-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, eSI+kvcVN1akIi8SbTEoZ0jWdLKRl2k9V+lfNET5YOXCXTs/DS4I70Agp9gmNxgr 00juGsG3kU7+Ie3D0GweVQ== 0000356446-95-000006.txt : 19950615 0000356446-95-000006.hdr.sgml : 19950615 ACCESSION NUMBER: 0000356446-95-000006 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950318 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19950320 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN HOLDINGS INC /DE/ CENTRAL INDEX KEY: 0000356446 STANDARD INDUSTRIAL CLASSIFICATION: [9995] IRS NUMBER: 953419191 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-10566 FILM NUMBER: 95521847 BUSINESS ADDRESS: STREET 1: P O BOX 74 STREET 2: 376 MAIN STREET CITY: BEDMINSTER STATE: NJ ZIP: 07921 BUSINESS PHONE: 9082349220 MAIL ADDRESS: STREET 1: P O BOX 74 STREET 2: 376 MAIN STREET CITY: BEDMINSTER STATE: NJ ZIP: 07921 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTER MEMORIES INC /DE/ DATE OF NAME CHANGE: 19940411 8-K/A 1 AMENDMENT TO 8-K FILED ON 01/17/95 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Date of Amendment No. 1: March 17, 1995 Date of Initial Report: January 18, 1995 (Date of earliest event reported): January 3, 1995 AMERICAN HOLDINGS, INC. (Exact name of registrant as specified in its charter) STATE OR OTHER JURISDICTION OF INCORPORATION: Delaware COMMISSION FILE NUMBER: 0-10566 IRS EMPLOYER IDENTIFICATION NO.: 95-3419191 376 MAIN STREET, P. O. BOX 74, BEDMINSTER, NJ 07921 ------------------------------------------------------- (Address of Principal Executive Offices) Registrant's telephone number: (908) 234-9220 Item 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND EXHIBITS a. Financial Statements of Businesses Acquired: - Financial statements of Dr. Madis Laboratories, Inc. ("Madis") as of and for the two years ended December 31, 1994 together with Independent Accountant's Report. b. Proforma Financial Information: - Proforma consolidated condensed balance sheet as of December 31, 1994. - Proforma consolidated condensed statement of operations for the year ended December 31, 1994. c. Exhibits: (1) Plan of Reorganization of Dr. Madis Laboratories, Inc. (2) Disclosure Statement related to Plan of Reorganization AMERICAN HOLDINGS, INC. PROFORMA CONSOLIDATED CONDENSED BALANCE SHEET DECEMBER 31, 1994 ($000 OMITTED) (UNAUDITED)
American Holdings Madis Proforma HISTORICAL HISTORICAL ADJUSTMENTS PROFORMA ASSETS: Cash and cash equivalents .................................................................... $ 13,427 $ 427 ($ 2,045)A $ 11,209 ( 300)B ( 100)C ( 200)D Accounts receivable ..................................................................... 664 664 Inventory ....................................................................... 1,459 1,459 Prepaid expenses ................................................................ 36 36 -------- --------- --------- --------- Total current assets ....................................................................... 13,427 2,586 ( 2,645) 13,368 -------- --------- --------- --------- Marketable securities ..................................................................... 2,018 2,018 Other assets .................................................................... 1,491 309 200 D 3,425 1,668 E ( 243)E --------- --------- --------- --------- Total assets .................................................................. $ 16,936 $ 2,895 ($ 1,020) $ 18,811 ========= ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities .................................................................... $ 621 $ 2,950 ($ 2,045)A 2,226 ( 100)C 800 F Other liabilities ............................................................... 270 270 Stockholders' equity: Capital stock ................................................................... 77 1,819 ( 1,819)E 77 Additional paid -in capital .................................................................... 43,800 -- -- 43,800 Retained earnings (deficit) ...................................................................... (26,820) ( 2,144) 2,144E ( 26,820) Unrealized losses on marketable securities ..................................................................... ( 742) ( 742) --------- --------- --------- --------- Total stockholders' equity ....................................................................... 16,315 ( 325) 325 16,315 --------- --------- --------- --------- Total liabilities and stockholders' equity ....................................................................... $ 16,936 $ 2,895 ($ 1,020) $ 18,811 ========= ========= ========= =========
See accompanying notes to proforma consolidated condensed financial statements. AMERICAN HOLDINGS, INC. PROFORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1994 ($000 OMITTED, EXCEPT PER SHARE DATA) (UNAUDITED)
American Holdings Madis Proforma HISTORICAL HISTORICAL ADJUSTMENT PROFORMA Revenues ........................................................................ $ 5,995 $ 5,995 Cost of goods sold .............................................................. 4,008 4,008 --------- --------- Gross profit .................................................................... 1,987 1,987 --------- --------- 150 G Selling, general and ............................................................ 60 H administrative expenses ....................................................................... $ 1,771 $ 1,254 ( 154)I 3,081 --------- --------- ------- --------- Income (loss) from operations ..................................................................... ( 1,771) 733 ( 56) ( 1,094) --------- --------- ------- --------- Other income (expense) ...................................................................... 1,802 ( 3) 37 J 441 ( 111)K ( 80)L ( 144)M 1,060 I Reorganization expenses ....................................................................... --------- ( 1,219) 1,219 N -- --------- -------- ------- -------- Income (loss) before income taxes ................................................................... 31 ( 489) ( 195) ( 653) -------- -------- ------ ------- Income taxes (benefits).......................................................... 5 7 ( 12)O -- -------- -------- ------ ------- Net income (loss) ............................................................. $ 26 ($ 496) ($ 183) ($ 653) ======== ======== ====== ======== Earnings (loss) per common share ................................................................... -- ($ .08) ======== ======== Weighted average number of common shares outstanding ................................................................... 8,095 8,095 ======== ========
See accompanying notes to proforma consolidated condensed financial statements. AMERICAN HOLDINGS, INC. NOTES TO PROFORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS DECEMBER 31, 1994 (UNAUDITED) The following adjustments have been made to the proforma consolidated condensed financial statements to reflect the acquisition of Madis by American Holdings, Inc. (the "Company") on January 3, 1995. The acquisition is being treated as a purchase under generally accepted accounting principles. (A) Cash disbursed to the Trustee in Bankruptcy in accordance with the confirmed Plan of Reorganization. (B) Cash disbursed for a finder's fee ($100,000) and estimated professional fees ($200,000) incurred in connection with the acquisition. (C) Cash disbursed to a Madis employee benefit plan in accordance with the Plan of Reorganization. (D) Loan made to an affiliate of Madis in accordance with the Plan of Reorganization. (E) Eliminate the intercompany investment in Madis and record goodwill. (F) Contractual payments to former owners of Madis over next four years. (G) Record higher salary expense based on employment agreements with Madis executive officers. (H) Record additional rental payment to an affiliate of Madis for the lease of the Company's facilities in accordance with a lease agreement. The lease requires the same base payment as in 1994 plus an additional rental payment of 1% of sales each year up to an additional $200,000 per annum over the term of the lease. (I) On September 21, 1993, the Board of Directors of the Company approved in principle a plan to distribute the common stock of NorthCorp Realty Advisors, Inc. ("NorthCorp"), a real estate asset manager and a wholly-owned subsidiary of the Company, to all holders of the Company's outstanding common stock (the "Distribution"). Under the plan of distribution, the Company declared a dividend of one share of NorthCorp common stock for every two shares of the Company's common stock outstanding on the record date of the Distribution, July 8, 1994. At the date of distribution (July 11, 1994), 8,250,000 shares of NorthCorp common stock were outstanding. Approximately 4,000,000 shares, or 48%, of NorthCorp's common stock were distributed to the shareholders of the Company. On August 4, 1994, the Company sold substantially all of its remaining interest in NorthCorp. As part of the transaction, NorthCorp assumed the lease of the Company's Washington, D.C. office and the employment contract of one of the Company's executive officers. This entry eliminates these items and NorthCorp's results of operations. The unaudited proforma condensed consolidated statement of operations does not reflect the following proforma adjustments related to the disposition of NorthCorp and the Washington, D.C. office of the Company: 1. Interest income on the assumed reinvestment of the $1.5 million proceeds received. 2. Net gain of $378,000 on the sale of substantially all of the Company's remaining interest in NorthCorp. 3. The market value of the NorthCorp common stock distributed to the Company's shareholders. (J) Record interest income on the loans to affiliates. (K) Record amortization of goodwill incurred in the acquisition over 15 years. (L) Record 20% minority interest in earnings of Madis. (M) Reflect decreased interest income due to a decrease in investable cash used to acquire Madis. (N) Remove Reorganization expenses to show Madis operations as if Madis had not been under Chapter 11 in 1994. (O) Record proforma tax provision. The proforma results of operations have been adjusted to reflect the disposition of NorthCorp and the Washington, D.C. office of the Company (the "Disposition") had the Disposition taken place on January 1, 1994. The proforma results of operations also include the operations of Madis as if the acquisition of Madis had taken place on the same date. The proforma consolidated condensed balance sheet includes the accounts of Madis as if the acquisition had occurred on December 31, 1994. The proforma consolidated condensed financial information is not intended to reflect the results of operations which would have actually resulted had these transactions been effected on the dates indicated. Moreover, this proforma financial data is not intended to be indicative of results of operations which may be attained in the future. DR. MADIS LABORATORIES, INC. FINANCIAL STATEMENTS AS OF AND FOR THE TWO YEARS ENDED DECEMBER 31, 1994 INDEPENDENT AUDITORS' REPORT To the Stockholders of Dr. Madis Laboratories, Inc. South Hackensack, New Jersey We have audited the accompanying balance sheet of Dr. Madis Laboratories, Inc. (the "Company") as of December 31, 1994, and the related statements of operations, accumulated deficit and cash flows for the years ended December 31, 1994 and 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 1994, and the results of its operations and its cash flows for the years December 31, 1994 and 1993 in conformity with generally accepted accounting principles. As discussed in Notes 1 and 9 to the financial statements, on December 7, 1994, the Bankruptcy Court entered an order confirming the plan of reorganization which became effective on January 3, 1995. Under the plan of reorganization, the Company is required to comply with certain terms and conditions as more fully described in Notes 1 and 9. /s/ DELOITTE & TOUCHE - ----------------------- Dated: February 28, 1995 DR. MADIS LABORATORIES, INC. BALANCE SHEET DECEMBER 31, 1994
ASSETS CURRENT ASSETS: Cash .................................... $ 426,714 Accounts receivable, net of allowance for uncollectible accounts and returns and allowances of $102,000 ................ 664,150 Inventory ............................... 1,458,676 Prepaid expenses ........................ 35,978 ----------- TOTAL CURRENT ASSETS .................... 2,585,518 PROPERTY AND EQUIPMENT, at cost ........... 3,557,651 Less: Accumulated depreciation ......... 3,308,024 ----------- NET PROPERTY AND EQUIPMENT .............. 249,627 ----------- OTHER ASSETS: Security deposits ....................... 29,000 Notes receivable - stockholder .......... 30,000 ----------- TOTAL OTHER ASSETS ...................... 59,000 ----------- TOTAL ASSETS .............................. $ 2,894,145 ===========
(CONTINUED ON NEXT PAGE) DR. MADIS LABORATORIES, INC. BALANCE SHEET DECEMBER 31, 1994
LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable - trade ................ $ 724,228 Accounts payable - affiliate ............ 33,587 Current portion of long-term debt ....... 32,683 Accrued expenses and payroll taxes ...... 1,875,088 Accrued environmental costs ............. 280,000 Federal and state income taxes payable .. 3,500 ----------- TOTAL CURRENT LIABILITIES ............... 2,949,086 ----------- OTHER LIABILITIES: Long-term debt (net of current portion) .............................. 257,957 Notes payable - stockholder ............. 12,347 ----------- TOTAL OTHER LIABILITIES ................. 270,304 ----------- STOCKHOLDERS' DEFICIT: Capital stock ........................... 1,818,549 Accumulated deficit ..................... (2,143,794) ----------- TOTAL STOCKHOLDERS' DEFICIT ............. ( 325,245) ----------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 2,894,145 ===========
See accompanying notes to financial statements. DR. MADIS LABORATORIES, INC. STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1994 AND 1993
1994 1993 ----------- ----------- SALES ............................. $ 5,995,369 $ 5,219,732 COST OF GOODS SOLD ................ 4,008,138 3,522,649 ----------- ----------- GROSS PROFIT ...................... 1,987,231 1,697,083 SELLING, OPERATING AND ADMINISTRATIVE EXPENSES ......... 1,253,724 992,210 ----------- ----------- INCOME FROM OPERATIONS ............ 733,507 704,873 OTHER INCOME ...................... 32,324 106,333 INTEREST EXPENSE .................. ( 35,232) ( 217,308) ----------- ----------- 730,599 593,898 ----------- ----------- REORGANIZATION ITEMS: Chapter 11 professional fees .... ( 1,192,016) ( 94,614) Income tax penalties and interest ( 27,314) ( 3,688) ----------- ----------- TOTAL REORGANIZATION ITEMS ...... ( 1,219,330) ( 98,302) ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES . ( 488,731) 495,596 PROVISION FOR INCOME TAXES ........ 7,500 3,751 ----------- ----------- NET INCOME (LOSS) ................. ($ 496,231) $ 491,845 =========== ===========
See accompanying notes to financial statements. DR. MADIS LABORATORIES, INC. STATEMENTS OF ACCUMULATED DEFICIT YEARS ENDED DECEMBER 31, 1994 AND 1993
1994 1993 ------------ ------------ ACCUMULATED DEFICIT - BEGINNING OF YEAR . ($ 1,647,563) ($ 2,139,408) Net income (loss) . ( 496,231) 491,845 ------------ ------------ ACCUMULATED DEFICIT - END OF YEAR ....... ($ 2,143,794) ($ 1,647,563) ============ ============
See accompanying notes to financial statements. DR. MADIS LABORATORIES, INC. STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1994 AND 1993
1994 1993 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ................. ($496,231) $ 491,845 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Deferred costs .................. -- 1,129 Depreciation .................... 148,883 169,986 (Increase) decrease in: Accounts receivable ........... ( 6,285) (226,960) Inventory ..................... (202,686) (225,344) Notes receivable - shareholders ................. -- (30,000) Prepaid expenses .............. ( 8,308) 14,232 Security deposits ............. 3,333 (5,000) Increase (decrease) in: Accounts payable - trade ...... 87,417 (223,481) Accrued expenses and payroll taxes ................ 813,039 234,504 Due from affiliate ............ ( 30,365) (90,371) Federal and state income tax payable .................. ( 251) 3,751 --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES ............. 308,546 114,291 --------- --------- CASH FLOWS USED IN INVESTING ACTIVITIES: Purchase of property and equipment (46,831) (40,277) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on bank loan ... (26,353) (30,340) Principal payments on capital lease obligations ..................... ( 7,354) ( 8,739) --------- --------- NET CASH USED IN FINANCING ACTIVITIES ....................... (33,707) (39,079) --------- ---------
(CONTINUED ON NEXT PAGE) DR. MADIS LABORATORIES, INC. STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1994 AND 1993 (CONTINUED)
1994 1993 -------- -------- NET INCREASE IN CASH ............... 228,008 34,935 CASH, Beginning of year ............ 198,706 163,771 -------- -------- CASH, End of year .................. $426,714 $198,706 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for: Interest ....................... $ 33,893 $ 17,660 ======== ======== Income taxes ................... $ 4,000 $ 3,751 ======== ======== SCHEDULE OF NON-CASH FINANCING AND INVESTING ACTIVITIES: Equipment acquired through capital lease obligations .............. $ 20,233 $ 10,750 ======== ========
See accompanying notes to financial statements. DR. MADIS LABORATORIES, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 NOTE 1 - REORGANIZATION UNDER CHAPTER 11 On March 17, 1988, Dr. Madis Laboratories, Inc. (the "Company") filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code, and continued to operate its business as debtor-in-possession, subject to the approval of the Bankruptcy Court for certain of its proposed actions, until November 6, 1991. At that point, a Trustee was appointed, operating the business as a Trustee-In-Possession. Effective January 3, 1995, American Holdings, Inc. ("HOLD"), a Delaware corporation, acquired an 80% ownership interest in the Company pursuant to a Plan of Reorganization ("the Plan"). The Plan called for substantially all secured and unsecured creditors to be paid 100% of their claims with interest. See Note 9 of Notes to Financial Statements. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The Company's financial statements are presented on the historical cost basis. Pursuant to the Plan, the Company will merge with a wholly-owned subsidiary of HOLD, as further discussed in Note 9 of Notes to Financial Statements. Accordingly, the Company has not prepared these financial statements on a "fresh-start" basis of accounting. OPERATIONS Dr. Madis Laboratories, Inc., is engaged in the manufacture of botanical derivatives. The Company's headquarters, sales office, laboratories and main warehouse are located in South Hackensack, New Jersey. INVENTORIES Merchandise inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method. PROPERTY AND EQUIPMENT Depreciation and amortization are provided primarily using the double-declining balance method over the useful lives of the assets (seven to twelve years). DR. MADIS LABORATORIES, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 ENVIRONMENTAL COSTS Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. These amounts are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. The timing of these accruals generally coincides with completion of a feasibility study or the Company's commitment to a formal action plan. Amounts included in the accompanying balance sheet for estimated environmental costs at December 31, 1994 were $280,000. INCOME TAXES Deferred income taxes reflect the net effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating loss carryforwards. The deferred tax asset at December 31, 1994 was completely offset by a valuation allowance. NOTE 3 - INVENTORIES Inventory is comprised of the following: Raw materials $ 217,420 Work in process 163,874 Finished goods 1,077,382 ---------- $1,458,676 ==========
NOTE 4 - PROPERTY AND EQUIPMENT Property and equipment is comprised of the following: DR. MADIS LABORATORIES, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 Machinery and equipment $3,331,031 Equipment under capital lease 30,983 Furniture and fixtures 195,637 ---------- Total 3,557,651 Less: Accumulated depreciation 3,308,024 ---------- $ 249,627 ==========
NOTE 5 - LONG-TERM DEBT Long-term debt at December 31, 1994 consisted of the following: Note payable to American Holdings, Inc., with interest payable at 85% of the prime lending rate, due March 1, 2003, secured by substantially all assets of the Company $268,205 Capital lease obligation to Yale Financial, due in monthly installments of $299, including interest, through August 1996, secured by equipment 5,972 Capital lease obligation to Yale Financial, due in monthly installments of $399, including interest, through July 1997, secured by equipment 12,387 Capital lease obligation to Sanwa Leasing, due in monthly installments of $177, including interest, through November 1996, secured by equipment 4,076 -------- 290,640 Less: current maturities 32,683 -------- $257,957 ========
DR. MADIS LABORATORIES, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 Maturities of long-term debt are as follows:
Years Ending DECEMBER 31, ------------- 1995 $ 32,683 1996 33,634 1997 29,862 1998 29,900 1999 33,030 Thereafter 131,531 -------- $290,640 ========
NOTE 6 - INCOME TAXES As of December 31, 1994, the Company had net operating loss carryforwards ("NOL") of approximately $246,000 and $767,000 for federal and state income tax purposes, respectively, which may provide current and future tax benefits. The federal NOL's expire in the years 2006 and 2007. The state NOL's expire during the years 1995 through 1998. The provision (benefit) for income taxes is comprised of the following:
1994 1993 --------- ------- Federal: Current $ 7,500 $ 3,751 Deferred ( 139,024) 168,183 Increase (decrease) in valuation allowance 139,024 ( 168,183) -------- -------- Total federal $ 7,500 $ 3,751 ======== ========
DR. MADIS LABORATORIES, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994
1994 1993 --------- ------- State: Current - - Deferred ($ 43,986) $ 44,834 Increase (decrease) in valuation allowance 43,986 ( 44,834) -------- -------- Total $ - $ - ======== ========
Significant components of the Company's deferred tax assets at December 31, 1994 are as follows: Current: Accounts receivable allowance $ 40,739 Inventory obsolescence 58,524 Environmental costs 111,832 Employee stock ownership plan 39,940 Valuation allowance ( 251,035) --------- Total current - --------- Noncurrent: Reorganization costs 345,830 Net operating loss carryforwards 152,901 Alternative minimum tax credits 4,604 Valuation allowance ( 503,335) --------- Total noncurrent - --------- Total deferred tax assets $ - =========
A reconciliation of the provision for income taxes to the expected provision for income taxes [income (loss) before income taxes times the statutory tax rate of 34%] is as follows: DR. MADIS LABORATORIES, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994
1994 1993 -------- -------- Income (loss) before income taxes ($ 488,731) $ 495,596 Statutory federal income tax 34% 34% --------- --------- Expected income tax provision (benefit) ( 166,169) 168,503 State taxes, net of federal benefit ( 29,324) 29,736 Increase (decrease) in valuation allowance 183,010 ( 213,017) Other 19,983 18,529 --------- --------- Provision for income taxes $ 7,500 $ 3,751 ========= =========
NOTE 7 - CONTINGENCIES AND COMMITMENTS The Company conducts its operations in facilities leased from a corporation owned by the Company's shareholders for five years with renewal options for fifteen additional years. The rental payment for the premises is $20,000 per month plus an annual payment not to exceed $200,000 based on 1% of gross revenue. Rental expense to related parties totalled $240,000 in both 1994 and 1993. The Company also leases a warehouse facility from an unaffiliated entity under a two-year lease period at the rate of $8,333 per month beginning January 3, 1995. The lease has a renewal option for one three-year period at rates up to $10,833 per month. NOTE 8 - CAPITAL STOCK Capital stock of the Company at December 31, 1994 was comprised of the following: DR. MADIS LABORATORIES, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 Preferred stock, $100 par value; 1,017,000 shares authorized, 24,497 shares issued and outstanding. Common stock, Class A voting, no par value; 100 shares authorized, 100 shares issued and outstanding. Common stock, Class B non-voting, no par value; 10,000 shares authorized, 10,000 shares issued and outstanding. NOTE 9 - SUBSEQUENT EVENT On January 3, 1995, the Company, a New Jersey corporation, merged with HOLD's wholly-owned subsidiary, a Delaware corporation (the "Merger"), which then changed its name to Dr. Madis Laboratories, Inc. ("Madis Labs"). In the Merger, the former stockholders of the Company received 20% of the outstanding shares of the common stock of Madis Labs and an option to acquire 250,000 shares of HOLD's common stock at its book value of $2.10 per share. The balance of the common stock of Madis Labs is owned by HOLD. The Merger was effected in conjunction with the Joint Plan of Reorganization (the "Plan") filed by the Company in Chapter 11 proceedings under the Federal Bankruptcy Law and confirmed by the Court on November 29, 1994. Under the Plan, HOLD advanced $2,300,000 to the Company which, together with $900,000 of cash on hand, was used to fund the Plan. The balance of indebtedness was assumed by Madis Labs and will be paid from its working capital over a period of years or by HOLD in the event of any deficiency. The Company believes that its creditors will receive 100% of their approved claims. Therefore, pre- and post- petition liabilities are not separately disclosed. DR. MADIS LABORATORIES, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 In connection with the Merger, two principal stockholders who previously served as executive officers of the Company entered employment agreements with Madis Labs pursuant to which one will serve as chairman emeritus for three years at an annual salary of $100,000 and the other will serve as president for four years at an annual salary of $150,000. In addition, Madis Labs leased its principal business premises from a corporation owned by former stockholders of the Company. The lease may not be cancelled prior to December 1999 and has renewal options by Madis Labs for an additional fifteen years. The rental for the premises is $20,000 per month plus an additional annual payment of up to $200,000 based on 1% of gross revenue. HOLD also paid $100,000 to the Trustee of the Company's Employee Stock Ownership Plan to fund its termination. SIGNATURES 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. AMERICAN HOLDINGS, INC. By: /s/ Mark Koscinski -------------------------- Mark Koscinski Vice President (Principal Accounting Officer) Date: March 17, 1995 EX-99 2 GODLESKY & SYWILOK 51 MAIN STREET HACKENSACK, New Jersey 07601 (201) 487-9390 Attorney for Debtors-In Possession UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEW JERSEY ____________________________ : HONORABLE WILLIAM F. TUOHEY In the Matter of: CASE NOS. 88-01805 (WFT) : 88-01806 (WFT) DR. MADIS LABORATORIES, INC., : In Administratively Debtor Consolidated Proceedings for ____________________________ : Reorganization Under Chapter 11 of the Bankruptcy In the Matter of: : Code IVM CORPORATION, : CASE NO. 88-01806 (WFT) Debtors Second Amended Debtor : JOINT DISCLOSURE STATEMENT ___________________________ PURSUANT TO 11 U.S.C. 1125 FOR THE JOINT CHAPTER 11 PLAN OF REORGANIZATION OF DEBTORS-IN-POSSESSION Dr. Madis Laboratories, Inc. and IVM Corporation, the above-captioned administratively consolidated Debtors, submit the following Joint Disclosure Statement for consideration by creditors and interest holders. IVM CORPORATION BY: /S/ VOLDEMAR MADIS Voldemar Madis, President DATED: November 18, 1994 DR. MADIS LABORATORIES, INC. BY: /S/ VOLDEMAR MADIS Voldemar Madis, President INTRODUCTION This Joint Disclosure Statement ("Disclosure Statement") is submitted pursuant to Section 1125 of Title 11, United States Code (the "Bankruptcy Code") and includes and describes the Joint Chapter 11 Plan of Reorganization ("Plan") of Dr. Madis Laboratories, Inc. ("DML") and IVM Corporation ("IVM"). Capitalized terms used in this Disclosure Statement which are not otherwise defined herein have the meanings ascribed to such terms in the Plan or the Bankruptcy Code. On _______________________, 1994, after notice and a hearing, the Bankruptcy Court entered an Order approving this Disclosure Statement as containing information of a kind, and in sufficient detail, adequate to enable a hypothetical, reasonable investor typical of the creditor classes whose votes are being solicited to make an informed judgement about whether to accept or reject the Plan. APPROVAL OF THE DISCLOSURE STATEMENT, HOWEVER, DOES NOT CONSTITUTE A DETERMINATION BY THE BANKRUPTCY COURT OF THE FAIRNESS OR MERITS OF THE PLAN. EXHIBITS. Accompanying this Disclosure Statement are copies of the following: 1. Merger Agreement Between DML & MACO which is Exhibit A 2. The Order of the Court (1) approving the Disclosure Statement, (2) fixing the time for filing of acceptances or rejections of the Plan, (3) the date and time of the hearing to consider confirmation of the Plan, (4) the manner by which notice of the confirmation hearing is to be given to all parties in interest, and (5) the time for filing objections to the Plan. 3. Liquidation Analysis; Exhibit B 4. Financial Statement of American Holdings, Inc. which is Exhibit C 5. Ballot 6. Employee Petition Exhibit; Exhibit D 7. Analysis of funds available and to be distributed under plan; Exhibit E READ THE PLAN. You are urged to read the Plan, Disclosure Statement and all exhibits carefully and in their entirety before voting on the Plan. If your Claims or Interests (as defined in the Plan) are impaired by the Plan, you are entitled to vote on the Plan. Particular attention should be directed to the provisions of the Plan affecting or impairing your rights as they may presently exist. INFORMATION SUBMITTED BY DEBTORS. The information contained in this Disclosure Statement has been submitted from information obtained from the Debtors' records and employees, unless specifically stated to be from other sources. The Debtors believe that the contents of this Disclosure Statement are accurate and complete in all material respects. Any information, representations or inducements made to secure or obtain acceptances of this Plan which are other than, or inconsistent with, the information contained in this Disclosure Statement should not be relied upon by any holder of a Claim or Interest in arriving at a decision to vote for or against the plan. DEBTORS' RECOMMENDATION. THE DEBTORS BELIEVE THAT CONFIRMATION AND IMPLEMENTATION OF THE PLAN IS IN THE BEST INTERESTS OF, AND PROVIDES THE GREATEST POSSIBLE RECOVERY TO, CREDITORS AND EQUITY INTERESTS. THE PLAN PROVIDES CREDITORS WITH MORE THAN THEY ARE LIKELY TO RECEIVE IN A LIQUIDATION OF THE DEBTORS' ASSETS UNDER CHAPTER 7 OF THE BANKRUPTCY CODE. VOTING. Voting instructions are contained in ARTICLE I of this Disclosure Statement. To be counted, your Ballot must be duly completed, executed and filed with the Clerk of the United States Bankruptcy Court and received by the Debtors Counsel by 4:00 P.M. Eastern Standard Time on ____________________,1994. ARTICLE I. VOTING PROCEDURES AND REQUIREMENTS 1. BALLOTS AND VOTING DEADLINES. Accompanying this Disclosure Statement is a Ballot for acceptance or rejection of the Plan. When you vote and return your Ballot, please indicate the class or classes in which your Claims are classified by marking the appropriate space provided on your Ballot for such purpose. THE BANKRUPTCY COURT HAS DIRECTED THAT TO BE COUNTED FOR VOTING PURPOSES, BALLOTS FOR THE ACCEPTANCE OR REJECTION OF THE PLAN MUST BE FILED WITH THE CLERK OF THE UNITED STATES BANKRUPTCY COURT AND SERVED ON THE DEBTORS' COUNSEL NO LATER THAN 4:00 P.M. EASTERN STANDARD TIME ON ____________________, 1994. Ballots that do not indicate either an acceptance or rejection of the Plan will be deemed to constitute an acceptance of the Plan. Please vote and return your original Ballot to: Clerk United States Bankruptcy Court 50 Walnut Street, Third Floor Newark, New Jersey 07102; and Additionally, a copy of your Ballot should be sent to Debtors' counsel: Godlesky & Sywilok 51 Main Street Hackensack, New Jersey 07601 If you have any questions regarding the procedure for voting, please contact: John W. Sywilok Godlesky & Sywilok 51 Main Street Hackensack, New Jersey 07601 tel #: (201) 487-9390 fax#: (201) 487-9393 It is important for all creditors to exercise their rights to vote to accept or reject the Plan. Even if you do not vote to accept the Plan, you may be bound by the Plan if it is accepted by the requisite holders of Claims or Equity Interests and confirmed by the Bankruptcy Court. 2. PARTIES IN INTEREST ENTITLED TO VOTE. Any holder of a claim against or Equity Interest in the Debtors, whose Claim or Equity Interest has not been disallowed previously by the Bankruptcy Court, is entitled to vote to accept or reject the Plan, if such Claim or Equity Interest is impaired under the Plan and either (i) such holder's Claim or Equity Interest has been scheduled by the Debtors and is not scheduled as disputed, contingent or unliquidated; or (ii) such holder has filed a proof of Claim or Interest on or before the Bar Date set by the Bankruptcy Court for such filings. Any claim or Equity Interest to which an objection has been filed is not entitled to vote, unless the Bankruptcy Court, upon application of the holder to whose Claim or Equity Interest an objection has been made, temporarily allows such Claim or Equity Interest in an amount that it deems proper for the purpose of accepting or rejecting the Plan. A vote may be disregarded if the Bankruptcy Court determines, after notice and a hearing, that such vote was not solicited or procured in good faith or in accordance with the provisions of the Bankruptcy Code. 3. GENERAL BAR DATE. In accordance with an Order of the Court entered on March 27, 1989, May 30, 1989 was fixed as the last day for the filing of Claims by unsecured creditors, except such Claims that may arise from the rejection of an executory contract pursuant to Section 365 of the Bankruptcy Code. Subsequently, the court entered an Order on April 29, 1991, approving a prior disclosure of the Debtors, which fixed August 1, 1991 as the last day for filing Claims by all creditors. 4. DEFINITION OF IMPAIRMENT. Pursuant to Section 1124 of the Bankruptcy Code, a class of Claims or Equity Interests is impaired under a plan of reorganization unless, with respect to each Claim or Equity Interest of such class, the plan: (a) leaves unaltered the legal, equitable, and contractual right of the holder of such Claim or Equity Interest; or (b) notwithstanding any contractual provision or applicable law that entitles the holder of a Claim or Equity Interest to demand or receive accelerated payment of such Claim or Equity Interest after the occurrence of a default: (i) cures any such default that occurred before or after the commencement of the case under the Bankruptcy Code, other than a default of a kind specified in Section 365 (b)(2) of the Bankruptcy Code; (ii) reinstates the maturity of such Claim or Interest as it existed before such default; (iii) compensates the holder of such Claim or Interest for any damages incurred as a result of any reasonable reliance on such contractual provision or such applicable law; and (iv) does not otherwise alter the legal, equitable or contractual rights to which such Claim or Interest entitles the holder of such Claim or Interest; or (c) provides that, on the effective date of the plan, the holder of such Claim or Interest receives, on accountof such Claim or Interest, cash equal to: (i) with respect to a Claim, the allowed amount of such Claim; or (ii) with respect to an Interest, if applicable, the greater of: (A) any fixed liquidation preference to which the terms of any security representing such Interest entitle the holder of such Interest; or (B) any fixed price at which the debtor, under the terms of such security, may redeem such security from such holder. 5. CLASSES IMPAIRED UNDER THE PLAN. No classes of creditors are impaired and therefore are not entitled to vote on the Plan. All creditor classes are deemed to accept the plan pursuant to 1126(f). ARTICLE II. CONFIRMATION PROCEDURE 1. CONFIRMATION OF HEARING. A hearing before the Honorable William F. Tuohey, United States Bankruptcy Judge, has been scheduled for the ______ day of _____________, 1994, at _____ a.m./p.m., at the United States Bankruptcy Court, Martin Luther King, Jr. Federal Building, 50 Walnut Street (Third Floor), Newark, New Jersey 07102 to consider confirmation of the Plan. The Confirmation Hearing may be adjourned from time to time by the Bankruptcy Court without further notice, except for an announcement of the adjourned date made at the Confirmation Hearing. 2. PROCEDURE FOR OBJECTIONS. Any objection to confirmation of the Plan must be made in writing and specify in detail the name and address of the objector, all grounds for the objection and the amount of the Claim or Equity Interest held by the objector. Any such objection must be filed with the Bankruptcy Court and served on the Debtors' counsel and all parties who have filed a notice of appearance by 4:00 p.m. Eastern Standard Time on ____________________, 1994. Unless an objection to confirmation is timely filed and served, it may not be considered by the Bankruptcy Court. 3. REQUIREMENTS FOR CONFIRMATION. The Bankruptcy Court will confirm the Plan only if it meets all the requirements of Section 1129 of the Bankruptcy Code. Among the requirements for confirmation are that the Plan be (i) accepted by all impaired classes of Claims and Equity Interests or, if rejected by an impaired class, that the Plan "does not discriminate unfairly" against and is "fair and equitable" with respect to such class; (ii) feasible; and (iii) in the "best interests" of creditors and stockholders impaired under the Plan. The Bankruptcy Court must also find that: (a) The Plan has classified Claims and Interests in a permissible manner; (b) The Plan complies with the technical requirements of Chapter 11 of the Bankruptcy Code; and (c) The Plan has been proposed in good faith. 4. CLASSIFICATION OF CLAIMS AND INTERESTS. Section 1122 of the Bankruptcy Code requires the Plan to place a Claim or Interest in a particular Class only if such Claim or Interest is substantially similar to the other Claims or Interests in such class. The Plan creates separate classes to deal respectively with secured Claims, unsecured Claims, and shareholder Interests. The Debtors believe that the Plan's classifications place substantially similar Claims or Interests in the same class and thus, meets the requirements of Section 1122 of the Code. 5. VOTING AND ACCEPTANCE OF THE PLAN. As a condition to confirmation of the Plan, the Bankruptcy Code requires each class of "impaired" Claims or Interests entitled to vote on the Plan to vote to accept the Plan. (a) ACCEPTANCE. The Bankruptcy Code defines acceptance of a plan by a class of creditors as acceptance by holders of two-thirds (2/3) in dollar amount and more than one-half (1/2) in number of those claims actually voting. Acceptance of the plan by a class of equity interests is defined as acceptance by holders of two-thirds of the number of shares actually voting. Holders of Claims or Equity Interests who fail to vote will not be counted as either accepting or rejecting the plan. A vote, moreover, may be disregarded if the Bankruptcy Court determines, after notice and a hearing, that it was not made or solicited in good faith. Classes of Claims or Equity Interests that are not "impaired" under a plan of reorganization are conclusively presumed to have accepted the plan of reorganization and thus are not entitled to vote. 6. BEST INTERESTS TEST. The "best interests" of creditors test requires that each holder of a Claim or Equity Interest receive or retain under the Plan property of a value that is not less than the value such holder would receive or retain if the Debtors were liquidated under Chapter 7 of the Bankruptcy Code. To determine what members of each impaired class of Claims and Equity Interests would receive if the Debtors were liquidated, the Bankruptcy Court must determine the dollar amount that a liquidation of the Debtors' businesses and assets would generate in the context of a Chapter 7 liquidation sale. The amount available for satisfaction of Claims and Equity Interests would consist of the proceeds resulting from the sale, reduced by the Claims of secured creditors, to the extent of the value of their collateral, and the costs and expenses of the liquidation. After consideration of the effects a Chapter 7 liquidation would have on the ultimate proceeds available for distribution to Creditors in this case, the Debtors believe that the Plan satisfies the "best interests" of creditors test. The Debtors liquidation analysis is attached as Exhibit B. 7. THE FEASIBILITY TEST. The "feasibility" test requires the Bankruptcy Court to find that confirmation of the Plan is not likely to be followed by the liquidation or the need for further reorganization of the Debtors. As set forth on Exhibit C, there will be sufficient funds on hand to make the required Plan payments. 8. THE FAIR AND EQUITABLE TEST. If any impaired class of Claims or Equity Interests does not accept the Plan, the Bankruptcy Court may still confirm the Plan despite such nonacceptance. To obtain such confirmation, the Plan must not "discriminate unfairly" and be "fair and equitable" with respect to each impaired class of Claims or Interests that has rejected the Plan. Under Section 1129 (b) of the Bankruptcy Code, a plan is "fair and equitable" to a class if, among other things, the plan provides: (a) with respect to secured Claims, that each holder of a Claim included in the rejecting class will receive or retain on account of its Claim property that has a value, as of the effective date of the plan, equal to the allowed amount of such Claim; and (b) with respect to unsecured Claims and Equity Interests, that the holder of any Claim or Equity Interest that is junior to the Claims or Equity Interests of such class will not receive or retain on account of such junior Claim or Equity Interest any property at all unless the senior class is paid in full. A plan does not discriminate unfairly if the legal rights of a dissenting class are treated in a manner consistent with the treatment of other classes whose legal rights are similar to those of the dissenting class and if no class receives more than it is entitled to receive on account of its Claim or Interest. 9. OTHER REQUIREMENTS OF SECTION 1129. The Debtors believe that the Plan meets all the other technical requirements of Section 1129 of the Bankruptcy Code, including that the Plan has been proposed in good faith. THE DEBTORS MAY AND SHALL SEEK CONFIRMATION OF THE PLAN IF LESS THAN THE REQUISITE AMOUNTS OF CLAIMS OR INTERESTS IN ANY ONE OR MORE CLASSES VOTE TO ACCEPT THE PLAN. ARTICLE III. BACKGROUND INFORMATION This section of the Disclosure Statement describes a brief history and background of the Debtors. 1. INTRODUCTION. On March 17, 1988 (the "Petition Dates"), the Debtors filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code. On October 24, 1990, an Order was entered directing the joint administration of the Debtors' cases for procedural purposes only. The Debtors remained in possession of their assets as debtors-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code, until November 5, 1991 when a Trustee was appointed by the Office of the United States Trustee for the Third Region. 2. DESCRIPTION OF THE DEBTORS AND THEIR BUSINESSES. (a) DML is a New Jersey corporation engaged in the business of producing botanical flavor and medicinal extracts. Its founder, Dr. V.H. Madis, was born in Estonia and received his undergraduate, graduate and doctoral degrees from the Royal Hungarian University of Science in 1938. After working in private industry, Dr. Madis, along with his son, Voldemar, founded DML and began processing botanical derivatives. In the early 1980's the company upgraded its facility, and its core business of botanical extraction and wholesaling, into the area of contract manufacturing. In 1983, an explosion in DML's plant caused a temporary closure of the business and required repairs and renovations. As a result, operations did not resume until December 1984. Debtor was forced to sell its existing inventory to maintain sales, and the insurance proceeds received in connection with the explosion were insufficient to cover reconstruction and loss of business costs. Because operating capital was used for reconstruction rather than for typical working capital purposes, revenue diminished and ultimately DML's primary lender froze its line of credit facility. This inhibited DML's ability to purchase raw materials. Efforts to generate cash flow from asset sales, refinancing or additional capital contributions proved unsuccessful and ultimately, the company was forced to file for protection under Chapter 11 of the Bankruptcy Code on March 17, 1988. (b) IVM CORPORATION. IVM has no business operations. It serves as a real estate holding company and owns the real estate and improvements located at 375 Huyler Street, South Hackensack, New Jersey. There is a lease agreement between IVM and DML at an annual amount of $240,000. DML also pays all utilities. 3. REAL PROPERTY OWNED BY IVM CORPORATION AND LIENS THEREON. DML owns no real estate. IVM owns the following real property: (a) 375 HUYLER STREET, SOUTH HACKENSACK, NEW JERSEY. IVM owns the operating facility of DML located at 375 Huyler Street, South Hackensack, New Jersey. The property consists of approximately two and nine-tenths (2.9) acres, and is improved by a single and multi-story building containing approximately one hundred ten thousand (110,000) square feet, including approximately five thousand (5,000) square feet of office space. The property is encumbered by a first mortgage lien held by Columbia Savings & Loan Association ("Columbia") dated July 19, 1977, recorded July 21, 1977 in Mortgage Book 5938, Page 8 to secure a promissory note in the original principal sum of $1,500,000.00. Columbia filed a Proof of Claim in the IVM case on April 18, 1988 in the amount of $968,357.32. Columbia is owed the sum of $660,339.98 in principal and accrued interest as of August 4, 1994. The balance accrues interest at the per diem rate of $163.69. Interest only payments have been made since the appointment of the Trustee in November, 1991. As of filing date, the property was encumbered by mortgages held by United Jersey Bank ("UJB"). On or about May 18, 1983, IVM executed and delivered a promissory note in the principal sum of $1,000,000.00 to the New Jersey Economic Development Authority ("EDA"). On or about May 18, 1983, DML executed and delivered to the EDA a promissory note in the principal sum of $1,500,000.00. These notes were secured by separate mortgages dated May 18, 1983, both recorded on May 20, 1983 in Mortgage Book 6540, Page 107 and Mortgage Book, 6540, Page 133, respectively. IVM also executed an Assignment of Leases to the EDA, which in turn assigned its Mortgages and Assignment of Lease to UJB on May 18, 1983. On or about August 1983, UJB extended a $1,000,000.00 Credit Line to DML, which Credit Line was secured by a mortgage made by IVM to UJB dated August 10, 1983, and recorded November 4, 1983 in Mortgage Book 6604, Page 206. On May 23, 1989, UJB filed separate Proofs of Claim in the DML and IVM bankruptcy case indicating that as of the filing date, the sum of $2,799,657.20 was owed by the Debtors. Prior to the Trustee's appointment, a series of cash collateral orders respecting the Debtors' use of the real property and the income therefrom were entered on May 2, 1988; October 6, 1988, January 30, 1989, February 16, 1989, March 21, 1989, April 10, 1989 and May 8, 1989. As of May 5, 1989 the indebtedness owed to UJB was $2,444,199.01. As noted in Article IV of this Disclosure Statement, IVM sold adjacent property located at 100 Huyler Street, Teterboro, New Jersey approximately one year prior to the Trustee's appointment and a significant portion of the Debtors' obligation to UJB was paid from the proceeds of that sale. Weekly and subsequent monthly payments were made representing principle and interest to UJB reducing the indebtedness as of August 31, 1994, to $273,858.65 which accrues interest at the per diem rate of $47.66. Subsequently, American Holdings purchased the claim of UJB for the sum of $250,000.00 on September 13, 1994. The property is further encumbered by a mortgage filed by International Sabila, S.A. ("Sabila") recorded on April 30, 1987, in Mortgage Book 7283, Page 663 to secure the sum of $1,500,000.00 The mortgage was given by IVM to secure DML's obligations under an agreement dated April 24, 1987 relating to the purchase of raw aloe leaves by DML from Sabila as set forth in more detail in Article IV below. On March 29, 1994, the court entered a stipulation settling an adversary proceeding instituted by the Trustee against Sabila, wherein Sabila's Claim was settled for $366,000.00. The Trustee has been making payments in accordance with the stipulation and at present the balance due Sabila is $336,000.00. Subsequently Zuellig purchased the claim of International Sabila. The property is encumbered by a pre-petition lien for unpaid real estate taxes and sewer/water charges. The Township of South Hackensack was determined to hold a valid pre-petition municipal lien in the total sum of $201,022.44 consisting of principal of $138,651.44 and accrued interest as of May 15, 1992 of $62,371.00. The secured Claim of South Hackensack is discussed in more detail below. In accordance with an appraisal of the Huyler Street property dated May 8, 1992, prepared by Carl Krell, Inc., the property was appraised to have a value of $4,400,000.00. (b) IVM also owns a residential home located at 40 Park Slope Terrace, Hawthorne, New Jersey. The property is subject to a mortgage made by IVM to Columbia recorded March 7, 1986, in Mortgage Book 196, Page 42 to secure the original principal sum of $200,000.00. The mortgage was assigned by Columbia to Interboro Savings & Loan Association ("Interboro") on October 15, 1987, in Assignment of Mortgage Book N14, Page 147. The home is occupied by Dr. V.H. Madis. Interboro filed a motion for relief from the automatic stay on August 14, 1992. The stay motion was continued to enable Interboro to submit an appraisal. On May 3, 1993 a Consent Order was entered which provided, in part, for the continuation of the stay and for Trustee to pay current monthly principal and interest of $1,366.49, plus $500.00 on account of the arrearage under the loan, for a total monthly payment of $1,866.49. The Trustee, in turn, received an equivalent sum from Dr. Madis as rent for the home. On October 4, 1993, another Consent Order was entered continuing the monthly payments and providing for a continuation of the hearing. Although the stay was lifted on the latest hearing date, the Trustee and Interboro have since agreed that the monthly adequate protection payments will continue until September 1, 1994. Interboro's appraisal of the Hawthorne property indicates a value as as of September 4, 1992, of $378,000.00. As of June 30, 1994, the balance owed to Inerboro was $205,099.61, which accrues interest at the per diem rate of $30.22. ARTICLE IV. SIGNIFICANT EVENTS DURING THE CHAPTER 11 CASE This section of the Disclosure Statement summarizes significant events during the debtor-in-possession period and since the Trustee's appointment. 1. DEBTOR-IN-POSSESSION PERIOD FROM MARCH 17, 1988 TO NOVEMBER 5, 1991. (a) SALE OF 100 HUYLER STREET, TETERBORO, NEW JERSEY. On November 17, 1989, the Debtors filed a motion for authorization to sell real property owned by IVM located at 100 Huyler Street, Teterboro, New Jersey to Panorama Park, Inc. for the price of $1,400,000.00 The motion also sought authority for DML to lease the property back from the purchaser. The transaction was approved by the late Hon. Vincent J. Commisa by Order dated December 21, 1989. The approximate sum of $1,300,000.00 was paid to UJB on account of its secured Claims against IVM and DML from the proceeds of sale. DML remains as tenant on the 100 Huyler Street property in accordance with a Lease Agreement dated December 29, 1989 between DML and the purchaser's assignee, Teterboro '89 Associates. Pursuant to the lease, DML is obligated to pay fixed monthly rent in the amount of $23,333.33. In January of 1992, the Trustee negotiated a modification of the rental payments based on DML's cash flow problems at that time. The modification permitted the Trustee to apply the security deposit to the monthly rent and pay one half (1/2) of the rent for four (4) months. After the modification period expired, the Trustee resumed monthly payments of $24,105.24, which includes a real estate tax escalation above the fixed base rental amount. On July 13, 1994, $31,666.67 was paid to bring the lease up to date. The lease expires on December 31, 1994, and as of September 1st the sum of $72,315.72 remains on the lease. (b) DEBTOR'S FAILURE TO PAY PAYROLL, INCOME AND FICA TAXES, REAL ESTATE TAXES AND SEWER AND WATER CHARGES. After filing for bankruptcy protection, the Debtors operated their businesses as Debtors-in-Possession pursuant to 1107 and 1108 of the Bankruptcy Code. For the period from December 1989 through December 1991, DML fell behind in its obligation to pay payroll taxes, income taxes and FICA taxes in the total amount of $227,769.13. IVM Corporation also failed to pay federal taxes amounting to $145,186.00. In addition, IVM Corporation did not pay real estate taxes, sewer and water use charges, and accrued interest thereon, during the Debtor-in-Possession period. The total arrearage owed by IVM to the Township of South Hackensack through February 1991 was approximately $430,000.00. (c) STAY MOTION BY TOWNSHIP OF SOUTH HACKENSACK AND TAX FORECLOSURE SALE. On March 11, 1991, the Township of South Hackensack filed a motion seeking relief from the automatic stay. The motion was resolved by the entry of a Consent Order on April 9, 1991 which provided, in part, that the Debtors agreed to (1) pay the sum of $105,000.00 to the Township on or before April 24, 1991, (2) remain current on all payments of taxes, sewer and water use charges, and (3) permit the automatic stay to be lifted upon submission by the Township of an EX PARTE Application to the Court in the event the Debtors failed to make the specified payments or confirm a Plan of Reorganization by August 1, 1991. On June 17, 1991 the Court entered an EX PARTE Order vacating the automatic stay and on August 8, 1991, the Township of South Hackensack held a tax foreclosure sale. At the sale, the Township purchased the tax sale certificate for the sum of $323,566.54, consisting of taxes for 1987-1988 in the principal sum of $90,823.92 with accrued interest of $64,258.71, and the sewer charges for the years 1987- 1990 in the principal sum of $121,530.61 with accrued interest of $46,853.30. Township would not accept Debtors payments thereafter as they wanted to be paid in the entirety. (d) CONSENT ORDER WITH INTERNAL REVENUE SERVICE. In March 1990, the Internal Revenue Service filed a motion which sought an Order dismissing or converting the Debtors' cases for failure to pay federal taxes. On April 6, 1990, an Order was entered which provided that DML make a payment to the Internal Revenue Service in the amount of $10,000.00 per week and that upon DML's failure to do so, the Internal Revenue Service was entitled to submit an Affidavit requesting conversion of the case to Chapter 7. The Order was silent with respect to the outstanding amount of taxes paid as of that date. (e) THE DEBTORS' PLAN OF REORGANIZATION. On August 24, 1990, the Debtors filed a joint Plan of Reorganization and Disclosure Statement. Objections to the Disclosure Statement were filed by the Township of South Hackensack and International Sabila, S.A. On April 17, 1991, an Amended Disclosure Statement and Plan were filed by the Debtors and on April 29, 1991 an Order was entered approving the Disclosure Statement and Amendment, and fixing a confirmation hearing date for June 14, 1991. On May 31, 1991 the Internal Revenue Service filed an objection to Debtors' Plan. After numerous adjournments of the confirmation hearing, the Plan was withdrawn. 2. SIGNIFICANT EVENTS SINCE APPOINTMENT OF TRUSTEE. (a) ADVERSARY PROCEEDING AGAINST TOWNSHIP OF SOUTH HACKENSACK. As ---------------------------------------------------------- noted in Paragraph 1(b) of this Article, the Township of South Hackensack obtained relief from the automatic stay and purchased a tax sale certificate for unpaid real estate taxes, water and sewerage charges and interest thereon. On April 8, 1992, the Trustee filed an adversary proceeding against the Township to vacate prior Orders of the Court lifting the automatic stay, to reimpose the stay, and to determine the extent and validity and priority of the Township's municipal liens. The Complaint also sought to restrain the Township from proceeding to an IN REM tax foreclosure judgement. The adversary proceeding was - -- --- resolved by the entry of a Consent Order on June 8, 1992. Under the Consent Order, the automatic stay was reinstated and the Township was determined to hold a valid pre-petition municipal lien in the principal amount of $138,651.44, plus accrued interest in the amount of $62,371.00 as of May 15, 1992. The Township was also determined to hold an administrative expense claim in the principal amount of $182,059.14, plus accrued interest of $21,829.29 as of May 15, 1992. Pursuant to the Consent Order, the Trustee paid the sum of $86,000.00 on account of all post-petition administrative charges, thus satisfying the Township's administrative expense claim in full. Additionally, the Trustee commenced making monthly adequate protection payments of $1,155.43 to the Township, representing interest on the Township's pre-petition municipal lien. (b) OFFER AND MOTION OF TRIARCO CORP. On May 8, 1992, a Motion was filed by Triarco Corp. which sought to compel the Trustee to accept or reject Triarco's offer to purchase all of the assets of both Debtors for the sum of $2,500,000.00. The Motion was filed as a result of Triarco's dissatisfaction with the Trustee's rejection of the offer as being inadequate. On June 1, 1992, the Trustee filed a response and objection to Triarco's Motion and on June 11, 1992, an Order was entered denying the Motion. (c) OPPOSITION TO REQUEST FOR PAYMENT OF ATTORNEYS' FEES AND COSTS BY ALFIO LANUTO. As noted in Paragraph 1(c) of this Article, prior to the Trustee's appointment the Debtors entered into a Consent Order with the Township of South Hackensack. The Order that was submitted to the Court, in part, recognized an entitlement to counsel fees of $20,598.82 to Alfio S. Lanuto, Esq., the Township's attorney. The Court deleted the portion of the Order which recognized Mr. Lanuto's entitlement to fees and directed that any fees be fixed upon and after Application to the Court. Mr. Lanuto filed a fee Application seeking fees of $28,100.00, and costs of $44.75. A hearing on M. Lanuto's fee application was scheduled for December 18, 1991. The Trustee filed an objection on various grounds, including the absence of a Court Order retaining Mr. Lanuto, and the lack of any benefit to the bankruptcy estates. The hearing was adjourned several times, and ultimately on the latest hearing date of December 14, 1992, Mr. Lanuto withdrew his application. (d) INVESTIGATION OF CLAIMS RELATING TO 1983 EXPLOSION. An explosion occurred at DML's facility on September 12, 1983. The Debtor contended that the explosion caused a loss of saleable products and substantial cash flow problems. Specifically, the Debtor asserted that a defect in the production of Veragel(R), its major product at that time, was a consequence of the explosion. On March 19, 1985, DML submitted a claim to the Chubb Group of Insurance Companies ("Chubb") under DML's insurance policy #694 11 81, which was underwritten by Federal Insurance Company ("Federal"). After a series of correspondence between the parties, the claim was denied. Upon the Trustee's appointment, the Debtors' management placed great emphasis on the value of the claim and asserted that coverage was wrongfully and improperly denied. However, the Debtors took no action in the Bankruptcy Court against Chubb or Federal. The Trustee, with the assistance of his counsel, conducted an extensive review of the files relating to the insurance claim, and commenced negotiations with Chubb and Federal. Chubb and Federal remained steadfast in their denial of the claim. On June 3, 1992, the Trustee filed a Complaint against Federal and Chubb seeking a declaration that the claim was covered by the insurance policy, and for damages. The adversary proceeding was filed to preserve the bar date under the policy which was June 4, 1992. Ultimately, the Trustee determined that the facts of the matter were not favorable and that it would be in the best interests of the estate to voluntarily dismiss the adversary proceeding. This was done with the participation and knowledge of the Debtors and their counsel, and on November 13, 1992 an Order was entered dismissing the adversary proceeding. (e) ADVERSARY PROCEEDING AGAINST INTERNATIONAL SABILA, S.A. DML's principal supplier of raw aloe leaves used in the production of Veragel(R) was International Sabila, S.A. ("Sabila"). As of December 31, 1986, DML was indebted to Sabila in the sum of $260,282.55 for past purchases of raw aloe leaves. In early 1987, DML requested that Sabila supply additional raw materials. Sabila agreed to do so only if arrangements were made to address the outstanding balance, and to provide collateral for further purchases by DML. On April 24, 1987, Sabila, DML and IVM entered into an Agreement which provided, in part, that DML would pay the balance of $262,000.00 to Sabila in equal monthly installments, at 6% interest per year, until the balance was fully paid. The Agreement also provided that DML would purchase minimum amounts of Aloe product in the future. To secure the obligations of DML to pay the prior balance, and to pay for future shipments, DML granted Sabila a security interest in all of its machinery, equipment, furniture and fixtures, and proceeds. As further security for DML's obligations under the Agreement, IVM granted Sabila a mortgage on the 375 Huyler Street property in the sum of $1.5 million. The mortgage amount corresponded to the amount of further credit that Sabila was to extend to DML under the Agreement. Sabila perfected its security interests in the DML assets by filing a UCC financing statement, and also duly perfected its mortgage lien by filing the mortgage with the appropriate recording office. DML made several payments on account of the past debt and thereafter defaulted under the Agreement. DML also received additional Aloe product, for which only partial payment was made. The Agreement provides that in the event of a default by DML, interest shall accrue on the amount owed at the rate of 14% per year. By letter dated May 22, 1989, Sabila notified DML of its default under the Agreement and demanded payment, including interest of $78,729.44 as of May 1988. DML's records indicated that as of October 1989, the principal sum of $314,809.30, exclusive of interest, was owed to Sabila. Prior to the Trustee's appointment, the Debtors filed an Amendment and Supplement to their Joint Plan and Disclosure Statement which recognized that Sabila was a valid secured creditor and that as of October 12, 1990, Sabila was owed the sum of $519,029.06. Based on the accrual of interest under the Agreement, Sabila would currently be owed in excess of $700,000.00. On June 24, 1993, the Trustee filed an adversary proceeding against Sabila. The Complaint sought to determine the validity, priority and extent of the liens of International Sabila and to avoid and recover preferential and fraudulent transfers. The Trustee alleged, INTER ALIA, that the $260,282.55 past due obligation was satisfied by virtue of an assignment by Voldemar Madis of his preferred stock in the Debtors; that the mortgage lien and security interests were fraudulent conveyances since there was no balance owed to Sabila at the time; that certain payments made by DML to Sabila were preferential; that the mortgage lien given by IVM to Sabila was a fraudulent conveyance since IVM was not indebted to Sabila; and that the granting of the mortgage lien and security interests to Sabila were themselves preferential. There were various difficulties with the Trustee's case, including the existence of a letter written by Voldemar Madis which purportedly withdrew his offer to convey his stock in satisfaction of the $260,282.55 debt; that the liens and security interests of Sabila were validly perfected and recorded, thus undermining the Trustee's preference argument; that Sabila gave substantial "new value" in the form of additional Aloe shipments after the granting of the security interests; that the Trustee's witnesses would consist of the Debtors' shareholders and employees who lacked credibility since the Debtors' Amended Disclosure Statement acknowledged the secured claim of Sabila; and that the documentation pertaining to the relevant issues were conflicting, inconsistent and unclear. The adversary proceeding was settled on the basis that Sabila was afforded an allowed secured claim of $366,000.00, of which $30,000.00 has been paid by the Trustee. The balance of $336,000.00 shall be paid over a three (3) year period with monthly payments of $1,400.00 representing interest only at 5% during the first year, and monthly payments of $14,740.79 for the second and third years, representing principal and interest at 5% per year. Sabila's mortgage liens and security interests were deemed valid and perfected on the assets of DML and IVM and Sabila waived all other liens, claims and interests of any nature against the bankruptcy estates. On March 29, 1994, a Stipulation and Order was entered approving the settlement and dismissing the adversary proceeding. (f) TRUSTEE'S NEGOTIATIONS WITH SYNTHELABO S.A. ("SBO") AND SOCIETE EURIPEENNE DE PLANTES ET EXTRAITS ("SEPEX"). During the Trustee's involvement, the Debtors and the Trustee actively sought to market the Debtors' assets in order to fund a Plan of Reorganization. The Debtors and their counsel had extensive negotiations with two French companies, Synthelabo S.A. ("SBO") and Societe Europeenne de Plantes Et Extraits ("SEPEX"). Pursuant to these negotiations, various draft agreements were prepared, including a trademark and technology purchase and assignment agreement, a license agreement, a distributorship agreement and a sales representative agreement. In general, the negotiations contemplated a transfer of certain trademarks and technology by DML to SBO for a cash payment, with DML retaining the right to recover the transferred property in the future. SBO was to license back to DML the rights transferred in exchange for DML's payment of a 10% royalty. Additionally, SEPEX was to obtain the exclusive right to market DML's products outside the United States, and the parties discussed a reciprocal arrangement authorizing DML to sell certain SEPEX products in the United States on a commission basis. After lengthy negotiations, the parties were ultimately unable to reach an acceptable agreement which could be utilized by the Debtors and Trustee in formulating a Plan of Reorganization, and the negotiations terminated. (g) POST PETITION TAXES AND TRADE DEBT DML's financial performance is greatly improved since filing for Chapter 11. All post-petition payroll and FICA taxes are paid. Unpaid interest of $88,504 and a penalty of $85,769.03 remain unpaid. This debt was incurred before the Trustee's appointment and has not been paid as it was not part of his obligation. Trade debt upon filing for Chapter 11 was $865,534.46. As of August 31, 1994, post-petition trade debt is $270,103.03. Accounts Receivable upon filing for Chapter 11 was $638,669.89. As of August 31, 1994, receivables are $1,041,842.53. The present management has been the same since the filing of the Chapter 11 and the Trustee has permitted the management to continue their role in the operation of the Debtors. If the Debtors' Plan is confirmed, the present management will continue. (h) AGREEMENT WITH PDK LABORATORIES, INC. After extensive negotiations, the Chapter 11 Trustee has entered into agreements with DMLAC, the nominee of PDK Labs, Inc. In general, the agreements provide for the sale of substantially all of the assets of DML to DMLAC, and the lease by DMLAC of the 375 Huyler Street property from IVM. On November 11, 1994 DML, IVM and Equity Interests entered into a Merger Agreement with American Holdings and MACO. ARTICLE V ENVIRONMENTAL CONCERNS REGARDING THE DEBTORS' PROPERTY The Trustee and his professionals have addressed a variety of environmental issues relating to DML's operations and the 375 Huyler Street property which are described as follows: 1. UNDERGROUND STORAGE TANK ISSUES. Fifteen (15) underground storage tanks ("UST") and four (4) above ground storage tanks ("AGST") are located at the 375 Huyler Street, South Hackensack, New Jersey facility (the "Facility"). All of the AGSTs and nine (9) USTs at the Facility have been taken out of service. The remaining six (6) USTs are operational and serve the Facility. The USTs and AGSTs, which have been taken out of service, are approximately fifteen (15) to twenty-five (25) years old. An environmental audit of the Facility was conducted in 1988 by an environmental consulting firm, Clayton Environmental Consultants, Inc. ("Clayton"). Clayton detected existing soil and groundwater contamination at the Facility. The report generated by Clayton revealed that soil samples collected and analyzed from the western part of the Facility contained petroleum hydrocarbon ("PHCs") contamination in excess of the New Jersey Department of Environmental Protection and Energy's ("DEPE") informal guidelines. Further, the report indicated that laboratory analysis of groundwater samples did not reveal contamination of priority pollutant volatile organic compounds, has determined that no further work or remediation is necessary regarding UST No. E-7. 2. INDUSTRIAL SITE RECOVERY ACT ("ISRA") (FORMERLY KNOWN AS THE ENVIRONMENTAL CLEANUP RESPONSIBILITY ACT ("ECRA")) ISSUES. Generally, in New Jersey, before an industrial property or the assets of the company can be transferred, approval from the DEPE is required. This is required pursuant to ISRA (which was formerly known as ECRA). However, there are certain exceptions. In anticipation of a sale of DML's assets, the Trustee, on or about August 5, 1992, filed with the DEPE a letter of nonapplicability ("LNA") application. The LNA application sought to exempt DML from the requirement to obtain approval from the DEPE before selling the assets of DML and/or IVM to a third party. The basis for the LNA application was that the Facility is not an industrial establishment, then covered by ECRA. Because of the type of work conducted at the Facility, the Trustee argued that DML's standard industrial classification number was not covered by ECRA, which would require approval of the DEPE on the sale of the assets. The DEPE ultimately agreed with the Trustee and issued a LNA on September 18, 1992. 3. RESULTS OF PHASE II SOIL INVESTIGATION. In furtherance of the Phase II, on June 1 through 3, 1994, DRAI conducted soil sampling around the various tanks at the Facility. The results, which were available on July 13, 1994, indicated two (2) areas of concern. The first was around Tank No. 6, which is a two hundred fifty (250) gallon gasoline underground storage tank ("UST"). The second area of concern is Tank No. 5, which is a one thousand (1,000) gallon No. 2 fuel oil UST. The sample results obtained around Tank No. 6 indicated levels of xylene in excess of the DEPE'S most stringent standard of ten (10) parts per million ("ppm"). The results of the soil samples collected around Tank No. 5 indicated levels of petroleum hydrocarbons above DEP's guidelines of ten thousand (10,000) ppm. Based on these foregoing results, there is a requirement that the DEP be notified that a discharge occurred from these two (2) tanks. The DEP will most likely require that the two (2) USTs be closed and that the contaminated soil surrounding the tanks be excavated. The DEP will also most likely require groundwater monitoring at these areas. The Trustee obtained a cost estimate from Dan Raviv Associates Inc. to address the two (2) USTs that are of concern. The cost estimate is approximately $32,000.00. This cost estimate includes removal of the USTs, removal and disposal of contaminated soil from each UST excavation, the installation of one monitoring well in each excavation and a collection of one round of samples from each well for laboratory analysis. Based on the results of those tests, the DEP may require additional work. However, if the results of the initial investigation, proposed in DRAI's estimate, indicate no further environmental issues, DRAI will recommend to the DEP that no further action be taken by IVM. Debtors intend to conform with the clean up plan initiated by the Chapter 11 Trustee. A fund up to $200,000.00 will be set aside for this purpose. In addition Successor Corporation will reimburse IVM up to the sum of $80,000.00 in connection with the remediation of environmental problem and more specifically the environmental tanks. ARTICLE VI SUMMARY OF PLAN OF REORGANIZATION The following is a brief summary of certain provisions of the Debtors' Plan. This summary does not purport to be complete, the reader is urged to review the Plan in full. A copy of the Plan is annexed to this Disclosure Statement. 1. INTRODUCTION. In formulating the Plan, the goal was to find an acceptable method for satisfying the Claims of Creditors and the Interests of Interest holders in accordance with the priorities and requirements of the Bankruptcy Code. There is a need to balance the competing Interests of the various classes of Creditors and Interest holders to formulate a plan which is fair and feasible. Debtors believe this Plan has greater recovery to Debtors and Stockholders. 2. CLASSIFICATION OF CLAIMS AND INTERESTS AND THEIR TREATMENT UNDER THE PLAN. The Plan classifies Claims and Equity Interests separately in accordance with the Bankruptcy Code and provides different treatment for different Classes of Claims and Interests. As described more fully below, the Plan provides, separately for each class, either that the Claims or Interests are unimpaired or that holders of the Claims will receive various types of distributions under the Plan. Distributions on account of Allowed Claims under the Plan will be in full settlement, satisfaction and discharge of such Claims. Upon confirmation of the Plan, (i) the Debtors will be discharged from all Claims that arose before confirmation of the Plan, except for payments and distributions provided for in the Plan or the Confirmation Order, and (ii) all Equity Interests will be deemed to be terminated, canceled and annulled, except as provided for in the Plan or the Confirmation Order. (a) UNCLASSIFIED CLAIMS. Pursuant to Section 1123 (a)(1) of the Bankruptcy Code, Claims of a kind including those specified in Sections 507(a) (1) or (a)(7) of the Bankruptcy Code, may not be designated in a class. Thus, Administrative Claims and Priority Tax Claims against the Debtors shall be treated separately as unclassified Claims. (i) ADMINISTRATIVE CLAIMS. Administrative Claims are Claims against the Debtors constituting a cost or expense of administration of the Chapter 11 Cases allowed under Sections 503(b) and 507(a)(1) of the Bankruptcy Code, including any actual and necessary costs and expenses of operating the Debtors' businesses, any indebtedness or obligations incurred or assumed in connection with the conduct of the businesses, any allowance of compensation or reimbursement of expenses to the Trustee or professionals to the extent allowed by the Bankruptcy Court under Sections 330 and 331 of the Bankruptcy Code, and fees or charges assessed against the Debtors' estates under Section 1930, Chapter 12, Title 28, United States Code. These Claims consist primarily of (i) payables incurred in the ordinary course of business of DML's and the Trustee's post-petition operations, (ii) the commissions, fees and expenses, as approved by the Court, for the Trustee, professional persons retained by the Debtors, Trustee and the Creditors' Committee, (iii) certain post-petition taxes and water and sewer use charges incurred by the Debtors on the South Hackensack property before the Trustee's appointment; (iv) post-petition payroll, income and FICA taxes incurred by the Debtors before the Trustee's appointment and interest and penalties accrued thereon; and (v) post-petition rental obligations remaining due to Teterboro '89 Associates for DML's lease of the 100 Huyler Street Teterboro, New Jersey property. Each professional person or firm which holds or asserts a Claim for fees and costs as an administrative expense Claim that accrued before the Confirmation Date shall file with the Bankruptcy Court, and serve on all parties required to receive notice, no later than sixty (60) days after the Confirmation Date, a fee application. Failure to timely file a fee application shall result in the administrative Claim being forever barred and discharged. Chapter 11 Trustee estimate of professional fees in the Chapter 11 cases, exclusive of services to be rendered post-confirmation, will total approximately $583,000.00. In addition, the Chapter 11 Trustee estimates that his commission will be in the approximate amount of $600,000.00. This is an estimate only and the amount of such fees and commissions may be lower or higher. The following schedule sets forth the professional persons and an estimate of their fees, costs and commissions:
Estimate of Unpaid Fees PROFESSIONAL POSITION THROUGH CONFIRMATION Edward P. Bond Chapter 11 Trustee $600,000.00 Cole, Schotz, Meisal, Trustee's Counsel $200,000.00 Forman & Leonard, P.A. Bederson & Company Trustee's Accountants $150,000.00 John Sywilok, Esq. Debtor's Counsel $150,000.00 Michael Kopelman, Esq. Counsel to Creditors' $ 50,000.00 Committee Lampf, Lipkind, Prupis, Special Counsel for $ 5,000.00 Petigrow & LaBue Debtors (ESOP) Dan Raviv Associates, Trustee's Environmental $ 13,000.00 Inc. Consultant
The Chapter 11 Trustee & Debtors reserve their rights to object to the fee applications of certain of the foregoing professionals, if appropriate. The Plan provides for payment or treatment of Administrative Claims as follows:
Estimate of Unpaid Fees PROFESSIONAL POSITION THROUGH CONFIRMATION John F. Chiodi Debtors' Accountant $ 15,000.00
(A) Payment of the administrative fees and expenses to the Trustee, the professionals retained by him, counsel for the Debtors and professionals retained by the Debtors' counsel for the Creditors' Committee, and payment of the post-position real estate taxes and water and sewer charges due to the Township of South Hackensack shall be made on the Consummation Date. In addition to the above listed professional fees, timely payments have been made to Bederson & Co., Cole, Schotz, Meisel, Forman & Leonard and Dan Raviv Associates Inc. in compliance with Consent Orders. (B) The accounts payable incurred by the Trustee in the operation of DML's business shall be paid by Debtor in the ordinary course of business from and after the entry of an order confirming the Plan up to the Effective Date. All such Claims in existence on and after the Effective Date shall be assumed by, and paid in the ordinary course of business until fully satisfied. (C) Accrued taxes and other expenses as of the Effective Date, including payroll taxes and accrued expenses will be paid on the Consummation Date. (D) Payment of $174,323.00 to the Internal Revenue Service for penalties and accrued interest on post-petition payroll taxes, income taxes and FICA taxes which were incurred by DML before the Trustee's appointment will be made on the Consummation Date. (E) Chapter 11 Trustee states the following: "No payment to the Internal Revenue Service for accrued penalties and interest on post-petition federal taxes not paid by IVM before the Trustee's appointment. The accrued penalties and interest totalled approximately $108,000.00 as of June 30, 1994. No payment will be made on penalties and interest accrued due to a mistake by IVM's accountant. IVM's 1989 Federal Tax Form 1120 was improperly prepared on a consolidated basis with DML's tax return due to the erroneous belief that a parent-subsidiary relationship existed between the two companies. The Trustee and his accountants discovered that this relationship did not exist and subsequently amended the tax returns, giving rise to the penalties and interest on the resulting tax liability, the principal amount of which has been fully eliminated by the application of loss carrybacks since the Trustee's appointment". Debtors dispute the same and will contest with IRS. (F) Payment of $1,046.95 to the bankruptcy trustee in the case of AAA TRUCKING CORPORATION, United States Bankruptcy Court for the District of New Jersey, Case No. 90-20606 (WFT) in accordance with a Consent Order entered in that case in August 1992 will be made on the Consummation Date. (G) The remaining amounts due under DML's lease with Teterboro '89 Associates will be paid by Debtors as and when due under the Lease. (ii) PRIORITY TAX CLAIMS. All Allowed Priority Tax Claims shall consist of any Claim held by a federal, state or local governmental unit entitled to priority in payment under Section 507(a)(7) of the Bankruptcy Code. Each holder of an Allowed Priority Tax Claim shall receive, on the Consummation Date, the allowed amount of such Claim. Debtors estimate such Claims total $244,340.00. (b) CLASSIFIED CLAIMS AND INTERESTS. The following is a description of the Plan's classification of those Claims against and Equity Interests in the Debtors required to be classified under the Bankruptcy Code. (i) CLASS 1 - SECURED CLAIM OF TOWNSHIP OF SOUTH HACKENSACK. -------------------------------------------------------- Class 1 shall consist of the Allowed Secured Claim of the Township of South Hackensack, which is not impaired. The Township of South Hackensack will be deemed the holder of an Allowed Secured Claim in the amount of $201,022.44, representing unpaid pre-petition real estate taxes and water and sewer use charges agreed upon in the June 8, 1994 Consent Order. On the Consummation Date, the Debtors shall pay the sum of $201,022.44 in full payment of this Claim. (ii) CLASS 2 - SECURED CLAIM OF COLUMBIA SAVINGS & LOAN -------------------------------------------------- ASSOCIATION. Class 2 shall consist of the Allowed Secured Claim of Columbia, which is not impaired. As of the Effective Date, Columbia shall be deemed the holder of an Allowed Secured Claim in the amount of $660,339.98. On the Consummation Date, Debtors shall pay Columbia the sum of $660,339.98 in full satisfaction of its Claim. (iii) CLASS 3 - SECURED CLAIM OF AMERICAN HOLDINGS. Class 3 ---------------------------------------------- shall consist of the Allowed Secured Claim of American Holdings ("AMH"), which is not impaired. This claim was purchased from United Jersey Bank. As of the Effective Date, AMH shall be deemed the holder of an allowed Secured Claim in the amount of $279,664.00. DML shall pay AMH the sum of $279,664.00 in fifteen equal monthly installments. (iv) CLASS 4 - SECURED CLAIM OF INTERBORO SAVINGS & LOAN --------------------------------------------------- ASSOCIATION. Class 4 shall consist of the Allowed Secured Claim of Interboro, which is not impaired. As of the Effective Date, Interboro shall be deemed the holder of an Allowed Secured Claim in the amount of $205,099.61. Interboro shall retain its mortgage lien on the 40 Park Slope Terrace, Hawthorne, New Jersey premises owned by IVM, and shall receive monthly payments of $1,972.00, representing principal reduction and interest payments on the claim at the annual rate of nine (9%) percent for a period of two hundred three (203) months until the claim is fully paid. In the event that IVM defaults in any payment, Interboro's sole remedy shall be to foreclose its mortgage and pursue all of its rights under its loan documents in accordance with applicable state law. (v) CLASS 5 - SECURED CLAIM OF ZUELLIG GROUP N.A., INC. ---------------------------------------------------- Class 5 shall consist of the Allowed Secured Claim of Zuellig Group, Inc. in the amount of $336,000.00 which is not impaired. This claim was purchased by Zuellig from International Sabila. Successor Corporation shall pay the sum of $336,000.00 in accordance with the stipulation and order entered in the Bankruptcy Court. (vi) CLASS 6 - PRIORITY NON-TAX CLAIMS. Class 6 shall consist ---------------------------------- of Claims entitled to priority pursuant to Sections 507(a)(2), (3), (4), (5) or (6) of the Bankruptcy Code, but only to the extent that it is or has become an Allowed Claim. The Debtors believe that no amounts are owed to members of this Class. In the event any amounts are determined to be owed, the Debtors shall pay creditors in this class in the full amount of their Allowed Claims on the Consummation Date. (vii) CLASS 7 - GENERAL UNSECURED CLAIMS. Class 7 shall ----------------------------------- consist of all Allowed Unsecured Claims, consisting primarily of pre-petition trade Claims. The Debtors listed a total of $865,534.46 of general unsecured Claims on their bankruptcy schedules. The Debtors repaid certain pre-petition unsecured claims during the debtor-in-possession period. An analysis of the Debtors' books and records conducted by the Trustee's accountants indicates that the current amount of the Allowed General Unsecured Claims is approximately $372,000.00. The holders of Allowed Unsecured Claims shall receive the aggregate sum of $372,000.00, to be shared on a pro rata basis. This will constitute a dividend of one hundred (100%) percent if all of the Claims that do not comport with the Debtors' books and records are successfully challenged. Payment to this class shall be made by the Trustee when the Trustee's/Debtors Claims Motion, as defined in the Plan, is fully and finally adjudicated. In addition this class of creditors will receive as interest: (i) $25,000.00 on the Distribution Date (ii) $10,000.00 on each of the three consecutive anniversary dates of the Distribution Date and (iii) 1% of the increment in DML's revenue calculated by subtracting DML's revenue for year ending December 31, 1994 from DML's revenue for year ending December 31, 1998 not to exceed $150,000.00 (viii) CLASS 8 - -EQUITY Interests of All Preferred Stockholders of DML. Class 8 shall consist of the preferred stockholders of DML including the Interests of DML employee stock ownership plan participants. The shares of issued and outstanding preferred stock in DML are as follows: Dr. V.H. Madis (526.37); Voldemar Madis (1,343.88); Nancy Madis (1,000); Kristin Madis (400); Heidi Madis (400); Lisa Madis (400); Bethany Madis (400); and IVM (4,832.71). In addition, DML adopted an Employee Stock Ownership Plan ("ESOP"), which was restated effective January 1, 1984. The Trustees under the Plan are Voldemar Madis and Ilona Madis. DML was listed as the Plan Administrator. The members of this class are not impaired. Each member of this class (except the ESOP) shall retain their stock interests in DML subject to the terms of the Merger Agreement. The ESOP will receive $100,000.00 on the Consummation Date in full satisfaction and thereafter the ESOP will be terminated. (ix) CLASS 9 - ALLOWED EQUITY INTERESTS OF ALL SHAREHOLDERS IN DML, OTHER THAN CLASS 8 SHAREHOLDERS. There are one hundred (100) issued and outstanding shares of Class A Common Stock owned as follows: Dr. V.H. Madis (38 shares); Voldemar Madis (25 shares); and IVM (37 shares). There are ten thousand (10,000) issued and outstanding shares of Class B Non- Voting Stock as follows: J.J. Wallace, as Trustee for Dr. V.H. Madis (3,792 shares); Nancy Madis, as Trustee for Voldemar Madis (2,491 shares); and IVM (3,717 shares). Each member shall retain their stock interests subject to the terms of the Merger Agreement. In accordance with Local Bankruptcy Rule 24, the Trustee's accountants have reviewed a summary of the claims on file with the Bankruptcy Court as of November 21, 1993. Based upon this review, as well as the Trustee's analysis of unpaid general unsecured creditor claims as of the filing dates compared to the present, the Trustee anticipates objecting to approximately forty (40) unsecured claims. In several instances, the basis of the objection is the discrepancy between the claim as filed and the claim as reflected on the Debtors' books and records. (x) CLASS 10 - PREFERRED STOCK INTERESTS IN IVM CORPORATION. Class 10 shall consist of the preferred stock Interests in IVM. There are twenty-one thousand six hundred forty (21,640) authorized shares of preferred stock in IVM at $100.00 per share, eight (8%) percent noncumulative. The issued and outstanding shares are as follows: Dr. V.H. Madis (60); Voldemar Madis (4,973.23); Voldemar Madis, in Trust for Kristin Madis (1,915.67); Voldemar Madis, in Trust for Heidi Madis (1,915.67); Voldemar Madis, in Trust for Lisa Madis (1,754.17); Voldemar Madis, in Trust for Bethany Madis (1,754.17); Ilona Quest (3,681.31); Ilona Quest, in Trust for Wendy Quest (1,915.67); Ilona Quest, in Trust for Amy Quest (1,915.67); and Ilona Quest, in Trust for Susan Quest (1,754.17). Each member of this Class shall retain their Interests in IVM. (xi) CLASS 11 - COMMON STOCK INTERESTS IN IVM CORPORATION. Class 11 shall consist of the common stock Interests in IVM. There are one hundred (100) issued and outstanding shares of IVM Class A Common Voting Stock held by Dr. V.H. Madis (55.55 shares) and Voldemar Madis (44.45 shares). Additionally, IVM Class B Common Stock shares are owned as follows: Voldemar Madis and Family (5,675.67 shares); Donald Quest Family (4,015.45 shares); and J.J. Wallace, Trustee for V.H. Madis (308.88 shares). The members of this Class shall retain their stock interests. 3. REJECTION OF EXECUTORY CONTRACTS AND LEASES. A Chapter 11 plan may provide for the assumption or rejection of executory contracts and unexpired leases. If an executory contract or unexpired lease is rejected, the other party to the agreement may file a Claim for damages resulting from the rejection. A Claim for damages arising from the rejection of an executory contract or unexpired lease shall be an Allowed Claim only if a proof of Claim is filed with the Bankruptcy Court and served on Debtors' counsel no later than thirty (30) days after entry of the Confirmation Order. Such a Claim is treated as a pre- petition general unsecured Claim pursuant to the Bankruptcy Code and shall be included within Class 10. The Plan provides for the continuance of all of DML's unexpired executory contracts, if any. 4. MEANS FOR EXECUTION OF THE PLAN. Funds to be provided by Merger Agreement between DML and MACO of $3,000,000.00. See attached Exhibit A-Merger Agreement terms. In addition Debtors have cash on hand of approximately $900,000.00 which shall also be used to fund the Plan. See Exhibit E. This is a all cash deal with no contingency other than Confirmation of Plan. The present management will continue to operate the business pursuant to employment agreements with Successor Corporation in merger as provided in Merger Agreement. In addition, American Holdings will pay the sum of $100,000.00 to R.G. Quintero and Company as a finder's fee. 5. LEASE OF 375 HUYLER STREET BY IVM BY SUCCESSOR CORPORATION. Pursuant to the terms of Merger Agreement IVM Corporation shall lease the 375 Huyler Street facility to the Successor Corporation. 6. TIME AND METHOD OF DISTRIBUTION. All distributions to be made under the Plan by the Trustee in accordance with terms of Plan. Distributions on account of post-confirmation professional fee awards shall be made upon entry of a Court Order awarding such fees and costs. Subject to Bankruptcy Rule 9010, distributions to holders of Allowed Claims shall be made at the address of each holder as set forth in the proofs of Claims or proofs of Interest filed by such holders. If any holder's distribution is returned as undeliverable, no further distributions to such holder shall be made unless and until the Trustee is notified of such holder's then-current address, at which time all missed distributions shall be made to such holder without interest. Amounts with respect to distributions which remain undeliverable sixty (60) days after the Consummation Date shall be deposited into the Disbursement Account for payment in accordance with the terms of the Plan. 7. DISBURSING AGENT. The Trustee will receive and maintain all funds to be deposited into the Disbursement Account and shall act as the Disbursing Agent for all disbursements to be made under the Plan, including, but not limited to, the disbursements to be made on the Consummation Date and the Unsecured Claims Distribution Date. DML will pay all current obligations of lease with Teterboro '89 Associates, and all trade payables when due as a going concern. 8. EFFECT OF CONFIRMATION, DISCHARGE OF DEBTOR AND INJUNCTION. Pursuant to Section 1141(a) of the Bankruptcy Code, the provisions of the Plan shall bind the Debtors, IVM and any holder of a Claim and Equity Interest, whether or not the Claim or Interest is impaired under the Plan, and whether or not the Creditor or Equity Security holder has accepted the Plan. Pursuant to Section 1141(c) of the Bankruptcy Code, except as otherwise provided in the Plan, the Confirmation Order shall be a judicial determination of discharge of the Debtors from any debt that arose before the Confirmation Date and any debt of a kind specified in Section 502(g), (h) or (i) of the Bankruptcy Code, whether or not (i) a proof of Claim based on such debt is filed under Section 501 of the Bankruptcy Code, (ii) such Claim is allowed under Section 502 of the Bankruptcy Code, or (iii) the holder of such Claim has accepted the Plan. On the Effective Date, without further notice or order, all holders of any and all such Claims shall be enjoined automatically from asserting any Claim against the Debtors or any asset of the Debtors. Any judgement obtained at any time, to the extent such judgement is a determination of the Debtors' liability with respect to any such Claim, shall be void as provided in Section 524 of the Bankruptcy Code. 9. TREATMENT OF DISPUTED GENERAL UNSECURED CLAIMS. As soon as practicable, but in no event later than sixty (60) calendar days after the Confirmation Date, unless otherwise ordered by the Bankruptcy Court, objections to Claims shall be filed with the Bankruptcy Court and served upon the holders of such Claims. No distribution will be made to any holder of a Contested Claim unless and until such Claim becomes an Allowed Claim pursuant to Final Order of the Bankruptcy Court. 10. RETENTION OF JURISDICTION. Under the Plan, the Bankruptcy Court retains jurisdiction over matters that may be pending before it on the Confirmation Date and over a variety of matters that may arise subsequently. These matters include, but are not limited to, the following: (a) Any modification or amendment to the Plan; (b) The classification, allowance or disallowance of Claims and Interests and objections thereto; (c) All controversies, suits and disputes, if any, as may arise in connection with the interpretation or enforcement of the Plan; (d) Applications for the allowance of compensation and reimbursement of expenses to Professional Persons for services rendered before and after the Confirmation Date; (e) Any and all applications, adversary proceedings and contested and litigated matters not released or discharged as of the Effective Date, including, without limitations, proceedings relating to the prosecution of the Debtors' Claims; (f) All proceedings to estimate Claims for the purpose of allowance, if any; (g) All proceedings to enforce and administer the provisions of the Plan; (h) All proceedings to correct any defect, cure any omission or reconcile any inconsistency in the Plan or the Confirmation Order as may be necessary to effect the purposes and intent of the Plan; (i) All proceedings to determine such other matters as may be provided for in the Confirmation Order or as may be authorized from time to time under the relevant provisions of the Bankruptcy Code or any applicable law; (j) All proceedings to enforce all Orders, judgements, injunctions and rulings entered in connection with the Debtors' cases; and (k) All proceedings to enter such Orders as may be necessary and appropriate in aid of confirmation and to facilitate implementation of the Plan. If the Court abstains from exercising jurisdiction, or declines to exercise jurisdiction, or is otherwise without jurisdiction over any matter set forth herein, or if the Trustee or Debtors elect to bring an action or proceeding in any forum other than the Bankruptcy Court, this Article of the Plan shall have no effect upon and shall not control, prohibit or limit the exercise of jurisdiction by any other court, public authority or commission having jurisdiction over such matters. 11. MODIFICATION OF THE PLAN. The Debtors may amend or modify the Plan before confirmation in accordance with Section 1127 of the Bankruptcy Code and Bankruptcy Rule 3017, provided that (i) the Plan, as modified, meets the requirements of Sections 1122 and 1123 of the Bankruptcy Code, and (ii) the Debtor shall have complied with section 1125 of the Bankruptcy Code. The Debtors may amend or modify the Plan after confirmation provided that (i) the Plan, as modified, meets the requirements of Sections 1122 and 1123 of the Bankruptcy Code and (ii) the Bankruptcy Court, after notice and a hearing, confirms the Plan, as modified, under Section 1129 of the Bankruptcy Code. A holder of a Claim or Equity Interest that has accepted or rejected the Plan shall be deemed to have accepted or rejected the modified Plan, as the case may be, unless, within the time fixed by the Bankruptcy Court, such holder changes its previous acceptance or rejection. 12. REVOCATION OF PLAN. The Debtors may revoke and withdraw the Plan at any time before confirmation. ARTICLE VII. LIQUIDATION ANALYSIS In the event the Plan is not confirmed by the Court, the Debtors' assets could be liquidated pursuant to Chapter 7 of the Bankruptcy Code. As set forth in the Liquidation Analysis annexed as Exhibit B, in the event of liquidation all Creditors will be paid. The Liquidation Analysis assumes that in the event these Chapter 11 cases were converted to liquidation proceedings pursuant to Chapter 7 of the Bankruptcy Code, only ninety (90%) percent of the accounts receivable would be collected, and the actual saleable value of DML's inventory would be no greater than fifty (50%) percent of its book value. ARTICLE VIII. CONCLUSION Neither the filing of the Plan nor Disclosure Statement, nor any statement or provision contained therein, nor the taking of any action by the Debtors, a Claimant or an Interest holder with respect to the Plan or Disclosure Statement is, or shall be deemed an admission or waiver of any of the Debtors rights or defenses. The Debtor shall reserve all of his rights to amend the Plan and the proposed treatment of claimants and Interest holders. In the event confirmation does not occur or the Plan does not become effective, no statement contained herein or in the Plan may be used or relied upon in any manner in any suit, action, proceeding, or controversary within or outside of this case. The Debtor further reserves any and all of his rights as against all persons in the event the Plan is not confirmed. THIS DISCLOSURE STATEMENT WAS APPROVED BY THE COURT, AFTER NOTICE AND A HEARING, AS CONTAINING ADEQUATE INFORMATION SUFFICIENT FOR CLAIMANTS AND INTEREST HOLDERS TO MAKE AN INFORMED DECISION ABOUT THE PLAN. THE DEBTORS BELIEVE THAT CONFIRMATION OF THE PLAN IS THE BEST ALTERNATIVE FOR AND IN THE BEST INTERESTS OF ALL PARTIES-IN-INTEREST. /S/ VOLDEMAR MADIS President Dr. Madis Laboratories, Inc. and IVM Corp. DATED: November 18, 1994 EX-2 3 GODLESKY & SYWILOK 51 MAIN STREET HACKENSACK, New Jersey 07601 Attorney for Debtors-In Possession (201) 487-9390 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEW JERSEY ____________________________ : HONORABLE WILLIAM F. TUOHEY In the Matter of: CASE NOS. 88-01805 (WFT) : 88-01806 (WFT) DR. MADIS LABORATORIES, INC., : In Administratively Debtor Consolidated Proceedings for ____________________________ : Reorganization Under Chapter 11 of the United States In the Matter of: : Bankruptcy Code IVM CORPORATION, : CASE NO. 88-01806 (WFT) Debtors Second Amended Debtor: Joint Chapter 11 Plan of Reorganization ___________________________ of Dr. Madis Laboratories, and IVM Corporation Dr. Madis Laboratories, Inc. ("DML") and IVM Corporation ("IVM"), the above- captioned administratively consolidated debtors and debtors-in-possession ("Debtors"), hereby submits the following Plan of Reorganization ("Plan") pursuant to Section 1121(a) of Title 11 of the United States Code (the "Bankruptcy Code"). By: /S/ VOLDEMAR MADIS President Dr. Madis Laboratories, Inc. and IVM Corp. DATED: November 18, 1994 ARTICLE I RULES OF CONSTRUCTION AND DEFINITIONS As used in the Plan, the following terms shall have the respective meanings specified below: 1.1 RULES OF CONSTRUCTION. 1.1.1. In the Plan, unless otherwise provided, the capitalized terms shall have the meaning set forth in Section 1.2 of this Article. 1.1.2 Any capitalized term used in this Plan that is not defined in Section 1.2 of this Article shall have the meaning ascribed to such term in the Bankruptcy Code. 1.1.3 The rules of construction used in Section 102 of the Bankruptcy Code will apply to the construction of this plan. 1.1.4 For purposes of this Plan, the meanings below and in the Bankruptcy Code shall apply equally to the singular, plural and possessive forms and masculine, feminine and neuter genders of the defined terms. 1.1.5 All of the foregoing definitions are intended to be, and hereby are, part of the substantive provisions of this Plan and have the same force and effect as any other provision of this Plan. 1.2 DEFINITIONS. 1.2.1 "ADMINISTRATION CREDITOR" shall mean any person entitled to payment of an Administrative Claim. 1.2.2 "ADMINISTRATIVE CLAIM" shall mean any Claim constituting a cost or expense of administration of the Debtors' Chapter 11 Cases allowable under Section 503(b) and referred to in Section 507(a)(1) and (2) of the Bankruptcy Code incurred by the Debtors on or after the Petition Date, including, without limitation, the actual, necessary costs and expenses of preserving the Debtors' estates and operating the Debtors' businesses, including, but not limited to, compensation for legal and other services and reimbursement of expenses awarded under Section 330(a) of the Bankruptcy Code, and all fees and charges assessed against the Debtors' estates under Chapter 1930 of Title 28 of the United States Code incurred by the Debtors and the Trustee from the Petition Date through the Confirmation Date. Administrative Claim shall not include any interest earned on a Secured Claim during the period from the Petition Date through the Effective Date. 1.2.3 "ALLOWED ADMINISTRATIVE CLAIM" shall mean any Administrative Claim that is or becomes an Allowed Claim. 1.2.4 "ALLOWED" when used as an adjective preceding the words "Claim" or "Equity Interest", shall mean any Claim against or Equity Interest in the Debtors, that is scheduled by or on behalf of the Debtors as liquidated in amount and not disputed or contingent, or proof of which was filed on or before the date designated by the Bankruptcy Court as the last date for filing Proofs of Claim or Equity Interests against the Debtors and, in either case, a Claim (i) as to which no objection to the allowance thereof has been interposed within the applicable period of limitations fixed by the Plan, the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure ("Bankruptcy Rules"), the Local Rules of Bankruptcy Procedure or the Bankruptcy Court, or (ii) as to which an objection has been interposed and such Claim has been allowed, in whole or in part, by a Final Order. Unless otherwise specified in the Plan, "Allowed Claim' and "Allowed Equity Interest" shall not, for purposes of computation of distributions under the Plan, include interest on the amount of such Claim or Equity Interest from and after the Petition Date. 1.2.5 "ALLOWED CLASS 1 CLAIM" shall mean the Allowed Secured Claim of the Township of South Hackensack ("South Hackensack"). 1.2.6 "ALLOWED CLASS 2 CLAIM" shall mean the Allowed Secured Claim of Columbia Savings and Loan Association ("Columbia"). 1.2.7 "ALLOWED CLASS 3 CLAIM" shall mean the Allowed Secured Claim of American Holdings ("AMH"). 1.2.8 "ALLOWED CLASS 4 CLAIM" shall mean the Allowed Secured Claim of Interboro Savings and Loan Association ("Interboro"). 1.2.9 "ALLOWED CLASS 5 CLAIM" shall mean the Allowed Secured Claim of Zuellig Group N.A., Inc. ("Zuellig") 1.2.10 "ALLOWED CLASS 6 CLAIM" shall mean the Allowed Unsecured Priority Claims that are or become Allowed pursuant to Section 507(a)(3), (4), (5) or (6) of the Bankruptcy Code. 1.2.11 "ALLOWED CLASS 7 CLAIM" shall mean the Allowed Claims of ----------------- Unsecured Creditors. 1.2.12 "ALLOWED CLASS 8 CLAIM" shall mean the Allowed Equity Interests of DML employee stock ownership plan participants and preferred stockholders. 1.2.13 "ALLOWED CLASS 9 CLAIMS shall mean the Allowed Equity Interests of all stockholders of DML other than preferred stockholders and employee stock ownership plan participants. 1.2.14 "ALLOWED CLASS 10 CLAIM" shall mean the Allowed Equity Interests of the preferred stockholder of IVM. 1.2.15 "AMERICAN HOLDINGS" shall mean American Holdings, Inc. a Delaware Corporation which trades on the national market of NASDAQ under the symbol "Hold". 1.2.16 "ALLOWED CLASS 11 CLAIM" shall mean the Allowed Equity Interests of the common stockholders of IVM. 1.2.17 "BALLOT" shall mean the form transmitted to Creditors with the Plan and Disclosure Statement on which they may vote to accept or reject the Plan pursuant to Rule 3018 of the Bankruptcy Rules and Section 1126 of the Bankruptcy Code. 1.2.18 "BANKRUPTCY CODE" shall mean the Bankruptcy Reform Act, as amended, and as codified in Title 11 of the United States Code (11 U.S.C.101, ET SEQ.). 1.2.19 "BANKRUPTCY COURT" shall mean the United States Bankruptcy Court for the District of New Jersey having jurisdiction over the Debtors' Chapter 11 Cases and, to the extent of any reference made pursuant to 28 U.S.C. 157, the unit of such District Court constituted pursuant to 28 U.S.C. 151. 1.2.20 "BANKRUPTCY RULES" shall mean the Federal Rules of Bankruptcy Procedure originally promulgated pursuant to 28 U.S.C. 2075. 1.2.21 "BAR DATE" shall mean August 1, 1991. 1.2.22 "CASH" shall mean legal tender of the United States of America or cash equivalents. 1.2.23 "CHAPTER 11 CASES" shall mean the Cases under Chapter 11 of the Bankruptcy Code in which DML and IVM are the Debtors. 1.2.24 "CLAIM" shall mean any right to payment from the Debtors, whether or not such right is reduced to judgement, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or any right to an equitable remedy for breach of performance if such breach gives rise to a right of payment from the Debtors, whether or not such right to an equitable remedy is reduced to judgement, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured. 1.2.25 "CLAIMS MOTION" shall mean a motion filed by the Trustee/Debtor after the Effective Date to reduce, modify and/or expunge the Claims of Creditors. 1.2.26 "COMMITTEE" or "CREDITORS' COMMITTEE" shall mean the Official Committee of Unsecured Creditors appointed in the Debtors' Chapter 11 Cases pursuant to Section 1102 of the Bankruptcy Code. 1.2.27 "CONFIRMATION" shall mean entry by the Bankruptcy Court of the Confirmation Order. 1.2.28 "CONFIRMATION DATE" shall mean the date of entry by the Bankruptcy Court of the Confirmation Order. 1.2.29 "CONFIRMATION HEARING" shall mean the hearing conducted by the Bankruptcy Court for the purpose of considering confirmation of the Plan. 1.2.30 "CONFIRMATION ORDER" shall mean the Order entered by the Bankruptcy Court confirming the Plan in accordance with the provisions of Chapter 11 of the Bankruptcy Code. 1.2.31 "CONSUMMATION DATE" shall mean 30 days after the Plan has ------------------- been confirmed. 1.2.32 "CONTESTED CLAIM" shall mean any Claim to which the Trustee/Debtors has interposed an objection in accordance with the Plan, the Bankruptcy Code or the Bankruptcy Rules, which objection has not been determined by a Final Order. 1.2.33 "CREDITOR" shall mean any person that has a Claim against the Debtors that arose on or before the Petition Date, or a Claim against the Debtors' estates of any kind specified in Section 502(g), 502(h) or 502(i) of the Bankruptcy Code. 1.2.34 "DEBTORS" shall mean DML and IVM. 1.2.35 "DEBTORS' COUNSEL" shall mean John Sywilok, Esq. 1.2.36 "DISBURSEMENT ACCOUNT" shall mean the account to be established by the Trustee to disburse all funds. 1.2.37 "DISBURSING AGENT" shall mean Trustee. 1.2.38 "DISCLOSURE STATEMENT" shall mean the Disclosure Statement (and all exhibits and schedules annexed thereto and referenced herein) that relates to the Plan and that was approved by the Bankruptcy Court pursuant to Section 1125 of the Bankruptcy Code. 1.2.39 "DML" shall mean the Debtor, Dr. Madis Laboratories, Inc. 1.2.40 "EFFECTIVE DATE" shall mean the same date as the Consummation Date. 1.2.41 "ENVIRONMENTAL COMPLIANCE FUND" shall mean the Fund that will be established by the Debtors for the payment of environmental cleanup costs in an amount not to exceed $200,000.00. 1.2.42 "EQUITY INTEREST" shall mean the holder of an equity Interest in the Debtors. 1.2.43 "FEE APPLICATION" shall mean an application of a Professional Person under section 330 or 503 of the Bankruptcy Code for a final allowance of compensation and reimbursement of expenses in the Chapter 11 Cases. 1.2.44 "FINAL ORDER" shall mean an Order of the Bankruptcy Court or a Court of competent jurisdiction to hear appeals from the Bankruptcy Court which, not having been reversed, modified, or amended, and not having been stayed, and the time to appeal from which or to seek review or rehearing of which having expired, has become final and is in full force and effect. 1.2.45 "INTEREST HOLDER" shall mean the holder of any interest in the Debtors that existed on the Petition Date. 1.2.46 "IVM" shall mean the Debtor, IVM Corporation. 1.2.47 "LEASE AGREEMENT" shall mean the Lease Agreement by and between Successor Corporation and IVM for 375 Huyler Street, South Hackensack, N.J. 1.2.48 "MACO" shall mean Amhold MACO, Inc. the subsidiary corporation of American Holdings, Inc. which is merging with DML. 1.2.49 "MERGER AGREEMENT" shall mean the Agreement between MACO and DML merging the corporations. 1.2.50 "PERSON" shall mean any individual, corporation, partnership, association, joint stock company, joint venture, estate, trust, unincorporated organization, or governmental unit or any political subdivision thereof or other entity. 1.2.51 "PETITION DATE" shall mean March 17, 1988, the date on which the Debtors filed their voluntary petitions for relief commencing their Chapter 11 Cases. 1.2.52 "PLAN" shall mean this Plan of Reorganization proposed by the Debtors either in its present form or as may be altered, amended or modified from time to time. 1.2.53 "PRIORITY TAX CLAIMS" shall mean Claims that are Allowed pursuant to Section 507(a)(7) of the Bankruptcy Code. 1.2.54 "PROFESSIONAL PERSON" shall mean a Person retained or to be compensated pursuant to sections 327, 328, 330, 503(b) or 1103 of the Bankruptcy Code. 1.2.55 "SECURED CLAIM" shall mean any Claim which is secured by a valid lien, security interest, or other interest in property in which the Debtors have an interest, which has been perfected properly as required by applicable law, but only to the extent of the value of the Debtors' interests in such property as determined pursuant to Section 506 of the Bankruptcy Code. 1.2.56 "SUCCESSOR CORPORATION" shall mean successor in interest of the merger between DML and MACO. 1.2.57 "UNSECURED CLAIM" shall mean any Claim against the Debtors which arose or which is deemed by the Bankruptcy Code to have arisen before the Petition Date, and which is NOT (a) a Secured Claim pursuant to Section 506 of the Bankruptcy Code, or (b) a Claim entitled to priority under Section 503 or 507 of the Bankruptcy Code. 1.2.58 "UNSECURED CLAIMS DISTRIBUTION DATE" shall mean the date which is ten (10) days after the entry of a final and nonappealable Order or Orders with respect to the Claims Motion resolving all Contested Claims. ARTICLE 2 UNCLASSIFIED CLAIMS AND THEIR TREATMENT 2.1 ADMINISTRATIVE CLAIMS. Administrative Claims are unclassified pursuant to Section 1123(a)(1) of the Bankruptcy Code. Each holder of an Allowed Administrative Claim shall be paid the full amount of such Allowed Administrative Claim in Cash on the Effective Date, or upon such other terms as may be agreed to between such holder and the Debtors or as ordered by the Bankruptcy Court; PROVIDED HOWEVER, that (1) accounts payable incurred by the Trustee in the operation of DML's business shall be paid by the Trustee in the ordinary course of business from and after the Confirmation Date to the Consummation Date and all such claims in existence on and after the Closing Date shall be assumed by, and paid in the ordinary course of business of, DML until fully satisfied, (2) no payment shall be made on account of accrued penalties and interest on post-petition taxes incurred by IVM to the Internal Revenue Service. Compensation to Professional Persons and others whose compensation must be approved by the Bankruptcy Court will be paid only after the Bankruptcy Court approves such compensation. The Debtors shall also pay, on the Effective Date, all fees due and payable to the United States Trustee's Office. 2.2 PRIORITY TAX CLAIMS. Priority Tax Claims are not classified pursuant to Section 1123(a)(1) of the Bankruptcy Code. Each holder of an Allowed Priority Tax Claim shall receive, on the Consummation Date the sum of $244,340.00 or the Allowed amount of such Claim. ARTICLE 3 CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS All Claims and Equity Interests are classified as follows: 3.1 A Claim is in a particular class only to the extent the Claim qualifies within the description of Claims of that class, and only to the extent that it is an Allowed Claim, and such Claim is in a different class to the extent the remainder of the Claim qualifies within the description of the different class. Pursuant to Section 1123(a)(4) of the Bankruptcy Code, all Allowed Claims of a particular class shall receive the same treatment unless the holder of a particular Allowed Claim has agreed to a less favorable treatment for such Allowed Claim on or before the Confirmation Date. All Claims shall be bound by the provisions of this Plan and are hereby classified as follows: 3.2 CLASS 1 CLAIM. The Allowed Secured Claim of the Township of South Hckensack. 3.3 CLASS 2 CLAIM. The Allowed Secured Claim of Columbia Savings & Loan Association. 3.4 CLASS 3 CLAIM. The Allowed Secured Claim of American Holdings. --------- 3.5 CLASS 4 CLAIM. The Allowed Secured Claim of Interboro Savings & Loan --------- Association. 3.6 CLASS 5 CLAIM The Allowed Secured Claim of Zuellig Group N.A., Inc. 3.7 CLASS 6 CLAIM. The Allowed Unsecured Priority Claims pursuant to Section 507(a), (3), (4), (5) or (6) of the Bankruptcy Code. 3.8 CLASS 7 CLAIM. The Allowed Unsecured Claims of Unsecured Creditors. --------- 3.9 CLASS 8 CLAIM. The Allowed Equity Interests of all DML employee --------- stock ownership plan participants and preferred stockholders. 3.10 CLASS 9 CLAIM. The Allowed Equity Interests of all shareholders of DML other than preferred stockholders and employee stock ownership plan participants. 3.11 CLASS 10 CLAIM. The Allowed Interests of all preferred stockholders ---------- of IVM. 3.12 CLASS 11 CLAIM. The Allowed Interests of all common stockholders of ---------- IVM. ARTICLE 4 IMPAIRMENT OF CLAIMS AND EQUITY INTERESTS 4.1 In the event of any controversy regarding the impaired or unimpaired status of any Claim Holders or holders of Equity Interests, the Bankruptcy Court shall determine whether an Allowed Claim or Equity Interest or a Class of Claims or Equity Interests is impaired or unimpaired. 4.2 IMPAIRED CLASSES. No class of creditors are impaired under this Plan and no creditor class is entitled to vote on the Plan. All class of creditors are deemed to accept this Plan. ARTICLE 5 PROVISION FOR PAYMENT OF THE ALLOWED SECURED CLAIM OF TOWNSHIP OF SOUTH HACKENSACK (CLASS 1) 5.1 The Allowed Secured Claim of Township of South Hackensack is not impaired. 5.2 The Township of South Hackensack will be deemed the holder of an Allowed Secured Claim in the amount of $201,022.44, representing unpaid pre-petition real estate taxes and water and sewer use charges. On the Consummation Date, the Trustee shall pay the sum of $201,022.44 in full payment of this Claim. ARTICLE 6 PROVISION FOR PAYMENT OF THE ALLOWED SECURED CLAIM OF COLUMBIA SAVINGS & LOAN ASSOCIATION ("COLUMBIA") (CLASS 2) 6.1 The Allowed Secured Claim of Columbia is not impaired. 6.2 The Allowed Secured Claim of Columbia shall be treated as follows: As of the Effective Date, Columbia shall be deemed the holder of an Allowed Secured Claim in the amount of $660,339.98. On the Consummation Date, the Trustee shall pay Columbia the sum of $660,339.98 in full satisfaction of its Claim. ARTICLE 7 PROVISION FOR THE PAYMENT OF THE ALLOWED SECURED CLAIM OF AMERICAN HOLDINGS ("AMH") (CLASS 3) 7.1 The Allowed Secured Claim of American Holdings is not impaired. 7.2 The Allowed Secured Claim of American Holdings shall be treated as follows: As of the Effective Date, AMH shall be deemed the holder of an Allowed Secured Claim in the amount of $279,664.00. DML shall pay AMH the sum of $279,664.00 in full satisfaction of its Claim or such amount as may be due in fifteen equal monthly installments. ARTICLE 8 PROVISION FOR THE PAYMENT OF THE ALLOWED SECURED CLAIM OF INTERBORO SAVINGS & LOAN ASSOCIATION ("INTERBORO") (CLASS 4) 8.1 The Allowed Secured Claim of Interboro shall not be impaired. 8.2 The Allowed Secured Claim of Interboro shall be treated as follows: As of the Effective Date, Interboro shall be deemed the holder of an Allowed Secured Claim in the amount of $205,099.61. Interboro shall retain its mortgage lien on the 40 Park Slope Terrace, Hawthorne, New Jersey premises owned by IVM, and shall receive monthly payments of $1,972.00, representing principal reduction and interest payments on the claim at the annual rate of nine (9%) percent for a period of two hundred three (203) months until the claim is fully paid. In the event that IVM defaults in any payment, Interboro's sole remedy shall be to foreclose its mortgage and pursue all of its rights under its loan documents in accordance with applicable state law. ARTICLE 9 PROVISION FOR THE PAYMENT OF THE ALLOWED SECURED CLAIM OF ZUELLIG GROUP N.A. INC. 9.1 The Allowed Claim of Zuellig Group N.A., Inc. is not impaired. 9.2 The Allowed Claim of Zuellig shall be treated as follows: Zuellig shall retain all of its rights under the Stipulation and Order Approving Settlement and Dismissing Adversary Proceeding entered by the Court on March 29, 1994 in the adversary proceeding, EDWARD P. BOND, CHAPTER 11 TRUSTEE V. INTERNATIONAL SABILA, S.A., Adv. Pro. No. 93-2041. Specifically, Zuellig shall retain its security interests and liens on the Debtors' property pursuant to the Stipulation and will receive all of the payments provided for in the Stipulation The liens and security interests of Zuellig in and to the Debtors' assets shall survive. The payments shall be made by the Trustee until the Consummation Date, after which the obligation to make the payments in accordance with the Stipulation shall be assumed and made by Successor Corporation. ARTICLE 10 PROVISION FOR THE PAYMENT OF THE ALLOWED CLAIMS PURSUANT TO SECTIONS 507 (A) (3), (4), (5) AND (6) OF THE BANKRUPTCY CODE (CLASS 6) 10.1 The Allowed Claims pursuant to Section 507(a) (3), (4), (5) and (6) of the Bankruptcy Code shall be treated as follows: The Debtors believe that no amounts are owed to members of this Class. In the event any amounts are determined to be owed, the Trustee shall pay creditors in this class the full amount of their Allowed Claims on the Consummation Date, or such other payments as may be agreed to by the Trustee and Debtors and this Class. ARTICLE 11 PROVISION FOR THE PAYMENT OF THE ALLOWED UNSECURED CLAIMS (CLASS 7) 11.1 The Allowed Unsecured Claims of unsecured creditors shall not be impaired. 11.2 The Allowed Unsecured Claims of unsecured creditors shall be treated as follows: The holders of Allowed Unsecured Claims shall receive the aggregate sum of $372,000.00, to be shared on a pro rata basis. This will constitute a dividend of one hundred (100%) percent if all of the Claims that do not comport with the Debtors' books and records are successfully challenged by the Trustee. Payment to this class shall be made by the Trustee when the Trustee's/Debtors Claims Motion, as defined in the Plan, is fully and finally adjudicated. In addition this class of creditors will receive as interest: (i) $25,000.00 on the Distribution Date (ii) $10,000.00 on each of the three consecutive anniversary dates of the Distribution Date and (iii) 1% of the increment in DML's revenue calculated by subtracting DML's revenue for year ending December 31, 1994 from DML's revenue for year ending December 31, 1998 not to exceed $150,000.00. ARTICLE 12 PROVISION FOR THE TREATMENT OF ALLOWED EQUITY INTERESTS OF PREFERRED STOCKHOLDERS OF DML, INCLUDING DML EMPLOYEE STOCK OWNERSHIP PLAN PARTICIPANTS ("ESOP")(CLASS 8) 12.1 Allowed Equity Interests of this class shall not be impaired. 12.2 Allowed Equity interests of the ESOP (excluding Madis Family members) shall receive on a pro rata basis in proportion to their respective percentage the sum of $100,000.00 and thereafter the ESOP Plan shall be terminated. $100,000.00 will be paid on the Consumation Date. 12.3 All other Equity Interests of this class will retain their interest subject to the Merger Agreement between MACO and DML. ARTICLE 13 PROVISION FOR THE TREATMENT OF ALLOWED EQUITY INTERESTS OF ALL STOCKHOLDERS OF DML, OTHER THAN PREFERRED STOCKHOLDERS AND EMPLOYEE STOCK OWNERSHIP PLAN PARTICIPANTS (CLASS 9) 13.1 Allowed Equity Interests of this class is not impaired. 13.2 The members of this class shall retain their interest in DML subject to the terms of the Merger Agreement between MACO and DML. ARTICLE 14 PROVISION FOR THE TREATMENT OF ALLOWED INTERESTS OF PREFERRED STOCKHOLDERS OF IVM (CLASS 10) 14.1 Allowed Equity Interests of Preferred Stockholders of IVM is not impaired. 14.2 The members of this class shall retain their Interests in IVM. ARTICLE 15 PROVISION FOR TREATMENT OF ALLOWED INTERESTS OF COMMON STOCKHOLDERS OF IVM (CLASS 11) 15.1 Allowed Equity Interests of Common Stockholders of IVM is not impaired. 15.2 The members of this class shall retain their interest in IVM. ARTICLE 16 ACCEPTANCE OR REJECTION OF PLAN 16.1 CLASSES ENTITLED TO VOTE. Each impaired class of Claims or Equity Interests shall be entitled to vote separately to accept or reject the Plan. 16.2 CLASS ACCEPTANCE REQUIREMENT. A class of Claims shall have accepted the Plan if accepted by at least two-thirds in dollar amount and more than one-half in number of the Allowed Claims of such class that have voted on the Plan pursuant to Section 1126(c) of the Bankruptcy Code. A class of Equity Interests shall have accepted the Plan if it is accepted by at least two-thirds in amount of the Allowed Equity Interests of such class that have voted on the Plan in accordance with Section 1126(d) of the Bankruptcy Code. 16.3 DEEMED ACCEPTANCE. Since all classes of creditors are not impaired then all classes of creditors are deemed to accept this plan. ARTICLE 17 MEANS FOR EXECUTION OF THE JOINT PLAN 17.1 REVESTING OF ASSETS OF IVM & DML. On Confirmation, title to and possession of any and all property of the IVM and DML estate, real or personal, tangible or intangible, shall be revested in IVM and DML on the Consummation Date, free and clear of all liens, claims and encumbrances, except such liens and claims expressly provided herein. 17.2 FINANCING PROVIDED BY AMERICAN HOLDINGS, INC. pursuant to the Merger Agreement between MACO and DML the Successor Corporation shall lease the 375 Huyler Street premises from IVM in accordance with the terms set forth in the Merger Agreement. $3,000,000.00 in United States Treasury Bills are being held by MACO solely for the purpose of financing the Plan. The present management will continue to operate the business pursuant to employment agreements with the Successor Corporation after the merger as provided in Merger Agreement. In addition, American Holdings will pay the sum of $100,000.00 to R.G. Quintero & Co. as a finder's fee. 17.3 ENVIRONMENTAL COMPLIANCE FUND. In addition to the Disbursement Account, the Trustee shall establish and maintain the Environmental Compliance Fund, which will be funded in an amount not to exceed $200,000.00. The funds in the Environmental Compliance Fund shall be paid in the Trustee's discretion, as incurred, to address environmental cleanup costs after the application of the payments for this purpose by DML in accordance with the Lease Agreement. Any funds remaining in the Environmental Compliance Fund after a no further action letter is received from the DEPE, shall revert to DML. 17.4 TIME AND METHOD OF DISTRIBUTION. All distributions to be made under the Plan by the Trustee, except (a) distributions to class 7 General Unsecured Claims, (b) distributions, if any, to Class 8 DML employee stock ownership plan participants, (c) payment of post-confirmation professionals' fee awards, shall be made in cash within ten (10) days of the Consummation Date. Distributions to Class 7 Claimants shall be made on the Unsecured Claims Distribution Date. Distributions on account of post-confirmation professional fee awards shall be made upon entry of a Court Order awarding such fees and costs. In addition American Holdings will pay the finder's fee required under the Merger Agreement. This is an all cash deal with no contingency other than Confirmation of the Plan. Subject to Bankruptcy Rule 9010, distributions to holders of Allowed Claims shall be made at the address of each holder as set forth in the proofs of Claim or proofs of Interest filed by such holders. If any holder's distribution is returned as undeliverable, no further distributions to such holder shall be made unless and until the Trustee is notified of such holder's then-current address, at which time all missed distributions shall be made to such holder without interest. Amounts with respect to distributions which remain undeliverable sixty (60) days after the Consummation Date shall be deposited by the Trustee into the Disbursement Account for payment in accordance with the terms of the Plan. 17.5 DISBURSING AGENT. The Trustee will receive and maintain all funds to be deposited into the Disbursement Account. The Trustee shall act as the Disbursing Agent for all disbursements to be made under the Plan, including, but not limited to, the disbursement to be made on the Consummation Date. Successor Corporation shall act as the Disbursing Agent as to all obligations that will continue as a going concern, including (a) the remaining obligations under DML's lease with Teterboro'89 Associates, (b) all other lease agreements and (c) all trade payables. The disbursements to be made by Successor Corporation will occur as and when such obligations become due. 17.6 BAR DATE FOR FEE APPLICATION CLAIMS. Each and every Professional Person requesting compensation in the Case pursuant to Sections 327, 328, 330, 331, 503(b) or 1103 of the Bankruptcy Code shall be entitled to file a Fee Application for allowance of final compensation and reimbursement of expenses in the Chapter 11 Cases within sixty (60) days of the Confirmation Date, or such fees and expenses shall be deemed to be waived. 17.7 OBJECTIONS TO CLAIMS. Any objections to Claims must be filed with the Bankruptcy Court within sixty (60) days after the Confirmation Date or within the specific time required in any Order of the Court entered relative thereto or shall be forever barred. 17.8 PROSECUTION OF PENDING OBJECTIONS TO CLAIMS. Objections to Claims that are pending on the Confirmation Date shall be prosecuted after confirmation. The Debtors shall have the discretion to litigate to judgement, settle or withdraw objections to contested Claims. 17.9 To the extent practicable, the Trustee as Disbursing Agent shall invest any cash and reserve in a manner that will yield a reasonable net return taking into account the safety of the investment. 17.10 PROVISION FOR PAYMENT OF POST-CONFIRMATION PROFESSIONAL FEES AND COSTS. The Trustee shall set aside the sum of $100,000.00 from the Disbursement Account to be used for payment of professional fees and costs (1) incurred by the Trustee and his professionals after the Effective Date, and (2) awarded by the Bankruptcy Court. 17.11 A sum not to exceed $80,000.00 will be paid to IVM to remediate any liability or environmental conditions associated with removal of the underground tanks. ARTICLE 18 EXECUTORY CONTRACTS AND UNEXPIRED LEASES 18.1 REJECTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES. On the Confirmation Date, all executory contracts and unexpired leases of the Debtors will be deemed current and will be paid when such obligations become due. 18.2 CLAIMS BASED ON REJECTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES. Any party to a lease or contract rejected pursuant to the Plan shall be deemed an unsecured creditor included within Class 7, provided each such Creditor files a Proof of Claim by thirty (30) days after the Confirmation Date ARTICLE 19 CONDITIONS TO CONFIRMATION 19.1 CONFIRMATION ORDER. The Plan shall be null and void and have no force and effect unless the Bankruptcy Court enters a Confirmation Order which shall provide, among other things, that: 19.1.1 Except as otherwise expressly provided in the Plan, on the Confirmation Date, the rights afforded in the Plan shall be in exchange for and in complete satisfaction, discharge and release of all Claims against, debts of or Equity Interests in the Debtors, their estates, assets and property, of any nature whatsoever, and the liability and respect thereof shall be extinguished completely, regardless of whether reduced to judgement, liquidated or unliquidated, contingent or non-contingent, asserted or unasserted, fixed or not, matured or unmatured, disputed or undisputed, legal or equitable, known or unknown, that arose or are deemed to have arisen on or before the Confirmation Date, including, without limitation, (i) all interest, if any, on any such Claims, debts or Interests, whether such interest accrued before or after the Petition Date, and (ii) any liability of a kind specified in Sections 502(g), 502(h) and 502(i) of the Bankruptcy Code, regardless of whether a proof of Claim or Equity Interest is filed or deemed filed under Section 501 of the Bankruptcy Code, such Claim of Equity Interest is allowed, or the holder of such Claim or Equity Interest has accepted the Plan. 19.1.2 Except as otherwise provided in the Plan, all Creditors and holders of Interests shall be precluded from asserting against the Debtors or their estates, assets or property, any other or further Claim or Interest based on any act or omission, transaction or other activity of any kind or nature that occurred before the Effective Date; provided, however, that nothing contained in the Plan shall alter the legal, equitable and contractual rights of the holder of any Claim or Interest specifically designated as unimpaired in the Plan. 19.1.3 The provisions of the Confirmation Order shall not be severable and are mutually dependent. ARTICLE 20 RETENTION OF JURISDICTION 20.1 Under the Plan, the Bankruptcy Court retains jurisdiction over matters that may be pending before it on the Confirmation Date and over a variety of matters that may arise subsequently. These matters include, but are not limited to, the following: 20.1.1 Any modification or amendment to the Plan. 20.1.2 The Classification, allowance or disallowance of Claims and Interests and objections thereto; 20.1.3 All controversies, suits and disputes, if any, as may arise in connection with the interpretation or enforcement of the Plan; 20.1.4 Applications for the allowance of compensation and reimbursement of expenses to Professional Persons for services rendered before and after the Confirmation Date; 20.1.5 Any and all applications, adversary proceedings and contested and litigated matters not released or discharged as of the Effective Date, including, without limitations, proceedings relating to the prosecution of the Debtors' Claims; 20.1.6 All proceedings to estimate Claims for the purpose of allowance, if any; 20.1.7 All proceedings to enforce and administer the provisions of the Plan; 20.1.8 All proceedings to correct any defect, cure any omission or reconcile any inconsistency in the Plan or the Confirmation Order as may be necessary to effect the purposes and intent of the Plan; 20.1.9 All proceedings to determine such other matters as may be provided for in the Confirmation Order or as may be authorized from time to time under the relevant provisions of the Bankruptcy Code or any applicable law; 20.1.10 All proceedings to enforce all Orders, judgements, injunctions and rulings entered in connection with the Debtors' cases; and 20.1.11 All proceedings to enter such Orders as may be necessary and appropriate in aid of confirmation and to facilitate implementation of the Plan. If the Court abstains from exercising jurisdiction, or declines to exercise jurisdiction, or is otherwise without jurisdiction over any matter set forth herein, or if the Trustee or Debtors elect to bring an action or proceeding in any forum other than the Bankruptcy Court, this Article of the Plan shall have no effect upon and shall not control, prohibit or limit the exercise of jurisdiction by any other court, public authority or commission having jurisdiction over such matters. ARTICLE 21 EFFECTS OF PLAN CONFIRMATION 21.1 DISCHARGE. Except as otherwise expressly provided in the Plan, pursuant to Section 1141 of the Bankruptcy Code, confirmation of the Plan shall discharge the Trustee and the Debtors effective on the date that the Confirmation Order becomes final and nonappealable, from any Claim and any debt and the Debtors' liability in respect thereof is extinguished completely, whether reduced to judgement or not, liquidated or unliquidated, contingent or non-contingent, asserted or unasserted, fixed or not, matured or unmatured, disputed or undisputed, legal or equitable, known or unknown, that arose from any agreement the Debtors entered into or obligation of the Debtors incurred before the Confirmation Date or from any conduct of the Debtors before the Confirmation Date, or that otherwise arose before the Confirmation Date, including, without limitation, all interest, if any, on any such Claim or debt, whether such interest accrued before or after the Petition Date, and from any liability of a kind specified in Sections 502(g), 502(h) and 502(i) of the Bankruptcy Code, whether or not a Proof of Claim or Interest is filed or deemed filed under Section 501 of the Bankruptcy Code, such Claim or Interest us Allowed under Section 502 of the Bankruptcy Code, or the holder of such Claim or Interest has accepted the Plan. Except as otherwise provided herein, all Creditors and Equity Interest holders shall be precluded from asserting against the Debtors, their estates or assets or property, or against the Trustee its successors and assigns, except as to Stipulation between the Trustee and International Sabila, any other or further Claim or Interest based on any act or omission, transaction or other activity of any kind or nature that occurred prior to the Confirmation Date. 21.2 TERM OF INJUNCTION OR STAYS. Unless otherwise provided, all injunctions or stays provided for in the case pursuant to Section 362 of the Bankruptcy Code or otherwise extant on the Confirmation Date shall become permanent and remain in full force and effect unless otherwise provided for by Court Order. ARTICLE 22 CRAMDOWN UNDER THE BANKRUPTCY 22.1 In the event any impaired Class hereunder rejects this Plan, it is the intention of the Debtors to seek confirmation and implementation of the Plan, pursuant to the provisions of Section 1129(b) of the Bankruptcy Code, as it applies to any and all such classes, which provision is commonly referred to as the "cramdown provision" of the Bankruptcy Code. ARTICLE 23 MISCELLANEOUS PROVISIONS 23.1 Distributions to Creditors and treatment of Interest Holders pursuant to the Plan shall be in full settlement, release, discharge and satisfaction of all Claims and Interests, release, discharge and satisfaction of all Claims and Interests, if any, against the Debtors and their property, whether or not such Claim or Interest has been timely asserted and whether or not such Creditor or Interest Holder shares in the distribution under the Plan pursuant to 11 U.S.C. 1141, except as provided in Article 14, Section 14.3 pertaining to the Claims of Unsecured Creditors in the event of a Chapter 11, 7 or Assignment for the Benefit of Creditors filing by the Reorganized Company. 23.2 MODIFICATION OF THE PLAN. The Debtors reserve the right to amend or modify the Plan before confirmation in accordance with Section 1127 of the Bankruptcy Code and Bankruptcy Rule 3017, provided that (i) the Plan, as modified, meets the requirements of Sections 1122 and 1123 of the Bankruptcy Code and (ii) the Debtors shall have complied with Section 1125 of the Bankruptcy Code. The Debtors may amend or modify the Plan after confirmation provided (i) the Plan, as modified, meets the requirements of Sections 1122 and 1123 of the Bankruptcy Code and (ii) the Bankruptcy Court, after notice and a hearing, confirms the Plan, as modified, under Section 1129 of the Bankruptcy Code. A holder of a Claim or Equity Interest that has accepted or rejected the Plan shall be deemed to have accepted or rejected the modified plan, as the case may be, unless, within the time fixed by the Bankruptcy Court, such holder changes its previous acceptance or rejection. 23.3 The Debtors reserve the right to modify the treatment of any Allowed Claims or Interest at any time after the Effective Date upon the consent of the Creditor or Interest Holder whose Allowed Claim or Interest treatment is being modified. 23.4 All notices, requests or demands in connection with this Plan shall be in writing and shall be deemed to have been given when received, or if mailed, five (5) days after the date of mailing, provided such writing shall be sent by registered or certified mail, postage prepaid, return receipt requested, and if sent to the Debtors, addressed to: John W. Sywilok Godlesky & Sywilok 51 Main Street Hackensack, N.J. 07601 with a copy to: American Holdings 376 Main Street Box 74 Bedminister, N.J. 07921 23.5 The headings used in this Plan are inserted for convenience only and neither constitute a portion of this Plan nor in any manner affect the provisions of this Plan. 23.6 If confirmation of this Plan does not occur or if, after confirmation occurs, the Debtors elect to terminate the Plan, the Plan shall be deemed null and void. In such event, nothing contained in this Plan shall be deemed to constitute a waiver or release of any Claims by or against the Debtors of their estates or any other persons, or to prejudice in any manner the rights of the Debtors or any person in any further proceeding involving the Debtors or their estates. Respectfully submitted, /S/ VOLDEMAR MADIS Voldemar Madis President Dr. Madis Laboratories, Inc. and IVM Corp. DATED: November 18, 1994 GODLESKY & SYWILOK 51 MAIN STREET HACKENSACK, New Jersey 07601 Attorney for Debtors-In Possession UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEW JERSEY ____________________________ : HONORABLE WILLIAM F. TUOHEY In the Matter of: CASE NOS. 88-01805 (WFT) : 88-01806 (WFT) DR. MADIS LABORATORIES, INC., : In Administratively Debtor Consolidated Proceedings for ____________________________ : Reorganization Under Chapter 11 of the Bankruptcy In the Matter of: : Code IVM CORPORATION, : Debtor : ORDER APPROVING DISCLOSURE ___________________________ STATEMENT AND FIXING TIME FOR FILING ACCEPTANCES OR REJECTIONS OF PLAN, COMBINED WITH NOTICE THEREOF A Disclosure Statement under Chapter 11 of the Bankruptcy Code having been filed by the Debtors, Dr. Madis Laboratories, Inc. and IVM Corporation, referring to a Plan under Chapter 11 of the Code filed by Dr. Madis Laboratories, Inc. and IVM Corporation on November , 1994 and it having been determined after hearing on notice that the Disclosure Statement contains adequate information pursuant to Section 1125 of the Bankruptcy Code, IT IS on this day of , 1994, ORDERED and notice is hereby given that: 1. The Disclosure Statement filed by the Debtors dated November , 1994 is approved. 2. __________, 1994 is fixed as the last day for filing written acceptances or rejections of the Plan referred to above. 3. Within ________ days after the entry of this Order, the Plan, the Disclosure Statement and a ballot conforming to Official Form 14 shall be mailed to creditors, equity security holders and other parties in interest, and shall be transmitted to the United States Trustee, as provided in Fed. R. Bankr. P. 3017(d). 4. ______, 1994, at ________ _.m., is hereby fixed for the hearing on confirmation of the Debtors Plan. 5. _____________, 1994 is fixed as the last day for filing and serving pursuant to Fed. R. Bankr. P. 3020(b) (1) written objections to confirmation of the Plan. -------------------------- Bankruptcy Judge -----END PRIVACY-ENHANCED MESSAGE-----