbia pursuant to the Omnibus Orders and any
professional seeking compensation or reimbursement of expenses pursuant to
sections 330(a) and 503(b)(4) of the Bankruptcy Code.
118. "PROFESSIONAL CLAIM" means a Claim described in Section
II.B.1.a.
119. "PRO-RATA SHARE" means a fraction the numerator of which is
the aggregate of the Allowed amount of a Class 3.2 Claim and the post-petition
interest to be paid on such Claim in accordance with the Plan (as reduced by
the application of the set-off provisions of Section IV.H and of Section V.H,
as appropriate), and the denominator of which is the aggregate of the Allowed
amounts of all Allowed Class 3.2 Claims and the post-petition interest to be
paid on all such Claims in accordance with the Plan (as so reduced).
120. "RATE SWAP AGREEMENT" means that certain Interest Rate Swap
Agreement, dated as of November 30, 1990, between Columbia and The Toronto-
Dominion Bank, New York Branch and the agreements entered into by Columbia and
such bank ancillary or pursuant thereto.
121. "RECORD DATE" means August 1, 1995.
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122. "RECORDATION ORDER" means the order of the Bankruptcy Court,
dated April 18, 1995, Authorizing Procedures to Maintain Records of Certain
Pre-Petition Claims.
123. "RELEASEE" has the meaning set forth in Section X.D.
124. "RELIANCE GROUP" means, collectively, Reliance Insurance
Company and United Pacific Insurance Company.
125. "REORGANIZATION CASE" means the case commenced under Chapter
11 of the Bankruptcy Code bearing number 91-803 pending in the Bankruptcy
Court with respect to Columbia.
126. "REORGANIZED COLUMBIA" means Columbia (i) on the Effective
Date to the extent and for the purpose of performing those acts which are
required under the Plan to be performed by Reorganized Columbia on the
Effective Date and (ii) after the Effective Date.
127. "REORGANIZED TCO" means TCO (i) on the effective date of the
TCO Plan to the extent and for the purpose of performing those acts which are
required under the TCO Plan to be performed by Reorganized TCO on the
effective date of the TCO Plan and (ii) after the effective date of the TCO
Plan.
128. "RETIREMENT PLAN" has the meaning set forth in Section
II.C.6.b.
129. "SCHEDULE OF LIABILITIES" means the schedule of assets and
liabilities Filed by Columbia under section 521(1) of the Bankruptcy Code, as
amended from time to time.
130. "SEC" means the United States Securities and Exchange
Commission.
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131. "SECURITIES CLAIM" means any Claim or claim asserted in,
arising under or related to the Class Action other than any Claim asserted
therein on behalf of any entity that is a defendant in the Class Action and
other than any Claim asserted therein on behalf of any entity whose liability
in respect of the subject matter of the Class Action will be released pursuant
to the Class Action Settlement Documents.
132. "SETOFF FUNDS" means those funds held by Morgan Guaranty
Trust Company of New York in accordance with the Setoff Order.
133. "SETOFF ORDER" means that certain Stipulation and Order
Authorizing Investment of Certain Funds subject to Setoff and Providing
Adequate Protection, among Columbia, Morgan Guaranty Trust Company of New York
and Mellon Bank, N.A., approved by the Bankruptcy Court on December 17, 1992.
134. "SETTLEMENT FUND" has the meaning set forth in Section
III.B.4.
135. "$750 MILLION CREDIT AGREEMENT" means that certain $750
Million Credit Agreement, dated as of October 5, 1988, among Columbia, the
banks listed therein and Morgan Guaranty Trust Company of New York, as Agent,
as amended or restated from time to time.
136. "STIPULATION OF DISMISSAL WITH PREJUDICE" has the meaning
set forth in Section IV.A.
137. "STIPULATION OF SETTLEMENT" means that certain stipulation of
settlement, dated as of July 18, 1995, among each of Columbia, the
Contributors and the individual defendants in
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37
the Class Action and the lead counsel to the plaintiffs in the Class Action, a
copy of which is annexed as Exhibit 6 to the Disclosure Statement.
138. "STOCKHOLDER" means any holder of any of the issued and
outstanding shares of Common Stock.
139. "STOCK VALUE" means, with respect to a share of Common Stock,
the weighted average of the trading prices of all trades on the New York Stock
Exchange of shares of Common Stock for the five consecutive trading days
ending on the last trading date prior to the date on which the value of such
share is to be determined.
140. "SUPPLEMENTAL BAR DATE" means the bar date for filing proofs
of claim provided in the Supplemental Bar Date Order.
141. "SUPPLEMENTAL BAR DATE ORDER" has the meaning set forth in
Section III.B.4.
142. "SUPPLEMENTAL PROOF OF CLAIM" means a timely Filed proof of
claim complying with the Supplemental Bar Date Order.
143. "SURRENDER INSTRUMENTS" has the meaning set forth in Section
IV.C.2.
144. "TCO" means Columbia Gas Transmission Corporation, a Delaware
corporation and a wholly-owned subsidiary of Columbia.
145. "TCO COMMITTEES" has the meaning set forth in Section X.D.
146. "TCO PLAN" means the Second Amended Plan of Reorganization of
TCO as Further Amended, dated July 17, 1995, and all exhibits, attachments and
schedules annexed thereto or referenced therein, filed in the TCO Proceeding,
as the same may
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be further amended, modified or supplemented, provided that such further
amendments, modifications or supplements shall have been consented to by
Columbia and TCO.
147. "TCO PROCEEDING" means TCO's case under Chapter 11 of the
Bankruptcy Code, bearing number 91-804, pending in the United States
Bankruptcy Court for the District of Delaware.
148. "TERM LOAN FACILITY" means one or more banking facilities,
other than the Working Capital Facility, to be entered into by Reorganized
Columbia as of the Effective Date with such financial institution or
institutions and on such terms and conditions as Reorganized Columbia may deem
appropriate.
149. "UNCLAIMED DISTRIBUTION" has the meaning set forth in Section
IV.F.2.
150. "UNCLASSIFIED CLAIM" means a Claim described in Section
II.B.1.
151. "UNDERTAKING" means that certain undertaking, substantially
in the form of Exhibit K, to be entered into by Columbia for the benefit of
certain current and former directors and officers of Columbia and TCO who are
not named as defendants in the Class Action or the Derivative Action.
152. "U.S. TRUSTEE" means the Office of the United States Trustee.
153. "U.S. TRUSTEE'S FEE CLAIMS" means the Claims described in
Section II.B.1.d.
154. "VOTING DEADLINE" means the deadline for voting to accept or
reject the Plan established by Final Order.
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155. "WORKING CAPITAL FACILITY" means one or more working capital
banking facilities to be entered into by Reorganized Columbia as of the
Effective Date with such financial institution or institutions and on such
terms and conditions as Reorganized Columbia may deem appropriate.
B. RULES OF INTERPRETATION
For purposes of the Plan: (i) whenever from the context it is
appropriate, each term, whether stated in the singular or the plural, shall
include both the singular and the plural; (ii) any reference in the Plan to a
contract, instrument, release, indenture or other agreement or document being
in a particular form or on particular terms and conditions means that such
document shall be substantially in such form or substantially on such terms
and conditions; (iii) any reference in the Plan to a document or exhibit Filed
or to be Filed means such document or exhibit, as it may have been or may be
amended, modified or supplemented; (iv) unless otherwise specified, all
references in the Plan to sections, articles, schedules and exhibits are
references to sections, articles, schedules and exhibits of or to the Plan;
(v) the words "herein" and "hereto" refer to the Plan in its entirety rather
than a particular portion of the Plan; (vi) captions and headings to articles
and sections are inserted for convenience of reference only and are not
intended to be a part of or to affect the interpretation of the Plan; and
(vii) the rules of construction set forth in section 102 of the Bankruptcy
Code shall apply.
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C. COMPUTATION OF TIME
In computing any period of time prescribed or allowed by the Plan, the
provisions of Bankruptcy Rule 9006(a) shall apply.
D. GOVERNING LAW
EXCEPT TO THE EXTENT THAT THE BANKRUPTCY CODE OR BANKRUPTCY RULES ARE
APPLICABLE, AND SUBJECT TO THE PROVISIONS OF ANY CONTRACT, INSTRUMENT,
RELEASE, INDENTURE OR OTHER AGREEMENT OR DOCUMENT ENTERED INTO IN CONNECTION
WITH THE PLAN, THE RIGHTS AND OBLIGATIONS ARISING UNDER THE PLAN SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF DELAWARE, WITHOUT GIVING EFFECT TO CONFLICTS-OF-LAW PRINCIPLES WHICH
WOULD APPLY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF DELAWARE OR THE
UNITED STATES OF AMERICA.
II. UNCLASSIFIED CLAIMS AND
CLASSES OF CLAIMS AND INTERESTS
A. GENERAL
Administrative Claims and Priority Tax Claims described below in
Section II.B, have not been classified and the Holders thereof are not
entitled to vote on the Plan.
To the extent that a Holder of a Claim asserts or holds more than one
Claim and such Claims are classified in different Classes, each such Claim
shall be deemed for purposes of this Plan to be a distinct Claim entitled to
participate in the appropriate Class, subject to the following sentence. If
any Holder of a Claim asserts or holds more than one Claim in any one Class,
all of such Claims shall be aggregated and the Holder's aggregate Claim shall
be accorded the treatment appropriate for a
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Claim of such type and amount, provided, however, for purposes of determining
whether a Claim is includable in Class 3.1 or Class 3.2 such aggregation shall
be made as of the Record Date.
A Claim is classified in a particular Class only to the extent that
the Claim qualifies within the description of that Class. A Claim is also
classified in a particular Class for the purpose of receiving distributions
pursuant to the Plan only to the extent that such Claim is an Allowed Claim in
that Class and has not been paid, released or otherwise satisfied.
B. UNCLASSIFIED CLAIMS
1. ADMINISTRATIVE CLAIMS
Administrative Claims consist of those Claims described below:
a. PROFESSIONAL CLAIMS
Professional Claims consist of all Administrative Claims for unpaid
fees and expenses of Professionals and amounts for compensation Allowed under
sections 330(a) and 503(b) of the Bankruptcy Code. Professional Claims
further consist of any Claims for compensation of the Trustee, the Bank Agent
or other parties pursuant to applications made under section 503(b) of the
Bankruptcy Code. Notwithstanding any provision contained herein to the
contrary, the right of the Trustee, the Bank Agent or other parties to seek
compensation pursuant to section 503(b) of the Bankruptcy Code is without
prejudice to each such party's right to seek payment of its fees and expenses,
including legal fees, based upon any contract such party may have with
Columbia,
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or to Columbia's right to oppose some or all of such Claims on any ground.
b. POST-PETITION OPERATIONAL CLAIMS
Post-Petition Operational Claims consist of all Administrative Claims
in respect of liabilities incurred by Columbia in the ordinary course of
business during the pendency of the Reorganization Case including, but not
limited to, Administrative Claims of governmental units for taxes, trade
vendor and supplier payment obligations and obligations under contracts and
leases.
c. ASSUMED EXECUTORY CONTRACT CLAIMS
Assumed Executory Contract Claims consist of all obligations of
Columbia to cure defaults arising from or in connection with the assumption of
pre-petition executory contracts and unexpired leases by Columbia, under the
Plan or otherwise, pursuant to section 365(b)(1) of the Bankruptcy Code.
d. U.S. TRUSTEE'S FEE CLAIMS
The U.S. Trustee's Fee Claims consist of the fees Columbia is required
to pay pursuant to 28 U.S.C. Section 1930(a)(6).
e. MISCELLANEOUS ADMINISTRATIVE CLAIMS
Miscellaneous Administrative Claims consist of all Administrative
Claims other than Professional Claims, Post-Petition Operational Claims,
Assumed Executory Contract Claims and U.S. Trustee's Fee Claims, including but
not limited to (i) contingent indemnification Claims of officers, directors,
employees and agents of Columbia, TCO or any other subsidiary of Columbia,
(ii) post-petition personal injury and property damage
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Claims, (iii) LESOP Action Claims and (iv) the Claims of the LESOP Indenture
Trustee for fees and expenses incurred pursuant to the LESOP Indenture.
Miscellaneous Administrative Claims include specifically: (i) the indemnity
Claims arising under the Canada Sale Agreement in favor of the purchaser of
the stock of Columbia Canada and (ii) indemnity Claims under Columbia's
indemnity agreements with the Reliance Group.
2. PRIORITY TAX CLAIMS
Priority Tax Claims consist of all Claims for the payment of taxes
entitled to priority in payment pursuant to section 507(a)(8) of the
Bankruptcy Code.
C. CLASSES OF CLAIMS AND INTERESTS
1. CLASS 1 - DIP FACILITY CLAIM
Class 1 consists of the DIP Facility Claim.
2. CLASS 2 - NON-BORROWED MONEY CLAIMS
Class 2 consists of all pre-petition Claims that are not Unclassified
Claims and that are not treated in any other Class under the Plan. Class 2
shall include all Claims for the pre-petition and post-petition fees and costs
of Creditors including any such Claim of the Indenture Trustee arising under
the 1961 Indenture and the Bank Agent under the $500 Million Credit Agreement
and the $750 Million Agreement, if such Claim arises as a result of
contractual obligations under the relevant debt instrument.
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3. CLASS 3 - BORROWED MONEY CLAIMS
a. CLASS 3.1 - BORROWED MONEY CONVENIENCE CLAIMS
Class 3.1 consists of all Claims the principal amount of which, as of
the Record Date, did not exceed $20,000 and that, but for such monetary
limitation, would be classified in Class 3.2.
b. CLASS 3.2 - OTHER BORROWED MONEY CLAIMS
Class 3.2 consists of the following Claims the principal amount of
which, as of the Record Date, exceeded $20,000:
i. DEBENTURE CLAIMS:
All pre-petition Claims arising under the Debentures;
ii. $500 MILLION CREDIT AGREEMENT CLAIMS:
All pre-petition Claims (other than Auction Note Debt Claims)
arising under the $500 Million Credit Agreement;
iii. $750 MILLION CREDIT AGREEMENT CLAIMS:
All pre-petition Claims arising under the $750 Million Credit
Agreement;
iv. COMMERCIAL PAPER CLAIMS:
All pre-petition Claims arising under the Commercial Paper;
v. BID NOTE CLAIMS:
All pre-petition Claims arising under the Bid Notes;
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vi. AUCTION NOTE DEBT CLAIMS:
All pre-petition Claims arising under the Auction Note Debt;
vii. MEDIUM TERM NOTE CLAIMS:
All pre-petition Claims arising under the Medium Term Notes;
viii. LESOP CLAIMS:
All Claims arising under the LESOP Guaranty, subject,
however, to the provisions of Section V.H; and
ix. RATE SWAP CLAIMS:
All pre-petition Claims arising under the Rate Swap
Agreement.
4. CLASS 4 - SECURITIES CLAIMS
Class 4 consists of all Securities Claims which are not Opt-Out
Securities Claims.
5. CLASS 5 - INTERCOMPANY CLAIMS
Class 5 consists of the Intercompany Claims.
6. CLASS 6 - ASSUMED CLAIMS
a. CLASS 6.1 - INDEMNITY CLAIMS
Class 6.1 consists of the pre-petition Claims of the officers,
directors, employees or agents of Columbia, TCO or Columbia's other
subsidiaries arising from liabilities assessed against such officers,
directors, employees or agents for which Columbia is obligated to indemnify
them pursuant to the terms of Columbia's certificate of incorporation or
otherwise, to the extent insurance proceeds from the D&O Insurance are
inadequate or unavailable to satisfy such Claims.
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b. CLASS 6.2 - PENSION CLAIMS
Class 6.2 consists of all Claims with respect to the Retirement Income
Plan for the Columbia Gas System Companies (the "Retirement Plan"), including
but not limited to the Retirement Plan's Claims, if any, for minimum funding
contributions required by ERISA and the three Claims Filed by the PBGC with
regard to the Retirement Plan.
c. CLASS 6.3 - SHAWMUT GUARANTY CLAIM
Class 6.3 consists of Columbia's secondary obligation to Shawmut Bank
of Boston, N.A. for certain of the obligations of Columbia Gas of Ohio, Inc.
under the lease for the latter's headquarters in Columbus, Ohio.
7. CLASS 7 - OPT-OUT SECURITIES CLAIMS
Class 7 consists of all Opt-out Securities Claims the Holders of which
have preserved their right to proceed against Columbia or Reorganized Columbia
in the District Court sitting in bankruptcy in accordance with the
requirements of the Class Action Settlement Documents.
8. CLASS 8 - INTERESTS IN COLUMBIA COMMON STOCK
Class 8 consists of all Interests of the Stockholders.
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III. TREATMENT OF CLAIMS AND INTERESTS
A. TREATMENT OF UNCLASSIFIED CLAIMS
1. ADMINISTRATIVE CLAIMS
a. PROFESSIONAL CLAIMS
Each Holder of an Allowed Professional Claim will receive cash equal
to the amount of such Claim and such post-petition interest as may be Allowed
by the Bankruptcy Court (unless Columbia and the Holder of such Claim agree to
less favorable treatment) on the later of (i) the Effective Date and (ii) the
tenth day after the date on which an order allowing such Claim and post-
petition interest becomes a Final Order.
b. POST-PETITION OPERATIONAL CLAIMS
Each Post-Petition Operational Claim that is unpaid as of the
Effective Date will be assumed and paid by Reorganized Columbia pursuant to
the terms and conditions of the particular transaction giving rise to such
Claim, without any further action on the part of the Holder of such Claim.
c. ASSUMED EXECUTORY CONTRACT CLAIMS
Each Assumed Executory Contract Claim that is an Allowed Claim on the
Effective Date will be paid, together with any post-petition interest which
may be due thereon, calculated as described below, in cash, on the Effective
Date or upon such earlier or later date as may be authorized by order of the
Bankruptcy Court. Any Assumed Executory Contract Claim that becomes an
Allowed Claim after the Effective Date will be paid, together with any post-
petition interest which may be due thereon, calculated as described below, in
cash, within thirty
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days after the end of the Calendar Quarter in which such Claim becomes an
Allowed Claim.
Post-petition interest shall be calculated from the date a defaulted
payment was required to have been made to and including the day prior to the
date of distribution: (i) with respect to any Assumed Executory Contract Claim
evidenced by a written agreement setting forth a non-default contractual
interest rate, at such non-default contractual rate, and (ii) with respect to
any other Assumed Executory Contract Claim, at the rate of six percent (6%)
per annum, or as otherwise provided by the Bankruptcy Court.
d. U.S. TRUSTEE'S FEE CLAIMS
U.S. Trustee's Fee Claims that are unpaid as of the Effective Date
will be paid in cash on the Effective Date.
e. MISCELLANEOUS ADMINISTRATIVE CLAIMS
Indemnity Claims under the Canada Sale Agreement (i) if liquidated by
Final Order on the Effective Date, will be paid on the Effective Date in cash
or (ii) if not then liquidated, will be assumed by Reorganized Columbia and
the then-existing Kotaneelee Escrow will be adjusted in accordance with the
terms of the Canada Sale Agreement. At Columbia's option, the Kotaneelee
Escrow may be replaced on the Effective Date or at any time thereafter by a
letter of credit as provided for in the Canada Sale Agreement.
Indemnity Claims arising under agreements with the Reliance Group (i)
if liquidated on the Effective Date, will be paid on
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the Effective Date in cash or (ii) if not then liquidated, will be assumed by
Reorganized Columbia.
Pursuant to the LESOP Action Settlement: (i) the LESOP Action shall be
deemed dismissed and LESOP Action Claims shall be discharged, each with
prejudice, in consideration of the treatment provided in Section V.H; (ii)
Columbia shall pay to the LESOP Indenture Trustee, in cash, its fees and costs
incurred pursuant to the LESOP Indenture in an amount not in excess of the
LESOP Indenture Trustee Claim Amount on the Effective Date; and (iii) the
LESOP Indenture Trustee shall waive all rights to seek any further payment
with respect to such fees and costs, including, but not limited to, the right
to seek payment through an application pursuant to section 503(b) of the
Bankruptcy Code or through the exercise of the LESOP Indenture Trustee's lien
rights.
Any remaining Miscellaneous Administrative Claim that is unpaid as of
the Effective Date will be assumed by Reorganized Columbia and paid in cash as
it becomes due and payable or as otherwise agreed to or directed by the
Bankruptcy Court.
Any Miscellaneous Administrative Claim liquidated prior to the
Effective Date and not paid at the time liquidated shall be entitled, when
paid, to receive, in cash, post-petition interest from the date such Claim is
liquidated to and including the day prior to the date of payment thereof
calculated: (i) with respect to any Miscellaneous Administrative Claim
evidenced by a written agreement setting forth a non-default contractual
interest rate, at such non-default contractual rate, and (ii) with respect to
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any other Miscellaneous Administrative Claims, at the rate of six percent (6%)
per annum, or as otherwise provided by the Bankruptcy Court.
Notwithstanding any provision herein to the contrary, the LESOP
Indenture Trustee shall not be entitled to the payment of any post-petition
interest for any amounts paid for its fees and costs pursuant to terms of the
LESOP Action Settlement.
2. PRIORITY TAX CLAIMS
Each Priority Tax Claim (other than a Claim that is the subject of the
IRS Order) that is Allowed on the Effective Date, and any post-petition
interest due thereon, will be paid, to the extent Allowed, in cash on the
Effective Date. Any such Priority Tax Claim that becomes an Allowed Claim
after the Effective Date, and any post-petition interest due thereon, will be
paid, to the extent Allowed, in cash within thirty days from the date on which
it becomes an Allowed Claim.
Priority Tax Claims that are the subject of the IRS Order will be paid
in installments over a period not to exceed six years from the date of
assessment of such Claims, together with interest at the rate set forth in
Section D.7 of the IRS Closing Agreement. The full amount of such Claims will
be paid in cash in equal quarterly installments beginning on the date which is
three months after the Effective Date and ending on the last quarterly date
which does not exceed six years from the date of assessment of such Claims,
except that the first quarterly installment shall be paid in three equal
monthly installments beginning on the Effective Date. Each monthly or
quarterly
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installment shall be paid together with interest on such installment accrued
to the date of payment, at the rate set forth in the IRS Order and the IRS
Settlement Agreement. Notwithstanding the foregoing, however, Reorganized
Columbia shall have the right to pay the Claims of the IRS, or any remaining
balance of such Claims, in full or in part at any time on or after the
Effective Date, without premium or penalty. Any payments with respect to
Claims of the IRS made by TCO or Reorganized TCO pursuant to the IRS
Settlement Agreement shall reduce the Claim of the IRS in accordance with
Section D.7 of the IRS Closing Agreement.
All holders of Priority Tax Claims shall be entitled to post-petition
interest payable pursuant to the appropriate statute imposing such tax, at the
rate of interest set forth in such statute, or, if no rate is set forth in
such statute, at the rate of six percent (6%) per annum, or as otherwise
provided by the Bankruptcy Court, provided, however, that the rate of interest
to be paid to the IRS shall be governed by the provisions of the IRS Order and
the IRS Settlement Agreement.
B. TREATMENT OF CLASSIFIED CLAIMS
1. CLASS 1 - DIP FACILITY CLAIM
The DIP Facility Claim shall be paid in full in cash on the Effective
Date, if then Allowed, or if not then Allowed, then on or before the tenth day
after such Claim becomes an Allowed Claim. On the Effective Date, the DIP
Facility will terminate by its terms. Any Deficiency Claim shall be treated
as an Administrative Claim in accordance with section 364(c) of the
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Bankruptcy Code and the Bankruptcy Court order approving the DIP Facility.
The Class 1 Claim is unimpaired.
2. CLASS 2 - NON-BORROWED MONEY CLAIMS
On the Effective Date, the Holder of each Allowed Class 2 Claim shall
be paid, in cash, the Allowed amount of its Claim together with post-petition
interest thereon from the Petition Date to and including the day prior to the
Effective Date calculated: (i) with respect to any Allowed Class 2 Claim
evidenced by a written agreement setting forth a non-default contractual
interest rate, at such non-default contractual rate, and (ii) with respect to
any other Allowed Class 2 Claim, at the rate of six percent (6%) per annum, or
as otherwise provided by the Bankruptcy Court.
Class 2 Claims are unimpaired.
3. CLASS 3 - BORROWED MONEY CLAIMS
a. CLASS 3.1 - BORROWED MONEY CONVENIENCE CLAIMS
On the Effective Date, the Holder of each Allowed Class 3.1 Claim
shall be paid, in cash, the Allowed amount of its Claim (determined in
accordance with the paragraph of Exhibit G relevant to such Claim in those
cases where such paragraph describes the method of computation of the Allowed
amount of the Claim), together with post-petition interest thereon calculated
in accordance with the paragraph of Exhibit G relevant to such Claim as if
such Claim were an Allowed Class 3.2 Claim.
Class 3.1 Claims are unimpaired.
b. CLASS 3.2 - OTHER BORROWED MONEY CLAIMS
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On the Effective Date, the Holder of each Allowed Class 3.2 Claim
shall be paid the Allowed amount of its Claim (determined in accordance with
the paragraph of Exhibit G relevant to such Claim in those cases where such
paragraph describes the method of computation of the Allowed amount of the
Claim), together with post-petition interest thereon calculated in accordance
with the paragraph of Exhibit G relevant to such Claim, by the issuance to the
Holder thereof of its Pro Rata Share, subject to adjustment as described in
Section IV.C.5, of (i) the Cash Consideration, if any, (ii) the aggregate
principal amount of each Issue of New Indenture Securities, (iii) the
aggregate Liquidation Value of the New Preferred Stock and (iv) the aggregate
Liquidation Value of the DECS.
The New Preferred Stock and the DECS shall be subject to optional
redemption by Reorganized Columbia as set forth in Exhibits C and D,
respectively. As provided in Exhibit C, Reorganized Columbia may not redeem
any New Preferred Stock on or prior to the 120th day following the Effective
Date (or, if such day is not a Business Day, the next succeeding Business Day)
if, after giving effect to such redemption, any DECS would remain outstanding.
The total number of shares of New Preferred Stock to be issued
pursuant to the preceding paragraph will be that number of shares that has an
aggregate Liquidation Value of $200 million and the total number of shares of
DECS to be issued pursuant to the preceding paragraph will be that number of
shares that has an aggregate Liquidation Value of $200 million, subject, in
each
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case, to adjustment as described in Section IV.C.5. The amount of the Cash
Consideration, if any, will be determined by Columbia prior to the Effective
Date taking into account the cash Columbia projects will be available to it on
the Effective Date, the cash Columbia estimates will be required post-
Effective Date for its and its subsidiaries' working capital and liquidity
needs and the cash required by it to fulfill its obligations under the Plan
and the Columbia Omnibus Settlement. Columbia intends to obtain a Term Loan
Facility which will become available upon Columbia's emergence from Chapter
11. If the Term Loan Facility is obtained and is available for borrowing on
the Effective Date and if borrowings thereunder are available at an all-in
cost (determined without regard to future changes in relevant Term Loan
Facility reference rates) equal to or lower than the weighted average cost of
borrowing through the issuance of New Indenture Securities (assuming each
Issue thereof is issued in the same principal amount), Reorganized Columbia
will provide as Cash Consideration and for purposes of payments required under
Section IV.C.5 at least the lesser of $350 million and the then available
amount of such Term Loan Facility. The balance of the consideration to be
paid to holders of Allowed Class 3.2 Claims will be in the form of New
Indenture Securities, divided among the respective Issues thereof
substantially equally, with no Issue having an aggregate principal amount
which is more than 150% of the aggregate principal amount of any other Issue
(subject, however, to the provisions of Section IV.C.5).
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The payments and distributions to the Holders of Allowed Class 3.1
Claims and Allowed Class 3.2 Claims are in complete satisfaction of any rights
of such Holders to enforce the subordination provisions contained in any
document, instrument or provision pertinent to or relevant to such Holders'
Claims, and the distributions to be made to Holders of such Claims shall not
be subject to any claim, attachment or similar right of any Holder of an
Allowed Class 3.1 Claim or an Allowed Class 3.2 Claim asserting the benefit of
any subordination provisions. Such payments and distributions shall not bar
Allowed Class 3.1 or Allowed Class 3.2 Claims from participation in Class 4
or, in the alternative, Class 7 under this Plan.
Class 3.2 Claims are impaired.
4. CLASS 4 - SECURITIES CLAIMS
Pursuant to the Plan and the Stipulation of Settlement, Columbia and
various non-debtors (collectively, the "Contributors") will establish a
settlement fund (the "Settlement Fund") in the amount of $36.5 million (of
which approximately $16.5 million will be contributed by Columbia) to settle
the Class Action.
Holders of Securities Claims that are not Class 7 Claims shall not be
entitled to any distributions under the Plan but shall have such entitlements
as they may have to distributions pursuant to the Class Action Settlement
Documents.
Class 4 Claims will be discharged and the Holders thereof shall be
forever barred from seeking to recover any payment on their Securities Claims
from Columbia or Reorganized Columbia.
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Holders of Securities Claims may elect to refuse to accept the
proposed treatment provided in the Class Action Settlement Documents (the
"Opt-out Election"). Securities Claims, the Holders of which exercise the
Opt-out Election and preserve their rights to proceed against Columbia in the
District Court sitting in bankruptcy in accordance with the requirements of
the Class Action Settlement Documents, shall be Class 7 Claims.
Distributions from the Settlement Fund shall be made in the amounts,
at the times and in the manner provided for in the Class Action Settlement
Documents, which shall also govern requirements for qualifying for
distributions, the manner and time of the giving of notices, the forms of the
documents to be filed by Holders of Securities Claims and all other matters
concerning the Class Action and its settlement other than as specifically
provided for in the Plan. Neither Columbia nor Reorganized Columbia shall
have any responsibility with respect to the Class Action Settlement Documents
or the disposition of the Settlement Fund, other than to make the contribution
thereto required of Columbia and to cooperate in certain respects in the
gathering of certain information with respect thereto.
The defendants in the Class Action have the option, in their sole
discretion, to terminate the Stipulation of Settlement if the amount of the
securities as to which the Opt-out Election is properly exercised exceeds a
specified limit.
If the option to terminate the Stipulation of Settlement is not
exercised, each Holder of a Class 4 Claim will, pursuant to the Class Action
Settlement Documents, release all Securities
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Claims such Holder may have against Columbia, the other defendants in the
Class Action and the present or former officers and directors of Columbia or
TCO similarly situated to those of its present or former officers and
directors who are defendants.
Class 4 Claims are unimpaired.
5. CLASS 5 - INTERCOMPANY CLAIMS
Pursuant to the Columbia Omnibus Settlement, the Intercompany Claims
shall be settled and discharged in full.
The Class 5 Claims are unimpaired.
C. TREATMENT OF ASSUMED CLAIMS
1. CLASS 6.1 - INDEMNITY CLAIMS
Each Class 6.1 Claim shall be paid (i) if Allowed on the Effective
Date, in full in cash on the Effective Date, and (ii) if not then Allowed,
shall be assumed and paid in the ordinary course.
Class 6.1 Claims are unimpaired.
2. CLASS 6.2 - PENSION CLAIMS
On the Effective Date, Reorganized Columbia shall assume its
obligations to the Retirement Plan, including all obligations imposed by
ERISA. Class 6.2 Claims shall survive and be unaffected by the Plan.
Class 6.2 Claims are unimpaired.
3. CLASS 6.3 - SHAWMUT GUARANTY CLAIM
Columbia's secondary obligations to Shawmut Bank of Boston, N.A. shall
be assumed and the Plan shall leave unaltered the legal, equitable and
contractual rights to which Shawmut Bank of
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Boston, N.A. is entitled under such obligations and nothing in the
Confirmation Order will affect such rights.
The Class 6.3 Claim is unimpaired.
D. TREATMENT OF CLASS 7 - OPT-OUT SECURITIES CLAIMS
Holders of Class 7 Claims shall have their Securities Claims paid on
the Effective Date, if then Allowed, or if not then Allowed, within thirty
days from the date such Claims become Allowed, in Common Stock (valued for
such purposes at the Stock Value as of the date of distribution) or, at
Reorganized Columbia's discretion, in cash or in any combination of the
foregoing.
In order to preserve any Securities Claim it may have against
Columbia, each Holder of an Opt-out Securities Claim must execute an Opt-out
Form. Submission of an Opt-out Form that does not indicate to the contrary,
will be deemed to be an election to preserve such Claim in the District Court
sitting in bankruptcy.
Columbia disputes and shall object to, and may seek the estimation of,
the Opt-out Securities Claims and Holders of such Claims shall litigate their
Securities Claims in the District Court sitting in bankruptcy.
Class 7 Claims shall be deemed: (i) impaired if Columbia chooses to
pay such Claims in whole or in part in Common Stock, and (ii) unimpaired if
Columbia chooses to pay such Claims solely in cash.
E. TREATMENT OF CLASS 8 - INTERESTS IN COMMON STOCK
All Holders of Class 8 Interests shall retain their outstanding shares
of Common Stock. Class 8 Interests may be
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affected by the Plan as a result of the issuance of the DECS and the possible
issuance of additional shares of Common Stock.
Class 8 Interests are deemed impaired.
IV. PROVISIONS GOVERNING DISTRIBUTIONS
A. TRANSACTIONS ON THE EFFECTIVE DATE
The following transfers and transactions shall take place on the
Effective Date:
1. Reorganized Columbia shall take or cause to be taken all
actions which are necessary or appropriate to effect:
(a) the filing with the Secretary of State of the State of Delaware
of an amended and restated certificate of incorporation substantially
in the form of Exhibit A and certificates of designation with respect
to the New Preferred Stock and the DECS substantially in the form of
Exhibits C and D, respectively;
(b) the issuance of shares of the New Preferred Stock and DECS
under the Plan; and
(c) the issuance of the New Indenture Securities.
2. Reorganized Columbia shall enter into the New Indenture.
3. Reorganized Columbia shall enter into one or more Disbursing
Agent Agreements.
4. If not previously entered into, Reorganized Columbia shall
enter into the Working Capital Facility and the Term Loan Facility unless
Columbia waives this condition to the Effective Date.
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5. Reorganized Columbia shall make all cash payments required to
be made under the Plan on the Effective Date to Holders of Allowed Claims
other than those Claims classified in Class 3.1 or Class 3.2.
6. Reorganized Columbia shall deliver to the appropriate
Disbursing Agent or Disbursing Agents all consideration required
to be paid on the Effective Date to Holders of Allowed Claims in Class 3.1 and
Class 3.2.
7. The Disbursing Agent or Disbursing Agents shall make all
distributions required to be made, pursuant to the Plan, on the Effective Date
to Holders of Allowed Claims in Class 3.1 and 3.2.
8. The Setoff Funds shall be distributed in accordance with the
terms of the Setoff Order and the interest earned and accrued on the Setoff
Funds shall be distributed to Reorganized Columbia.
9. Reorganized Columbia shall adjust or replace the Kotaneelee
Escrow in accordance with the provisions of the Canada Sale Agreement.
10. A Stipulation of Dismissal With Prejudice of the Intercompany
Claims Litigation, which is conditioned only upon the completion of payment by
Reorganized TCO of all distributions payable on the effective date of the TCO
Plan (the "Stipulation of Dismissal With Prejudice") shall have been filed
with and, if necessary, approved by the District Court. To the extent not
previously resolved, the Motion to Unseal Judicial Records, filed
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with the District Court by the customer's committee appointed in the TCO
Proceeding, shall not be dismissed.
11. The LESOP shall be terminated and the Common Stock held by
the LESOP Thrift Plan Trustee in Fund E of the LESOP Trust shall be purchased
by Reorganized Columbia in accordance with the terms of this Plan.
12. Columbia shall make all payments required to be made by
Columbia under the terms of the Stipulation of Settlement.
13. Reorganized Columbia shall take any and all further actions
necessary or appropriate to effectuate the Plan.
B. DISTRIBUTIONS ON UNCLASSIFIED CLAIMS AND CLAIMS IN CLASSES 1, 2 AND 6
Except as otherwise provided under the Plan or pursuant to a Final
Order, (i) distributions to Holders of Unclassified Claims and Class 1, Class
2 and Class 6 Claims that are Allowed Claims as of the Effective Date will be
made by Reorganized Columbia commencing on the Effective Date, in accordance
with the treatment provided under the Plan for such Claims and (ii)
distributions to Holders of any such Claims that become Allowed after the
Effective Date will be made, in the case of Unclassified Claims and Class 6
Claims, to the extent not otherwise provided for in the Plan, in the ordinary
course of business as such Claims become Allowed and, in the case of the
remaining such Classes of Claims, within thirty days after the end of the
Calendar Quarter in which such Claims become Allowed.
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C. DISTRIBUTIONS ON CLASSES 3.1 AND 3.2 CLAIMS.
1. LEDGER CLOSING DATE
As of the close of business on a date to be determined by Columbia and
notice of which shall have been given to Holders as the Bankruptcy Court shall
direct, which date shall not be less than ten nor more than thirty days prior
to the Effective Date (the "Ledger Closing Date"), all transfer ledgers,
transfer books, registers and any other records maintained by the
designated transfer agents in accordance with the Recordation Order with
respect to ownership of the Borrowed Money Instruments and the Borrowed Money
Claims arising therefrom or in connection therewith shall be closed, and for
purposes of the Plan, there shall be no further changes in the record holders
of any Borrowed Money Instruments or any Borrowed Money Claim arising
therefrom or in connection therewith on such ledgers, books, registers or
records. Columbia shall thereafter have no obligation to recognize any
transfer of any Borrowed Money Instrument or any Borrowed Money Claim arising
therefrom or in connection therewith but shall be entitled instead to
recognize and deal with, for all purposes under the Plan, only those Persons
that are Holders of Borrowed Money Instruments or any Borrowed Money Claim
arising therefrom or in connection therewith on the Ledger Closing Date, as
reflected on such ledgers, books, registers or records.
2. SURRENDER OF INSTRUMENTS
Each Holder of a Claim arising from or evidenced by a Bid Note, a
Debenture, any note issued pursuant to the $500 Million Loan Agreement and any
note issued pursuant to the $750 Million
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Loan Agreement (each, a "Surrender Instrument"), as a condition to the
delivery to such Holder of the distributions to which it is entitled under the
Plan, shall be required to surrender the Surrender Instrument giving rise to
or evidencing such Claim to the Person set forth opposite the name of such
Surrender Instrument in the table below (or to such other Person as may be
designated by Columbia):
Surrender Instrument Person
Bid Notes Columbia
Debentures Indenture Trustee
Notes issued pursuant Bank Agent
to the $500 Million
Credit Agreement
Notes issued pursuant Bank Agent
to the $750 Million
Credit Agreement
To the extent that such Holder is not the record holder of such relevant
Surrender Instrument as of the Ledger Closing Date, such Holder must deliver
to the specified Person, together with the relevant Surrender Instrument,
documents reasonably satisfactory to Columbia evidencing succession of title
from the record holder thereof. In the event that any such Surrender
Instrument has been lost, destroyed, stolen or mutilated or in the event such
Surrender Instrument is not in the possession of the Holder of a Claim based
on or evidenced by such Surrender Instrument, the Holder thereof may instead
execute and deliver an affidavit of loss and indemnity with respect thereto in
form that is customarily utilized for such purposes and that is reasonably
satisfactory to Columbia, together with, if Columbia so requests,
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a bond in form and substance (including, without limitation, amount)
reasonably satisfactory to Columbia. Until the relevant Surrender Instrument
has been surrendered or the foregoing provisions of this Section IV.C.2 have
been complied with with respect thereto, the distribution to be made under the
Plan to the Holder of any Claim based thereon or evidenced thereby shall
not be so delivered to such Holder, and such Holder shall have no rights
under, or with respect to, the New Indenture, the New Indenture Securities,
the New Preferred Stock or the DECS issuable to it or the cash payable to it
under the Plan.
Procedures concerning the surrender of Surrender Instruments shall be
approved by order of the Bankruptcy Court and notice thereof shall be given to
Holders of Class 3.1 and Class 3.2 Claims prior to the Effective Date.
3. CANCELLATION OF SURRENDER INSTRUMENTS AND TERMINATION OF DEBT
OBLIGATIONS
Promptly upon surrender of a Surrender Instrument in accordance with
Section IV.C.2, such Surrender Instrument, if not previously so delivered,
shall be delivered to Reorganized Columbia and canceled.
As of the Effective Date, upon the delivery by Reorganized Columbia to
the appropriate Disbursing Agent of all distributions to be made to Holders of
Allowed Claims in Classes 3.1 and 3.2, each of the Borrowed Money Instruments,
the $500 Million Credit Agreement, the $750 Million Credit Agreement, the 1961
Indenture, the Rate Swap Agreement, the Commercial Paper Master Note
representing the Commercial Paper, the LESOP Indenture and any
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other instrument or document evidencing any Claim in Class 3.1 or Class 3.2
shall be terminated, deemed null and void and of no further force and effect
and none of the Bank Agent, the Indenture Trustee, the LESOP Indenture Trustee
and the Holders or owners of the Borrowed Money Instruments shall have any
further obligations thereunder, in each case except as may be otherwise
provided for in any Disbursing Agent Agreement, and all Borrowed Money Claims
and all Claims arising pursuant to or in connection with the Borrowed Money
Instruments or any other document or instrument referred to in this paragraph
shall be deemed satisfied and discharged, and the Holders thereof shall have
no further rights against Columbia or Reorganized Columbia except that each
Holder of an Allowed Borrowed Money Claim shall have the right to receive from
the applicable Disbursing Agent the consideration to which it is entitled
under the Plan upon compliance by such Holder with the terms of the Plan.
4. DISTRIBUTIONS OF CASH, NEW DEBT INSTRUMENTS, PREFERRED STOCK
AND DECS
On the Effective Date, Reorganized Columbia shall deliver to the
appropriate Disbursing Agents, as agent for the Holders of Allowed Claims in
Class 3.1 and Class 3.2, (i) the Cash Consideration, if any, (ii) the cash
required to pay Allowed Class 3.1 Claims, (iii) the cash necessary to make
payments required in accordance with Section IV.C.5, (iv) one duly issued
certificate, registered in the name of each of the appropriate Disbursing
Agents, for, in the aggregate, the number of shares of DECS to be issued under
the Plan to Holders of Class 3.2 Claims,
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and (v) one duly issued certificate, registered in the name of each of the
appropriate Disbursing Agents, for, in the aggregate, the number of shares of
Preferred Stock to be issued under the Plan to Holders of Class 3.2 Claims.
On the Effective Date, Reorganized Columbia shall deliver to The Depository
Trust Company or its nominee, for the account of the appropriate Disbursing
Agents, one or more duly issued and authenticated New Indenture Securities for
each Issue to be issued under the Plan, payable to The Depository Trust
Company or its nominee. On the Effective Date, or from time to time
thereafter upon compliance with the provisions of Section IV.C.2 in the case
of Claims arising from Surrender Instruments, the Disbursing Agent shall make
all appropriate distributions of such consideration in accordance with the
Plan in respect of Allowed Class 3.1 Claims and Allowed Class 3.2 Claims.
Distributions to Holders of Claims based on the Debentures, the $500
Million Credit Agreement and the $750 Million Credit Agreement may be affected
by the exercise of any lien rights by the Indenture Trustee and the Bank
Agent, respectively, to satisfy the payment of any legal fees they may have
incurred in connection with the Reorganization Case. Columbia takes no
position with respect to the enforceability of any such lien rights and
reserves its right to contest the same. Columbia further reserves its right
to select any appropriate Disbursing Agents, other than the Indenture Trustee
or the Bank Agent, in which event it is possible that no proceeds may be
received by
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the Trustee or the Bank Agent to which their respective liens, if any, could
attach.
5. CASH IN LIEU OF FRACTIONAL SHARES; ROUNDING OF NEW INDENTURE
SECURITIES
(a) Fractional shares of New Preferred Stock or DECS will
not be issued or distributed. Any Holder of an Allowed Class 3.2 Claim
entitled, but for this provision, to receive a fractional share of New
Preferred Stock or DECS, shall, in lieu thereof, be paid cash in an amount
equal to the Liquidation Value of such fractional share.
(b) New Indenture Securities shall be issued only in
denominations of $1,000 or integral multiples thereof.
Any Holder of an Allowed Class 3.2 Claim entitled as a result of the
treatment of Claims as provided in Section III.B.3.b, to receive New Indenture
Securities aggregating less than $70,000 in principal amount shall receive (i)
First Issue Securities to the extent of that portion of its entitlement that
is an integral multiple of $1,000 and (ii) cash or a First Issue Security for
the balance, as described below. Any Holder of an Allowed Class 3.2 Claim
entitled to receive New Indenture Securities aggregating $70,000 or more in
principal amount shall receive (i) for such portion of its entitlement that is
an integral multiple of $7,000, equal principal amounts of each Issue of New
Indenture Securities, (ii) for so much of the balance of its entitlement that
is an integral multiple of $1,000, First Issue Securities and (iii) for the
balance of its entitlement, cash or a First Issue Security, as described
below.
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If the amount to be paid pursuant to clause (ii) of the first sentence
or clause (iii) of the second sentence of the preceding paragraph (a) is $500
or less, such amount shall be paid in cash or (b) is more than $500, such
amount shall be paid, at Reorganized Columbia's option, in cash or by the
issuance of a First Issue Security in the principal amount of $1,000, in which
latter case Reorganized Columbia shall deduct from the Cash Consideration, if
any, to which such Holder is entitled, the amount by which $1,000 exceeds the
amount required to be paid to such holder under such clause (ii) or (iii).
D. REORGANIZED COLUMBIA OR THIRD PARTY AS DISBURSING AGENT FOR CLAIMS
Reorganized Columbia, as Disbursing Agent, or such third-party
Disbursing Agent as Reorganized Columbia may in its sole discretion employ,
shall make all distributions required in respect of Claims under the Plan.
Each such Disbursing Agent shall serve without bond, and such third-party
Disbursing Agent shall be entitled to receive from Reorganized Columbia,
without further Bankruptcy Court approval, reasonable compensation for
distribution services rendered pursuant to the Plan and reimbursement of
reasonable and necessary out-of-pocket expenses incurred in connection with
such services, on terms acceptable to Reorganized Columbia.
E. COSTS OF DISTRIBUTION
Reorganized Columbia shall bear all costs associated with the
effectuation of the Plan, including but not limited to all costs of
distributions to Holders of Allowed Claims and the fees
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and expenses of the Disbursing Agents in accordance with the respective
Disbursing Agent Agreements.
F. DELIVERY OF DISTRIBUTIONS; UNCLAIMED DISTRIBUTIONS
1. DELIVERY OF DISTRIBUTIONS IN GENERAL
Distributions to each Holder of an Allowed Unclassified Claim or a
Class 1 Claim, Class 2 Claim, Class 6.1 Claim or Class 7 Claim shall be made
(i) at the address set forth on the proof of claim or any amendment thereto
Filed by such Holder, (ii) in lieu of the address set forth in clause (i), at
the address set forth in any written notice of address change received by the
relevant Disbursing Agent after the Effective Date or (iii) at the address of
such Holder reflected in the Schedule of Liabilities if no proof of claim has
been Filed and the relevant Disbursing Agent has not received a written notice
of a change of address. Distributions to Holders of Allowed Class 3.1 Claims
and Allowed Class 3.2 Claims shall be sent to the Persons at the addresses set
forth in the records of the appropriate designated transfer agent maintained
in accordance with the Recordation Order, provided, however, that New
Indenture Securities that are to be issued in non-certificated form shall be
credited by The Depository Trust Company to the accounts of its participants
for the benefit of the Persons entitled thereto pursuant to the Plan, in
accordance with the procedures of The Depository Trust Company and the
instructions of the appropriate Disbursing Agent.
2. UNCLAIMED DISTRIBUTIONS
An Unclaimed Distribution shall be (A) any distribution made to the
Holder of an Allowed Claim pursuant to the Plan including,
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in the case of any check or other instrument, the proceeds thereof, that (i)
is returned to Reorganized Columbia or the applicable Disbursing Agent as
undeliverable or because delivery thereof is not accepted or (ii) in the case
of a distribution made in the form of a check, is not presented for payment
within six months after it is sent to the payee thereof, and (B) any
distribution to be made to the Holder of an Allowed Claim pursuant to the Plan
in respect of a Surrender Instrument if such Surrender Instrument is not
surrendered to the appropriate Person in accordance with Section IV.C.2 or the
provisions of Section IV.C.2 are not otherwise complied with within six months
after the Effective Date.
Any Unclaimed Distribution in the form of cash shall, until such time
as such Unclaimed Distribution becomes deliverable, be paid over by the
appropriate Disbursing Agent to Reorganized Columbia, which shall hold such
cash and may commingle it with its other funds. Unclaimed Distributions in
the form of the New Indenture Securities, New Preferred Stock or DECS shall be
held by the applicable Disbursing Agent (through The Depository Trust Company
in the case of New Indenture Securities that are to be issued in non-
certificated form). Notwithstanding any provision herein to the contrary, any
Holder of an Allowed Claim that does not claim an Unclaimed Distribution
within the later of five years after the Confirmation Date or two years after
a payment was tendered to satisfy such Allowed Claim shall not participate in
any further distributions under the Plan and shall be forever barred from
asserting any such Claim against Reorganized Columbia
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or its property. At the end of such five year period, the Unclaimed
Distributions consisting of New Indenture Securities, New Preferred Stock,
DECS and any dividends, interest and other property received in exchange for
or in respect of such New Indenture Securities, New Preferred Stock or DECS
shall be delivered (if not already delivered) by the Disbursing Agent (through
The Depository Trust Company in the case of New Indenture Securities that are
to be issued in non-certificated form) to Reorganized Columbia which shall
retain the same as its property, free of any restrictions, and may cancel any
such New Indenture Securities, New Preferred Stock or DECS. Any cash held by
any Disbursing Agent in respect of such Claims shall be delivered by such
Disbursing Agent to Reorganized Columbia and any such cash previously
delivered to and being held by Reorganized Columbia shall be the property of
Reorganized Columbia, free of any restrictions. Nothing contained in the Plan
shall require any Disbursing Agent or Reorganized Columbia to attempt to
locate any Holder of an Allowed Claim other than by reviewing its own or
Reorganized Columbia's records or the records maintained in accordance with
the Recordation Order.
G. MEANS OF CASH PAYMENTS
Cash payments made pursuant to the Plan shall be in United States
dollars by check drawn on a domestic bank selected by the Disbursing Agent
making such payment, or, at the option of such Disbursing Agent, by wire
transfer from a domestic bank; provided, however, that cash payments to
foreign creditors, if any, may be made, at the option of such Disbursing
Agent, in such
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funds and by such means as are necessary or customary in a particular foreign
jurisdiction. All foreign currency costs and wire transfer costs incurred in
making distributions to any Holder of a Claim pursuant to the Plan shall be
for the account of such Holder.
H. SETOFFS
Reorganized Columbia may set off against any Allowed Claim and the
distributions to be made pursuant to the Plan on account of such Claim, the
claims, rights and causes of action of any nature that Columbia or Reorganized
Columbia may hold against the Holder of such Allowed Claim; provided, however,
that neither the failure to effect such a setoff nor the allowance of any
Claim hereunder shall constitute a waiver or release by Columbia or
Reorganized Columbia of any such claim, right or cause of action that Columbia
or Reorganized Columbia may possess against such Holder.
On the Effective Date, Morgan Guaranty Trust Company of New York
shall, in accordance with the terms of the Setoff Order, deliver the Setoff
Funds to the Disbursing Agent which shall distribute such Setoff Funds to
Holders of Allowed Class 3.1 Claims and Allowed Class 3.2 Claims that arise by
virtue of the $500 Million Credit Agreement (other than the Auction Note Debt)
and the $750 Million Credit Agreement in partial satisfaction of their Claims.
The remaining amount of each of the Claims arising from the $500 Million
Credit Agreement and the $750 Million Credit Agreement shall be treated as a
Class 3.2 Claim or, if the principal amount of the Claim as of the Record Date
(after giving
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effect to the foregoing reduction) is not greater than $20,000, as a Class 3.1
Claim.
In accordance with the provisions of the Setoff Order, interest earned
and accrued on the Setoff Funds shall be distributed by Morgan Guaranty Trust
Company of New York to Columbia on the Effective Date.
I. EFFECTIVE DATE PAYMENTS OR DISTRIBUTIONS
Any payment or distribution that is required under the Plan to be made
on the Effective Date or other date, if made as soon as practicable
thereafter, shall be deemed to have been made on the Effective Date or such
other date, as applicable. All cash distributions required to be made
pursuant to the Plan shall be deemed to have been made upon the mailing of a
check or transmission of a wire transfer by Columbia or Reorganized Columbia
to the Disbursing Agent, as agent for the Holder of the Allowed Claim entitled
to such distribution. Any Holder of an Allowed Claim entitled to post-
petition interest in accordance with the Plan shall receive such post-petition
interest on the cash portion of the distribution to which it is entitled, in
an amount calculated consistent with the relevant paragraph of Exhibit G or as
otherwise provided in the Plan, from the Petition Date to and including the
day before the date of distribution of the cash payments made with respect to
such Claim, provided, however, that with respect to Allowed Claims in respect
of a Surrender Instrument which has not been surrendered to the appropriate
Person in accordance with Section IV.C.2 or the provisions of Section IV.C.2
are not otherwise complied with,
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such post-petition interest shall cease to accrue as of the day before the
Effective Date.
J. LIMIT ON DISTRIBUTIONS
Anything to the contrary contained in the Plan notwithstanding, no
Holder of a Claim shall receive under the Plan more than the Allowed amount of
such Claim, together with any post-petition interest to which such Holder may
be entitled pursuant to the Plan or any order of the Bankruptcy Court. All
payments and distributions to be made under the Plan shall be made without
interest, penalty or late charge arising subsequent to the Petition Date,
except as expressly provided by the Plan or by Final Order.
K. CONTINUATION OF CERTAIN RETIREMENT, WORKERS' COMPENSATION AND LONG-
TERM DISABILITY BENEFITS
Notwithstanding anything to the contrary herein contained, all
employee and retiree benefit plans or programs in existence as of the Petition
Date (other than the LESOP) shall continue after the Effective Date.
V. MEANS FOR IMPLEMENTATION OF THE PLAN
A. CONTINUED CORPORATE EXISTENCE AND VESTING OF ASSETS IN REORGANIZED
COLUMBIA
Columbia shall continue to exist after the Effective Date as
Reorganized Columbia, a Delaware corporation, with all the rights and powers
of a corporation under applicable law and without prejudice to any right to
alter or terminate such existence (whether by merger or otherwise) under
Delaware law, subject to the terms and provisions of this Plan and the
Confirmation Order.
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Except as otherwise provided in the Plan, on or after the Effective Date, all
property of the Estate, and any property and assets acquired by Columbia or
Reorganized Columbia under any provisions of the Plan, shall vest in
Reorganized Columbia, free and clear of any and all Claims, liens, charges and
other encumbrances. On and after the Effective Date, Reorganized Columbia may
operate its business and may use, acquire and dispose of property or assets
and compromise or settle any claims against it without supervision or approval
by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or
Bankruptcy Rules, other than those restrictions expressly imposed by the Plan
or the Confirmation Order. Without limiting the foregoing, Reorganized
Columbia may pay the charges that it incurs on or after the Effective Date for
professional fees, disbursements, expenses or related support services without
application to the Bankruptcy Court.
B. CORPORATE GOVERNANCE, DIRECTORS AND OFFICERS
1. CERTIFICATE OF INCORPORATION
On the Effective Date, the certificate of incorporation of Reorganized
Columbia shall be amended and restated to read in its entirety as set forth in
Exhibit A. The certificate of incorporation as so amended shall, among other
things, prohibit the issuance of non-voting equity securities to the extent
required by section 1123(a) of the Bankruptcy Code. After the Effective
Date, Reorganized Columbia may further amend and restate its certificate of
incorporation or by-laws as permitted by the Delaware General Corporation Law.
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2. DIRECTORS AND OFFICERS OF REORGANIZED COLUMBIA
Those persons serving as the directors and officers of Columbia as of
the date hereof will, subject to changes in the ordinary course of business,
continue to serve in their same capacities on behalf of Reorganized Columbia
after Confirmation.
3. CORPORATE ACTION
Upon the Effective Date, adoption by Reorganized Columbia of an
amended and restated certificate of incorporation and the other matters
contemplated by or provided for under the Plan involving the corporate
structure of Columbia or Reorganized Columbia or corporate action to be taken
by or required of either Columbia or Reorganized Columbia shall be deemed to
have occurred and be effective and all actions required or contemplated in
order to consummate the Plan shall be authorized and approved in all respects
without any requirement of further action by Stockholders or directors of
Columbia or Reorganized Columbia.
4. VOTING SECURITIES
The New Preferred Stock and the DECS shall be deemed voting securities
for purposes of section 1123(a) of the Bankruptcy Code but shall not be deemed
voting securities for purposes of the HCA.
C. PRESERVATION OF RIGHTS OF ACTION
Except as provided elsewhere in the Plan or in any contract,
instrument, release, indenture or other agreement or document entered into or
created in connection with the Plan, in accordance with section 1123(b) of the
Bankruptcy Code, Reorganized Columbia shall retain and may enforce any claims,
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rights and causes of action that either Columbia or its Estate may hold
against any Person and shall retain the right to prosecute all adversary
proceedings asserting Avoidance Claims that are pending before the Bankruptcy
Court as of the Effective Date. All other Avoidance Claims will be released.
All Intercompany Claims shall be settled and released as of the Effective Date
pursuant to the Stipulation of Dismissal With Prejudice. Reorganized Columbia
and its successors and assigns may pursue such retained claims, rights or
causes of action, as appropriate, in accordance with the best interests of
Reorganized Columbia.
D. RELEASE OF LIENS
Except as otherwise provided in the Plan or in any contract,
instrument, release, indenture or other agreement or document created in
connection with the Plan, on the Effective Date, all mortgages, deeds of
trust, liens or other security interests against the property or assets of the
Estate shall be deemed discharged and satisfied, and all the right, title and
interest of any holder of any such mortgage, deed of trust, lien or other
security interest shall revert to Reorganized Columbia and its successors and
assigns.
E. COLUMBIA'S FUNDING OBLIGATIONS
Columbia and Reorganized Columbia shall be obligated, but only to the
extent expressly set forth herein, to fund all distributions required to be
made under the Plan, on the Effective Date or otherwise, and in accordance
with the provisions of the Plan, including but not limited to, (i)
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required distributions to the Holders of Claims on or after the Effective Date
and (ii) distributions in respect of those obligations expressly assumed by
Reorganized Columbia under the Plan.
F. DERIVATIVE CLAIMS
The claims alleged in the Derivative Actions are property of the
Estate under section 541 of the Bankruptcy Code. Consistent with the
determination of the Special Litigation Committee of Columbia's Board of
Directors and for good and valuable consideration, including the benefits of
the Plan and the agreement of Columbia's primary D&O Insurance carrier to
contribute its share of the Settlement Fund, and in order to facilitate the
expeditious reorganization of the Debtor: (i) on or after the Effective Date,
as soon as practicable after Columbia or Reorganized Columbia and each
defendant in the Derivative Action have executed and delivered to Columbia a
Mutual Release, the Derivative Action shall have be dismissed as to each such
defendant, with prejudice and without costs, and Columbia shall be authorized
and empowered to take whatever actions may be necessary or appropriate, and to
execute, deliver and file in all courts in which the Derivative Action is
pending, documents and instruments in order to fully implement and effectuate
the dismissal of the Derivative Action as to such defendants provided for
herein; (ii) all named plaintiffs seeking recovery in the Derivative Action
and their respective attorneys, servants, agents and representatives shall
thenceforth be permanently enjoined, stayed and restrained from pursuing or
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prosecuting the Derivative Action against any and all Persons as to whom
claims were dismissed pursuant to the preceding clause (i); (iii) the D&O
Insurance carriers shall be released from their policy obligations in respect
of the subject matters of the Class Action and the Derivative Action; (iv)
Reorganized Columbia shall enter into the Hold Harmless Agreement; and (v)
Reorganized Columbia shall enter into the Undertaking.
If the Stipulation of Settlement is not approved or is terminated,
then: (i) the Special Litigation Committee of the Columbia Board of Directors
shall determine whether the continued conduct of the Derivative Action is in
the best interests of Columbia, which determination shall be binding on the
Board; (ii) the Plan shall be amended to describe such determination and
provide for the treatment of the purported derivative claims arising from such
Derivative Action; and (iii) Columbia shall not enter into the Hold Harmless
Agreement, the Undertaking or the Mutual Release.
G. COLUMBIA OMNIBUS SETTLEMENT
Pursuant to the TCO Plan, Reorganized TCO, with the consent of
Columbia, may opt to make a portion of certain payments to Class 3.3 and Class
3.4 claimants under the TCO Plan in the form of shares of Common Stock. If
such option is elected and consented to by Columbia, Reorganized Columbia
shall authorize the issuance of and issue such shares of Common Stock as may
be necessary to fulfill Reorganized TCO's obligations arising from the
exercise of such option and make such shares of Common Stock available to
Reorganized TCO by (i) selling such shares to
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Reorganized TCO for cash, in exchange for indebtedness or partly for cash and
partly in exchange for indebtedness or (ii) as otherwise determined by
Columbia.
Columbia and Reorganized Columbia shall be bound by the provisions of
the Columbia Customer Guaranty and the Columbia Guaranty. Notwithstanding any
other provisions to the contrary, the Columbia Customer Guaranty and the
Columbia Guaranty shall survive from Confirmation of the Plan until the TCO
Plan is fully consummated.
H. LESOP CLAIMS
On the Effective Date, the LESOP shall be terminated and Reorganized
Columbia, in accordance with the terms of the LESOP Trust, shall purchase the
shares of Common Stock held by the LESOP Thrift Plan Trustee in Fund E of the
LESOP Trust for cash at a price per share equal to the Stock Value as of the
Effective Date. Such cash purchase price shall be delivered by Columbia to
the LESOP Indenture Trustee.
As part of the Confirmation of this Plan, the Bankruptcy Court shall
approve the settlement of the LESOP Action between Columbia and the LESOP
Indenture Trustee (the "LESOP Action Settlement"). Pursuant to the LESOP
Action Settlement, (i) the LESOP Indenture Trustee shall have an Allowed
Administrative Claim, in an amount not to exceed $300,000 (the "LESOP
Indenture Trustee Claim Amount"), for the LESOP Indenture Trustee's fees and
expenses payable in accordance with the LESOP Indenture, and (ii) the cash
purchase price derived from the purchase of the shares of the Common Stock, as
set forth in the preceding
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paragraph, shall be paid to the Holders of the LESOP Debentures, pro rata, on
account of: (a) unpaid principal and (b) unpaid interest, continuing to and
including the day prior to the Effective Date (including interest on overdue
principal and on overdue installments of interest), computed at the rate of
9.875% per annum provided for pursuant to the provisions of the LESOP
Indenture. Such payment shall be credited ratably, without preference or
priority of any kind, to the amounts due and payable on the LESOP Debentures
for principal and interest so calculated, respectively. In computing interest
pursuant to clause (ii) of this paragraph, the methodology (but not the
interest rate) shall be the same as the methodology set forth in paragraph
(ix) (pertaining to LESOP Claims) of Exhibit G. The remaining principal
balance of each LESOP Debenture shall be used to recompute the total amount of
interest due and owing thereon, in accordance with Exhibit G.
The sum of such remaining principal balance, and interest thereon
calculated in accordance with the methodology of and the interest rate
provided in paragraph (ix) (pertaining to LESOP Claims) of Exhibit G shall be
treated as a Claim arising from the LESOP Guaranty. Any such Claim of a
Holder of a LESOP Guaranty Claim shall be treated as a Class 3.2 Claim or, if
the principal amount of such Claim as of the Record Date (after giving effect
to the foregoing reduction) is not greater than $20,000, as a Class 3.1 Claim.
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Pursuant to the LESOP Action Settlement, the LESOP Indenture Trustee
shall waive all Claims for fees and expenses in excess of the LESOP Indenture
Trustee Claim Amount.
As of the Effective Date, in consideration of the treatment of the
Claim of the LESOP Indenture Trustee for fees and expenses and the treatment
of the Claims arising under the LESOP Debentures and the LESOP Guaranty
pursuant to the LESOP Action Settlement, and conditioned on the ultimate
treatment of such Claims in this manner, the LESOP Action shall be deemed
dismissed and the LESOP Action Claims shall be discharged, each with
prejudice.
I. CLASS ACTION SETTLEMENT
As of the Effective Date, Columbia's settlement of the Class Action
shall become effective in accordance with the terms of the Stipulation of
Settlement and Columbia shall be authorized to perform and shall perform its
obligations under the Stipulation of Settlement.
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VI. BAR DATES; PROCEDURES FOR ESTABLISHING ALLOWED CLAIMS
AND FOR RESOLVING DISPUTED CLAIMS
A. BAR DATE FOR OBJECTIONS TO NON-ADMINISTRATIVE CLAIMS
Any non-Administrative Claim which was not Filed at least thirty days
prior to the date of the hearing on the Disclosure Statement may be objected
to by Columbia, Reorganized Columbia, the Equity Committee, or the Creditors'
Committee by the later of (i) the Effective Date or (ii) sixty days after a
proof of claim with respect to such Claim has been Filed. Any such Claim that
has not been objected to on or prior to such date shall be an Allowed Claim in
the appropriate Class.
B. BAR DATES FOR CERTAIN ADMINISTRATIVE CLAIMS
1. PROFESSIONAL CLAIMS
Professionals or other Persons requesting compensation or
reimbursement of expenses pursuant to sections 330, 331 or 503(b) of the
Bankruptcy Code for services rendered before the Effective Date (including
compensation requested pursuant to section 503(b)(4) of the Bankruptcy Code by
any Professional or other Person for making a "substantial contribution" in
the Reorganization Case) shall File and serve on Reorganized Columbia, the
U.S. Trustee and the Fee Examiner an application for final allowance of
compensation and reimbursement of expenses within such time period as the
Bankruptcy Court shall fix in the Confirmation Order or in any other order,
provided, however, that any Professional or other Person that fails timely to
File an application for final allowance of compensation and reimbursement of
expenses shall be forever barred from asserting such Claims
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against Columbia or Reorganized Columbia, Columbia and Reorganized Columbia
shall be discharged from such Claims and neither Columbia nor Reorganized
Columbia shall be obligated to pay such Claims; provided further, that any
Professional that is subject to the Administrative Fee Order or other such
order of the Bankruptcy Court as of the Effective Date may continue to receive
compensation and reimbursement of expenses as provided therein for services
rendered before the Effective Date. Objections to applications of
Professionals or other Persons for compensation or reimbursement of expenses
must be Filed and served on Reorganized Columbia, the U.S. Trustee, the Fee
Examiner and the requesting party within such time period as the Bankruptcy
Court shall fix in the Confirmation Order or in any other order. Payment of
such Professional fees shall be subject to approval by the Bankruptcy Court
following a hearing. Nothing herein shall be deemed a consent of Columbia to
the payment of any post-petition interest on any such compensation or
reimbursement.
2. BAR DATE FOR ADMINISTRATIVE CLAIMS ARISING FROM REJECTION OF
EXECUTORY CONTRACTS OR UNEXPIRED LEASES
Bar dates for Administrative Claims arising from the rejection of
executory contracts or unexpired leases shall be established as set forth in
Section VII.C.
3. NON-ORDINARY COURSE ADMINISTRATIVE CLAIMS
Columbia shall file a motion seeking an order of the Bankruptcy Court
establishing sixty (60) days after the
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Confirmation Date as the bar date for the Filing of any motion seeking
allowance of an Administrative Claim excluding any:
(a) Administrative Claims of Professionals and other
entities requesting compensation or reimbursement of expenses
pursuant to sections 327, 328, 330, 331, 503(b) or 1103 of
the Bankruptcy Code for services rendered before the
Effective Date,
(b) Post-Petition Operational Claims,
(c) Assumed Executory Contract Claims,
(d) U.S. Trustee Fee Claims, and
(e) contingent indemnification Claims of officers,
directors, employees and agents of Columbia or its
subsidiaries, including TCO.
C. AUTHORITY TO PROSECUTE OBJECTIONS
Subject to any objections to applications made in accordance with this
Section VI or Section VII.C, after the Effective Date, only Reorganized
Columbia shall have the authority to File objections, and to settle,
compromise, withdraw and/or litigate to judgment objections to Claims Filed by
it, upon notice to the party that had made the Claim and subject to the
approval of the Bankruptcy Court. Reorganized Columbia shall File all such
objections to Claims by the date which is one hundred twenty days after the
Effective Date.
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VII. TREATMENT OF EXECUTORY CONTRACTS AND
UNEXPIRED LEASES; ADDITIONAL BAR DATES
A. GENERAL
Except as otherwise provided in the Plan or in any contract,
instrument, release, indenture, or other agreement or document entered into in
connection with the Plan, on the Effective Date (i) all of Columbia's
executory contracts not expressly assumed or rejected by order of the
Bankruptcy Court as of the Confirmation Date and that are listed on Exhibit E
shall be assumed or rejected or otherwise dealt with as set forth in Exhibit E
and (ii) all other executory contracts not expressly rejected shall be
assumed. For the purposes of this Plan, the Indemnity Agreements shall
constitute non-executory contracts.
B. PAYMENTS RELATED TO ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED
LEASES
Any monetary amounts by which any executory contract or unexpired
lease to be assumed pursuant to the Plan is in default will be satisfied,
pursuant to section 1123(a)(5)(G) of the Bankruptcy Code, by payment of the
defaulted amount, together with such post-petition interest as may be due with
respect thereto, in cash on the Effective Date or on such other terms as are
agreed to by Columbia and the parties to such executory contract or unexpired
lease. In the event of a dispute regarding (i) the amount of any cure
payments, (ii) the ability of Reorganized Columbia to provide "adequate
assurance of future performance" (within the meaning of section 365 of the
Bankruptcy Code) under the contract or lease to be assumed or (iii) any other
matter pertaining to assumption, the cure payments required
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by section 1123(a)(5)(G) of the Bankruptcy Code will be made following the
entry of a Final Order resolving the dispute and approving the assumption.
C. BAR DATE FOR REJECTION DAMAGES
If the rejection of an executory contract or unexpired lease pursuant
to the Plan or the Confirmation Order gives rise to an unsecured Claim or
Administrative Claim by the other party or parties to such contract or lease,
such Claim will be forever barred and will not be enforceable against
Columbia, Reorganized Columbia or its successors or assigns, or the properties
of any of them, unless, with respect to an Administrative Claim, a request for
payment, or, with respect to any other Claim, a proof of claim is Filed and
served on Reorganized Columbia within the later of (i) the time period
established by the Bankruptcy Court in its Final Order authorizing such
rejection or (ii) thirty days after the Effective Date. Objections to any
request for payment or proof of Claim shall be filed not later than sixty days
after the Effective Date.
D. EXECUTORY CONTRACTS AND UNEXPIRED LEASES ENTERED INTO AND OTHER
OBLIGATIONS INCURRED AFTER THE PETITION DATE
Executory contracts and unexpired leases entered into and other
obligations incurred by Columbia after the Petition Date (unless the
Bankruptcy Court has entered an order authorizing rejection of such contracts
or leases) shall survive and remain unaffected by the Plan or entry of the
Confirmation Order.
VIII. CONDITIONS PRECEDENT TO CONFIRMATION
AND CONSUMMATION OF THE PLAN
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A. CONDITIONS TO CONFIRMATION
The Bankruptcy Court shall not enter the Confirmation Order unless and
until each of the following conditions has been satisfied or, to the extent
permitted, duly waived by Columbia pursuant to Section VIII.C:
1. The Bankruptcy Court has entered or shall concurrently enter
an order, pursuant to section 1129 of the Bankruptcy Code, confirming the TCO
Plan.
2. The Plan shall have been approved by the SEC under the HCA
and the SEC shall also have approved all transactions contemplated by the TCO
Plan which require its approval.
3. There shall have been no material adverse change to
Columbia's business, properties, financial condition, results of operations or
business prospects between the Plan Mailing Date and the Confirmation Date.
4. No material environmental liability Claim shall have been
Filed by any Person, including, without limitation, any state or federal
environmental or regulatory agency, asserting actual or potential liability
against Columbia or against any affiliate or predecessor of Columbia for which
Columbia may be liable, other than Claims Filed pursuant to consensual
settlement agreements between Columbia and such state or federal environmental
or regulatory agency or other governmental entity.
5. TCO and Columbia shall have received a ruling from the IRS,
in form and substance satisfactory to TCO and Columbia, to the effect that
payments made by TCO under the TCO Plan that are attributable to the breach,
termination or rejection of gas
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purchase contracts are deductible in the year paid by TCO for Federal income
tax purposes.
6. The Plan shall not have been amended, modified, waived,
supplemented or withdrawn, in whole or in part, without (a) the prior consent
of Columbia, after consultation with the Creditors' Committee and the Equity
Committee, and (b) the consent of the Creditors' Committee and the Equity
Committee to the extent required by the provisions of Section XII.B.2.
7. Each of Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group shall have issued a provisional or similar rating to the effect
that each Issue of the New Indenture Securities, upon its issuance in
accordance with the Plan, shall be rated Investment Grade.
8. The District Court shall have entered or shall concurrently
enter an order and a judgment approving the settlement of and dismissing the
Class Action pursuant to the Class Action Settlement Documents and such order
shall not have been vacated, reversed or stayed.
B. CONDITIONS TO EFFECTIVE DATE
The Plan shall not be consummated and the Effective Date shall not
occur unless and until each of the following conditions has been satisfied or,
to the extent permitted, duly waived by Columbia pursuant to Section VIII.C:
1. The Confirmation Order shall not have been vacated, reversed
or stayed.
2. The Bankruptcy Court shall have confirmed the TCO Plan and
the order with respect to such confirmation shall not have
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been vacated, reversed or stayed. The TCO Plan shall have become or shall
concurrently become effective on terms consistent with the Plan and without
any amendments to which Columbia shall not have consented.
3. The order of the SEC approving, under HCA, the Plan and all
transactions contemplated by the TCO Plan which require its approval shall not
have been vacated, reversed or stayed.
4. There shall have been no material adverse change to
Columbia's business, properties, financial condition, results of operations or
business prospects between the Confirmation Date and the Effective Date.
5. Any condition to Confirmation described in Section VIII.A
that is waived by Columbia as permitted by Section VIII.C and that, at the
time of such waiver, Columbia elects to have become a condition to the
consummation of the Plan, shall have been satisfied or, if waivable, waived.
6. Reorganized Columbia shall have entered into the New
Indenture, the Working Capital Facility and the Term Loan Facility, each of
such agreements shall be in effect and the full amount of each such Facility
shall be available for borrowing by Reorganized Columbia.
7. The Stipulation of Dismissal With Prejudice shall have been
filed with and, if necessary, approved by the District Court.
8. Each of Moody's Investors Service, Inc. and Standard & Poor's
Rating Group shall have confirmed that each Issue of the New Indenture
Securities, upon its issuance in accordance with
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the Plan, shall be rated Investment Grade, and neither of those rating
agencies shall have put Columbia on "credit watch" with negative implications.
9. The Effective Date shall occur on or before June 28, 1996.
C. WAIVER OF CONDITIONS TO CONFIRMATION OR EFFECTIVE DATE
Each of the conditions set forth in Sections VIII.A and VIII.B may be
waived in whole or in part by Columbia at any time in its discretion, provided
that (i) the condition numbered 2 in Section VIII.A may be waived as a
condition to the Confirmation Date only if Columbia elects to have such
condition become a condition to the Effective Date and may not be waived as a
condition to the Effective Date, (ii) the conditions numbered 4, 5 and 8 in
Section VIII.A may be waived as conditions to the Confirmation Date only if
Columbia elects to have such conditions become conditions to the Effective
Date, (iii) the condition numbered 7 in Section VIII.A and the conditions
numbered 8 and 9 in Section VIII.B may be waived or modified by Columbia only
with the consent of the Equity Committee and the Creditors' Committee, (iv)
the condition numbered 6 in Section VIII.A, to the extent such condition
requires consultation with the Creditors' Committee and the Equity Committee,
may not be waived without consulting with the Creditors' Committee and the
Equity Committee and, to the extent such condition requires the consent of the
Creditors' Committee and the Equity Committee, may not be waived without the
consent of the Creditors' Committee and the Equity Committee, and (v) none of
the conditions set forth in Sections
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VIII.A and VIII.B may be waived without the Equity Committee and the
Creditors' Committee having been given prior notice thereof and an opportunity
to be heard. To be effective, any such waiver and consent must be in writing
and Filed and served upon each of the appropriate parties. If condition
numbered 5 in Section VIII.A has not been satisfied by December 15, 1995, then
Columbia and TCO shall, by December 31, 1995, either (a) waive such condition
to Confirmation and/or the Effective Date, as appropriate, or (b) refuse to
waive such condition, in which case, if the Initial Accepting Producer
Settlement Agreement set forth in the TCO Plan terminates, Columbia may revoke
the Plan. The failure of a condition to have been satisfied may be asserted
by Columbia regardless of the circumstances giving rise to such failure
(including any action or inaction by Columbia or TCO). Columbia's failure to
exercise any of the foregoing rights shall not be deemed a waiver of any other
rights and each such right shall be deemed an ongoing right, which may be
asserted at any time.
D. EFFECT OF NON-OCCURRENCE OF CONDITIONS TO EFFECTIVE DATE
Each of the conditions to the Effective Date set forth in the Plan
must be satisfied or duly waived by Columbia or other appropriate parties in
accordance with the Plan by June 28, 1996. If the Confirmation Order is
vacated, whether prior to or subsequent to the Effective Date, the Plan,
including the discharge of Claims pursuant to section 1141 of the Bankruptcy
Code, and the assumptions or rejections of executory contracts or unexpired
leases pursuant to Section VII.A, unless modified,
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supplemented or amended in accordance with the provisions of Chapter 11 of the
Bankruptcy Code so that the Confirmation Order is reinstated or a new
Confirmation Order is entered, shall be null and void ab initio in all
respects. In the event the Confirmation Order is so vacated, nothing
contained in the Plan shall (i) constitute a waiver or release of any Claim by
or against, or any Interests in, Columbia or TCO, (ii) prejudice in any manner
the rights of Columbia or TCO or (iii) constitute an admission against
Columbia or TCO.
E. FAILURE OF PLAN TO BECOME EFFECTIVE
In the event that any of the conditions set forth in Section VIII.B
hereof do not occur by June 28, 1996 and are not timely waived in accordance
with Section VIII.C hereof, Columbia shall have the right to withdraw the Plan
and the Plan, including the discharge of Claims and all settlements of Claims
in connection with the Plan, shall be null and void in all respects without
any further action by any party or approval by the Bankruptcy Court
or any other court and nothing contained in the Plan shall (i) constitute a
waiver or release of any Claim by or against, or any Interests in, Columbia,
(ii) prejudice in any manner the rights of Columbia or any of the Creditors or
(iii) constitute an admission against Columbia or any of the Creditors.
IX. CONFIRMABILITY AND SEVERABILITY
OF THE PLAN AND CRAMDOWN
A. CONFIRMABILITY AND SEVERABILITY OF THE PLAN
Columbia and the Plan must satisfy the confirmation requirements of
section 1129 of the Bankruptcy Code. Subject to
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Section XII.B hereof, Columbia reserves the right, in its sole discretion, to
modify, revoke, supplement or withdraw the Plan, in whole or in part. Subject
to Section XII.B hereof, a determination by the Bankruptcy Court that the Plan
is not confirmable pursuant to section 1129 of the Bankruptcy Code shall not
limit or affect Columbia's ability to modify or supplement the Plan to satisfy
the confirmation requirements of said section 1129.
B. CRAMDOWN
Columbia reserves the right to seek confirmation of the Plan under
section 1129(b) of the Bankruptcy Code if any impaired Class does not accept
the Plan pursuant to section 1126 of the Bankruptcy Code.
X. DISCHARGE, RELEASES, SETTLEMENT OF CLAIMS AND INJUNCTION
A. DISCHARGE OF CLAIMS AND TERMINATION OF INTERESTS
Except as otherwise expressly provided in the Plan or in the
Confirmation Order, the Confirmation Order operates as a discharge, pursuant
to section 1141(d) of the Bankruptcy Code, as of the Effective Date, of all
debts of, Claims against and Interests in Columbia that arose prior to the
Confirmation Date including, without limitation, any Claims for interest
accrued on Claims from the Petition Date. Without limiting the generality of
the foregoing, on the Effective Date, Columbia shall be discharged from any
debt that arose prior to the Confirmation Date and from all debts of the kind
specified in sections 502(g), 502(h) or 502(i) of the Bankruptcy Code, whether
or not (i) a
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proof of Claim based on such debt was Filed pursuant to section 501 of the
Bankruptcy Code, (ii) a Claim based on such debt is an Allowed Claim pursuant
to section 502 of the Bankruptcy Code or (iii) the Holder of a Claim based on
such debt has voted to accept the Plan.
As of the Confirmation Date, except as otherwise specifically provided
in the Plan or Confirmation Order, all Persons shall be precluded from
asserting against Columbia, Reorganized Columbia, or their respective
successors or assigns, or the properties of any of them, any other or further
Claims, debts, rights, causes of action, liabilities or equity interests based
upon any act, omission, transaction or other activity of any kind or nature
that occurred prior to the Confirmation Date. In accordance with the
foregoing, except as specifically provided in the Plan or Confirmation Order,
the Confirmation Order shall be a judicial determination of discharge of all
such Claims and other debts and liabilities against Columbia, pursuant to
sections 524 and 1141 of the Bankruptcy Code, and such discharge shall void
any judgment obtained against Columbia at any time, to the extent that such
judgment relates to a discharged Claim.
Nothing contained in the Plan or the Confirmation Order shall be
construed as discharging, releasing or relieving Columbia, Reorganized
Columbia, or any other party, in any capacity, from any liability with respect
to the Retirement Plan to which such party is subject under any law or
regulatory provision. Notwithstanding the foregoing, nothing contained in the
Plan shall preclude Reorganized Columbia from exercising its
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right to amend, modify, or terminate the Retirement Plan following the
Effective Date in accordance with then existing provisions of applicable law.
Except as otherwise provided, Columbia's obligations incurred pursuant
to the Columbia Omnibus Settlement shall survive the entry of the Confirmation
Order and shall remain extant until the entry of a final decree by the
Bankruptcy Court concluding the Reorganization Case.
B. INJUNCTION
As of the Confirmation Date, except as provided in the Plan or the
Confirmation Order, all Persons that have held, currently hold or may hold a
Claim or other debt or liability that is discharged pursuant to the terms of
the Plan are permanently enjoined from taking any of the following actions on
account of any such discharged Claims, debts or liabilities, other than
actions brought to enforce any rights or obligations under the Plan: (i)
commencing or continuing in any manner any action or other proceeding against
Columbia, Reorganized Columbia or their respective properties; (ii) enforcing,
attaching, collecting or recovering in any manner any judgment, award, decree
or order against Columbia, Reorganized Columbia or their respective
properties; (iii) creating, perfecting or enforcing any lien or encumbrance
against Columbia, Reorganized Columbia or their respective properties; (iv)
asserting a setoff, right of subrogation or recoupment of any kind against any
debt, liability or obligation due to Columbia, Reorganized Columbia or their
respective properties; and (v) commencing or continuing, in any
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manner or in any place, any action that does not comply with or is
inconsistent with the provisions of the Plan or the Confirmation Order.
As noted in Section X.A, nothing in the Plan or the Confirmation Order
shall be construed as discharging, releasing or relieving Columbia,
Reorganized Columbia or any other party, in any capacity, from any liability
with respect to the Retirement Plan to which such party is subject under any
law or regulatory provision. Accordingly, nothing contained in the Plan or
the Confirmation Order shall be construed as enjoining the PBGC or the
Retirement Plan from enforcing any liability with respect to the Retirement
Plan to which such party is subject under any law or regulatory provision as a
result of the Plan's or the Confirmation Order's provisions concerning the
discharge, release and settlement of Claims. Notwithstanding the foregoing,
nothing contained in the Plan shall preclude Reorganized Columbia from
exercising its right to amend, modify or terminate the Retirement Plan in
accordance with applicable law.
C. LIMITATION OF LIABILITY
Columbia, Reorganized Columbia, their affiliates and their respective
directors, officers, employees, agents, representatives and Professionals
(acting in such capacity), and the Creditors' Committee, the Equity Committee
and their respective members, their agents and Professionals (acting in such
capacity), and their respective heirs, executors, administrators, successors
and assigns and the Equity Committee's invitees (including their
professionals), shall neither have nor
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incur any liability to any Person for any act taken or omitted to be taken in
good faith in connection with or related to the formulation, preparation,
dissemination, implementation, confirmation or consummation of the Plan, the
Disclosure Statement or any contract, instrument, release or other agreement
or document created or entered into, or the offer, issuance, sale or purchase
of securities to be issued under the Plan, or any other act taken or omitted
to be taken in connection with the Plan or the Reorganization Case, provided,
however, that the foregoing provisions of this Section X.C shall have no
effect on the liability of any Person that would otherwise result from any
such act or omission to the extent that such act or omission is determined in
a Final Order to have constituted gross negligence or willful misconduct, and,
provided further, that the foregoing provisions of this Section X.C shall not
limit the liability of any Person for any violation of securities laws except
to the extent that such Person (x) would not be liable for such violation
under section 1125(e) of the Bankruptcy Code or (y) would be exempt from any
compliance with such laws pursuant to section 1145 of the Bankruptcy Code.
D. RELEASES
On the Effective Date, Columbia and Reorganized Columbia and all
Holders of Claims will release unconditionally and are hereby deemed to
release unconditionally (a) each of Columbia's and Reorganized Columbia's
officers, directors, shareholders, employees, consultants, financial advisors,
attorneys, accountants and other representatives, each of their respective
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successors, executors, administrators, heirs and assigns, (b) the Creditors'
Committee and, solely in their capacity as members or representatives of the
Creditors' Committee, each member, consultant, financial advisor, attorney,
accountant or other representative of the Creditors' Committee, and each of
their respective successors, executors, administrators, heirs and assigns, (c)
the Equity Committee and, solely in their capacity as members, invitees or
representatives of the Equity Committee, each member, invitee (including its
professionals), consultant, financial advisor, attorney, accountant or other
representative of the Equity Committee, and each of their respective
successors, executors, administrators, heirs and assigns, (d) the Official
Committee of Unsecured Creditors and the Official Committee of Customers of
TCO appointed in the TCO Proceeding (collectively, the "TCO Committees") and,
solely in their capacity as members or representatives of the TCO Committees,
each member, consultant, financial advisor, attorney, accountant or other
representative of the TCO Committees, each of their respective successors,
executors, administrators, heirs, and assigns and (e) TCO, Reorganized TCO,
CNR and each of their respective officers, directors, shareholders,
consultants, financial advisors, attorneys, accountants or other
representatives, and each of their respective successors, executors,
administrators, heirs and assigns (the entities referred to in clauses (a),
(b), (c), (d) and (e) are collectively referred to as the "Releasees"), from
any and all claims, obligations, suits, judgments, damages, rights, causes of
action or liabilities whatsoever, whether known
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or unknown, foreseen or unforeseen, existing or hereafter arising, in law,
equity or otherwise, based in whole or in part upon any act or omission,
transaction, event or other occurrence taking place on or prior to the
Effective Date in any way relating to the Releasees, Columbia, TCO, the TCO
Proceeding, the Reorganization Case, the TCO Plan or the Plan, including,
without limitation, the Intercompany Claims and all claims arising from or
related to the transactions which are the subject of the Intercompany Claims
as set forth in Section X.E (provided, however, that the release of such
Intercompany Claims shall not be effective unless and until the Stipulation of
Dismissal with Prejudice becomes effective pursuant to its terms) and the
Confirmation Order will enjoin the prosecution by any Person, whether
directly, derivatively or otherwise, of any claim, debt, right, cause of
action or liability which was or could have been asserted against the
Releasees, except as otherwise provided herein, provided, however, that, such
releases shall not be effective as to (i) any claim for professional fees
sought by any of the Releasees until such claim has been paid, satisfied or
otherwise disposed of, (ii) any claim arising in the normal course of business
after the Petition Date between Columbia's Creditors or Columbia and TCO until
such claim has been paid, satisfied or otherwise disposed of, and (iii) any
Securities Action Claim until such Claim has been paid, satisfied or otherwise
disposed of in accordance with the Stipulation of Settlement and this Plan.
Nothing in the foregoing release shall preclude any Holder of an Opt-out
Securities Claim from pursuing
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any rights it may have in respect of the subject matter of the Class Action
against the defendants in the Class Action, other than Columbia, in the
federal courts.
As noted in Section X.A, nothing in the Plan or the Confirmation Order
shall be construed as discharging, releasing or relieving Columbia,
Reorganized Columbia or any other party, in any capacity, from any liability
with respect to the Retirement Plan to which such party is subject under any
law or regulatory provision. Notwithstanding the foregoing, nothing contained
in the Plan shall preclude Reorganized Columbia from exercising its right to
amend, modify or terminate the Retirement Plan in accordance with applicable
law.
E. INTERCOMPANY CLAIMS
As part of the Columbia Omnibus Settlement, which is incorporated
herein, the Intercompany Claims Litigation is being settled upon confirmation
of the TCO Plan. A vote to accept the Plan shall constitute consent to the
settlement of the Intercompany Claims Litigation. On or prior to the
Effective Date, as set forth in Section IV.A and Section VIII.B, the
Stipulation of Dismissal With Prejudice shall have been Filed with and, if
necessary, approved by the District Court. As of the Effective Date, except
for the prosecution of the Motion to Unseal Judicial Records, filed with the
District Court by the customer's committee appointed in the TCO Proceeding,
the Intercompany Claims and all claims arising from or related to the
transactions which are the subject of the Intercompany Claims
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shall be settled and released in their entirety in accordance with Section X.D
and the provisions of the TCO Plan.
XI. RETENTION OF JURISDICTION
Notwithstanding the entry of the Confirmation Order and the occurrence
of the Effective Date, the Bankruptcy Court shall retain such jurisdiction
over the Reorganization Case after the Effective Date as is legally
permissible, including jurisdiction to:
1. Allow, disallow, determine, liquidate, classify, estimate, or
establish the priority or secured or unsecured status of, any Claim, including
the resolution of any request for payment of any Administrative Claim, the
resolution of any disputes concerning any Disbursing Agent Agreement and the
resolution of any and all objections to the allowance or priority of Claims
(including the Opt-out Securities Claims) and of post-petition interest on
such Claims (including any Administrative Claim and any Priority Tax Claim);
2. Grant or deny any application for allowance of compensation
or reimbursement of expenses authorized pursuant to the Bankruptcy Code or the
Plan, for periods ending on or before the Effective Date;
3. Resolve any matters related to the assumption or rejection of
any executory contract or unexpired lease to which Columbia is a party or with
respect to which Columbia may be liable and to hear, determine and, if
necessary, Allow any Claim arising therefrom;
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4. Resolve any determinations which may be requested by Columbia
or Reorganized Columbia of unpaid or potential tax liability or any matters
relating thereto under sections 505 and 1146(d) of the Bankruptcy Code,
including tax liability or such related matters for any taxable year or
portion thereof ending on or before the Effective Date;
5. Resolve any issues relating to distributions to Holders of
Allowed Claims pursuant to the provisions of the Plan, including the
redemption or resetting of rates and other matters with respect to the DECS
and the New Preferred Stock and assertion of set-off rights by or against
Columbia;
6. Decide or resolve any motions, adversary proceedings,
contested or litigated matters and any other matters and grant or deny any
applications that may be pending on or commenced after the Effective Date,
that arise in or relate to the Reorganization Case or the Plan, including, any
determination concerning the Allowed amount, if any, of the Opt-out Securities
Claims;
7. Enter such orders as may be necessary or appropriate to
implement or consummate the provisions of the Plan and all contracts,
instruments, releases, indentures and other agreements or documents created in
connection with or referred to in the Plan or the Disclosure Statement;
8. Resolve any cases, controversies, suits or disputes that may
arise in connection with the consummation, interpretation or enforcement of
the Plan or any Person's obligations under or in connection with the Plan,
including determinations relating to the enforceability of the Columbia
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Customer Guaranty and the Columbia Guaranty and any disputes regarding
compensation for those post-Effective Date services referenced in Section
XII.A, except that such retention of jurisdiction shall not apply to any
cases, controversies, suits or disputes that may arise in connection with FERC
regulatory matters;
9. Modify the Plan before, on or after the Effective Date
pursuant to section 1127 of the Bankruptcy Code or modify the Disclosure
Statement or any contract, instrument, release, indenture or other agreement
or document created in connection with the Plan or the Disclosure Statement,
or remedy any defect or omission or reconcile any inconsistency in any
Bankruptcy Court order, the Plan, the Disclosure Statement or any contract,
instrument, release, indenture or other agreement or document created in
connection with the Plan or the Disclosure Statement, in such manner as may be
necessary or appropriate to consummate the Plan, to the extent authorized by
the Bankruptcy Code;
10. Issue injunctions, enter and implement other orders or take
such other actions as may be necessary or appropriate to restrain interference
by any Person with consummation or enforcement of the Plan;
11. Enter and implement such orders as are necessary or
appropriate if the Confirmation Order is for any reason modified, stayed,
reversed, revoked or vacated and as may be necessary or appropriate between
the Confirmation Date and the Effective Date;
12. Determine any other matters that may arise in connection with
or relate to the Plan, the Disclosure Statement,
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the Confirmation Order, any Claim or any contract, instrument, release,
indenture or other agreement or document created in connection with the Plan
or the Disclosure Statement, except as otherwise provided herein;
13. Resolve any disputes or any other matters relating to the
Securities Action Claims; and
14. Enter a final decree closing the Reorganization Case.
XII. MISCELLANEOUS PROVISIONS
A. DISSOLUTION OF THE CREDITORS' COMMITTEE AND THE EQUITY COMMITTEE
The Creditors' Committee and the Equity Committee may continue in
existence until the Effective Date for the principal purposes of participating
in the reconciliation and resolution of Disputed Claims and in overseeing the
implementation of the Plan, provided, however, that the Creditors' Committee
may continue in existence after the Effective Date, and the Professionals
retained by the Creditors' Committee may continue to be employed after the
Effective Date, to represent the Creditors' interests solely with respect to
any redemption of the New Preferred Stock or the DECS or the resetting of the
dividend rates of the New Preferred Stock and the DECS and the establishment
of certain terms of the DECS, and shall be dissolved immediately following the
conclusion of those events. The Creditors' Committee may, after the Effective
Date, in its discretion dissolve upon notice to Reorganized Columbia.
The members of and the Professionals retained by the Creditors'
Committee shall not be entitled to compensation or
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reimbursement of expenses for any services rendered after the Effective Date,
except for services performed by the Creditors' Committee and the
Professionals retained by the Creditors' Committee after the Effective Date as
described in the preceding paragraph.
The members of and the Professionals retained by each of the
Creditors' Committee and the Equity Committee are entitled to seek
compensation or reimbursement of expenses for services rendered and expenses
incurred in connection with any applications for allowance of compensation and
reimbursement of expenses pending on the Effective date or Filed and served
after the Effective Date pursuant to Section VI.B.1.
The members of and the Professionals retained by each of the
Creditors' Committee and the Equity Committee must, in order to receive
compensation and reimbursement of expenses incurred with respect to services
permitted after the Effective Date in accordance with this Section XII.A,
submit monthly bills to Reorganized Columbia for such services and Reorganized
Columbia shall pay all reasonable costs and expenses of the members of and the
Professionals retained by each of the Creditors' Committee and the Equity
Committee. Any dispute regarding compensation for such post-Effective Date
services shall be determined by the Bankruptcy Court.
On the Effective Date, or such later date as provided herein, the
Creditors' Committee and Equity Committee shall dissolve and the members of
those Committees, together with the invitees of the Equity Committee, as such,
shall be released and
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discharged from all rights and duties arising from or related to the
Reorganization Case. Except as otherwise provided herein, the Professionals
retained by the Creditors' Committee and Equity Committee and the members
thereof shall not be entitled to compensation or reimbursement of expenses for
any services rendered after the Effective Date.
B. MODIFICATION OF THE PLAN
1. GENERAL
Subject to the restrictions on modifications set forth in section 1127
of the Bankruptcy Code and the restrictions set forth in the Plan, Columbia
reserves the right to alter, amend, supplement or modify the Plan before its
substantial consummation.
2. AMENDMENTS OF CERTAIN PROVISIONS
Columbia shall not amend, without the prior consent of each of the
Creditors' Committee and the Equity Committee: (i) the Pricing Formulae, (ii)
the conditions to the Confirmation Date and Effective Date set forth in
Sections VIII.A and VIII.B, respectively, and (iii) the treatment proposed in
the Plan for Holders of Class 3.1 and Class 3.2.
C. REVOCATION OF THE PLAN
Columbia reserves the right to revoke or withdraw the Plan prior to
the Confirmation Date. If Columbia revokes or withdraws the Plan, or if
Confirmation does not occur, then the Plan shall be null and void ab initio in
all respects, and nothing contained in the Plan shall: (i) constitute a
waiver or release of any claims by or against, or any interests in, Columbia
or TCO, (ii)
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prejudice in any manner the rights of Columbia or TCO or (iii) constitute an
admission against Columbia or TCO.
D. SEVERABILITY OF PLAN PROVISIONS
If any term or provision of the Plan is held by the Bankruptcy Court
prior to or at the time of Confirmation to be invalid, void or unenforceable,
the Bankruptcy Court shall have the power to alter and interpret such term or
provision to make it valid or enforceable to the maximum extent practicable,
consistent with the original purpose of the term or provision held to be
invalid, void or unenforceable, and such term or provision shall then be
applicable as so altered or interpreted. In the event of any such holding,
alteration, or interpretation, the remainder of the terms and provisions of
the Plan may, at Columbia's option, remain in full force and effect and not be
deemed affected, impaired or invalidated by such holding, alteration or
interpretation. However, Columbia reserves the right not to proceed to
Confirmation or consummation of the Plan if any such ruling occurs. The
Confirmation Order shall constitute a judicial determination and shall provide
that each term and provision of the Plan, as it may have been altered or
interpreted in accordance with the foregoing, is valid and enforceable
pursuant to its terms.
E. SUCCESSORS AND ASSIGNS
The rights, benefits and obligations of any Person named or referred
to in the Plan shall be binding on, and shall inure to the benefit of, any
heir, executor, administrator, successor or assign of such Person. From and
after the Voting Deadline, any
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heir, executor, administrator, successor or assign of any Creditor that has
voted to accept the Plan shall be bound by the Plan and the treatment of such
Creditor hereunder.
F. SERVICE OF DOCUMENTS ON COLUMBIA OR REORGANIZED COLUMBIA
Any pleading, notice or other document required by the Plan to be
served on or delivered to Columbia or Reorganized Columbia shall be sent by
first class U.S. mail, postage prepaid to:
The Columbia Gas System, Inc.
20 Montchanin Road
Wilmington, Delaware 19807-0020
Attention: Tejinder S. Bindra
Edmond M. Ianni
with copies to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004-2696
Attention: Lewis Kruger
Robin E. Keller
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019-7475
Attention: John E. Beerbower
Gregory M. Shaw
Young, Conaway, Stargatt & Taylor
11th Floor - Rodney Square North
P.O. Box 391
Wilmington, Delaware 19899-0391
Attention: James L. Patton, Jr.
G. PAYMENT AND WITHHOLDING OF TAXES
Except as otherwise specifically provided in the Plan, all
distributions made pursuant to the Plan shall, where applicable, be subject to
information reporting to appropriate governmental authorities and to
withholding of taxes.
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CONFIRMATION REQUEST
Columbia hereby requests Confirmation of the Plan pursuant to Section
1129(a) or Section 1129(b) of the Bankruptcy Code (in the event the Plan is
not accepted by each of those Classes of Claims and Interests entitled to
vote).
Dated: July 27, 1995
Respectfully submitted,
THE COLUMBIA GAS SYSTEM, INC.
By: /s/ Oliver G. Richard III
----------------------------
Oliver G. Richard III
Chairman and Chief Executive
Officer
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
_________________________________x
In re: : Chapter 11
:
The Columbia Gas System, Inc. : Case No. 91-803 (HSB)
:
Debtor. :
_________________________________x
DISCLOSURE STATEMENT PURSUANT TO SECTION 1125 OF
THE BANKRUPTCY CODE FOR THE THIRD AMENDED PLAN
OF REORGANIZATION OF THE COLUMBIA GAS SYSTEM, INC.
DATED JULY 27, 1995
--------------------------------------------------
Respectfully Submitted,
STROOCK & STROOCK & LAVAN
Lewis Kruger
Robin E. Keller
Seven Hanover Square
New York, New York 10004-2594
(212) 806-5400
CRAVATH, SWAINE & MOORE
John F. Hunt
John E. Beerbower
825 Eighth Avenue
New York, New York 10019-7475
(212) 474-1000
YOUNG, CONAWAY, STARGATT & TAYLOR
James L. Patton, Jr.
11th Floor - Rodney Square North
P.O. Box 391
Wilmington, Delaware 19899-0381
(302) 571-6600
Co-Counsel for The Columbia Gas
System, Inc.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED BY THE BANKRUPTCY COURT FOR
CIRCULATION TO CREDITORS OR FOR USE IN THE SOLICITATION OF VOTES ON THE THIRD
AMENDED PLAN OF REORGANIZATION OF THE COLUMBIA GAS SYSTEM, INC.
112
TABLE OF CONTENTS
PAGE
----
I. SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
B. Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1. The Debtors and their Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2. The Problems that Led to the Chapter 11 Petitions . . . . . . . . . . . . . . . . . . . . . 11
3. The Debtors' Business Operations, Financial Performance and Prospects . . . . . . . . . . . 12
a. Columbia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
b. TCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4. Obstacles to Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5. The Cornerstone of the Columbia and TCO Plans: The Columbia Omnibus Settlement . . . . . . 21
6. Proposed Resolution or Treatment of Other Major Controversies in Columbia's
Chapter 11 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
a. Intercompany Claims Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 23
b. Post-Petition Interest and Related Claims by
Unsecured Columbia Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
c. Securityholder Lawsuits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
d. Assumption of Certain Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7. Amendment to the Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . 29
C. Distributions Under The Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
D. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
E. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
II. OVERVIEW OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. Reorganized Columbia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
B. Summary of Description of Classes and Distributions . . . . . . . . . . . . . . . . . . . . . . . . 1
C. TABLE OF SUMMARY DESCRIPTION OF CLASSES AND THEIR DISTRIBUTIONS . . . . . . . . . . . . . . . . . . 4
1. Unclassified Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. Secured Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3. Unsecured Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4. Securities Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5. Intercompany Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6. Assumed Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7. Opt-out Securities Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8. Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
D. PAYOUT ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
113
III. BUSINESSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. Columbia's Historic Corporate Structure and Operation . . . . . . . . . . . . . . . . . . . . . . . 1
1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Columbia Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
a. Exploration and Production (E&P) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
b. Interstate Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
c. Local Distribution Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
d. Columbia Gas System Service Corporation . . . . . . . . . . . . . . . . . . . . . . . . 4
e. Other Energy Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
B. Public Utility Holding Company Act Regulation and System Financing; SEC Approval Of The Plan . . . . 6
1. Regulation of Columbia by the SEC Under the HCA; External and Internal Columbia Financing . 6
a. Regulatory Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
b. System External and Internal Financing . . . . . . . . . . . . . . . . . . . . . . . . 7
2. HCA Jurisdiction Over the Terms of the Plan . . . . . . . . . . . . . . . . . . . . . . . . 9
IV. SUMMARY OF SIGNIFICANT CLAIMS IN COLUMBIA'S CHAPTER 11 CASE AND THEIR SETTLEMENTS OR PROPOSED RESOLUTIONS . 1
A. Borrowed Money Claims and the Negotiations and Settlement of Such Claims . . . . . . . . . . . . . . 1
B. The Intercompany Claims Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1. Stipulation and Order Concerning Prosecution of the Intercompany Claims . . . . . . . . . . 4
2. Intercompany Claims Litigation Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 5
a. Allegations of Equitable Subordination . . . . . . . . . . . . . . . . . . . . . . 5
b. Allegations Seeking Recharacterization of Debt as Equity . . . . . . . . . . . . . 6
c. Allegations of Fraudulent Conveyances . . . . . . . . . . . . . . . . . . . . . . . 6
d. Allegations of Voidable Reduction in Capital . . . . . . . . . . . . . . . . . . . 7
e. Allegations of Preference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3. Response of Columbia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4. Pre-Trial Intercompany Claims Litigation
Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. The Intercompany Claims Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6. Summary of the TCO Creditors' Committee Position . . . . . . . . . . . . . . . . . . . . . 12
7. Summary of Columbia's Analysis of the Intercompany Claims . . . . . . . . . . . . . . . . . 15
8. Settlement of the Intercompany Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
C. The IRS Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1. The IRS Pre-Petition Claims and Settlement . . . . . . . . . . . . . . . . . . . . . . . . 18
2. The IRS Administrative Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
D. Status and Treatment of Securities
Claims and Derivative Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1. Procedural History of The Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2. Summary of Class Action Allegations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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3. Summary of Relevant Public Disclosures by Defendants . . . . . . . . . . . . . . . . . . . 31
4. Trends in Columbia's Stock Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5. The June 19, 1991, Announcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6. Proposed Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7. Derivative Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
E. The Columbia Omnibus Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
F. Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
V. DESCRIPTION OF THE COLUMBIA CHAPTER 11 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
B. Commencement of the Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1. First Day Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Columbia's Retention of Professionals . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
C. Debtor in Possession Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
D. Formation of Committees/Retention of Professionals . . . . . . . . . . . . . . . . . . . . . . . . . 4
E. Meetings with the Equity and Creditors'
Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
F. Administrative Fee Order/Appointment of Fee
Examiner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
G. Significant Proceedings in the Chapter 11 Case
and Status of Related Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1. Cash Collateral Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2. Sale of Columbia Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. Investment Guidelines Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4. Approval of Tax Allocation Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5. LESOP Claims and LESOP Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
a. Columbia's Thrift Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
b. Columbia's Amendment to the Thrift Plan . . . . . . . . . . . . . . . . . . . . . . 19
c. Procedural History of LESOP Action . . . . . . . . . . . . . . . . . . . . . . . . 23
d. Proposed Disposition of LESOP Action Claims . . . . . . . . . . . . . . . . . . . . 24
6. Agreement With Banks Regarding Funds Subject
to Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7. Extension of Exclusive Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8. Extension of Time to Remove Actions and File
Proofs of Claim on Behalf of Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9. Surety Bond Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10. Recapitalization of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11. Amendment of Employment Agreements With
Senior Officers and Assumption of
Retention Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12. Employee Retention and Release Program . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13. Data Room . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
14. Loan to Columbia's Thrift Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
15. Columbia's Long-Term Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
16. Shareholder Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
H. Procedures Relating to Filing and Determination
of Claims Process and Bar Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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1. Bar Date/Claims Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2. Claims Objection Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3. Claims Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
I. Miscellaneous Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
1. Mountaineer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2. Kuntz Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
VI. PLAN TREATMENT OF CLAIMS AND SUMMARY OF OTHER PLAN PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 1
A. Classification and Treatment of Claims and Interests . . . . . . . . . . . . . . . . . . . . . . . . 1
1. Unclassified Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
a. Administrative Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(i) Professional Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(ii) Post-Petition Operational Claims . . . . . . . . . . . . . . . . . . . . . 3
(iii) Assumed Executory Contract Claims . . . . . . . . . . . . . . . . . . . . 3
(iv) U.S. Trustee's Fee Claims . . . . . . . . . . . . . . . . . . . . . . . . 5
(v) Miscellaneous Administrative Claims . . . . . . . . . . . . . . . . . . . 6
b. Priority Tax Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2. Classes of Claims and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
a. Class 1 - DIP Facility Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
b. Class 2 - Non-Borrowed Money Claims . . . . . . . . . . . . . . . . . . . . . . . . 11
c. Class 3.1 Claims - Borrowed Money Convenience Claims . . . . . . . . . . . . . . . 12
d. Class 3.2 - Borrowed Money Claims . . . . . . . . . . . . . . . . . . . . . . . . . 13
e. Class 4 - Securities Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
f. Class 5 Claims - Intercompany Claims . . . . . . . . . . . . . . . . . . . . . . . 21
g. Class 6 - Assumed Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(i) Class 6.1 - Indemnity Claims . . . . . . . . . . . . . . . . . . . . . . . . . 22
(ii) Class 6.2 - Pension Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(iii) Class 6.3 - Shawmut Guaranty Claim . . . . . . . . . . . . . . . . . . . . . 23
h. Class 7 - Opt-out Securities Claims . . . . . . . . . . . . . . . . . . . . . . . . 24
i. Class 8 - Interests in Common Stock . . . . . . . . . . . . . . . . . . . . . . . 25
B. Transactions On the Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
C. New Indenture and New Indenture Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
D. New Preferred Stock and DECS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
E. Reorganized Columbia or Third Party as Disbursing Agent For Claims . . . . . . . . . . . . . . . . . 28
F. Delivery of Distributions; Unclaimed Distributions . . . . . . . . . . . . . . . . . . . . . . . . . 28
1. Delivery of Distributions on Unclassified Claims and Claims in Classes 1, 2 and 6 . . . . 28
2. Delivery of Distributions to Holders of Classes 3.1 and 3.2 Claims . . . . . . . . . . . . 29
a. Ledger Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
b. Surrender of Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
c. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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d. Distributions of Cash, New Indenture Securities, New Preferred Stock and DECS . . . 31
e. Cash in Lieu of Fractional Shares; Rounding of New Indenture Securities . . . . . . 32
f. Securities Action Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3. Unclaimed Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4. Means of Cash Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5. Setoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6. Continuation of Certain Retirement, Workers' Compensation and Long-Term Disability
Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
G. Continued Corporate Existence and Vesting of Assets in Reorganized Columbia . . . . . . . . . . . . 38
H. Corporate Governance, Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
1. Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2. Directors and Officers of Reorganized Columbia . . . . . . . . . . . . . . . . . . . . . . 40
3. Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4. LESOP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5. Waivers, Releases and Abandonment of Claims . . . . . . . . . . . . . . . . . . . . . . . . 42
I. Bar Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
1. Bar Date for Objections to Non-Administrative Claims . . . . . . . . . . . . . . . . . . . 44
2. Bar Dates for Professional Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3. Non-Ordinary Course Administrative Claims . . . . . . . . . . . . . . . . . . . . . . . . . 45
J. Rejection of Executory Contracts and Unexpired Leases; Additional Bar Dates . . . . . . . . . . . . 45
1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2. Tax Allocation Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3. Bar Date for Rejection Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4. Executory Contracts and Unexpired Leases Entered Into and Other Obligations Incurred
After the Petition Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
K. Conditions Precedent to Confirmation and Consummation of the Plan . . . . . . . . . . . . . . . . . 47
1. Conditions to Confirmation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
2. Conditions to Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3. Waiver of Conditions to Confirmation or Effective Date . . . . . . . . . . . . . . . . . . 50
4. Effect of Non-Occurrence of Conditions to Effective Date . . . . . . . . . . . . . . . . . 52
5. Working Capital Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6. Term Loan Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
L. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
1. Dissolution of Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
2. Discharge, Termination and Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
3. Jurisdiction of the Bankruptcy Court . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5. Modification of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
6. Revocation of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7. Severability of Plan Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8. Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
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9. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
VII. RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. Conditional Nature of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
B. Lack of Established Market for the New Indenture Securities, DECS and New Preferred Stock;
Volatility and Other Risks Affecting Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
C. Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
D. Business Factors and Competitive Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
E. Liabilities Assumed by Columbia and the Uncertainties Associated with the Opt-Out Securities
Claimants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
F. Uncertainties Associated with the TCO Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
G. Approval of Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
H. Environmental Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
I. Redemption of the DECS and New Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
J. Holding Company Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
VIII.FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. Tax Consequences to Columbia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Discharge of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Deductibility of Plan Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
B. Tax Consequences To Holders of Claims and Interests . . . . . . . . . . . . . . . . . . . . . . . . 3
1. Trade Creditors and Others Receiving only Cash . . . . . . . . . . . . . . . . . . . . . . 3
2. Creditors Whose Claims Are Assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Holders of Class 3.2 Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
a. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
b. Tax Consequences of the Exchange . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Holders of Class 4 and Class 7 Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5. Certain Other Tax Considerations for Holders of Claims . . . . . . . . . . . . . . . . . . 10
a. Receipt of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
b. Accrued Market Discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
c. Original Issue Discount ("OID") . . . . . . . . . . . . . . . . . . . . . . . . . . 12
d. Future Stock Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
e. Future Sales of New Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
f. Defeasance of New Indenture Securities . . . . . . . . . . . . . . . . . . . . . . 16
g. Tax Treatment of DECS (and New Preferred Stock, where noted) . . . . . . . . . . . 16
h. Disposition of New Preferred Stock and DECS Pursuant to Redemption Option. . . . . 20
i. Backup Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6. Holders of Class 8 Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7. Proposed Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8. Importance of Obtaining Professional Tax Assistance . . . . . . . . . . . . . . . . . . . . 22
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IX. VOTING PROCEDURES AND CONFIRMATION REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. Confirmation Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
B. Confirmation Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. Best Interests Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. Feasibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. The Plan Must Comply with the Applicable Provisions of the Bankruptcy Code . . . . . . . . 7
a. Classification of Claims and Interests . . . . . . . . . . . . . . . . . . . . . . 7
b. Mandatory and Optional Plan Provisions . . . . . . . . . . . . . . . . . . . . . . 12
c. Post-Petition Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
d. Compromise of Intercompany Claims . . . . . . . . . . . . . . . . . . . . . . . . . 16
5. Columbia Must Comply with the Applicable Provisions of the Bankruptcy Code . . . . . . . . 18
6. Alternatives to the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
a. Cramdown Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
b. Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
C. Voting Procedures and Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1. Voting Requirements - Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
X. REORGANIZED COLUMBIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. Business of Columbia Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
B. Financial Projections; Recapitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Principal Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
a. Columbia and TCO Plan Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . 6
b. Financing Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
c. Business, Regulatory and General Economic Assumptions . . . . . . . . . . . . . . . 9
d. Tax Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3. Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
C. Best Interests Test Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
D. Pricing of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
E. Securities To Be Issued Pursuant To The Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2. Indenture Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3. Equity DECS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4. Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5. New Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6. Applicability of Federal and Other Securities . . . . . . . . . . . . . . . . . . . . . . . 41
a. Issuance of Securities Under the Plan . . . . . . . . . . . . . . . . . . . . . . . 41
b. Transfers of New Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
c. Certain Transactions by Stockbrokers . . . . . . . . . . . . . . . . . . . . . . . 44
7. HCA Provisions Applicable to Securities To Be Issued Pursuant to the Plan . . . . . . . . . 44
8. Future Stock Issuances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
F. Other Post-Reorganization Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
1. Term Loan Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
2. Working Capital Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3. Other Credit Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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G. Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
1. Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
2. Officers of Columbia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
a. Overview of Columbia's Senior Management . . . . . . . . . . . . . . . . . . . . . 53
b. Changes in Senior Management of Columbia . . . . . . . . . . . . . . . . . . . . . 57
H. Amendment to Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
XI. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
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I. SUMMARY
THE MANAGEMENT OF COLUMBIA BELIEVES THAT THE PLAN IS IN THE BEST
INTERESTS OF CREDITORS AND INTEREST HOLDERS AND URGES ALL CREDITORS AND
INTEREST HOLDERS TO VOTE IN FAVOR OF THE PLAN.
THE EQUITY COMMITTEE SUPPORTS CONFIRMATION OF THE PLAN AND URGES THE
HOLDERS OF CLAIMS AND INTERESTS IN IMPAIRED CLASSES TO ACCEPT THE PLAN.
VOTING INSTRUCTIONS ARE CONTAINED ON YOUR BALLOT AND ARE SET FORTH AT
PAGES IX-22 - IX-25 OF THIS DISCLOSURE STATEMENT. TO BE COUNTED, YOUR BALLOT
MUST BE DULY COMPLETED, EXECUTED AND ACTUALLY RECEIVED NO LATER THAN 5:00 P.M.,
PACIFIC STANDARD TIME, ON , 1995.
CREDITORS AND INTEREST HOLDERS ARE ENCOURAGED TO READ AND CONSIDER
CAREFULLY THIS ENTIRE DISCLOSURE STATEMENT, INCLUDING THE PLAN OF
REORGANIZATION ATTACHED HERETO AS EXHIBIT 1 AND THE MATTERS DESCRIBED IN THIS
DISCLOSURE STATEMENT IN SECTION VII "RISK FACTORS," PRIOR TO VOTING.
A. INTRODUCTION
On the Petition Date,(1) Columbia and TCO, one of Columbia's
wholly-owned subsidiaries, each Filed a voluntary petition for reorganization
under Chapter 11 of the Bankruptcy Code. On January 18, 1994, TCO Filed, with
Columbia as co-sponsor, a plan of reorganization and accompanying Disclosure
Statement which were amended on April 17, 1995 and further amended on June 13,
1995 and July 17, 1995 (as so amended, the "TCO Plan" and the "TCO Disclosure
Statement", respectively).
On April 17, 1995, Columbia Filed a plan of reorganization and
accompanying Disclosure Statement, on June 14, 1995,
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(1) Terms not otherwise defined in this Disclosure Statement shall have the
meanings ascribed to them in the Columbia Plan, or in subsequent
sections of this Disclosure Statement, or in the Bankruptcy Code and/or
the Federal Rules of Bankruptcy Procedure.
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Columbia Filed its First Amended Plan of Reorganization and related Disclosure
Statement, and on July 17, 1995, Columbia Filed its Second Amended Plan of
Reorganization and a Disclosure Statement relating thereto. Simultaneously
with the filing of this Disclosure Statement, Columbia Filed its Third Amended
Plan of Reorganization dated July 27, 1995 (as so amended, the "Plan", and
together with the TCO Plan, the "Plans"), which documents amend the documents
filed on July 17, 1995 primarily to reflect a settlement of the Class Action
and an agreement with the LESOP Indenture Trustee regarding the treatment of
the Claims arising under the LESOP Debentures and LESOP Guaranty.
This Disclosure Statement is submitted by Columbia in connection with
its solicitation of acceptances of the Plan. This Disclosure Statement will be
supplemented by a report of the SEC to be issued in accordance with Section
11(g) of the HCA. That report should be read in conjunction with this
Disclosure Statement.
IN THE EVENT OF ANY CONFLICT OR INCONSISTENCY BETWEEN THE PLAN AND THIS
DISCLOSURE STATEMENT, OR ANY SCHEDULE OR EXHIBIT HERETO, THE PLAN SHALL
CONTROL.
The following Executive Summary is intended to highlight key aspects of
the Columbia Reorganization Case and the proposed Plan and is not intended in
any way to substitute for a complete review of the Plan and the balance of this
Disclosure Statement. ALL HOLDERS OF CLAIMS AGAINST, AND EQUITY INTERESTS IN,
COLUMBIA
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ARE ENCOURAGED TO READ THE PLAN AND THIS DISCLOSURE STATEMENT IN THEIR
ENTIRETY.
Columbia's and TCO's Chapter 11 filings were precipitated by a
combination of events which adversely affected TCO's operations and financial
viability, and consequently the liquidity of Columbia, a holding company, and
its seventeen operating subsidiaries, including TCO (collectively referred to
as the "System"). The Chapter 11 cases have, in turn, been closely tied to
each other as TCO's creditors have sought recoveries from Columbia to
supplement the values available in the TCO estate. Columbia, after
consultation with the Creditors' Committee and the Equity Committee, believes
that it is in the best interests of both estates, in that values will be
maximized and the reorganization process expedited, for Columbia to retain
ownership of TCO and to recapitalize its own debt and equity structure in
conjunction with a recapitalization of TCO and funding of payments to TCO's
creditors.
Thus, important elements of the Plan relate to the proposed refinancing
of TCO by Columbia and other concessions by Columbia embodied in the "Columbia
Omnibus Settlement" (described infra) which will facilitate the reorganization
of TCO. The Plan contemplates concurrent implementation of the Plan and the
TCO Plan.
The overall goals of the Plans are to (i) pay Columbia's Creditors 100%
of their Allowed Claims (and, in most cases, post-petition interest thereon),
(ii) maximize the value of the
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recoveries to TCO's creditors by settling ongoing litigation, (iii) alter the
debt and equity structures of Columbia and TCO to permit them to emerge from
their respective Chapter 11 cases with modernized and viable capital structures
and (iv) preserve and ultimately enhance shareholder value. In addition, the
Plans preserve Columbia's and TCO's basic business operations which have proven
to be viable and financially sound notwithstanding the filing of the Chapter 11
petitions.
The Plan provides for payment in full of all liquidated Allowed Claims
of Creditors of Columbia. Holders of Allowed Borrowed Money Claims,
representing substantially all of the third-party Claims against Columbia
generally will receive, in settlement and satisfaction of their Claims for
principal and pre-petition interest, together with post-petition interest
thereon, a combination of cash, to the extent available in accordance with the
terms of the Plan, and new debt and equity securities of Columbia having
aggregate principal amounts and Liquidation Values which, when added to the
cash, if any, to be distributed to the Holders of such Claims, will equal the
amount of their Allowed Claims plus post-petition interest thereon. As
described in Section X below, Columbia believes that the Creditors' Committee,
the Equity Committee and their respective financial advisors agree with
Columbia and its financial advisor, Salomon Brothers Inc ("Salomon") that the
methodologies for pricing the securities to be issued pursuant to the Plan will
result in such securities having a fair market value on a
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fully distributed basis, subject to market fluctuations and other factors
described in Section VII.B, "Risk Factors," that approximates the amount of
such Allowed Claims and post-petition interest, less the cash, if any, to be
distributed in respect of such Claims.
Except as described below, other Creditors will receive cash in the
amount of their Allowed Claims, or, in some cases, will have obligations
assumed by Columbia under the Plan. Finally, Holders of Securities Claims
(described below) that do not opt out of the Class Action will have their
Claims treated in accordance with the Stipulation of Settlement and orders and
agreements in furtherance thereof (the "Class Action Settlement"). The
Stipulation of Settlement provides that such Holders, provided that they timely
file proof of claim and release forms in the District Court, the form of which
has been approved by the District Court pursuant to the Hearing Order
(described below) (the "Proof of Claim and Release Form"), will be paid their
share (determined in accordance with the Class Action Settlement Documents) of
the Settlement Fund ($36.5 million, of which Columbia's contribution is
approximately $16.5 million) that is not applied to pay counsel fees and costs
of administration. Holders of Securities Claims that opt out of the Class
Action, provided that they file or are deemed to file proofs of Claim in the
Bankruptcy Court (through procedures embodied in the Class Action Settlement
Documents), may continue to litigate their Claims against Columbia in the
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District Court sitting in bankruptcy following the Effective Date. Such
Opt-out Securities Claimants will be paid by Reorganized Columbia the Allowed
amount of such Securities Claims, if any, when such Claims are Allowed, in
Common Stock valued at then current market prices or, at Columbia's option, in
cash.
Columbia Stockholders will retain their equity interests in Columbia
and are asked to vote to accept the Plan and, in particular, are asked to
approve amendments to the certificate of incorporation of Columbia which, among
other things, will prohibit the issuance of non-voting equity securities as
required by section 1123(a)(6) of the Bankruptcy Code, delete present
restrictions on Common Stock dividends and amounts of debt applicable while any
preferred stock of Columbia (the "Preferred Stock") is outstanding, provide
that the Board of Directors may determine the specific rights, powers and
preferences of each series of Preferred Stock and the limitations thereon at
the time of its issuance and increase the amount of Columbia's authorized
Preferred Stock.
The Plan further provides that a vote for the Plan constitutes an
express acceptance of the settlement of the Intercompany Claims as set forth in
the Plan.
The TCO Plan does not provide for payment in full of all claims of
TCO's creditors, but does provide for, among other things, Columbia's guaranty
of payments by TCO to third-party creditors as provided in the TCO Plan, in
consideration for (i)
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the retention by Columbia of TCO's equity, (ii) the settlement and release of
the Intercompany Claims Litigation (described in Section IV.B below) and (iii)
the resolution of numerous other disputes affecting both Columbia's and TCO's
reorganization efforts. The TCO Plan provides for prompt payment in cash of
over $1 billion to holders of allowed third-party claims against TCO on the
effective date of the TCO Plan, embodies agreements over disputed claims and
other issues which TCO believes are acceptable to most, if not all, of its
creditors and ensures the availability of substantial resources to pay allowed
claims against TCO that are not settled as of such effective date.
In the event the Plan is not confirmed, it is likely that litigation
over the Intercompany Claims will continue, inevitably consuming much time and
resources. In that event, no assurances can be given as to when Columbia will
emerge from bankruptcy or how Columbia's Creditors and Stockholders will be
treated under any other plan of reorganization that might be proposed.
The requirements for Confirmation, including the vote of certain
classes of Claims and Interests to accept the Plan and certain statutory
findings that must be made by the Bankruptcy Court, are set forth in Section IX
under the caption "Voting Procedures and Confirmation Requirements."
Confirmation of the Plan and the occurrence of the Effective Date are subject
to a number of significant conditions. Although Columbia believes that
satisfaction of those conditions should be feasible, there
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can be no assurance that they will be satisfied. See Section VII, "Risk
Factors."
All aspects of the Plan have been extensively negotiated with, and
reviewed by, the Creditors' Committee, and thus the Plan reflects their comment
and input. However, there remain a few areas of disagreement which the
Creditors' Committee has indicated do not affect the Creditors' Committee's
basic support for the Plan. As noted above, the Equity Committee supports
Confirmation of the Plan in its present form. The Equity Committee reserves
the right to withdraw support for the Plan if the Equity Committee is not
satisfied with any subsequent amendments to the Plan pertaining to the few
areas of disagreement with the Creditors' Committee.
B. EXECUTIVE SUMMARY
1. THE DEBTORS AND THEIR BUSINESSES
Columbia is a Delaware holding company with seventeen operating
subsidiaries engaged in various aspects of the natural gas and oil industry.
The operating companies are engaged in the exploration for and production,
purchase, marketing, storage, transmission and distribution of natural gas and
other energy operations such as electric power generation and propane
distribution. A more complete description of Columbia's business is set forth
in Section III.A below, and its financial statements are included in the Annual
Report on Form 10-K for 1994 attached hereto as Exhibit 2 (the "Columbia Annual
Report"), and in the Quarterly Report on Form 10-Q for the first
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quarter ending March 31, 1995 attached hereto as Exhibit 3 (the "Columbia
Quarterly Report")(2) . Columbia is a registered public utility holding company
under the HCA and, pursuant to the HCA, the Plan and Columbia's external and
intercompany financing activities, including certain transactions contemplated
by the TCO Plan, and certain of its intercompany contractual relationships and
various other matters, are regulated by the SEC.
TCO is one of two interstate pipeline companies owned by Columbia. TCO
owns and operates an approximately 19,000 mile natural gas transmission
pipeline network and related extensive underground gas storage fields that
serve parts of thirteen states in the Northeastern, Mid-Atlantic, Midwestern
and Southeastern regions and the District of Columbia. TCO's customers are
various affiliated and unaffiliated gas distribution companies, gas marketers,
producers and end users of gas ("Customers"). Its rates, charges, services and
facilities are subject to regulation by FERC, primarily pursuant to the Natural
Gas Act, 15 U.S.C. Section Section 17, et seq. ("NGA"). Prior to November 1,
1993, TCO operated as a "merchant" of gas, purchasing gas from producers and
other pipeline suppliers and reselling it to distribution companies and large
industrial users. Since November 1, 1993, following a fundamental change in
the gas industry brought about by FERC under its Order
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(2) If the mailing of this Disclosure Statement is after August 14, 1995,
the second quarter Form 10-Q will be attached instead.
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No. 636, TCO no longer conducts any significant gas merchant activities and is
presently almost entirely engaged in the business of transporting and storing
gas for its Customers.
Columbia has provided debt and equity financing for all its operating
subsidiaries, including TCO, and has been the principal vehicle for raising
funds in the capital markets for the System. Columbia has generally reinvested
in its operating subsidiaries the net proceeds of its equity and debt issues,
as well as cash flows from its subsidiaries in excess of its own debt service
requirements.
Prior to June 1985, Columbia made loans to TCO on an unsecured basis
and, at the time of the filing of the Chapter 11 petitions, Columbia held
unsecured obligations of TCO aggregating $351 million, including accrued
interest. Loans made by Columbia to TCO after June 1985 were secured by first
mortgage liens on substantially all TCO's assets. At the time of the filing of
the Chapter 11 petitions, Columbia held secured obligations of TCO aggregating
approximately $1.34 billion in principal amount. Pre- and post-petition
interest accrued through December 31, 1995 on such secured obligations is
projected to be approximately $644 million. Columbia has not made additional
loans to TCO since the Petition Date, and TCO has made no payments to Columbia
on its loans since such date.
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2. THE PROBLEMS THAT LED TO THE CHAPTER 11 PETITIONS
Columbia's and TCO's Chapter 11 filings were precipitated by a
combination of events which adversely affected TCO's physical operations and
financial viability and which, in turn, caused a liquidity shortfall for
Columbia. Most notable were (i) federal legislative and regulatory actions,
instituted years after TCO's gas purchase contracts were entered into, that
significantly impacted TCO's ability to sell the gas it had contracted to buy
and to recover its costs from its Customers and (ii) TCO's continuing
contractual obligations to purchase gas at prices above those at which it was
able to market gas. These problems were exacerbated by record-setting warm
weather, which caused spot market prices for gas to plunge, created excess
transportation capacity and precluded taking additional gas into storage, thus
making an unexpected and persistent oversupply of bargain-priced gas available
to TCO's Customers. As a result, TCO's ability to market its gas was severely
undercut, substantially reducing both sales volumes and revenues.
After completing studies in early June 1991 that revealed the magnitude
of TCO's gas supply management problems, Columbia announced on June 19, 1991
that the present value of losses associated with TCO's above-market priced gas
purchase contracts could exceed $1 billion, that a substantial portion of that
amount would be charged to income in the second quarter of 1991
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and that the dividend on Columbia's Common Stock was being suspended.
Columbia immediately initiated negotiations with banks in an effort to
reestablish lines of credit that were interrupted by the June 19 announcement,
and TCO promptly proposed a comprehensive producer settlement plan with gas
producers ("Producers") that offered to buy out Producers' contracts and settle
other contractual disputes for a pro rata share of $600 million of TCO debt
obligations. Progress was made in both areas of negotiation. However,
agreements could not be concluded before TCO's and Columbia's available cash
resources were substantially exhausted, forcing both to seek Chapter 11
protection at the end of July 1991.
3. THE DEBTORS' BUSINESS OPERATIONS, FINANCIAL
PERFORMANCE AND PROSPECTS
a. COLUMBIA
Since the filing of its Chapter 11 petition, Columbia's operating units
have performed soundly overall. See the Columbia Annual Report and the
Columbia Quarterly Report attached as Exhibits 2 and 3, respectively, to this
Disclosure Statement. These positive operating results demonstrate the
financial health and viability of Columbia's basic business units. While
Columbia has maintained its core business operations and instituted some new
programs and capital expenditures, certain aspects of its operations have been
restricted by the Chapter 11 proceedings. As a debtor-in-possession under the
jurisdiction of the Bankruptcy Court,
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Columbia cannot engage in transactions outside the ordinary course of business
without obtaining Bankruptcy Court approval. Although Columbia arranged the
DIP Facility, it has been otherwise unable to access the capital markets. It
also has incurred substantial bankruptcy-related expenses, including
Professional fees. Accordingly, Columbia believes that it will be in a
position to improve its financial results upon emergence from the Chapter 11
proceedings.
In addition, Columbia believes that its reorganization, as proposed in
the Plan, will enhance Columbia's financial position following emergence. The
Plan includes the issuance to existing Columbia Creditors, subject to
adjustment as described herein, of up to $3.0 billion principal amount of New
Indenture Securities and $200 million aggregate Liquidation Value of DECS and
$200 million aggregate Liquidation Value of New Preferred Stock. As more fully
described in Sections VI and X herein, Columbia has the option to redeem, in
whole or in part, at any time on or prior to the 120th day following the
Effective Date, first the DECS and then (or concurrently) the New Preferred
Stock issued to the Holders of Borrowed Money Claims. In order to fund such
redemption, Columbia may issue other debt or equity securities.
Columbia's recapitalization will also include the distribution of cash
in an amount to be determined in conjunction with the arrangement of unsecured
bank financing of up to $1.15 billion, consisting of a Working Capital Facility
of
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up to $700 million and a Term Loan Facility of up to $450 million (together,
the "Bank Facilities"). A portion of the Bank Facilities is expected to be
used by Columbia to fund payments to TCO in connection with TCO's
reorganization and a portion may be used by Columbia to fund cash payments to
Columbia's Creditors. The Bank Facilities will also be available to fund the
future needs of other Columbia subsidiaries. If the Term Loan Facility is
obtained, and if borrowings thereunder are available at an all-in cost equal to
or lower than the weighted average cost of borrowing through the issuance of
New Indenture Securities, Reorganized Columbia will provide at least the lesser
of (i) $350 million and (ii) the then available amount of such facility to the
Holders of Borrowed Money Claims in respect of their Claims. A more detailed
description of Columbia's projected financial performance, proposed
capitalization and prospects is set forth in Section X.B, "Financial
Projections; Recapitalization."
b. TCO
Subsequent to the filing of its Chapter 11 petition, TCO rejected, as
permitted by the Bankruptcy Code, over 4,800 gas purchase contracts. The
Producer counterparties to those contracts filed claims for rejection damages
and other pre-petition contractual amounts in excess of $13 billion.
Rejection of the above-market-price contracts enabled TCO to purchase
market-priced gas which bolstered its sales to competitive levels in the
interim between its Chapter 11 filing
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and its withdrawal from the merchant business in the fall of 1993 (in
accordance with FERC Order No. 636). Since that time, TCO's transportation and
storage service businesses have prospered. Accordingly, TCO has recorded
substantial operating profits and projects an accumulated cash balance as of
December 31, 1995 of approximately $1.4 billion in excess of operating cash
needs, reserves and Customer refunds.
Under Order No. 636, pipelines such as TCO have the right to recover
from their customers various costs resulting from the mandated transition from
merchants to transporters. However, FERC has determined that, with minor
exceptions, TCO is not eligible to recover costs arising from its rejection of
Producers' gas supply contracts. The ultimate level of TCO's other recoverable
transition costs has been the subject of controversies with its Customers,
controversies which largely will be resolved upon consummation of the TCO Plan.
The largest claims against the TCO estate for borrowed money are held
by Columbia and are secured by substantially all TCO's assets. This
indebtedness bears interest at rates substantially higher than those being
earned by TCO on its excess cash because of legal limitations on TCO's
temporary investments imposed by the Bankruptcy Code. As a result, the growth
in TCO's secured interest obligations (the status of which had been challenged
by the Intercompany Claims) has exceeded its interest earnings on its cash
available for debt
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service by an amount exceeding $450 million when projected to December 31,
1995.
4. OBSTACLES TO REORGANIZATION
In contrast to the situation of many other Chapter 11 cases, the
reorganization of Columbia and TCO has not been hampered by unprofitable or
marginal business operations. Rather, in Columbia's case, the achievement of
reorganization under Chapter 11 has been delayed pending achievement of a
reorganization of TCO and by the protracted litigation of the Intercompany
Claims and the time- consuming resolution of other Claims and related issues.
The reorganization cases are linked principally because Columbia requires
resumption of payments due to it on its claims against TCO in order to meet its
own debt service requirements. Validation of those claims has been delayed
pending resolution of the Intercompany Claims Litigation.
In TCO's case, achievement of reorganization has been delayed by (1)
the dispute and eventual settlement of the Claims of the IRS against TCO and
Columbia, (2) extensive litigation over the amount and priority of claims for
refunds by Customers and of TCO's right to recover Order No. 636 transition
costs from Customers (the "FERC Receivables"), which litigation has proceeded
both before FERC and the Bankruptcy Court, (3) the Intercompany Claims
Litigation and (4) the size and complexity of the disputed Claims filed against
TCO by Producer-creditors.
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There have been prolonged, extensive negotiations with the IRS over its
pre-petition Claims against Columbia and TCO exceeding $550 million,
principally for pre-petition income taxes, plus penalties and interest. These
Claims were finally resolved by a settlement agreement, which reduced the
Claims to approximately $112 million, plus post-petition interest thereon.
That settlement agreement was approved by the Joint Committee on Taxation of
the United States Congress on June 30, 1994 and by Order of the Bankruptcy
Court dated October 12, 1994.
The litigation surrounding the Customer claims and FERC Receivables has
been prolonged and contentious. After lengthy, complex negotiations with a
group of more than 100 Customers and state regulatory and consumer agencies, a
consensual settlement with a substantial majority of TCO's Customers,
negotiated in early 1995, is embodied in TCO's proposed treatment of Customers
under the TCO Plan. The Customer Settlement Proposal was presented to FERC for
approval in April 1995. On June 15, 1995, FERC entered an order approving
those aspects of the Customer Settlement subject to its jurisdiction, which
approval is conditioned upon Bankruptcy Court approval of those aspects of the
Customer Settlement subject to its jurisdiction and confirmation of TCO's Plan.
While non-settling Customers have the right to oppose their treatment under the
TCO Plan and may continue to litigate Claims against TCO following TCO's
emergence from Chapter 11, the proposed Customer Settlement is supported by
substantially all the Customers, and, therefore, is
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expected to resolve another of the principal obstacles to reorganization.
After 2-1/2 years of pre-trial procedures, the Intercompany Claims
asserted by the Official Committee of Unsecured Creditors of TCO (the "TCO
Creditors' Committee") and the Official Committee of Customers of TCO (the "TCO
Customers' Committee"), were tried before District Judge Farnan in September
and October 1994. The Plan, in conjunction with the TCO Plan, embodies a
settlement of the Intercompany Claims Litigation with the plaintiffs (the TCO
Creditors' and Customers' Committees), and it is a condition to consummation of
both the Columbia and TCO Plans that a Stipulation of Dismissal With Prejudice
of the Intercompany Claims Litigation shall have been filed with and, if
necessary, approved by the District Court.
Columbia and TCO have also devoted substantial efforts to the
resolution of disputed Producer claims. The Producer counterparties to the
rejected gas purchase contracts filed claims for rejection damages in excess of
$13 billion, an amount which, TCO believes, based on its own analysis and its
review of the Bankruptcy Court-appointed Claims Mediator's Initial Report and
Recommendations on Generic Issues for Natural Gas Claims dated October 13, 1994
and the Supplement to the Initial Report dated February 17, 1995 (collectively,
the "Claims Mediator's Report"), is significantly greater than the actual
allowable level of those claims. Producer-creditors also Filed other claims
based on pre-filing contractual disputes, including
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disputes relating to pricing and take-or-pay obligations, in amounts well in
excess of TCO's estimates of its liabilities with respect to such disputes.
Pursuant to the estimation procedures established by the Bankruptcy
Court in order to liquidate Producer claims, Charles Normandin, the
Court-appointed Claims Mediator, called for the completion of recalculation
forms by Producers by June 30, 1995, to be followed by audits and
contract-specific objections. Charles Normandin has also directed that TCO,
the TCO Creditors' Committee and other parties review recalculation forms,
recommend specific claims for audit and continue settlement efforts to resolve
claims disputes. Other estimation procedures are presently deferred.
From the early months of these Chapter 11 cases, Columbia and TCO have
endeavored to identify and settle their differences with Producer-creditors
through extensive meetings and discussions. However, a broadly consensual
recalculation of contract rejection and certain other Producer claims has
become possible only since the issuance of the Claims Mediator's Report.
Following the issuance of that report and in order to end protracted litigation
with Producer-creditors, TCO made offers to settle the claims of certain of the
largest Producers, and commenced a process of negotiation of those settlement
offers and related TCO Plan issues with such Producers and with the TCO
Creditors' Committee. As a result, TCO, Columbia and holders of what TCO
believes to be in excess of 80% of the
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aggregate amount of Producer claims (the "Initial Accepting Producers") entered
into a settlement agreement dated as of April 14, 1995 (the "Producer
Settlement Agreement"), which is embodied in the TCO Plan. On April 27, 1995,
TCO and Columbia filed a motion with the Bankruptcy Court seeking an order
approving the Producer Settlement Agreement, and a hearing on that motion was
held on June 15 and 16, 1995. On June 16, 1995, the Bankruptcy Court entered
an order approving the Producer Settlement Agreement.
Since the filing of the motion to approve the Producer Settlement
Agreement, approximately 300 additional Producers have indicated to TCO that
they intend to accept the settlement values proposed for their Producer claims.
On July 21, 1995, TCO filed a motion with the Bankruptcy Court seeking an order
approving settlements with 89 Producers, totalling, in the aggregate,
approximately an additional 6% of TCO's proposed allowed amounts for Producers.
Under the Producer Settlement Agreement, the Initial Accepting
Producers will receive between 68.875% and 72.5% of their allowed claims, or
slightly more, depending upon the aggregate amount of Producer claims that are
ultimately allowed. The Producer Settlement Agreement provides for the claims
of the Initial Accepting Producers to be allowed in a total amount of $1.327
billion, with a maximum payout of $962.3 million. The Producer Settlement
Agreement has also resulted in the development of a set of schedules proposing
settlement values
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under the TCO Plan for all other disputed Producer claims, acceptance of which
would resolve disputes as to the allowable levels of those claims, which,
together with a related agreement on payout and risk sharing, would
substantially resolve the largest category of disputed claims in the TCO case.
Although some Producers may not accept their proposed settlement values set
forth in the TCO Plan and elect instead to continue to dispute their claims
following the effective date of the TCO Plan, the existence of those dissenters
will not preclude TCO's reorganization, so long as other TCO Plan conditions
are met.
5. THE CORNERSTONE OF THE COLUMBIA AND TCO
PLANS: THE COLUMBIA OMNIBUS SETTLEMENT
Columbia and TCO believe that litigated resolutions of the
inter-related Intercompany Claims and Producer claims against TCO would take
several more years and that such litigation is not in the best interests of
their estates. Columbia is therefore proposing an omnibus settlement (the
"Columbia Omnibus Settlement") in order to facilitate and expedite the
emergence of both Columbia and TCO from Chapter 11, and allow payments to be
made to thousands of creditors whose Claims are liquidated and Allowed. The
Columbia Omnibus Settlement provides that, in consideration of, among other
things, (i) the retention by Columbia of the equity of Reorganized TCO, (ii)
the settlement of litigation over the liquidation of the Producer claims of the
Initial Accepting Producers, of Customer claims and of certain other disputed
claims and (iii) a settlement and release of the claims raised or which could
have been raised in the
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Intercompany Claims Litigation and other claims and disputes between TCO's
creditors and Columbia and various other claims and disputes between TCO's
creditors and TCO:
(i) Columbia will assist TCO in monetizing the TCO Plan which
provides for value (the "TCO Distributable Value") to be distributed to
TCO creditors (including Columbia) of approximately $3.9 billion (in
the event of 100% acceptance by Producers and other creditors of the
settlement offers proposed in the TCO Plan), which distribution, in the
case of creditors other than Columbia will be substantially in cash;
(ii) Columbia will provide a guaranty of the Customer
Settlement Proposal reached by TCO with its Customers;
(iii) Columbia will not receive any cash distribution with
respect to its secured claim against TCO but instead will receive new
secured debt securities of Reorganized TCO (secured by substantially
all TCO's assets) for a portion of its secured claim and will
contribute the balance of such secured claim to Reorganized TCO's
equity;
(iv) Columbia will consent to the assumption by Reorganized
TCO of certain pre-petition environmental claims of governmental
agencies and certain other claims; and
(v) Columbia will guaranty payment of distributions to TCO's
creditors as provided under the TCO Plan (excluding assumed
obligations).
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These considerations cannot be collectively expressed as a precise dollar
amount, but reflect significant consideration from Columbia to the TCO estate
to terminate the Intercompany Claims Litigation and other disputes in the TCO
proceedings which have delayed the reorganization of both Columbia and TCO. On
the other hand, the Columbia Omnibus Settlement will provide substantial
benefits to Columbia in addition to the retention of ownership of TCO, by
resolving numerous contentious disputes with Customers and Producers affecting
the economic value of the TCO estate on terms which Columbia believes to be
fair and reasonable, and permitting both Columbia and TCO to emerge from
bankruptcy as promptly as possible, to pay their creditors, and to pursue
ongoing business objectives free of the burdens and constraints of Chapter 11.
The Columbia Omnibus Settlement is subject to the approval of the Bankruptcy
Court as part of Confirmation of the Plan and TCO's Plan.
6. PROPOSED RESOLUTION OR TREATMENT OF OTHER MAJOR
CONTROVERSIES IN COLUMBIA'S CHAPTER 11 PROCEEDINGS
a. INTERCOMPANY CLAIMS LITIGATION
Columbia agrees to provide funding for the TCO Distributable Value on
the terms set forth in the TCO Plan, in consideration for, among other things,
settlement and release of the Intercompany Claims and retention of the equity
of Reorganized TCO.
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b. POST-PETITION INTEREST AND RELATED CLAIMS BY
UNSECURED COLUMBIA CREDITORS
Columbia has not made any payments with respect to its outstanding
pre-petition obligations since the filing of its Chapter 11 petition. The
Creditors' Committee asserted that unsecured Creditors are entitled to
post-petition interest on their obligations, as well as interest on missed
interest payments compounded at various times and at rates which are in some
cases significantly in excess of the non-default interest rate provided for in
the applicable contracts. In addition, the Creditors' Committee claimed that
some unsecured Creditors are entitled to the payment of a call penalty or
pre-payment premium in connection with the restructuring of their pre-petition
indebtedness. The Equity Committee, on the other hand, questioned the extent
of the Creditors' entitlement to post- petition interest, their entitlement to
interest on overdue interest payments and the rates and compounding used in
calculating that post-petition interest and interest on missed interest
payments. In addition, the Equity Committee argued that the Creditors are not
entitled to payment of call penalties or prepayment premiums on their debt
Claims.
After discussions with both the Equity Committee and the Creditors'
Committee, Columbia proposed a compromise resolution of the allowance and
calculation of post-petition interest on unsecured Claims. The specific method
of calculating post-petition interest for the various types of indebtedness for
borrowed money is set forth in Exhibit G to the Plan. The
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proposed payments do not include any pre-payment or similar premiums.
Columbia believes that its compromise proposal represents a fair
resolution of competing positions, litigation of which would be prolonged,
costly and uncertain of outcome. Acceptance of their treatment by Holders of
Claims for Borrowed Money will facilitate the prompt payment in full of their
Claims. In addition, payment of the Borrowed Money Claims under the Plan will
result in the waiver and release by the Holders of such Claims of the assertion
of any inter-creditor subordination provisions.
c. SECURITYHOLDER LAWSUITS
After the announcement on June 19, 1991 by Columbia's Board of
Directors regarding its proposed charge to second quarter earnings and
suspension of its dividend, the Class Action, comprised of seventeen complaints
purporting to be class actions, was filed in the District Court against
Columbia, various of its current and former officers and directors, and certain
of its underwriters and its accountants. These actions, which have been
consolidated, allege that from February 28, 1990 through June 18, 1991, the
defendants disseminated materially false and misleading statements regarding
Columbia's financial condition and failed to disclose material facts which
rendered other statements misleading, thereby artificially inflating the market
price of Columbia's Common Stock and publicly traded debt securities. The
complaints allege violations of the Securities
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Act of 1933, the Securities Exchange Act of 1934 and the Florida State
Securities Act, negligent misrepresentations and common law fraud and deceit.
Upon the filing of Columbia's bankruptcy case, the Class Action was
automatically stayed as to Columbia pursuant to section 362 of the Bankruptcy
Code; and on November 30, 1994, any further proceedings in the Class Action
were stayed until the entry of a final judgment on the Intercompany Claims
Litigation. On July 18, 1995, the Bankruptcy Court and the District Court
entered orders lifting the stays of the Class Action to let the settlement of
that litigation described below proceed.
Pursuant to the Stipulation of Settlement, unless Holders of a
significant amount of Securities Claims opt out of the Class Action, Columbia
and the other Contributors will establish a Settlement Fund of $36.5 million
(approximately $16.5 million of which will be contributed by Columbia) in full
settlement of the Class Action. Holders of Securities Claims that timely file
Proof of Claim and Release Forms in the District Court will be paid their share
(determined in accordance with the allocation set forth in the Class Action
Settlement Documents) of the Settlement Fund that is not applied to pay counsel
fees and costs of administration as more fully described in Section VI.D,
"Status and Treatment of Securities Claims and Derivative Litigation."
Consistent with Rule 23 of the Federal Rules of Civil Procedure, all Securities
Claims other than those of Holders that opt out of the Class Action, will be
discharged and
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released as against Columbia, the other defendants in the Securities Action and
certain other parties referred to in the Stipulation of Settlement. Pursuant
to the Stipulation of Settlement, Holders of Securities Claims that fail to
timely file Proof of Claim and Release Forms in the District Court will be
barred from receiving distributions thereunder. However, the Claims of such
Holders against Columbia and other released parties will be discharged and
released by order of the District Court in the Class Action, except for Holders
of Securities Claims that timely submit Opt-Out Forms. As to Claims of Holders
that opt out and file or are deemed to file proofs of Claim in the Bankruptcy
Court, Columbia shall object to and/or seek estimation of such Claims; however,
Reorganized Columbia will pay those Claims in full when Allowed. Such
Claimants shall have their Claims determined by the District Court sitting in
bankruptcy after the Effective Date, and those Claims, if and when Allowed,
will be paid by Reorganized Columbia in Common Stock valued at then current
market prices or, at Columbia's option, in cash. The Claims of Holders of
Securities Claims that opt out of the Class Action but do not file or have
their Claims deemed filed against Columbia in the Bankruptcy Court, shall be
discharged against Columbia under the Plan.
There can be no certainty that the Class Action Settlement will be
approved by the District Court or that the amount of securities as to which
Opt-out Forms are submitted will not
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exceed the specified amount, which would give the defendants the right to
terminate the Stipulation of Settlement.
d. ASSUMPTION OF CERTAIN CLAIMS
Claims, if any, arising from Columbia's obligations to indemnify its
officers, directors and agents and the officers, directors, employees and
agents of its subsidiaries, including TCO, Claims relating to Columbia's
Retirement Plan, including the Retirement Plan's Claims for minimum
contributions required by ERISA and the Claims Filed by the PBGC with regard to
the Retirement Plan, and Columbia's guaranty to Shawmut Bank of Boston, N.A.
("Shawmut") for certain obligations of Columbia Gas of Ohio, Inc. ("Columbia
Ohio") under the lease for Columbia Ohio's headquarters in Columbus, Ohio, as
well as timely Filed indemnification Claims of non-debtor defendants in the
Securities Action will be assumed by Reorganized Columbia and the Plan will
leave unaltered the legal, equitable and contractual rights to which such
Claimants are entitled. As more fully described in Section IV.D.7, in the case
of indemnified officers and directors that are, or are similarly situated to,
defendants in the Class Action, Columbia will contractually agree to cover
their costs (other than for penalties and fines), if any, as a result of their
continuing exposure to Opt-out Securities Claims and claims based on the same
subject matter. Indemnity Claims under the Canada Sale Agreement and
Columbia's indemnity agreement with the Reliance Group (each of which is
described in Section VI.A.1.a(v) under
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the caption "Miscellaneous Administrative Claims") will be assumed by
Reorganized Columbia and paid in the ordinary course of business.
7. AMENDMENT TO THE CERTIFICATE OF INCORPORATION
The Columbia Plan includes an amendment and restatement of Columbia's
certificate of incorporation. The proposed amendments represent a streamlining
and modernization of Columbia's charter as well as certain additional changes.
The principal differences between the proposed amendments and the
current certificate of incorporation are: (i) the inclusion of a prohibition
on the issuance of non-voting equity securities as required by section
1123(a)(6) of the Bankruptcy Code; (ii) the deletion of present restrictions on
Common Stock dividends and amounts of debt applicable while Preferred Stock is
outstanding; (iii) the addition of a provision allowing the Board of Directors
to determine the specific rights, powers and preferences of each series of
Preferred Stock and the limitations thereon at the time of its issuance; (iv) a
provision for the continuation of a staggered Board of Directors elected by
holders of Common Stock even if directors are elected by the holders of
Preferred Stock; (v) an increase in the number of authorized shares of
Preferred Stock to 40 million shares and (iv) a reduction in the par value of
the Preferred Stock from fifty dollars ($50) to ten dollars ($10) per share.
A more complete description of proposed amendments to Columbia's
certificate of incorporation is set forth in Section
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X.H under the caption "Amendment to the Certificate of Incorporation."
Stockholders who vote to approve the Plan will, by such vote and
without further action, approve the amendments to the certificate of
incorporation described above.
C. DISTRIBUTIONS UNDER THE PLAN
The Plan provides for:
(1) Payment in cash in full of all Allowed Unclassified
Claims, consisting principally of administrative claims and tax claims
entitled to priority under section 507(a)(8) of the Bankruptcy Code, on
the Effective Date or, in the case of the IRS's Claims, over a period
of up to six years. Payment of post-petition interest on the Allowed
Unclassified Claims will also be made where appropriate, and Holders of
Unclassified Claims will not be entitled to vote on the Plan.
(2) Payment on the Effective Date in cash in full of
Claims under the DIP Facility. Claims under the DIP Facility are
unimpaired and Holders of such Claims will not be entitled to vote on
the Plan.
(3) Payment on the Effective Date in cash in full of all
Allowed Non-Borrowed Money Claims, consisting of all Claims not
included in any other Class under the Plan, such as pre-petition Claims
for uncashed checks, intercompany payables and other trade payables,
which are estimated to total approximately $1.0 million (excluding
post-petition
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interest). Holders of Allowed Claims in this Class shall be paid
post-petition interest calculated (i) with respect to such Claims
evidenced by a written agreement, at the non-default contractual
interest rate set forth therein or (ii) if no such rate is set forth
therein or if such Claim is not evidenced by a written agreement, at 6%
per annum. Non-Borrowed Money Claims are not impaired by the Plan and
will not be entitled to vote on the Plan.
(4) Borrowed Money Claims, consisting of Claims arising under
Columbia's 1961 Indenture, Claims under pre-petition bank lending
facilities, Claims of holders of the LESOP Debentures arising under the
LESOP Guaranty, Claims under the Rate Swap Agreement and Claims under
certain other pre-petition borrowing arrangements, including Commercial
Paper, Bid Notes and Auction Note Debt, exceeding $20,000 in principal
amount as of the Record Date are treated as one Class of Claims and
Borrowed Money Claims not exceeding $20,000 principal amount as of such
date are treated as a separate Class. Holders of all such Allowed
Claims shall be entitled to post-petition interest calculated as
provided in Exhibit G to the Plan. The Plan provides for payment of
each such Allowed Claim and related post-petition interest in full with
each holder of a Claim exceeding $20,000 in principal amount as of the
Record Date receiving its proportionate share (generally based on the
proportion of such Allowed Claim to all Allowed Claims in
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such Class) of cash, if any, each Issue of New Indenture Securities to
be issued by Reorganized Columbia (except that Holders of Claims
entitled to receive New Indenture Securities having an aggregate
principal amount not exceeding $70,000 will receive only Issue A New
Indenture Securities) and the DECS and New Preferred Stock to be issued
by Reorganized Columbia (subject to adjustment to avoid the issuance of
fractional shares of DECS and New Preferred Stock and non-round lots of
any Issue of New Indenture Securities). Each holder of such a Claim
not exceeding $20,000 in principal amount as of the Record Date will
receive cash.
The DECS and the New Preferred Stock issued to the Holders of
Borrowed Money Claims will be redeemable by Columbia on the terms and
conditions described more fully in Exhibit 4 to this Disclosure
Statement. In summary, Columbia, at its option, may redeem the DECS
and then (or concurrently) the New Preferred Stock in whole or in part,
at any time on or prior to the 120th day following the Effective Date
(provided that Columbia may not redeem less than all of either class of
securities if, after giving effect to such redemption, less than $50
million in Liquidation Value of such class of securities would be
outstanding). Upon any such redemption, each Holder of DECS and New
Preferred Stock to be redeemed will receive, in exchange for such
equity securities, cash in an amount
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equal to the sum of (i) the Liquidation Value of such DECS and New
Preferred Stock and (ii) if such redemption occurs after the 90th day
following the Effective Date, all accrued and unpaid dividends thereon.
Borrowed Money Claims not exceeding $20,000 in principal
amount as of the Record Date are unimpaired and Holders of such Claims
will not be entitled to vote on the Plan. Borrowed Money Claims in
excess of $20,000 in principal amount as of the Record Date are
impaired and Holders of such Claims will be entitled to vote on the
Plan.
(5) As stated in Section B.6.C. above, Holders of Securities
Claims that do not opt out of the Class Action and that timely file
Proof of Claim and Release Forms in the District Court will be paid
their share (determined in accordance with the allocation set forth in
the Class Action Settlement Documents) of the Settlement Fund provided
for therein and described in Section IV.D.6, "Status and Treatment of
Securities Claims and Derivative Litigation." The Securities Claims
(other than certain Claims of Opt-out Securities Claimants described
below) are unimpaired and Holders of such Claims will not be entitled
to vote on whether or not to accept the Plan.
Columbia will object to and/or seek the estimation of the
Opt-out Securities Claims, the Holders of which file or are deemed to
file proofs of Claim in the Bankruptcy Court,
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and such Claimants will litigate their Claims in the District Court
sitting in bankruptcy after the Effective Date, and will be paid by
Reorganized Columbia the Allowed amount of their Claims, if and when
such Claims are Allowed, in Common Stock valued at then current market
prices or, at Columbia's option, in cash. Opt-out Securities Claims,
the Holders of which file or are deemed to file proofs of Claim in the
Bankruptcy Court, are impaired and all Holders of such Claims will be
entitled to vote on whether or not to accept the Plan unless Columbia
elects, prior to Confirmation of the Plan, to pay those Claims, when
Allowed, in cash, in which case such Claims will not be impaired and
the Holders thereof will not be entitled to vote on whether or not to
accept the Plan.
(6) The Columbia Omnibus Settlement and the Plan include
consideration from Columbia to TCO and its creditors to settle the
Intercompany Claims. Class 5, consisting of the Intercompany Claims,
is unimpaired.
(7) The Stockholders will continue to own their interests in
Reorganized Columbia, but are deemed to be impaired by the Plan and
will be entitled to vote on such Plan.
(8) As stated in Section B.6.d above, Class 6 Claims
consisting of various indemnity, pension and guaranty-type obligations
of Columbia, will be assumed by Reorganized Columbia and paid in the
ordinary course of business, and
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will remain unimpaired within the meaning of section 1124 of the
Bankruptcy Code.
D. CONDITIONS
The Confirmation and effectiveness of the Plan are subject to certain
conditions. Those conditions include, among other things, that (i) the TCO
Plan shall have been (or is concurrently) confirmed and the order with respect
to such Confirmation shall not have been vacated, reversed or stayed, and such
Plan shall have become (or concurrently becomes) effective; (ii) the SEC shall
have approved, under the HCA, the Columbia Plan and the transactions under the
TCO Plan requiring its approval, and the related order shall not have been
vacated, reversed or stayed; (iii) Moody's Investors Service, Inc. and Standard
& Poor's Ratings Group shall have confirmed that the New Indenture Securities,
upon their issuance, will be rated Investment Grade; (iv) TCO and Columbia will
have received a satisfactory ruling from the Internal Revenue Service to the
effect that the payments made by TCO under the TCO Plan that are attributable
to the breach, termination or rejection of gas purchase contracts are
deductible in the year paid by TCO for federal income tax purposes; provided
that, if such ruling has not been received by December 15, 1995, then the
settlement with the Initial Accepting Producers shall terminate on December 31,
1995, unless prior to December 31, 1995 either (a) Columbia and TCO waive the
receipt of such ruling as a condition to Confirmation or the Effective Date, as
appropriate, or (b) the
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Initial Accepting Producers agree, in writing, to an extension of the time
within which the IRS ruling must be obtained; (v) the District Court shall have
entered an Order and Judgment approving the Class Action Settlement and
dismissing the Class Action, and such order shall not have been vacated,
reversed or stayed; (vi) a Stipulation of Dismissal With Prejudice of the
Intercompany Claims Litigation, conditioned only upon the completion of payment
of all distributions payable on the effective date of the TCO Plan, shall have
been filed with and, if necessary, approved by the District Court; (vii)
Reorganized Columbia will have entered into the New Indenture, the Working
Capital Facility and the Term Loan Facility; and (viii) the Effective Date
shall have occurred on or before June 28, 1996. For a complete description of
all of the conditions to the Plan and, if applicable, the circumstances under
which they may be waived, see Section VI.K, "Conditions Precedent to
Confirmation and Consummation of the Plan."
E. CONCLUSION
The Plan provides for termination of bankruptcy proceedings pending for
nearly four years and payment in full of all pre- petition liquidated Allowed
Claims of Creditors of Columbia, together with post-petition interest, while at
the same time preserving the basic business operations of Columbia and its
subsidiaries which have proved to be financially sound overall. Columbia
believes that resolution of its own and TCO's bankruptcy proceedings on the
terms set forth in the Plan and
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the TCO Plan provides the most expeditious path out of Chapter 11, and will
result in the preservation and ultimately the enhancement of values for
shareholders. Columbia's Creditors and Stockholders are urged to vote for
acceptance of the Plan as a prompt, cost-effective and balanced solution for
all concerned.
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II. OVERVIEW OF THE PLAN
THE FOLLOWING IS A BRIEF OVERVIEW OF CERTAIN MATERIAL PROVISIONS OF
THE PLAN. THIS OVERVIEW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
PROVISIONS OF THE PLAN, A COPY OF WHICH IS ATTACHED HERETO AS EXHIBIT 1.
ADDITIONALLY, SECTION VI, "PLAN TREATMENT OF CLAIMS AND SUMMARY OF OTHER PLAN
PROVISIONS," OF THIS DISCLOSURE STATEMENT CONTAINS A DETAILED NARRATIVE
DESCRIPTION OF THE TREATMENT OF CLAIMS UNDER AND MECHANICS FOR IMPLEMENTATION
OF THE PLAN.
A. REORGANIZED COLUMBIA
Under the Plan, Reorganized Columbia will continue to operate as a
public utility holding company under the HCA, and will retain ownership of the
stock of its various subsidiaries, including TCO. Aside from those changes
specifically identified in Section X.G, "Reorganized Columbia - Management,"
the Plan does not provide for any further changes to Columbia's current
management.
B. SUMMARY OF DESCRIPTION OF CLASSES AND DISTRIBUTIONS
The Plan proposes the payment of the Allowed amounts of all Claims in
full, together with, in most cases, appropriate post-petition interest, in cash
or, in the case of Borrowed Money Claims in excess of $20,000 in principal
amount as of the Record Date, in a combination of New Indenture Securities,
with maturities ranging from five to thirty years, shares of New Preferred
Stock and DECS and, if available, cash. Holders of Securities Claims that
timely file Proof of Claim and Release Forms in the District Court in
accordance with the Stipulation of Settlement will receive distributions and
participate in the Settlement provided for therein. Holders of Securities
Claims
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that opt out of the Class Action and timely file or are deemed to file
proofs of Claim in the Bankruptcy Court may continue to litigate their Claims
against Columbia in the District Court sitting in bankruptcy after the
Effective Date, and will be paid by Reorganized Columbia the Allowed amounts of
such Securities Claims, if and when such Claims are Allowed, in Common Stock
valued at then current market prices or, at Columbia's option, in cash, or any
combination of the foregoing, in an amount equivalent to, as of the date of
distribution, the Allowed amounts of such Claims. The Plan further provides
that the current Holders of Common Stock will retain their holdings.
The following table summarizes each category of Claims and Interests
and indicates, where appropriate, the classification of Claims and Interests,
the estimated amount at which Claims in each Class will be Allowed and, for
impaired Classes, the estimated number of Claimants or Interest Holders voting
in each Class. As the Plan contemplates the payment in full of all Allowed
Claims, the distribution for each Class thereunder is one hundred percent.
The estimated Claims amounts in the following table assume an
Effective Date of December 31, 1995.(1) Such amounts
- ----------------------------------
(1) Unless otherwise specified, all references to the Effective Date in
this Disclosure Statement and calculations based thereon assume an
Effective Date of December 31, 1995. The actual Effective Date may
differ from the assumed Effective Date set forth herein for a variety
of substantive and scheduling reasons, including the ultimate date set
by the Bankruptcy Court for the Confirmation hearing and the date upon
which conditions to the Effective Date have been
(continued...)
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constitute Columbia's present estimates of the amounts of such Claims upon
resolution of all Disputed Claims. The estimated amounts separately state the
principal portions of the Claim (which in most cases is the pre-petition Claim
amount, including pre-petition interest) and, where appropriate, estimates of
accrued post-petition interest on pre-petition indebtedness through the
Effective Date, calculated as provided in the Plan.
By far the largest percentage of all Claims Filed against Columbia's
Estate are claims for principal, interest and other amounts due on Borrowed
Money Claims. Columbia and its advisors have worked with the Creditors'
Committee and the Equity Committee and their advisors and the representatives
of and advisors to various Creditors in an effort to resolve discrepancies in
the amounts of those Claims. The method of calculating post-petition interest
on the Borrowed Money Claims, as set forth in Exhibit G to the Plan, has been
determined by Columbia after extensive discussion with the Creditors' Committee
and the Equity Committee, and is to be approved by the Bankruptcy Court as part
of the Confirmation of the Plan, if not previously approved. Columbia believes
that, except as to the Securities Claims of Opt-Out Securities Claimants, if
any, there are no material disputes over the amount at which Claims are to be
Allowed.
- ----------------------------------
(1)(...continued)
satisfied or, if waivable, waived. See Section VI.K.2, "Conditions
to the Effective Date."
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Claims in Class 3.2 and Claims in Class 7, if Columbia does not elect
to pay such Class 7 Claims, if and when Allowed, solely in cash, and Interests
in Class 8 are, or are deemed to be, impaired under the Plan. All other
Classes are unimpaired and, thus, will not vote on the Plan.
Set forth in Section II.D below is a Payout Analysis of the Plan Dated
July 26, 1995 (the "Payout Analysis"). The Payout Analysis sets forth the
estimated level of distributions under the Plan in respect of all Claims,
classified and unclassified, and is premised upon the treatment of Claims
described herein, as well as the fulfillment of the numerous assumptions set
forth in this Disclosure Statement.
C. TABLE OF SUMMARY DESCRIPTION OF CLASSES AND THEIR DISTRIBUTIONS
DESCRIPTION AND ESTIMATION DESCRIPTION OF
OF CLAIMS AND INTERESTS DISTRIBUTION UNDER THE PLAN
- -------------------------- ---------------------------
1. UNCLASSIFIED CLAIMS
-------------------
PROFESSIONAL CLAIMS: Claims for unpaid fees and Each Holder of an Allowed Professional Claim
expenses of Professionals and amounts for will receive cash in the amount of such Claim
compensation allowed under sections 330(a) and on the later of the Effective Date or the tenth
503(b) of the Bankruptcy Code. Professional day after the Claim is Allowed. Post-petition
Claims further consist of any claims for interest will be payable, to the extent Allowed
compensation by the Trustee, the Bank Agent, by the Bankruptcy Court, on amounts held back
the LESOP Indenture Trustee or other parties by order of the Bankruptcy Court with respect
pursuant to applications made under section to interim fee applications. Professional
503(b) of the Bankruptcy Code. Claims are unimpaired.
ESTIMATED PAYMENTS:
$4.8 million
DISTRIBUTION: 100%
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POST-PETITION OPERATIONAL CLAIMS: Claims Each Post-Petition Operational Claim will be
incurred by Columbia in the ordinary course of assumed by Reorganized Columbia and paid in the
its business post-petition, including tax ordinary course of business according to the
obligations, trade vendor and supplier terms of the transaction giving rise to such
obligations and post-petition obligations under Claim. Post-Petition Operational Claims are
contracts and leases. unimpaired.
ESTIMATED PAYMENTS:
Not applicable
DISTRIBUTION: 100%
ASSUMED EXECUTORY CONTRACT CLAIMS: Claims Each Holder of an Allowed Assumed Executory
arising from the assumption by Columbia of pre- Contract Claim will receive cash in the amount
petition executory contracts, including, if the of such Claim, together with post-petition
Bankruptcy Court shall approve, the Tax interest at the non-default contractual rate,
Allocation Agreement (defined in Section IV.C), if one is provided, and otherwise at the rate
and unexpired leases pursuant to section of 6% per annum, or as otherwise provided by
365(b)(1) of the Bankruptcy Code. the Bankruptcy Court. Distribution will be
made on the Effective Date or such earlier or
later time as may be authorized by the
Bankruptcy Court. Any Assumed Executory
Contract Claim that is Allowed after the
ESTIMATED PAYMENTS: Effective Date will receive cash in the amount
Pre-Petition Claims: $ 23.9 million of such Claim, together with such interest,
Post-Petition Interest: $ 5.3 million within thirty days after the end of the
Calendar Quarter in which such Claim is
DISTRIBUTION: 100% Allowed. Assumed Executory Contract Claims are
unimpaired.
U.S. TRUSTEE'S FEE CLAIMS: The quarterly The U.S. Trustee's Fee Claims which remain
statutory fees owed to the United States unpaid and outstanding as of the Effective Date
Trustee. will be paid in full in cash. The U.S.
Trustee's Fee Claims are unimpaired.
ESTIMATED PAYMENTS: $5,000
DISTRIBUTION: 100%
MISCELLANEOUS ADMINISTRATIVE CLAIMS: All Miscellaneous Administrative Claims that have
Administrative Claims not included in the been liquidated prior to the Effective Date
previous categories of Unclassified Claims, shall be paid in full in cash on the Effective
including (i) contingent indemnification Claims Date. Any Miscellaneous Administrative Claims
of officers, directors, employees and agents of that remain unliquidated as of the Effective
Columbia, TCO or other subsidiaries of Date will be assumed by Reorganized Columbia
Columbia, (ii) post-petition personal injury and paid as they come due, as otherwise agreed
Claims, (iii) indemnity Claims under the Canada by the relevant Person or as directed by the
Sale Agreement in favor of the purchaser of the Bankruptcy Court. If the indemnity Claims
stock of Columbia Canada under the Canada Sale Agreement are assumed, the
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and (iv) indemnity Claims under Columbia's present Kotaneelee Escrow will be adjusted
indemnity agreement with the Reliance Group. in accordance with the provisions of the Canada
Sale Agreement. Miscellaneous Administrative
ESTIMATED PAYMENTS: Claims that have been liquidated prior to the
$470,000 Effective Date shall receive post-petition
interest at the non-default contractual rate,
DISTRIBUTION: 100% if one is provided, and otherwise at the rate
of 6% per annum, or as otherwise provided by
the Bankruptcy Court. Miscellaneous
Administrative Claims are unimpaired.
PRIORITY TAX CLAIMS: Claims attributable to Each Holder of an Allowed Priority Tax Claim
income taxes, property taxes and any other will receive cash in the aggregate amount of
taxes entitled to priority in payment pursuant such Claim and post-petition interest thereon
to section 507(a)(8) of the Bankruptcy Code. calculated at the appropriate statutory rate,
if one is provided, and otherwise at the rate
ESTIMATED PAYMENTS: of 6% per annum, or as otherwise provided by
Pre-Petition Claims: $111.9 million the Bankruptcy Court, on the Effective Date, if
Post-Petition Interest: $24.6 million then allowed, or if not then allowed, within
thirty days from the date on which such Claim
DISTRIBUTION: 100% becomes Allowed; provided, however, that with
respect to any such Claim of the IRS for
federal income taxes pursuant to the IRS
Settlement Agreement (i) Columbia will pay such
Claim in equal quarterly installments
commencing three months from the Effective Date
over the course of six years as measured from
the date such Claim was first assessed, or such
earlier date as may be determined by
Reorganized Columbia (except that the first
quarterly installment will be paid in three
equal monthly installments commencing on the
Effective Date) with interest at the rate set
forth in Section D.7 of the IRS Closing
Agreement and (ii) Columbia will, on the
Effective Date, be reimbursed by TCO for any
portion of the Claim allocable to TCO under the
Tax Allocation Agreement and in turn will
reimburse its other subsidiaries for any sums
due to such subsidiaries under the Tax
Allocation Agreement. Priority Tax Claims are
unimpaired.
2. SECURED CLAIMS
--------------
CLASS 1: DIP FACILITY CLAIM: The Claim of The DIP Facility Claim will be paid in full on
Chemical Bank as agent under the DIP Facility. the Effective Date and the DIP Facility will
terminate by its terms on the Effective Date.
ESTIMATED PAYMENTS: Any Deficiency Claim will be treated as a
$48,000 "superpriority" Administrative Expense Claim.
The DIP Facility Claim is unimpaired.
DISTRIBUTION: 100%
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3. UNSECURED CLAIMS
----------------
CLASS 2: UNSECURED NON-BORROWED MONEY CLAIMS: Each Holder of an Allowed Class 2 Claim will
All Unsecured Claims that are not otherwise receive, on the Effective Date, cash in an
classified under the Plan, including Unsecured amount equal to the Allowed amount of such
Claims for uncashed checks, intercompany Claim, together with post-petition interest at
payables and other trade payables. Class 2 the non-default contractual rate, if one is
includes all Allowed Claims for pre-petition provided, and otherwise at the rate of 6% per
and post-petition fees and costs of Creditors annum, or as otherwise determined by the
including such Claims of (i) the Indenture Bankruptcy Court. Class 2 Claims are
Trustee arising under the 1961 Indenture and unimpaired.
(ii) the Bank Agent arising under the $500
Million Credit Agreement and the $750 Million
Agreement, if such Claims arise as a result of
contractual obligations under the relevant debt
instrument.
ESTIMATED PAYMENTS:
Pre-Petition Claims: $1.0 million
(net of setoffs)
Post-Petition Interest: $0.3 million
DISTRIBUTION: 100%
CLASS 3.1: UNSECURED BORROWED MONEY Each Holder of a Class 3.1 Claim will receive,
CONVENIENCE CLAIMS: Unsecured Borrowed Money on the Effective Date, payment in full in cash
Claims that would be classified as Class 3.2 of the aggregate of the Allowed amount of its
Claims but for the fact that such Claims did Claim and post-petition interest thereon
not exceed $20,000 in principal amount as of calculated in accordance with the paragraph of
the Record Date. Columbia believes all such Exhibit G attached to the Plan applicable to
Claims to be Debenture Claims. such Claim as if such Claim were a Class 3.2
Claim. Class 3.1 Claims are unimpaired.
ESTIMATED PAYMENTS:
Included in Estimated Payments for
Debenture Claims in Class 3.2
DISTRIBUTION: 100%
CLASS 3.2: UNSECURED BORROWED MONEY CLAIMS: Each Holder of an Allowed Class 3.2 Claim shall
All Borrowed Money Claims that, as of the receive, on the Effective Date, payment in full
Record Date, were for an amount in excess of of the aggregate of the Allowed amount of its
$20,000 in principal amount, consisting of the Claim and post-petition interest thereon
following: calculated in accordance with the paragraph of
Exhibit G attached to the Plan applicable to
such Claim. Payment will be effected by
distributing to or for the benefit of each such
Holder its Pro Rata Share of each of (i) the
Cash Consideration, if any, (ii) each Issue of
New Indenture Securities (except that Holders
of Claims entitled to receive New Indenture
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a. DEBENTURE CLAIMS: All Claims Securities aggregating less than $70,000 (in
arising under the Debentures. principal amount) will receive only one Issue
(Issue A) of New Indenture Securities), and
ESTIMATED PAYMENTS: (iii) shares of DECS having an aggregate
Pre-Petition Claims: $926.7 million Liquidation Value of $200 million and (iv)
Post-Petition Interest: $432.9 million shares of New Preferred Stock having an
aggregate Liquidation Value of $200 million;
b. $500 MILLION CREDIT AGREEMENT CLAIMS: subject to adjustment to avoid issuance of
All Claims (other than Auction Note fractional shares of DECS and New Preferred
Claims) arising under the $500 Million Stock and non-round lots of New Indenture
Credit Agreement. Securities of any Issue. The DECS and the New
Preferred Stock issued to the Holders of Class
ESTIMATED PAYMENTS: 3.2 Claims will be redeemable by Columbia, at
Pre-Petition Claims: $101 million its option, in whole or in part, at any time on
Post-Petition Interest: $31.5 million or prior to the 120th day following the
Effective Date. Upon any such redemption, each
c. $750 MILLION CREDIT AGREEMENT CLAIMS: holder of DECS and New Preferred Stock will
All Claims arising under the $750 Million receive, in exchange for such equity securities
Credit Agreement. so redeemed, cash in an amount equal to the sum
of (i) the Liquidation Value of such DECS and
ESTIMATED PAYMENTS: New Preferred Stock and (ii) if such redemption
Pre-Petition Claims: $ 404.5 million occurs after the 90th day following the
Post-Petition Interest: $ 138.2 million Effective Date, all accrued and unpaid
dividends thereon. To the extent the DECS and
d. COMMERCIAL PAPER CLAIMS: All Claims New Preferred Stock are not redeemed within the
arising under the Commercial Paper. 120-day period, the dividend rates thereon will
be reset and certain other terms will be
ESTIMATED PAYMENTS: established. Class 3.2 Claims are impaired.
Pre-Petition Claims: $ 268 million
Post-Petition Interest: $ 89.5 million
e. BID NOTE CLAIMS: All Claims arising under
the Bid Notes.
ESTIMATED PAYMENTS:
Pre-Petition Claims: $ 76.6 million
Post-Petition Interest: $26.3 million
f. AUCTION NOTE DEBT CLAIMS: All Claims
arising under the Auction Note Debt.
ESTIMATED PAYMENTS:
Pre-Petition Claims: $ 45.4 million
Post-Petition Interest: $ 15.6 million
g. MEDIUM TERM NOTE CLAIMS: All Claims
arising under the Medium Term Notes.
ESTIMATED PAYMENTS:
Pre-Petition Claims: $ 471.3 million
Post-Petition Interest: $ 225.7 million
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h. LESOP CLAIMS: All Claims of holders of
the LESOP Debentures arising under the
LESOP Guaranty.
ESTIMATED PAYMENTS:
Pre-Petition Claims: $ 87 million
Post-Petition Interest: $ 40.1 million
(to be reduced by application of the
proceeds of the sale of Common Stock by
the LESOP Trustee.)
i. RATE SWAP CLAIMS: All Claims arising
under the Rate Swap Agreement.
ESTIMATED PAYMENTS:
Pre-Petition Claim: $ 3.2 million
Post-Petition Interest: $ 0.8 million
ESTIMATED NUMBER OF CLASS 3.2 CLAIMANTS:
3,500 (based upon number of registered
holders and an estimate of the number of
beneficial owners holding in street name.
Does not include all beneficial owners.)
DISTRIBUTION ON ALL CLASS 3.2 CLAIMS: 100%
4. SECURITIES CLAIMS
-----------------
CLASS 4: SECURITIES CLAIMS: All Securities Pursuant to the Stipulation of Settlement,
Claims, the Holders of which have not filed Columbia and the other Contributors (consisting
Opt-out Forms. of the primary insurance carrier for Columbia's
officers and directors, the underwriters of
ESTIMATED PAYMENTS: Approximately $16.5 Columbia's December 6, 1990 public offering and
million (of a total Settlement Fund of $36.5 Arthur Andersen L.L.P.) shall establish a
million) will be contributed by Columbia Settlement Fund of $36.5 million (of which
approximately $16.5 will be contributed by
DISTRIBUTIONS: 100% Columbia) to settle the Class Action. The
Stipulation of Settlement provides that the
portion of Settlement Fund that is not applied
to pay counsel fees and costs of administration
shall be distributed to persons who purchased
or otherwise acquired Columbia debentures or
shares of or call options on Common Stock or
sold put options on Common Stock from
January 19, 1990 through June 18, 1991 and who
timely file Proof of Claim and Release Forms in
the District Court. Each such Holder shall
receive its share (determined in accordance
with the allocation set forth in the Class
Action Settlement Documents) of the Settlement
Fund that is not applied to pay
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counsel fees and costs of administration.
Persons not satisfying the criteria described
above shall not receive any payment under the
Class Action Settlement. Holders of Securities
Claims may elect not to participate in and be
bound by the Class Action by submitting the
Opt-out Form contemplated by the Stipulation of
Settlement, in which case they will be treated
as Class 7 Claimants, provided that they file
or are deemed to file proofs of Claim in the
Bankruptcy Court. Class 4 Claims are
unimpaired.
5. INTERCOMPANY CLAIMS
-------------------
CLASS 5: INTERCOMPANY CLAIMS: All Claims On the Effective Date, pursuant to the Columbia
asserted against Columbia and CNR on behalf of Omnibus Settlement, the Intercompany Claims
TCO in the Intercompany Claims Litigation and shall be settled and discharged in full. Class
any Claims or causes of action against Columbia 5 Claims are unimpaired.
or CNR arising out of the same or similar facts
or circumstances.
6. ASSUMED CLAIMS
--------------
CLASS 6.1: Indemnity Claims of Officers and Each Holder of a Class 6.1 Claim that is
Directors: All claims of officers, directors, Allowed on the Effective Date will receive, on
employees and agents of Columbia, TCO or the Effective Date, cash in an amount equal to
Columbia's other subsidiaries arising from the Allowed amount of such Claim. All
liabilities for which Columbia has an indemnity Indemnity Claims which are not Allowed on the
obligation under Columbia's certificate of Effective Date shall survive and be unaffected
incorporation or otherwise. by the Confirmation Order and will be assumed
and paid by Reorganized Columbia if and when
due and payable. Class 6.1 Claims are
ESTIMATED PAYMENTS: unimpaired.
Not applicable
DISTRIBUTION: 100%
CLASS 6.2: Pension Claims: All Claims relating On the Effective Date, Reorganized Columbia
to Columbia's Retirement Plan, including the will assume its obligations to the Retirement
Retirement Plan's Claims, if any, for minimum Plan, including all obligations imposed by
funding contributions required by ERISA and the ERISA. The Claims in Class 6.2 shall survive
three Claims filed by the PBGC against Columbia and be unaffected by the Confirmation Order.
with regard to the Retirement Plan. Class 6.2 Claims are unimpaired.
ESTIMATED PAYMENTS:
Not applicable
DISTRIBUTION: 100%
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CLASS 6.3: Shawmut Guaranty Claim: Columbia's The Plan will leave unaltered the legal,
secondary obligations to Shawmut Bank, N.A. for equitable and contractual rights to which
certain of the obligations of Columbia Gas of Shawmut is entitled under Columbia's guaranty
Ohio, Inc. for payments under the lease for the to Shawmut and nothing in the Confirmation
latter's headquarters located in Ohio. Order will affect such rights. The Shawmut
guaranty Claim will be assumed and paid by
ESTIMATED PAYMENTS: Reorganized Columbia if and when due and
Not applicable payable. The Class 6.3 Claim is unimpaired.
DISTRIBUTION: 100%
7. OPT-OUT SECURITIES CLAIMS:
-------------------------
CLASS 7: OPT-OUT SECURITIES CLAIMS: All Columbia shall object to and/or seek the
Securities Claims the Holders of which timely estimation of the Claims of Class 7 Claimants
file Opt-out Forms and file or are deemed to and such Claimants shall litigate their Claims
have filed their Claims in the Bankruptcy in the District Court sitting in bankruptcy.
Court. Class 7 Claimants will be paid by Reorganized
Columbia the Allowed amount of their Claims, if
ESTIMATED PAYMENTS: $0 and when such Claims are Allowed, in Common
Stock valued at then current market prices or,
DISTRIBUTIONS: Not applicable at Columbia's option, in cash, or any
combination of the foregoing, in an amount
equal to the Allowed amount of such Claims.
Class 7 Claims are impaired, unless Columbia
elects, prior to Confirmation of the Plan, to
pay such Claims, if and when Allowed, in cash,
in which case such Claims are unimpaired.
8. INTERESTS
---------
CLASS 8: INTERESTS: All Interests in Common All Interests shall survive. Class 8 Interests
Stock. may be affected by the Plan as a result of the
issuance of shares of DECS and the possible
issuance of additional shares of Common Stock.
ESTIMATED NUMBER OF INTEREST HOLDERS: Class 8 Interests are deemed impaired.
57,500 registered Stockholders, which, in
Columbia's estimate, represents
approximately 90,000 beneficial holders.
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D. PAYOUT ANALYSIS
The Columbia Gas System Inc.
Payout Analysis Reflecting Emergence @ 12/31/95
Includes Setoffs and All Claims Limitations
7/26/95
CLASS CLAIM CATEGORY NET CLAIM PAYOUT PAYOUT
----- -------------- --------- ------ ------
1. Unclassified Claims:
--------------------
1.a Administrative Claims
i. Administrative Professional Fee Claims 4,755,949 100.00% 4,755,949
ii. Post Petition Operational Claims 0 100.00% 0
iii. Assumed Executory Contract Claims 29,152,716 100.00% 29,152,716
iv. U.S. Trustee's Fee Claims 5,000 100.00% 5,000
v. Miscellaneous Administrative Claims 470,000 100.00% 470,000
------------- ------- -------------
TOTAL CLASS 1.a 34,383,665 100.00% 34,383,665
------------- ------- -------------
1.b Priority Tax Claims 136,504,705 100.00% 136,504,705
------------- ------- -------------
TOTAL 170,888,370 100.00% 170,888,370
============= ======= =============
2. Classes of Claims and Interests:
--------------------------------
2.a DIP Facility Claims 48,000 100.00% 48,000
2.b Non-Borrowed Money Claims 1,272,325 100.00% 1,272,325
3.1 Borrowed Money Convenience Claims N/A* 100.00% N/A*
3.2 Other Borrowed Money Claims**
-----------------------------
i. Debenture Claims 1,359,604,349 100.00% 1,359,604,349
ii. $500 Million Credit Claims 132,509,831 100.00% 132,509,831
iii. $750 Million Credit Claims 542,728,650 100.00% 542,728,650
iv. Commercial Paper Claims 357,486,508 100.00% 357,486,508
v. Bid Note Claims 102,854,556 100.00% 102,854,556
vi. Auction Note Debt Claims 60,902,734 100.00% 60,902,734
vii. Medium Term Note Claims 696,996,923 100.00% 696,996,923
viii. LESOP Claims 127,109,195 100.00% 127,109,195
ix. Rate Swap Claims 4,031,210 100.00% 4,031,210
------------- ------- -------------
TOTAL CLASS 3.2 3,384,223,956 100.00% 3,384,223,956
------------- ------- -------------
4.0 Securities Claims 16,500,000 100.00% 16,500,000***
5.0 Intercompany Claim 0 100.00% 0
6.0 Assumed Claims 0 100.00% 0
6.1 Indemnity Claims 0 100.00% 0
6.2 PBGC Guarantee Claims 0 100.00% 0
6.3 Shawmut Guarantee Claim 0 100.00% 0
7.0 Opt-out Securities Claims 0 100.00% 0
8.0 Interests in Common Stock of Columbia 0 100.00% 0
------------- ------- -------------
TOTAL CLASSIFIED CLAIMS 3,402,044,281 100.00% 3,402,044,281
============= ======= =============
TOTAL ALL CLAIMS 3,572,932,651 3,572,932,651
============= =============
* Included in estimates for Class 3.2.
** Certain Other Borrowed Money Claims are based on interest rates
forecasted through December 31, 1995.
*** Columbia will contribute approximately $16.5 million and an additional
$20 million will be paid by or on behalf of other Defendants in the
Class Action.
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III. BUSINESSES
A. COLUMBIA'S HISTORIC CORPORATE STRUCTURE AND OPERATION
1. GENERAL
Columbia was incorporated in Delaware in 1926 following the merger of
Columbia Gas and Electric Company and Ohio Fuel Corporation. Columbia became a
registered public utility holding company in 1938 under the HCA and, pursuant
to regulation under the HCA, divested its electric utilities in 1946, thereby
resulting in a single, integrated natural gas system.
The post-World War II demand for natural gas led to Columbia's
expansion of its pipeline system from Appalachia to the Southwest and of its
exploration and underground storage programs. Today, Columbia is one of
fourteen public utility holding companies registered under the HCA and one of
three integrated natural gas systems so registered.
Columbia today has eighteen subsidiaries, all but one of which are
wholly-owned, comprising one of the largest natural gas systems in the United
States. Columbia's subsidiaries are engaged in the three principal segments of
the natural gas business -- exploration and production, interstate transmission
and local distribution -- as well as other energy ventures such as
cogeneration, propane marketing and non-regulated gas marketing. Throughout
most of this century, the System has grown in response to increasing demand for
natural gas and market and regulatory changes in the industry. The System is a
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major supplier of natural gas in the United States. A leader in the industry,
Columbia, through its subsidiaries, has developed new energy ventures such as
cogeneration plants (producing electricity and thermal energy from natural
gas-fueled generating systems for manufacturing and consumer needs),
established one of the country's first natural gas market centers in response
to a changing domestic energy market, is recommissioning part of North
America's largest liquefied natural gas facility at Cove Point, Maryland, and
is utilizing new technologies such as natural gas vehicles, appliances and
horizontal drilling. Columbia also has pursued environmental conservation and
safety, as exemplified by the environmental assessment and remediation programs
of TCO and Columbia Gulf Transmission Company ("Columbia Gulf") along their
approximately 24,000-mile pipeline system and conservation measures at the Cove
Point facility of Columbia LNG Corporation ("Columbia LNG").
2. COLUMBIA BUSINESSES
The operations of Columbia's subsidiaries are briefly summarized
below. For further information with respect to those operations, see the
Columbia Annual Report and the Columbia Quarterly Report attached hereto as
Exhibits 2 and 3, respectively.
a. EXPLORATION AND PRODUCTION (E&P)
Two Columbia subsidiaries, Columbia Gas Development Corporation
("Columbia Gas Development") and CNR, explore for,
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develop, acquire and produce natural gas and oil in the United States. These
companies hold interests in more than two million net acres of gas and oil
leases and have proved oil and gas reserves in excess of 750 billion cubic feet
of gas equivalent. These "E&P" operations are focused in the Appalachian,
Arkoma, Permian, and Williston basins, both onshore and offshore in the Gulf
Coast areas of Texas and Louisiana, and in Utah and California. Columbia's E&P
subsidiaries own more than 6,100 net natural gas and oil wells. In 1994, these
companies produced 66.7 billion cubic feet of natural gas and 3.6 million
barrels of crude oil.
b. INTERSTATE TRANSMISSION
Columbia owns two interstate natural gas transmission companies, TCO
and Columbia Gulf, which operate an approximately 24,000 mile pipeline network
that extends from offshore in the Gulf of Mexico to New York and the eastern
seaboard. They serve, directly or through local retail distribution companies
("LDCs"), more than eight million customers in fifteen Northeastern, Middle
Atlantic, Midwestern and Southern states and the District of Columbia.
Additionally, TCO operates one of the nation's largest underground natural gas
storage systems.
By virtue of FERC Order No. 636, which took effect in 1993, TCO and
others in the pipeline industry have had to restructure their operations,
becoming primarily transporters, rather than merchants, of natural gas.
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c. LOCAL DISTRIBUTION COMPANIES
Columbia's five distribution LDC subsidiaries provide natural gas
service to more than 1.9 million residential, commercial and industrial
customers in Ohio, Pennsylvania, Virginia, Kentucky and Maryland. With more
than 29,000 miles of distribution pipelines, these companies serve major
markets such as: Columbus, Lorain, Parma, Springfield and Toledo in Ohio;
Gettysburg, York and a part of Pittsburgh in Pennsylvania; Lynchburg, Staunton,
Portsmouth and Richmond suburbs in Virginia; Ashland, Frankfort and Lexington
in Kentucky; and Cumberland and Hagerstown in Maryland. In 1994, these five
LDCs provided approximately 513 billion cubic feet of natural gas to their
customers.
d. COLUMBIA GAS SYSTEM SERVICE CORPORATION
Columbia Gas System Service Corporation (the "Service Corporation"), a mutual
service company approved by the SEC under the HCA, cost-effectively provides a
broad range of managerial, specialized and other business services to support
the operations of Columbia and its subsidiaries. These services include
electronic data processing, risk management, accounting, legal, financial,
environmental, tax, human resources, auditing and other services for Columbia
and its subsidiaries. Through economies of scale and efficiency, the Service
Corporation is able to service the diverse and specialized needs of Columbia
System businesses.
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e. OTHER ENERGY OPERATIONS
Columbia companies are also engaged in other energy businesses which
are highlighted below.
Columbia Energy Services Corporation is the System's non-regulated
affiliate which markets natural gas and provides an array of supply and fuel
management services to distribution companies, independent power producers and
other large end users both on and off Columbia's transmission and distribution
pipeline systems.
Columbia Propane Corporation and Commonwealth Propane, Inc. sell
propane at wholesale and retail to more than 68,000 customers in Virginia,
Pennsylvania, Ohio, Maryland, North Carolina, Kentucky, New York and West
Virginia.
Columbia LNG, an approximately 92%-owned subsidiary of Columbia, in
partnership with a subsidiary of Potomac Electric Power Company, has started
construction of a FERC-approved natural gas peaking facility at the Cove Point,
Maryland facility referred to above. Peaking and related services are expected
to start in late 1995 to meet the peak demands for natural gas in the
mid-Atlantic area.
TriStar Ventures Corporation ("TriStar") develops new business
opportunities in power generation and other energy-related markets. Its
primary focus is the development, ownership and operation of natural gas-fueled
cogeneration and independent power projects. Its cogeneration projects include
interests in a 117 megawatt facility at the B.F. Goodrich
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manufacturing plant in Pedricktown, New Jersey, a 44 megawatt facility at
International Paper's Anitech plant in Binghamton, New York, a 46 megawatt
facility at the Progresso Foods plant in Vineland, New Jersey and an 85
megawatt facility in Rumford, Maine.
Columbia Coal Gasification Corporation ("Coal Gasification") owns more
than 500 million tons of coal reserves in the Appalachian area. Approximately
fifty percent of the total reserves are leased to other companies for
development.
B. PUBLIC UTILITY HOLDING COMPANY ACT REGULATION AND SYSTEM
FINANCING; SEC APPROVAL OF THE PLAN
1. REGULATION OF COLUMBIA BY THE SEC UNDER THE HCA;
EXTERNAL AND INTERNAL COLUMBIA FINANCING
a. REGULATORY FRAMEWORK
As noted above, Columbia is a public utility holding company,
registered and regulated by the SEC under the HCA. The HCA provides an
extensive regulatory framework which limits the business activities of the
System to the operation of utility companies (defined under the HCA to be the
local retail distribution companies) and such nonutility businesses as are
reasonably incidental or economically necessary or appropriate to the utility
operations. On an ongoing basis, the HCA requires prior approval by the SEC
for issuances or acquisitions of securities by Columbia or any of its public
utility subsidiaries and for acquisitions of securities by any of its
non-public utility subsidiaries.
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The HCA also establishes controls over certain transactions among
System companies, prohibits upstream loans to a parent company and establishes
procedures for approval of a subsidiary mutual service company to provide
services to affiliates generally at cost according to strict cost accounting
and allocation standards.
Sections 6 and 7 of the HCA govern the issuance by Columbia and any
Columbia subsidiary of its own securities, including the securities to be
issued by Columbia under the Plan or in connection therewith. Sections 9 and
10 of the HCA govern Columbia's acquisition of securities of its subsidiaries.
From time to time Congress has considered proposals either to repeal the HCA in
its entirety or to modify it substantially.
b. SYSTEM EXTERNAL AND INTERNAL FINANCING
Substantially all outside funding of the System historically has been
implemented through public equity and debt offerings by Columbia and borrowings
by Columbia from banks and the transfer of the proceeds to Columbia
subsidiaries through purchases of securities from those subsidiaries. Because
Columbia itself represents the aggregate of the diversified credits of its
subsidiaries, historically it had enjoyed ready and cost-efficient access to
the financial markets.
With minor exceptions, all System subsidiaries obtain their long-term
capital and are financed short-term through the issuance and sale to Columbia
of common stock and the issuance and sale to Columbia of unsecured installment
promissory notes
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(or, in the case of TCO after 1985, mortgage bonds secured by substantially all
its assets) on terms that approximate the terms of long-term debt instruments
issued by Columbia. As with Columbia's issuance of long-term debt securities,
the issuance and purchase of subsidiary installment promissory notes are
regulated under the HCA and subject to approval by the SEC. The rate on new
intercompany installment promissory notes has been based on a published market
rate for comparable utility issues.
Funds for inventory purchases and other short-term working capital
needs of Columbia's subsidiaries are obtained from a short-term financing
vehicle (the "System Money Pool") administered by the Service Corporation under
which subsidiaries with temporary excess funds loan those funds to subsidiaries
in the System (other than TCO) in need of funds. To the extent that the funds
deposited in the System Money Pool are insufficient to meet the needs of
borrowing subsidiaries, Columbia deposits funds in the System Money Pool and
such funds become available for borrowing by the subsidiaries requiring
short-term working capital. The interest rates on short-term loans to the
subsidiaries from the System Money Pool historically have been based on the
weighted average costs for Columbia's short-term transactions. Since the
filing of Columbia's bankruptcy petition, the interest rate utilized for the
System Money Pool for borrowings and deposits has been the yield on excess
funds invested in money market instruments.
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Columbia anticipates that, upon consummation of the Columbia Plan, it
will resume and, for the foreseeable future, continue the financing of the
operations of the System subsidiaries in a manner similar to that described
above for the pre-Petition Date period.
2. HCA JURISDICTION OVER THE TERMS OF THE PLAN
Under Section 11(f) of the HCA, the Plan must be approved by the SEC
after public notice and opportunity for hearing, and, under Section 11(g) of
the HCA, a report by the SEC on the Plan (or an abstract of such report), made
after opportunity for hearing, must be distributed to Columbia's Stockholders
and Creditors in order to solicit their acceptances of the Plan.
While pursuant to HCA Rule 49(c), SEC review of reorganization plans
of non-utility subsidiaries of registered holding companies such as TCO is not
required, several of the transactions which are or may be necessary in order to
consummate the TCO Plan (as distinguished from the TCO Plan itself) require
approvals by the SEC under the HCA. Specifically, (i) the acquisition by
Columbia of securities of TCO in satisfaction of its existing Secured Claims
against TCO requires approval under Sections 9 and 10 and (ii) any issuance of
Common Stock or other securities of Columbia pursuant to the Plan or the TCO
Plan and Columbia's guaranties in respect of payments to Creditors under the
TCO Plan require approval under Sections 6, 7 and 12. In each case, public
notice and an
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opportunity for a hearing before the SEC by interested parties are required.
In accordance with section 11(f) of the HCA, on May 4, 1995, Columbia
filed an Application-Declaration on Form U-1 with the SEC seeking approval of
the Plan and Columbia's participation in the TCO Plan and seeking authorization
to disseminate this Disclosure Statement, along with the SEC's report, which
application was amended on June 21, 1995 (such application, as amended, the
"Application"). In the Application, Columbia requested that the SEC issue its
Notice with respect to Columbia's Application no later than June 23, 1995. On
June 23, 1995, the SEC issued its Notice with respect to the Application which
set July 17, 1995 as the deadline for filing written comments or requests for
hearing with the SEC. As of the date hereof, Columbia is not aware of any
written comments or requests for hearing filed with the SEC. Columbia will
supplement this Disclosure Statement when a report has been issued by the SEC
under Section 11(g) of the HCA with respect to the Plan.
Columbia has no reason to believe that the Plan will not be approved
by the SEC. Similarly, neither Columbia nor TCO has any reason to believe that
the TCO Plan transactions which require approval by the SEC will not be so
approved.
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IV. SUMMARY OF SIGNIFICANT CLAIMS IN COLUMBIA'S CHAPTER 11 CASE AND THEIR
SETTLEMENTS OR PROPOSED RESOLUTIONS
A. BORROWED MONEY CLAIMS AND THE NEGOTIATIONS AND SETTLEMENT OF
SUCH CLAIMS
The majority of the Claims Filed against Columbia are unsecured Claims
for amounts due under various short-term and long-term borrowing arrangements,
including: (i) Debenture Claims and Medium Term Note Claims under the 1961
Indenture, (ii) Claims under the $500 million Credit Agreement (other than the
Auction Note Debt Claims), (iii) Claims under the $750 Million Credit
Agreement, (iv) Commercial Paper Claims, (v) Auction Note Debt Claims, (vi) Bid
Note Claims, (vii) Claims under the Rate Swap Agreement, and (viii) Claims by
the Holders of the LESOP Debentures issued in connection with the LESOP,
including claims under the LESOP Guaranty. A more detailed description of the
nature, amount and treatment of these Borrowed Money Claims is contained in
Section VI.A, "Classification and Treatment of Claims and Interests."
During the course of Columbia's Reorganization Case, Columbia and its
Professionals have held regular discussions with the Equity Committee and the
Creditors' Committee, individual Creditors, and their respective professional
advisors regarding the quantification and treatment of the Borrowed Money
Claims against Columbia. The discussions with the Columbia Committees have
related to, inter alia, (i) the scope of the entitlement of the Holders of
Borrowed Money Claims to distributions in respect of post-Chapter 11 petition
interest, (ii) their entitlement to
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call premiums or pre-payment penalties, in the case of certain issues of
Debentures and Medium Term Notes, (iii) the method of satisfaction of the
Borrowed Money Claims, and (iv) the structure and terms of various securities of
Reorganized Columbia to be distributed to the Borrowed Money Creditors under the
Plan.
The Bankruptcy Code (consistently with pre-Bankruptcy Code federal
insolvency law) requires solvent Chapter 11 debtors to compensate impaired
creditors for the use of their funds during the pendency of bankruptcy
proceedings. This requirement is reflected in section 726(a)(5) of the
Bankruptcy Code which provides for the payment of post-petition interest at the
"legal rate" in cases of liquidations of debtors' estates where proceeds exceed
the amounts required to pay all "allowed" claims (that is, claims for principal
and pre-petition interest and other claims which have been allowed under
section 502 of the Bankruptcy Code), as well as in case law reflecting an
equitable obligation for solvent debtors to compensate creditors for their
delay in payment. Given that Columbia is a solvent debtor, the Plan provides
that distributions to its Creditors will include amounts in respect of
post-petition interest together with interest on interest. As to the
appropriate rate of such post-petition interest, the weight of existing
authority indicates that, with respect to contractual claims, such rate should
normally be based on the rate provided in the underlying contract or, if none
is provided, at the applicable state statutory rate.
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While acknowledging the obligation of Columbia as a solvent debtor to
pay post-petition interest to impaired Creditors, the Equity Committee took the
position that the Bankruptcy Court has the ability to apply different interest
rates, in appropriate circumstances, that distributions of post-petition
interest should be limited to simple interest from the date of the filing of
the Chapter 11 petition to the date of distributions under the Plan at the
Federal Judgment Interest Rate as of the Petition Date, with interest on
interest payable at such Federal Judgment Interest Rate where the underlying
contract provides for interest on missed interest payments and was executed
after mid-1989, and that the Holders are not entitled to call premiums and/or
liquidated damages. In contrast, the Creditors' Committee took the position
that such distributions should be measured by the contractual provisions
relating to interest and to interest on interest applicable to each such
tranche (or, absent any contractual provision, by the New York legal rate of
interest) and that, as to certain tranches, post-petition interest should be
compounded whether or not compounding was called for by contract or applicable
law and, in addition, that certain tranches should be entitled to call premiums
and/or liquidated damages.
In order to facilitate an agreement among the parties, and to avoid
the potentially significant delay and expense of litigation, Columbia proposed
a compromise approach which, after further discussions with the respective
Committees and further
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refinement, is now embodied in the Plan. Under this approach, assuming a
December 31, 1995 Effective Date, distributions in respect of post-petition
interest and interest on interest shall be made on Allowed Borrowed Money
(Classes 3.1 and 3.2) Claims in the manner set forth on Exhibit G to the Plan
and described in Section VI.A.2.d, "Class 3.2-Borrowed Money Claims." No
distributions will be made in respect of call premiums or prepayment penalties.
B. THE INTERCOMPANY CLAIMS LITIGATION
1. STIPULATION AND ORDER CONCERNING PROSECUTION OF THE
INTERCOMPANY CLAIMS
On February 4, 1992, the Bankruptcy Court approved a stipulation (the
"Stipulation") among Columbia, TCO and the TCO Creditors' Committee assigning
to the TCO Creditors' Committee the right to investigate and prosecute, on
behalf of the TCO estate, the Intercompany Claims, including all Claims against
Columbia or CNR relating to transactions occurring prior to the Petition Date
that may give rise to actions under sections 510(c), 544, 545, 547, 548, 550(a)
and 550(b) of the Bankruptcy Code or under applicable non-bankruptcy law for
fraudulent conveyance, equitable subordination, illegal dividend, corporate
waste, alter ego, piercing the corporate veil, preference, invalidation of
unperfected liens or security interests and breach of fiduciary duty.
The Stipulation allowed the claims to be pursued without conflict by
the TCO creditors that potentially had the most to gain from the litigation and
provided that TCO would cooperate
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with the TCO Creditors' Committee in the investigation and prosecution of all
Intercompany Claims. The order approving the Stipulation reserved to TCO and
Columbia the right to include settlement of the litigation in any plan(s) of
reorganization. Settlement negotiations were conducted prior to the filing of
a complaint, but did not produce a settlement.
2. INTERCOMPANY CLAIMS LITIGATION PROCEEDINGS
On March 18, 1992, the TCO Creditors' Committee Filed a complaint
against Columbia and CNR asserting the Intercompany Claims (the "Intercompany
Complaint") and Filed a proof of claim against Columbia based upon the
Intercompany Claims, which are summarized below.
a. ALLEGATIONS OF EQUITABLE SUBORDINATION
The Intercompany Complaint asserted that from 1985 to the filing of
TCO's bankruptcy petition in 1991, Columbia had used its position as sole
stockholder of TCO to gain for itself an unfair advantage over TCO's
unaffiliated creditors by maintaining TCO in an undercapitalized or insolvent
condition while Columbia removed valuable assets from TCO and repositioned
itself as a secured creditor in TCO's remaining assets so that Columbia would
be at the head of the creditor line in the event of a TCO bankruptcy. Among
the transactions challenged as part of the equitable subordination case were
the transfer of TCO's oil, gas and coal properties to CNR in exchange for the
return of TCO stock; the payment by TCO of $130 million in dividends to
Columbia; the use of new secured debt to Columbia to pay
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principal and interest on TCO's pre-1985 unsecured debt owed to Columbia; and
the increase in TCO's secured debt to Columbia prior to bankruptcy. The
Intercompany Complaint alleged that these actions had conferred an unfair
advantage on Columbia over TCO's other creditors and caused injury to TCO and
its creditors. As a remedy for this conduct, the Intercompany Complaint sought
the equitable subordination of Columbia's claims against the TCO estate to the
claims of TCO's other creditors.
b. ALLEGATIONS SEEKING RECHARACTERIZATION OF
DEBT AS EQUITY
The Intercompany Complaint also asserted that Columbia's secured
advances to TCO from 1985 through 1991 should be recharacterized as equity
contributions because those loans were made by an insider at a time when TCO
was undercapitalized or had inadequate equity capital such that no
disinterested lender would have been willing to lend a like amount of funds to
TCO on similar terms. The Intercompany Complaint asserted that Columbia's use
of secured debt to finance TCO in these circumstances inequitably shifted the
risk of loss from Columbia to TCO's other creditors.
c. ALLEGATIONS OF FRAUDULENT CONVEYANCES
The Intercompany Complaint further asserted that the transfer of TCO's
oil, gas and coal properties to CNR, the payment of dividends to Columbia after
July 31, 1988, the payment of principal and interest on TCO's prior unsecured
debt to Columbia after July 31, 1988, and the untimely perfection of certain of
Columbia's liens during that period constituted
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fraudulent conveyances under applicable state and federal law. The
Intercompany Complaint alleged that those transfers were made with the intent
to hinder, delay or defraud TCO's creditors; that TCO was insolvent or engaged
in business with unreasonably small capital at the time of those transfers; and
that TCO did not receive fair consideration.
d. ALLEGATIONS OF VOIDABLE REDUCTION IN CAPITAL
The Intercompany Complaint further alleged that TCO's capital was
impaired as a result of the transfer of TCO's oil, gas and coal properties to
CNR and that, therefore, that transfer was avoidable under applicable state and
federal law. That claim was withdrawn at trial.
e. ALLEGATIONS OF PREFERENCES
The Intercompany Complaint also asserted that TCO's payments of
principal and interest on its unsecured debt to Columbia and the untimely
perfection by Columbia of certain liens on TCO real estate between July 31,
1990, and the Petition Date, were transfers made on account of antecedent debts
when TCO was insolvent which enabled Columbia to receive more than it would
have received in a liquidation of TCO under Chapter 7, and thus voidable
preferences under section 547 of the Bankruptcy Code.
3. RESPONSE OF COLUMBIA
Columbia's response to the Intercompany Complaint was, among other
things, that:
(i) with respect to the fraudulent conveyance claims,
such transfers were made for legitimate business reasons
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and fair consideration, TCO was solvent and sufficiently capitalized at all
relevant times and did not act to hinder, delay or defraud its creditors, that
dividends were paid in accordance with Delaware Corporation Law and that TCO
had sufficient earnings and/or surplus to pay such dividends to Columbia;
(ii) with respect to the preference claims, that TCO
was solvent at the time the payments were made; that the loans were obtained
and the payments were made in the ordinary course of TCO's business; that the
loans were repaid in accordance with their regular payment terms; and TCO's
payments of principal and interest on Columbia's unsecured debt were not
voidable preferences under section 547 of the Bankruptcy Code;
(iii) with respect to claims for equitable
subordination and recharacterization of Columbia's debt as equity, when TCO
encountered severe business problems in 1985, Columbia could have either
supported TCO or allowed it to enter bankruptcy; the decision by Columbia to
support TCO and avert its bankruptcy immensely benefitted TCO and its
creditors, especially Producers that received payments made by TCO from 1985 to
1987 of approximately $1 billion to reform TCO's large Southwest Producer
contracts with prices above the prevailing market price, including
approximately $800 million paid primarily pursuant to TCO's Producer Price
Reduction Purchase Plan (the "PPRPP") and more than $1.6 billion in
above-market payments for gas; supporting TCO with unsecured debt or equity was
foreclosed by
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Columbia's duties to its equity and debt securityholders and thus secured debt
was the only means of providing TCO with financial support; TCO was solvent and
adequately capitalized during the relevant period; all of TCO's dividends were
legally paid, reasonable and appropriate; through Columbia's support, TCO
continued to operate successfully until record warm weather arrived in early
1990; TCO paid all its obligations as they came due (including those owed to
Producers and Columbia alike); TCO did not prepay unsecured debt or in any way
convert it to secured debt; Columbia's conduct was neither inequitable nor
injurious to TCO's other creditors; and any alleged advantage to Columbia over
other creditors in bankruptcy is derived from its unique position--unlike other
creditors, Columbia provided new financing to TCO and did so at a time when
TCO's financial position was precarious; the allegation regarding
recharacterization of debt as equity is not a separate claim under the
Bankruptcy Code and, in any event, recharacterization would be improper because
it benefitted creditors when TCO incurred the debt and Columbia received SEC
approval to finance TCO on a secured basis after public notice; in addition,
only initial undercapitalization, which is not alleged in the Intercompany
Complaint, could support a claim for recharacterization, and the Intercompany
Complaint also fails to adequately allege facts that could support a finding of
injury or unfair advantage as is required under section 510(c) of the
Bankruptcy Code.
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4. PRE-TRIAL INTERCOMPANY CLAIMS LITIGATION PROCEEDINGS
On April 13, 1992, the Bankruptcy Court entered a scheduling order
with respect to discovery and procedures relating to the Intercompany Claims.
Hundreds of thousands of document pages were produced to the TCO Creditors'
Committee by TCO, Columbia and CNR, and depositions of two dozen former or
current employees of TCO and Columbia were taken. In addition, approximately a
dozen expert witnesses were deposed by the parties.
On May 8 and 14, respectively, the TCO Creditors' Committee filed A
Demand for Jury Trial and a Motion to Withdraw the Jurisdictional Reference,
which requests were denied by the District Court as well as by the United
States Court of Appeals for the Third Circuit.
In May through June 1992, the Equity Committee and the Creditors'
Committee both intervened in the Intercompany Claims Litigation as
defendant-intervenors and answered the Intercompany Complaint jointly, and
TCO's Customers' Committee intervened as a plaintiff-intervenor and Filed a
complaint substantially similar to the Intercompany Complaint.
On June 30, 1992, Columbia Filed an objection to the TCO Creditors'
Committee's proof of claim filed on behalf of TCO against Columbia, which was
consolidated with the Intercompany Complaint pursuant to a consent order signed
on July 31, 1992.
In June 1992, Columbia and CNR Filed a Motion for Partial Judgment on
the Pleadings and Partial Summary Judgment (the "Summary Judgment Motion") as
to the equitable subordination,
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recharacterization and certain other claims in the Intercompany Complaint. The
parties (including the intervening committees) briefed the Summary Judgment
Motion extensively, first in 1992 and then, based upon the factual record
developed during discovery, again in 1993. The Summary Judgment Motion was
denied shortly before trial without opinion.
On May 13, 1994, the Bankruptcy Court made asua sponte motion to the
District Court for withdrawal of the jurisdictional reference of the
Intercompany Claims Litigation. On May 25, 1994, the District Court granted
the Bankruptcy Court's sua sponte motion and withdrew the jurisdictional
reference of the Intercompany Claims Litigation.
5. THE INTERCOMPANY CLAIMS TRIAL
Trial before the Honorable Joseph J. Farnan commenced in the District
Court on September 12, 1994. The trial was completed on October 25, 1994. The
Columbia Creditors' and Equity Committees participated in trial preparation and
defense and the preparation of post-trial submissions.
During the trial the TCO Creditors' Committee called three fact
witnesses (as adverse witnesses) and six expert witnesses and offered 677
exhibits in support of TCO's Claims against Columbia. In their defense,
Columbia and CNR called four fact witnesses and seven expert witnesses and
offered 184 exhibits in opposition to the evidence presented by the TCO
Creditors' Committee. Each side designated portions of depositions in support
of its position. All of the fact witnesses testifying at
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trial or by deposition were present or former officers of Columbia or TCO.
Following the trial, both sides submitted proposed findings of fact,
reply findings of fact, proposed conclusions of law, and post-trial argument.
These post-trial written submissions were completed on December 20, 1994.
Judge Farnan had announced that he would issue his decision around June 1,
1995. However, Columbia and the TCO Creditors' Committee have asked Judge
Farnan to defer his decision pending further proceedings on the consensual
settlement of the Intercompany Claims contained in the proposed reorganization
plans, which decision will be moot if the Plans are consummated.
6. SUMMARY OF THE TCO CREDITORS' COMMITTEE POSITION
The TCO Creditors' Committee contends that it established at trial
that between 1985 and 1991 Columbia was carrying out a plan to use its control
over TCO to gain for itself an inequitable advantage over TCO's general
unsecured creditors. The TCO Creditors' Committee contends that the evidence
showed (i) that Columbia formulated this plan in late 1984 and early 1985 when
TCO was experiencing severe financial problems, including the possibility that
it might soon be forced into bankruptcy; (ii) that Columbia recognized that, as
stockholder and unsecured creditor of TCO, it had little chance of holding on
to its investment in TCO if TCO went into bankruptcy at that time; and (iii)
that to avoid the loss of its investment and gain a priority over TCO's other
creditors, Columbia devised and
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implemented a plan to forestall an immediate TCO bankruptcy and maintain
Columbia's control over TCO while Columbia removed assets from TCO and
repositioned itself as a secured creditor in TCO's remaining assets, thereby
shifting the risk of loss to TCO's other creditors in case TCO failed.
The TCO Creditors' Committee contends that the evidence further showed
that Columbia's plan included (i) the removal of TCO's valuable oil, gas and
coal properties for the benefit of Columbia through the transfer of those
assets to CNR in exchange for the return of shares of TCO's own stock which had
no value to TCO; and (ii) the removal of an additional $130 million from TCO
through the payment of dividends by TCO to Columbia when TCO was
undercapitalized and needed additional cash. The TCO Creditors' Committee
contends that the evidence also showed that TCO borrowed additional secured
debt from Columbia to pay those dividends, and that Columbia's equity interest
was thereby in effect converted into secured debt having a priority over TCO's
unsecured creditors.
In addition, the TCO Creditors' Committee contends that the evidence
at trial showed that Columbia made several changes in its practices with
respect to TCO's financial structure between 1985 and 1991 for the purpose of
improving Columbia's claim position in the event of a TCO bankruptcy, including
(i) leaving TCO severely undercapitalized from 1985 through 1991 so as to
minimize Columbia's equity investment at risk in TCO without reducing its
ownership and control; (ii) the institution of a new
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policy in 1985 of meeting all of TCO's financing requirements from 1985 onwards
exclusively with secured debt from Columbia in an attempt to gain a secured
claim on all of TCO's remaining assets; and (iii) the conversion of over $300
million of Columbia's pre-1985 unsecured loans to TCO into secured loans by
having TCO borrow new secured debt from Columbia to repay the prior unsecured
debt, thereby elevating Columbia's claim in bankruptcy over that of TCO's other
unsecured creditors.
The TCO Creditors' Committee contends that the evidence showed that
Columbia's conduct was inequitable and, unless remedied by the District Court,
would result in an unfair advantage for Columbia in the distribution of the TCO
estate and a corresponding injury to TCO's other creditors.
The TCO Creditors' Committee contends that the evidence at trial also
showed that a number of these transactions could be set aside as fraudulent
conveyances or voidable preferences. Thus, the TCO Creditors' Committee
contends that the evidence established (i) that the transfer of TCO's oil, gas
and coal properties to CNR was both an intentional fraudulent conveyance and a
constructive fraudulent conveyance under section 548 of the Bankruptcy Code and
Delaware fraudulent conveyance law; (ii) that the dividends paid to Columbia in
the three years prior to TCO's bankruptcy were fraudulent conveyances under
Delaware law; (iii) that the new liens given to Columbia in connection with the
conversion of TCO's pre-1985 unsecured debt to Columbia into secured debt in
the three years prior to bankruptcy were
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fraudulent conveyances under Delaware law; and (iv) that the liens acquired by
Columbia in connection with the conversion of TCO's pre-1985 unsecured debt to
Columbia into secured debt in the one year prior to bankruptcy and those liens
that Columbia failed to perfect on a timely basis prior to the preference
period were voidable preferences under section 547 of the Bankruptcy Code.
7. SUMMARY OF COLUMBIA'S ANALYSIS OF THE INTERCOMPANY CLAIMS
Columbia believes that the TCO Creditors' Committee failed to show at
trial (i) that any transfers by TCO to Columbia were improper or inequitable or
that any such transfers (or liens) constituted fraudulent conveyances or
voidable preferences; (ii) that the secured financing of TCO by Columbia (or
any other conduct of Columbia) was improper or inequitable or that Columbia
obtained any unfair advantage thereby; (iii) that TCO accelerated any payments
to Columbia on unsecured debt or that any unsecured debt was converted to
secured debt; (iv) that the secured financing by Columbia of TCO injured or
unfairly disadvantaged any group of actual or potential creditors of TCO; or
(v) that TCO was initially undercapitalized.
Columbia also believes that the credible evidence at trial
demonstrates that the two-part plan developed by TCO and Columbia in response
to TCO's problems in 1985 was a reasonable and bona fide attempt to solve TCO's
problems permanently, which in large part succeeded until adverse regulatory
and market developments followed by unprecedented warm weather in 1990-91 led
to TCO's
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Chapter 11 filing. The evidence presented at trial also shows that (i) TCO's
problems in 1985 and the attendant increase in its debt/equity ratio were a
result of adverse business developments unrelated to Columbia's conduct; (ii)
all financing of TCO was approved by the SEC, after public notice and
opportunity for objection; (iii) TCO repaid unsecured debt only as it came due;
(iv) TCO had sufficient net cash flow from operations to fund all of its debt
and dividend payments to Columbia; (v) TCO's payment of principal and interest
to Columbia was in the ordinary course of business and pursuant to the terms of
loans made in the ordinary course of business that had been approved by the
SEC; (vi) providing TCO with unsecured debt or equity in connection with the
large debt incurred to buy out Producer contracts in 1985 would have been
inconsistent with Columbia's duties to its own creditors and shareholders; and
(vii) all TCO's dividends were proper.
Most important, Columbia contends that the trial record demonstrates
that Columbia's continued funding of TCO greatly benefitted TCO's creditors,
since it enabled TCO (i) to continue operating and fulfilling TCO's obligations
to outside creditors (including the purchase of gas from Producers at prices
above spot market prices) and (ii) to substantially reduce potential Producer
claims against the TCO estate by the payment of approximately $850 million over
two years to Producers under the PPRPP, the continued performance of the
long-term gas contracts from 1986 through mid-1991, and the expenditure of more
than
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$200 million for buy-outs (and buy-downs) of long-term contracts after 1986.
Finally, Columbia believes that the credible evidence demonstrates
that the CNR transfer was not a fraudulent conveyance because TCO was in fact
solvent and had sufficient capital available to it at the time of the transfer
(and immediately thereafter) and the transfer was not made with fraudulent
intent, but was made to further long-standing substantial and legitimate
business purposes that were shared and effectuated by many other pipelines,
including ensuring that unregulated properties were maintained in a separate
unregulated company where they could be managed and developed more efficiently
free from regulatory constraints.
8. SETTLEMENT OF THE INTERCOMPANY CLAIMS
The outcome of the numerous legal and factual issues raised by the
Intercompany Claims Litigation is not without doubt. Based on the position of
the parties at trial, the asserted range of outcomes varies from zero recovery
to in excess of $1 billion. In addition, any decision by the trial court would
likely be subject to costly and time-consuming appeals. The appeals could
result in a reversal and a new trial that would only further delay resolution
of these Claims and the payment of TCO's creditors. The settlement and release
of these Claims pursuant to the Columbia Omnibus Settlement allows TCO's
creditors an opportunity to receive substantial cash payments upon the
Effective Date and permits TCO and Columbia the opportunity to
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emerge from bankruptcy proceedings without further extended delay. The
Columbia Omnibus Settlement, including the settlement of the Intercompany
Claims thereunder, is subject to Bankruptcy Court approval as part of
Confirmation of the Plan and of the TCO Plan.
C. THE IRS CLAIMS
1. THE IRS PRE-PETITION CLAIMS AND SETTLEMENT
On or about March 13, 1992, the IRS timely filed four duplicative
proofs of claim against Columbia as well as identical claims against TCO, each
in the amount of $553,728,311.39 (the "IRS Claims"). The IRS Claims asserted
claims for income taxes, plus penalties and interest, for the taxable years
ending 1980, 1981, 1983, 1987, 1988 and 1990 and for excise taxes (Form 720)
for the period ended June 30, 1991 and protective claims for pension excise
taxes. The IRS Claims asserted that (i) $11,667,918.33 constituted a secured
claim by virtue of a set-off of refunds due for the taxable years 1979, 1982
and 1989, (ii) $461,884,205.75 constituted an unsecured priority Claim and
(iii) $80,176,187.31 constituted a general unsecured Claim.
Columbia disputed both the amount and priority of the IRS Claims and
engaged in extensive negotiations, along with TCO, over the IRS Claims.
Ultimately Columbia and its subsidiaries, including TCO, entered into the IRS
Settlement Agreement with respect to the IRS Claims.
The principal federal income tax issues raised by the IRS Claims
consisted of: (i) IRS objections to the treatment by TCO
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as deductible expenses of approximately $850 million in payments made by TCO to
Producers under the PPRPP and for other similar payments to Producers from 1985
to 1987 in order to obtain price and take-or-pay reductions and for other
contract reformation costs under gas purchase contracts which TCO had with such
Producers; (ii) TCO's ability to deduct in certain tax years expenses that had
previously been included in the valuation of its book and tax LIFO inventory
layer; and (iii) as to TCO as well as other members of the Columbia
consolidated tax group (the "Columbia Group"), questions relating to the
deductibility of software development costs incurred during the taxable years
1985 to 1990.
The IRS Closing Agreement was approved by the Joint Committee on
Taxation of the United States Congress on June 30, 1994 and was approved by an
order of the Bankruptcy Court dated October 12, 1994. The IRS settlement
reduced the IRS Claims for the Columbia Group as a whole from approximately
$554 million to $111,902,703.00 plus post-petition interest (of approximately
$24.6 million projected to December 31, 1995) to be calculated pursuant to the
IRS Settlement Agreement, and the Bankruptcy Court's order approving the
settlement allowed the IRS Claims, as compromised pursuant to the IRS
Settlement Agreement, to be priority Claims under section 507(a)(8) against
both Columbia and TCO. It is anticipated that future tax benefits arising from
deductions permitted the Columbia Group in 1991 through 1995 pursuant to the
IRS Settlement Agreement (the "turnarounds") will
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reduce the effective cost of the settlement to approximately $68.2 million,
including post-petition interest through December 31, 1995.
The consolidated income tax regulations provide that each member of
the Columbia Group is severally liable for the entire consolidated tax
liability of the Columbia Group. However, Columbia and TCO intend to allocate
the tax savings and costs from the IRS settlement in accordance with the Tax
Allocation Agreement dated as of December 31, 1990, among Columbia and its
subsidiaries (the "Tax Allocation Agreement") which is to be assumed by both
Columbia and TCO pursuant to their respective Plans. As a result, TCO, as the
taxpayer primarily responsible for generating the tax liabilities, will fund the
payment to the IRS, including post-petition interest, and receive its allocable
share of the turnarounds. Net refunds allocable to Columbia and its non-debtor
subsidiaries which have been offset by the IRS against its Claim will be paid by
TCO to those Persons as a cure cost under the Tax Allocation Agreement. It is
estimated that, under the IRS Settlement Agreement and in accordance with the
Tax Allocation Agreement, TCO will owe the IRS $134.6 million plus post-petition
interest of approximately $29.6 million, and that other members of the Columbia
Group will be collectively entitled to a refund of approximately $22.7 million
plus post-petition interest of approximately $5.0 million. After taking into
account various turnarounds for the period 1991 through 1995, the net cost of
the settlement to TCO is approximately $76.8 million,
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including interest through December 31, 1995 and the net result to other
members of the Columbia Group is a refund of approximately $8.6 million,
including interest through December 31, 1995.
At the time the Bankruptcy Court approved the IRS Settlement
Agreement, it also approved an agreement among Columbia, TCO and TCO's
Creditors' Committee providing that in the event the Bankruptcy Court failed to
approve the allocation of post-petition interest to TCO pursuant to the Tax
Allocation Agreement or otherwise, Columbia and/or its non-debtor subsidiaries
would be obligated to make that payment to the IRS.
2. THE IRS ADMINISTRATIVE CLAIMS
On May 24, 1995, the IRS filed an administrative Claim for federal
income taxes in the amount of $87,844,798.69 (including interest of
$13,879,916.69 through May 28, 1995) against Columbia for its taxable year
ending December 31, 1992. This Claim arose in connection with an audit of the
Columbia Group's federal income tax returns for the taxable years ending
December 31, 1991 and December 31, 1992. The audit of the tax return for the
1991 year resulted in a net refund to the Columbia Group of $730,548.00. The
issues discussed below were also raised in that year.
The principal federal income tax issues raised by the 1992 IRS
administrative Claim are the deductibility by Columbia of approximately $174
million of accrued interest expense on its outstanding debt obligations and the
deductibility by Columbia of
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approximately $10.8 million and by TCO of approximately $13.5 million of
professional fees incurred in the course of their bankruptcy proceedings.
Columbia believes that its position on these and the other federal income tax
issues raised in the IRS administrative Claim are strong, and it is currently
in the process of challenging the proposed IRS adjustments to its taxable
income. However, there is no way of predicting what the outcome of these
challenges will be.
Under the consolidated income tax regulations, each member of the
Columbia Group is severally liable for the entire consolidated tax liability of
the Group. It is expected that TCO will be required to bear its allocable
share of any income tax deficiency resulting from the IRS administrative Claim,
including related interest and penalties, either as a direct obligation or
pursuant to its obligations under the Tax Allocation Agreement.
D. STATUS AND TREATMENT OF SECURITIES
CLAIMS AND DERIVATIVE LITIGATION
1. PROCEDURAL HISTORY OF THE ACTIONS
Following the announcement on June 19, 1991, by Columbia's Board of
Directors regarding the suspension of the dividend, the likelihood of a
substantial charge to second quarter earnings and the possibility of a
bankruptcy filing, sixteen complaints purporting to be class actions were filed
in the District Court against Columbia, various of its current and former
officers and directors, certain of its underwriters (Morgan Stanley & Co.,
Inc., Donaldson, Lufkin & Jenrette and The First Boston
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Corporation) and its accountants, Arthur Andersen L.L.P. (formerly known as
Arthur Andersen & Co.) (together, the "Defendants"). A seventeenth complaint
was filed on January 28, 1992. All of these actions, which constitute the
Securities Action, were eventually consolidated under the caption In re
Columbia Gas Securities Litigation, Consol. C.A. No. 91-357.
On or about June 21, 1991, three derivative shareholder suits (the
"Derivative Actions"), were filed in the Court of Chancery of the State of
Delaware and consolidated under the caption In Re Columbia Gas System, Inc.
Derivative Litigation. The complaints in those actions name as defendants John
H. Croom, Robert A. Oswald, William R. Wilson, William E. Lavery, George
MacNichol, III, Sherwood L. Fawcett, Robert H. Hillenmeyer, W. Frederick Laird,
Ernesta G. Procope, Ronald W. Skeddle, John W. Snow, James R. Thomas, II,
Thomas S. Blair, John D. Daly, Malcom T. Hopkins and Columbia (as nominal
defendant). The complaints generally allege that the individual members of the
Board of Directors breached their fiduciary duties to Columbia by failing to
make required disclosures, thereby: (i) causing Columbia to initiate bankruptcy
proceedings; (ii) damaging Columbia's reputation and ability to gain access to
credit and equity markets; and (iii) subjecting Columbia to federal securities
liabilities. Those complaints allege defendants represented, despite knowing
that Columbia had been "significantly affected" by warm weather, that
Columbia's financial integrity and fiscal health were "beyond question."
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As of the Petition Date, no class had been certified with respect to
the Class Action. The Class Action was automatically stayed as to Columbia
pursuant to section 362 of the Bankruptcy Code. That litigation was also
stayed by agreement as to all other defendants, which agreement was repeatedly
extended until October 31, 1994. The Derivative Actions were stayed pursuant
to section 362 of the Bankruptcy Code.
Pursuant to an order of the Bankruptcy Court fixing a bar date for
filing proofs of claim against Columbia, approximately 29 individual proofs of
claim were Filed against Columbia based upon allegations described in the
complaints filed in the Class Action, including Claims filed by the LESOP
Thrift Plan Trustee on account of shares of Common Stock held by the Thrift
Plan. Three related proofs of claim on behalf of purported classes of
shareholders and debentureholders allegedly injured during the claim period
were also Filed against Columbia. In addition, various officers, directors,
underwriters of Common Stock and others Filed Claims against Columbia for
indemnification relating to the Class Action.
On or about October 31, 1994, counsel for class action plaintiffs in
the Class Action filed with the District Court (i) a consolidated amended class
action complaint (the "Class Action Complaint"), which, because of the
automatic stay, did not include Columbia as a defendant, and (ii) a motion for
class certification. In addition, counsel for the class action plaintiffs
Filed in the Bankruptcy Court (i) a motion to withdraw
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the reference from the Bankruptcy Court to the District Court of all matters
relating to the securities-related proofs of claim previously Filed in the
Bankruptcy Court and (ii) a motion for class certification.
The Class Action Complaint alleges that from February 28, 1990,
through June 18, 1991, Defendants disseminated materially false and misleading
statements regarding Columbia's financial condition and failed to disclose
material facts which rendered other statements misleading, thereby artificially
inflating the market price of Columbia's Common Stock and debt securities,
causing plaintiffs to purchase such securities at artificially inflated prices.
The Class Action Complaint alleges violations of sections 11, 12(2), 15 and 18
of the Securities Act of 1933, 15 U.S.C. Section Section 77k, 771 and 77o;
sections 10(b), 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934, 15
U.S.C. Section Section 78j(b), 78n and 78t(a); and the Florida State
Securities Acts, as well as negligent misrepresentation, and common law fraud
and deceit.
On November 1, 1994, Columbia Filed a motion (the "Supplemental Bar
Date Motion") in the Bankruptcy Court seeking to establish supplemental bar
date procedures for individual Claims against Columbia and against any third
party that timely filed an indemnification Claim against Columbia based upon
the subject matter of the Class Action, so as to permit Columbia and the other
bankruptcy participants to assess the scope and
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potential magnitude of those Claims in connection with the preparation of a
plan of reorganization.
On November 15, 1994, the Class Action, previously pending before
Judge Latchum of the District Court, was transferred to Judge Farnan of that
Court. On November 30, 1994, Judge Farnan issued an order (the "Stay Order")
staying, pursuant to 11. U.S.C. Section Section 362 and 105, further
proceedings in the Class Action until the entry of a final judgment on the
Intercompany Claims.
By letter dated February 13, 1995, counsel for Columbia requested that
Judge Farnan modify the Stay Order to allow Columbia's Supplemental Bar Date
Motion to be heard so that Columbia could obtain the information necessary
regarding its potential liability in order to finalize its reorganization
proposals. Counsel for class action plaintiffs opposed that request by letter
dated February 17, 1995. On April 10, 1995, counsel for class action
plaintiffs filed a motion requesting that Judge Farnan lift the Stay Order. As
described below, Judge Farnan subsequently lifted the Stay Order.
2. SUMMARY OF CLASS ACTION ALLEGATIONS
The Class Action Complaint generally alleges misrepresentations,
omissions and the failure by Defendants to adequately disclose the financial
burden arising from TCO's then existing, above-market priced gas supply
contracts and Columbia's general financial condition and prospects, and in
particular, the potential financial exposure arising from the long-term, high
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priced non-market sensitive gas supply contracts entered into by TCO prior to
1982.
Following the enactment of the Natural Gas Wellhead Decontrol Act of
1989, TCO performed various studies that purported to analyze or estimate the
costs that would be associated with "buying out" or "buying down" various gas
supply contracts to market levels. In estimating buy-down costs, those studies
attempted to calculate the present value of the expected payments under those
contracts for the purchase of gas in excess of the projected spot market
prices, referred to as "excess gas costs". Those studies also reflected
assumptions as to the percentage of the "excess gas costs" so calculated that
would be required as payment to Producers for the reformation of their
contracts.
The Class Action Complaint (referenced herein by paragraph number)
alleges that Columbia should have disclosed that the results of an early
buy-down analysis performed by low-level TCO personnel in April 1990:
"arrived at a net present value ("NPV"), discounted at 10%, of the
Company's excess gas cost exposure from the ten Southwest producers of
$832 million (of which Coleve represented $334 million).
Assuming,inter alia, a $.20 on the dollar settlement value to
renegotiate these contracts, the April 1990 Study arrived at a 20% of
NPV discounted costs to the Company of $166 million to buy-down the
applicable contracts."
(Paragraph 151).
Similarly, the Class Action Complaint alleges that Columbia should
have disclosed that a further study performed in May of
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1990 "arrived at a revised 'Total Settlement Cost' of $186 million" (Paragraph
153) and concluded that:
"[I]n order for Columbia to be competitive, measures to reduce gas
purchase cost must be taken to ensure WACOG recovery and resume the
purchase of gas under market responsive contracts."
(Paragraph 155).
In fact, Columbia's May 15, 1990, Form 10-Q had reported that:
"Recent factors, including increased gas available under some older
high cost contracts coupled with the anticipated effects of
deregulation and Columbia Transmission's decline in sales volumes,
have made it evident that a few Southwest producer contracts not
previously renegotiated may present future marketability problems if
not renegotiated. Columbia Transmission is in the process of
investigating the feasibility of such reformations, the magnitude of
costs which might be incurred and the long-term desirability of
reformations."
The Class Action Complaint attacks that disclosure on the grounds that
allegedly:
"GAAP required the Company not only to reserve the $500 million plus
discussed above, it further required Columbia Gas to disclose the high
end of any material loss contingency (i.e. $1.165 billion from the May
1990 Study) as well as all assumptions underlying the findings of the
Study. Columbia Gas not only failed to disclose the $1.165 billion
figure, it also did not disclose the assumptions underlying the May
1990 Study, which the Individual Defendants knew or recklessly
disregarded at the time were based upon,inter alia, materially
inflated and insupportable sales and spot gas price projections."
(Paragraph 173).
The Class Action Complaint also identifies a draft study prepared by
TCO dated October 25, 1990, and alleges that Defendants failed to disclose the
risks that study revealed. (See Paragraph Paragraph 194-206, Paragraph
Paragraph 225-242).
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The Complaint further alleges that defendants should have disclosed
details of an April 1991 study, which allegedly "determined a gross excess gas
cost exposure of $1.1 billion, discounted 10% to an NPV of $800 million,
compared to gross exposure of $858.9 and 10% NPV exposure of $617.9 million in
the October study, with the increase attributed to lower spot prices and
greater contract deliverabilities" (Paragraph Paragraph 313), as well as the
conclusions of subsequent studies and revisions completed on May 13, May 28,
June 11 and June 14, 1991. (Paragraph Paragraph 321-323, 331-333).
The Class Action Complaint repeats throughout the allegation that TCO
was "unreasonably optimistic" with regard to its gas cost studies and other
internal studies and projections. Many other allegations contend that
statements made by Defendants casting Columbia's financial condition in a
positive light, understated or misrepresented Columbia's alleged serious
financial problems.
For example, the Class Action Complaint alleges that with regard to
Gas Inventory Charge (GIC) payments TCO was eligible to recover pursuant to the
1989 Global Settlement with its Customers, statements in Columbia's May 15,
1991, 10-Q were misleading for reporting that the GIC test "may not" be met
when Columbia allegedly knew that it could not be met:
"The statement that Columbia Gas 'may not be able to meet the test of
price comparability with other pipelines' in order to be eligible to
collect its GIC was false and misleading when made. Internal Company
communications . . . demonstrate that the Individual Defendants knew
or recklessly disregarded at least as early as June, 1990 and
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were again advised in December, 1990, that the Company would not meet
its eligibility criteria to qualify to collect the GIC in 1991."
(Paragraph 327).
Similarly, the Class Action Complaint alleges that the declaration of
an increased dividend in January 1991 was misleading:
"On January 16, 1991 the Company announced in a PR Newswire release
(the 'January 1991 Release') that its board of directors had authorized
an increase in its quarterly dividend from $.55 to $.58. Consistent
with the Company's previous false and misleading material statements
about its positive business and financial prospects, the January 1991
Release trumpeted the fact that this was the second consecutive year of
dividend rate increases, raising the annual dividend from $2.20 in 1990
to $2.32 in 1991, and continuing an unbroken stream of dividend
payments going back 43 years."
(Paragraph 258).
Likewise, the Class Action Complaint alleges that Columbia's Chairman
of the Board of Directors, John Croom, made false and misleading statements in
a February 6, 1991, press release when he reported that:
"Although the weather has severely impacted earnings in the short-term
and interrupted the earnings rebound begun in 1989, the Corporation
has not changed its long range positive outlook or its goals and
objectives."
(Paragraph 266).
In addition, the Class Action Complaint contends that Defendants
violated Generally Accepted Accounting Principles, Statement of Financial
Accounting Standards and Financial Accounting Standards Board Interpretation
rules through the alleged improper amortization of certain accounts and the
alleged
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failure to recognize and disclose certain risks. (See Paragraph Paragraph
170-174, 215-223).
Finally, the Class Action Complaint alleges that Defendants improperly
did not disclose that on May 15, 1991, Columbia's Chief Financial Officer,
Robert Oswald, allegedly told the Board of Directors that:
"The severity of the situation has not been disclosed pending the
completion of our analysis and plans for correction. Until additional
disclosures are made, going to the public capital markets is difficult
if not impossible. . . . We will face the strong likelihood of a
credit downgrading, the degree of which will be dependent on the
credibility of our proposed solutions."
(Paragraph 324).
However, Columbia did announce on May 15, 1991, that:
"Columbia Transmission has concluded that actions beyond the
previously announced renegotiations of certain producer contracts are
necessary. The parameters of the problem and the costs and
feasibility of various possible responses, including seeking
regulatory changes in the merchant function, are under intense study
in light of current and prospective market conditions and the impact
of final deregulation," and continued that their problems "may limit
the Corporation's ability to access the financial markets".
3. SUMMARY OF RELEVANT PUBLIC DISCLOSURES BY DEFENDANTS
In Columbia's Form 10-K and Annual Report for the fiscal year ending
December 31, 1989, filed March 16, 1990, Columbia reported that "[i]n the
future, essentially all of Transmission's gas supply will come from producers",
and that "Transmission is continually assessing its gas supply contracts in an
effort to provide the necessary flexibility to meet the changing marketplace."
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On May 15, 1990, Columbia filed its Form 10-Q for the first quarter of
1990, reporting that Columbia had had disappointing earnings of $47.6 million
due to warm weather, and also stated:
"Columbia Transmission continually assesses whether its gas supply
contracts are responsive to market conditions. Recent factors,
including increased gas available under some older high cost contracts
coupled with the anticipated effects of deregulation and Columbia
Transmission's decline in sales volumes, have made it evident that a
few Southwest producer contracts not previously renegotiated may
present future marketability problems if not renegotiated. Columbia
Transmission is in the process of investigating the feasibility of
such reformations, the magnitude of the costs which might be incurred
and the long-term desirability of reformations."
Filed on August 14, 1990, the Second Quarter Form 10-Q reported
lackluster performance due to lower seasonal demands and warm weather. It also
repeated the First Quarter Form 10-Q's statement that TCO was continually
assessing the feasibility and desirability of reforming those older, high-cost
Producer contracts that may present future marketability problems.
On September 28, 1990, in a press release announcing its settlement
for $32 million of its long term gas supply contract with Coleve, Columbia
stated that it had concluded it was "desirable" to "seek contract reformations"
and that "whether the effort will be successful cannot be ascertained at this
time".
On November 7, 1990, Columbia issued a press release stating that
"Columbia Transmission is continually assessing whether its gas supply
contracts are responsive to the market and is attempting to renegotiate certain
Southwest producer contracts and, in some cases, to resolve related
litigation." The release noted that the $32 million settlement announced on
September 28,
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1990, had involved "one such contract." The release acknowledged that the cost
of resolving TCO's other negotiations could be as high as $180 million and that
this would exceed reserves by up to $150 million. The release stated that TCO
did not expect the cost to exceed that amount.
On November 13, 1990, Columbia filed its Third Quarter Form 10-Q,
which stated that:
"[e]arlier this year, the Company announced that recent factors,
including increased gas available under some older high-cost
contracts, the anticipated effects of gas deregulation legislation
passed in 1989 which will remove all remaining controls on pricing and
Columbia Transmission's dramatic decline in sales volumes in the late
1980s (primarily due to large customers switching from sales to
transportation service), made it evident that several of the Southwest
[producer] contracts . . . will present future marketability problems
if not renegotiated. . . ."
"The cost of these renegotiations, if incurred, is not expected by the
Company to exceed current reserves of approximately $30 million by
more than $150 million. Although most of the costs are not expected to
be recovered in rates, approximately $22 million is expected to be
recovered in the fourth quarter of 1990 from revenues earned under
Columbia Transmission's gas inventory charge. . . . The incurrence of
these costs in the estimated amounts should not have a material
adverse effect on the consolidated financial position of the Company.
However, due to the uncertainties inherent in the situation, it is
impossible to predict the ultimate outcome or the timing of the
renegotiation efforts."
Columbia repeated the disclosures of its Third Quarter 10-Q in a
Registration Statement and Prospectus for the sale of Common Stock it filed on
December 6, 1990.
On February 6, 1991, a Form 8-K filed by Columbia noted that "[t]he
transmission segment's storage inventory is currently 90 billion cubic feet
over planned levels, more than at any time
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in the company's history, reducing its ability to purchase gas under its
producer contracts" and that, "[b]ecause of continued warm weather, a decline
in spot market prices and availability of pipeline transportation capacity, TCO
has reduced its estimated sales level for the contract year 1991 to about 150
Bcf, which is some 100 Bcf below original estimate." Furthermore, the press
release warned that "the lingering effects of 1990's warm weather coupled with
continued warm weather thus far in 1991 have reduced Columbia's earnings
outlook for 1991" and that "spot market prices for gas are significantly below
earlier projections". In addition, the Form 8-K stated that "recoupable TOP
[take or pay] obligations of up to $100 million may be incurred in 1991", and
that "spot market prices for gas are significantly below earlier projections
which will reduce revenues of Columbia oil and gas operations."
On March 13, 1991, Columbia filed its 1990 Form 10-K and Annual
Report. In his message to shareholders, Croom reported that the record warm
temperatures of 1990 that were continuing in 1991 "have substantially reduced
gas demand, held wellhead prices at depressed levels by extending the
nationwide supply surplus and created numerous operating problems." "As a
result", Croom continued, "1990 earnings are disappointing and well below
anticipated levels." Croom stated that the warm weather, "along with wellhead
price and production levels in the oil and gas segment, decisions in pending
Transmission and Distribution rate cases and negotiations with producers to
restructure gas purchase
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contracts to make them market sensitive will affect earnings in 1991." Croom
further stated the weather had "significantly reduced sales volumes and, in
turn, purchases from producers. Columbia's Management currently expects that
recoupable take-or-pay obligations of up to $100 million may be incurred in
1991." The annual report noted that while "$22 million of . . . costs were
recovered under the 'GIC' in 1990", "[m]anagement cannot estimate to what
extent, if any, the remaining costs will be recovered in rates."
On April 17, 1991, Columbia held its annual shareholders meeting and
filed an accompanying Form 8-K. At that meeting, Croom repeated that "[t]he
depressed gas prices and the continuing impact of the warm weather on
transmission operation make it unlikely that 1991's earnings will be as high as
1990's earnings", which themselves had been disappointing. At the same
shareholders meeting, Columbia Chief Financial Officer Oswald said that because
of the warm weather, TCO's results would continue to be affected for the next
year or more.
In that Form 8-K, Croom also warned that "low gas prices and increased
availability of transportation capacity provided the transmission segment's
customers ready access to cheaper gas supplies and greatly reduced its sales
volumes. These conditions demonstrated the inherent risks of a
closely-regulated merchant function and have caused us to re-evaluate the
advisability of maintaining Transmission's sales service in its current form."
In addition, he stated that "contractual obligations with some
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producers will require prepayments which will increase borrowing costs."
On April 19, 1991, Prudential Securities reported that Columbia
management had met with securities analysts in New York the previous day to
"explain the substantial and surprising deterioration that has taken place in
the company's intermediate-term earnings prospects as a result of the record
warm weather that has plagued this very weather-sensitive company." According
to Prudential Securities, Columbia's management stated that "if spot prices did
not recover, actions in addition to the partial buy-down program announced in
late 1990 would probably be required."
On May 1, 1991, Columbia announced first quarter earnings of $49.8
million. The release quoted Croom as saying that the past 15 months' warm
weather was "likely to depress transmission's financial performance for the
next year or more." Croom further warned:
"[T]ransmission ended the heating season with a significant excess of
natural gas in storage which will increase carrying costs, Croom said.
To bring gas supplies into balance with anticipated demand,
transmission has been negotiating temporary but costly settlements
with producers and customers to implement new supply and storage
agreements. In spite of these efforts, Croom said that transmission
still expects to incur take-or-pay liabilities during 1991.
"Croom said that if spot market gas prices remain depressed for an
extended period of time, regulatory and other actions, in addition to
the renegotiations of producer contracts . . . will be required to
reduce transmission's merchant gas prices to marketable levels.
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"Absent increased sales, high gas supply management costs will
continue to be incurred. If gas prices continue at low levels, as we
are currently projecting, meaningful changes in the merchant function
are critical to the successful future financial performance of
Columbia's transmission segment."
On May 15, 1991, Columbia filed its First Quarter 1991 Form 10-Q, for
the quarter ending March 31, 1991. The filing stated:
"In the third quarter of 1990, Columbia Transmission announced that
it would attempt to renegotiate certain high-cost gas supply
contracts. Using recently revised gas price projections, Columbia
Transmission's cost of gas is now projected to be higher than
generally anticipated gas price levels, even assuming the successful
completion of the announced renegotiations. Consequently, gas sales
are projected to be insufficient to avoid future gas supply
management costs. In addition, Columbia Transmission may not be able
to meet the tests of price comparability with other pipelines which is
required to permit it to collect its gas inventory charge to
reimburse it for gas supply management costs. Therefore, Columbia
Transmission has concluded that actions beyond the previously
announced renegotiations of certain producer contracts are necessary.
The parameters of the problem and the costs and feasibility of
various possible responses, including seeking regulatory changes in
the merchant function, are under intense study in light of current
and prospective market conditions and the impact of final
deregulation."
The First Quarter 1991 Form 10-Q estimated that "actions to minimize
supply management costs" and "higher carrying costs due to the excess storage
position" would cost TCO $30 million in the summer of 1991. "Despite these
efforts," the Form 10-Q continued, "Columbia Transmission may incur
approximately $65 million of recoupable take-or-pay liabilities in 1991." To
manage its 1991 cash requirements, Columbia would seek "additional sales of
commercial paper and borrowings under its bank credit facilities, issuance of
senior debt, reductions in
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capital expenditures, proceeds from the potential sale of its Canadian
properties . . ., and other potential sources of cash or reductions in
spending." The Form 10-Q reported that "matters discussed herein including
those discussed under 'Supply Matters' . . . may limit the Corporation's
ability to access the financial markets."
4. TRENDS IN COLUMBIA'S STOCK PRICE
From early 1990 through May 1991, despite Columbia's numerous
disclosures of specific information regarding the subjects of the Class Action
Complaint's allegations, Columbia's Common Stock experienced relatively small
daily price fluctuations. The movement in Columbia's share prices followed the
market generally and pipeline industry trends. Columbia shares traded in the
mid-$40 per share range from March through August 1990. The price rose to the
low-$50's in September 1990 and reached the mid-$50's in early November 1990.
The price returned to the mid-$40's in December 1990, where it stayed until
mid-April 1991. Thereafter, the price dropped to the high-$30's then stayed in
the high-$30's and low $40's until mid-June 1991. When the disclosures
occurred in May that the previously announced TCO contract buy-down program
might be insufficient, that TCO's merchant function may have to be reassessed
and that intense studies were underway to consider TCO's problems and possible
solutions, Columbia's stock price barely changed.
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5. THE JUNE 19, 1991, ANNOUNCEMENT
On June 19, 1991, Columbia issued a press release, which stated,inter
alia, that the Board had voted to suspend the dividend on its Common Stock.
The release explained that:
"The present value of losses associated with the pipeline subsidiary's
above-market priced gas contracts could exceed $1 billion. It is
anticipated that a substantial portion of these losses will be charged
to income in the second quarter."
"Columbia System Chairman John H. Croom said corporate officers are
meeting with bank lenders today seeking to reestablish the System's
credit facilities on revised terms in view of the pipeline
subsidiaries' financial difficulties. In addition, Columbia
Transmission is launching a comprehensive effort to renegotiate all of
its above-market gas purchase contracts. The program contemplates
offering producers up to $600 million of Columbia Transmission
obligations to fairly compensate them for restructuring their
contracts. . . ."
"'[T]oday's action is a result of the Board's determination that in
view of recent developments, including management's conclusions during
the course of its studies regarding likely spot market prices over the
next several years, it is no longer in the best interests of the
System to have Columbia Transmission attempt to deal with the
producers on any basis which does not clearly provide a permanent
resolution of all the high-cost contract problems,' Croom said. . . ."
"Croom cautioned that the Columbia System's failure to reestablish and
continuously maintain adequate lines of credit with its banks or the
failure of producers to respond promptly and favorably to Columbia
Transmission's efforts to restructure its contracts could force the
System, the pipeline subsidiary, or both to seek protection from
creditors under the bankruptcy laws."
This announcement contained significant new information reflecting
recent developments. In particular, the announcement disclosed (i) the
decision of Columbia's Board of Directors that Columbia would no longer support
TCO absent a comprehensive
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solution to the producer contract problem; (ii) the adoption of a plan to
attempt to renegotiate all of those contracts at one time at an expected cost
of $600 million; (iii) the expectation of a substantial charge to earnings; and
(iv) the existence of a liquidity problem giving rise to the possibility of a
bankruptcy filing. Columbia's share price fell $14 on June 19, 1991.
6. PROPOSED SETTLEMENT
Columbia disputes the assertion that there is any liability on the
part of Columbia or other Defendants in the Class Action with respect to any
Claims asserted with respect thereto or any claims based upon the same or
similar allegations giving rise to the Class Action. Columbia believes that
its public disclosures adequately and accurately described the information that
could and should have been made available to the market. In fact, Columbia
contends that several of the particular purported disclosures and accounting
charges that the Class Action Complaint asserts should have been made would, if
made, have been improper, false and highly misleading. In particular, Columbia
believes that the Complaint improperly characterizes the calculations of
"excess gas costs" in buy-down studies prepared in connection with anticipated
contract renegotiations and erroneously labels the results as "loss
contingencies."
Moreover, Columbia disputes the allegations that any identifiable drop
in the prices of its securities occurred during the class period as a result of
the disclosure of information that should or even could have been disclosed
earlier. In fact,
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the relative stability of the Columbia share price through the series of
announcements of the business problems demonstrates the extent of the market's
knowledge and understanding of Columbia's business prospects.
As described in Section III of this Disclosure Statement, Columbia and
TCO are regulated entities about which extensive information is publicly
available. They are engaged in businesses that are subject to regular scrutiny
and reporting by sophisticated and specialized securities analysts. The
significant drop in price on June 19, 1991, reflected the market's reaction to
the new information that could not have been previously disclosed--primarily
the Board's determination that TCO's contracts must all be renegotiated and the
prospect of a bankruptcy filing.
Periodically throughout the Reorganization Case, Columbia has
discussed the possibility of settlement of the Class Action with counsel
representing the as-yet uncertified class action plaintiffs. On July 17, 1995
those discussions led to an agreement in principle on the terms of a settlement
among all parties to the Class Action and this agreement was embodied in a
Stipulation of Settlement dated as of July 18, 1995, a copy of which is annexed
as Exhibit 6 to this Disclosure Statement.
On July 18, 1995, the District Court granted a motion made by parties
to the Stipulation of Settlement, in accordance therewith, lifting the Stay
Order. On July 18, 1995, the Bankruptcy Court granted a motion lifting the
automatic stay of
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the Class Action against Columbia for the purpose of permitting the
implementation of the Class Action Settlement.
Pursuant to the Stipulation of Settlement, the Class Action plaintiffs
filed a Second Consolidated Amended Complaint, substantially in the form of the
Class Action Complaint, naming Columbia as a defendant and changing the
commencement of the class period to January 19, 1990. On July 21, 1995, the
District Court entered an order (the "Hearing Order"), which provided for, among
other things, (a) the provisional certification of the classes described in the
Stipulation of Settlement, (b) the scheduling of a hearing (the "Fairness
Hearing") on October 16, 1995, pursuant to Rule 23(e) of the Federal Rules of
Civil Procedure (i) to determine whether to certify those classes; (ii) to
determine whether the proposed settlement of the Claims in the Class Action, on
the terms provided for in the Stipulation of Settlement, should be approved by
the District Court; and (iii) to determine whether a Final Judgment and Order
Approving Settlement should be entered dismissing the Class Action on the
merits, with prejudice, and without costs and (c) approving the mailing of a
notice (the "Notice"), Proof of Claim and Release Form and Opt-out Form to
Securities Claimants and the publication of a summary notice of the proposed
Class Action Settlement and the Fairness Hearing.
Pursuant to the Stipulation of Settlement, Columbia and the other
Contributors (Columbia's primary D&O Insurance carrier, Federal Insurance Co.;
Columbia's underwriters, Morgan Stanley &
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Co., Inc., Donaldson, Lufkin & Jenrette Securities Corporation and CS First
Boston Corp., and Columbia's accountants, Arthur Andersen L.L.P.) will
establish a Settlement Fund of $36.5 million (approximately $16.5 million of
which will be contributed by Columbia) to settle the Class Action. That fund
will be applied to pay District Court-approved counsel fees and costs of
administration and the remaining Settlement Fund will be distributed to Holders
of Securities Claims who timely file Proof of Claim and Release Forms in the
District Court.
Persons entitled to participate in the Class Action Settlement are
persons who purchased or otherwise acquired Columbia debentures or Common Stock
and persons who bought call options on or sold put options on Common Stock from
January 19, 1990 through June 18, 1991.
To participate in the Class Action Settlement, the Holder of a
Securities Claim must timely submit a Proof of Claim and Release Form in the
District Court, in accordance with the procedures established pursuant to the
Stipulation of Settlement and set forth in the Hearing Order. Each such Holder
will receive, in complete compromise and full satisfaction of its Securities
Claims, its share, determined as provided in the Class Action Settlement
Documents, of the Settlement Fund remaining after payment of counsel fees and
costs of administration. All such Holders of Securities Claims will, unless
they timely opt out of the Class Action, release all Securities Claims such
Holders may have against Columbia and the other Defendants, and
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officers and directors of Columbia and TCO during the Class period who were not
named as Defendants.
Holders of Securities Claims may elect, by submitting an Opt-out Form,
to opt out of the Class Action and not participate in or be bound by the Class
Action Settlement. In order to preserve any Securities Claims it may have
against Columbia, an Opt-out Securities Claimant must indicate on its Opt-out
Form that it elects to pursue its claim against Columbia in Bankruptcy Court.
Submission of an Opt-out Form that does not clearly indicate that the
submitting Holder does not wish to preserve its Claims against Columbia in
bankruptcy will be deemed to be the filing of such Claims with the Bankruptcy
Court. The Claims of Opt-out Securities Claimants that elect or are deemed to
have elected to pursue their Claims against Columbia in bankruptcy are dealt
with and will be discharged under the Plan. The Claims of Holders of
Securities Claims that Opt-Out of the Class Action but do not file or have
their Claims deemed filed against Columbia in the Bankruptcy Court, shall be
discharged against Columbia under the Plan. Opt-out Securities Claimants can
pursue their Securities Claims against the non-Debtor Defendants in the federal
courts.
Columbia shall object to and/or seek estimation of the Claims of
Opt-out Securities Claimants that have preserved their rights to proceed
against Columbia. Such Claimants shall have their Claims determined by the
District Court sitting in bankruptcy after the Effective Date and those Claims,
if and when
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Allowed, will be paid by Reorganized Columbia in Common Stock valued at then
current market prices or, at Columbia's option, in cash or any combination of
the foregoing.
The Stipulation of Settlement provides that it may be terminated by
the Defendants if the amount of securities as to which Opt-out Forms have been
submitted exceeds a specified amount.
Columbia, without admitting any wrongdoing or liability, has agreed to
the proposed Class Action Settlement primarily to avoid costly and
time-consuming litigation and to facilitate the reorganization process. If the
Stipulation of Settlement does not become effective, the Class Action will
revert to its status prior to the date of execution of such Stipulation and
shall proceed as if such Stipulation and related orders and papers had not been
executed.
Further information with respect to the Class Action Settlement, the
steps that must be taken by Securities Claimants to participate therein and the
distributions to be made pursuant thereto will be set forth in the Notice and
related documents to be given to Class Action Claimants pursuant to the
procedures established by the District Court and set forth in the Hearing
Order.
After the receipt and processing of Opt-out Forms (which are due on
September 30, 1995) and prior to Confirmation of the Plan, Columbia will make a
determination as to the form of consideration to be used to pay Class 7 Claims.
If that
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consideration includes Common Stock, Class 7 Claims will be impaired and the
Holders thereof will be entitled to vote on the Plan, and if that consideration
is entirely cash, such Claims will be unimpaired and the Holders thereof will
not be entitled to vote on the Plan.
Columbia's primary D&O Insurance carrier's willingness to contribute
its share of the Settlement Fund is conditioned upon the Bankruptcy Court's
approval of the disposition of the Derivative Actions, as described below, and
a release of all D&O Insurance carriers from their policy obligations in
respect of the subject matters of the Class Action and Derivative Actions.
Given this release, and as a condition to their agreement to the Class Action
Settlement, the individual Defendant directors and officers have requested that
they remain protected from any opt-out or other related litigation exposure.
In addition to Columbia's existing Certificate of
Incorporation indemnification obligations assumed under the Plan, Columbia has
entered into an agreement, a form of which, in substantially final form, is
attached as Exhibit J to the Plan, with each of the Class Action Defendants who
are or were directors or officers of Columbia or TCO to place them in
substantially the same position as they would have been had their insurance
coverage not been released. For the same reason, Columbia will also provide an
undertaking, a form of which, in substantially final form, is attached as
Exhibit K to the Plan, to protect directors and officers of Columbia and TCO
during the
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class period who are not named as Defendants in the Class Action or the
Derivative Actions.
7. DERIVATIVE ACTIONS
The claims alleged in the Derivative Actions are property of the
Estate under section 541 of the Bankruptcy Code. On March 15, 1995, Columbia's
Board of Directors formed a Special Litigation Committee of the Board (the
"SLC") to determine on behalf of the Board of Directors whether it is in the
best interests of Columbia to pursue or abandon the Derivative Actions. The
determination of the SLC is binding upon the Board of directors. The SLC is
currently comprised of Gerald E. Mayo, Richard F. Albosta and Robert H. Beeby,
who were not incumbent during the class period and are not Defendants in the
Class Action or the Derivative Actions. On or about April 13, 1995, the SLC
retained the law firms of (i) Ballard Spahr Andrews & Ingersoll and (ii) the
Offices of Stephen P.Lamb as special counsel to investigate whether it is in
the best interests of Columbia to pursue the Derivative Actions against any or
all the defendants, or to file a motion to dismiss the derivative lawsuits or
otherwise abandon the Derivative Actions. By order dated May 3, 1995, the
Bankruptcy Court approved Columbia's nunc pro tunc retention of the special
counsel.
On July 17, 1995, the SLC reported to the Board of Directors that,
after an extensive investigation of the allegations asserted in the Derivative
Actions, its members determined that it is not in the best interests of
Columbia to pursue such
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actions and that such actions should be settled without payment of any money by
or on behalf of the director defendants in the Derivative Actions other than as
provided for in the Settlement of the Class Action. That determination was
made in consideration of and subject to the settlement of Securities Claims
embodied in the Stipulation of Settlement.
The Derivative Actions are premised on the assumption that the
Claims asserted in the Class Action have merit and that Columbia directors
named as defendants are liable to Columbia for all losses it may suffer in the
Class Action. Columbia, however, has consistently taken the position that
there is no liability on the part of Columbia or the other Defendants in the
Class Action and that Columbia's public disclosures adequately and accurately
described the information that could and should have been made available to the
market in the relevant period preceding the Petition Date. Assuming, however,
that some of or all the allegations against Columbia in the Class Action were
true, Columbia would still have to prove under Delaware law that the director
Defendants in the Class Action breached their fiduciary duties to Columbia in
order to establish liability in the Derivative Actions.
Further prosection of claims asserted in the Derivative Actions would
impose substantial discovery and litigation burdens and expenses on Reorganized
Columbia and its management without any assurance of ultimate success. In
addition, if Columbia's purported claims against director defendants in the
Derivative
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Actions are left outstanding and unresolved, each of them in turn could
continue to assert Claims against Columbia pursuant to the indemnification
provisions of Columbia's Certificate of Incorporation. Those indemnification
Claims, however, would not be covered by Columbia's D&O Insurance as the
insurer will be released from liability therefor in consideration of its
contribution to the Settlement Fund if the Class Action Settlement is
implemented. The resolution of the Class Action through a substantial
contribution by Columbia's D&O Insurance provider provides substantial benefits
to Columbia. Therefore, the Derivative Actions will be disposed of by the
Plan, consistent with the findings of the SLC; such disposition is subject to
approval by the Bankruptcy Court at the hearing on Confirmation of the Plan.
E. THE COLUMBIA OMNIBUS SETTLEMENT
As described in Section I, in order to facilitate the emergence of
both Columbia and TCO from Chapter 11, Columbia is proposing the Columbia
Omnibus Settlement, under which Columbia will, inter alia, assist TCO to
monetize the TCO Plan in order to provide distributions, substantially in the
form of cash, to TCO Creditors under the TCO Plan, in consideration for, among
other things, (i) the retention by Columbia of the equity of Reorganized TCO,
(ii) the settlement of litigation over the liquidation of Producer claims,
Customer claims and certain other disputed claims and (iii) a settlement and
release of the claims
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raised or which could have been raised in the Intercompany Claims Litigation.
Specifically, the Columbia Omnibus Settlement allows Columbia to
retain ownership of TCO and will end litigation over the Intercompany Claims,
and as consideration therefor provides that: (a) Columbia will assist TCO in
monetizing the TCO Plan which is estimated to provide for value to be
distributed to TCO's creditors of approximately $3.9 billion (in the event of
100% acceptance by Producers and other creditors of the settlement offers
proposed in the TCO Plan), which distribution, in the case of third party
creditors will be substantially in cash; (b) Columbia will not receive any cash
distribution with respect to its Secured Claim against TCO but, instead, will
receive new secured debt securities of Reorganized TCO for a portion of such
Claim and contribute the balance of such Claim to Reorganized TCO's equity; (c)
Columbia will agree to the assumption by Reorganized TCO of certain
pre-petition environmental claims of governmental agencies and certain other
claims; (d) Columbia will guarantee distributions to be made to TCO's creditors
as provided under the TCO Plan (excluding assumed obligations); and (e)
Columbia will provide a guaranty of the Customer Settlement Proposal (the
"Columbia Customer Guaranty").
Pursuant to the Columbia Customer Guaranty, Columbia has agreed to
guarantee the financial integrity of the Customer Settlement Proposal and the
payment of distributions to accepting Customers. Specifically, Columbia has
agreed (i) that the
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Customer Settlement Proposal will not be "retraded" with TCO's
Customer-creditors so as to reduce the financial benefits of the settlement to
them, (ii) that the financial benefits of the Customer Settlement Proposal will
not be adversely affected by virtue of any subsequent settlement reached with
other parties in either TCO's or Columbia's bankruptcy proceeding, and (iii)
that Columbia and TCO will include the Customer Settlement Proposal and the
Columbia Customer Guaranty in their respective plans of reorganization.
However, the foregoing guaranty does not apply to any modification imposed on
the Customer Settlement Proposal or on the TCO Plan or the Columbia Plan
incorporating the Customer Settlement Proposal by the action of any judicial or
regulatory authority.
The Columbia Omnibus Settlement provides substantial benefits to
Columbia in addition to the retention of ownership of TCO, including the
resolution of contentious disputes with TCO's Producers and Customers affecting
the economic value of the TCO estate on terms which Columbia believes are fair
and reasonable, the facilitation of the emergence of Columbia and TCO from
bankruptcy and a potentially substantial tax benefit to the System through
deductions of payments to Producers and Customers on Columbia's consolidated
federal income tax return.
Salomon has provided ranges of going-concern values for TCO employing
customary investment banking valuation methodologies for a going concern.
Taking into consideration many relevant factors including, but not limited to,
TCO's projected cash
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balances as of the effective date of the TCO Plan, but excluding any value
attributable to the Intercompany Claims, Salomon has advised TCO that (i) it
estimated TCO's going-concern value ranges from $3.362 billion to $3.542
billion as of the projected effective date of the TCO Plan. Based on the
foregoing, Columbia believes that the $3.9 billion projected to be paid to TCO
creditors under the TCO Plan, which includes incremental values provided by
Columbia through the Columbia Omnibus Settlement, significantly exceeds the
fair market value of TCO as a going-concern.
For all of the foregoing reasons, Columbia believes that the Columbia
Omnibus Settlement is in the best interests of both Columbia's Estate and TCO's
estate and that it will permit them to emerge from their respective Chapter 11
proceedings and turn their full attention and resources to the management of
their ongoing businesses. The Columbia Omnibus Settlement is subject to the
approval of the Bankruptcy Court as part of Confirmation of the Plan and the
TCO Plan. The Bankruptcy Court must find that the Columbia Omnibus Settlement
is fair and equitable and in the best interests of Columbia's and TCO's
respective estates. See Section IX.B.b for a discussion of the factors to be
considered by the Bankruptcy Court in determining whether to approve a
settlement under the Plan.
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F. OTHER CLAIMS
Mountaineer Gas Company ("Mountaineer") has filed a contingent Claim
relating to potential environmental liabilities.(1) Mountaineer has taken the
position that it has direct contingent Claims for such liabilities for an
unliquidated amount which Claims are allowable under section 502(e) of the
Bankruptcy Code. To the best of Columbia's knowledge, as of the date hereof,
Columbia is unaware of any actual liability on such environmental claims and
believes that it has no material liability to Mountaineer for environmental
obligations.
The remaining pre-petition Claims against Columbia include unsecured
Claims for uncashed dividend checks, proxy fees, Board of Directors' fees,
expenses and pension or other retirement benefit payments, intercompany
payables and other trade payables. Pursuant to the Plan, all of these
unsecured Claims will be paid in full by Columbia on the Effective Date, plus
post-petition interest at the non-default contractual interest rate set forth
in a written agreement, if any, or if no such rate is set forth or if such
Claim is not evidenced by a written agreement, at the rate of 6% per annum.
There may also be Claims for costs of collection and fees asserted by
Creditors, including Claims for
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(1) Mountaineer filed a similar contingent environmental claim against TCO as
well. TCO believes that such claim, if any, may be a pre-petition
unsecured claim against TCO with no liability on the part of Columbia,
and subject to disallowance pursuant to section 502(e) of the Bankruptcy
Code.
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legal fees incurred in connection with pre-petition Claims, which are presently
unquantified.
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V. DESCRIPTION OF THE COLUMBIA CHAPTER 11 PROCEEDINGS
A. GENERAL
Chapter 11 is the principal reorganization chapter of the Bankruptcy
Code. Pursuant to Chapter 11, a debtor in possession attempts to reorganize
its business for the benefit of itself, its creditors, its equity holders and
other parties in interest. The commencement of a Chapter 11 case creates an
estate consisting of all of the legal and equitable interests of the debtor in
property as of the date the petition is filed. Sections 1101, 1107 and 1108 of
the Bankruptcy Code provide that a debtor may continue to operate its business
and remain in possession of its property as a "debtor-in-possession" unless the
Bankruptcy Court orders the appointment of a trustee. Each of the Debtors has
remained in possession of its property and continues to operate its business as
a debtor-in-possession.
The filing of a Chapter 11 petition also triggers the
automatic stay provisions of the Bankruptcy Code. Section 362 of the
Bankruptcy Code provides, among other things, for an automatic stay of all
attempts to collect on pre-petition claims from the debtor or otherwise
interfere with its property or business. In Chapter 11 cases, and except as
otherwise ordered by the Bankruptcy Court, the automatic stay remains in full
force and effect until the effective date of a confirmed plan of
reorganization.
The formulation of a plan of reorganization is the principal
purpose of a Chapter 11 case. A plan sets forth the
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means for satisfying the holders of claims against and interests in the debtor.
B. COMMENCEMENT OF THE CASE
On the Petition Date, Columbia Filed a voluntary petition under
Chapter 11 of the Bankruptcy Code and its Reorganization Case remains pending
before the Bankruptcy Court. Columbia has continued as a debtor-in-possession
pursuant to sections 1107 and 1108 of the Bankruptcy Code since the Petition
Date.
1. FIRST DAY ORDERS
On or about the Petition Date, the Bankruptcy Court issued numerous
"first day orders" which covered various issues including, inter alia,
authorization for joint administration of Columbia's and TCO's bankruptcy
proceedings; authorization to invest excess cash in accordance with
court-approved investment guidelines; and approval of debtor-in-possession
financing on an interim basis pending a final hearing.
In addition, on August 2, 1991, the Bankruptcy Court entered an order
authorizing Columbia to continue financing its non-debtor subsidiaries by
transferring cash to such subsidiaries in accordance with Columbia's
pre-petition practice and in accordance with orders of the SEC previously
issued under the HCA.
2. COLUMBIA'S RETENTION OF PROFESSIONALS
On the Petition Date, the Bankruptcy Court issued an order approving
Columbia's retention of Cravath, Swaine & Moore, as special corporate counsel,
Stroock & Stroock & Lavan, as
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bankruptcy counsel, Young, Conaway, Stargatt & Taylor, as local bankruptcy
counsel, and Arthur Andersen LLP, as accountants. The Bankruptcy Court
approved Columbia's retention of Salomon as financial advisor on October 22,
1991.
In addition to the above Professionals, Columbia subsequently received
authorization to retain various other Professionals, consultants, experts and
non-bankruptcy counsel to provide advice and services to Columbia with regard
to various matters.
C. DEBTOR IN POSSESSION FINANCING
Following its Chapter 11 filing, Columbia received approval from the
Bankruptcy Court and the SEC for the DIP Facility. The initial DIP Facility,
secured by subsidiaries' common stock and debt securities held by Columbia,
permitted Columbia to make available borrowings or letter of credit issuances
of up to $275 million from a syndicate of banks led by Manufacturers Hanover
Trust Company (succeeded by merger by Chemical Bank). The DIP Facility was
designed to supplement the use of internally generated funds for general
corporate purposes and to provide financing for Columbia subsidiaries not
involved in the bankruptcy proceedings.
Columbia has since gradually reduced the borrowing capacity under the
DIP Facility to $25 million in letter of credit issuances (with commensurate
cost savings) as internally generated funds, including cash surpluses, have
been sufficient to meet current and projected financial needs. Letters of
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credit with an aggregate stated amount of $13 million are currently outstanding
under the DIP Facility, and will be replaced in accordance with the terms of
the Plan as of the Effective Date.
D. FORMATION OF COMMITTEES/RETENTION OF PROFESSIONALS
On August 12, 1991, the U.S. Trustee appointed the Creditors'
Committee. In addition, the U.S Trustee appointed the Equity Committee on
October 18, 1991.
The following are the members of, and professional advisors to, each
Columbia Committee:
1. Columbia's Official Creditors' Committee:
Members:
Teachers Insurance & Annuity Association
Marine Midland Bank
Metropolitan Life Insurance Co.
Merrill, Lynch, Pierce, Fenner & Smith
Morgan Guaranty Trust Company of New York
Bankers Trust Company
Provident Life & Accident Insurance Company
Counsel:
Milbank, Tweed, Hadley and McCloy
1 Chase Manhattan Plaza
New York, NY 10005
(212) 530-5000
Morris, Nichols, Arsht & Tunnell
1201 North Market Street
P.O. Box 1347
Wilmington, DE 19899
(302) 658-9200
Financial Advisors:
Barr Devlin Associates Incorporated
450 Park Avenue
New York, NY 10022
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New Harbor Incorporated
885 Third Avenue
New York, NY 10022
2. Columbia's Official Equity Committee:
Members:
Robert F. Baker
General Conference Corp. of Seventh Day
Adventists
David H. Goodman
Kenneth E. Lehman
Carl Stern
First Fidelity Bank, N.A.
Marion E. Vaughn
Invitees:
CALPERS
Ohio State Teachers Retirement System
Counsel:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, NY 10019
(212) 424-8000
Cooch and Taylor
824 Market Street
P.O. Box 1680
Wilmington, DE 19899
(302) 652-3641
Financial Advisors:
Smith Barney Inc.
388 Greenwich Street
New York, NY 10013
E. MEETINGS WITH THE EQUITY AND CREDITORS'
COMMITTEES
Throughout Columbia's Reorganization Case, representatives of Columbia
have met regularly with representatives of both the Equity Committee and the
Creditors' Committee to discuss the System's ongoing business operations, the
various matters which
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have come before the Bankruptcy Court, the quantification and resolution of
Claims against Columbia and the elements, strategy and timing for Plans of
Reorganization for Columbia and TCO. Extensive discussions with the Columbia
Committees occurred regarding, inter alia, (i) the calculation and payment of
post-petition interest on the Borrowed Money Claims against Columbia and the
allowability of pre-payment premiums or call penalties on Columbia's Debentures
and Medium Term Notes; (ii) the structure and terms of various reorganization
plans for Columbia and TCO; (iii) the tax effects of such various
reorganization structures; (iv) the feasibility of various capital structures
for a Reorganized Columbia; (v) the Intercompany Claims Litigation and the
impact of such litigation on Columbia and its Reorganization, including issues
relating to the solvency of Columbia and TCO; and (vi) proceedings relating to
the liquidation and appropriate treatment of Producer and Customer claims
against TCO. For a further description of the negotiations regarding
Columbia's Borrowed Money Claims and other plan-related discussions with the
Committees, see Section IV.A, "Borrowed Money Claims and the Negotiations and
Settlement of Such Claims."
F. ADMINISTRATIVE FEE ORDER/APPOINTMENT OF FEE
EXAMINER
On motion of Columbia and TCO dated October 18, 1991, the Bankruptcy
Court entered the Administrative Fee Order, establishing procedures for interim
compensation and reimbursement of expenses of all Professionals. The
Bankruptcy
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Court appointed Professional Fee Examiners, Inc. as the Fee Examiner to assist
the Bankruptcy Court in reviewing fee applications in Columbia's and TCO's
cases which are in excess of $75,000. To date, the Fee Examiner has Filed
reports relating to the first two interim fee periods: the Petition Date
through March 31, 1992 (the "First Fee Period"); and April l, 1992 through
November 30, 1992 (the "Second Fee Period"). A hearing on the interim fee
applications covered by the First Fee Period was held on June 13, 1994, at
which time an order approving fees for that period was entered. No hearing has
yet been scheduled regarding the Second Fee Period.
G. SIGNIFICANT PROCEEDINGS IN THE CHAPTER 11 CASE
AND STATUS OF RELATED CLAIMS
1. CASH COLLATERAL ORDER
As of the Petition Date, the total principal amount of secured debt
owed to Columbia by TCO on Columbia's secured Claim against TCO was
approximately $1.3 billion, secured by substantially all the assets of TCO.
The secured indebtedness consists of (i) approximately $410 million of
principal amount and approximately $3 million of pre-petition interest arising
under the Inventory Loan Agreement, secured by a lien on TCO's stored gas
inventory (the "Inventory Collateral") and (ii) first mortgage indebtedness in
the approximate amount of $930 million in principal plus pre-petition interest
of $29 million outstanding under the TCO Indenture of Mortgage and Deed of
Trust pursuant to which TCO issued First Mortgage Bonds to Columbia, secured by
substantially all TCO's non-storage
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inventory assets and property (the "Mortgage Collateral"). All present and
future proceeds of the Inventory Collateral and the Mortgage Collateral, to the
extent held or received by TCO, constitute "cash collateral" as defined in
section 363 of the Bankruptcy Code.
On or about the Petition Date, TCO Filed a motion with the Bankruptcy
Court seeking an emergency order authorizing it to use cash collateral pursuant
to section 363 of the Bankruptcy Code, and granting adequate protection to
Columbia. On August 23, 1991, the Bankruptcy Court entered a final order
(retroactively effective as of the Petition Date) authorizing TCO to use
Columbia's cash collateral and granting Columbia replacement liens and security
interests in TCO's post-petition assets, to the extent such pre-petition liens
and security interests were valid, perfected and not avoidable as of the
Petition Date and to the extent the value of the collateral securing Columbia's
secured claims diminished after the Petition Date as a result of TCO's use of
the cash collateral. Columbia's post-petition liens and security interests
were expressly subordinated to (i) TCO's debtor-in-possession financing
facility; (ii) post-petition liens held by purchasers of winter service gas
from TCO under certain winter service agreements; (iii) other pre-petition
liens on inventory, if valid; (iv) claims of the trustee under the Inventory
Loan Agreement for compensation, reimbursement and indemnification; and (v) the
unpaid expenses of members of the TCO Creditors'
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Committee and the unpaid fees and expenses incurred by all the professionals
retained by TCO and the TCO Creditors' Committee in TCO's bankruptcy proceeding
to the extent allowed by the Bankruptcy Court.
2. SALE OF COLUMBIA CANADA
On November 25, 1991, Columbia and Anderson Exploration Ltd.
("Anderson") executed an agreement (the "Canada Sale Agreement") pursuant to
which Columbia agreed to sell to Anderson all the issued and outstanding shares
of Columbia Canada, a wholly-owned oil and gas exploration and production
subsidiary of Columbia operating in Canada. Anderson agreed, pursuant to the
Canada Sale Agreement, inter alia, to pay Columbia an aggregate consideration
of $109.3 million (Cdn.) (the "Purchase Price"), plus or minus an adjustment
for changes in working capital subsequent to the Columbia Canada balance sheet
dated June 30, 1991.
The Canada Sale Agreement also contained certain obligations on the
part of Columbia after the sale. Columbia assumed responsibility for certain
litigation that is currently pending against Columbia Canada including a number
of civil suits (the "Specified Litigation") and three separate suits concerning
the properties located in the Kotaneelee Production area (the "Kotaneelee
Litigation"). Columbia has the right to conduct both the Specified Litigation
and the Kotaneelee Litigation to conclusion and has assumed certain
indemnification obligations with respect to the two types of litigation. In
the
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case of the Specified Litigation, the indemnification pertaining thereto (the
"Specified Litigation Indemnification") covers only the identified cases
pending at the closing of the Canada Sale Agreement (the "Canada Closing") and
any liability to employees terminated prior to that date.
With regard to the indemnification pertaining to the Kotaneelee
Litigation (the "Kotaneelee Litigation Indemnification"), the indemnity extends
to any actions filed within the later of six years following the Canada Closing
or thirty months after the termination of the litigation pending at the Canada
Closing or litigation arising out of matters pending at such Closing. In the
case of the Kotaneelee Litigation Indemnification, Columbia has the right to
bind Columbia Canada to settlement agreements. Judgments resulting in a change
in the nature of the interest held by Columbia Canada or even in a forfeiture
of the interest could be rendered. Under both the Specified Litigation
Indemnification and the Kotaneelee Litigation Indemnification, Columbia agreed
to indemnify Anderson for all litigation expenses, costs, damages and losses
incurred as a result of any litigation covered under the indemnifications.
Columbia's maximum liability to Anderson for these post-sale
obligations is limited to the Purchase Price plus interest thereon at the rate
of seven percent (7%) per year compounded annually (hereinafter referred to as
the "Aggregate Indemnification Obligation"). Columbia's post-sale obligations
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to Anderson are secured under the terms of a "Security Agreement" pursuant to
which approximately $30 million (Cdn.) of the sales proceeds was deposited with
Montreal Trust Company, a Canadian trust company, in an escrow account (the
"Kotaneelee Escrow") in which interest earned will accumulate. The Canada Sale
Agreement provides that an additional $25 million (Cdn.) is to be added to the
Kotaneelee Escrow upon Confirmation of the Plan, and that letters of credit may
be substituted for cash in the Kotaneelee Escrow. Under the Canada Sale
Agreement, the Kotaneelee Escrow may be reduced if Columbia maintains
investment grade ratings on its long-term unsecured debt of Baa2 or better and
BBB or better by Moody's Investor's Service, Inc. and Standard & Poor's Ratings
Group, respectively, on its debt for any six-month period following the
Effective Date. Columbia expects to replace the Kotaneelee Escrow with a
letter of credit as permitted under the Canada Sale Agreement.
On December 31, 1991, the Bankruptcy Court approved the Canada Sale
Agreement (the "Canada Order"). Pursuant to the Canada Order, Columbia's
post-sale obligations to Anderson were granted administrative expense Claim
status against Columbia and its Estate. Except for the (i) administrative
expense claims of Chemical Bank under the DIP Facility, (ii) unpaid fees and
disbursements allowed pursuant to order of the Bankruptcy Court to
Professionals retained pursuant to sections 327 and 1103 of the Bankruptcy Code
up to a maximum of $7.5 million (exclusive of compensation previously awarded
whether or not paid) and
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(iii) quarterly fees required to be paid to the U.S. Trustee pursuant to 28
U.S.C. Section 1930(a)(6), Anderson's administrative expense Claim has
priority over all other administrative expense Claims of the kind specified in
sections 726(b), 364(c), 507(b) and 503(b) of the Bankruptcy Code, regardless
of whether such competing administrative expense Claim(s) of parties other than
Anderson arise in connection with Columbia's Reorganization Case, a superseding
Chapter 7 case, or in any subsequent case or proceeding filed by or against
Columbia under the provisions of the Bankruptcy Code. The Canada Order also
provides that Anderson's Claims against Columbia or its Estate shall not be
estimated under the provisions of section 502(c) of the Bankruptcy Code, or
disallowed under the provisions of section 502 of the Bankruptcy Code, in
Columbia's Reorganization Case, any superseding Chapter 7 case, or in any
subsequent case or proceeding filed by or against Columbia under the provisions
of the Bankruptcy Code. If Anderson's Claims are estimated, Anderson's Claims
shall be estimated in the full amount of the Purchase Price plus accrued
interest as described above, and shall be estimated solely for purposes of
determining the feasibility of any proposed plan of reorganization. For a
discussion of the treatment of Claims against Columbia arising under the Canada
Sale Agreement, see Section VI.A, "Classification and Treatment of Claims and
Interests."
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3. INVESTMENT GUIDELINES LITIGATION
On the Petition Date, Columbia and TCO sought and obtained Bankruptcy
Court approval of their use of guidelines for the investment of all their
respective cash (the "Investment Guidelines Order"). The Bankruptcy Court
expressly held that, although Columbia's and TCO's investments were not limited
to ones insured or guaranteed by the government of the United States, they did
not need to obtain bonds from the entities with which such funds were to be
deposited or invested and that compliance with the guidelines was "adequate and
sufficient compliance with the requirements of section 345(b) of the Bankruptcy
Code...."
On August 14, 1991, the U.S. Trustee Filed a motion for
reconsideration of the Investment Guidelines Order, which was denied by the
Bankruptcy Court after conducting a hearing on October 3, 1991. Subsequently,
on October 15, 1991, the U.S. Trustee appealed the Investment Guidelines Order
to the District Court, which overturned the decision of the Bankruptcy Court,
and this appeal was subsequently taken to the Court Appeals for the Third
Circuit.
On August 29, 1994, the Third Circuit issued its decision (i)
affirming the District Court's decision except to the extent that it ruled on
Columbia's and TCO's investments in repurchase agreements and (ii) remanding
the matter to the District Court for further proceedings consistent with the
opinion. In its opinion, the Third Circuit suggested to the District and
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Bankruptcy Courts that they implement the statutory guidelines of section
345(b) of the Bankruptcy Code in a gradual manner so as not to have an unduly
adverse impact on the TCO and Columbia Estates.
The District Court remanded the matter to the Bankruptcy Court for
further proceedings. As of the date hereof, no further proceedings have
occurred. In order to come into compliance with the Third Circuit's decision,
Columbia and TCO, in consultation with the U.S. Trustee, have transferred
essentially all their investments into government-backed securities and other
similar government insured or guaranteed investments as their prior
non-conforming investments have matured and continue to mature.(1)
4. APPROVAL OF TAX ALLOCATION PROCEDURES
Under Section 12 of the HCA and rule 45(a) promulgated thereunder, no
System company may extend credit to another, including extensions of credit
which may result from the allocation of consolidated taxes, without prior
approval from the SEC. Pursuant to rule 45(c) under the HCA, a registered
holding company which files a consolidated federal income tax
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(1) On October 22, 1994, President Clinton signed into law the Bankruptcy
Reform Act of 1994 which, among other things, amends section 345(b) of the
Bankruptcy Code so as to insert the phrase "unless the court for cause
orders otherwise" at the end of section 345(b). This amendment allows the
court to approve investments other than those permitted by section 345(b)
for just cause, thereby effectively overruling the Third Circuit's August
29, 1994 decision in In re Columbia Gas System, Inc. The relevant section
of the Bankruptcy Reform Act, however, only applies prospectively to cases
filed after its effective date.
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return is required to secure the approval of the SEC for the allocation of the
liabilities and benefits arising from such return among the consolidated
companies unless there is in effect a tax agreement approved by the SEC
providing for such allocation.
Columbia and its subsidiaries entered into the Tax Allocation
Agreement prior to the Petition Date which provides for the allocation of the
benefits and liabilities arising from their consolidated tax returns in a
manner consistent with the requirements of rule 45(c). The Tax Allocation
Agreement provides for apportionment of the consolidated tax in accordance with
the "separate return tax" method. The Tax Allocation Agreement specifically
provides that each loss-company (i.e., a company having, after intercompany
eliminations, a negative separate return tax) will receive current cash payment
in an amount equal to its negative separate return tax, rather than receive the
amount of that tax benefit in a subsequent year when it has taxable income.
The Tax Allocation Agreement also provides that each profit-company (i.e., a
company having, after intercompany eliminations, a positive separate return
tax) will pay amounts equal to its separate return tax liability. The Tax
Allocation Agreement also provides (consistently with rule 45(c)) that no
subsidiary company shall be required, as a result of the allocation method
provided in the Tax Allocation Agreement, to pay more than its separate return
tax.
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The Tax Allocation Agreement also provides that: "Any parent
corporation gain or loss realized from its sale of its interest in
subsidiaries' securities will be assigned to parent corporation and will not be
allocated to other members."
On November 27, 1991, Columbia and TCO Filed a joint motion with the
Bankruptcy Court seeking authorization to pay federal income taxes (including
estimated federal income taxes) for 1991 and to allocate the System's 1991
consolidated tax liability in accordance with the Tax Allocation Agreement. On
December 12, 1991, the Bankruptcy Court issued an order granting the
authorization but expressly noted that its authorization did not constitute an
assumption of the Tax Allocation Agreement nor create a rule of construction or
legal presumption with respect to the effect or validity of the Tax Allocation
Agreement. Thereafter, on April 13, 1992 and April 1, 1993, the Bankruptcy
Court issued similar orders authorizing Columbia and TCO to pay federal income
taxes (including estimated federal income taxes) for 1992 and 1993,
respectively, and to allocate the System's consolidated tax liability for those
years in accordance with the Tax Allocation Agreement. These orders also
provided that the Bankruptcy Court's authorization did not constitute an
assumption of the Tax Allocation Agreement.
Pursuant to the Plan, Columbia will assume the Tax Allocation
Agreement; and pursuant to the TCO Plan, TCO also will assume the Tax
Allocation Agreement. Columbia believes
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that assumption of the Tax Allocation Agreement is prudent and in the best
interests of its Estate.
5. LESOP CLAIMS AND LESOP ACTION
a. COLUMBIA'S THRIFT PLAN
Columbia adopted, effective September 1, 1958, the Employees' Thrift
Plan of Columbia Gas System, as Amended and Restated Effective July 1, 1994
(the "Thrift Plan") for eligible employees of its subsidiaries (including TCO)
which elect to participate in the Thrift Plan. The Thrift Plan is a qualified
plan under section 401(a) of the Internal Revenue Code of 1986, 26 U.S.C.
Section 401(a) as amended (the "IRC"). Columbia has no employees covered
under the Thrift Plan, but TCO and 15 non-debtor subsidiaries of Columbia are
contributing employers.
Prior to October 1991, the assets of the Thrift Plan were held in a
trust established under an Agreement and Declaration of Trust by and between
Columbia and Bankers Trust Company, as amended December 20, 1989 and March 14,
1990 (the "Trust). The assets of the Trust are not part of the bankruptcy
estates of either Columbia or TCO. Fidelity Management Trust Company is now
trustee for all Trust assets, except that the LESOP Thrift Plan Trustee is
trustee of the Columbia Common Stock Fund and another fund ("Fund E") described
below.
Effective April 1, 1990, the Thrift Plan was amended to include the
LESOP for the purpose of pre-funding approximately 11.5 years of employer
matching contributions ("Employer Matching Contributions") to the Thrift Plan.
At that time the
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