NCD095458527_19940418_FCX Inc. (Statesville)_SERB C_Bankruptcy File 1988 - 1994-OCR

MICHAEL F. EASLEY
ATTORNEY GENERAL
State of North Carolina
Department of Justice
P.O. BOX629
RALEIGH
27602-0629
--MEMORANDUM--
TO:
FROM:
•G~overc-N4='cno~son, Pat DeRosa
Superfund Section
Nancy Scott'1! M
Assistant Attorney General, EPD
RE: F,cx:EnY.ir.onm·enta·l-Sett·lement-Trust-Fund1
~
DATE: April 18, 1994
Attached for your information is a copy of the 12/31/93
accounting for the FCX Environmental Settlement Trust Fund, showing
approximately $2.11 million in the fund.
As you are aware, ten percent of the Trust assets are
available to cover any expenses the State may incur at the former
FCX properties in Washington and Statesville, including, of course,
the State's statutory ten percent share of an NPL site remediation
funded by the federal superfund. The Trust Agreement includes
specific procedures for claiming expenses from the Trust. I have
a copy of the Agreement in my file. Please let me know if you need
a copy.
/en
Attachment
c.c. Rob Gelblum
An Equal Opportunity / Affirmative Action Employer
' '
I I • •
FCX ENVIRONMENTAL SETTLEMENT TRUST
Assets as of 12/31/93:
Checking Account -SNB
Checking Account -FUNB
Checking Account -UCB
Checking Account -Centura
Certificates of Deposit -FUNB
Certificates of Deposit -SNB
Certificates of Deposit -Centura
Total
Liabilities as of 12/31/93:
1993 Federal and North Carolina
Income Tax Liabilities
Receipts 1/1/93 -12/31/93:
Interest Income
Disbursements 1/1/93 -12/31/93:
Surety Bond
Trustee Fees
Accounting Fees
Bank Charges
1992 Income Taxes Paid
1993 Estimated Tax Payments
Total Disbursements
Receipts in Excess of Disbursements
1/1/93 -12/31/93
$
RECEIVF.O·
APil 1 ii i994
16,759.40
33,192.66
61,665.80
19,778.24
404,731.61
976,822.53
596,963.36
$ 2,109,913.60
$
$
$
24,944.00
73,553.12
10,124.00
2,569.65
1,031.05
90.06
26,181.00
15,360.00
55,355.76
18.197.36
•
' '
Adlts, Black and AssociaA, P.A.
CERTIFIED PUBLIC ACCOUNTANTS AND MANAGEMENT CONSULTANTS
3008 ANDERSON DRIVE, SUITE 203
RALEIGH, NORTH CAROLINA 27609
919-781-3581 FAX [phone]
April 14, 1994
Mr. Holmes P. Harden, Trustee
FCX Environmental Settlement Trust
Post Office Box 19764
Raleigh, North Carolina 27619
Dear Holmes:
Please find attached the information requested in Article IV,
Paragraph 4.5 of the FCX Environmental Settlement Trust
Agreement. This information was obtained from bank statements,
tax reporting statements, and bank account reconciliations that
you provided. We have also prepared the enclosed tax returns
based on this information.
Please contact me if you have any questions or if I can be of
further assistance.
Sincerely yours,
C~Ao~
CAA:shb
MEMBER: AMERICAN INSTITUTE OF C.P.A.'S AND THE NORTH CAROLINA ASSOCIATION OF C.P.A.'S
/ L,r'~. .-,,,,..... • ,L--r ~ s-> -~ _/ J;~~[;:;~
' e/ '-~ 5 '[,j ~ ~ ~ < J' / X:._::,:;.•
Q."'-~ u 1/J~St e of North Carolina
u.cv H. THORNB Department of Justice
~TTORNE GE P.O. BOX 629 -f /~ RALEIGH
\L 27602-0629
--MEMORANDUM--
TO: Brenda Rivers
Solid Waste Management Division
FROM: Nancy Scott '-1J ~
Assistant Attorney General
DATE: July 17, 1992
SUBJECT: Contracts Destruction
(In re FCX), Chapter 11 liquidation
Judge Small of the u. s. Bankruptcy Court for the Eastern
District of N. c. will soon be entering an order allowing
distribution from the Trust Fund established for reimbursement of
the State and federal governments for expenses incurred at the FCX
Washington and ·statesville Super fund sites, including li tgation
expenses.
In order to document these expenses, any contracts related to
the Superfund Section's site investigations and preliminary
assessments at these sites should be retained. (This work began on
or before June, 1986.) All Superfund Section contracts for the
period in which the matter was litigated -April 15, 1988, to the
present -to the extent that they relate to Section costs,
including salaries and benefits, indirect costs, office overhead,
etc., should also be retained. All contracts, MOA's or similar
documents with EPA relating to the Superfund Section should be
retained for this period. All contracts with the State Laboratory
of Public Health relating to Superfund Section work during this
period should be retained.
NES:gg
cc: Lee Crosby
Mike Kelly
An Equc1l Opportunity/ Affirn1<1tive Action En1plnyer
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11 ,-1
IN THE MATTER
-OF-
FCX, INC.,
• •
UNITED STATES BANKRUPTCY .COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH.DIVISION
IN PROCEEDINGS FOR THE
REORGANiZATION OF A CORPORATION
(EMPLOYER'S I.D. #56-0220040),
Debtor
CHAPTER lf CASE NO.:
S-85-01574-5.
r ,·.
PLAN OF REORGANIZATION
FCX, INC.
JUNE 6, 1986
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Articles
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.
XI.
XII.
XIII.
XIV.
xv.
XVI.
XVII.
XVIII.
XIX.
xx.
XXI.
• •
PLAN OF REORGANIZATION OF FCX, INC.
TABLE OF CONTENTS
Definitions
Construction
Nature of Plan
Administration and Tax Claims
Classification of Claims and Interest
Treatment of Claims and Glasses Not Impaired
Under the Plan
Treatment of Glass One Secured Claim
(The Columbia Bank for Cooperatives)
Treatment of Glass Two, Claims of Unsecured Creditors
Treatment of Glass Three, Claims of Subordinated
Debenture Holders
Treatment of Glass Four, Equity Security Holders
Covenants of the Debtor
Post-Confirmation Operations of Reorganized Debtor
Liquidation of Non-Operating Assets and Administration
of Liquidating Trust
Means for Execution of The Plan
Assumption of the Executory Contracts and Unexpired
Leases
Modification of the Plan
Provisions
Retention of Jurisdiction
Other Materials
Confirmation for Impaired Glass not Accepting the Plan
Committees
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l
6
6
10
11
12
16
18
19
20
21
24
25
27
28
28
29
30
32
32
33
•
ARTICLE I
DEFINITIONS
•
The following terms used in the Plan shall, unless the context otherwise
requires, have the meanings specified below:
1.1. "Administrative Claim11 : A cost or expense of administration in the
case, including any actual, necessary expense of preserving or liquidating the
estate, any actual, necessary expense of operating the business of the Debtor,
any actual, necessary expense of consummating the Plan, and all allowances,
costs and fees approved by the Court in accordance with the Code.
1. 2. "Columbia Bank for Cooperatives": The Columbia Bank for
Cooperatives, . Columbia, South Carolina ("CBC"), the Debtor's sole secured
lender.
1. 3. "Allowed Claim": A claim (a) (i) a proof of which is filed within
the time fixed by the Court or, if the claim arose out of the rejection of an
executory contract or unexpired lease, within such time as may be fixed by the
Court after such rejection, or (ii) that has been, or hereafter is, listed by
the Debtor as liquidated in amount and not disputed or contingent, and in
either event (b) to which no objection to the allowance thereof has been filed
within any applicable period fixed by the Court, or as to which the Order
allowing such claim has become final and non•appealable.
shall not include any administrative claim.
"Allowed Claim"
1. 4. "Business Day": Any day on which banks are open to carry on their
ordinary commercial banking business in the State of North Carolina.
1.5. "Case": The Chapter 11 case, number S-85-O1574-5 commenced under
the provisions of Chapter 11 of the United States Bankruptcy Code on the 17th
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• •
day of September, 1985, in the United States Bankruptcy Court for the Eastern
District of North Carolina.
1.6. "Claim": Any right to payment, or right to an equitable remedy for
breach of performance if such breach gives rise to a right of payment, against
the Debtor in existence on or as of the petition date, whether or not such
right to payment or right to an equitable remedy is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, secured or unsecured.
1. 7. "Code": The Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, as
amended, 11 U.S.C. Sections 101-151326.
1. 8. "Compromised Claim": The secured claim of CBC as defined in Article
III, Paragraph 3.2.
1. 9. "Confirmation Date": The date of entry of an Order by the United
States Bankruptcy Court confirming the Plan.
1.10. 11 Consummation Date": The first business day occurring on or after
the 11th day after the confirmation date; provided, however, that if a stay of
the Order confirming the Plan is in effect on such first business day, then
the effective date shall be the first business day thereafter on which (i) no
stay of the Order confirming the Plan is in effect and (ii) the Order
confirming the Plan has not been vacated.
1.11. 11 Court11 : The United States Bankruptcy Court for the Eastern
District of North Carolina including the United States Bankruptcy Judge, the
Honorable A. Thomas Small, presiding in this case.
1.12. "Creditor": The holder of an· allowed claim.
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• •
1.13. "Debtor": FCX, Inc., an agricultural cooperative corporation,
incorporated under the North Carolina Cooperative Marketing Act, ("FCX"),
Debtor in this case, or any successor thereto or -any transferee of all or
substantially all of its assets.
1.14. "Disclosure Statement": That certain disclosure statement approved
by the Court in the case and accompanying the Plan.
1.15. "Investments in Other Cooperatives": Assets which are the corpus of
the liquidating trust, excepting the Debtor's interest in Goldkist, the FFR
and universal litigation and/or offset claim, and stock and allocated surplus
of CBC.
1.16. "Petition Date": September 17, 1985, the date on which a voluntary
proceeding under the provisions of Chapter 11 of the Bankruptcy Code was filed
in behalf of FCX, Inc., the Debtor herein, in the United States Bankruptcy
Court for the Eastern District of North Carolina.
1.17. "Plan": The Plan of Reorganization as set forth herein, or as the
same may be modified or amended hereafter.
1.18. "Tax Claims": All liquidated unsecured tax claims of governmental
units against the Debtor or its property entitled to priority under Section
507(a)(7) of the Code.
1.19 "Pension Plan11 : The FCX, Inc. pension plan and the Central
Carolina Farmers, Inc. retirement income plan which have been maintained and
sponsored by FCX.
1.20. "Liquidating Trust": That certain trust agreement, specimen copy
of which is attached hereto, between FCX, Inc. and the trustee designated
therein for the benefit of the CBC, unsecured creditors and subordinated
debenture holders.
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• •
1. 21. "Remaining Non-Operating Assets": Assets not sold to Goldkist or
Southern States and which are not the corpus of the liquidating trust.
1. 21. "Subordinated Claim": The portion of the claim of CBC as set forth
in Article III, Paragraph 3. 2 subordinated to claims, as define·d, of unsecured
creditors and subordinated debenture holders.
ARTICLE II
CONSTRUCTION
Where not inconsistent, or in conflict with the provisions of the Plan,
the words and phr.,ses used herein shall have the meanings ascribed thereto in
the Gode and in the Bankruptcy Rules.
ARTICLE III
NATURE OF PLAN
3.1. Summary: The Plan hereinafter set forth provides for all claims of
creditors of the Debtor. The Plan proposes an orderly liquidation of the
Debtor's remaining non-operating assets and assumes an effective date of July
15, 1986.
The Plan contemplates three classes of creditors and one class of
interest holders whose interests will be impaired, including the CBC,
unsecured creditors, subordinated debenture holders and equity security
holders.
3.2. Columbia Bank for Cooperatives. In general, this Plan provides for
an adjustment to the. claim of the CBC by compromising the same against the
Debtor in the following manner:
(a) CBC shall set off and apply the proceeds of all of the
Debtor's interest in CBC (including all "C stock" and 11 allocated
surplus" of the bank owned by the Debtor) at face value to ~he
principal balance of loans and advances outstanding by CBC to
Debtor;
(b) CBC shall apply payments after July l, 1985 and applied by
the bank to payments of interest as reductions in the principal
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• • balance of Debtor's ·1oan and subordinating such claims for pre-and post-interest to the claims of unsecured creditors and subordinated debenture holders as more particularly set forth hereafter;
(c) CBC shall subordinate its super-priority claim for post-petition loan advances made pursuant to the Debtor-in-Possession Loan Agreement (as amended from time to time) to the reasonable costs of administration, as may be allowed by the Bankruptcy Court, for counsel and financial advisor for the Debtor and counsel for the unsecured creditors committee and subordinated debenture holders committees. CBC reserves its right to object to ·allowance of all such claims in its -sole and absolute discretion;
(d) CBC shall waive its own super-priority claim for counsel fees, expenses and related costs of administration;
(e) CBC shall further subordinate an additional $1,500,000.00 of its claim to the payment of unsecured creditors and subordinated
debenture holders as more particularly set forth hereafter; and
(f) CBC shall fund through loans and advances made pursuant to the Debtor-in-Possession Loan Agreement the settlement of the Debtor's potential liability to Energy Cooperative, Inc. ( "ECI") in the amount of $156,000.00 which sum, together with the bank's release of its -security interest in the Debtor's participation in the bankruptcy estate of ECI, will represent full satisfaction of the Debtor's liability to ECI, upon approval of the Bankruptcy
Court, together with reasonable counsel fees attendant thereto as may be approved.
(g) Valid severance pay claims not to exceed the sum of One Hundred Ninety-Five Thousand and No/100 Dollars ($195,000.00) in the aggregate, will be paid to employees of the Debtor terminated as the result of the sale of assets to Southern States, as a post-petition obligation, as follows:
Length of service:
up to 10 years 1 month
--10 to 20 years 2 months
--over 20 years 3 months
Employees offered a job by Southern States Cooperative, Inc. ("Southern States") and accepting the same, shall not be entitled to severance pay. Southern States will fund one-third (1/3) of the severance pay and the Bank will fund the Debtor's requirements as limited and set forth above and to subordinate that portion of the severance pay claim relating to any payment in excess of one (1) month (to the extent not paid for by Southern States) to the unsecured and subordinated debenture holders.
(h) Through loans and advances made pursuant to the Debtor-in-
Possession Loan Agreement, except that such loans and advances will be made at the request of the Debtor and shall bear interest at the CBC term loan variable interest rate, CBC will fund a policy of
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• •
insurance to insure payment of certain run-off liabilities under the
Debtor's Aetna Life Insurance Company Group Insurance Policy
#GP-602196 (the "Policy") and Split Funded Agreement (the
"Agreement"). Aetna will pay all of the run-off claims under the
Policy and the Agreement and retain an amount to cover its
reasonable charges and expenses upon the payment in three (3) equal
monthly installments of Ninety-Eight Thousand Seven. Hundred
Sixty-Four and No/100 Dollars ($98,764.00), the first such
installment being due on April 1, 1986. The sum of Sixty-Five
Thousand One Hundred Ninety and 66/100 Dollars· ( $65,190.66) , which
amount reflects certain previous payments of the Debtor's run-off
claims, charges and expenses, shall be credited against the first
installment payment. The parties hereto further agree that the
amounts paid pursuant to this paragraph shall constitute a portion
of CBC's claim to be satisfied pursuant to paragraph 9(a)(i) through
(iv) of the Stipulation.
The resulting "compromised and subordinated claims of the CBC shall be
satisfied as set forth in Article VII below.
3.3. Unsecured Creditors. Unsecured creditors of the Debtor will receive
a minimum pro-rata distribution, if available, aggregating a total of Five
Million and No/100 Dollars ($5,000,000.00). Proceeds required to fund such
minimal distribution will be developed from the liquidation of the Debtor's
non-operating assets. Two Million Four Hundred Thousand and No/100 Dollars
($2,400,000.00) of the net proceeds, together with interest accrued thereon,
from the sale of the Debtor's real property in Morrisville, North Carolina,
will be placed in an interest-bearing escrow account and distributed to the
unsecured creditors on account of this minimum distribution which sum,
together with interest earned thereon, will be distributed to the unsecured
creditors upon consummation of the proposed Plan, provided, however, that
priority payments required under Sections 503 and 507 of the United States
Bankruptcy Code to pre-and post-petition claimants have been satisfied in
full.
The Plan proposes additional distributions to unsecured creditors, if
available, beyond the minimum pro-rata distribution of Five Million and No/100
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• • Dollars ($5,000,000.00).· Should proceeds of the liquidation of non-operating
assets produce funds in excess of the amount necessary to pay the unsecured
creditors the balance of their minimum pro-rata distribution, then, and in
that event, all such excess funds shall be divided equally between the
unsecured creditors and the CBC until all such excess funds have been
exhausted or the subordinated claim of the CBC has been paid in full. In the
event the subordinated claim of the CBC is paid in full, any excess funds
shall be paid to the unsecured creditors until all excess funds have been
exhausted. Further, unsecured creditors may receive a share of distribution
of proceeds from the liquidating trust as more particularly set forth
hereafter.
3.4. Subordinated Debenture Holders. Following satisfaction of the
CBC's compromised claim and the minimum pro-rata distribution to unsecured
creditors, subordinated debenture holders shall re_ceive the available proceeds
of the Debtor's investments in other cooperatives distributed through the
liquidating trust, until they receive a total minimum pro-rata distribution of
up to Five Million and No/100 Dollars ($5,000,000.00). In the event that the
proceeds of the liquidating trust provide a surplus after payment to the
subordinated debenture holders of Five Million and No/100 Dollars
($5,000,000.00), then such excess shall be divided between the subordinated
debenture holders, the CBC (until the CBC receives payment in full of its
"subordinated" claim), and the unsecured creditors (until they receive payment
in full of their claims) one-third (1/3), one-third (1/3) and one-third (1/3).
3.5. Employee Claims. Upon the effective date of the Plan, the CBC will
release its secured interest against the over-funded pension plan acquired by
the Debtor effective July 1, 1980, by a merger with Central Carolina Farmers'
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• •
Exchange, Inc. ("CCF"), providing that the Debtor is successful in merging the
plan (CCF Plan) into the existing FCX pension plan. CBC shall release its
security interest in said over-funded portion of the CCF pension plan and
further waives in favor of employees of FCX its right to secure any excess
over-funding of the FCX plan occasioned by said merger.
Pre-petition priority claims of employees for wages, vacation pay, sick
pay and other claims provided priority by Section 507 of the Code are
unimpaired under the terms of this Plan. In addition, post-petition claims
for such matters are treated as costs of administration claims under the Plan,
payment of which is provided on the effective date of the Plan or as soon
thereafter as such claims may be determined and allowed. In addition certain
claims for severance pay, resulting from the sale to Southern States, shall be
paid in accordance with Paragraph 3.2(g) above.
3.6, Equity Security Holders. The Plan proposes that the Bankruptcy
Court find and determine that all equity interests in the Debtor, junior to
subordinated debenture holders are without value and that the holders thereof
are entitled to declare such loss.
ARTICLE IV
ADMINISTRATIVE AND TAX CLAIMS
4.1. Administrative Claims. Administrative claims are defined as a cost
or expense of administration of the case, including actual, necessary expense
of preserving or liquidating the estate, any actual, necessary expense of
operating the business of the Debtor, any actual, necessary expense of
consummating the Plan and all allowances, costs and fees approved by the Court
in accordance with the Code. The CBC has agreed to subordinate its
super-priority claim for post-petition loan advances made pursuant to the
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• • Debtor-in-Possession Loan Agreement, as amended from time to time, to the
reasonable costs of administration, as may be allowed by the Bankruptcy Court
for counsel and financial advisors for the Debtor and counsel for the
unsecured creditors committee and subordinated debenture holders committee.
Such subordination is not effective as to other professionals who have been
authorized to provide services to the estate. The CBC has, however, reserved
its right to object to such allowances in its sole discretion as appropriate.
It is estimated that the total amount of cost of administration claims in this
case, including expenses incurred by the Debtor in the ordinary course of
business will approximate One Million and No/100 Dollars ($1,000,000.00). The
amount of administrative claim$ will increase as the case continues.
4.2. Tax Claims. All liquidated unsecured tax claims of governmental
units against the Debtor or its property entitled to priority under Section
507(a)(7) of the Code.
4.3. Priority Claims. Claims entitled to priority under Sections
507(a)(3), 507(a)(4), 507(a)(5) or 507(a)(6).
ARTICLE V
CLASSIFICATION OF CLAIMS AND INTERESTS
5.1. Class One. The secured claim of the CBC including without ---
limitation, all legal, equitable and contractual rights arising from its
security interest in all of the Debtor's assets.
5.2. Class Two. All unsecured claims of whatever nature or description
against the Debtor, except as otherwise classified in the Plan.
5.3. Class Three. Claims of subordinated debenture holders.
5.4. Class Four. Claims of holders of common and preferred stock of the
Debtor, certificates of equity and members of Debtor.
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• •
ARTICLE VI
TREATMENT OF CLAIMS IN CLASSES NOT IMPAIRED UNDER THE PLAN
6.1. Administrative Claims. Any administrative claim shall be paid in
cash in full on the entry of an Order of the Court allowing such
administrative claim or on the consummation date, or as soon thereafter as may
be practicable. Any administrative claim representing a liability incurred in
the ordinary course of business may be paid in cash in the ordinary course of
business.
FCX is primarily liable for certain so-called "runoff" liabilities
pursuant to its Aetna Life Insurance Company ("Aetna") Group Insurance Policy
#GP-602196 ("the policy") and Split Funded Agreement ("the agreement").
Runoff liabilities are liabilities incurred while the policy was in force that
(1) have not yet been recorded as paid or (2) have been extended, such as
extended liability claims for disabled individuals. The policy and agreement
were terminated as of midnight, March 31, 1986.
FCX will pay its runoff liabilities, as an administrative expense, by
insuring these liabilities through an arrangement with Aetna as follows:
(1) FCX will make a cash premium to Aetna to insure the sum of: (a) the
estimated runoff claims as of April 1, 1986, and (b) the reasonable expenses
associated with processing this runoff (the "runoff liabilities"). The runoff
claims are estimated to be Two Hundred Seventy-Three Thousand Nine Hundred
Eighty-Eight and No/100 Dollars ($273,988.00) and the related expenses are
estimated to be Twenty-Seven Thousand Three Hundred Ten and No/100 Dollars
($27,310.00), for a ·total runoff liability figure of Three Hundred One
Thousand Two Hundred Ninety-Eight and No/100 Dollars ($301,298.00). The
premium to insure the runoff liabilities will be paid in a lump sum of Two
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•
Hundred Ninety-Four Thousand Thirty-Three and No/100 Dollars ($294,033), or in
three (3) equal installments of Ninety-Eight Thousand Seven Hundred Sixty-Four
and No/100 Dollars ($98,764'. 00) each, unless otherwise agreed upon between
Aetna and FCX. Aetna shall credit the sum of Sixty-Five Thousand One Hundred
Ninety and 66/100 Dollars ($65,190.66) against either the lump sum payment or
first installment payment, reflecting funds that have been paid to Aetna for
the payment of FCX' s runoff claims and expen·ses.
(2) In exchange for the premium payment by FCX, Aetna will pay all of
the runoff claims and retain an amount to cover Aetna's reasonable expenses.
If runoff liabilities exceed FCX's premium payment, Aetna will pay these
claims and expenses without reimbursement from FCX.
(3) Aetna will prepare and submit to FCX a final written accounting of
runoff liabilities as of October 1, 1987 (18 months after the termination date
of March 31, 1986). This accounting will be provided to FCX not more than two_
(2) months after that ·date.
All of the premiums paid by FCX, which ·are not paid out in properly
incurred runoff claims and reasonable expenses related thereto by October· 1,
1987, shall be refunded to FCX on the date the accounting is submitted. The
Aetna accounting will be subject to review by FCX and its agents and to
possible challenge before the Bankruptcy Court if a disagreement arises as to
any aspect of the claims payments and expenses, repayment, accounting or any
matter related thereto. Aetna shall also provide an interim review of the
runoff experience as of January 1, 1987, to determine whether a preliminary
refund of unused FCX premium can be made at that time if, in Aetna's
reasonably exercised discretion, based upon Aetna's past actuarial experience,
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• • the experience. review so allows. This interim review shall also be subject to
the above-described review and possible challenge by FCX.
Any refund that is declared at either the interim review or final
accounting shall be paid to FCX without recourse.
Aetna will provide detailed, written information to FCX on a quarterly
basis regarding the runoff claims paid and Aetna's reasonable expenses related
thereto.
Joint experience rating between two different group insurance policies is
the procedure that takes into consideration the experience results under both
policies when determining an experience credit or deficit.
Specifically for FCX, joint experience rating between the runoff under
the group insurance policy that terminated on March 31, 1986 (the "Old
Policy") and the new policy that was effective on April 1, 1986 (the "New
Policy") means that before a possible experience credit is declared based upon
the runoff experience of the Old Policy, the experience results under the New
Policy would first be taken into consideration. (In consideration of the
payment of a specified premium, Aetna has agreed to insure the runoff under
the.Old Policy. When this explanation refers to ~he experience under the Old
Policy, it means the insured runoff experience under the Old Policy.)
All of the employees insured under the New Policy will be considered as a
group in determining the experience credit or deficit under the New Policy,
and any return premium payable to FCX under its arrangement with Aetna to
insure the runoff under the Old Policy will take into consideration any
experience credit or deficit attributable to the New Policy.
Whenever a determination of experience credits'or deficits is made under
either the Old or New Policy, the net credit or deficit taking into
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·•· ·•-•-..... ~ ._I-.t,(,, -:..-,.< 4.G
• • consideration the experience under both policies will determine whether funds
are available for refund to FCX.
In the event that a net deficit develops under joint experience rating
(either because the experience deficit under one policy is greater than the
experience credit under the other policy, or because both policies have
experience deficits), FCX will not be responsible or liable for any further
payments to Aetna.
For example, if a Ten Thousand and No/100 Dollars ($10,000.00) experience
credit were indicated based solely on the runoff experience of the Old Policy
and a Four Thousand and No/100 Dollars ($4,000.00) experience deficit were
indicated for the New Policy,· then ·the net credit for both policies would be
Six Thousand and No/100 Dollars ($6,000.00) ($10,000.00 $4,000.00
$6,000.00). Similarly, if there was a deficit under the Old Policy of Four
Thousand and No/100 Dollars ($4,000,00) but a credit under the New Policy of
Ten Thousand and No/100 Dollars ($10,000.00), there would be a net of Six
Thousand and No/100 Dollars ($6,000.00). If there are deficits under both
policies, FCX would pay nothin_g other than their -previously paid premium; but
if there are credits on both, the credit will be paid to FCX accordingly.
Aetna shall conduct an interim and final review of the claims charges and
expenses under the New Policy at the time it conducts a review for purposes of
evaluating the insured runoff experience as noted above. Aetna shall report
to FCX the results of its reviews, and FCX shall have the same right to review
and possibly challenge Aetna's evaluations as described in the runoff
libaility section above.
6.2. Priority and Tax Claims. Claims entitled to priority under
Sections 507(a)(3), 507(a)(4), 507(a)(S), 507(a)(6) or 507(a)(7) including
wages, vacation pay, sick leave, contributions to employee benefit plans and
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taxes o~ whatever nature or description, to the extent not disputed by the
Debtor shall be paid from proceeds generated from liquidation of non-operating
assets until paid in full. Any claims within any of the foregoing classes
which are disputed as of the date they would otherwise be paid will be paid
within a reasonable time following resolution of such dispute.
ARTICLE VII
TREATMENT OF CLASS ONE CLAIMS (COLUMBIA BANK FOR COOPERATIVES)
Upon confirmation of the Plan, the claim of the CBC shall be reduced by
the aggregate amount of the following credits and subordinations:
(a) Application of all
the CBC owned by the Debtor
of loan and advances by the
11 C stock" and "allocated surplus" of
at face value to the principal balance
CBC to the Debtor;
(b) All payments made after July 1, 1985, by the Debtor to the
CBC and applied to interest shall be reapplied as reductions in the
principal balance of Debtor's loans and such pre-and post-petition
interest shail be subordinated to claims of unsecured creditors and
subordinated debenture holders to a maximum of Five Million and
No/100 Dollars ($5,000,000.00) respectively.
(c) The CBC shall subordinate its lien position and
super-priority claim for post-petition loan advances made pursuant
to the Debtor-in-Posse.ssion Loan Agreement for counsel fees of the
Debtor, its· financial consultant, as well as counsel for the
unsecured creditors and subordinated debenture holders committees.
The CBC reserves however, its rights to object and be heard in its
sole discretion as it deems appropriate. Such obligation terminates
upon payment of the compromised claim of CBC.
(d) The CBC shall waive its right to seek reimbursement for
counsel fees, expenses and related costs of administration.
(e) The CBC shall subordinate the sum of One Million Five
Hundred ~housand and No/100 Dollars ($1,500,000.00) to be advanced
by the bank for payment for pre-petition grain and related claims to
the interest of creditors and subordinated debenture holders
(f) The CBC shall advance the sum of One Hundred Fifty-Six
Thousand and No/100 Dollars ($156,000.00) together with reasonable
counsel fees attendant thereto to fund a settlement with Energy
Cooperative, Inc., which has heretofore been approved by the United
States Bankruptcy Court.
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• • The resulting claims of the CBC thus becomes its "compromised clairn11 and
its "subordinated claim" as defined herein.
7.1. Payment. The compromised claim of the CBC shall be first satisfied
from proceeds generated from previously Court-approved ·sales to GoldKist, Inc.
of Atlanta, Georiga ("Gol"dkist") and Southern States. Further, the CBC shall
apply against its compromised claim proceeds generated from the redemption by
Goldkist of FCX's equity interest in Goldkist and other assets as may be
necessary to satisfy the claim of CBC as compromised.
If the compromised claim of CBC has not been satisfied subsequent to
application of proceeds as identified herein, then and in that event, the CBC
shall receive the first proceeds of liquidation of non-operating assets until
such compromised claim is paid in full. In the event that such compromised
claim has not been paid in full after exhaustion of proceeds resulting from
liquidation of non-operating ~ssets, the CBC shall receive the :first proceeds
of the liquidation of investments of other cooperatives pursuant to the terms
of the liquidating trust, until its claim, as reduced and compromised, is paid
in full.
7.2. Subordinated Claim. The subordinated claim of'CBC shall be paid
after receipt by the unsecured creditors and subordinated debenture holders of
the sum of Five Million and No/100 Dolla~s ($5,000,000,00) respectively, as
hereinafter set forth. After payment in full of the CBC's compromised claim,
unsecured creditors shall receive the next Five Million and No/100 Dollars
($5,000,000.00) from the liquidation of non-operating assets. The CBC has
agreed in connection therewith that upon the sale of the Debtor's real
property located in Morrisville, North Carolina, the sum of Two Million Four
Hundred Thousand and No/100 Dollars ($2,400,000.00) therefrom will be placed
in an interest-bearing escrow account and distributed to the unsecured
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• • creditors, together with interest accrued thereon, on account of their minimum
distribution upon consummation of the proposed Plan, subject, however, to the
provisions of Section 507 of the Code. Notwithstanding its lien position
regarding such real property, CBC has agreed that funds attributable to the
sale thereof shall be in any event made available to unsecured creditors for
application upon the minimum distribution to that class.
In the event that the proceeds of the liquidating trust provide a surplus
after payment to the subordinated debenture holders of Five Million and No/100
Dollars ($5,000,000.00), then, and in that event, any such excess shall be
divided between the subordinated debenture holders, unsecured creditors and
the CBC until the latter receives payment in full of the subordinated amounts
of its claims one-third (1/3), one-third (1/3) and one-third (1/3).
ARTICLE VIII
TREATMENT OF CLASS TWO (UNSECURED CLAIMS)
8.1. Payment. Claims of unsecured creditors will be discharged by the
payment with respect to each such claim of p~oceeds attributable to the
Debtor's orderly liquidation. Subject only to receipt by. the CBC of its
compromised claim and payment of priority claims, unsecured creditors shall
receive the first proceeds from liquidation of non-operating assets until such
class of creditors .shall have received a minimum distribution of Five Million
and No/100 Dollars ($5,000,000.00). Upon receipt of a minimum distribution of
Five Million and No/100 Dollars ($5,000,000,00) from the liquidation of
non-operating assets, proceeds in excess of such amount shall be divided
equally between the unsecured creditors and the CBC until the CBC has received
the total amount of its subordinated claim.
In the event unsecured creditors do not receive a minimum distribution of
Five Million and No/100 Dollars ($5,000,000.00) from the liquidation of
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• • remaining non-operating assets, then, and in such event, unsecured creditors
shall receive proceeds from the liquidating trust in such amount as is
necessary to distribute to unsecured creditors such minimum amount.
Unsecured creditors will receive the net proceeds from the. sale of the
Debtor's real property located in Morrisville, North Carolina up to Two
Million Four Hundred Thousand and No/100 Dollars ($2,400,000.00) together with
the interest earned thereon upon consummation of the Plan. Such proceeds •will
be distributed together with such interest to unsecured creditors for
application upon the minimum distribution of Five Million and No/100 Dollars
($5,000,000.00) and shall not be subject to the prior lien and super-priority
claim of the CBC, but shall be subject to the payment of pre-and
post-petition priority claims entitled to such priority under the provisions
of Section 507 of the Code.
8.2. Liquidating Trust. In addition to the distribution hereinbefore
referred .to, unsecured creditors shall be entitled to one-third (1/3) of the
excess funds available through the liquidating trust as hereinafter defined.
Such excess funds shall be distributed to the CBC, unsecured creditors and
subordinated debenture holders one-third (1/3), one-third (1/3) and
(1/3) to the extent necessary to satisfy their claims in full.
ARTICLE IX
TREATMENT OF CLASS THREE (SUBORDINATED DEBENTURE HOLDERS)
one-third
9.1. Payment. Subordinated debenture holders shall receive proceeds
from the liquidation of the Debtor's investments in other ·cooperatives up to a
minimum distribution of Five Million and No/100 Dollars ($5,000,000.00),
subject only to the prior claims of the CBC to receipt in full of its
compromised claim, hereinbefore defined, and to receipt by the class of
unsecured creditors of Five Million and No/100 Dollars ($5,000,000.00).
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The Debtor shall liquidate its investments in other cooperatives through
a liquidating trust, a specimen copy of which is attached hereto and
incorporated herein by reference. Distribution shall be made in accordance
with the terms thereof and this Plan.
9.2. Certificates of Participation. Holders of subordinated debentures
shall receive certificates of participation in the liquidating trust. The
certificate of participation shall be in the manner and form as is attached to
the liquidating trust, and shall entitle the holder thereof to receipt of
periodic distributions from the available proceeds of the said liquidating
trust.
Within thirty (30) days of ·the date of confirmation of this Plan, the
trustee under the terms of the liquidating trust shall transmit to the holder
of each subordinated debenture a certificate of participation reflecting the
face amount of the prior subordinated debenture.
9.3. Surplus Proceeds. In the event that the proceeds of the liquidating
trust provide a surplus after payment to the holders of subordinated
debentures of Five Million and No/100 Dollars ($5,000,000.00), then and in
that event, any such excess shall be divided between the holders of
certificates of participation, unsecured creditors and the CBC. Provided,
however, that no class shall be entitled to receive more than the face amount
of their claims in full.
ARTICLE X
TREATMENT OF CLASS FOUR (EQUITY SECURITY HOLDERS; MEMBERS)
As used herein, the term "equity security holders" mean holders of
preferred stock, common stock (which is membership stock) and certificates of
equity issued by the Debtor. The holders of such certificate of equity,
preferred stock and common stock shall receive no distribution unless, and
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until, all claims hereinabove set forth have been paid in full. The Debtor
does not anticipate that proceeds will be generated from the orderly
liquidation of its remaining operating and non-operating assets to result in a
dividend to equity security holders.
10.1. Finding of No Value. This Plan proposes that the United States
Bankruptcy Court find as a fact that claims in this class are of no value.
10.2. Cancellation. The order of confirmation confirming this Plan
shall contain a provision canc.elling the certificates of equity, preferred
stock, common shares or other evidences of equity in FCX, Inc., as being of no
value.
ARTICLE XI
COVENANTS OF THE DEBTOR
From the conswnmation date, until such time as the claims of Class One,
Class Two, Class Three and Class Four creditors are fully discharged, or
unless waived in writing, the reorganized Debtor will:
11.1. Financial Statements. As soon as available, and in any event,
within one hundred twenty (120) days after the end of each fiscal year of the
Debtor, deliver to· parties requesting the same, a copy of the annual financial
statement of the Debtor! including its balance sheets as of the end of such
year and related. changes in financial. position, prepared by the Debtor in
conformity with generally accepted accounting principles consistently applied.
11.2. Interim Report. Within thirty (30) days after each quarterly
accounting period of the Debtor, deliver to such parties as may request the
same, a copy of the report of operations of the Debtor for such accounting
period, which report is certified by an officer of the Debtor to be true and
accurate.
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11.3. Taxes and Liabilities. Pay all taxes, assessments and other
liabilities accruing hereafter, prior to the date on which penalties result
therefrom or any lien is imposed on its property as a result thereof, except
to the extent that such tax, assessment or other liabilities being contested
in good faith and by appropriate proceedings.
11.4 .. Post-Confirmation Credit. Not incur or permit to exist any
indebtedness or liability for borrowed money or for the deferred purchase
price of any property or services except,
a. Indebtedness for funds borrowed pursuant to the Debtor-in-
Possession Loan Agreement heretofore approved by the Bankruptcy Court
which is hereby ratified with consent of the CBC to the extent necessary
to provide funding during the post-confirmation period prior to payment
in full of the adjusted and compromised claim of the CBC;
b. Current or future accounts payable arising in the ordinary
course of business;
c. Other indebtedness incurred after the consummation date arising
from the ordinary operation of the reorganized Debtor.
11.5. Liens. Not create or permit to exist any mortgage, pledge, title
retention lien, or other lten, encumbrance or security interest with respect
to any property, except:
a. Liens arising in the ordinary course of business for sums not
due or sums being contested in good faith and by appropriate proceedings
i and not involving any deposits or advances or borrowed money or the
deferred purchase price of property or services;
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• • b. Those existing on the consummation date of this Plan, including
the security interest in favor of the CBC which remain in full force and
effect and are not affected by the confirmation of this Plan.
11.6. Guarantees, Loans or Advances. Not become or be a guarantor or
security of, or otherwise become or be responsible in any manner (whether by
agreement to purchase any obligations, stock, assets, goods or services, or to
apply or a~vance any funds, assets, goods or services, or otherwise) with
respect to any undertaking of any person or entity, or make or permit to exist
any loans or advances to any person or entity, except for:
a. The endorsement in the ordinary course of collection, of
instruments payable to it or its order; and
b. Advances to officers and employees or suppliers reasonably
required in the ordinary course of the Debtor's business.
11.7. Mergers and Consolidations. Not be a party to any merger or
consolidation except mergers or consolidations approved by the Bankruptcy
Court.
11.8. Investments. Not purchase or otherwise acquire all or
substantially all of the assets of any person or entity except in the ordinary
course of business; and not purchase or otherwise acquire any stock of any
class of, or any partnership or joint venture interest. in, any other person or
entity. Provided, however, this shall not restrict the operation ·. of the
liquidating trust hereinbefore referred· to.
11.9. Access to Information. Permit and direct its employees and
accountants to respond to the reasonable inquiries of all parties in interest
on matters regarding the Debtor's financial condition and progress in the
orderly liquidation of its remaining non-operating assets.
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11.10. Economies of Administration. Use every effort to reduce cost of
operations including reduction in personnel and overhead expense related to
the Debtor's orderly liquidation of remaining non-operating assets.
ARTICLE XII
POST-CONFIRMATION OPERATIONS OF REORGANIZED DEBTOR
The Debtor will operate for the purposes provided herein for a period
sufficient to conclude the liquidation of non-operating assets and
implementation of the liquidating trust. Such operations shall be consistent
with this Plan and limited to an orderly liquidation of remaining tangible and
intangible assets. In addition, management shall assist counsel and
professional staff in the administration of this Chapter 11 case including
development and presentation of financial data and material as well as an
analysis of objectionable claims and prosecution thereof.
12.1. Board of Directors. Management of the reorganized Debtor shall be
vested in a reconstituted board of directors composed of individuals selected
from representative interests in this Chapter 11 case. Such reconstituted
board .shall take office on the date of conswnmation of the Plan of
Reorganization and consist of five (5) members. The board may have one (1)
member selected by the CBC, two (2) members selected by the committee of
unsecured creditors and two (2) members selected by the committee of
subordinated debenture holders. This reconstituted board of directors shall
be responsible for and charged with the liquidation of the Debtor's remaining
tangible and intangible assets but, however, shall be held harmless and
indemnified from any claims asserted against them individually in the exercise
of such responsibility in good faith. The reconstituted board of directors
shall administer the terms of the confirmed Plan in all respects and furnish
on a quarterly basis a report as to the status of the liquidation of assets
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• and distribution of proceeds related thereto. In addition, the reconstituted
board of directors shall implement a system for the periodic distribution of
proceeds to unsecured creditors and shall execute in behalf of the Debtor the
liquidating trust implementing the terms thereof. If the CBC, Committee of
Unsecured Creditors and Committee of Subordinated Debenture Holders decline to
serve in such capacity, the Debtor will propose individuals for service upon
( such Boar~ representing interests of the case, whose appointment shall be
subject to prior approval by the Court.
ARTICLE XIII
LIQUIDATION OF NON-OPERATING ASSETS
AND ADMINISTRATION OF LIQUIDATING TRUST
The Debtor, under the direction of the reconstituted board of directors,
will promptly liquidate its remaining non-operating assets in an orderly
fashion for the benefit of parties in interest. During the post-confirmation
period and for an indeterminate time, the Debtor will liquidate and administer
its remaining assets. These assets consist of tangible non-operating personal
properties, tracts of ·real property, miscellaneous inventories and its
interests in other cooperatives.
A. SALE OF ASSETS; POLICY. Subsequent to c_onfirmation, the following
procedure will be utilized in connection with the sale of assets:
·(a) For ·assets , with a fair market value of less than Five
Hundred and No/100 Dollars ($500.00) per item, the Debtor 'is
authorized to dispose of those items of property with no formal
notice to interested parties or a hearing before the Bankruptcy
Court at a price that is substantially the same as ·the fair market
value as represented to the Bankruptcy Court on a list prepared by
the Debtor, conditioned upon authorization by Debtor's management
and counsel and upon approval by the Bankruptcy Court.
(b) For assets with a fair market value of between Five
Hundred and No/100 Dollars ($500.00) and Five Thousand and No/100
Dollars ($5,000.00), the Debtor is authorized to dispose of such
items at a price and under terms with no formal notice to interested
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parties or a hearing before the Bankruptcy Court, conditioned upon
the prior written authorization of Debtor's management, counsel for
the Debtor, counsel for CBC, counsel for the unsecured creditors
committee counsel for the debenture holders committee, and upon
approval by the Bankruptcy Court.
(c) For assets with a value in excess of Five Thousand and
No/100 Dollars ($5,000.00), the Debtor will furnish notice pursuant
to 11 U.S.C. Section 363 by moving for Court approval for such sale
and by providing notice of such proposed sale and hearing thereon as
required by the Bankruptcy Code and Bankruptcy Rules.
The Debtor reserves unto itself and its reconstituted board of directors
the absolute and sole discretion for methodology used in liquidation, subject,
however, to the provisions of this Plan and the retained jurisdiction of the
Court to enforce its terms.
B. ADMINISTRATION OF LIQUIDATING TRUST. The Debtor's investments in
other cooperatives shall be liquidated and the proceeds derived therefrom held
in a liquidating trust for the use and benefit of CBC, unsecured creditors and
subordinated debenture holders. A specimen copy of the proposed trust
agreement is attached hereto and incorporated herein by reference. The trust
shall be administered by a corporate trustee designated therein who shall not
less frequently than once quarterly report to the reconstituted board of
directors as to the status of the trust, collections on investments and
distributions to parties in interest.
The trust shall be administered by the designated trustee in accordance
with the statutes of the State of North Carolina relating to such investments,
and for s_uch services, the designated trustee shall be entitled to receive
compensation at the statutory rate, or as otherwise may be agreed upon by the
parties limited to such Trust. Within thirty (30) days of the date of
confirmation, the trustee shall distribute to holders of subordinated
debentures, certificates of participation reflecting the face amount of the
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prior subordinated debenture. The certificates of participation and
acceptanc~ thereof shall constitute a release, cancellation and novation of
the prior subordinated debenture.
ARTICLE XIV
MEANS FOR EXECUTION OF THE PLAN
14.1. Payments. The funds required to implement this Plan will be
developed from the orderly liquidation of the Debtor's remaining assets as
well as advances made pursuant to the Debtor-in-Possession Loan Agreement.
Confirmation of the Plan will not require the immediate need for cash in
excess of those amounts required to be paid at the effective date. It is
estimated that the funding requirement for distribution of claims required to
be paid upon the effective date is approximately One Million and No/100
Dollars ($1,000,000.00). The source of revenues for funding such payments are
as hereinabove set forth, subject to the liens of CBC provided that its
compromised claim has not been paid.
14.2. Events of Default. The occurrence of any of the following shall
constitute an event of default under the Plan:
(a) Failure to make payments as required pursuant to any
provision of this Plan, which failure continues for a period of
fifteen (15) days after the due date thereon.
(b) The failure on the part of the reorganized Debtor to
perform, or the violation of any of the terms, covenants or
provisions of this Plan or any document or estimate delivered in
connection herewith, including the liquidating trust and
certificates of participation representing interests therein, which
failure of performance or which violation remains uncured for a
period expiring on the 20th day after (i) the .Debtor has knowledge
of such failure or violation, or (ii) after receipt by the Debtor of
written notice from a party in interest of such failure or
violation.
14.3. Remedies Upon Default. Upon the occurrence of an event of default
which is not excused, postponed, modified or waived, holders of claims and
parties in interest may exercise all rights and remedies available under this
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Plan and the Code, and any committee appointed by the .Bankruptcy Court or its
designee may also exercise such rights and remedies upon such default.
14.4. Revesting of Property In The Debtor. All of the assets of the
Debtor will be retained by the Debtor and on the day of entry of an Order
confirming the Plan the Debtor will hold all right, title and interest of the
property of the Debtor, and the reorganized Debtor will have the right to
possession and use of said property consistent with the provisions of this
Plan.
ARTICLE x:,J
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
Except as otherwise specified, the filing of this Plan shall constitute a
rejection of all executory contracts which exist between the Debtor and any
individual or entity, whether such contracts be in writing or oral, which have
not heretofore been rejected or assumed by Orders of this Court. Provided,
however, that this provision is not intended to reject and does not reject any
contracts entered into following the initiation of this case, or any contracts
adopted by the terms of this Plan.
ARTICLE XVI
MODIFICATION OF THE PLAN
16.1. Modification Prior to Confirmation. Modifications of the Plan may
be proposed in writing by the Debtor, at any time before the confirmation
date, provided that such Plan, as modified, meets the requirements of Sections
1122 and 1123 of the Code, and the Debtor shall have complied with Section
1125 of the Code.
16.2. Modification After Confirmation. The Plan may be modified at any
time after the confirmation date and before its substantial consummation,
provided that such Plan, as modified, meets the requirements of Sections 1122
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and 1123 of the Code and the Court, after notice and a hearing, confirms such
Plan, as modified, under Section 1129 of the Code, and the circumstances
warrant such modification.
16.3. Deemed Acceptance or Rejection of Modifications. A holder of a
claim or interest that has accepted or rejected the Plan shall be deemed to
have accepted or rejected, as the case may be, the Plan as modified, unless
such holder files a notice to the contrary, within the time period for such
notice affixed by the Court.
16.4. Defects or Omissions. After confirmation, the Debtor may, with
the approval of the Court, remedy any defect or omission or reconcile any
inconsistencies in the Plan, Disclosure Statement or the Confirmation Order,
in such manner as may be necessary to carry out the purposes and effect of the
Plan, Disclosure Statement or Confirmation Order, so long as such remedy does
not materially or adversely affect the interests of creditors and other
parties in interest.
ARTICLE XVII
PROVISIONS
17.1. Extension of Payment Dates. If any payment under the Plan falls
due on a Saturday, Sunday or other day which is not a business day, then such
due date shall be extended to the next following business day.
17.2. Notices. Any notice hereunder to the Debtor shall be in writing
and, if by telegram or telex, shall be deemed to have been given when sent
and, if mailed, shall be deemed to have been given three (3) days after the
date when sent by registered or certified mail, postage prepaid, and addressed
as follows:
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If to the Debtor:
With ·copies to:
To the Committee of
Unsecured Creditors:
To the Committee of
Subordinated Debenture
Holders:
To the Columbia Bank for
Cooperatives:
•
FCX, Inc.
c/o J. Stewart Hodges
Vice President & Financial
Administrator
Post Office Box 2419
Raleigh, North Carolina 27602
William H. McCullough
Sanford, Adams, McCullough and Beard
Attorneys at Law
Post Office Box 389
Raleigh, North Carolina 27602-0389
Lacy H. Reaves, Esq.
Poyner and Spruill
Attorneys at Law
Post Office Box 10096
Raleigh, North Carolina 27605-0096
Michael E. Weddington, Esq.
Smith, Anderson, Blount, Dorsett,
Mitchell and Jernigan
Attorneys at Law
Post Office Box 12807
Raleigh, North Carolina 27605
Howard T. Glassman, Esq.
Blank, Rome, Comisky and McCauley
Attorneys at Law
1200 Four Penn Center Plaza
Philadelphia, Pennsylvania 19102
Or such other address (if any) as the Debtor may have designated as its
address for such purposes, or at any address of such party appearing in the
records of the party giving such notice.
17.3. Transfer of Claims. Claims may be transferred and will be honored
only in accordance with the provisions of Bankruptcy Rule 3001.
17.4. Captions. The Section captions used in the Plan are for
convenience only and shall not affect the construction of the Plan.
ARTICLE XVIII
RETENTION OF JURISDICTION
The Court shall retain jurisdiction of this case to require the
performance of any act that is necessary for the consummation of the Plan
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• including, without limitation, the jurisdiction to hear and determine all
claims against the Debtor and to enforce all causes of action which may exist
in the Debtor's favor, and to modify the Plan pursuant to provisions of
Section 1127 of the Bankruptcy Code. In the event an appeal is perfected from
the Order confirming the Plan, the Court shall also retain jurisdiction to
enter such Orders regarding the disbursement of funds under the Plan or the
conswnmation thereof as may be necessary to protect the interests of
Debtor, its creditors and subordinated debenture holders, as well as
parties in intere·st. Specifically, the Court shaH retain jurisdiction
the following purposes:
(a) Determination of the allowability of claims upon objection
to such claim by the Debtor or·any other party in interest.
(b) Determination of a request for fees under Section
5O7(a)(l) of the Code.
(c) Resolution of any disputes regarding the interpretation of
the Plan.
(d) · Implementation of the provision of the Plan and entry of
any Order'in aid of consummation of the Plan, and including, without
l'imitation, · appropriate o·rders to protect the revested Debtor from
creditor action.
(e) Modification of the Plan pursuant to Section 1127 of the
Code.
(f) Adjudication of any causes of actions, including avoiding
powers brought by the Debtor or any other party in interest.
( g) Entry of a final decree·.
(h) As well as all other matters properly before the Court by
provision of the Code or Rules, including sales of remaining assets
and disputes relating thereto.
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ARTICLE XIX
OTHER MATERIALS AND HOLD HARMLESS PROVISIONS
19.1. · Disclosure Statement. The attention of holders of claims in
interest in FGX, Inc., is directed to the Disclosure Statement filed with this
case together with the Exhibits attached thereto and to the Exhibit attached
to this Plan.
19.2. Indemnification; Hold Harmless.
(a) Reconstituted Board of Directors. The reconstituted board of
directors of FCX, Inc. shall serve in accordance with provisions of this Plan
and for such actions taken in connection therewith shall be held harmless and
indemnified from any actions ·asserted against them on account of such service,
provided that such actions are made in good faith by the members thereof.
(b) Cammi ttees. Each creditor of the Debtor and other parties in
interest, by and upon the confirmation of the Plan, is hereby deemed to have
waived, released and relinquished any and all of its claims and rights, if
any, against the committee of unsecured creditors, committee of subordinated
debenture holders, and committee of equity security holders (including each
voting or non-voting member thereof) arising out of, or related to, their
respective determinations and recommendations regarding actions, suits,
proceedings or other matters in potential claims, and rights, if any,
considered during the course of the administration of this Chapter 11 case.
ARTICLE XX
CONFIRMATION FOR IMPAIRED GLASS NOT ACCEPTING THE PLAN
In respect to any class of creditors impaired but not accepting the Plan
by the requisite majority in number and two-thirds (2/3) in amount, the
proponent of this Plan requests the Court to find that the Plan does not
discriminate unfairly and is fair and equitable with respect to each class of
claims or interest that is impaired under the Plan and that the Court confirm
the Plan without such acceptance by said impaired Class or Classes.
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ARTICLE XXI
COMMITTEES
•
(a) So long as any payments or distributions required to be made to
creditors have not been made, the committees heretofore appointed by the
Bankruptcy Court shall continue in existence. Members of the committees and
their designee shall serve without compensation.
(b) In the event that a vacancy occurs on a committee by reason of
death, resignation or retirement, or because a designee of a member of a
committee shall no longer be employed by such member, the vacancy thereby
created shall be filled within thirty (30) days thereafter by a person
designated by the member of the committee to whom the former designee was
employed or with whom the former designee was affiliated. In the event such
member of the committee fails to designate a successor representative to serve
on the committee, the vacancy shall be filled by a majority of the remaining
members of the committee from among the representatives of holders of claims
therein.
(c) Upon the occurrence of one or.the other of the following events, and
effective immediately upon such occurrence, a member of a committee shall have
been deemed to haVe resigned from-the committee:
(1) If such member shall assign all or any portion of its
claim (other than as security for an obligation of, or to an
affiliate or such general creditor), or
(2) Releases the Debtor from payment of all nr a portion of
its claim.
Any vacancy created as a result of the foregoing shall be filled by a
designee of a majority of the remaining members of the committee from among
the employees or representatives of the remaining holders of interest therein.
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• • (d) The committee shall function as such whether or not any vacancy is
filled. No holder of a claim in the class represented thereby shall have more
than one (1) representative on the committee at any given time.
(e) A committee shall act by a majority vote of its members present and
voting, either with or without formal meetings.
(f) Any committee shall have the power and right to postpone the time of
any payment or distribution provided for under the terms of the Plan, in whole
or in part.
(g) A committee shall have the power and right, upon such terms and
conditions as the committee may determine, to waive, modify or excuse
performance of any of the covenants of the Debtor set forth in the Plan, but
such waiver or excuse shall not be deemed to constitute a waiver of any other
term or provision of this Plan or waiver of any other term or provision of
this Plan or waiver or excuse of the same covenant on a different occasion.
Any waiver or excuse, or any consent or approval required under provisions of
the Plan, or under any document or instrument delivered in connection with
this Plan, shall be in writing and executed by a member or a representative of
the committee.
(h) The committee shall have the right, subsequent to the confirmation
date to utilize the services; c;,f attorneys, accountants·, or other agents which,
in the exercise of reasonable.discretion of the committee, are nece~sary to
perform the duties of that particular committee. The Debtor shall pay the
' reasonable fees and expenses of such attorneys, accountants or other agents.
Any dispute that may arise in connection with services or payment for services
to be rendered to the committee by any such attorneys, accountants or other
agents shall, if necessary, be resolved by the Bankruptcy Court.
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(i) Upon the completion of i:he payments and distributions to be made in
accordance with the terms of the Plan, the duties, power and responsibilities
of the committees and their agents shall terminate.
(j) Neither the committee nor any of its members, any of their
designees, the firms by whom they are employed, counsel or accountants to the
committees, nor any· duly designated agent or representative of the committees
(hereinafter collectively referred to as "agents") shall be liable to the
Debtor, any ·creditor, or any other person, firm or corporation, for any error
Of judgment or for any mistake of law or fact or any act done or cause to be
done or omitted'to be done, by the committees or. any of their agents. Each
member of a committee and the committee's respective agents shall be liable
only for acts of willful misconduct by itself or such agents.
Respectfully submitted, this the 9~ day of__...~~-===--• 1986.
(J
J. Larkin Pahl
of SMITH; DEBNAM, HIBBERT & PAHL
Special Counsel for the Debtor
Post Office Drawer 2"6268
Raleigh, North Carolina 27611
·Telephone: [phone]
j lpB1382. 001
By:
FCX, INC.
U/4~.~/lt~Ct~ William H. Mc~lough
P. Carlton,
Sanford, Adams, Mc ullough & Beard
Attorneys for Debtor
Post Office Box.389
Raleigh, North Carolina 27602-0389
Telephone: ·[phone]
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• • EXHIBIT A
LIQUIDATING TRUST
THIS AGREEMENT AND DECLARATION OF. TRUST is made this day
1986, by and between FCX, Inc., Debtor and
Debtor-In-Possession, an agricultural cooperative corporation incorporated under
the North Carolina Cooperative Marketing Act (the "Company"), and
___________ , a North Carolina financial institution (the "Trustee").
RECITALS
On September 17, 1985, the Company filed a voluntary petition under the
provisions of Chapter 11 of the United States Bankruptcy Code. Pursuant to a
Plan of Reorganization (the "Plan") confirmed by a final unappealable order of
the United States Bankruptcy Court for the Eastern District of North Caroline
(the "Bankruptcy Court"), the Company hes or will liquidate all of its real,
personal, tangible, and intangible assets for the benefit of its creditors, and
will thereupon liquidate. · The Plan requires the Company to establish a
liquidating trust to be used to receive end hold funds attributable to the
liquidation of the Company's interest in certain other cooperatives, and to
distribute the proceeds to such parties entitled to the same under the terms of
the Plan.
Now, therefore, it is agreed as follows:
1.1 Definitions.
• ARTICLE I
DEFINITIONS
The following terms and words when used in this
Agreement (as designated by the capitalization of the first letter thereof) shall
have, unless they are otherwise expressly modified herein or the context
otherwise 1·equires, the following meanings:
' (a) "Agreement" shall mean this instrument as originally executed or
as it may from time to time be amended.
(b) "Bankruptcy Court" shall mean the Unite.d States Bankruptcy
Court for the Eastern District of North Carolina which has had jurisdiction
over the Company as a debtor in possession under Chapter 11 of the
United States Bankruptcy Code.
(c) "CBC" shall mean the Columbia Bank for Cooperatives, Columbia,
South Carolina.
(d) "Certificateholder" shall mean the registered owner of a
Certificate, as shown by the registration books maintained by the Trustee.
(e) "Certificate" shall me1m any Certificate issued under this
Agreement to a former Debentureholder of the Company in substitution for
and redemption of his Debentures.
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(f) "Company" shall mean FCX, Inc.
(g) "Cooperative Assets" shall mean the Company's interests in the
other corporations and other cooperatives set forth in attached Exhibit A.
(h) "Debentureholder" shall mean a subordinate debentureholder of
the Company who will receive Certificates in cancellation and redemption of
his Debentures.
(i) "Debentures" shall mean all subordinated investment debentures
of the Company which are to be cancelled and redeemed by issue of
Certificates hereunder.
(j) "Plan" shall mean the Plan of Reori;anization of the Company
which has been confirmed by u final, unappealable order of the
Bankruptcy Court.
(k) "Preferred Claim" in the singular, shall mean the Compromised
Claim of CBC, as set forth in the Plan, or the Minimum Distribution to the
Unsecured Creditors, as set forth in the Plan, as the context may require,
and, in the plural, shall mean both of the foregoing.
(I) "Trust" shall mean the FCX Liquidating Trust established by
this Agreement.
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(m) "Trustee" shall mean the original Trustee and its successor
trustee.
(n) "Trust Estate" shall mean all property, including cash or its
equivalent, held by the Trustee from time to time under this Agreement,
including without limitation, all income earned on or other receipts received
from the investment of the Trust Estate.
(o) "Unit" shall mean an undivided portion of the Trust Estate which
reflects a former Debentureholder's · percentage ownership of. the Company's
Debentures prior to their cancellation and redemption.
(p) "Unsecured Creditors" shall . mean the creditors holding
unsecured claims &gain st the Company, as set forth in the Plan.
(q) "Unsecured Creditor's Committee" shall mean the committee of
creditors holding unsecured claims against the Compa·ny, which was
appointed by the Bankruptcy Court, as such committee is ·constituted from
time to time.
1. 2 Construction. Except where the context otherwise requires, all
pronouns and any variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular, or plural, as the identity of the pernon, persons,
entity, or entities may require. All references to Articles, Sections, and other
subdivisions refer to the corresponding Articles, Sections, and other
subdivisions of this Agreement.
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• • ARTICLE II
TRANSFER TO TRUSTEE
2 .1 Transfer to Trustee. The Company hereby transfers to the Trustee
the sum of ten dollars. In addition, the Company further irrevocably assigns
to the Trustee all of its rights in and to the net proceeds of the liquidation of
1:he Company's interest in the corporations and unincorporated companies set
forth. in attached Exhibit A (the "Cooperative Assets"), and agrees to transfer
such net proceeds to the Trustee when and as received. All transfers to the
Trustee hereunder shall be in trust nevertheless for the uses and purposes
hereinafter stated, and the Trustee accepts such property, and agrees to
accept such future transfers, and the trust.
2. 2 Further Assurance. The Company and such persons as shall have
the right and power after the dissolution of the Company, will, upon the
reasonable request of the . Trustee, execute, acknowledge, and deliver such
further instruments and do such further acts as may be necessary or proper to
carry out the purposes of this Agreement more effectively, to transfer any
property intended to be covered hereby, and to vest in the Trustee, its
successors and assigns, the estate, powers, instruments, or funds in trust
hereunder.
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• • 2. 3 Payment of Transferee Liability. Should any liability be asserted
1gainst the Trustee. as transferee of the Trust Estate, on account of any
claimed liability of or through the Company, the Trustee moy use such part of
the Trust Estate as may be necessary in contesting the liability and in payment
thereof.
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ARTICLE Ill
TRUST CERTIFICATES
3 .1 Issuance of Certificates of Participation. The beneficial interests
in the Trust Estate by the Debentureholders will be divided into equal,
undivided portions ("Units") to be evidenced by the Certificates. Within 30
days after the date of a final, unappealable order confirming the Plan, the
Trustee will issue to the Debentureholders, es directed by the Company,
Certificates representing each Debentureholder's Units in the Trust, in
replacement of and substitution for the Debentures theretofore held by such
Debentureholder, which Debentures will thereupon and as a result thereof be
fully redeemed, cancelled, and of no further force or effect. Upon such
issuance, the Debentureholders' sole rights with rE!spect to such redeemed and
cancelled Debentures shall be their rights hereunder as Certificateholders.
Upon receipt of the Certificates, the Debentureholders shall promptly return to
the Company all Debentures, duly endorsed to the Company. The Certificates
shall be in such form as may be fixed by the Trustee, with such changes as
the Trustee may from time to time find necessary or desirable to conform to any
applicable laws or regulations.
3. 2 Rights of Trust Certificateholders. The re{ristered owner of each
Certificate shall be entitled to participation, accordinc-to the number of his
Units, in the rights and benefits due to a Certificate holder. Each
Certificateholder or transferee of nny Certificate shnll take and hold the same
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subject to all the terms and provisions of this Agreement. The Certificates nnd
the interest of the Certiflcateholders nnd all rights 1mC.: benefit8 evidenced
thereby, shall be in all respects personal property nnd upon the death of an
individual Certificateholder his interest as reprei;,anted by a Certificate shall
pass to his legal representative ond such death shall in no event terminate or
affect the validity of this Agreement.
3. 3 Registration of Certificates. The Trustee shall cause to be kept, at
such place or places within or without the State of North Carolina as the ·
Trustee may determine, books for the reg-istration and transfer of the
Certificates (the "Register of the Trustee"); and, upon presentation for this
purpose, the Trustee shall, under reasonable regulations which it may
prescribe, cause to be registered or transferred therein, any of the
Certificates. The Trustee may appoint one or more registrars for this purpose,
and may pay any such registrars reasonable compensation for services.
3. 4 Transfer of Certificates. The Certificates and the interest
r,epresented thereby (but no fractional part of u single Unit) · may be
transferred by the holder thereof in person or by _a duly authorized agent or
attorney, or by the properly appointed legal represen_tBtives _ of the holder,
upon the surrender of the Certificate, du1y executed for transfer, to the
Trustee with directions that the transfer be made and recorded in the Register
of the Trustee, upon the delivery of such other documents as the Trustee may
reasonably require and upon payment of the reasonable transfer charges, if
any, established by the Trustee for the purpose of reimbursing the Trustee for
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the incidental expenses. Until any tran_sfcr is recorded in the Register of the
Trustee, the Trustee may treat the holder of record of any Certificate as the
owner for all purposes and shall not be charged with n·otice of ar.y claim or
demand to such Certificate or the interest of &ny other person. The ownership
and registration of the Certificates may be in any form which the applicable law
permits, subject to the reasonable regulation thereof by the Trustee.
3. 5 Effect of Transfer. The recordation in the Register· of the Trustee of
a transfer of a Certificate shall, for the purposes of this Trust, transfer to the
transferee as of the date of recordation all right, title and interest of the
transferor in and to the Certificate to which the transferor might then be or
thereafter become entitled, except that R transfer of a Certificate shall not by
such transfer, tronsfer to the transferee the right of the transferor to any sum
payable by the Trustee to holders of record on a date prior to the date of
recordation in the Register of the Trustee of the transfer.
3.6 Applicable Law. As to matters affecting the title, ownership,
warranty, transferability, or attachment of the Certificates, the laws from time
to time in force in the State of North Caroll'na with respect lo debentures shall
govern except as otherwise herein specifically provided.
3. 7 Mutilated, Lost, Stolen, and Destroyed Certificates. In case any
Certificate shall be mutilated, lost, stolen or destroyed, then, upon the
production of the mutilated Certificate or upon the receipt of evidence
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• • satisfactory to I.he Trustee of the loss, theft, or destruction of the Certificate
and upon receipt also of a surety bond satisfactory to it, unlimited in amount if
it shall so specify, or such other security or indemnity as may be required by
it, the Trustee in its discretion may execute and deliver or cause to be
executed and delivered a new Certificate in exchange for, and upon cancellation
of, the mutilated Certificate, or in lieu of the Certificate so lost, stolen, or
destroyed. Any holder of a new Certificate issued under this Section shall be
entitled to the benefits of this Agreement equally snd ratably with other holders
. of Certificates. The Trustee in its discretion, may place upon the new
Certificate a distinguishing mark or legend to. comply with the rules of any
security exchange or to conform to any usage with r.espect thereto, but such
mark or legend shall not affect the validity of the new Certificate. If required
by the Trustee, the applicant for a substitute certificate may also be required
as a condition precedent to the issuance .ther~of, to pey all reasonable costs, .
expenses, and attorneys' fees incurred in connection with the issuance of the
Certificate.
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ARTICLE IV
DURATION AND TERMINATION OF TRUST
4.1 Name. This Trust shall be known as the FCX Liquidating Trust.
4. 2 Duration. Unless sooner terminated as hereinafter provided, this
Trust shall continue until December 31, 2007. In the event the duration of this
Trust is limited by the applicable laws of any state to a term which is shorter
than the term hereinabove set forth and a court of competent jurisdiction has
finally determined that the shorter term must be used and the laws of such
state must be applied in determining the duration of this Trust, this Trust
shall continue for the maximum period permitted under the laws of such state
· for the duration of this Trust, in lieu of the period set forth in the preceding
sentence.
4. 3 Termination by Trustee. S,hould the Trustee at any time determine,
upon appropriate representation and certification of the salient facts from the
Company, CBC, and the Unsecured Creditors Committee, that all of the
Company's interests in the Cooperative Assets have been liquidated and
conveyed to the Trustee, and that, further, either (i) the Preferred Cluims
have both been fully satisfied, either from previous distributions from the
Trust Estate or from other sources, or (ii) although either of such Preferred
Claims has not been fully satisfied, the Company has no other assets with which
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to satisfy such Preferred Cluim, then, in either 811ch event, the Trust ·Shall be
deemed terminated and the Trust Estate .distributed in accordance with Article
V.
4. 4 Continuance of Trust for Winding Up. After the termination of the
Trust and for the purpose of liquidating and winding up the affairs of this
Trust, the Trustee shall continue to act as such until its duties have been fully
performed. Upon the distribution of all of the Trust. Estate to the
Certificateholders, CBC, and/or the Unsecured Creditors, and the payment and
discharge of all debts, liabilities, and obligations of the Trust, the Trustee
shall have no further duties or obligations hereunder except to account
provided in Section 5. 5.
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ARTICLE V
DISTRIBUTION OF TRUST EST/'.TE
5 .1 Payment of Expenses and Other Liabilities. The Trust'ee shall pay
from the Trust Estate all expenses, charges, liabilities, and obligations of _the
Trust Estate and all liabilities and obligations which the Trustee specifically
assumed · and agreed to pay pursuant to this Agreement and any transferee
liabilities which the Trustee may be obligated to pay 11s transferee of the Trust
Estate, including, but without limiting the generality of the foregoing, interest,
taxes, assessments, and public charges of every kind and nature and t1
costs, charges, end expenses connected with or growing out of the execution or
administration of this Trust and such other payments and disbursements as are
provided in t1'is Agreement or which m11y be determined to be a proper charge
against the Trust Estate by the Trustee. The Trustee may, in its discretion,
make ·provision by reserve or otherwise out of the Trust Estate for such amount
as the Trustee in good faith may determine to be necessary to meet present or
future liabilities of the Trust, whether fixed or contingent.
5. 2 Distributions of Trust Estate. Any distributions of the Trust Estate
shall be made in the following manner and order of priority:
(a) First, and to the extent necessary under the Plan and available,
to CBC in an amount equal to the Preferred Claim of CBC, less any
amounts paid to CBC by the Company from other sources with respect to
that Preferred Claim, or previously by the Trustee pursuant to this
Agreement;
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(b) Second, and to the e::tcnt neces~ury under tlu, Plan and
avnilnble, to the Unsecured Creditors in accordance with the terms of the
Plan, in an amount equal to the Preferred Claim of the Unsecured
Creditors, less any amounts paid to the Unsecured Creditors by the
Company from other sources with respect to such Preferred Claim, or
previously by the Trustee pursuant to this Agreement;
(c) Third, and to. the extent available, to the Certificateholders, as
a class, in Rr. amount equal to $5,000,000 less any amounts previously paid
to· the Certificateholders by the Trustee pursuant to this Agreement; and
(ct) Finally, to the Unsecured Creditors (as a class), CBC, and the
Certificateholders (as a class) in equal one-third shares.
5. 3 Timing· of Distributions. (a) Distributions of the Trust Estate shall
be made at such times and in such amounts as the Trustee shall determine,
recogP.izing that the Trust Estate is to be held principnlly for the use and
benefit of the Certificateholders, subject only to the prior el11ims of the
Unsecured Creditors and CBC to the Preferred Claims. In making its
determination concerning distributions, Trustee shall take into
consideration the amount of the Preferred Claims, and the ussets of the
Company other than the Cooperative Assets then availnble to satisfy those
Preferred Claims, based on representations made to it t0 that effect by the
Company, CBC, nnd counsel for the Unsecured Creditors Committee. No
distributions shall be made unless the Trustee is satisfied that either (i)
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the Preferred Claims have been fully satisfied, or (ii) the Preferred Claims
have not been satisfied, but the Compony has no assets remaining (other
than the Cooperative Ass_ets) with which to satisfy the Preferred Claims.
(b) Except as provided in Article IV, no distribution will be made
which will result in the termination of the Trust created hereby, unless
the Trustee is reasonably satisfied that none of the Cooperative Assets
remaining at that time can be reduced to a cash equivalent.
5. 4 Distributions to Certificateholders. Any distributions to
Certificateholders will be made pro rats, based on the percentage of total Units
held by each Certificateholder.
5. 5 Reports to Certificateholders. As soon as practicable after the end of
each fiscal year of the Trust and after termination of the Trust, the Trustee
sha½ submit a written report and account to the holders of Certificates showing
(i) the assets and liabilities of the Trust at the end of such fiscal year or upon
termination and the receipts and disbursements of the Trustee for the fiscal
year or period, certified by independent public accountants, (ii) any changes
in the Trust Estate which they have not previously reported, and (iii) any
action taken _ by the Trustee in the performance of its duties under this
Agreement which they have not previously reported and which in its opinion
materially affects the Trust Estate. The Trustee may submit similar reports for
such interim periods during the fiscal year as they deem advisable. The
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• • approval of 51 percent in interest of the Ccrtificntcholcters of any report or
account ~hnll, as to all matters ond tronsoctions discloscct therein, be finnl und
binding upon all persons, whether in being or not, who may then or thereafter
become interested in or entitled to share in any Certificate. The fiscal year of
the Trust shall end on June 30 of each year unless the Trustee deems advisable
to establish some other date as the date on which the fiscal year· of the Trust
shall end.
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ARTICLE VI
PURPOSE OF TRUST AND LIMITATIONS ON TRUSTEE
6. l Purpose of Trust. The sole purpose of this Trust is to distribute
the Trust Estate in accordance with the terms of the Plan (after the payment
of, or provision for, expenses and liabilities), to the Certificatcholders, CBC,
and/or the Unsecured Creditors.
6. 2 Limitations on Trustee. The Trustee shall not at any time, on behalf
of the Trust or Certificateholders, enter into or engage in any business. This
limitation shall apply irrespective of whether the conduct of any such business
activities is deemed by the Trustee to be necessary or proper for the
conservation and protection of the Trust Estate.
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• ARTICLE Vil
POWER OF TIJE TRUSTEE
7 .1 Generally. The Trustee shall hold the legal and equitable title to all
·. property at any time , constituting a part of the Trust Estate and shall hol_d the
property in trust to be administered and disposed of by it pursuant to the
terms of this Agreement for the benefit of the Certificateh9lders,
7. 2 · · Specific Powers. In addition to all other powers stated or implied
herein or conferred on it by law, but subject to the provisions of Article VI,
the Trustee, in connection with the administration of the Trust, shall have and
may exercise the following powers, authorities, and discretion:
·ca) To collect and receive any and all money ,and other property of
whatsoever kind or nature due to or owing or belonging to the Trust 11nd
to give full discharge and acquittance therefor;
(b) To execute and deliver, upon proper puyment, partial and
complete releases of any third-party obligations transferred to the Trust;
( c) To hold legal title to any and all rights of the Company arising
from the sale of any of the Cooperative Assets, and to receive and collect
any and all payments due in connection with any such sales;
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(d) To protect nP.d enforce tile rir;hts vested in the Trustee to the
Trust Estate by this Agreement by· any method deemed appropriate,
including without limitntion, by judicial proceedings;
(e) To employ legal counsel, accountants, and agents in connection
with the administration or termination• of the Trust, and to pay out of the
assets of the Trust · to such counsel, accountants, and agents reasonable
compensation for· services rendered;
(f) To invest any cash not ave.ilable for distribution in demand and
time deposits in federally-insured banks or savings institutions, or
short-term certificates of deposits of such institutions, or United States
Treasury bills with not more than 180-day maturities; and
( g) To file any nnd all tax returns required in connection with the
Trust, and to pay any taxes properly payable by the Trust.
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ARTICLE VIII
CONCEilNING THE TRU::i'l'EE
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~ .1 Generally. The Trustee accepts and undertakes to discharge the
Trust created by this Agreement, upon the terms and conditions hereof. The
Trustee shall exercise each of the rights and powers vested in it by this
.Agreement, and use the same· degree of · care and skill in -its exercise;· as a
prudent man would exercise or use under the circumstances in the conduct of
his own affairs. No provisions of this· Agreement shall be construed to relieve
the Trustee from liability for its own_ negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(a) The Trustee· sh'ail not be liable except for the performance of
such duties and obligations as are specifically set forth in• this ·Agreement,
and no implied covenants or obligations shall be read into this Agreement
against the' Trustee.
(b) In· the absence 'df bad faith on the part of Trustee, the Trustee
may conclusively rely, as to the truth ·· of the statements and the
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to· the Trustee and conforming to the requirements of
this Agreement; but in the case any certificates or opinions which are
specifically required to be furnished to the Trustee, the Trustee shall be
under a duty to examine them to determine whether or not they conform to
the requirements of this Agreement.
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(c) The Trustee shall not be liable for any error of judgment made
In good faith, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts.
8. 2 Reliance by Trustee. Except as otherwise provided in Section 8 .1:
(a) The Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, n.otice,
request, consent, order, or other paper or document believed by the
Trustee to be genuine and to have been signed or presented by the
proper party or parties.
(b) The Trustee may consult with legal counsel to be selected by it,
and the Trustee shall not be liable for any action taken or suffered by it
in accordance with the advice of counsel.
(c) Persons dealing with the Trustee shall look only to the Trust
Estate to satisfy any liability incurred by the Trustee to such person in
carrying out the terms of this Trust, and the Trustee shall have no
personal. individual obligation to satisfy any such liability.
8. 3 Indemnification of Trustee. The Trustee shall be indemnified by and
receive reimbursement from the Trust Estate agains~ and from any and all loss,
liability, expense, or damage which such Trustee may incur or sustain, in good
faith and without negligence, in the exercise and performance of any of the
powers and duties of such Trustee under this Agreement.
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ARTICLE IX
TRUSTEE AND SUCCESSOR TRUSTEES
9 .1 Resignation and Removal. The Trustee may resign and be discharged
by giving written notice to the Company. Such · resignation shall become
effective on the day specified in the notice or upon the appointment of the
Trustee's· successor and the successor's acceptance· of the appointment,
whichever is earlier. Any Trustee may be removed at any time, with or
without cause by the Company.
9. 2 Appoint of Successor. Should at any time the Trustee resign or be
removed, die or become incapable of acting, or be adjudged a bankrupt or
insolvent, a vacancy shall· be deemed to exist in the office of the Trustee, and
a successor shall be ap·pointed by the Company.
9.3 Acceptance of Appointment by Successor Tru·stee. Any successor
Trustee shall execute an instrument accepting tile appointment· and shull deliver
one counterpart to the Company, and, in case of a resignation, to the -retiring
Trustee. Thereupon the successor Trustee shall, without any further act,
become vested with all the estates, properties, rights, ·powers, trusts, and
duties of his· or its predecessor in the Trust with like effect as if originally
named; but the retiring Trustee shall nevertheless, when requested in writing
by the successor Trustee and upon payment of lawful charges and
disbursements then unpaid, if any, execute and deliver an instrument or
instruments conveying and transferring to the successor Trustee upon the
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,, ,, ,, • • Trust herein expressed, all the estates, properties, rights, powers, and trusts
of the retiring Trustee, and shall duly Assign, transfer, and deliver to the
successor Trustee all property and money held by it hereunder.
9. 4 Appointment of Successor Trustee by Court. In the event a vacancy
in the office of Trustee shall continue for a period of nt least 30 days, a
temporary Trustee may be appointed by the Clerk of Superior Court of Wake
County, or such other probate court as may then have jurisdiction over the
administration of the Trust, on the application of any Certificateholder upon
such notice, if any, as the Court me.y deem proper and prescribe. The
temporary Trustee shall act only until a successor Trustee is appointed by th.;
Company.
9. 5 Bonds. No bond shall be required of the original Trustee, or, if a
bond is required by law, no surety or security with respect to such bond shall
be required unless required by Jaw. No bond shall be required of any
successor Trustee, or, if a bond required by law, no surety or security with
respect to such bond shall ~e required unless required by law.
9. 6 Compensation of Trustee. The Trustee shall receive, and is
authorized to charge against the Trust, reasonable compensation for its
services, which shall not exceed the compensation it usually receives for similar
services at the time the services hereunder ore rendered, payable
quarter-annually or at such other times as the Trustee may determine. The
Trustee shall be reimbursed fror:i the Trust Estate for wl expenses reasonably
incurred by it in the performance of its duties in accordance with this
Agreement.
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• ARTICLE X
MISCELLANEOUS
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10 .1 Amendment. This Agreement cannot be altered, amended, or revoked
by the Company without the express written consent of CBC, the Unsecured
Creditors Committee, and the Certificateholders then possessing more than 50%
in interest in the aggregate Units outstanding, provided that any such
alteration or amendment which shall affect the duties of the Trustee hereunder
shall not be effective until consented to in writing by the Trustee.
10. 2 Unclaimed Certificates or Distributions. In the event any Certificate
and /or a distribution with respect to a Certificate is returned to the Trustee
and remains unclair.ied after the Trustee has made a reasonable·, diligent effort
to locate the Certificateholder, Units represented by the Certificate or the
distribution with respect thereto, as the case may be, shall, if the Trustee in
its discretion so determines, be deemed forfeited and reallocated pro rat a to the
other Certificateholders.
10. 3 Governing Law. This Agreement nnd its application shall be governed
by the laws of the State of North Carolina, and its provisions may be enforced
only in and throug·h the State or Federal Courts sittinr; in Wake County, North
Carolina.
10. 4 Severability. If any term or provision hereof or the application
thereof to any circumstance shall be held invalid or unenforceable, such term or
24
D&loitte
Haskinr-Sells
ACCOUNTANTS' COMPILATION REPORT
~}. lf,
To the Board of 01 rectors;:,~: .,
FCX, Inc.
Raleigh, North Carolina
..
•
2000 Cente• Ptaza Bu•ld:na
Pest Off,c~ Bo'!( 2778 •
Rale,gh. Nor:h Cara1,;ia 27602
1919) 828-0716
Cacle DEHAN OS
We have comp11ed·the accompanying budget:of disbursements for the period
of May i", 1986 through December 31, 1987, based on assumptions. provided by
management, in accordance with standards established by the American
Institute of Certified Publjc Accountants.
. ~ ; The accompanying budget of disbursements and this report were prepared for
the U. S. Bankruptcy Court to estimate required disbursements for the
period of May 1, · 1986 through December 31, 1987 and should not be used for
any other purpose. :·:::; •.
A compilation is limited to·presenting in the .form of a budget information
that is the representation,of management and does not include evaluation
of the support: for the as·sumptions underlying ·the budget. We have not
examined the budget of disbursements and, accordingly, do not express an
opinion or any other form of assurance on the accompanying budget of
disbursements or assumptions. Furthermore, there will usually be
differences between budgeJed and actua 1 disbursements. because events and
iircums~ances frequently ~l ~ot occur as expected, and these differences
may b·e materi a 1. -·
"2~ c~itt-'. /µ..:._ .%
May 23, 1986
5
• • provision shall be ineffective, but shall not affect in nny respect whatsoever
the validity of the remainder of this Agreement.
10. 5 Notices. Any notice or other. communication by the ·Trustee to any
Certificateholder shall be deemed to have been sufficiently given, for all
purposes if mailed first class, postage prepaid, addressed to the holder at his
address as shown on the Register of the Trustee.
10. 6 Headings. Headings in this Agreement are inserted for convenience of
reference only and are · not to be considered in the interpretation or
construction of this Agreement.
10.7 Counterparts. This Agreement may be executed in any one or more
. r
counterparts, each of which shall be deemed an original, but all of which
together sh_all constitute one and the same agreement.
·.~;, '
JN WITNESS WHEREOF, FCX, Inc. and the Trustee have caused this
Agreement to be signed and acknowledged by their duly authorized
representatives, as of the date first above written.
FCX, INC., Debtor and Debtor-in-Possession
By: -----------------ATTEST:
TRUSTEE:
BANK ----------
By: -----------------ATTEST:
25
Budget of Disbursements
'This budget'of disbursements is management's estimate-of the most probable
disbursements for the budget period. Accordingly, the budget reflects
management's judgment, based on present circumstances, of the most likely
set of conditions and its most likely course of action. ··
The assumptions disclosed herein are·those which management believes are
significant to the budget of disbursements or otherwise relate to key
factors on which the financial results of the Company depend. Some
assumptions inevitably will not materialize and unanticipated events and
circumstances may occur subsequent to May 23, 1986, the date that this
budget was prepared. Therefore, the actual disbursements during the
budget period will vary from the budget and_ the variation may be material.
Purpose of the Financial Budget
The Board of Directors of. FCX, Inc. (the •company") authorized and
directed management of the Company to take such steps as were appropriate
in management's discretion to curtail, as much as possible; the operating
losses of the Company in order to preserve the Company's net worth. The
Company announced that. all operations would cease and that the Company
would dispose of its assets. The.Board of Directors of the Company,
subject to ·1:he approval by shareholders, have adopted a Plan of
Reorganization which will provide that, as soon as.practicable after
approval by the creditors, the Company will liquidate its then remaining
assets and settle all claims. The accompanying budget of disbursement
presents_ management's estimated cost to operate _its remaining facilities.
Salaries and Wages
Salaries and wages include the.continued employment.of a financial
administrator, and the accounting and data. processing _employees necessary
to adequately account for and _preserv~ the Company's remaining assets.
Severance Pav
Severance pay is based on the appropriate court's approYal of allowed
severance pay as detailed in the plan of reorganization.
Home Office Costs
Home office costs include the relocation of the corporate office
facilities to a smaller location in June 1986. Rent expense is calculated
based on an existing agreement. Other home office overhead costs are
calculated on historical information and management's estimates of future
cost. Telephone expenses are expected to decline in relation to the
dee 11 ni ng number of emp 1 oyees ..
See Accountants' Compilation Report.
3.
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Investment Property Costs
All wareho"'locations will close in May. 'e costs incurred to maintain
investment property is primarily monthly utilities and the annual property
taxes.
Health Insurance -Prior
Health Insurance -Prior is based on the appropriate court's approval of
the payment of self-funded insurance program's run-off liability.
Health Insurance -Current
Health Insurance -Current is an additional health insurance cost which is·
covered by an agreement that establishes the cost of maintaining medical
insurance for the remaining employees.
Transportation Costs
Transportation costs include the estimated costs of travel by the
financial administrator.
Equipment Rental
Equipment rental is the computer rental cost until the Company releases
the computer in May of 1986.
Taxes and Licenses
Taxes and licenses include payment of the sales tax liability resulting
from retail and wholesale operations.
Payroll Tax Expense
Payroll tax expense is calculated based on wages paid at the current tax
rates.
Accounts Receivable Collection Expense
Accounts receivable collection expense is calculated on approximately
S900,000 of the accounts receivables expected to be turned over to
attorneys for collection; of this amount 60% will be collected. The
attorneys retain 25% of amounts collected.
Bankruptcy Administrative Costs
Bankruptcy administrative costs is an estimate of the administrative
expenses and the professional fees based on a review of services being
provided and discussions with the professionals.
See Accountants' Compilation Report.
4.
• EXHIBIT A •
TRACT l. . All that certain tract or parcel of land ·si.tuc.tc. in Statesville.
Township, Iredell County, No_rth Carolina,' ~nd. ·more· pa.;;ti.cularly described
as follows: · '.
lleginning in the center of the int~rsectionof the T;;ylorsville-Statesvill.c
hard surface Highway and Phoenix Avenue, and runs ;,i.t.:h the center of Phocni.Y.
Avenue North 3 degrees 15 minutes Ea,:t about 350 feet to the.center of the main
track of the Southern Railway Company, running· fr.om f;tntcsville to. Taylor"ville;
thence:North 61 degrees 19 minutes West ,;,ith the center of said.main track about
660 feet to the corne_r of the State.. Farm and·lredcll ·nevelopn,ent Company; thence
South 3 degrees 15 minutes West about 25 fc.ec· tc, an ir<'n stake; thence South 61
dc.grees 38 minutes E"ast 132 feet ·co· an "iron stake, corrn?r of the Crawford Lind;
thence S_outh 23 degrees 17 minutes West about 2.72. f:c.et· to ·the ccn.:er of t:he ··
Taylcirsville-Statesville hard surface Highway; thence -with the.center of said
Highway in a southeasterly direction about 645 feet: ;:c.the beginning, :Lt.bei:1.,;
all of Block A. of the T. D. Miller property, a plat: ·of which is recorded. in
Map Boo·k 2, page 17 ,· of the records of the Regis.ter of Deeds for Ircde 11 · Co=:y,
North Carolina,.said landa being subject, however, to the rights.of way of tha
Southern Railway Company, and the.Taylorsville-Statesville hard·surface. Hi~h"'ay,
and Phoenix Avenue,· and subject, further,· to the. ri~ht of way of. a water: line·-
_along: the northern edge of·. the· Taylorsville-Statesville Highway.· . . ~ . .
ALSO,.
• • 'TRACT 4 . ·
All that certain tract or pa_rcel of.land in the City of Statesvil.le, N. C., lying .
on th~ Nort.h side of N. C. Hi:;h·~ay No. 90, and being more partic·ul'lrly described as
follo,_•s: Beginning at an· iron sto~e iry the South•_iest corner of the Statesville FCX
p~o?erty, said iron sta'>:e being a dista:ice of 6 .4 ft. from the north~rn cur·b of
N. c. Hi:;h·~ay No. 90; thence'in the right o_f vay of saicl hi:;1,-.·ay llo. !JO l,orc·n Sl
deg. 10 min. '\/est 215.88 ft. to an iron. stcise, a corner vith the Carnation Mi.lk
Company, said iron st,il<e being a dist,ince of 11.25 fc. froin Lhe northern curb of
Highway No: 90; thence ..,ith_ the line. of Carnation Hilk Cornp,rny property North 17
deg. 19 min. East 219.19 feet ,o a fence post set-in concrete, said fence post
being a distance of 49.75 ft. from the c"n,er of the Alc,::inder Railroad; thence South
77 deg. 07 min. East 104.62 ft. to a sta'Ke; the:ice. South 3 deg.··£.1 11,in. I-lest 4.06·
ft. to a stake; t~ence South 62 deg. 04 min. Ease 132 feet to an existing iron in
the Statesville FCX property line, or corner, ·said iron st,ike being a dist,ince of
25.34 ft. from the center of Alexanoer P~ilr~ad; thence ..,ith the existing line of
Statesville FCX property South 22 deg. 51 min. '\/est 243.25 ft. to the_beginning.
The sa,;,e ·containing an ;,rea of 1.22 acres, more or less,-as surveyed by Kestler &
l-!acKay, Registered Surveyors, on }'.ay 15, 1968.
The same beini; the lands conveyed to C. A. Sherrill and -.,ife, }\arie B. Sherrill,
_by deeds recorced in Deed Zook 100; Pace 223, and Deed Dock 135, P~se 594, Ir~dell
County Re;;istry.
TRACT 5
Beginning at a st21<e, the Nort'h·...>est-cor:ier of Statesville ?CX. property:
thence J;orth 62 deg. 04 min. •..;est 132.0 feet to a stake; thC!nce )lorth 3.deg. 41 ">in.
·E.2s t ~ .06 ft." to a stake in the line of the_ Carnation l·ii.lk Con1:12ny curr.icr; t~1ence
~ith the line of the Carnation Milk Company proper~y, 2nd tl,~-cent~r o~· the
A1e~an<ler Railroad in a nor~heasterly direction t6 a point c~ac~l~ C?po~itc to the
begL-,ning point; thence South 22 oe·g. 51 min. i.:est: 2S:3li ft .. to the beginning poi.nt.
~-
The Sc!t:-.e containing a S:7,all tract of );J.nd adjacent to·cnc NortTica!::.t corner of the 1.·
acre trc:ct co:·.·.;,:yE.:-d by 1~arie B. S}-ier:-ill to the "'iirst :.Party, all 2s
1 :;ho....,n.
by a ..-,ap of ~aid pro;,c::-ty 29 ~ur,.:eyed by hes~1er & J-~-:1ch.:?y Rc..:gi:::cc:.rc.:d Su_rveyors·, on
·. }!ay 15, 1968 ..
TR.>.CT' 6
All of the
.:icrcs, more or 1c~s, tr;ict
;,1f Party ... one l~ncs co:iveyed
· r,as ih the right .of ,,_-ay of
J 2:ics o--.;ed by the , 1rst
of land c;nvey~d }lay~?,
by this conveyan~e b~ing
N. C. liii:.cr..-ay J;o_ 90.
Party
19.60,
lying so-:ich of the 'i.22.
by M,:iric. ·B .. Sherrill 0LD t..'1e
• •
Those certain parcels lying and being in Washington Township, Beaufort
County, North Carolina, and more particularly described as follows:
TRACT 1:
BEGINNING at a new iron pipe located in the western line of
the Mt. Pleasant Canal, which lies between the hereinafter
described tract and lands of Rufus E. Knott; thence with the line
of the Mt. Pleasant Canal South 49° 12' 44' West 500.0 feet to a new
iron pipe; thence with the line of lands of L. E. Knott North 22°
42' 25 11 West 435. 0 feet to an existing iron pipe; thence continuing
with the line of L. E. Knott North 49° 12' 44" East 500. 0 feet to an
existing iron pipe in the western right of way of the Seaboard
Coastline Railroad (believed to be abandoned); thence with the
western right of way of the Seaboard Coastline Railroad South 22°
42' 25" East 435.0 feet to the point and place of BEGINNING.
The above description is taken from that certain plat entitled
"Map for Record, Farmers Cooperative Exchange, Inc. , " prepared
by Ronnie G. Stroud, Registered Land Surveyor, L-2573, dated
July 22, 1986, and shown thereon as Tract 4, containing 4. 7466
acres.
TRACT 2:
BEGINNING at the point of intersection at the center line of
the right of way of Whispering Pine Road with the center line of
• •
the right of Grimes Road (also known as Old Pactolus Highway) and
runs thence North 25° 46' 49 11 West to a point in the center line of
Grimes Road, and thence South 50° 04' 44 11 West 30. 95 feet to an
existing iron pipe in the western right of way tine of Grimes Road,
the point of TRUE BEGINNING; from the point of TRUE
BEGINNING, thence South 50° 04' 44 11 West 256,96 feet to a new
iron pipe in the center line of the Seaboard Coastline Railroad
(believed to be abandoned); thence with the center line of the
Seaboard Coastline Railroad right of way North 22° 42' 25 11 West
52. 35 feet to a new iron pipe; thence North 50° 04' 44 11 East 254. 27
feet to a new iron pipe in the western right of way line of Grimes
Road; thence with the western right of way line of Grime.s Road
South 25° 33' 42 11 East 51.61 feet to the point and place of TRUE
BEGINNING.
TRACT 3:
All right, title and interest which the Grantor may have in and
to that portion of the Seaboard Coastline Railroad right of way
(believed to be abandoned) lying within the following perimeter:
(1) bounded on the west by the eastern line of Tract 4
hereinabove described;
( 2) on. the north by extending the northern line of Tract 4
hereinabove described in a northeasterly direction to the
center line of said railroad right of way;
-2-
• •
(3) on the south by the extension of the southern line of Tract 4
hereinabove described in a northeasterly direction to the
center line of said railroad right of way; and
( 4) on the east by the center line of said railroad right of way.
TRACT 4:
All right, title and interest which Grantor has acquired in
crossing the railroad right of way of Seaboard Coastline Railroad
for ingress and egress to Tract 4 as above described to and from
Grimes Road (Old Pactolus Highway).
[Property: BANKS]
-3-
• EXHIBIT B •
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
IN THE MATTER OF: ) IN THE PROCEEDINGS
) REORGANIZATION OF
FCX, INC., Employer's Identification ) CORPORATION
Number 560220040 )
) CHAPTER 11
FOR
A
Debtor. ) CASE NO. S-85-01574-5
CONSENT ORDER APPROVING SETTLEMENT AGREEMENT
THE
The undersigned parties, FCX, Inc. ("FCX") through its counsel, the
Committee of Unsecured Creditors and the Committee of Debenture Holders, each
through its counsel, the Columbia Bank for Cooperatives ("CBC") through its
counsel, the United States Environmental Protection Agency ("USEPA") and the _p ~H Nf.L ·
State of North Carolina Depa:i;_trnent of Human Resources ("State"), each through
its counsel, now tender to the Court with this Consent Order the attached
Settlement Agreement and Release which compromises and settles all issues in
dispute among them. A Motion to Approve this Settlement Agreement and Release
has been filed with the Court by the United States of America and appropriate
notice and opportunity for hearing under Section 102(l)(A) of the Bankruptcy
Code has been provided to all creditors and parties in interest in this case.
The Court, having been fully informed concerning all matters at issue and
having heard all the necessary evidence thereon, NOW FINDS:
1. FCX, Inc., is an agricultural cooperative association organized
under the laws of the State of North Carolina ( "FCX") and as debtor and
debtor-in-possession is now operating under a Plan of Reorganization confirmed
by Order of this Court, dated August 4, 1986, in the above-captioned
bankruptcy case.
• •
2. The United States Environmental Protection Agency and the State of
North Carolina have, in various proceedings more fully detailed in the
attached Settlement Agreement and Release, sought to redirect distribution of
funds from the FCX bankruptcy estate.
3. Pursuant to a Settlement Agreement and Release attached to this
Order and fully incorporated into it by reference, the parties have agreed to
resolve all disputed issues among them.
4. The terms of the proposed Settlement Agreement and Release among
FCX, its Committee of Unsecured Creditors, its Committee of Subordinated
Debenture Holders, the Columbia Bank for Cooperatives, the United States
Environmental Protection Agency and the State of North Carolina are fair and
reasonable and in the best interest of the creditors and administration of the
FCX bankruptcy estate.
5. All creditors and parties in interest have been properly served with
notice of the proposed Settlement Agreement and Release and have had an
appropriate opportunity to be heard as required by Section 102 of the
Bankruptcy Code and by the Bankruptcy Rules.
NOW, THEREFORE, IT IS HEREBY ORDERED that the Settlement Agreement and
Release which is proposed between FCX, the USEPA and the State of North
Carolina is hereby approved and the parties are authorized to execute and
implement this agreement as of August 1989, by and between FCX, its
Committee of Unsecured Creditors, its Committee of Subordinated Debenture
Holders, the Columbia Bank for Cooperatives, the United States Environmental
2
• •
Protection Agency and the State of North Carolina and are authorized to
execute the documents set out in the agreement and to take all ·other actions
necessary to execute and implement the Settlement Agreement and Release now
being approved.
DATED: _______ _
A. THOMAS SMALL
UNITED STATES BANKRUPTCY JUDGE
We consent to the entry of this order:
(signatures as necessary)
FCX6-30/sd
3
• EXHIBIT C
D1<.A Ft f-r;; iB ~ /J E&ioTI ,'f ,£ P
,S: c-CJ;AI, ,v Lj ~ +
:s£'IILE mGAli j
FCX ENVIRONMENTAL SETTLEMENT TRUST AGREEMENT
THIS AGREEMENT AND DECLARATION OF TRUST is made this __ day of ___ _
1989, by and between FCX, Inc., Debtor, and Debtor-In-Possession, an
agricultural cooperative corporation incorporated under the North Carolina
Cooperative Marketing Act ("FCX"), and Homes P. Harden, Esq. ("Trustee") as
Trustee for the United States Environmental Protection Agency and the State of
North Carolina ("Beneficiaries").
RECITALS
On September 17, 1985, FCX filed a voluntary petition under the
provisions of Chapter 11 of the United States Bankruptcy Code. Pursuant to a
Plan of Reorganization ("Plan") confirmed on August 4, 1986, by a final
unappealable order of the United States Bankruptcy Court for the Eastern
District of North Carolina ( "Bankruptcy Court"), FCX has or will liquidate all
of its real, personal, tangible, and intangible assets for the benefit of its
creditors.
As the result of contested matters between the United States
Environmental Protection Agency ("USEPA"), the State of North Carolina
("State") and FCX, the USEPA and the State have on August __ , 1989 entered
into a Settlement Agreement with FCX ("Settlement Agreement") whereby FCX has
agreed to deposit two million dollars ($2,000,000.00) into a trust for the
benefit of the above-named Beneficiaries. The Settlement Agreement requires
FCX to establish a trust to be used to receive and hold certain funds and for
• •
the Trustee to distribute these funds to such parties entitled to the same
under the terms of the Settlement Agreement.
Now, therefore, it is AGREED as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms and words when used in this
Agreement (as designated by the capitalization of the first letter thereof)
shall have, unless they are otherwise expressly modified herein or the context
otherwise requires, the following meanings:
(a) "Agreement" shall mean this instrument as originally executed
or as it may from time to time be amended.
(b) "Bankruptcy Court" shall mean the United States Bankruptcy
Court for the Eastern District of North Carolina which has jurisdiction over
FCX as a debtor in possession under Chapter 11 of the United States Bankruptcy
Code.
( c) "FCX" shall mean FCX, Inc. , debtor and debtor-in-possess ion.
(d) "Plan" shall mean the Plan of Reorganization of FCX which has
been confirmed on August 4, 1986, by a final, unappealable order of the
Bankruptcy Court.
(e) ''Response Costs'' means cost of response, removal and remedial
costs including, but not limited to, administrative, investigative, removal,
remedial, access, enforcement (including attorneys' fees) and oversight costs,
prejudgment interest on any or all such costs, and all other direct or
2
•
indirect costs, however denominated, alleged to have been incurred by the
United States or by the State of North Carolina in connection with the Sites.
(f) "Settlement Agreement" shall mean the Settlement Agreement and
Release dated August __ , 1989, between FCX and the Beneficiaries hereto,
which has been approved by order of the Bankruptcy Court.
(g) "Sites" means the former FCX distribution and blending facility
located on West Front Street, Statesville, Iredell County, North Carolina, and
the former FCX distribution and blending facility located at the intersection
of Grimes and Whispering Pine Roads in Washington, Beaufort County, North
Carolina, formerly owned by FCX and currently owned by Fred Webb, Inc. A
description of the Sites is set forth in Exhibit A attached hereto.
(h) "Trust" shall mean the FCX Environmental Settlement Trust
established by this Agreement.
(i) "Trustee" shall mean the original Trustee and any successor
Trustee.
(j) "Trust Estate" shall mean all property, including cash or its
equivalent, held by the Trustee from time to time under this Agreement,
including without limitation, all income earned on or other credits received
from the investment of the Trust Estate.
ARTICLE II
TRANSFER TO TRUSTEE
2.1 Transfer to Trustee. FCX hereby transfers to the Trustee the sum of
two million dollars ($2,000,000.00). This sum is transferred to the Trustee
hereunder in trust for the uses and purpo·ses hereinafter stated. Trustee
3
• •
accepts his appointment as Trustee hereunder, acknowledges receipt of such sum
in trust, and agrees faithfully to perform and discharge his duties as Trustee
hereunder.
2.2 State of North Carolina. Two hundred thousand dollars ($200,000.00)
of the $2,000,000.00 paid in settlement to the Trust (and interest accrued on
the $200,000.00) shall be reserved within the Trust for payment of the State's
ten percent share of the costs of any future remedial actions at the Sites and
to help defray post-remedial operation and maintenance requirements at the
Sites, as provided by 42 U.S.C. Section 9604(c)(3). Should remedial and
post-remedial activity under CERCLA not require payment of the full
$200,000.00 plus accrued interest, any portion thereof remaining in the Trust,
may be used for reimbursement of Response Costs incurred by either the State
or USEPA in connection with the Sites.
2.3 Further Assurance. FCX and such persons as shall have the right and
power after the dissolution of FCX, will, upon the reasonable request of the
Trustee, execute, acknowledge, and deliver such further instruments and do
such further acts as may be necessary or proper to carry out the purposes of
this Agreement more effectively.
ARTICLE III
DURATION AND TERMINATION OF TRUST
3.1 Name. This Trust shall be known as the FCX Environmental Settlement
Trust.
3.2 Duration. Unless sooner terminated as hereinafter provided, this
Trust shall continue until December 31, 1999.
4
• •
3.3 Termination by Trustee. Should the Trustee at any time determine,
upon appropriate representation and certification from FCX, the USEPA, and the
State that (i) the claims of the USEPA and the State for Response Costs at the
Sites, have both been fully satisfied from previous distributions from the
Trust Estate, or (ii) although outstanding claims for Response Costs by either
the EPA or the State have not been fully satisfied, the Trust Estate has been
totally and fully depleted due to withdrawals made according to the terms of
this Agreement, then, in either event, the Trust shall be deemed terminated.
3.4. Continuance of Trust for Winding Up. After the termination of the
Trust and for the purpose of ~iquidating and winding up the affairs of this
Trust, the Trustee shall continue to act as such until his duties have been
fully performed. Upon the distribution of all of the Trust Estate as provided
herein, the Trustee shall have no further duties or obligations hereunder
except to account provided in Section 4.4.
ARTICLE IV
DISTRIBUTION OF TRUST ESTATE
4.1 Payment of Expenses and Other Liabilities. The Trustee shall pay
from the Trust Estate all expenses, charges, and obligations connected with or
resulting from the administration of the Trust and such other payments and
disbursements as are provided in this Agreement or which may be determined to
be a proper charge against the Trust Estate by the Trustee.
4.2 Distribution to Beneficiaries. The payment specified in Article II
above will be held in trust by the Trustee to hold and disburse the settlement
funds paid under the Settlement Agreement and any interest.accrued upon the
5
• •
corpus of the Trust less the costs of management of the Trust. The Trustee
shall disburse such funds held in trust to the EPA Hazardous Substances
Superfund, Superfund Accounting, P.O. Box 100142, Atlanta, Georgia 30384 upon
receipt of a letter from the Regional Administrator of USEPA stating that the
United States has, during a previous fiscal year, performed further response
actions at either of the Sites and listing the site, the actions and the
amount to be reimbursed. Should the United States complete all response
actions at both Sites pursuant to CERCLA and funds remain in the trust, those,
funds and accrued interest shall be held for the benefit of the State of North
Carolina should it determine that further response actions under state law are
necessary at either of the Sites. The Trustee shall disburse funds held in
C.t.:c..t
trust to the State upon receipt of a letter from the Head of the State
~-" Superfund Br,anch which states the site, the actions and the appropriate amount
to be reimbursed. Upon receipt of the certification called for in 3.3(i)
above that claims have been fully satisfied, the Trustee shall, pursuant to
paragraph six (6) of the Settlement Agreement, return the remaining funds to
FCX.
4.3 Documentation. The transmittal of all payments described herein
shall reference the name(s) of the Site(s) and the bankruptcy case number.
The transmittals shall be accompanied by correspondence identifying In Re FCX,
Inc., Bankruptcy Case No. S-85-01574-5, U.S. Department of Justice, Land and
Natural Resources Division File No. 90-11-3-350, North Carolina Superfund
Branch File Numbers NCO 981475932 and NCO 095458527, and the identity of the
paying party. Copies of this correspondence and the payments shall be
6
• •
concurrently transmitted to all counsel of record for the United States and
the State of North Carolina and other parties to the Settlement Agreement.
4.4 Timing of Distributions. Distributions from the Trust Estate shall
be made at such times and in such amounts as the Trustee shall reasonably
determine following requests for reimbursement, it being understood that the
Trust Estate is held principally for the use and benefit of the USEPA and the
State. It is contemplated that requests for reimbursement will be presented
annually to the Trustee near or shortly following the September 30 close of
the USEPA Superfund fiscal year. The first distribution from the Trust shall
be made within ten (10) days of the Effe~tive Date of the Settlement
Agreement.
4.5 Reports to FCX, USEPA and the State of North Carolina. As soon as
practicable after the end of each fiscal year of the Trust (which shall be the
calendar year unless otherwise mutually agreed) and after termination of the
Trust, the Trustee shall submit a written report and accounting to FCX or its
successor in interest, the USEPA and the State showing (i) the assets and
liabilities of the Trust at the end of such fiscal year or upon termination
and the receipts and disbursements of the Trustee for the fiscal year or
period, (ii) any changes in the Trust Estate which he has not previously
reported, and (iii) any action taken by the Trustee in the performance of his
duties under this Agreement which has not previously reported and which in his
opinion materially affects the Trust Estate.
7
• •
ARTICLE V
PURPOSE OF TRUST AND LIMITATIONS ON TRUSTEE
5.1 Purpose of Trust. The sole purpose of this Trust is to distribute
the Trust Estate in accordance with the terms of the Settlement Agreement.
5.2 Limitations on Trustee. The Trustee shall not at any time, on
behalf of the Trust, enter into or engage in any business. This limitation
shall apply irrespective of whether the conduct of any such business
activities is deemed by the Trustee to be necessary or proper for the
conservation and protection of the Trust Estate.
ARTICLE VI
POWER OF THE TRUSTEE
6.1 Generally. The Trustee shall hold title to the Trust Estate and
shall hold the Trust Estate in trust to be administered and disposed of by him
pursuant to the terms of this Agreement for the benefit of the parties hereto.
6.2 Specific Powers. In addition to all other powers stated or implied
herein or conferred on him by law, but subject to the provisions of Article V,
the Trustee, in connection with the administration of the Trust, shall have
and may exercise the following powers, authorities, and discretion:
(a) To invest any cash not required for distribution in demand and
time deposits in one or more federally insured banks or savings institutions,
or short-term certificates of deposits of such institutions, or United States
Treasury bills with not more than 18O-day maturities; and
(b) To file any and all tax returns required in connection with the)
Trust, and to pay any taxes properly payable by the Trust.
8
• •
(c) To disburse funds from the Trust Estate and to pay expenses and
costs of administration of the Trust, as provided above.
6.3 Engagement of Professionals. Should the Trustee deem it necessary ✓
to engage counsel, agents, or accountants in protecting, defending, enforcing,
or performing Trustee's rights and duties hereunder, or in protecting,
preserving, or defending the Trust Estate, Trustee shall first seek approval
of the other parties. If such approval is not obtained within ten days of
Trustee's request, Trustee may petition the Bankruptcy Court for approval.
ARTICLE VII
CONCERNING THE TRUSTEE
7.1 Generally. The Trustee accepts and undertakes to discharge the
Trust created by this Agreement, upon the terms and conditions hereof. The
Trustee shall exercise each of the rights and powers vested in him by this
Agreement, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of
his own affairs. No provisions of this Agreement shall be construed to
relieve the Trustee from liability for his own negligent action, his own
negligent failure to act, or his own willful misconduct, except that:
(a) The Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Agreement,
and no implied covenants or obligations shall be read into this Agreement
against the Trustee.
(b) In the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely as to the truth and correctness of the letters
requesting reimbursement for response actions as provided in Sections 4.2 and
9
• •
4.3 above. In the case of any other requests for payment or distributions
from the Trust Estate, the Trustee shall be under a duty to examine them to
determine whether or not they conform to the requirements of this Agreement.
(c) The Trustee shall not be liable for any error of judgment made
in good faith, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts.
7.2 Reliance by Trustee. Except as otherwise provided in Section 7.1:
(a) The Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order or other paper or document beli~ved by the Trustee to
be genuine and to have been signed or presented by the proper party or
parties.
(b) The Trustee may consult with legal counsel to be selected by/
him pursuant to Section 6.3 above, and the Trustee shall not be liable for any
action taken or suffered by him in accordance with the advice of counsel.
(c) Persons dealing with the Trustee shall look only to the Trust
Estate to satisfy any liability incurred by the Trustee to such person in
carrying out the terms of this Trust, and the Trustee shall have no personal
individual obligation to satisfy any such liability.
7.3 Indemnification of Trustee. The Trustee shall be indemnified by and
receive reimbursement from the Trust Estate against and from any and all loss,
liability, expense, or damage which such Trustee may incur or sustain, in good
faith and without negligence, in the exercise and performance of any of the
powers and 'duties of such Trustee under this Agreement.
10
• •
ARTICLE VIII
TRUSTEE AND SUCCESSOR TRUSTEES
8.1 Resignation and Removal. The Trustee may resign and be discharged
by giving at least thirty days prior written notice to all other parties.
Such resignation shall become effective on the day specified on the notice or
upon the appointment of the Trustee's successor and the successor's acceptance
of the appointment, whichever is earlier. Any Trustee may be removed at any
time, with or without cause, by unanimous consent of all other parties or by
the Bankruptcy Court.
8.2 Appointment of Successor. Should at any time the Trustee resign or
be removed, die or become incapable of acting, or be adjudged a bankrupt or
insolvent, a vacancy shall be deemed to exist in the office of the Trustee,
and a successor shall be appointed by unanimous consent of all other parties,
or by the Bankruptcy Court as provided in Section 8.4 below.
8.3 Acceptance of Appointment by Successor Trustee. Any successor
Trustee shall execute an instrument accepting the appointment and shall
deliver one counterpart to FCX, and, in case of a resignation, to the retiring
Trustee. Thereupon the successor Trustee shall, without any further act,
become vested with all the estates, properties, rights, powers, trusts, and
duties of his or its predecessor in the Trust with like effect as if
originally named; but the retiring Trustee shall nevertheless, when requested
in writing by the successor Trustee and upon payment of lawful charges and
disbursements then unpaid, if any, execute and deliver an instrument or
instruments conveying and transferring to the successor Trustee upon the Trust
herein expressed, all the estates, properties, rights, powers, and trusts of
11
• •
the retiring Trustee, and shall duly assign, transfer, and deliver to the
successor Trustee all property and money held by him hereunder.
8.4 Appointment of Successor Trustee by Court. In the event a vacancy
in the office of Trustee shall continue for a period of at least 30 days, a
successor Trustee may be appointed by the United States Bankruptcy Court for
the Eastern District of North Carolina, on the application of any Beneficiary
upon such notice, if any, as the Court may deem proper and prescribe.
8.5 Bonds. A fidelity surety bond shall be required of the original
Trustee or any successor Trustee in favor of FCX, USEPA and the State, as
their interests may appear, issued by an insurance or bonding company licensed
to do business in the State of North Carolina, in the original sum of two
million dollars ($2,000,000). The amount of the bond shall thereafter
diminish as of the end of each fiscal year of the Trust so as to equal as
nearly as practicable the amount of the Trust Estate then outstanding.
Expenses in obtaining and maintaining such bond shall be a cost of
administration of the Trust.
8.6 Compensation of Trustee. The Trustee shall receive, and is
authorized to charge against the Trust, reasonable compensation for his
services, which shall not exceed the compensation he usually receives for
similar services at the time the services hereunder are rendered, payable
quarter-annually or at such other times as the Trustee may determine. The
Trustee shall be_ reimbursed from the Trust Estate, as a cost of
administration, for all expenses reasonably incurred by him in the performance
of.his duties in accordance with this Agreement.
12
•
ARTICLE IX
MISCELLANEOUS
•
9.1 Amendment. This Agreement cannot be altered or amended without the
express written consent of FCX, the USEPA and the State, provided that any
such alteration or amendment which shall affect the duties of the Trustee
hereunder shall be not effective until consented to in writing by the Trustee.
9.2. Governing Law. This Agreement and its application shall be governed
by the laws of the State of North Carolina, and its provisions may be enforced
only in and through the United States Bankruptcy Court for the Eastern
District of North Carolina.
9.3 Severability. If any term or provision hereof or the application
thereof to any circumstance shall be held invalid or unenforceable, such term
or provision shall be ineffective, but shall not affect in any respect
whatsoever the validity of the remainder of this Agreement.
9.4 Notices. Any notice or other communication by any party or parties
to any other party or' parties shall be deemed to have been sufficiently given,
for all purposes if mailed first class, postage prepaid, addressed as follows:
USEPA
Jon A. Mueller, Esq. or successor
Environmental Enforcement Section
Post Office Box 7611
Washington, D.C. 20044
State of North Carolina
Nancy E. Scott or successor
Associate Attorney General
Post Office Box 629
Raleigh, North Carolina 27602
13
• •
FCX
Douglas Q. Wickham and William H. McCullough
Adams, McCullough & Beard
Post Office Box 389
Raleigh, North Carolina 27602
Trustee
Holmes P. Harden
Maupin, Taylor, Ellis & Adams, P.A.
3201 Glenwood Avenue
Raleigh, North Carolina 27612
9.5 Headings. Headings in this Agreement are inserted for convenience
of reference only and are not to be considered in the interpretation or
construction of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed and acknowledged as of the date first above written.
ATTEST:
State of North Carolina
By: _____________ _
fcx7-5/sd
FCX, INC., Debtor-In-Possession
By: ------------------
Environmental Protection Agency of
the United States of America
By: _______________ _
TRUSTEE:
Holmes P. Harden, Esq.
14
•
N.C. DEPARTMENT OF JUSTICE
Lacy H. Thornburg
Attorney General
Post Office Box 629
Raleigh, North Carolina 27602.
Nancy E. Scott
Assistant Attorney General
Post Office Box 629
Raleigh, North Carolina 27602
•
STATE OF NORTH CAROLINA
DEPARTMENT OF ENVIRONMENT,
HEALTH AND NATURAL RESOURCES*
Secretary
Post Office Box 27687
512 N. Salisbury Street
Raleigh, North Carolina 27611
William L. Meyer; Director
Division of Solid Waste
Management
Department of Environment,
Health and Natural Resources
Post Office Box 2091
Raleigh, North Carolina 27602
* By virture of a statutory reorganization, the Division of
Solid Waste Management, which administers the North Carolina
programs under CERCLA and N.C.G.S. Chapter 130A-310, was
transferred from the Department of Human Resources to the
new Department of Environment, Health and Natural Resources.
See Chapter 727 of the 1989 Legislative Session, ratified
August 3, 1989, effective retroactive to July 1, 1989.
• •
SETTLEMENT AGREEMENT AND RELEASE
The undersigned parties, FCX, Inc. ("FCX") through its counsel, the
Committee of Unsecured Creditors and the Committee of Debenture Holders, each
through its counsel, the Columbia Bank for Cooperatives ("CBC") through its
counsel, the United States Environmental Protection Agency ("USEPA") and the
State of North Carolina Department of Environment Health and Natural
Resources, Division of Solid Waste Management ("State")_, each through its
counsel, now hereby enter into the following Settlement Agreement and Release
which compromises and settles all issues in dispute among them.
WHEREAS FCX, INC. was a North Carolina farm cooperative which filed its
Petition for Relief under Chapter 11 of the United States Bankruptcy Code on
September 17, 1985; and
WHEREAS a Liquidating Plan of Reorganization for FCX was confirmed by
Order of the United States Bankruptcy Court for the Eastern District of North
Carolina ("Bankruptcy Court") on August 4, 1986. FCX has been proceeding with
an orderly liquidation of its assets pursuant to the terms of the confirmed
Plan of Reorganization; and
WHEREAS a motion for Authority to Make a Second Dividend Distribution to
unsecured creditors and CBC ("Second Dividend Motion".) was filed by FCX with
the Bankruptcy Court on April 11, 1988; and
WHEREAS the USEPA and the State opposed FCX's Second Dividend.Motion and
also filed Motions seeking to redirect distribution of estate assets because
of releases of pesticides and other hazardous substances at the FCX
Distribution Center in Statesville, North Carolina ("Statesville") and at the
• •
former FCX Distribution Center in Washington, North Carolina ("Washington")
which had been sold to Fred Webb, Inc. by Order of the Bankruptcy Court on
August 4, 1986. (These properties are collectively referred to herein as the
''Sites'' and a more specific description of their location is attached to this
Settlement Agreement as Exhibit A); and
WHEREAS the USEPA and the State filed objections to the proposed Second
Dividend Distribution pursuant to Section 107(a) of the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), as
amended by the Superfund Amendments and Reauthorization Act of 1986 (SARA), 42
U.S.C. Section 9607(a), and pursuant to the North Carolina Inactive Hazardous
Sites Law, N.C.G.S. Section 130A-310, et~-seeking recovery of Response
Costs incurred or to be incurred at the Sites; and
WHEREAS the USEPA and the State allege that FCX was an "owner or
operator" within the meaning of Section 101(20)(a) of CERCLA, 42 U.S.C.
Section 9601(20)(a), of "facilities" as defined in Section 101(9), 42 U.S.C.
Section 9601(9), "at the time of disposal of hazardous substances", as defined
in Sec.ti.on 101(14) of CERCLA, 42 U.S.C. Section 9601(14). The State also
alleges that FCX is a "responsible party" within the meaning of N.C.G.S.
Section 130A-310, and
WHEREAS the USEPA and the State allege that FCX is jointly and severally
liable under Section 107(a) of CERCLA as amended, 42 U.S.C. Section 9607(a),
for all Response Costs incurred by the United States·and the State of North
Carolina not inconsistent with the National Contingency Plan and Section 104
of CERCLA as amended, 42 U.S.C. Section 9604, for investigation, removal,
2
f
• •
remedial and enforcement activities, and other response actions relating to
the Sites. The State alleges alternatively that FCX is liable under N.C.G.S.
Section 130A-310 for all costs of public health and environmental
investigation and monitoring and costs of development and implementation of
remedial action plans at the Sites incurred or to be incurred by the State of
North Carolina; and
WHEREAS FCX has denied liability of its bankruptcy estate for the matters
as alleged and has disputed the rights of the USEPA and the State to pursue
and collect claims from the assets of its bankruptcy estate; and
WHEREAS FCX proposed on October 19, 1988, to abandon its Statesville site
as burdensome to the estate; and
WHEREAS after contested Court hearings several Orders have been entered
both by the United States District Court for the Eastern District of North
Carolina (December 29, 1988) and by the United States Bankruptcy Court for the
Eastern District of North Carolina (December 30, 1988, February 3, 1989, and
February 6, 1989) addressing the various issues raised by the parties to this
Set~lement Agreement; and
WHEREAS appeals have been noted by several parties from each of these
Court Orders; and
WHEREAS the parties stipulate and agree to the making and entry of a
Consent Order pursuant to this Settlement Agreement and Relea·se without any
.admission of liability for any purpose. The terms and conditions of the c£v-vJi7
Consent Order are attached hereto, incorporated herein and marked "Exhibit B11 ;
and
3
• •
WHEREAS the parties recognize that the estate of FCX, Inc. will be
liquidated, that the Response Costs at the Sites may exceed the remaining
assets of the estate of FCX, Inc., and that in an effort to complete the
response actions at the Sites, FCX, Inc. agrees to pay a portion of its
remaining estate into a trllst account established pursuant to this Settlement
Agreement which will provide funds for reimbursement of the Response Costs;
and
WHEREAS to resolve the matter constructively, to avoid prolonged
litigation, to further the public interest, and to preserve the bankruptcy
estate, all of the parties desire to compromise and settle all issues that
have been raised among them, and in consideration of the mutual covenants
herein, now AGREE as follows:
DEFINITIONS
For purposes of this Settlement Agreement, any Consent Order entered
pursuant thereto, and the FCX Environmental Settlement Trust certain terms are
. defined as follows:
a. The "Sites" means the former FCX distribution and blending facility
located on West Front Street, Statesville, Iredell County, North Carolina, and
the former FCX distribution and blending facility located at the intersection
of Grimes and .Whispering Pine Roads in Washington, Beaufort County, North
Carolina, formerly owned by FCX and currently.owned by Fred Webb, Inc. A
description of the Sites is set forth in Exhibit A attached hereto.
4
• •
b. 11 Response Costs'' means cost of response, removal and remedial costs
including, but not limited to, administrative, investigative, removal,
remedial, access, enforcement (including attorneys' fees) and oversight costs,
prejudgment interest on any or all such costs, and all other direct or
indirect costs, however denominated, alleged to have been incurred by the
United States or by the State of North Carolina in connection with the Sites.
c. 11 FCX" or 11bankruptcy estate11 refers to the bankruptcy estate of the
debtor, FCX, Inc.
d. "Effective Date" shall mean the date on which a Consent Order
entered into by the parties to this Settlement Agreement and Release has been
approved and entered by the United States Bankruptcy Court for the Eastern
District of North Carolina and has become final.
e. "Consent Order11 means that certain consent order, a copy of which is
attached hereto and marked 11 Exhibit B", which the parties to this agreement
contemplate will be entered by the United States Bankruptcy Court for the
Eastern District of North Carolina and which will. finally dispose of all
issues_ a~ong the parties.
f. "Fiscal Year" means the twelve month period from October 1 to
September 30.
g. Terms not otherwise defined herein shall have their ordinary meaning
unless defined at Section 101 of CERClA, 42 U.S.C. Section 9601, in which case
the definition in Section 101 of CERClA shall control.
5
• •
AGREEMENTS
1. FCX agrees to pay within ten (10) days of the Effective Date, two
million dollars ($2,000,000) in reimbursement of the Response Costs incurred
and to be incurred by the United States and the State of North Carolina with
respect to the Sites.
2. The two million dollars ($2,000,000.00) shall be paid by cashier's
check or wire transfer into a trust account to be held for the reimbursement
of Response Costs incurred at the Sites by USEPA or the State of North
Carolina for the benefit of the estate of FCX, Inc. Within ten (10) days of
the Effective Date, FCX shall present to USEPA and the State for approval a
signed Trust Agreement in the form of Exhibit C establishing the "FCX
Environmental Settlement Trust". The Trust Agreement shall instruct the
Trustee to make distributions from the aforesaid Trust Fund to reimburse the
United States or the State for the amounts of Response Costs which are
demanded by the governments. A distribution shall be made by the Trustee
within ten (10) days of the Effective Date to reimburse Response Costs
incurred by the United States and the State prior to the Effective Date.
3. Two hundred thousand dollars ($200,000.00) of the $2 million paid in
settlement (and interest accrued on the $200,000.00) .shall be reserved within
the trust.for payment of the State's ten percent share of the costs of any
remedial actions at the Sites and to help defray post-remedial operation and
maintenance requirements at the Sites, as provided by.42 U.S.C. Section
9604(c)(3). This State share of the settlement may also be used to cover
costs of ·any other activities deemed necessary to protect public health and
the environment under State law, which costs are related to FCX disposal at
6
• •
the Sites and are not paid by the Federal Government. Should remedial and
post-remedial activity under CERCLA not require payment of the full
$200,000.00 and accrued interest thereon, any portion thereof remaining in the
trust, may be used for reimbursement of Response Costs incurred by either the
State or EPA in connection with the Sites.
4. The payment specified in paragraph two (2) above will be held in
trust by an individual or entity designated by the Bankruptcy Court as an
authorized trustee to hold and disburse the settlement funds paid.under this
Settlement Agreement and any interest accrued upon the corpus of the trust
less the costs of management of the trust. The Trustee of the Trust Agreement
shall disburse such funds held in trust to the EPA Hazardous Substances
Superfund, Superfund Accounting, P.O. Box 100142, Atlanta, Georgia 30384 upon
receipt of a letter from the Regional Administrator of EPA that the United
States has, during a previous Fiscal Year, performed further response actions
at either of the Sites and the amount to be reimbursed. Should the United
States complete all response actions at both Sites pursuant to CERCLA and
funds remain in the trust, those funds and accrued interest thereon shall be
held for the benefit of the State of North Carolina should it determine that
further response actions under state _law are necessary at either of the Sites.
The Trustee shall disburse funds held in trust to the· State upon receipt of a
letter from the Chief of the State Superfund Section which provides the amount
to be reimbursed.
5. The transmittal of all payments described herein shall reference the
names of the Sites and the bankruptcy case number. The ·transmittals shall be
accompanied by correspondence identifying In Re FCX, Inc., Bankruptcy Case No.
7
• •
S-85-01574-5, U.S. Department of Justice, Land and Natural Resources Division
File No. 90-11-3-350, North Carolina Superfund Section File Numbers
NCO 981475932 and NCO 095458527, and the identity of the paying party. Copies
of this correspondence and the payments shall be concurrently transmitted to
all counsel of record for the United States and the State of North Carolina
and other parties to this Settlement Agreement.
6. If after reimbursement of all costs associated with federal and
state response actions at both Sites, funds remain in the Trust, the remaining
funds shall be returned to FCX in accordance with the Trust Agreement and the
Trust shall terminate. In the event that the entire two million dollars
($2,000,000.00) and accrued interest is utilized for Response Costs and
reasonable expenses of maintaining the Trust, then the Trustee shall so inform
the parties and the Trust shall terminate.
7. Of the amounts specified above, one million seven hundred fifty
thousand dollars ($1,750,000.00) is being paid by FCX to resolve its liability
to the United States and the State at the Washington site. Two hundred and
fifty ·thousand dollars ($250,000.00) is being paid by FCX to resolve its
liability to the United States and the State at the Statesville site.
Pursuant to 42 U.S.C. Sections 9613(f)(2) and 9622(h)(4), this Settlement
Agreement does not discharge the liability of any other potentially
responsible party which is not a party to the Settlement Agreement and Consent
.Order to be entered pursuant -thereto. However, pursuant to 42 U.S.C. Sections
9613(f)(2) and 9622(h)(4), the settlement reduces the potential liability of
the other potentially liable persons by the amount of the settlement. Nothing
8
• •
in this Settlement Agreement, however, shall limit the ability of the
governments to apply the entire $2 million plus accrued interest contained in
the FCX Environmental Settlement Trust towards performance of response actions
at either of the Sites.
8. FCX agrees that, in consideration of the agreements set forth
herein, it will not voluntarily rescind the sale of the Washington site to
Fred Webb, Inc:, without the consents of USEPA and the State.
9. FCX agrees that the United States may perfect the filing of liens,
as provided for in Section 107(1) of CERCLA, 42 U.S.C. Section 9607(1),
against the Sites.
10. In the event that the USEPA and the State complete all necessary
response actions at the Statesville site not inconsistent with the National
Contingency Plan and applicable state law without expending sums in excess of
the two million dollars ($2,000,000) paid pursuant to the terms of this
Settlement Agreement and Release and accrued interest thereon, the United
States and the State agree to release their liens. against the Statesville
site. The United States and the State agree to provide separate certification
to FCX that the response actions at the Statesville site have been completed
and that their respective liens, if any, have been r.eleased.
11. In the event that FCX reacquires title to the Washington site, and
in the event that the USEPA and the State complete all neces~ary response
actions not inconsistent with the National Contingency Plan and applicable
state law without expending sums in excess of the two million dollars
($2,000,000) paid pursuant to the terms of this Settlement Agreement and
9
• •
Release and accrued interest thereon, the United States and the State agree to
release their liens against the Washington site. The United States and the
State agree to provide separate certification to FCX that the response actions
at the Washington site have been completed and that their respective liens, if
any, have been released.
12. In consideration of the payments set forth in paragraphs two (2) and
three (3) above and of the mutual covenants and promises contained herein, the
United States and the State both agree to dismiss with prejudice all present
and future civil claims they may have against FCX with respect to the release
or threat of release of hazardous substances at the Sites. The USEPA and the
State, after FCX has paid the two million dollars ($2,000,000) under this
Settlement Agreement, will refrain from taking civil actions based upon
environmental claims alleged in the pleadings of the governments filed in the
bankruptcy case which interfere with the further administration of the FCX
bankruptcy estate and with the distribution by FCX of its remaining assets to
its creditors under the confirmed Plan of Reorganization except claims brought
to enforce the terms of this Settlement Agreement. The USEPA and the State
further covenant not to sue or bring any civil judicial or administrative
action or any other type of proceeding or make any claims against FCX for
remedial action or the reimbursement of Response Costs incurred or to be
incurred at the Sites pursuant to Sections 104, 106, and 107 of CERCLA, 42
U.S.C. Sections 9604, 9606, and 9607 (except Sectioni 9607(a)(4)(C) and (f)
[natural resource damages]), and furthermore hereby release, discharge and
. . ..
remise any ·and all CERCLA claims, iiabilities and causes of action of any kind
10 ·
• •
or nature whatsoever, whether judicial or administrative, except criminal
claims, based on releases of hazardous substances at the Sites.
13. The release and covenant not to sue from the USEPA and the State
shall not extend to any person or legal entity other than the parties to this
Settlement Agreement including FCX, its predecessors and successors in
interest and its subsidiaries, divisions, parent corporations and affiliates.
14. FCX covenants not to sue the USEPA or the State for any liability
for action taken and expenditures made by the USEPA or the State, or by their
agents and employees, prior to the Effective Date in responding to the release
or threatened release of hazardous substances into the environment from the
Sites. Further, FCX agrees not to assert any causes of action, claims, or
demands against the United States or the State of North Carolina for
reimbursement from the Superfund, 26 U.S.C. Section 9507, including claims
pursuant to Sections 111 and 112 of CERCLA, 42 U.S.C. Sections 9611 and 9612.
This paragraph shall not preclude FCX from asserting in any subsequent action
other than for enforcement of this Settlement Agreement and Consent Order any
defense ~vailable to FCX or any release or covenant not to sue other than as
stated in this paragraph. Nothing in this release and covenant shall limit
the ability of FCX to seek further relief from any person or entity other than
the United States or the State of North Carolina based upon conditions· at the
Sites that were unknown to USEPA or to the State on the Effective Date.
15. Nothing in this Settlement Agreement or in the Consent Order to be
entered pursuant thereto shall be deemed to constitute preauthorization of a
11
• •
CERClA claim within the meaning of 40 C.F.R. Section 300.25(d) or 42 U.S.C.
Section 9622(b).
16. Pursuant to Sections 113(f) and 122(h)(4) of CERClA, 42 U.S.C.
Sections 9613(f) and 9622(h)(4), as amended by the Superfund Amendments and
Reauthorization Act of 1986, FCX is by this Settlement Agreement resolving its
liability to the United States and to the State of North Carolina with respect
to response actions taken or to be taken at the Sites, and FCX shall not be
liable for claims for contribution regarding matters addressed in this
Settlement Agreement and/or the Consent Order to be entered pursuant thereto.
This Settlement Agreement does not discharge the liability of any other
potentially responsible party which is not a party to this Settlement
Agreement or the Consent Order to be entered pursuant thereto. Any claim or
defense which the United States, the State of North Carolina, or FCX may have
against any other person or entity not a party to this Settlement Agreement
and/or the Consent Order to be entered pursuant thereto, including but not
limited to claims for indemnity or contribution, is expressly reserved.
Nothing in this Settlement Agreement or Consent Order to be entered pursuant
thereto shall in any way limit the rights of· FCX with respect to any defense
that may be raised in any action other _than an action to enforce the
provisions of this Settlement Agreement and/or Consent Order.
17. Nothing in this Settlement Agreement or in the Consent Order to be
entered pursuant thereto, nor any part thereof, nor the performance of any act
in compliance with the terms thereof, shall constitute an admission of any
fact, claim, or allegation concerning the Sites, of FCX'~ .relation to that
12
• •
Site, or any liability of FCX under any Federal, state o_r local statute,
ordinance or regulation, or under Federal or state common law.
18. The United States shall, immediately upon execution of this
Settlement Agreement, cause a notice of this Settlement Agreement to be
published in the Federal Register pursuant to the public notice and comment
requirements contained in Section 122(i) of CERCLA, 42 U.S.C. 9622(i), as
amended by Superfund Amendments and Reauthorization Act of 1986 and at 28
C.F.R. Section 50.7, for a period of not less than thirty (30) days for public
notice and comment.
19. After the aforementioned period of public notice and comment has
expired and after the United States has the opportunity to consider any
comments to the proposed Settlement Agreement, the United States shall, unless
this settlement is found not to be in the public interest, cause a Motion to
Approve this Settlement Agreement and Release to be filed with the Bankruptcy
Court and will give such notice and opportunity for hearing as is appropriate
under the United States Bankruptcy Code. Any hearing on the Motion to Approve
this Settlement Agreement and Release shall be scheduled after the public
notice and comment period stated in paragraph 18 has expired.
20. As of the Effective Date, the USEPA and the State will withdraw all
their obj.ections and motions including among others, their objections to
proposed distributions and motions to set aside funds and all" parties will
dismiss all pending appeals to the Orders of the district and bankruptcy
courts dated December 29, 1988; December 30, 1988; February 3, 1989; and
February 6, 1989.
13
• •
21. The parties agree that, should a dispute arise concerning compliance
with this Settlement Agreement and Consent Order or with the Trust Agreement
whose resolution requires an interpretation of CERCLA, they will jointly move
for withdrawal of reference of the CERCLA issue to the United States District
Court for the Eastern District of North Carolina.
This the __ day of August, 1989.
ADAMS, McCULLOUGH & BEARD
Attorneys for Debtor-In-Possession
FCX, Inc.
Adams, McCullough & Beard
Post Office Box 389
Raleigh, North Carolina 27602-0389
Telephone: [phone]
FCX, INC.
J. Stewart Hodges
609 St. Mary's Street
Raleigh, North Carolina 27605
14
•
POYNER & SPRUILL
Attorneys for Unsecured Creditors
Committee
3600 Glenwood Avenue
Post Office Box 10096
Raleigh, North Carolina 27605-0096
Telephone: [phone]
•
Committee of Unsecured Creditors
15
•
SMITH, ANDERSON, BLOUNT, DORSETT,
MITCHELL & JERNIGAN
Attorneys for Committee of
Subordinated Debenture Holders
1300 St. Mary's Street
Raleigh, North Carolina 27605
Telephone: [phone]
•
Committee of Subordinated Debenture
Holders, by its chair
16
•
BLANK, ROME, COMISKY & McCAULEY
, Attorneys for Columbia Bank for
Cooperatives
1200 Four Penn Center
Philadelphia, Pennsylvania 19103
•
Columbia Bank for Cooperatives
17
•
FOR THE UNITED STATES OF AMERICA
By:
By:
By:
By:
By:
Richard B. Stewart
Assistant Attorney General
Land and Natural Resources Division
U.S. Department of Justice
Jon A. Mueller, Esq.
Environmental Enforcement Section
Post Office Box 7611
Washington, D.C. 20044
Greer C. Tidwell
Regional Administrator, Region IV
U.S. Environmental Protection Agency
Marcia Owens
Associate Regional Counsel
345 Courtland Street, N.E .
. Atlanta, Georgia 30365
Edward E. Reich
Acting Assistant Administrator
Office of Enforcement and
Compliance Monitoring
402 M. Street, S.W.
Washington, D.C. 20460
18
•
•
N.C. DEPARTMENT OF JUSTICE
Lacy H. Thornburg
Attorney General
Post Office Box 629
Raleigh, North Carolina 27602
Nancy E. Scott
Associate Attorney General
Post Office Box 629
Raleigh, North Carolina 27602
•
STATE OF NORTH CAROLINA
DEPARTMENT OF ENVIRONMENT, HEALTH
AND NATURAL RESOURCES*
William L. Meyer, Director
Division of Solid Waste Management
Department of Environment, Health
and Natural Resources
Post Office Box 2091
Raleigh, North Carolina 27602
* By virtue of a statutory reorganization, the Division of Solid
fcx7-6/sd
Waste Management, which administers the North Carolina programs
under CERCLA and N.C.G.S. Chapter 130A-310, was transferred from the
Department of Human Resources to the new Department of Environment,
Health and Natural Resources. See Chapter 727 of the 1989
Legislative Session, ratified August 3, 1989, effective retroactive
to July 1, 1989.
19
IN THE MATTER
-OF-
FCX, INC.,
(EMPLOYER'S I.D. #56-0220040),
Debtor
IN PROCE~lt [(ii. BD!t<3, l~t!~:,;,
REORGAN I ZA 'Jl~~ l!n{l(l'i,~y OC't •-<"> ,
CORPORA TIO Kfltl.81"41!.M !X.~TP ! ~T f.# "-e._
CHAPTER 11 CASE NO.:
S-85-01574-5
ORDER APPROVING DISCLOSURE STATEMENT AND
FIXING TIME FOR FILING ACCEPTANCES ~R REJECTIONS OF PLAN,
OBJECTIONS TO CONFIRMATION, COMBINED WITH NOTICE THEREOF
A Disclosure Statement under Chapter 11 of the Bankruptcy
Code having been filed by the Debtor on April 17, 1986, as amended
on June 6, 1986, referring to a P::.an under Chapter 11 of the
Code filed by the Debtor on May 1, 1986, as amended on June
9, 1986; and
It having been determined after hearing on notice that
the Disclosure Statement as proposed and amended by the Debtor
referred to above contains adequate information;
It is ordered, and notice is hereby given, that:
A. The Disclosure Statement filed by the Debtor dated
April 17, 1986, and amended on June 6, 1986, is approved.
B. July 28, 1986, is fixed as the last day for filing
written acceptances or rejections of the Plan as amended referred
to above.
C. Within twenty (20) days after the entry of this Order,
the Plan filed May 1, 1986, as amended on June 9, 1986, the
Order approving the Disclosure Statement, the Amended Disclosure
Statement and a Ballot for accepting or rejecting the plan shall
be t.ransmi tted by mail to creditors and subordinated debenture
holders. Equity security holders shall receive a summary of
the Plan describing the Plan's treatment of such interests.
D. July 30, 1986, at 10:00 o'clock a.m., United States
Bankruptcy Court, Century Station, Room 208, 300 Fayetteville
Street Mall, Raleigh, North Carolina, is fixed as the date,
time and place for the hearing on confirmation of the Plan
referred to above.
E.
and serving
pursuant to
acceptances
July 28, 1986, is fixed
written objections to
Rule 3020(b)(l) and as
as the last day for filing
confirmation of the Plan
the last day for filing
or rejections.
DATED: June 11, 1986.
BY THE COURT
/S/ A. THOMAS SMALL
A. Thomas Small
Judge
Dliitte
Haskins+SeHs
ACCOUNTANTS' COMPILATION REPORT
To the Board of Directors
FCX, Inc.
Raleigh, North Carolina
•
2000 Center Plaza Building
Post Office Box 2778
Raleigh, North Carolina 27602
[phone]
Cable DEHANDS
We have compiled the·accompanying summary of financial balances and
projected significant transactions of FCX, Inc. as of April 30, 1986 and
for the period May 1, 1986 through December 31, 1987, based on data and
assumptions provided by management, in accordance with standards
established by the American Institute of Certified Public Accountants.
The accompanying summary of financial balances and projected significant
transactions and this report were prepared solely for use by the United
States Bankruptcy Court (Eastern District of North Carolina) in connection
with their consideration of the reorganization plan for FCX, Inc., for the
period of May l, 1986 through December 31, 1987 and should not be used for
any other purpose. The accompanying financial summary is not intended to
present financial position and res~lts of operations in conformity with
generally accepted accounting principles.
This compilation is limited to presenting financial information that is
the representation of management and does not include evaluation of the
support for the assumptions underlying the financial information. We have
not examined the summary of financial balances and projected significant
transactions and, accordingly, do not express an opinion or any other form
of assurance on the accompanying financial summary or underlying
management assumptions. Furthermore, there will usually be differences
between estimated and actual receipts and disbursements, because events
and circumstances frequently do not occur as expected, and these
differences may be material.
June 10, 1986
FCI INC. SUl'll'IARY OF FINANCIAL BALAKCES AND PROJECTED SJ6NIFICANT TRANSACTIONS AS OF APRIL JD1 199b AKO FOR THE PER I OD IIAY I, 1'86 THROU6H O[CEIIBER JI, 1997 ASSETS: CASH AND DEPOSITS TRADE ACCOUNTS RECEIVABLE ACCOUNTS RECEIVABLE IN L1116ATION ALLOWANCE fOR DOUIIF\l. ACCOUIITS NOTES A>IO OTIU RECEIVABLES RECEIVIBLES -OTHER OUERREO COSTS PREPAID EIP[NSES PREPAID INSURANCE PR EPA IO SUPPLIES PREPAID PURCHASES UTILITY DEPOSllS FUNDS HELO 11 ESCROII NERCHANOISE INVUTORTES INYESTPUTS IN COOPERATIY£S1 C,f, INDUSTRIES -STOCK A>ID EiUITY COLU/IBIA IAJIK • STOCK AND EQUITY 60LDKIST Of GEDAGIA -STOC< A>IO EQUITY OTHER CODHJIITIVES -STOCk All!) EQUITY REAL PROPERTY -UXDEPRECIATEO 10111( VALUE ESTIIIATEO REAL PROPERTY OISPOSIT!OI COG! IUD6Em CASH DTGIURSENENTS TOTAL ASSETS SECURED BORRONIIGS1 POST PE11110N ACCOUNTS PAYABLE ICCRUED HEALTH INSURAMCE ACCRUED EPIPlOYEE YACAT ION ACCRUED TUES -OTIU ACCRUED PROPERTY TAIES PREPEllTIDN E"PLOYEE VICITION PAYRDlL TAIES HAYl116 PRIORITY CDLU,BIA BAM< FOR COOPERAllVES mm ASSETS OYER SECURED BORRDVINGS UNSECURED out: HOTES PAYABLE 10 EC! ACCOUNTS PAYABLE 1)£BENTURES -SUBORDINATED EICESS ASSETIILIABl OYER UNSECURED DEBT SEN'tRAL LEDGER BALAMCE AT APRIL JO, 19Bb nm NOT REFLECTED IN THE GEW[RAL LEDGER ------------------------GOLDKIST/ ACCRUED SOUTHERN INTEREST STATES EIPENSE REVISED 6EN£RAL LE06ER BALA>ICE Al APRIL JO, 1986 PROJECTED Sl6NlflCAN1 TRANSACTIONS FOR TH< PERIOD !Al I, 118& THROIJSH DEmBER ll, 1187 \--------------------------------------------------------------------------------------------------/ REl'IAIHIN6 SOUTHERN STATES FINAL PAYll:OH ADDITIONAL ESll,AIED LOSSES 16AINSI REDUCTION ESTl"ATED SUBORDINATED DEBENTURES BALAMCES BUDSEHD IN THE PROCEEDS FRO!! TRUST S[TTLEl!.[IH TO BE CASH CLA!, Of THE SALE Of -------------------------Of LIOUIDATED OISBURSEl'IENTS COLUPIBIA REl!AIIIIN6 RHllCTlONS TRANSFERS SECURED OR BAMK REAL ESUTE II VALUE TO TRUST 80flROWU16S SETTLED -----------------------------------------------------------------------------------------------------------------------------------840, JJJ l1b1J1IU 2,b9J18'1 12,505,8411 11388,591 2,1,,5, 7,524 143,452 J'11Jl4 b0b15l4 2B1003 IOD,JIB m,m1 17,321,259 6,95S,235 10,091,110 71b42,JBI 4,270,295 1,758,ltb 23,512,624 S1b82,245 70,231,265 121610,128 11,508 J00,000 l89,BJ2 425,000 501000 2se10JJ l74,b29 8401 Jll I 1b7l1 llb 2,6'3,8'7 12,505,8411 t1lBB159I 261,959 7 .524 143,452 l'7,ll4 60b1514 2e1001 100,llB 27 ,J52 tO,lbb,024 10101u, tto 71b42,39I 4,270,295 11758,lU 17,BJ0,37' 0 0 0 S71'211tJ7 ll,508 100,000 lH,Bl2 425,000 50,000 2se10Jl lH,62B 9'4 I 159 2,1,,5, 7,524 247,JH SU1514 t0,3661024 2,522,778 71So81lll 71642,JBI 43' ,599 113181717 l1'78,44l b,754,4Jb 7,097,500 1,064,625 11,064,USI 2,7l51000 --------------14,344,467 9,816,SJI 2,735,000 7,642,JBI 6,032,875 2,962,377 8,887,130 431bJ21lH 12,6101129 11,2,2,oeo, l2,ll4,2U 14,344,467 ll,6571271 l,632,875 ----------24, 78',923 113'9,SOO 11,1e11911 B,7ll,7ll 2,877,739 1,2921080 2314'7,BU I ,3'91500 II 17811 971 817ll17ll ----------0 I ,292.0BO I ,SBS,b59 0 ,.a7b1Sll 2,ns,000 16,014,8901 2,400,000 2,962,377 e,B87,llO 1,241,500 0 B,6l510JI 2,735,000 161014,9901 2,400,000 O 219b2,l77 817ll,71J ISS,417 B111 Ott 10013\8 27,352 1,700,000 22,322 l1b73,IJ6 2,693,897 13,500,0001 I, 388,591 0 0 IU,452 150,000 b0,000 29,003 0 0 0 0 0 2,570,295 0 0 D 12,735,0001 ---------------------2,6451681 2149',bU 11 ,soa 100,000 lH,BJ2 425,000 0 50,000 0 258,033 0 374,628 b79,690 0 157,000 2,494,6'6 157,000 9,l811971 0 101 fb,887,2751 :,::n::z::z:::::::::::::::::::c:::::a:::::::s:::::::::::"zz:s:s:s:sza:s:ssaz:::•zzz:z:zz:z:z:::a:z:za,in:az:s:•=z••=•z:aszz:a:u:aa:za:::::az::aza,:::aaz:::za••••"••••=••"s•"zz::s:uas SEE ACCOUNTANTS' COI\PILIAllON 11:PORT ANO S""IIARY OF Sl6Nlf!CAM1 ASSUI\PTIONS 2 • •
FCX, INC. • • SUMMARY OF FINANCIAL BALANCES ANO PROJECTED SIGNIFICANT TRANSACTION
ASSUMPTIONS AS-OF APRIL 30, 1986 AND FOR THE PERIOD MAY 1, 1986 THROUGH
DECEMBER 31 1987
Su1Tl11ary of Financial Balances and Projected Significant Transactions
This SU1Tl11ary of the financial balances and projected significant
transactions of FCX, Inc. (the "Company") is management's analysis of the
reorganization plan for the Company for the period May 1, 1986 through
December 31, 1987. Accordingly, the summary reflects management's
judgment, based on present circumstances, of the most likely set of
conditions and its most likely course of action.
The assumptions disclosed herein are those which management believes are
significant to the summary of financial balances and projected significant
transactions or otherwise relate to key factors on which the financial
results of the Company depend. Some assumptions inevitably will not
materialize and unanticipated events and circumstances may occur
subsequent to June 10, 1986, the date that this surrrnary was prepared.
Therefore, the actual receipts and disbursements during the period will
vary from the sunY11ary of financial balances and projected significant
transactions and the variations may be material.
Purpose of the SunY11ary of Financial Balance and Projected Significant
Transactions
The Board of Directors of FCX, Inc. authorized and directed management of
the Company to take such steps as are appropriate in management's
discretion to curtail, to the extent possible, the operating losses of the
Company in order to preserve the Company's net worth. The Company has
announced that all operations would cease and that the Company would
dispose of its assets. The Board of Directors of the Company, subject to
the approval by shareholders, have adopted a Plan of Reorganization which
will provide that, as soon as practicable after approval by the creditors,
the Company will liquidate its then remaining assets and settle all
claims. The accompanying surrrnary of the financial balances and projected
significant transactions presents management's estimated receipts and ·
disbursements to liquidate its remaining assets.
General Ledger Balance at April 30, 1986
The general ledger balances were obtained from the Company's general
ledger prepared by management as of April 30, 1986.
GoldKist/Southern States
The GoldKist/Southern States represents various advances by GoldKist and
Southern States made directly to the Columbia Bank for Cooperatives which
were not included in the April 30, 1986 general ledger.
3.
Southern States Final.ment •
The Southern States final payments represent a June 4, 1986 receipt for
final settlement for the purchase of assets.
Additional Estimated Losses (Gains)
The Company has estimated additional losses to be incurred in connection
with the final disposition of its assets. Such losses include
uncollectible accounts and sales of property and equipment at less than
undepreciated value.
Budgeted Cash Disbursements
Budgeted cash disbursements represent the Company's estimated costs to
operate its remaining facilities, collect remaining receivables and settle
all claims during the liquidation period.
Reduction in the Claim of the Columbia Bank for Cooperatives
The claim of Columbia Bank for Cooperatives (the "Bank") is adjusted for
the following items:
The offset of the debtor's investment in stock
and equity of the Bank (including all "C Stock"
and "Allocated Surplus") $ 7,642,381
The reversal of the Company's interest expenses
on its debt to the Bank accruing subsequent
to July 1, 1985 through April 30, 1986
The subordination of Bank debt
4,358,890
1,500,000
The Bank's agreement to advance funds to settle
the Energy Cooperative, Inc. litigation 156 000
$13,657,271
Estimated Proceeds From the Sale of Remaining Real Estate
The Company estimates its remaining real estate has a market value of
approximately $7,097,500. The Company has reduced this amount by
estimated disposition cost of 15% of the estimated market value.
The Company estimates that $2,400,000 of the proceeds from the sale of
these assets together with the interest accrued thereon will be directly
applied to-unsecured creditors' liabilities.
4.
Settlement of .ured Borrowings • The Company estimates that all adjusted secured borrowings will be paid.
Subordinated Debentures Trust
The Company has reduced the value of its investments in other cooperatives
by approximately 25% of its carrying value of such investments. The final
liquidation amount of these investments will be based on each
cooperatives' individual equity redemption policy, as determined by their
respective board of directors. The Company has formally requested the
redemption of these investments in other cooperatives but no formal
redemption policies have been confirmed.
Under the Company's reorganization plan, certain investments in
cooperatives of the Company will be allocated to the benefit of the
subordinated debenture holders and therefore will not be available to
secured debtors.
5.
IN THE MATTER
-OF-
FCX, INC.,
• •
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
(EMPLOYER'S I. D. #56-0220040),
Debtor
DISCLOSURE STATEMENT OF FCX, INC.
JUNE 6, 1986
IN PROCEEDINGS FOR THE
REORGANIZATION OF A
CORPORATION
CHAPTER 11 CASE NO. :
S-85--01 574-5
(The Plan of Reorganization for FCX, Inc. is attached to this Disclosure
Statement as Exhibit A).
• •
DISCLOSURE STATEMENT OF FCX, INC.
TABLE OF CONTENTS
I. INTRODUCTION
A. Purpose of Disclosure Statement
B. Source of Information
C. Filing of Reorganization Case; Appointment of Committees
D.
E.
Manner of Voting on Plan
Confirmation of Plan
1.
2.
3.
4.
5.
Solicitation of Acceptances
Creditors Entitled to Vote on Plan
Hearing on Confirmation of Plan
Acceptances Necessary to Confirm Plan
Confirmation of Plan Without Necessary Acceptances
II. PLAN OF REORGANIZATION
A.
B.
c.
D.
E.
F.
G.
H.
Claim of Columbia Bank for Cooperatives; Unsecured
Creditors; Employee Claims; Subordinated Debenture
Holders • • . . • . . • • • • • • • • . . • . .
Description and Classification of Claims and Interests
Treatment of Claims Not Impaired by the Plan
( Administrative Claims)
Treatment of Creditors Claims Impaired by the Plan
Funding of the Plan • • • • .
Post-Confirmation Operations of Reorganized Debtor
Liquidation of Non-Operating Assets
Administration of Liquidating Trust
i
3
3
3
4
5
5
6
7-11
11
14
15
20
23
24
26
• •
TABLE OF CONTENTS (continued)
III. DESCRIPTION OF FCX, INC,
A, In trod uc tion
1.
2.
3.
4,
5,
6.
7,
8,
The Debtor
Brief Historical Statement
Summary of Pre-Petition Operations
Summary of Post-Petition Operations
Sale of Assets to Gold Kist, Inc.
Sale of Assets to Southern States Cooperative, Inc.
Budget of Disbursements for Post-Confirmation
Operations of Reorganized Debtor ..... , ,
Litigation; Accounts Receivable; Reclamations
IV. ORDERLY LIQUIDATION OF FCX, INC.
A.
B.
c.
D.
Analysis of Debtor's Assets and Liabilities and Probable
Liquidation Values • . • . . . . . . • . • . .
Analysis of Debtor's Values Associated With Equities in
Other Cooperatives
Merger of FCX and CCF Pension Plans
Representations .
ii
27
27
28
29
29
30
31
33
33
34
37
39
40
EXHIBIT A.
EXHIBIT B.
EXHIBIT C.
• •
EXHIBITS
Debtor's Plan of Reorganization
Budget of Disbursements for Reorganized FCX, Inc. -
Post-Confirms tion
Pro Forma Projection
iii
• •
DISCLOSURE STATEMENT OF FCX, INC.
I. INTRODUCTION
A. PURPOSE OF DISCLCSURE STATEMENT. FCX ("FCX") or ("Debtor") is an
agricultural cooperative corporation incorporated in 1934 under the North
Carolina Cooperative Marketing Act as Farmers Cooperative Exchange, Inc. In
December of 1965, the corporate name was changed to FCX, Inc. The Debtor is
providing this Disclosure Statement (the "Disclosure Statement") to all of
its known creditors as of September 17, 1985, the date a voluntary petition
under the provisions of Chapter 11 of the United States Bankruptcy Code was
filed. This Disclosure Statement is furnished pursuant to Section 1125 of
the Bankruptcy Reform Act of 1978 (Pub. L.95-958), as amended, 11 U.S.C.
Section 101 ~ ~-(the ·"code"), in order to permit them to make an
informed judgment in exercising their right to vote on the Plan of
Reorganization ( the "Plan") described below. A copy of the Plan is attached
hereto as Exhibit A. The Disclosure Statement is being furnished to all
known creditors and parties in interest to inform them about the Plan and
their rights with respect thereto.
B. SOURCE OF INFORMATION. Except as otherwise expressly indicated,
the portions of this Disclosure Statement describing the Debtor, its business
and values associated with assets as well as the Plan have been prepared from
information furnished by the Debtor and materials and reports provided by
Deloitte, Haskins and Sells, Certified Public Accountants, acting as
financial advisors in this case, together with Peat, Marwick and Mitchell,
Certified Public Accountants acting as Court-appointed accountants. Where an
opinion is stated as to value, be it liquidation or otherwise, the identity
of the party asserting such opinion is set forth therewith.
c. FILING OF REORGANIZATION CASE; APPOINTMENT OF COMMITTEES. On
September 17, 1985, a voluntary petition under the provisions of Chapter 11
• •
of the United States Bankruptcy Code ( "Code") was initiated and filed by
Debtor herein, in the United States Bankruptcy Court for the Eastern District
of North Carolina ( "Bankruptcy Court"). The Debtor has operated from and
after September 17, 1985, pursuant to an Order Authorizing Operation of
Business and the terms of a Court-approved "Debtor-in-Possession Loan
Agreement" under the jurisdiction of the Bankruptcy Court. Upon filing, the
case was assigned to the Honorable A. Thomas Small, United States Bankruptcy
Judge.
Upon entry of the Order for Relief under Chapter 11, the Debtor became a
"Debtor-in-Possession" under the Code and since that time has operated its
business in such capacity pursuant to the aforesaid Order Authorizing
Operation of Business. The Debtor has filed the Plan and this Disclosure
Statement is furnished with respect to the Plan.
Pursuant to the applicable provisions of the Code, a committee of
creditors holding unsecured claims was appointed by the Court. The
membership of the creditors committee was determined by Court Order, and the
committee has been active in this case. The committee of unsecured creditors
has taken positions upon most of the substantive issues in the administration
of this case, and has devoted considerable time to the development of this
Plan.
In addition to the committee of unsecured creditors, the Court has
appointed a committee of subordinated debenture holders whose membership was
also determined by Court Order, and a committee of equity security holders
similiarly composed. While the Cammi ttee of subordinated debenture holders
has been active in this case and has participated in the development of this
Plan, the Cammi ttee of equity security holders ( to the best of the Debtor's
knowledge) has not.
-2-
• •
The participation by either committee does not, however, constitute an
endorsement of the Plan in its entirety or preclude individual creditors or
claimants from forming their own conscious and knowledgeable decisions.
D. MANNER OF VOTING ON PLAN. All creditors entitled to vote on the
Plan may cast their votes for or against the Plan by completing, dating and
signing the ballot for accepting or rejecting the Plan accompanying this
Disclosure Statement and filing it with the Bankruptcy Court. Such filings
may be accomplished personally or by mailing ballots to the Bankruptcy Court
at its address which is the United States Bankruptcy Court, Post Office
Drawer 2007, Wilson, North Carolina 27894-2007. The Bankruptcy Court will
fix a date, time and place for a hearing upon this Disclosure Statement and
subsequently upon confirmation of the Plan. Ballots must be submitted in
accordance with notice furnished by the Bankruptcy Court.
E. CONFIRMATION OF PLAN.
1. Solicitation of Acceptances. This Disclosure Statement has
been approved by the Bankruptcy Court in accordance with Section 1125 of the
Code and Bankruptcy Rule 3017 and is provided to each creditor, including
unsecured creditors and debenture holders, whose claim has been scheduled by
the Debtor or who has filed a proof of claim against the Debtor. It is also
being furnished to each party in interest requesting a copy of the same. The
Disclosure Statement is intended to assist creditors whose claims are
impaired in evaluating the Plan and in determining whether to accept or
reject the Plan. Under the Code, acceptance or rejection of the Plan may not
be solicited unless a copy of this Disclosure Statement is furnished prior to
or concurrently with such solicitation.
The Court's approval of this Disclosure Statement does not constitute a
recommendation either "for" or "against" the Plan.
-3-
•
2. Creditors Entitled to Vote on Plan. Only the votes of classes of
creditors whose claims or interests are impaired by the Plan will be counted
in connection with confirmation of the Plan. Generally, subject to the
specific provisions of Section 1124 of the Code, this includes any creditor
who, under the Plan, will receive less than payment in full in cash of the
allowed amount of their respective claims on the "EFFECTIVE DATE" (as defined
in the Plan) . The only class of claims which is not impaired by the Plan is
administrative claims and pre-petition statutory priority claims dealt with
specifically by the Code, although there is no a·ssurance of their payment.
All other classes of creditors' claims are impaired by the Plan.
Accordingly, the holders thereof are entitled to vote on the Plan. In
determining acceptance of the Plan, votes will be counted only if submitted
by a creditor whose claim is scheduled by the Debtor as undisputed, non-
contingent and liquidated, or who, prior to the hearing on confirmation, has
filed with the Bankruptcy Court a proof of claim which has not been
disallowed, disqualified or suspended prior to computation of the vote on the
Plan. The ballot which accompanies this Disclosure Statement does not
constitute a proof of claim. If you are uncertain whether your claim has
been correctly scheduled, you should examine the Debtor's schedules which are
on file with, and may be inspected at, the Bankruptcy Court in Wilson, North
Carolina. Alternatively, you may obtain information by contacting the office
of counsel for the Debtor, William H. McCullough, Esq., Sanford, Adams,
McCullough and Beard, Attorneys at Law, 414 Fayetteville Street Mall, Post
Office Box 389, Raleigh, North Carolina 27602-0389, [phone].
An earlier reference was made to the "effective date". The Plan defines
the "effective date" as "the first business day occurring on or after the
11th day after the confirmation date; provided, however, that if a stay of
-4-
• •
the Order confirming the Plan is in effect on such business day, then the
effective date shall be the first business day thereafter on which no stay of
Order confirming the Plan is in effect and the Order confirming the Plan has
not been vacated."
3. Hearing on Confirmation of Plan. The Bankruptcy Court will set a
date, time and place as the time for the hearing to determine whether the
Plan has been accepted by the requisite number of creditors and whether the
other requirements for confirmation of the Plan have been satisfied. The
hearing will be held at the United States Bankruptcy Court,
Room 208, 300 Fayetteville Street Mall, Raleigh, North
Century Station,
Carolina. Each
creditor and party in interest will receive, either with this Disclosure
Statement or separately, the Court's notice of hearing on confirmation of the
Plan.
4-Acceptances Necessary to Confirm Plan. At the confirmation
hearing, the Bankruptcy Court must d~termine, among other things, whether the
Plan has been accepted by each class (a '"class'") of creditors whose claims or
interests are impaired by the Plan. Under Section 1126 of the Code, an
impaired class is deemed to have accepted the Plan if (1) at least two-thirds
(2/3) in amount and (2) more than one-half (1 /2) in number of the allowed
claims or the interests in class members who have voted on the Plan have
voted to accept it. Further, unless there is unanimous acceptance of the
Plan by an impaired class, the Court must also determine that under the Plan
class members will receive property of a value, as of the effective date of
the Plan, that is not less than the amount the class members would receive or
retain if the Debtor were liquidated under Chapter 7 of the Code on the
effective date of the Plan. It is for this reason that the Debtor's
estimation of liquidation value as well as other estimations as to
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• •
liquidation values set forth in this Disclosure Statement are important and
should be examined carefully by all creditors and parties in interest.
5. Confirmation of Plan without Necessary Acceptances. The Plan may
be confirmed even if it is not accepted by all of the impaired classes if the
Court finds that the Plan was accepted by at least one (1) impaired class and
does not discriminate unfairly against, and is fair and equitable as to, all
non-accepting impaired classes. This provision is set forth in Code Section
1129(b) and requires that, among other things, the creditors in the impaired
classes must either receive the full amount of their claims or, if they
receive less, no class with junior liquidation priority may receive anything.
In seeking confirmation of the Plan, the Debtor may rely on this provision as
to non-accepting classes.
II. PLAN OF REORGANIZATION
The following is a brief summary of certain of the more significant
provisions of the Plan. This summary is qualified in its entirety by the
full text of the Plan, which all creditors and all parties in interest are
urged to review carefully. The Plan, if confirmed, will be binding upon the
Debtor, its creditors, subordinated debenture holders, members and all
parties in interest. Capitalized terms used but not defined in this
Disclosure Statement have the meaning ascribed to them by the Plan. For
purposes of this Disclosure Statement the Debtor has assumed an effective
date of July 31, 1986.
The Plan proposes an orderly liquidation of assets. The tax
consequences resulting therefrom will have no practical effect upon the
Debtor. The Debtor had available operating losses in excess of Twenty-Six
Million and and No/1OO Dollars ($26,000,000.00) and this loss carry forward
has increased during this case.
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• •
The Plan contemplates four (4) classes of creditors whose interests will
be impaired, including the Columbia Pank for Cooperatives, Columbia, South
Carolina ("CBC") , the Debtor's sole secured lender, general unsecured
creditors, subordinated debenture holders and equity security holders.
Pursuant to an agreement ( "the agreement") between the secured creditor, the
committees of unsecured creditors and debenture holders and the Debtor, the
secured creditor will compromise its claim, and the Debtor will liquidate its
assets. This agreement will result in a distribution of proceeds of
liquidation in a manner not consistent with the code, but which has been
consented to.
real,
A. CLAIM OF COLUMBIA BANK FOR COOPERATIVES; UNSECURED CREDITORS;
EMPLOYEE CLAH!S; SUBORDINATED DEBENTURE HOLDERS
The Plan contemplates an orderly liquidation of the Debtor's remaining
personal, tangible and intangible assets. Upon a final and
unappealable Order of the Pankruptcy Court confirming this Plan, CBC will
compromise its claim against the Debtor in the following manner:
( a)
Debtor's
Surplus"
balance of
CBC shall set off and apply the proceeds of all of the
interest in CBC (including all "C Stock" and "Allocated
of CBC owned by Debtor) at face value to the principal
loans and advances outstanding by CBC to Debtor;
(b) CBC shall apply Debtor's pre-petition interest payments
accrued after July 1, 1985, and Debtor's post-petition interest
payments as credits against and reductions of the principal balance
of Debtor's loan and subordinating CBC's claims for interest to the
claims of unsecured creditors and subordinated debenture holders as
more particularly set forth hereafter;
(c) CBC shall subordinate its super-priority claim for post-
petition loan advances made pursuant to the Debtor-in-Possession
Loan Agreement ( as amended from time to time) to the reasonable
costs of administration, as may be allowed by the Bankruptcy Court,
for counsel and financial advisors for the Debtor and counsel for
the unsecured creditors committee and subordinated debenture
holders committee. CBC reserves its right to object to allowance
of all such claims in its sole and absolute discretion;
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• •
(d) CBC shall waive its own super-priority claim for counsel
fees, expenses and related costs of administration;
(e) CBC shall also subordinate an additional One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00) of its claim to the payment of unsecured creditors and subordinated debenture
holders as more particularly set forth hereafter; and
( f) CBC shall fund through loans and advances made pursuant
to the Debtor-in-Possession loan Agreement settlement of the Debtor's potential liability to Energy Cooperative, Inc. ("ECI") in the amount of One Hundred Fifty-Six Thousand and No/100 Dollars ($156,000.00) which sum, together with CBC's release of its security interest in Debtor's participation in the bankruptcy
estate of ECI, will represent full satisfaction of Debtor's
liability to ECI, upon approval of the Bankruptcy Court, together
with reasonable counsel fees attendant thereto as may be approved
by the Bankruptcy Court. The Debtor's potential liability in this
matter has been footnoted in its audited annual financial
statements since 1981, and some claims asserted against Debtor by ECI substantially exceed One Hund red Million and No/100 Dollars
($100,000,000.00).
Other salient aspects of the Plan which impact upon classes of creditors
are as follows:
(a) The Committee of Unsecured Creditors will not enforce the decision of the United States District Court relating to payment of
certain pre-petition wage claims and grain payments, and the appeal
to the Fourth Circuit Court of Appeals by the Debtor will be
withdrawn.
(b) The Plan provides for a prompt liquidation of all non-operating assets of the Debtor remaining upon the conclusion of the
heretofore approved sale of operating assets to Southern States
Cooperative, Inc. of Richmond, Virginia ("Southern States"). In addition, the Plan proposes the establishment of a liquidating
trust, to liquidate the investments of Debtor in other cooperatives
(with the exception of Gold Kist, Inc. of Atlanta, Georgia ("Gold Kist"), FFR, Universal offsets, and CBC).
The Plan provides for distribution of proceeds from sales of Debtor's
assets in payment of the claims of CBC, unsecured creditors, employee claims,
subordinated debenture holders and others whose claims are extended priority
under the provisions of the Code summarized as follows:
(a) Columbia Bank for Cooperatives. The "compromised" claim
of the Columbia Bank for Cooperatives, compromised as set forth herein shall be satisfied out of the proceeds of various sales of
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• •
assets to Gold Kist, previously approved by the Court, proceeds of
the sale of assets to Southern States previously approved by the
Bankruptcy Court, and pending sales of real estate and other non-
opera ting assets including Gold Ki st equity except, as modified
hereafter in the case of the "Morrisville" property.
In the event that the CBC has not received payment in full of
its compromised claim following the liquidation of all operating
and non-operating assets of the Debtor, then and only then, the
Bank shall receive the first proceeds of the liquidation of
investments in other cooperatives pursuant to the terms of the
liquidating trust until its claim, as reduced, is paid in full.
A specific share of the proceeds from the sale of the
Morrisville property, limited to 'Iwo Million Four Hundred Thousand
and No/ 1 00 Dollars ( $2, 400,000.00), regard less of whether CBC' s
subordinated claim has been paid in full, has been set aside for
the benefit of unsecured creditors as provided hereafter.
(b) Unsecured Creditors.
(i) Under the proposed Plan, the unsecured creditors will
receive, if available, a "MINIMUM DISTRIBUTION" of Five
Million and No/100 Dollars ($5,000,000.00). Upon the sale of
Debtor's real property in Morrisville, North Carolina, 'Iwo
Nillion Four Hundred Thousand and No/100 Dollars
($2,400,000.00) of the net proceeds therefrom will be placed
in an interest-bearing escrow account and distributed to the
unsecured creditors on account of their minimum distribution
which sum, together with the interest earned thereon, will be
distributed to the unsecured creditors upon consummation of
the proposed Plan, provided, however, that priority payments
required under Sections 503 and 507 of the Code to pre and
post-petition claimants have been satisfied in fulL
(ii) After application of the 'Iwo Million Four Hundred
Thousand and No/100 Dollars ($2,400,000.00) fund together with
interest earned thereon, as aforesaid to payment of the
minimum distribution, subject only to the payment of pre-and
post-petition priority claimants, and to the extent not.needed
to satisfy payment of the C"~'s reduced claim as aforesaid,
unsecured creditors will receive the next proceeds of the
liquidation of operating and non-operating assets until they
receive the balance of the minimum distribution provided for
herein.
(iii) In the event that the available proceeds of the
liquidation of non-operating assets are insufficient to pay
the unsecured creditors the balance of their minimum
distribution, then, and only then, the unsecured creditors
shall receive proceeds from the liquidating trust until they
receive the balance of the minimum distribution provided for
herein.
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• •
(iv) Should the proceeds of the liquidation of non-operating assets produce funds in excess of the amount necessary to pay the unsecured creditors the balance of their minimum distribution, then, and in that event, all such excess funds shall be divided equally between the unsecured creditors and CBC until all such excess funds have been exhausted or the subordinated claim of the CBC has been paid in full. In the event the subordinated claim of CBC is paid in full, any excess funds shall be paid to the unsecured creditors until all excess funds have been exhausted. In the event the unsecured creditors claims are paid in full, any excess funds shall be paid to the liquidating trust established for the benefit of the subordinated debenture holders.
(c) Employee Claims. On the effective date of the Plan, the CBC will release its secured interest against the over-funded pension plan acquired by the Debtor effective July 1, 1980 by merger with Central Carolina Farmers' Exchange, Inc. ("CCF"), provided that the Debtor is successful in merging that plan (CCF plan) in to the existing FCX pension plan. CBC releases its security interest in said over-funded portion of the CCF pension plan and further waives in favor of employees of FCX the right of CBC to secure a.r.y excess over-funding of the FCX plan occasioned by said merger.
Pre-petition priority claims of employees for wages, vacation pay, sick pay and other claims provided priority by Section 507 of the Code are dealt with as an unimpaired class of creditors under the terms of the Plan. In addition, post-petition claims for such matters are treated as costs of administration claims under the Plan, payment for which is provided on the effective date of the Plan or as soon thereafter as such claims may be determined and allowed. Payment of pre-petition priority claims shall be in accordance with the provisions, and limitations, of the Code.
The Debtor has heretofore amended its Schedules to set forth amounts finally owing to employees according to its records and best judgment, and has in addition thereto provided severance pay for employees whose jobs were terminated as a result of the sale of assets to Southern States the details with respect to which are more particularly set forth in a stipulation regarding Debtor's Motion for an Order Extending the Period of Exclusivity to file this Plan. The CBC agrees to subordinate that portion of the severance pay claim relating to any payment in excess of one month to the extent not paid for by Southern States to the unsecured and subordinated debenture holders.
(d) Subordinated Debenture Holders.
(i) Following satisfaction of CBC's compromised claim, priority claims and the minl.ll1um distribution to unsecured creditors, subordinated debenture holders shall receive the available proceeds of the investments in other cooperatives as
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• •
liquidated through the liquidating trust, except for the
Debtor's interest in CBC, Gold Kist, FFR and Universal, until
they receive a total distribution of up to Five Million and
No/ 1 00 Dollars ( $5,000,000.00). In the event that the
proceeds of the liquidating trust provide a surplus after
payment to the subordinated debenture holders of Five Million
and No/ 1 00 Dollars ( $5, 000, 000. 00), then and only then, any
such excess shall be divided between the subordinated
debenture holders, the CBC (until it receives payment in full
of its "subordinated" claim), and the unsecured creditors
(until they receive payment in full of their claims) one-third
(1/3), one-third (1/3) and one-third (1/3).
( ii) The liquidating trust is more particularly dealt
with in the Plan, and a copy of the proposed trust agreement
is attached to the Plan and incorporated therein by reference.
The foregoing is a brief summary of the Plan and its distributive
scheme. Distributions contemplated therein are contingent upon realization
of values for assets upon liquidation. ACCORDINGLY NO PRESUMPTIONS OF
MINIMUM DISTRIBUTIONS SHOULD BE MADE.
In the opinion of the Debtor, but for the concessions of the CBC, and
the distribution method provided in the Plan, it would not be likely that
either unsecured creditors or subordinated debenture holders would receive
any payment.
B. DESCRIPTION AND CLASSIFICATION OF CLAIMS AND INTERESTS.
The Plan divides claims and interests into four (4) separate classes
listed below. The number of claimants in each class and their respective
claims are based upon the books and records of the Debtor as of September 17,
1985 ( the date on which Debtor filed its petition in the Bankruptcy Court) as
reviewed and adjusted through June 30, 1986. The Debtor expects that there
will be no material change in the number or amount of these claims and
interests prior to the hearing on confirmation.
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• •
ADMINISTRATIVE CLAirS.
Administrative claims includes, costs or expenses of administration of
the Debtor's reorganization, including any actual, necessary expenses of
preserving or liquidating the Debtor's estate, any actual, necessary expenses
of operating the Debtor's business, and all allowances approved by the Court
in accordance with Section 364(b) of the Code. Provided, however, the CBC
has agreed to subordinate its super-.priority claim for post-petition loan
advances made pursuant to the Debtor-in-Possession Loan Agreement as amended
from time to time to the reasonable costs of administration, as may be
allowed by the Bankruptcy Court, for counsel and financial advisors for the
Debtor and counsel for the unsecured creditors' committee and subordinated
debenture holders' committee. The CBC has, however, reserved its right to
object to the reasonableness of the amount of such allowances. It is
estimated that the total amount of costs of administration claims in this
case, including expenses incurred by the Debtor in the ordinary course of
business, will approximate One Million and No/100 Dollars ($1,000,000.00).
The amount of administrative claims will increase as the case continues.
OTHER PRIORITY CLAIMS.
These are claims entitled to priority under Sections of the Code;
507(a)(3), 507(a)(4), 507(a)(5), 507(a)(6) or 507(a)(7). Schedules filed
with the Bankruptcy Court as amended, reflect priority indebtedness of Three
Million Four Hundred Seventy-Four Thousand Nine Hundred Forty-Four and 55/100
Dollars ($3,474,944.55) consisting of certain wages, vacation µ,.y, sick
leave, contributions to employee benefit plans and taxes of whatever nature
or description µ,.yable by the Debtor.
These claims are identified as follows:
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a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
1.
m.
n.
•
Elnployee Vacation Pay
Elnployee Commissions
Employee Separation, Retirement and
Ponus Pay
Elnployee Salary Owed 9/1 5/85
(Paid After 9/1 6/85)
Employee Sick Le.ave
•
Aetna Life Insurance Co. claims incurred
prior to 9/1 6/85
Nationwide Insurance Co. Pension
Contributions due 6/30/85
Nationwide Insurance Co. Pension
Contribution -Elnployee
Pension Contribution Elnployee -Voluntary
Estimated FCX Contributions
3/1/85 to 9/16/85
Federal Withholding and FICA due
3rd Quarter -1 S65
FCX Portion FICA (Paid After 9/16/85)
NC and SC Withholding (Paid After 9/16/85)
SC Unemployment Tax
NC Unemployment Tax
Various Other Taxes
Total:
$ 258,033.17
$ 21,295.95
$ 14,568. 58
$ 87 4, 092 . 80
$ 21,020.16
$ 372, 000. 00
(estimated)
$ 295,205.00
$ 44,170.88
$ 11,435-46
$ 40,000.00
$ 244,667.05
$ 62,329.02
$ 79,335.33
$ 16,527-95
$ 69,791-18
$1,050,472.02
$3,474.944. 55
Many of the claims are subject to verification and allowance and, as
noted, some were paid post-petition with Court approval.
CLASS I. COLUMBIA BANK FOR COOPERATIVES.
Claims of the CBC are secured by a first lien on all of the Debtor's
assets including real, personal property, accounts receivable and proceeds
and general intangibles, to the extent of the value of the CBC's interest in
such property. Schedules filed by the Debtor, as amended, with the
Bankruptcy Court reflect the total claim for CBC on or about the date of
filing of Fifty-Nine Million Eighty-Eight Thousand Thirty and No/100 Dollars
($59,088,030.00).
CLASS II. GENERAL UNSECURED.
These are all general unsecured claims of whatever. description not
constituting claims in other classes. The Class II claims approximate Twelve
Million and No/100 Dollars ($12,000,000.00).
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•
CLASS III. SUBORDINATED DEBENTURE HOLDERS.
These are claims of subordinated debenture holders which the Debtor
reflected upon its Schedules, as amended, filed with the Bankruptcy Court as
Eight Million Six Hundred Ninety-Six Thousand Six Hundred Thirty and 95/100
Dollars ($8,696,630.95) together with One Hundred Fifty-Four Thousand Nine
Hundred Twenty-Five and 71/100 Dollars ($154,925.71) of interest accrued,
Fifty-Seven Thousand Four Hundred Thirty-One and 40/100 Dollars ($57,431.40)
of reinvested debenture interest and Twenty-Five Thousand Four Hundred Fifty-
One and 40/100 Dollars ($25,451.40) of debenture interest under One and
No/100 Dollar ($1.00).
CLASS IV. EQUITY SECURITY HOLDERS; MEMBERS.
These are the holders of common and preferred stock and certificates of
equity issued by the Debtor.
c. TREATMENT OF CLAIMS NOT IMPAIRED BY THE PLAN (ADMINISTRATIVE CLAIMSAND PRIORITY CLAIMS)"":"
All administrative and priority claims will. be psid in cash in foll upon
the entry of an Order of the Bankruptcy Court allowing such administrative
claims or the effective date of the Plan or as soon thereafter as may be
practicable. Any administrative claim representing a liability incurred in
the ordinary course of business of the Debtor may be psid in cash in the
ordinary course of business. The claims and legal, equitable and contractual
rights of priority claimants, will be deemed unimpgired in conformity with
the provisions of Section 1124(2) of the Code. Any claims within any of the
foregoing Classes which are disputed as of the date they would otherwise be
psid will be psid within a reasonable time following resolution of such
dispute.
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• •
FCX will be liable for payment of claims "run-off" under its pre-
existing accident and heal th insurance. A "run-off" claim is a claim
asserted against the insurance company after notice of termination but prior '
to dissolution of the Plan. FCX proposes to insure this run-off liability
with the Aetna Life Insurance Company, pursuant to a written insurance
agreement, for a premium of approximately Two Hundred Ninety-Four Thousand
Thirty-Three and No/ 1 00 Dollars ($294,033.00) paid in a 1 ump sum or
approximately Two Hund red Ninety-Six Thousand Two Hund red Ninety-Two a'ld
No/100 Dollars ($296,292.00) paid in three (3) equal installments. '.i"he
Debtor is entitled to credits for payments heretofore made.
D. TREATMENT OF CREDITOR CLASSES IMPAIRED BY THE PLAN. ------
1. CLASS I. COLUMBIA BANK FOR COOPERATIVES.
The Class I claim• of the CBC is impaired in that the same shall not be
paid in full upon the effective date of the Plan. While the claim of the CBC
is impaired, such impairment is by consent and generally establishes a
framework for treatment of the secured claim summarized as follows:
(a) Application of all "C stock" and "Allocated Surplus" of
CBC owned by the Debtor at face value to the principal balance of
loans and advances by CBC to the Debtor.
(b) All interest accrued and payments made after July 1,
1985, by the Debtor to CBC applied to interest shall be reapplied
as reductions in the principal balance of Debtor's loans and
further that all pre-and post-petition interest after July, 1985,
shall be subordinated to claims of unsecured creditors and
subordinated debenture holders to a maximum of Five Million and
No/100 Dollars ($5,000,000.00) each. The subordination as to the
unsecured creditors' minimum distribution shall be followed by a
·one-half (1/2) and one-half (1/2) distribution of funds in excess
of the minimum distribution between the subordinated claim of the
CBC and unsecured creditors.
The subordination as to the subordinated debenture holders'
minimum distribution shall be followed by a one-third (1/3), one-
third (1 /3) and one-third (1 /3) distribution of funds in excess of
such minimum distribution between the subordinated claim of the
CBC, unsecured creditors and subordinated debenture holders.
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• •
(c) An additional subordination by CBC of its lien i:osi tion and super-priority claim for i:ost-peti tion loan advances made pursuant to the Debtor-in-Possession Loan Agreement for counsel fees of the Debtor, its financial consultant as well as counsel for the unsecured creditors and subordinated debenture hold er committees. In this regard, CBC reserves its rights to object and be heard, in its sole discretion, as it deems appropriate.
(d) A waiver by CBC of its own right to seek reimbursement for counsel fees, expenses and related costs of administration.
(e) Subordination of One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00).
(f) CBC has agreed to advance an additional One Hundred Fifty-Six Thousand and No/100 Dollars ($156,000.00) together with reasonable counsel fees attendant thereto to fund a settlement with Energy Cooperative, Inc., subject to approval by the Bankruptcy Court. The Debtor's i:otential liability in this matter has been footnoted in its audited annual financial statements since 1981, and some claims asserted against Debtor by WI substantially exceed One Hundred Million and No/100 Dollars ($100,000,000.00).
Upon confirmation of the Plan, the claim of CBC shall be reduced by the
aggregate amount of the credits and subordinations hereinbefore set forth and
its compromised claim shall thereupon be paid in full. The compromised claim
shall be first satisfied from proceeds generated from Court-approved sales to
Gold Kist and Southern States. CBC shall. also apply the proceeds from sales.
or redemptions of other assets as may be necessary to satisfy the compromised
claim of CBC.
If the adjusted and reduced claim of CBC has not been satisfied
subsequent to application of proceeds as identified herein, then and in that
event, CBC shall receive the first proceeds of liquidation of non-operating
assets until such compromised claim is paid in full. In the event that such
compromised claim has not been paid in full after exhaustion of proceeds
resulting from the liquidation of non-operating assets, CBC shall receive the
first proceeds of the liquidation of investments in other cooperatives
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• •
pursuant to the terms of the liquidating trust, until its claim, as reduced
and compromised is pa id in full.
While the CBC's compromised claim shall be paid in full as hereinabove
set forth, the portion of its claim subordinated to. the minimum distributions
to unsecured creditors and subordinated debenture holders shall receive
payment only upon receipt of the sum of Five Million and No/100 Dollars
($5,000,000.00) by the unsecured creditors and subordinated debenture holders
each. Provided, however, in the case of the liquidation of non-operating
assets, upon receipt by the unsecured creditors of the minimum distribution
of Five Million and No/100 Dollars ($5,000,000.00), then, and in that event,
all such excess funds shall be divided equally between the unsecured
creditors and CBC until CBC has received the total amount of its subordinated
claim. CBC has agreed in. connection therewith that upon the sale of the
Debtor's real property located in Morrisville, North Carolina, up to Two
Million Four Hundred Thousand and No/100 Dollars ($2,400,000.00) of the net
proceeds therefrom will be placed in an interest-betaring escrow account and
distributed to the unsecured creditors on account of their minimum
distribution which sum, together with the interest thereon, will be
distributed to the unsecured creditors upon consummation of the proposed
Plan. Notrittlehnding its security interest upon such real property, CBC has
agreed that such real property, up to Two Million Four Hundred Thousand and
No/100 Dollars ($2,400,000.00) of the proceeds from the sale thereof shall be
in any event, subject to entry of final non-appealable Order of Confirmation,
made available to unsecured creditors, subject to pre-and post-petition
priority claims, for application upon the minimum distribution to that Class •
.. -17-
• •
Investments in other cooperatives (except for those investments
liquidated for the CBC and the unsecured creditors) shall be liquidated
through a 1 iquid a ting trust for the benefit of subordinated debenture
holders, subject only, to the right of the CBC to receive its compromised
claim in full, and to the minimum distribution of Five Million and No/1 00
Dollars ($5,000,000.00) to unsecured creditors, Provided , however , in the
event that the proceeds of the liquidating trust provide a surplus after
payment to the subordinated debenture holders of Five f'<illion and No/100
Dollars ($5,000,000.00), then, and in that event, any such excess shall be
divided between the subordinated debenture holders, unsecured creditors and
CBC until the latter receives payment in full of the subordinated amounts of
its claim one-third (1/3), one-third (1/3) and one-third (1/3). Subordinated
debenture holders shall not be entitled to proceeds available in the
liquidating trust until the minimum distribution hereinabove set forth to
unsecured creditors and the compromised claim of CBC have been paid.
2. GENERAL UNSECURED.
Class II claims will receive a distribution from the proceeds
attributable to the Debtor's orderly liquidation. Subject only to receipt by
CBC of its adjusted and compromised claim, unsecured creditors shall receive
the first proceeds from liquidation of non-operating assets. until such class
of creditors shall have received a minimum distribution of Five Million and
No/100 Dollars ($5,000,000.00) including interest earned on the Morrisville
sums. Upon receipt of a minimum distribution of Five Million and No/100
Dollars ($5,000,000.00) from the liquidation of non-operating assets,
proceeds in excess of such amount shall be divided equally between the
unsecured creditors and the CBC as hereinabove set forth. The right of the
CBC to share in the proceeds in excess of the minimum distribution from the
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• •
liquidation of non-operating assets shall be limited to the total amount of
its subordinated claim.
Unsecured creditors will receive in any event, subject to entry of non-
appealable Order, the net proceeds from the sale of the Debtor's real
property located in 1'.orrisville, North Carolina up to Two Million Four
Hundred Thousand and No/100 Dollars ($2,400,000.00), together with the
interest earned thereon upon consummation of the Plan. Sue h proceeds,
including interest earned, will be distributed to unsecured creditors for
application upon the minimum distribution to such Class of Five Million and
No/100 Dollars ($5,000,000.00) and shall not be subject to the prior lien and
super-priority claim of CBC. Such payment shall, however, be subject to
rayment of allowed priority claims as provided by the Code.
3. SUBORDINATED DEBENTURE HOLDERS.
Subordinated debenture holders shall receive proceeds from the
liquidation of the Debtor's investments in other cooperatives, except CBC,
Gold Kist, FFR and Universal, up to a minimum distribution of Five Million
and No/100 Dollars ($5,000,000.00), subject only to the prior claims of the
CBC to receipt in full of its compromised claim and the claims of the class
of unsecured creditors to its minimum distribution of Five Million and No/100
Dollars ($5,000,000.00). The Debtor shall liquidate its investments in other
cooperatives through a liquidating trust. Holders of subordinated debentures
shall receive certificates of i:articipa tion in the liquidating trust. In the
event that the proceeds of the liquidating trust provide a surplus after
payment to such class of Five Million and No/100 Dollars ($5,000,000.00),
then and in that event, any such excess shall be divided between the
subordinated debenture holders, unsecured creditors and CBC. No class of
· -1 9-
•
creditors except secured creditors, shall be entitled to receive more than
the face amounts of their claims in full.
4. EQUITY SECURITY HOLDERS; MEMBERS.
As used herein, the term "equity security holders" means holders of
preferred stock, common stock ( which is membership stock) and certificates of
equity issued by the Debtor. The holders of such certificates of equity,
preferred stock and common stock shall receive no distribution tmless, and
until, all claims hereinabove set forth have been paid in full. The Debtor
does not anticipate that proceeds will be generated from the orderly
liquidation of its remaining operating and non-operating assets to result in
a dividend to equity security holders. The Plan provides that such
certificates, stock or other evidences of equity shall be cancelled and
deemed to be of no value.
E. FUNDING OF THE PLAN.
The funds required to implement this Plan will be provided through the
Debtor's Plan of orderly liquidation requiring disposition of its remaining
operating and non-operating assets for the benefit of all classes of
creditors. The Court has heretofore approved the sale of certain operating
assets to Gold Kist and Southern States. The remaining assets consist of
certain tracts of real property, inventories not sold to Gold Kist or
Southern States, personal properties associated with the Debtor's home office
and field operations not purchased in the prior-approved sales, certain
accounts receivable and other non-operating intangible assets having a book
value of approximately Five Million and No/1OO Dollars ($5,000,000.00). The
Debtor believes that the market value of such assets may be in excess of its
book value though no representation as to the same may be made with
assurance. In addition to the liquidation of tangible assets hereinabove set
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forth, the reorganized Debtor will also be charged with the liquidation of
certain investments in other cooperatives, principally CF Industries, Inc.,
totaling in the aggregate approximately Twelve Million and No/100 Dollars
($12,000,000.00). It is very difficult to assess the value of such interests
in other cooperatives as there are no legally enforceable redemption policies
regarding the same.
The Debtor will seek to maximize the values associated with the
liquidation of such tangible and intangible assets through management of the
reorganized, liquidating Debtor. Such management shall be governed by a
reconstituted Foard of Directors effective upon consummation of the Plan of
Reorganization and maybe, at their election, composed of representative
interests of unsecured creditors, subordinated debenture holders and the CBC.
In the period prior to confirmation, the Debtor has operated in
accordance with the terms of the Debtor-in-Possession Loan Agreement and in
connection therewith CBC has made from time-to-time certain loan advances
entitled to a super-priority lien position as authorized by the Bankruptcy
Court. The reorganized Debtor shall operate for the purpose of effecting an
orderly liquidation of its remaining assets and shall do so upon a budget
designed to reduce the size of its operations progressively as liquidation
continues. A copy of the Debtor's budget with respect to such proposed
operations in the post-confirmation period is attached to this Disclosure
Statement and incorporated herein by reference.
Such opera ting budget for the reorganized Debtor, post-confirmation, may
be at the discretion of the CBC, sole and absolute, funded by continuing
advances under the terms of the Debtor-in-Possession Loan Agreement, which is
ratified and affirmed by the terms of the Plan, subject to the adjusted and
compromised claim of the CBC, and shall continue until the CBC has received
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•
payment in full of its compromised claim. Thereafter, the Debtor shall fund
its operating needs by utilization of revenues generated from liquidation of
non-operating assets. The Debtor will draw upon such funds for ·the purpose
of funding its budgetary requirements until such orderly liquidation has been
completed.
1 . D.lring the period prior to payment in full of the CBC' s compromised
claim, additional loan advances may be, in the discretion of CBC, will be
made from time to time as requested by the Debtor and consistent with the
terms of its post-confirmation operating budget. The funding requirements of
the operating budget subsequent to i:ayment in full of the adjusted and
compromised claim of CBC shall be realized from the retention by the Debtor
of proceeds generated from liquidation of assets, collection of receivables
and other funds which may be available to it at that time.
2. The CBC has agreed to subordinate its claim to the approved and
allowed claims for professional fees associated with the cost of
administration of this Chapter 11 case. Such subordination is applicable. to
the Debtor's counsel, financial advisors, counsel for the committee of
unsecured creditors and the committee for subordinated debenture holders, and
shall terminate upon payment of the compromised claim of CBC.
3. Claims entitled to priority under Section 507 of the Code before
payment to 1msecured creditors or subordinated debenture holders shall be
paid the amount entitled to such priority first from proceeds generated from
the Two Million Four Hundred Thousand and No/100 Dollars ($2,400,000.00)
arising from Morrisville property sale, together with interest earned
thereon, liquidation of assets, collection of receivables and other funds
which may be available to the Debtor subsequent to payment in full of CBC's
compromised claim. For purposes of the minimum distribution, unsecured
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crcditora shull not include allowed udrniniatrutivo und priority creditors
whose clnirns . shnll be oo tisfierl in full prior to nny other unsecured
creditors, from proceeds ot the $2,400,000.00, if required.
4-The Debtor believes that through realization of proceeds from the
sale of assets to Gold Kist and Southern States and through the liquidation
and application of proceeds resulting from other sales, that CBC's
compromised claim will have been satisfied within a period not greater than
six (6) months from the date of confirmation of the Plan. The funds
necessary to implement each and every provision of the Plan will be available
either as a result of the bank's prior subordination through payment thereof
or from the realization of proceeds and subsequent liquidation.
F. POST-CONFIRMATION OPERATIONS OF REORGANIZED DEBTOR.
The Debtor anticipates an approximate eighteen· (18) month period for
operations of the reorganized Debtor. Such operations shall be consistent
with the Plan and limited to an orderly liquidation of remaining tangible and
intangible. assets. In addition, management shall assist counsel and
professional staff in the administration of tlu.s Chapter 11 case. including
develoµnent and presentation of financial data and material as well as an
analysis of objectionable claims and prosecution thereof.
1. Management of the reorganized Debtor shall be vested in a
reconstituted board of directors composed of individuals selected from
representative interests of this Chapter 11 case consenting to serve. The
Board shall take office on the date of confirmation of the Plan and shall
consist of five (5) members. The board will have offered for selection as
follows: one (1) member selected by CBC, two (2) members selected by the
committee of unsecured creditors and two (2) members sel'ected by the
committee of subordinated debenture holders. This roe onsti tuted board of
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directors shall be responsible for and charged with the liquidation of the
Debtor's remaining tangible and intangible assets but, however, shall be held
harmless and indemnified from any claims asserted against them individually
in the exercise of such responsibility in good faith, The reconstituted
board of directors shall administer the terms of the confirmed Plan in all
respects and furnish on a quarterly basis a report as to the status of the
liquidation of assets, and distribution of proceeds related thereto.
If the offer of appointment as set forth herein is not accepted, the
reorganized Debtor will appoint a Board fairly representing the interests of
the FCX case.
2. The reconstituted board of directors shall implement a system for
the periodic distribution of proceeds to unsecured creditors.
3, The Plan contains certain affirmative and negative operating and
reporting covenants to be observed by the reorganized Debtor between the
confirmation date and the date that the Debtor satisfies its obligations
under the Plan, Fach of these covenants and restrictions should be examined
by creditors and parties in interest as a part of an analysis of the Plan.
4, The Debtor is obligated to promptly liquidate its assets in
accordance with the Plan and the Court shall retain jurisdiction for the
purpose of resolving disputes, if any, relating to such liquidation,
G, LIQUIDATION OF NON-OPERATING ASSETS
The Plan proposes an orderly liquidation of Debtor's remaining assets.
furing the post-confirmation period, the Debtor will seek to maximize values
associated with real and personal property and to distribute the same in
accordance with the terms of the Plan. Proceeds obtained through realization
of investments in other cooperatives will be managed and subsequently
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distributed in accordance with the terms of the liquidating trust which is
more particularly discussed hereafter.
The Debtor has heretofore sold with approval of the Bankruptcy Court
substantially all of its operating assets. The Debtor's assets presently
consist of certain parcels of real property, miscellaneous inventories not
purchased by Gold Kist or Southern States, machinery and equipment, related
personal property, deposits and cash reserves and other miscellaneous assets.
The Plan proposes that these assets will be promptly liquidated and
values realized upon under the direction of the reconstituted board of
directors hereinbefore referred to as well as the Court who shall retain
jurisdiction for this purpose. As noted in the projected budget for post-
confirmation operations, the Debtor anticipates a diminishing staff and a
reduction of cost of operations or liquidation progresses. The Debtor
estimates that a period of approximately eighteen (18) months will be
necessary to complete the process of liquidation. The statement of remaining
assets reflects "book value" as well as "market value". In many instances,
these figures differ greatly and reflect the depreciated cost of the facility
as opposed to what current appraisal suggests the same may be worth. While
it is difficult to project the realization of market values, the Debtor does
anticipate that assets will be sold for book value or in excess thereof
during this remaining process of liquidation. In many instances, the
properties proposed to be sold are "single purpose" facilities, and as a
result thereof may not realize market values heretofore associated therewith.
The Debtor pledges its best efforts during this process of orderly
liquidation to realize upon such values,
The Debtor reserves unto itself and its reconstituted board of directors
the absolute and sole discretion as to methodology used in liquidation
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•
provided that such is consistent with the Plan and the Code. The Plan
proposes a system for notice to creditors with respect to liquidation of
certain assets while others may be liquidated without approval conditioned
upon minimum requisite values achieved therefore. Creditors and parties in
interest are urged to read the Plan for a further explanation of the I:ebtor' s
post-confirmation liquidation operation. An analysis of probable liquidation
values is set forth hereafter.
H. ADMINISTRATION OF LIQUIDATING TRUST.
The I:ebtor' s interest in other cooperatives, with the exception of those
hereinabove specified, shall be liquidated and the proceeds derived therefrom
held in a liquidating trust for the use and benefit of CBC, unsecured
creditors and subordinated debenture holders. The purpose of the liquidating
trust is to receive and hold funds attributable to the liquidation of the
I:ebtor' s interest in other cooperatives in accounts and investments
appropriate under the circumstances.
agreement is attached to the Plan.
A specimen copy of the proposed trust
The trust shall be administered by a
designated trustee who, as appropriate, shall distribute the proceeds thereof
to such parties entitled to the same under the terms of the Plan and the
Trust Agreement.
Trust.
All costs attributable to such Trust shall be borne by the
In summary, the proceeds held in the liquidating trust shall be for the
use and benefit principally of subordinated debenture holders, subject only
to the prior claims of the CBC to receipt in full of its compromised claim
and the claim of the class of unsecured creditors to a minimum distribution
of Five Million and No/100 Dollars ($5,000,000.00), together with the right
of the CBC to share one-third (1/3), one-third (1/3) and one-third (1/3) in
proceeds in excess of the minimum distribution to subordinated debenture
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• •
holders. Holders of such subordinated debentures shall receive from the
Tub tor within thirty (30) days of the date of confirmation of the Plan
replacement certificates of i:erticipation in the liquidating trust. Holders
of subordinated debentures are encouraged to read the provisions of the Plan
and the associated liquidating trust for the specific terms of its
administration and procedures for distribution.
III. DESCRIPTION OF FCX, INC ..
A. Introduction.
By virtue of Court-approved sales of assets to Gold Kist and Southern
States, the Tub tor is without an op>rating cai:ecity. Prior to its sales of
operating assets, FCX was an ag ric ul tur al cooperative corporation
headquartered in Raleigh, North Carolina. The Tubtor was incorporated in
1934 under the North Carolina Cooperative Marketing Act as Farmers
Cooperative Exchange, Inc.
changed to FCX, Inc.
1. The Debtor.
In Tucember of 1965, the corporate name was
The Tubtor transacted business in the states of North and South Carolina
and served the agricultural interests therein. Any producer of agricultural
products was able to become a member of FCX by purchasing one (1) share of
One Dollar and No/100 Dollars ($1. 00) common stock and thereafter purchasing
supplies from or marketing products with FCX at least one in a period of two
consecutive fiscal years. As a centralized cooperative, FCX transacted
business directly with its members. Its business and affairs was vested in a
board of directors elected by the members at annual meetings.
While operational, FCX was a purchasing and marketing cooperative. It
purchased supplies and equipment and marketed products and commodities for
its members. In addition, the Tub tor also transacted business with non-
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• •
members; however, the North Carolina Cooperative Marke ting Act required that
FCX transact more business with members than non-members.
met such requirement.
2. Brief Historical Statement.
The Debtor always
Effective July 1, 1980, Central Carolina Farmers Exchange, Inc., an
agricultural cooperative marketing corporation headquartered in Durham, North
Carolina ( "CCF") was merged in to FCX with FCX being the surviving
corporation.
FCX was one (1) of eight (8) agricultural cooperatives who were
shareholders of Energy Cooperative, Inc. ( "Ex::I"), a Delaware corporation
which operated a petroleum refinery at East Chicago, Indiana. In May of
1981, BcI filed a petition for reorganization under the Bankruptcy Code in
the Bankruptcy Court for the Northern District of Illinois. In 1981, FCX
wrote-off the investment in BcI of Six Million Eight Hundred Twenty-Six
Thousand Seven Hundred and No/100 Dollars ($6,826,700.00). The Debtor has
reached agreement with all parties in interest in connection with the Et:I
matter and proposes as a part of its Plan that the CBC will fund through
loans and advances made pursuant to the Debtor-in-Possession loan Agreement
such settlement of the Debtor's potential liability. Under the terms of the
settlement, FCX, Inc., will pay the sum of One Hundred Fifty-Six Thousand and
No/100 Dollars ($156,000.00) which sum, together with CBC's release of its
security interest in the Debtor's participation in the bankruptcy estate of
Ex::I, will represent full satisfaction of the Debtor's liability to BcI upon
approval of the Bankruptcy Court together with reasonable counsel fees
attendant thereto as may be approved. The Debtor's maximum exposure exceeds
One Hundred Million and No/100 Dollars ($100,000,000.00).
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• •
3. Summary of Pre-Petition Operations.
Prior to the initiation of this case, the Debtor was experiencing
significant annual losses. For fiscal year ending June 30, 1985, the Debtor
lost approximately Nine Million Three Hundred Thousand and No/100 Dollars
($9,300,000.00). FCX had historically funded its capital expenditures and
working capital requirements in excess of internal funds from two (2) primary
external sources: a public offering annually to legal residents of North
Carolina only of subordinated investment debentures with maturities of less
than five (5) years each and bank lines of credit with the CBC. In September
of 1985, the Debtor was advised by the CBC that it was unwilling to fund
continued operations. As a result, the Debtor initiated this Chapter 11 case
on the 17th day of September, 1985.
4. Summary of Post-Petition Operations.
From and after the initiation of this Chapter 11 case on September 17,
1985, the Debtor has operated in accordance with the provisions of Chapter 11
of the Code, its Order Authorizing the Operation of Business and the
provisions of the Debtor-in-Possession loan Agreement approved by the
Bankruptcy Court. The Debtor's board of directors explored a number of
alternatives including continued operations, financial reorganization and
sale of all or a portion of its operating assets. Operating losses continued
in the post-petition period in an amount approximating One Million and No/100
Dollars ($1,000,000.00) per month.
The Debtor was unable to obtain commitments for continuing operating
lines of credit either from CBC or from other sources in amounts sufficient
to justify the formulation of a Plan contemplating continued operations. In
addition, an analysis of probable success of litigation with CBC regarding an
involuntary use of cash collateral (proceeds from operations) was less than
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• •
positive. With an inability to attract working capital necessary for a
buildup of inventory during the spring, 1<J,:l6 sales season, the Debtor was
unable to justify continued operations. As a result, management negotiated
with Gold Kist and Southern States for a sale of operating assets which were
subsequently approved by the Bankruptcy Court upon Motion filed by the Debtor
and hearings conducted thereon.
As a result of sale of operating assets, the Debtor has effectively been
transformed from an operating agricultural cooperative to a company with
remaining non-operating assets whose function is to liquidate the same. At
or about the time of the filing of this Chapter 11 case, the Debtor employed
approximately one thousand two hundred (1,200) employees and its present
employment is approximately twenty (20).
5. Sale of Assets to Gold Kist, Inc .•
In an effort to eliminate ongoing losses resulting from its egg, poultry
and livestock operations, as well as from operations generally in the State
of South Carolina, the Debtor's board of directors, in the exercise of sound
business judgment, negotiated with Gold Kist for the sale of fixed assets,
inventory, as well as poultry and livestock. 'llie Debtor entered into a Asset
Purchase Agreement dated November 25, 19cl5, which Agreement was supplemented
by letter agreement dated November 27, 19cl5,
Under the terms of the Asset Purchase Agreement, Gold Kist agreed to JaY
Four Million Nine Hundred Thousand and No/100 Dollars ($4, 9:)0,000.00) for
fixed assets and approximately Six Million Nine Hundred Fifty-Seven Thousand
Nine Hundred Forty-Five and No/100 Dollars ($6,957,945.00) for inventories
overall, subject to specific determination subsequent to closing. Generally,
the purchase price attributable to purchased inventories and other personal
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• •
property was the lower of cost or market value, with such cost to be
determined on the first-in, first-out basis.
Proceeds realized from the Court-approved sale of assets as described
herein to Gold Kist have been applied to Debtor's secured indebtedness
pursuant to the terms of the Court-approved Debtor-in-Possession loan
Agreement.
In addition, the tebtor obtained Court approval for sale of its four
hundred twenty-five thousand (425,000) shares of Carolina Golden Products,
Inc. common stock for a purchase price of Two Million Six Hundred Thirty-One
Thousand Nine Hundred Seventeen and 39/100 Dollars ($2,631,917.39). CBC was
the only entity with an interest in the said stock by virtue of its security
interest. The bank consented to the terms of said sale with this lien
attaching to the proceeds therefrom. In addition to the sale of common
stock, the tebtor realized approximately Six Hundred Thousand and No/100
Dollars ($600,000.00) in a redemption by Gold Kist of such amount of Debtor's
equity in Gold Ki st. The proceeds described in this paragraph totaled Three
Million Two Hund red Thirty-Seven Thousand Five Hund red Eighty-Six and No/1 00
Dollars ($3,237,586.00).
Subsequent to the closing of sale of assets with Gold Kist, the
following approximate values have been realized:
Inventories
A. Merchandise
B. Eggs and Layer Inventories
C. Hogs, Pigs and Sows
Fixed Assets
Total:
$ 2,983,676.00
$ 1,779,023.00
$ 942,107.00
$ 4,900,000.00
$10,604,806.00
6. Sale of Assets To Southern States Cooperative, Inc.
The tebtor entered into an Asset Purchase Agreement with Southern States
dated January 9, 1986. Southern States is a farm supply cooperative based in
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Richmond, Virginia. Under the Asset Purchase Agreement, Southern States
agreed to purchase all operating assets in North Carolina, including
merchandise centers, distribution centers, grain markets and feed mills. The
sale also envisioned the purchase of inventory associated with each of these
operating locations.
The proposed sale of operating assets to Southern States was approved by
the l'ankruptcy Court by Order dated February 6, 1986. The Debtor ceased
transacting business operations with the close of business February 14, 1986.
Southern States commenced operation of the purchased assets effective
February 17, 1986, and assumed the related expenses of operation. Assets to
be purchased under the terms of the Court-approved agreement were leases and
executory contracts, North Carolina business locations and all of the
Debtor's tangible assets, properties and rights of every type and
description, real, personal and mixed, tangible and intangible (excluding
goodwill and accounts receivable) no matter where located which are used
directly or indirectly in the businesses conducted by Debtor at i.ts North
Carolina locations.
assets is as follows:
In general, the estimated purchase price for Debtor's
A.
B.
Inventory and Supplies
Real and Personal Property
Total:
$14,102,800.00
$8,876,949.00
$22, 'J79, 829. 00
Under the terms of the Court approved agreement, Ten Million and No/100
Dollars ($10,000,000.00) of the purchase price was paid at closing with the
balance due thereafter upon subsequent inventories and certifications.
The sale of the Debtor's remaining assets in North Carolina was in
furtherance of its desire to effect a liquidating Plan of Reorganization and
to withdraw from operations entirely.
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7.
• •
Budgeted Income Statement for Post-Confirmation Operations
of Reorganized Debtor.
As hereinbefore described, the Debtor anticipates an orderly liquidation
of its remaining-tangible and intangible non-operating assets. The Debtor's
business operations terminated as of the close of business on February 14,
1 986.
A projection as to revenues required to implement the terms of the
liquidating Plan from and after confirmation until December 31, 1987, are Two
Million Three Hundred Thousand and No/100 Dollars ($2,300,000.00). A copy of
the proposed operating budget for liquidation concluding December 31, 1987,
is attached to this Disclosure Statement as an Exhibit.
Generally, the Debtor anticipates a decreasing cost of payroll and
overhead as a result of reductions in staff and scope of operations.
Included within this operational budget are i terns necessary to implement the
terms of the Plan including severance pay, funding of health insurance plans,
costs of administration for professional services and advisors and other
i terns not directly associated with the Debtor's office operations.
8. Litigation; Accounts Receivable and Reclamation Claims.
Reference has heretofor been made to pending litigation with El'.:I. The
Debtor is party to other matters presently pending in state and federal
courts which may affect the distribution of proceeds under the Plan.
The Debtor is collecting its accounts receivable in North and Scuth
Carolina aggressively.
balances:
Its records reflect the following approximate
$ 500,000. 00
$ 300,000.00
$2,700,000.00
$1,700,000.00
$5, 200, ooo. 00
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Current Receivable
Dealer Accounts
Retail Accounts
Notes
Total Receivables
• •
A significant amount of the Debtor's remaining receivable are doubtful
accounts.
Reclamation claims against the Debtor total, in the aggregate,
approximately Seven Hundred Thousand and No/100 Dollars ($700,000.00). Such
requests for reclamation were consolidated for hearing upon Motion for
Summary Judgment filed by CBC. CBC contends that such claims can not be
recognized in the face of its lien position.
An Order was entered by the Court on June 4, 1986, granting partial
summary judgment. In summary, the Court ruled that the floating lien of the
CBC has priority over the rights of reclaiming sellers. However, the Court
added that such reclaiming sellers do not automatically lose all rights under
11 U.S.C. Section 546(c) and withheld a determination of such rights until
the trial on such issues.
A.
IV. ORDERLY LIQUIDATION OF FCX, INC.
ANALYSIS OF DEBTOR'S ASSETS AND LIABILITIES AND PROBABLE
LIQUIDATION VALUES.
Schedules filed with the Pankruptcy Court, as amended, reflect total
assets of One Hundred Nine Million Six Hundred Forty-Seven Thousand and
No/100 Dollars ($109,647,000.00) with total liabilities of Eighty-Six Million
One Hundred Eighty-Seven Thousand and No/100 Dollars ($86,187,000.00). The
value of assets is characterized generally as follows:
A.
B.
c.
D.
E.
F.
G.
H.
Real Property
Cash on Hand
Deposits
Livestock and Other Animals
Office Equipnen t and Supplies
Inventory
Interest in Corporations and
Unincorporated Companies
Other Properties
Total:
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$35,250,500.00
$ 33,882.00
$ 2,524,226.00
$ 3,024,499-00
$ 7, 21 o, 185. 00
$ 24,079,092.00
$ 25,764,486.00
$ 11 , 760, 196 .oo
$109,647,066. 00
• •
The scheduled assets were a reflection of the Debtor's stated book
values except for real estate which was stated at market. Bee a use of the
nature and use of a majority of the Debtor's assets, limited markets were
available for their disposition and sa)e.
As earlier noted, operating assets of the Debtor were sold to Gold Kist
and Southern States. Fixed assets in each instance were sold at stated
percentages of book value, which inventories were sold at the lower of cost
or market. These sales substantially account for an inability to achieve
book values.
As the result of the prior-approved sales of operating assets to Gold
Kist and Southern States, hereinabove described, the Debtor's remaining
assets consist of certain non-operating facilities, inventories not purchased
and other miscellaneous i terns of personal property. In addition, the Debtor
has interests in other corporations and agricultural cooperatives, the values
of which are hereafter addressed.
With respect to tracts of real property remaining to be sold after
February 17, 1936, the Debtor ascribes the following range of values:
1. Home Office
2. Hillsborough (I-85 & N.C. 86)
3. Zimmerman Farm
4, Wallace ID ts
5-Quiet Ac res
6. Rouse Property
7, Kirby Pro per ty
8. Moye Farm
9. Black Creek Property
10. Morrisville Property
11. Charlotte F.gg Market
12. furham Property
13. Sumter Chemical (s.c.)
14. Sumter Seed and Blend (S. C.)
15. Sumter FCX (s.c.)
16. FCX Pamplico, S.C.
1 7. Scotland County
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$1,700,000.00-$2,000,000.00
$ 3 50, 000. 00-$ 4 50, 000. 00
$ 325,000.00-$ 375,000.00
$ 2,500,00-$ 3,500.00
$ 9,000.00-$ 12,000.00
$ 20,000.00-$ 25,000.00
$ 2,500.00-$ 3,500.00
$ 75,000.00-$ 80,000.00
$ 12,000.00-$ 20,000.00
$2,720,000.00-$2,720,000.00
$ 215,000.00-$ 245,000.00
$ 90,000.00-$ 120,000.00
$ 120,000.00-$ 120,000.00
$ 40,000.00-$ 70,000.00
$ 100,000.00-$ 150,000.00
$ 65,000.00-$ 80,000.00
$ 5,000.00-$ 10,000.00
•
18. Washington Distribution Center
1 g. Statesville Distribution Center
20. Barber Trucking
Total:
$ 300,000.00-$ 500,000.00
$ 800,000.00-$1,000,000.00
$ 50,000.00-$ 10,000.00
$7,001,000.00-$8,054,000.00
In addition to real property, the Debtor estimates personal property to
have a value of between One Hundred Twenty-Five Thousand and No/100 Dollars
($125,000.00) and One Hundred Seventy-Five Thousand and No/100 Dollars
($175,000.00) rendering a total estimated market value range of between Seven
Million Ninety-Seven Thousand Five Hundred and No/100 Dollars ($7,097,500.00)
and Eight Million Two Hundred Thirty-Four Thousand and No/100 Dollars
($8,234,000.00).
Creditors and other parties in interest should be aware that the Debtor
has been advised of possible environmental considerations at the Statesville
and Washington, North Carolina and Sumter, facility sites. While the
attendant costs of "clean-up", if any, are yet speculative, the same would
constitute a cost of administration in this case. While it is not possible
to accurately estimate such costs, the same may exceed One Hundred Thousand
and No/100 Dollars ($100,000.00).
further, NCNB National Bank of North Carolina asserts a security
interest in funds totaling Twelve Thousand Two .Hundred Fourteen and 76/100
Dollars ($12,214.76) arising from an Agreement for Processing J:Byable through
drafts dated November 17, 1983 and through the cashing of certain of the
Debtor's negotiable checks. Its purported security is a portion of the
Debtor's deposit account with the Bank administratively held since the
initiation of this case. If such purported secured claim is upheld, such
funds would not otherwise be available for distribution.
further, C.R. Woods Roofing ComJBny, Inc. asserts a laborer's and
materialmen' s lien on real property of the Debtor in Siler City and High
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• •
Point, North Carolina. Such liens were transferred from the property to the
proceeds resulting from a subsequent Court-approved sale and distributed in
accordance with recorded priorities to the secured lender, CBC. Such
resulting unpaid claim, and others similarly situated, are thereupon entitled
to treatment as unsecured creditors.
B. ANALYSIS OF DEBTOR'S VALUES ASSOCIATED WITH EQUITIES IN
OTHER COOPERATIVES.
The books and records of the Debtor reflect the following adjusted
balances for interests in other cooperatives:
A.
B. c.
D.
E.
F.
G.
H.
I.
J.
K.
L.
M.
N.
CF Industries
Columbia Bank for Cooperatives
Gold Kist, Inc.
Gold Kist Joint Venture
Carolina Gold en Products
Cooperative Seeds
Southern States Cooperatives
Universal Cooperative
Southern States Insurance
Bonnie Plant Farm
Farmers Forage Research
Pitt and Green Electric
North American Poul try Co-Op
Others less Than $10,000.00
Total:
$10,091 , 11 o. 00
$ 7, 642, 381 . 00
$ 178,411.00
$4,096,083.00
$ 26,577.00
$ 89, ooo. 00
$ 145,422.00
$1,149,171.00
$ 33,549.00
$ 42, 391 • 00
$ 26,600.00
$ 68,258.00
$ 72,172.00
$ 41 , 799 .oo
$23,702,924.00
Of the equity interests referred to above, the Debtor's interest in CBC
is to be set-off under the terms of the Plan against principal indebtedness.
The Debtor's interest in Gold Kist and the Gold Kist joint venture, when
redeemed by Gold Kist, as well as interests in FFR and Universal to the
extent necessary, will be applied to Debtor's indebtedness to CBC until CBC's
compromised claim is paid, and thereafter any such redemption by Gold Kist
will be !'lid to unsecured creditors until its minimum distribution has been
Its interest in Carolina Golden Products has been heretofore
liquidated with proceeds applied to the principal indebtedness to CBC.
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• •
The remaining equities total Eleven Million Seven Hundred Fifty-Nine
Thousand Four Hundred Seventy-Two and No/100 Dollars ($11,759,472,00) and are
the subject of a liquidating trust which has hereinbefore been referred to.
It is difficult to assess the liquidation value of the Debtor's
remaining equities as these are entities that do not have a standing policy
with respect to redemption of such interests. In particular, the Debtor's
largest equity interest is associated with CF Industries in the amount of Ten
Million Ninety-One Thousand Seven Hundred Fifty-Five and No/100 Dollars
($10,091,755,00). With respect to CF Industries its member investment plan
does not address the issue of member mergers or bankruptcies, The Debtor
believes that redemption of a member's equity will continue to be handled on
an individual basis and will require approval of the board of directors of CF
Industries. The Debtor has corresponded with CF Industries, Inc. regarding
redemption, however, no position regarding such request has been taken.
Considering the state of agricultural markets in this country, it is
speculative to assign a particular value with respect to any investment
interest in an agricultural cooperative.
In addition, CF Industries has asserted a claim against the Debtor to
recover (1) Three Hundred Thirty-Three Eight Hundred Twenty-One and 12/100
Dollars ($333,821.12) in trade receivables; (2) unliq·1idated breach of
contract claims under a purchase agreement, which CF Industries believes to
be substantial; and (3) Two Hundred Eighty-Five Thousand and No/100 Dollars
($285,000.00) on account of a Subscription Agreement with the Debtor. CF
Industries asserts that its claim is secured by the Debtor's investment in CF
Industries and that CF Industries has a right of setoff against the proceeds
of any redemption of the Debtor's investment in CF Industries to recover its
claim. The effect of this assertion may be to substantially reduce the
-38-
• •
amount of the proceeds which may be ultimately received on account of any
redemption by CF Industries of the Debtor's investment in CF Industries. CF
Industries also asserts that the Debtor's investment in CF Industries in also
subject to restrictions on transfer which must be satisfied before any
transfer of those investments may take effect. The Debtor does not
necessarily agree with the above assertions of CF Industries.
C. MERGER OF FCX AND CCF PENSION PLANS.
The FCX Pension Plan ( the "FCX Plan") and the Central Carolina Farmers
Retirement Income Plan ( the "CCF Plan") have been maintained and sponsored by
FCX. The CCF Plan was "frozen" in 1981, and no additional. benefits are
accruing under that Plan (except for cost of living adjustments), nor have
any contributions been made to that plan by FCX since 1981.
The FCX Plan and the CCF Plan will be merged together as soon as
possible into one combined plan ( the "Pension Plan"). Subsequent to that
merger, the combined Pension Plan will be terminated, and its assets
distributed to the participants of the Pension Plan in accordance with the
terms of the combined Pension Plan. However, if the assets of the combined
plan are in excess of the amount needed to fund the Pension Plan's
liabilities to the p,rticipants and other administrative Pension Plan
expenses, i.e. , the combined Pension Plan is over funded , FCX and its
creditors waive any rights they may have to such over funding , and the
over funding will remain in the plan to provide additional benefits to the
rarticipants in the Pension Plan in accordance with their respective accrued
benefits.
As of December 31, 1934 (the most recent date for which financial and
actuarial data is available for the CCF Pension Plan), the assets of the CCF
Pension Plan exceeded the actuarial present value of the accumulated Pension
-39-
• •
Plan benefits by approximately Eight Hundred Sixty Thousand and No/100
Dollars ($860,000.00), computed on an on-going plan basis. As of June 30,
1985 (the most recent date for which financial and actuarial data is
available for the FCX Pension Plan), the assets of the FCX Pension Plan were
exceeded by the actuarial present value of the accumulated plan benefits by
$823,874, computed on an on-going plan basis. Thus, on the basis of these
figures, the combined Pension Plan would be overfunded.
However, the final numbers may differ from these, due to changes in
interest rates, changes in actuarial assumptions, additional expenses, and
the passage of time from the date of the. financial data. Thus, it is not
certain if and the extent to which the combined Plan will be over funded. The
court appointed Pension consultant is obtaining quotes from interested
insurance companies as to the termination of the combined Pension Plan, which
will provide a basis for determining the sufficiency of the assets upon its
tenn ina tion.
The Debtor did not make the contribution to the FCX Pension Plan
required for the Plan Year ended June 30, 1985-As a result, a small penalty
will be imposed by the IRS against the Debtor. A larger penalty could be
imposed by the IRS upon continued failure to make the contribution and/ or the
contribution itself required to be made, but if the combined Pension Plan is
overfunded, it is not expected that the larger penalty would be imposed or
the contribution required.
such Plan or Plans.
D. REPRESENTATIONS.
Any such penalty will be paid out of proceeds of
No representations concerning the Debtor (particularly as to its
liquidation operations, value of property or the value of any assets or
commitments under the Plan) are authorized by the Debtor other than as set
-40-
• •
forth in this Disclosure Statement and any accompanying correspondence from a
committee in this case. Any representation or inducement to secure your
acceptance which is other than is contained in this statement should not be
relied upon by you in arriving at your decision, and such additional
representation and inducement should be reported to counsel for the Debtor
who in turn shall deliver such information to the Bankruptcy Court for such
action as may be deemed appropriate. Nothing herein shall be construed to
restrict a committee from corresponding with its constituency.
· The information contained herein at the time of preparation had not been
subject to a certified audit, and additional supplemental material and
information will be available from time to time thereafter. The Budget of
Disbursements attached to the Disclosure Statement is for informational
purposes and should be examined in its entirety by creditors and other
parties in interest.-For the foregoing reasons, as well as because of the
great complexity of the Debtor's financial condition, the Debtor is unable to
warrant or represent the information contained herein is free from any
inaccuracy. However, great effort has been made to be accurate. This
Disclosure Statement contains a brief summary of the Plan and should not be
relied upon for voting purposes. Creditors are urged to read the Plan in
full. Creditors are further urged to consult with their attorneys or each
other, or with counsel for one or more committees in this case, in order to
fully understand the Plan. The Plan is complex and proposes a legally-
binding agreement by the Debtor, and an intelligent judgment concerning such
Plan cannot be made without understanding its terms.
-41 -
• •
17th day of April, 1986, and amended as a result of Hearings upon its
approval conducted on the 5th day of June, 1986.
J. Larkin Pahl
of SMITH, DEBNAM, HIBBERT & PAHL
Special Coun·sel for Debtor
Post Office Drawer 26268
Raleigh, North Carolina 27611
T!Jlephone: [phone]
jlpB1382. 001
FCX, INC.
Dy: W~H-IU~~
William H. McCullough
By, ~ I! CwJnr. fft. (if~ AlfrdP. Carl ton, Jr'. (J
--42-
Sanford, Adams, McCullough & Beard
Attorneys for Debtor
414 Fayetteville Street Mall
Post Office Box 389
Raleigh, North Carolina 27602
Telephone: [phone]
. ~-• ~ ~ UNITED STA TES r.oURT OF APPEALS
~~'\), · FOR TIIE FOURTH CIRCUIT
No. 87-1683
In Re: SMITH-DOUGLASS, INC.
BORDEN, Inc.
and
Debtor
BERNARD R. GARRETT; STATE OF
ILLINOIS
versus
WELLS-FARGO BUSINESS CREDIT;
GREGORY B. CRAMPTON, Trustee for
Smith-Douglass, Inc.
No. 87-1684
In Re.: SMITH-DOUGLASS, Inc.
Debtor
STATE OF ILLINOIS
and
BORDEN, INC.; BERNARD R. GARRETT
versus
WELLS-FARGO BUSINESS CREDIT;
GREGORY B. CRAMPTON, Trustee for
Smith-Douglass, Inc.
Plaintiff-Appellant
Plaintiffs
Defendant-Appel lee
Appellee
Plaintiff-Appellant
PL:iintiffs
Defendant-Appel lee
Appellee
I
Appeal for the United States District Court for the Eastern District
of North Carolina, at Raleigh. W. Earl Britt, Chief District
Judge. (86-1308-CIV-5)
Argued: May 4, 1988 Decided: September 6, 1988
• Before HALL and \flLKINSON, Circuit Judges,
District Judge for the Eastern District of
designation.
•
and MERHIGE, Senior
Virginia, sitting by
John M. Murchison, Jr. (Kennedy, Covington, Lobdell & Hickman;
Thomas W. Hill; Melvin D. Weinstein; Emens, Hurd, Kegler & Ritter
on brief) for Bordon, Inc.; Marcia Bellows, Assistant Attorney
General, Environmental Control Division (Neil F. Hartigan,
Attorney General; Shawn W. Denney, Solicitor General on brief)
for the State of Illinois; Gregory B. Crampton (Merriman,
Nicholls & Crampton, P. A. on brief) for Gregory B. Crampton,
Trusteee; Thomas B. Anderson, Jr. (Jenkins & Gilchrist, P.C. on
brief) for Wells Fargo Business Credit.
2
• •
MERHIGE, Senior District Judge:
The matter before the Court presents the question of
the cofiditions under which a trustee in bankruptcy will be per-
mitted to abandon property on which violations of state environ-
mental laws exist. For the reasons set forth below, we affirm
the finding that unconditional abandonment was appropriate.
Background
In the course of its ,at tempted reorganization, 1 the
debtor Smith-Douglass,
its fertilizer plant
Inc.
at
("Smith-DOll')lass")
Streator, Illinois.
moved to abandon
The State of
Illinois, Bernard Garrett ("Garrett"), and Borden, Inc.
("Borden") objected on the ground that the property contained
violations of Illinois environmental laws and regulations. The
Bankruptcy Court granted the debtor's request and the district
court affirmed.
The Streator facility was formerly owned by Borden and
operated by the Smith-Douglass division of Borden as a fertilizer
plant. In 1981, certain assets of Borden's Smith-Douglass
Division including the Streator facility were acquired by Garrett
Acquisition Corporation ( "GAC II), which was then renamed
Smith-Douglass, Inc. Wells Fargo financed G/\C' s purchase and
received a first lien on all the properties.
On March 11, 1983, Smith-Douglass filed a voluntary
petition under Chapter 11 of the bankruptcy code. Three months
later., Smith-Doug lass leased the St rco tor plant to another com-
pany, SECO, Incorporated ("SECO"), which is now in bankruptcy.
3
• •
SECO left the premises in August, 1985 and operations ceased.
At some point after the petition was filed,
Smith-Douglass concluded that it would not be able to reorganize
successfully. Wells Fargo, as first lien creditor, agreed to
provide post-petition financing while Smith-Douglass liquidated
its assets. There were no unencumbered assets.
Smith-Douglass attempted, unsuccessfully, to sell the
Streator facility both privately and by public auction. By
mid-1986, the Streator facility was the only piece of property
remaining in the estate. The debtor moved for leave to abandon
the property,and Wells Fargo moved for leave to terminate funding
of post-petition operations.
An evidentiary hearing was held on June 30, 1986. The
debtor's motion to abandon was supported by Wells Fargo. Borden,
Garrett and the State of Illinois opposed the proposed uncon-
ditional abandonment on the ground that the debtor should be
required to clean up alleged environmental hazards.2
The bankruptcy court found that conditions at the
Streator facility violated provisions of the Illinois
Environmental Protection Act and regulations promulgated
thereunder in the following respects:
A. Ponds 1, 2, 3, 4 and 5 were considered as treat-
ment works, but they were operated without operating permits.
B. Pond 2 was subject to flooding during wet weather
periods. It was not constructed, nor was it being operated, to
minimize violations during such wet weather periods.
C. Contaminants were deposited upon the land so as to
create a water pollution hazard. Contaminants also had entered
waters of the state at a number of locations at the facility and
had caused violations of the Stream Water Quality Standards.
4
• •
D. The discharge from sewer 4 and the discharge ditch
out of pond 4 were considered point source discharges which
require National Pollutant Discharge Elimination System permits.
The facility had no such permits.
E. Waters in the abandoned creek bed violated the
water quality standards as follows:
1. The waters contained unnatural sludge, bottom
deposits, color and turbidity.
2. Two water samples demonstrated a low pH (less
than 6. 5) and contamination by excessive amounts of f 1 uor ide,
sulfate, cadmium, iron, and manganese.
F. Contaminants were entering Phillips Creek, causing
the creek to con ta in unnatural sh1dge, bot tom deposits, color and
turbidity.
G. Waters contained in tl1c roadside ditch adjacent to
Smith-Douglass Road violated water quality. standards as follows:
1. '!'he waters contained unnatural sludge, bottom
deposits, color, turbidity and odor.
and
2. A water sample showed a
contamination by excessive amounts
iron, and manganese.
low pH (less than 6.5)
of fluoride, sulfate,
H.
concentration
danger level.
l\ sediment sample nt pond 2 indicated an arsenic
that is higher than authorized but not at the
I. A liquid sample in a sump at the base of two tanks
had a pH of less than one which is considered "hazardous" under
regulations.
J. '!'here were several 55 gallon drums of liquid waste
with a flash point below 140.
K. One 55 gallon drum contained hazardous waste.
L. '!'hen:, were over ten drums of spent vanadium pen-
t.oxide waste which is a hazardous waste.
M. Three tanks contained spe11t sulfuric acid.
The evidence further demon,;trated that the State of
Illinois monitored the facility. '!'lie Illinois Environmental
Protection Agency had made on-site inspections and received
5
• •
en vi ronmen tal reports from the debtor. and its predecessor. The
state agency, however., never. took any enforcement action against
any owner. of the Streator. facility for. environmental violations.
Though concluding that violations of state environmental laws
existed, the Court found that they did not present any imminent
harm or danger to the public. coupling that conclusion with the
fact that the debtor was devoid of unencumbered assets with which
to finance a clean up, the bankruptcy court authorized uncon-
ditional abandonment of the facility.'
The district court affirmed on the ground that aban-
donment 1s precluded '.'Offly where there is an i"ihrrCinent danger pre--~--. ,_ .
s~nt, and the bankruptcy court's determination that there was no
such imminent danger was not clearly erroneous. The district
court, however, found the bankruptcy court's consideration of the
financial condition of the debtor irrelevant.
Illinois appealed.
Discussion
Borden and
A trustee may abandon burdensome, income-draining pro-
perty pursuant
(the "Code"). 3
to section 554(a) of the Bankruptcy Code
In Midlantic National Bank v. New Jersey
Department of Environmental Protection, 474 U.S. 494 (1986), the
Court recognized a narrow exception to that power. The issues
before this Court relate to the contours of that exception.4
In Midla0_tic, a five member majority held that "a
trustee may not abandon property in contravention of a state sta-
tute or regulation that is reasonably designed to protect the
public health or safety from identified hazards." 474 U.S. at
6
507.
note:
• •
The Court qualified the holding with the following foot-
This exception to the abandonment power vested in the trustee by§ 554 is a narrow one. It does not encom-pass a speculative or indeterminate future violation of such laws that may stem from abandonment. The aband-donment power is not to be fettered by laws or regula-tions not reasonably calculated to protect the public health or safety from imminent and identifiable harm.
Id. at 507 n. 9.
Little 1n the Midlantic'opinion elucidates the meaning
of this qualification. Not surprisingly, the bankruptcy courts
interpreting Midlantic have reached inconsistent results. Some
courts have determined that the Midlantic exception applies only
where there is an imminent danger to pulilic health and safety.
In re Purco, Inc., 76 Bankr. 523, S33 (Bankr. W.D.
Pa. 1987); In re Franklin Signal Corp., 65 Bankr. 268, 271-72
(Bankr. D. Minn. 1986). Other courts have determined that
Midlantic requires full ·compliance, prior to abandonment, with
the applicable environmental law. In re Peerless Plating Co., 70
Bankr. 943, 946-47 & n. 1 (Bankr. W. D. Mich. 1987).
The problem faced by the Midlantic court was a
conflict in the implementation of two statutes, one state and one
federal, both of which serve important purposes. Under the
Supremacy Clause of Article VI of the United States Constitution,
when enforcement of a state law or regulation would undermine or
stand as an obstacle to the accomplishmc11t of the full purposes
and object.i vc:,s of Congress in ,onactiny a fcdc:,ral statute, the
conflict must be resolved in favor of the federal law. Hines v.
7
• •
Davidowitz, 312 U.S. 52, 66-67 (19411. The overriding purpose of
the Code 1s the expeditious and equitable distribution of the
assets of the debtor's estate. Midlantic, 474 U.S. at 508
(Rehnquist, J., dissenting l. State laws which obstruct expedi-
tious and equitable distribution, therefore, are preempted by the
Code. National Collection Agency, Inc. v. Trahan, 624 F.2d 906
(9th Cir. 1980).
Section 554 of the Code serves the purpose of expedi-
tious and equitable distribution by permitting the trustee to
abandon property that consumes the resources and drains the
income of the estate. State laws that require the trustee to
maintain such property may be preempted. See In re Oklahoma
Refining Co., 63 Bankr. 562, 565-66 (Bankr. N. D. Okl. 1986 l ( "To
require strict compliance with State environmental laws
would derogate the spirit and purpose of the bankruptcy laws
requiring prompt and effectual administrati.on within a limited
time period.").
Preemption by the Supremacy Clause, however, is a
question of Congressional intent. Hines, 312 u. S. at 66-67. ·rn
Midlantic, the Court found that Congress did not intend section
554 to preempt all state laws. 474 U.S. at 506. Nevertheless,
tl1e Court did not suggest that a radical disruption of effectual
administration of bankrupt estates under the Code was
appropriate. Rather, in describing the contours of the excep··
tion, the Court appears to have intended to fashion a narrow
exception to the trustee's abandonment power in order to protect
public safety rather than a broad exception to shield the state
8
• •
treasury. See Midlantic, 474 U.S. at 506 (Congress's concern
regarding imminent and substantial endangerment to public health
or the environment cited as support for the holding). According
to the teachings of Midlantic, where the public health or safety
is threatened with imminent and identifiable harm, abandonment of
the contaminated property must be conditioned on the performance
of procedures that wi 11 adequately protect public heal th and
safety. Id.at 507.
Admittedly, this public health exception to the
trustee's abandonment power runs counter to the expeditious
distribution purpose of the Code. However, as the Midlantic
Court· recognized, where conditions on property pose a danger of
imminent death or illness, the person in control of such pro~
perty should not be permitted to abandon it with such conditions
unattens:]ed. se.r::: Midlantic, 474 U.S. at 499 n. 3 (abandonment
believed to present risks of explosion, fire, contamination of
water supplies, genetic damage, death and other dangers).
Congress must not have intended to permit abandonment under such
circumstances, so that there is no preemption under the Supremacy
Clause. But this narrow exception applies where there is a
serious health risk, not where the hazards are speculative or may•
await appropriate action by an environmental ageicy.
474 U.S. at 507.
Midlantic,
The Bankruptcy Court does not have the power to
substitute its judgment for that of the state as to what consti-
tutes a serious public health or safety risk. After all, it is
the state law that relates to environmental concerns and, indeed,
9
• •
the focus of Midlantic is on that very concern. The bankruptcy
court, therefore, must determine whether the risk of imminent
harm exists in reference to the design of the state law or regu-
lation alleged to have been violated. Midlantic, 474 U.S. at
507 & n.95 Before any abandonment is permitted, the court is
powerless to authorize such action without conditions that will
adequately protect the public's health and safety in accordance
with the governing state law. Id. at 507.
The bankruptcy court deteimlned that there was no
threat of immediate harm. Indeed, the Illinois Environmental
Protection Agency had not taken any enforcement action. Cf. In
re Purco, Inc., 76 Bankr. 523, 533 (Bankr. W.D. Pa. l.987)
(inactivity of agency indicates lack of threat to publ. ic neal th
or safety). Said determination is not clearly erroneous.
The district court, contra to the bankruptcy court's
conclusion, held that the financial condition of the debtor i.s
irrelevant to the Midlantic analysis. This Court disagrees.
Cleaning up environmental violations is properly considered an
administrative expense within the meaning of 11 U.S.C. §
507(a)(l). l~hile such expense would be subordinate to secured
claims, it would have priority over unsecured claims.
Accordingly, where the estate has unencumbered assets, the
bankruptcy court should require stricter compliance with state
environmental law before abandonment is permitted.
Smith-Douglass, however, had no unencumbered assets.
We affirm the finding that unconditional abandonment
was appropriate in light of the estate's lack of unencumbered
10
·~t~
,,1~1 . 1,-
• • assets, coupled with the absence of serious public heal th · and
safety risks posed by the conditions in this case, but reject the
trial court's conclusion that the financial .condition of the deb-
tor was irrelevant.
AFFIRMED.
1 Subsequent to the bankruptcy court's decision on this matter,
this bankruptcy case was converted to a Chapter 7 liquidation and
Gregory B. Crampton was named trustee.
2 As former owners of the Streator facility, Borden and Garrett
are potentially liable for the cost of cleaning up the environ-
mental hazards.
3 11 U.S.C. § 554(a) provides: "After notice and a hearing, the
trustee may abandon any property of the estate that is burdensome
to the estate or that is of inconsequential value and benefit to
the estate." A debtor in possession has substantially the same
powers as a trustee. 11 U.S.C. § 1107.
4 At the outset, the Court wishes to point out what this case
is not about. The Court is not making a determination as to who
will ultimately be liable for the cost of cleaning up any
existing violations. Cf. Midlantic, 474 U.S. at 498 n. 2.
However, a dee is ion here adverse to the state may increase the
likelihood of the state's bearing at least some of the cost.
5 '!'hat is not to say that any violation of a law designed to
protect public health and safety from imminent harm would
preclude abandonment. Speculative and indetermine future.viola-
tions, for example, of such laws would not prevent unconditional
abandonment. Midlantic, 474 U.S. at 507 n.9.
11
-~l:.~~.-~··~ ... -~P~:;:i,_~.,~ .... ct'-.......,; • .:::'.'l!'if-:-~ • ·
I.• ..;
• • FILE[.
IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA
IN THE MATTER OF;
FCX, INC.,
Employer's Identification
Number 560220040
Debtor.
)
)
)
)
)
)
) ______________ )
PEGGY ll. DEANS, CLERK IN PROCEEDINGS FOR '7i!Bl• BANKRUPrCY COOR~ REORGANIZATION OF AEASTER!l DISTRICT OF J:I,
CORPORATION
·CHAPTER 11
CASE NO. S-85-01574-5
APPLICATION FOR REIMBURSEMENT OF ADMINISTRATIVE EXPENSES
This is an application by the State of North Carolina for
reimbursement of administrative expenses incurred by the Solid
Waste Management Section, Division of Health Services of the
Department of Human Resources. These expenses were incurred by
the CERCLA Unit (now "Superfund Branch") of the Section at the
Debtor's FCX Statesville and FCX Washington, North Carolina
sites, in response to notifications of disposal of hazardous
substances on the sites. Incurred since the filing of this
bankruptcy proceeding, these expenses were actual and necessary
costs of preserving the estate of the Debtor. The expenses are
entitled to first priority status pursuant to Sections 503 and
507 of the Bankruptcy Reform Act of 1978 ("the Code"), 11 u.s.c.
SS 503 and 507.
The expenses for which the Solid waste Management Section
seeks reimbursement are $23,272.01, and will continue to accrue
until the State• s response activities are complete, unless FCX
undertakes comprehensive investigations and remedial actions at
• •
these two sites, in accordance with its responsibility under 42
u.s.c. -9601 et seq. and N.C.G.S. 130A-310, et seq.
--, STATEMENT IN SUPPORT OF APPLICATION FOR REIMBURSEMENT OF ADMINISTRATIVE EXPENSES
1. September 17, 1985, Debtor filed a Petition for
Reorganization under Chapter 11 of the Bankruptcy Code.
2. On August 4, 1986, the Plan of Reorganization as
Amended was approved by Order of this Court.
3. The Debtor owned and operated facilities at Statesville
and Washington, North Carolina.
4. The Debtor's business at these sites included, in part,
the re-packaging and sales of liquid and powder pesticides,
herbicides and other farm chemicals.
5. Hazardous substances, as defined in Section 101(14) of
the Comprehensive Environmental Response Act ("CERCLA") as
amended by the Superfund Amendments and Reauthorization Act of
1986 ("SARA"), Pub. L. No. 99-499, 100 Stat. 1613 (1986), 42
u.s.c. 9601 (14) were disposed in trenches on these sites in a
manner so as to release them into the environment. Substantial
threats of endangerment to the public health and the environment
exist on both of these sites.
6. In April and August, respectively, of 1986, the CERCLA
Unit of the Solid Waste Management Section, Division of Health '' . ' Services, of the North Carolina Department of Human Resources,in
accordance with a cooperative agreement between the State arid the
-2-
. ·-. -. --.. -
i l ,. • •
United States Environmental Protection Agency, commenced
preliminary investigations and evaluations of the Statesville and
Washington FCX hazardous waste disposal sites.
7. These investigations included, inter alia, sampling and·
chemical analysis of soils, sediments, surface waters and ground
waters at the sites. The activities were conducted pursuant to
the provisions of the National Contingency Plan, established
pursuant to Section 105 of CERCLA, 42 u.s.c. § 9605, and codified
at 40 C.F.R. Part 300, Subpart F.
8. CERCLA was enacted to provide, inter alia, for response
to hazardous substances released or threatened to be released
into the environment and for the cleanup of inactive hazardous
waste disposal sites.
9. Section 107(a) of CERCLA, as amended, 42 U.S.C. §
9607(a), provides in pertinent part, that the owner or operator
of a facility from which there is a release or threatened release
of a hazardous substance and any person who arranged for disposal
of hazardous substances shall be liable for all costs of response
actions incurred by the United States or a State not inconsistent
with the National Contingency Plan.
10. Debtor's estate, created pursuant to Section 541 of the
Bankruptcy Code, 11 U.S. C. § 541, is or was the owner of two
facilities from which there have been releases. of hazardous
substances. Debtor-in-Possession, FCX, also generated and
disposed of the said hazardous substances. Accordingly, the
-3-
l f i i ! .
f ' i .
i • •
estate is liable under Sections 107(a)(l) and (3) of CERCLA,· 42
u.s.c. S 9607(a)(l) and (3) for the State's response costs at the
FCX Statesville and Washington, North Carolina, facilities
incurred since the commencement of this case and to be incurred ·
in the future.
11. To date, the State has incurred costs of $9,312.01 at
the FCX Statesville facility and $12,960.00 at the FCX Washington
site. (See Attachment I.) The State reserves the right to amend
this application to request additional administrative expenses
relating to this site.
12. The Solid Waste Management Section's response actions
have been undertaken in a manner not inconsistent with the
National Contingency Plan.
13. The State's expenditures incurred and to be incurred at
the FCX Statesville and Washington facilities are actual and
necessary costs of preserving the Debtor's estate, incurred after
the initiation of this bankruptcy proceeding. Accordingly, these
expenditures are administrative expenses under Section 503 of the
Code, 11 u.s.c. § 503, entitled to a first priority pursuant to
Section 507(a)(l) of the Code, 11 u.s.c. § 507(a)(l).
-4-
'' '.
, .
' !
I .
i
I
I
• •
14. No-· payments have heretofore been made to the State ·for
.
reimbursement
application.
..;
This the
of the costs that are the subject of
d /I ,, day of May, 1988.
Respectfully submitted,
LACY H. THORNBURG
Attorney Genera;/ p
'J)M-... A M/J-~n ·
Nancy 4ert Scott
Associate Attorney General
N. C. Department of Justice
P.O. Box 629
Raleigh, N.C. 27602-0629
Telephone: [phone]
ATTORNEY FOR SOLID WASTE
MANAGEMENT SECTION, NORTH
CAROLINA DEPARTMENT OF
HUMAN RESOURCES
-5-
this
i
f t ;
RE:
• •
4 May 1988
Wil~L L. Meyer, Chief~ ~JY/"'7.J Solid Waste Management Section
~~~u
Actual Experxlitures an::l Estimated Cleanup Costs
Fe:)( Washin:Jton an::l FCX statesville
ATTACHMENT I
Actual expenditures by the state of North Carolina for site investigation of the FCX facilities located in statesville, Iredell County an::l Washin:Jton, Beaufort 0:1-mty are as follows (telepi.one, postage; an::l health an::l safety equipment have not been included) :
1. Personnel COsts
2. Travel
3. F.quipment
4. SUpplies
5. Contractual
6. laboratory Analyses
7. In:lirect Costs
'TOI'Al.S
Fe:)( Washin:Jton
NCD981475932
$5,088.94
116.78
19.00
6,244.00
1.491.28
12,960.00
Estimated cleanup costs are as follows:
1. Soil sanpling an::l analysis
2. Removal an::l disposal of
pesticide cxmtaminated
soil ($300 per cubic yard).
(on-site incineration
is a mre costly altemative)
3. Repair an::l re:::irade the site
4. Grourrlwater cleanup an::l
res:overy system (operation
an::l maintenance for 10 years)
a. Well cohstruction
(10-12 wells)
b. Operation an::l maintenance
(10 years)
ESTIMATED 'TOI'Al.S
I.C/tb/a-7
60 -70,000
390 -450,000
(1300-1500 cubic yards)
15 -20,000
100 -125,000
600 -750.000
1,165,000 -1,415,000
Fe:)( Statesville
NCD09545B527
$3,175.54
88.68
17.00
5,086.00
944.79
9,312.01
60 -70,000
135,000
(450 cubic yards)
20.-30,000
100 -125,000
600 -750.000
915,000 -1,110,000
• STATE OF NORTH CAROLINA
COUNTY OF WAKE
VERIFICATION
•
. '
William L. Meyer, being duly sworn, deposes and says: That
he is the Chief, Solid Waste Management Section, of the
Department of Human Resources, that he has read the foregoing
APPLICATION FOR REIMBURSEMENT OF ADMINISTRATIVE EXPENSES,
including Attachment I, and knows the contents thereof, that the
same is true of his own knowledge.
This the /0-f{,,, day of May, 1988.
i!~.!L~~fl:!
Solid waste Management Section
Sworn to and subscribed before me
l ·~·l-v this /,) day of May, 1988 .
. :~·~' ,~ ,-z-:c,_ r 1 /:; I h/1_,,/
Notary Public
My Commission Expires:
I r·c, ,-,.() -,;-: -:, ---~
'' '.
I •• •• • ~ -• •
• •
CERTIFICATE OF SERVICE
I,-Nancy Ebert Scott, Attorney for the State in he above-entitled action, do hereby certify that I have served a . copy o;f the foregoing APPLICATION FOR REIMBURSEMENT . OF ·• ADMINIS~RATIVE EXPENSES by placing said copy in a postpaid' envelope addressed to the persons hereinafter named, at the places and addresses stated below, which are the last known addresses, and by placing said envelopes and their contents in the United States Mail to:
This
Mr. Douglas Q, Wickham
Attorney for Debtor-in-Possession
FCX, Inc.
Adams, McCullough & Beard One Exchange Plaza
Post Office Box 389
Raleigh, North Carolina 27602-0389
Poyner & Spruill
Attorney for Committee of Unsecured of FCX, Inc ..
Post Office Box 10096
Raleigh, North Carolina 27605-0096
the ll rf;. day of May, 1988.
Creditors
Associate Attorney General N. c. Department of Justice
P.O. Box 629
---
Raleigh, N, C, 27602-0629
Telephone: [phone]
''
. --•r•---••· .. ··--:'..~·-..-=.,~.-•'··-:,..:~•-·~.;.·~•.•~z·.::(=
• • FILED
IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA
ll~Gt B, DEANS, CLERK IN THE MATTER OF: IN PROCEEDING FORUTIU': BAIDIBOPTCY COURT REORGANIZATION OFW'l'mul DISTRICT OF B. O.
CORPORATION . FCX, INC.,
Employer"s Identification
Number 560220040
)
)
)
)
)
)
) Debtor. CHAPTER 11 _______________ ) CASE NO. S-85-01574-5
RESPONSE BY THE STATE OF NORTH CAROLINA OPPOSING THE MOTION FOR SECOND DIVIDEND DISTRIBUTION TO UNSECURED CREDITORS AND MOTION TO CONSERVE REMAINDER OF ESTATE FOR CLEANUP OF FCX HAZARDOUS WASTE DISPOSAL SITES
NOW COMES the State of North Carolina, Department of Human
Resources, Division of Health Services, Solid Waste Management
Section, through its attorneys, to oppose the motion for a Second
Dividend Distribution to Unsecured Creditors.
Debtor-in-Possession FCX was the owner and operator of two
hazardous waste disposal sites in North Carolina which pose
serious threats of harm to the public health and the environment.
The State of North Carolina hereby moves that a Sl!bstantial
portion of the bankrupt estate be conserved to meet necessary
investigative and clean-up expenses at these sites. The State
has received telephone notification from the Environmental
Protection Agency that these sites will be nominated for the
National Priorities List for Superfund Cleanup .. The FCX sites
'' are two of eleven sites in North Carolina with similarly high
hazard rankings which will be nominated to the list. FCX owned
and ope~ated the sites, and generated and disposed of hazardous
substances on the property. The corporation is therefore the-
'. • • • party legally responsible for cleaning up these sites under the
Comprehensive Environmental Response Act ("CERCLA"), 42_ U.S.C. §
9601, et seq. and the North Carolina Inactive Hazardous Sites
Law, -·-:, N. C. G. S. 130A-310, et Trustees and
debtors-in-possession are obliged to comply with State law in the·
management and operation of property of the estate. 28 u.s.c. §
959. Public policy considerations require that health and
environmental concerns of the innocent public take priority over
the claims of creditors.
In support of its motion to conserve a substantial portion
of the remainder of the estate for necessary response and
remedial actions at the two hazardous waste disposal sites, the
State shows the Court the following:
1. William L. Meyer, Chief of the Solid Waste Management
Section, Division of Health Services, Department of Human
Resources, has been delegated responsibility for implementation
and enforcement of all State and federal laws relating to solid
and hazardous waste management in North Carolina.
2 . FCX, Inc., Debtor-in-Possession, operated a
distribution center for agricultural products in Statesville,
North Carolina, commencing about 1940. Liquid and powder
pesticides were repackaged at the site until 1969.
3. According to the preliminary investigation conducted by
Solid Waste Management Staff, CERCLA Unit, FCX excavated. a pit in
1969 into which the company deposited approximately 10,000 pounds
-2-
• • of pesticides. After the disposal, the pit was_ covered with soil
and an 8-inch reinforced concrete slab, over which the existing
warehouse was then constructed.
4 ,., FCX reported the disposal of pesticides and heavy
metals to EPA in May, 1986, by submitting the required CERCLA
notification form.
5. Under a Cooperative Agreement with EPA, the CERCLA Unit
( now Superfund Branch) of the Solid Waste Management Section
performed a preliminary site investigation and evaluation of the
public health and environmental risks posed by the waste disposal
site.
6. On May 7, 1986, soil samples were taken from five
on-site locations and from four ground water monitoring wells
installed on the property.
concentrations identified
Chlordane, Dieldrin/DDE,
Hazardous wastes in the highest
by
DDT,
sampling
coal tar
included Lindane,
distillates, and
halogenated solvents. They were found in high concentrations in
both the soil and the groundwater. Lindane, for example, was
found in one well at 14 times greater than the federal drinking
water standard.
7. The site poses risk to aquifer contamination and risk
of human injury by direct contact exposure to the soil or
inhalation of windborne dust. Most of the pesticides detected in
the ·soils are persistent, chronically toxic and ',are suspected
human carcinogens.
-3-
• • 8. State Highway 90 bounds the FCX property to the south.
Land use is predominantly residential to the south, and more
residences are located northeast of the site . Approximately
. 1,000 f~et to the northeast is a school.
and northwest is light industrial.
Land use on the north
9. The report of the CERCLA Unit"s investigation and
evaluation of the FCX-Statesville site was sent to EPA on March
30, 1987.
10. Documented expenditures by the State of North Carolina
for the investigation and evaluation of the report totaled
$9,312.01. (Attachment I).
11. FCX owned and operated an eight-acre site adjacent to
the city limits of Washington, N.C., in Beaufort County from 1945
until 1986. On-site operations included repackaging and sales of
herbicides, pesticides, and other farm chemicals.
12. In about 1970 FCX buried pesticides, herbicides, and
tobacco sucker control agent (MH30) in a trench on the site,
according to the preliminary investigation of the CERCLA Unit.
The Trench was about 12 feet wide by 250 feet long and was dug to
10 or 12 feet deep until it intercepted the water table. Two to
three feet of soil were put back into the trench before the waste
was deposited, and the waste was then covered with about two feet
of soil. The quantity of waste is not known, but is estimated as
555 cubic yards, based· upon trench dimensions of 1'2 feet by .250
feet by 7 feet deep.
-4-
• • 13. On June 12, 1986, FCX submitted a CERCLA Section 103
Notice to EPA which stated that an •unknown• amount of pesticide
and heavy metals had been landfilled on the property.
14 j The CERCLA Unit of the Solid Waste Management Section
commenced a site investigation, and on August 26, 1986 soil and
groundwater samples were taken.
15. Surface soil samples showed high concentrations of
various hazardous constituents, including Chlordane, Aldrin, DDT,
DDE, Dieldrin, carbondisulfide, hexachlorobenzene, naphthalene,
phenanthrene, acenaphthylene, fluorene, dibenzofuran,
2-methylnaphthalene, and mercury.
16. No groundwater samples could be taken at the site
because no monitoring wells had been installed. Four deep wells
on adjacent properties were sampled, however, and showed no
contamination.
17. There is concern that the hazardous constituents found
in the soil may move into the ground water of the Post-Miocene
surficial aquifer which, together with the Miocene Yorktown
aquifer, locally recharges the underlying Castle Hayne aquifer.
The Castle Hayne aquifer, which top surface is about 30 feet
below land surface at the site is the major water supply aquifer
for wells in the vicinity. In the area within three miles of the
site there are no extensive confining units among the three
aquifers.
-5-
'. • •
18. It is not known at this time whether any of the
chemicals have migrated to the surficial or Yorktown Aquifers
because no means exists to sample them, no monitoring wells
· having· lieen installed. The deep wells sampled draw water from
the Castle Hayne aquifer.
19. Approximately 11,350 people live within three miles of
the site, 2,850 of whom obtain their water supply from private or
community wells.
20. A fresh water wetland lies adjacent to the Tar River
and Kennedy Creek. The wetland begins about 300 feet south and
slightly downslope of the trench disposal area.
20. The report of the CERCLA Unit"s investigation and
evaluation of the FCX-Washington site was sent to EPA on May 20,
1987.
21. Documented expenditures by the State of North Carolina
for the investigation and evaluation totaled $12,960. (Attachment
I ) .
22. On December 19, 1987, the Solid Waste Management
Section received telephone confirmation from EPA that the
FCX-Statesville and Washington sites were among eleven hazardous
waste disposal sites in North Carolina to be nominated to the
National Priorities List for Superfund clean-up.
23. The Inactive Hazardous Sites Notices submitted by FCX
in accordance with G.S. 130A-310.1 in March, '' 1988, give•. no
-6-
• • indication that any cleanup activities have been undertaken at
the sites.
24. Documentation of extensive chemical contamination at
and aroµnd the sites necessitates that FCX design and implement
comprehensive remedial investigations to determine the extent of·
the contamination, both vertically and horizontally. These
investigations should include, inter alia, the installation of at
least four ground water monitoring wells on each site. The
average cost for monitoring wells at FCX-Washington is $9,000
each for wells at an average depth of 25 feet: total cost of
$36,000. The average cost for monitoring wells at
FCX-Statesville is $11,000 each for wells at an average depth of
50 feet: total cost $44,000. The cost of eight wells at the two
sites will be approximately $80,000.
25. The Solid Waste Management Section has calculated
conservative preliminary estimates of the cost of cleaning up the
two sites. (Attachment I). Estimated cost for the Washington
site is between $1,165,000 and $1,415,000. Estimated cost for
the Statesville site is between $915,000 and $1,110,000. Total
estimated costs for cleaning up both sites· range between
$2,080,000 and $2,525,000. These estimates do not include the
cost of the remedial investigation and feasibility studies which
are necessary to determine the nature and extent of contamination
in order to design a remedy. A conservative range for
-7-
• • investigative costs is between $200,000 and $300,000 for both
sites
26, FCX, Debtor-in-Possession, has acknowledged at page 36
. of its•{Disclosure Statement filed with this Court on June 6,
1986, that costs attendant to "clean-up" of the Statesville and
Washington, N,C., sites, and the Sumter, s.c., site, would
constitute a cost of administration in this case.
WHEREFORE, the State of North Carolina prays for the
following relief:
1. That a minimum of 2.8 million dollars of the estate be
set aside and conserved to meet the projected costs of
investigation and clean-up of the public health and environmental
hazards at the FCX sites at Statesville and Washington, N.C.;
2. That the Court set a date for a hearing on this matter
and the State's objections to the Motion by Debtor-in-Possession
for a Second Dividend Distribution; and
3. Any other relief the Court finds proper to ensure the
availability of financial resources to alleviate the danger to
the public health and welfare caused by the pesticide disposal at
these two sites at which the Debtor is liable under State and
federal law for remedying the environmental hazards created by
the Debtor.
-8-
--,·--·---···-· .. -···
• • ti.. Respectfully submitted this the /I ~ day of May, 1988.
LACY H. THORNBURG 7f~Ge1if 4,-✓
Nancy Ebert Scott
Associate Attorney General
N. c. Department of Justice
P. o. Box 629
Raleigh, N.C. 27602-0629
Telephone: [phone]
ATTORNEY FOR SOLID WASTE
MANAGEMENT SECTION, NORTH
CAROLINA DEPARTMENT OF
HUMAN RESOURCES
-9-
... '10:
FRCM:
RE:
• •
-4 May 1988
wi{liam L. Meyer, Chief~ ~JJ1~J
Solid Waste Management Section
~~~u
Actual Elq:>eooitures am Estimated Cleanup Costs
FCX W~n am FCX statesville
Actual experxlitures by the state of North carolina for site
investigation of the FCX facilities located in statesville, Iredell County am
W~n, Beaufort County are as follows (telephone, postage, am health am
safety equipment have not been included) :
FCX W~n
NCD981475932
1. Personnel Costs $5,088.94
2. Travel 116.78
3. F.quipment
4. Supplies 19.00
5. Contractual
6. laboratory Analyses 6,244.00
7. Indirect Costs 1,491.28
'IOI'AIS 12,960.00
Estilllated cleanup costs are as follows:
1. Soil sarnplin;J am analysis
2. Rem::waJ. am disposal of
pesticide contaminated
soil ($300 per cubic yard).
(on-site incineration
is a m:>re costly alternative)
3. Repair ard regrade the site
4. Grourrlwater cleanup am
recovery system ( operation
am maintenance for 10 years)
a. Well construction
(10-12 wells)
b. Operation am maintenance
(10 years)
ESTlMATED 'IOI'AL5
IC/tb/a-7
60 -70,000
390 -450,000
(1300-1500 cubic yards)
15 -20,000
100 -125,000
600 -750.000
·1,165,000 -1,415,000
'' ''
FCX statesville
NCD095458527
$3,175.54
88.68
17.00
5,086.00
944.79
9,312.01
60 -70,000
135,000
(450 cubic yards)
20 -30,000
100 -125,000
600 -750.000
915,000 -1,110,000
• STATE OF NORTH CAROLINA
COUNTY OF WAKE
•
VERIFICATION
William L, Meyer, being duly sworn, deposes and says: That
he is the Chief, Solid Waste Management Section, of the
Department of Human Resources, that he has read the foregoing
RESPONSE BY THE STATE OF NORTH CAROLINA OPPOSING THE MOTION FOR
SECOND DIVIDEND DISTRIBUTION TO UNSECURED CREDITORS AND MOTION TO
CONSERVE REMAINDER OF ESTATE FOR CLEANUP OF FCX HAZARDOUS WASTE
DISPOSAL SITES and knows the contents thereof, that the same is
true of his own knowledge, except those matters and things herein
stated upon information and belief, and as to those he believes
them to be true.
This the /Offe day of May, 1988.
William L. Meyer, Chief
Solid Waste Management Section
Sworn to and subscribed before me
· 1·-:-ru this I:_ day of May, 1988.
_??~i~?/ ;z~·, /t ~ _/(~(__,/
Notary Public
My Commission Expires: I -;::;•_CJ-if{)
i -
,. • •
CERTIFICATE OF SERVICE
I _ Nancy Ebert Scott, attorney for the State in the above-entitled action, do hereby certify that I have served a copy of the foregoing RESPONSE OPPOSING THE MOTION FOR DISTRIBUTION AND MOTION TO CONSERVE REMAINDER OF ESTATE FOR . CLEANUP'. OF FCX HAZARDOUS WASTE DISPOSAL SITES by placing said copy in a postpaid envelope addressed to the persons hereinafter named, at the places and addresses stated below, which are the last known addresses, and by placing said envelopes and their contents in the United States Mail to:
This
Mr. Douglas Q. Wickham
Attorney for Debtor-in-Possession
FCX, Inc.
Adams, McCullough & Beard
One Exchange Plaza
Post Office Box 389
Raleigh, North Carolina 27602-0389
Poyner & Spruill
Attorney for Committee of Unsecured Creditors of FCX, Inc.
Post Office Box 10096
Raleigh, North Carolina 27605-0096 rL the /1 ~ day of May, 1988.
7/J flf~~
Nancy ::l Scott
Associate Attorney General
N. c. Department of Justice
P. o. Box 629
Raleigh, N. C. 27602-0629
Telephone: [phone]
, \ -.
. , • FIL E.D r, • .
•
!'li\ClnY Jl, i>,: , :•:: o , CLERK
0, 3, 1,/\'.-:ICU,'TCI COURT . IN THE UHITED STATES DISTRICT COURT 'JAS'!'tl'i'~ '.'.:S'\'RICT OF, N. C.
1,P'"i. O\' .IU?)NR THE EASTERN DISTRICT OF NORTH CAROLINA NC ,_, r•••.-•c•1l,i1~t.::i RALEIGH DIVISION H'dMAM l\L~• IV •
BANKRUPTCY COURT NO. S-85-01574-5
IN RE:
0 R D E R FCX, INC., Debtor.
This matter is before the court on motion of the United
States of America, on behalf of the Administrator of the Environ-
mental Protection Agency, and the State of North Carolina
(the "governments") received by the district court on November
17, 1988, for withdrawal of reference pursuant to 28 U.S.C.
§ 157 (d), and on respon·se by· FCX, Inc. ("debtor"), received . . -.
November 22, 1988, objecting to withdrawal of reference.
The governments seek withdrawal of the following matters:
(1) the debtor's October 19, 1988 Notice of Intention to Abandon
the contaminated Statesville site property, and the governments'
objections thereto, (2) the governments' objections to the
proposed second Distribution of Funds of the debtor, and (3)
the Application of the State of North Carolina for Reimbursement
of Administrative Expenses. The governments contend that
the mandatory withdrawal provision of§ 157(d) applies because
the resolution of these matters requires substantial and material
consideration of both the Bankruptcy Code and federal environ-
mental statutes, including the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), which
•
"
. ,-• •
regulate organizations or activities 'affecting interstate
commerce. The governments alternatively seek discretionary
withdrawal under § 157 (d).
The debtor objects to the governments' motion on the
grounds that (1) the motion is not timely filed, (2) mandatory
withdrawal is inapplicable because resolu~ion of the issues
which the governments seek to withdraw does not require sub-
stantial and material consideration of both the Bankruptcy
Code and non-Code federal law and (3) governments have not
shown cause for permissive withdrawal of reference.
For reasons discussed below, the court declines to
accept withdrawal of reference on either a mandatory or a
discretionary basis.
STATEMENT OF FACTS
1. The debtor filed a voluntary petition under Chapter
11 of the United States Bankruptcy Code on September 17, 1985,
in the United States Bankruptcy Court for the Eastern District
of North Carolina, United States Bankruptcy Judge A. Thomas
Small presiding.
2. The parties involved in the bankruptcy case include
FCX, the Committee of Unsecured Creditors, the Debenture Holders,
Columbia Bank for Coooeratives (''CBC'')--FCX's primary lender . .
and sole secured creditor, organized groups of employees repre-
sented by counsel, and groups of creditors seeking to make
claims for reclamation.
3. In February 1986, an environmental investigation
of one of the debtor's properties located in Statesville,
2
. , • •
N.C., (Statesville site) was completed by an environmental
consultant firm hired by a prospective buyer of the property.
The report was made available to debtor, who sent the report
to the State of North Carolina. The report indicated that
soil and groundwater contamination from pesticides existed
at the Statesville site.
4. On April 17, 1986, the debtor filed a disclosure
statement for a proposed plan of reorganization with the bank-
ruptcy court.
5. As of April 21, 1986, neither the State nor the
United States were on the formal mailing list of the bankruptcy
court.
6. On May 1, 1986, the FXC Plan of Reorganization
(the "plan'') based on liquidation was filed with the bankruptcy
court.
7. On May 2, 1986, the debtor forwarded the "Notification
of Hazardous Waste" at the Statesville site to the EPA at
the request of the Solid and Hazardous Waste Management Branch
of the North Carolina Department of Human Services, as well
as informed the EPA by letter dated May 2, 1986, that the
debtor was in ban~ruptcy.
8. State officials conducted an onsite investigation
of the Statesville site on May 7, 1986.
9. On June 6, 1986, the disclsosure statement was
amended in part to discuss the need to address environmetital
3
• •
•
concerns at the Stat~sville and WasHington sites. The statement
specified that any environmental clean-up costs would constitute
administrative expenses of the estate.
10. On June 9, 1986, the plan was amended.
11. On June 11, 1986 the disclosure statement was
approved.
Also on June 11, 1986, the debtor submitted "Notification
of Hazardous Waste'' at the Washington site to the EPA and
to the State's Solid and Hazardous Waste Branch.
12. On July 14, 1986, the State conducted the preliminary
assessment of the Washington site.
13. On July 30, 1986 the plan was amended a second
time.
14. On August 4, 1986 the bankruptcy court confirmed
the plan, which provided for orderly liquidation of both non-
operating assets and investments in other cooperatives held
by the debtor. The plan did not make any provisions for allow-
ing any environmental clean~up costs as administrative expenses
of the estate.
15. On August 18, 1986, the bankruptcy court approved
the debtor's sale of one of its properties in Washington,
North Carolina (i.e., the \·/ashington site) to Fred Webb, Inc.
16. State officials conducted an investigation of
the Washington site on August 26, 1986.
17. On March 30, 1987, the State completed the report
on the Statesville site; on May 20, 1987 the State completed
4
•
. , •
•
the Washington site re·po"rt·. These reports confirmed that
a release of hazardous substances had actually occurred at
the sites. At that point, the reorganization plan, which
did not provide for payment of environmental clean-up costs
as administrative expenses, had already been confirmed.
18. In March and May 1987, the State forwarded a copy
-.
of the Statesville/Washington inspection reports to the Environ-
mental Protection Agency.
19. On August 17, 1987, the bankruptcy court approved
the sale of the remaining parcels of the Washington site to
W. B. Gerard & Sons, Inc.
20. On September 23, 1987, the debtor moved to distribute
$5 million to unsecured creditors, and stated to the best
of its knowledge, any potential environmental clean-up claims
should not exceed the amounts on hand. The bankruptcy court
granted the debtor's.motion. This motion was the first document
of the bankruptcy proceedings received by the governments.
Prior to this time, motions filed in the bankruptcy court
were not served on the governments.
21. On December 24, 1987 the unsecured creditors received
$5 million minimum distribution following notice to all parties,
including the governments, and following approval by the bankruptcy
court.
22. In April of 1988, the debtor received copies of
the reports on the Statesville/Washington sites which the
State had forwarded to the EPA.
5
•
-.
•c. ., • r-::
I .-
•
i, . . 23. On April 1988 the debtor filed a motion for
authority to make a second dividend distribution of approxi-
mately $1.4 million to unsecured creditors and to CBC. Although
no claims had been made or notice of official action given,
the debtor indicated that it was aware of three possible un-
resolved claims, including two claims by the Solid Waste Manage-
ment Section of the Department of Human Resources of the State
of North Carolina and the EPA. These claims concerned potential
toxic waste at the Washington and Statesville sites.
24. On May 9, 1988, the EPA timely objected to the
debtor's motion for a second distribution of funds and asked
that the court not allow further distribution until the EPA
could assert claims against the debtor for costs incurred
as a result of environmental investigations or response actions
taken by EPA. The EPA objected to the disbursement on the
grounds that: (1) the previous motion to distribute assets
l1ad stated that sufficient assets would remain after the previous
disbursement to provide for environmental clean-up claims
of the Statesville and Washington sites and the current motion
did not make such a statement; (2) that no provision had been
made for clean-up of environmental contamination at the two
sites; and, (3) that if the disbursement went forward as pro-
posed, the only remaining real estate of the debtor available
to satisfy environmental clean-up claims was the Statesville
site, which may have to be abandoned and such abandonment
6
·'
•
. ,-• t '
•
should not be permitte6 u~~ll steps were taken to insure that
the site did not present a continuing environmental problem.
25. On May 11, 1988, the State also filed objections
to the debtor's motion for a second distribution of funds
and requested that $2.8 million be set aside to meet the pro-
jected costs of investigation and clean-up of the alleged
environmental hazard sites. The State also applied to the
bankruptcy court for reimbursement of ''administrative expenses"
it had incurred in investigating the sites.
26. On May 26, 1988, the Committee of Subordinated
Debenture Holders filed objections to the debtor's motion
for second distribution of funds.
27. The bankruptcy court held a status conference
on the motions on August 17, 1988 and indicated that in a
future hearing it would consider the debtor's obligation to
clean up the sites.
28. On September 13, 1988, the EPA issued an Admini-
strative Order under§ 106 of CERCLA, requiring the debtor
to remove hazardous wastes at the Washington site.
29. On or about September 22, 1988, the debtor received
the administrative order. A telephone conference was held
with the bankruptcy court at the debtor'.s request at which
time the bankruptcy court decided to consider implications
of the administrative order at a hearing scheduled for October
18, 1988.
7
• •
•
30. On Septemb~r 29, 1988, th~ EPA rescinded the order
pending resolution of other matters by the bankruptcy court.
31. On October 18, 1988, the bankruptcy court held
a hearing on (1) the motion by the debtor for the second distri-
bution of funds; (2) the motion of the State seeking admini-
strative expenses; (3) the motion of the State to set aside
the debtor's estate for clean-up; and (4) the debtor's motion
for instructions regarding the EPA clean-up order.
32. At the October 18 hearing, the debtor renewed
its motion for the second distribution of funds. The governments
presented evidence concerning the seriousness of the public
and environmental threats at the Statesville and Washington
sites and the projected costs of removal and remedial actions
at both sites. The debtor also presented evidence concerning
the sampling analysis conducted by its consultant and its
projected costs of a removal action at the Washington site.
The debtor and the creditors, however, argued that the claims
of the governments were barred on the basis of laches and
equitable estoppel. The debtor and the creditors also argued,
for the first time, that the sites should be abandoned under
§ 554 of the Bankruptcy Code. Although this argument had
not been brought on by motion and was not scheduled to be
considered by the court, the court advised at the conclusion
of the hearing that it would allow abandonment of the Statesville
site after receipt of a motion for abandonment. The court
8
. , • r
0
also stated that it ~id'ncii believe that the Washington site
was still part of the debtor's estate, but would permit the
parties to submit briefs by November 1 on that issue and whether
the court could provide administrative expense priority for
environmental claims concerning property which is no longer
part of the estate.
33. The bankruptcy court specifically found at the
October 18, 1988 hearing that the Statesville site posed no
imminent danger to public health and safety.
34. Prior to the October 18 hearing, nothing in the
record indicated that the bankruptcy court might be considering
issues which, pursuant to the governments' interpretation
of the law, would arise under CERCLA.
35. On October 19, 1988, the debtor submitted notice
of its intent to abandon the Statesville site.
36. On November 1, 1988, the governments filed a motion
to withdraw reference to the district court, as well as asked
the bankruptcy court to stay its ruling on the motions heard
at the October 18 hearing, pending the resolution of the govern-
ments' motion to withdraw reference.
37. On November 8, 1988, the bankruptcy court denied
the governments' motion to stay on the grounds that the govern-
ments' motion to withdraw reference was not timely filed.
38. On November 17, 1988, the district court received
the governments' motion to stay and motion for withdrawal
of reference.
9
• •
39. On November 22, 1988 the district court recieved
the debtor's objections to the governments' motions.
40. On December 8, 1988, the district court granted
the governments' motion to stay pending resolution of the
district court's decision on the governments' motion for with-
drawal of reference. The stay was limited in scope to the
issue of the second distribution of funds and the issue of
the abandonment of the Statesville site.
41. On December 5, 1988, the district court heard
oral arguments by both parties on the governments' motions
for stay and for withdrawal of reference. At this hearing,
the debtor conceded all liability for costs under CERCLA.
DISCUSSION
Federal district courts have original, but not exclusive
jurisdiction of ''all civil proceedings arising under Title
11, or arising in or related to cases under Title 11". 28
U.S.C. § 1334 (b). Pursuant to 28 U.S.C. § 157 (a), a district
court has discretion to refer to bankruptcy judges "any or
all cases under Title 11 and any or all proceedings arising
under Title 11 or arising in or related to a case under Title
11." An express limitation on the authority of district courts
to refer matters to bankruptcy courts is contained in 28 U.S.C.
§ 157 (d) Section 157(d) provides that:
[t]he district court may withdraw in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown. The district court shall, on timely motion of a party, so withdraw a proceeding
10
. , •
•
if the court'determi~es that resolution
of the proceeding requires consideration
of both Title 11 and other laws of the United
States regulating organizations or activities
affecting interstate commerce.
28 U.S.C. § 157 (d).
Withdrawal of reference is mandatory under§ 157(d)
where consideration of both Title 11 and other non-Code federal
statutes affecting interstate commerce is required to resolve
a proceeding. In re Combustion Equipment Associates, Inc.,
67 B.R. 709 (S.D.N.Y. 1986); In re Maislin Industries, U.S.,
Inc., 50 B.R. 943, 947 (E.D.Mich. 1985); In re White Motor
Corp., 42 B.R. 693, 705 (N.D. Ohio 1984). Non-Code law must
be substantially and materially considered before withdrawal
of reference is mandated. In re United States v. Ilco, 48
B.R. 1016 (N.D. Ala. 1985). Discretionary withdrawal under
Section 157(d) is appropriate for "cause shown." See Holland
America Ins. Co. v. Succession of Roy, 777 F.2d 992 (5th Cir.
1985) (listing factors for consideration in determining issue
of discretionary withdrawal). Timeliness is a requirement
for withdrawal of reference under both the discretionary and
mandatory provisions of§ 157(d). The purpose of the timeliness
provision of§ 157(d) is to insure "that the request for with-
drawal be filed as soon as practicable after it has become
clear that 'other laws' of the genre discribed in 28 U.S.C.
§ 157 (d) are implicated
(D.R. I. 1985).
n
11
In re Giorgio, 50 B.R. 327
•j • I_'
•
I.
The court first addresses the governments' withdrawal
of reference of the debtor's Notice to Abandon the Statesville
site.
-.
A. With regard to the issue of timeliness, the debtor
concedes in a supplemental response memorandum, submitted
December 14, 1988, that the governments timely filed the motion
to withdraw reference on this matter pursuant to § 157 (d) .1
The court agrees. Prior to the October 18 hearing, nothing
in the record indicated that the bankruptcy court might be
considering issues which, pursuant to the governments' interpre-
tation of the law, would arise under CERCLA. At the October
18 hearing, the debtor raised the issue of abandonment of
the Statesville site under 11 U.S.C. § 554(a). Following
the October 18 hearing, the debtor filed notice on October
19, 1988, of its intent to abandon the Statesville site.
The governments filed their motion to withdraw reference on
November 1, 1988. Accordingly, the court finds that the govern-
ments timely filed their motion to withdraw reference as to
the notice of abandonment "as soon as practicable'' after October
1 Prior to the debtor's submission of its December 14, 1988 memorandum, the debtor led the court to believe that the debtor was arguing that the governments' motion to withdraw reference as to the abandonment of the Statesville site ~as untimely filed pursuant to § 157 (d) in that the debtor made no distinction in its briefs or at the December 5 hearing as to the timeliness of withdrawal of each separate matter.
12
. , • •
•
19, 1988, when it becam'e clear that non-Code federal law was
implicated in the proceedings.2
B. The court finds, however, that withdrawal of reference
as to this matter is not mandated because the debtor's liability
under CERCLA is no longer an issue. The governments contend
that the threshhold issue presented by the debtor's notice
of abandonment filed October 19, 1988, is whether the bankruptcy
estate is liable for response costs under§ 107(a) of CERCLA,
42 U.S.C. § 9607 (a). The determination of liability, contend
the governments, requires application of non-Code federal
law, i.e., CERCLA, and not bankruptcy law, thereby mandating
2 The debtor also argues, under the heading of legal
theories such as~ judicata, laches, equitable estoppel,
and prejudicial delay, that the governments' motions are un-
timely because the government failed to file claims or otherwise
participate in the bankruptcy proceedings prior to the confirm-
ation of the plan. The court finds the debtor's contentions
under these legal theories to be meritless. First, the defenses
of laches and equitable estoppel may not be raised against
the governments. See United States v. RePass, 688 F.2d 154,
158 (2d Cir. 1982)-.-Second, it was unreasonable to expect
the governments to assert any form of "claim" prior to the
time the plan was confirmed on August 4, 1986, since (1) the
government had been assured in the June 6, 1986 disclosure
statement that clean-up costs would be treated by the debtor
as administrative costs of the estate, and (2) the State's
reports of March 30, 1987, and May 20, 1987, confirmed that
a release of hazardous substances had actually occurred at
the Statesville and Washington sites. By the time these events
occurred, the plan, which did not provide for payment of clean-
up costs as adminstrative expenses, had already been confirmed.
Any claims which the governments may have had, therefore appear
to have arisen after the confirmation of the plan. For the
foregoing reasons, the court rejects the debtor's arguments.
13
•
-.
•j • •
withdrawal of refeience on the notice 6f abandonment.3 The
debtor conceded liability for costs under CERCLA at the December
5, 1988, hearing before the district court. The debtor also
contended in its memorandum objecting the the governments'
motion to withdraw reference that the debtor's non-bankruptcy
liability under CERCLA was not at issue. The court interprets
this language as a concession of liability under CERCLA.
The court relies exclusively upon the representations made
by debtor's counsel at the December 5 hearing and in the debtor's
memorandum, in support of the finding that withdrawal of
reference as to the notice of abandonment is not mandated.
Had the debtor not conceded liability under CERCLA, withdrawal
of reference on the basis that both CERCLA and code law were
at issue would have been mandated.
3 The governments rely on Midlantic National Bank v. New Jersey Department of Natural Resources, 474 U.S. 494 (1986) as support for the contention that any non-Code issues under CERCLA should be withdrawn to and decided by the district court. The governments argue that Midlantic requires the district court, rather than the bankruptcy court, to determine whether the Statesville site properly may be abandoned under § 554(a). The governments' reliance on this case for these contentions is misplaced. Midlantic deals with the issue of abandonment of property of the estate under§ 554(a) of the Code; it does not address the issue of whether withdrawal of reference is appropriate. The specific issues under Midlantic are whether a .statute is designed to protect the public health, whether there is imminent and identifiable harm, and whether a court must formulate conditions prior to authorizing abandon-ment. These issues do not raise questions under non-code federal law requiring a decision by the district court. Such issues arise under§ 554(a) and properly may be determined by the bankruptcy court. See In re Smith-Douglass, Inc., 75 BR 994 (E.D.N.C. 1987), aff'd, 856 F.2d 12 (4th Cir. 1988).
14
•
. , •
•
II.
The court next addresses withdrawal of reference as
to the Second Distribution of Funds and the State's Application
for Reimbursement of Administrative Expenses. The governments
fail to show the applicability of either CERCLA or any other
non-Code federal 1·aw to these matters. Accordingly, the court
finds that withdrawal of reference is not mandated on these
matters. Because of this finding, a discussion of the issue
of timeliness is unnecessary.
Furthermore, because the governments fail to show
cause, the court declines to accept withdrawal of reference
of any of the three matters on a discretionary basis.
Conclusion
Based upon the foregoing reasons, the governments'
motion for withdrawal of reference is DENIED.
While the bankruptcy court has indicated that it would
allow the abandonment of the Statesville site, the bankruptcy
court has not made a final ruling on the issue. Assuming
the second distribution of funds is allowed to go forth, there
would not be sufficient funds to cover the anticipated costs
of clean-up in the event the bankruptcy court, or the district
court on appeal, determines that the environmental claims
have priority as administrative expenses. Accordingly, the
second distribution of funds is STAYED pending the bankruptcy
15
• •
•
court's decision on the debtor's Notice of Abandonment of
the Statesville Site.4
.J.. SO ORDERED this &~ -day of December, 1988.
District Judge
-.
4 The bankruptcy court determined in its order filed November 8, 1988, that the Statesville site presented no imminent and identifiable danger to the public health and safety.
·'
The bankruptcy court, however, decided this issue at the conclusion of the October 18, 1988 hearing which was not originally convened to address the issue of abandonment. See facts numbered 31 through 34 of this order. The debtor did not file its notice of abandonment until October 19, 1988. Section 554 requires a hearing to follow the notice of abandonment. The bankruptcy court has not held the necessary hearing pursuant to§ 554 on the notice of abandonment. The governments have submitted further evidence on this issue which must be considered.
Once the bankruptcy court has followed the proper procedure pursuant to§ 554 and renders it decision on the issue of abandonment, the proper vehicle for challenging the bankruptcy court's decision is by appeal by the adversely affected party.
16
•
0 72A ID
'""· 8182)
FCX, INC.,
ID#: 56-0220040
DEBTOR
·'7'.::
ii;;,.
DEC :rn 1988 UNITED STATES BANKRUPTCY COURT
PEGGY B. D:;:M!S , CLERK EASTERN DISTRICT OF NORTH CAROLINA S. BA!JKRUPTCY COURT EASTERN DISTRICT OF N, 0
CASE NUMBER:
S-85-01574-5
MEMORANDUM OPINION AND ORDER
Four matters were considered by this court at a hearing held
in Raleigh, North Carolina, on October 18, 1988: ( 1) the "Motion
for Authority to Make A Second Dividend Distribution to Unsecured
Creditors and CBC'' filed by the debtor on April 11, 1988,1 (2) the
1In this motion the debtor seeks court approval to distribute funds to unsecured creditors and to the debtor's secured creditor, Columbia Bank for Cooperatives, pursuant to the debtor's confirmed chapter 11 plan. A number of responses objecting to the motion were filed. Responses objecting to the proposed distribution were filed by the United States of America, Environmental Protection Agency (May 9, 1988), the State of North Carolina, Department of Human Resources, Di vision of Heal th Services, Sol id Waste Manage-ment Section (May 11, 1988) , CSX Transportation, Inc. (April 14, 1988), and the Committee of Subordinated Debenture Holders (May 27, 1988). The EPA and the State of North Carolina contend that their claim for clean up costs of hazardous materials on property either previously or currently owned by the debtor should be satisfied before distribution is made to unsecured creditors. The response of CSX Transportation, Inc. asks that its pro rata distribution be protected pending resolution of a challenge to the validity of its claim. The Committee of Subordinated Debenture Holders initially objected to the distribution to unsecured creditors because no provision was made for environmental clean up costs; the Committee also argues that EPA and the State of North Carolina should have no claim for environmental clean up costs. Additionally, Fred Webb, Inc. has filed an amicus curiae brief in support of the objections filed by EPA and the State of North Carolina (October 31, 1988). Fred Webb, Inc. has also filed a Motion to Stay Entry of Order of Distribution objecting to any distribution to the debtor's creditors (October 31, 1988).
1
-.
0 72A <D
l,v, 8/821
• •
"Motion to Conserve Remainder of Estate For Cleanup of FCX
Hazardous Waste Disposal Sites" filed by the State of North
Carolina, Solid Waste Management Section, Division of Health
Services of the Department of Human Resources (the ''State of North
Carolina'') on May 11, 1988,2 (3) the ''Application for Reimbursement
of Administrative Expenses" filed by the State of North Carolina on
May 11, 1988,3 and (4) a "Motion for Instructions Concerning
compliance with Administrative Order Issued by United States
Environmental Protection Agency'' filed by the debtor on September
4 26, 1988.
2This motion was included as part of the State of North carol ina' s response to the debtor's request to disburse funds to unsecured creditors and to the Columbia Bank for Cooperatives. The motion asks that funds be set aside to pay for the clean up of sites located in North Carolina at Statesville (costs estimated to be between $915,000 and $1,100,000) and Washington (costs estimated to be between $1,165,000 and $1,415,000). A response to the state of North Carolina's motion was filed by the debtor on June 9, 1988. The EPA's response to the debtor's motion to distribute funds does not include a request to set aside funds for clean up costs. EPA's response does, however, state that it "is anticipated that the United States will make an application on behalf of EPA for administrative expenses against the estate of the debtor for all costs incurred as a result of any environmental investigations or response actions taken at these locations by EPA."
3The application requests reimbursement of expenses of $23,272.01 incurred in investigating the hazardous waste sites ($9,312.01 at Statesville and $12,960 at Washington) plus future expenses as they accrue. An objection to the application was filed by the debtor on June 3, 1988.
4on September 13, 1988, the EPA issued an order directing the debtor to secure and clean up the site at Washington, North Carolina. On September 26, 1988, the debtor filed its motion asking for direction from the court concerning EPA's order. Subsequently, EPA rescinded its order pending resolution of the matter by the court.
2
-.
AO 72A EB
(Rev. 8182)
• •
The common issue in all of these proceedings is whether the
debtor has an obligation to clean up hazardous waste sites at
Statesville and Washington, North Carolina, and, if so, whether the
clean up costs have priority as costs of administration ahead of
the claims of the debtor's creditors.
At the conclusion of the hearing, the United States of
America Environmental Protection Agency ("EPA") and the state of
North Carolina requested time to file additional briefs. The court
gave all parties ten days to file briefs addressing the question of
what effect the postconfirmation sale of the Washington site by the
debtor has on the matters before the court. EPA and the State of
North Carolina did file a joint brief, but also filed a motion for
withdrawal of reference pursuant to 28 U.S.C. §157(d). In
addition, EPA and the State of North Carolina filed a motion for a
stay of the proceedings pursuant to Bankruptcy Rule 50ll(c)--
that motion was denied by this court on November 8, 1988, but was
granted by the district court on December 8, 1988, pending the
resolution of the governments' motion to withdraw reference.
Subsequently, on December 29, 1988, the district court denied the
request for a withdrawal of the reference, but continued the stay
with respect to the second distribution of funds pending this
court's decision concerning abandonment of the Statesville site.
This Memorandum Opinion and Order will address only those issues
which do not depend upon a decision regarding abandonment of the
Statesville property.
3
,0 72A ED
.,..,. 8182)
• •
FCX, Inc., a North Carolina farmers' purchasing and marketing
cooperative, filed a voluntary petition under chapter 11 of the
Bankruptcy Code on September 17, 1985, and as debtor in possession
proposed a plan of reorganization which was confirmed on August 4,
1986. The confirmed plan is a plan of liquidation which provides
for the orderly sale of the estate's assets and distribution of the
sale proceeds to the debtor's creditors. Under the plan, the
debtor's sole secured creditor, Columbia Bank for Cooperatives,
agreed to reduce its secured claim of approximately $60,000,000 to
permit the class of unsecured creditors (claims of approximately
$12,000,000) and the class of subordinated debenture holders
(claims of approximately $8,600,000) to participate in the
distribution of encumbered assets. The plan provides for the class
of unsecured creditors to receive at least $5,000,000 and for the
class of subordinated debenture holders to receive the proceeds of
specific FCX investments provided that those proceeds are not
needed to pay the compromised claim of Columbia Bank for Coopera-
tives and the minimum distribution of $5,000,000 to unsecured
creditors.
Most of the debtor's operating assets were sold to other
cooperatives prior to confirmation, but substantial assets remained
to be liquidated by the debtor after the plan was confirmed.
Included in those assets to be liquidated postconfirmation were two
distribution centers located in Statesville and Washington, North
Carolina.
4
,0 72A EB
~ ... 8/82)
•
For a number of years prior to bankruptcy, FCX conducted
pesticide blending operations at these centers, and it is un-
disputed that hazardous substances were buried by FCX at both
sites. On May 2, 1986, FCX submitted to EPA a "Notification of
Hazardous Waste Site" concerning the Statesville site. Subse-
quently, on June 11, 1986, FCX submitted a similar notification
concerning the facility at Washington. In each notification, the
party giving the notification was identified as FCX, Inc., Debtor
and Debtor-in-Possession. EPA and the State of North Carolina
contend, and it has not been contradicted, that they did not
receive a copy of the debtor's disclosure statement, did not
receive a copy of the plan, and did not receive notice of the
confirmation hearing. The plan was filed on June 6, 1986, was
amended on June 9 and July 30, and was confirmed on August 4, 1986.
No debt to EPA or the State of North Carolina in connection
with the hazardous waste sites is listed in the debtor's schedules
and neither the EPA nor the State of North Carolina has filed a
proof of claim in this case. 5 Furthermore, neither the EPA nor
the State of North carol ina submitted a request for a cost of
administration claim until the claim filed by the State of North
Carolina on May 11, 1988. Both the EPA and the State of North
Carolina now claim that the debtor is responsible for the costs of
5The effect of the governments' failure to file a proof of claim is not before the court at this time. Also not before the court is whether the governments could now file proofs of claim for a general unsecured claim in the event they are denied costs of administration claims. See Maressa v. A.H. Robins Co., 839 F.2d 220 (4th Cir. 1988).
5
10 72A EB
Aov. 8182)
• •
clean up of both the Statesville and Washington sites and that
those costs are entitled to priority as costs of administration.
The Committee of Subordinated Debenture Holders, however,
contends that EPA and the State of North Carolina should be barred
from asserting any claim for clean up against the estate because of
laches and equitable estoppel. Furthermore, even if EPA and the
state of North Carolina have claims for clean up costs, those
claims, according to the committee of Subordinated Debenture
Holders, should be considered to be general prepetition unsecured
claims rather than priority costs of administration. 6 Both the
debtor and the Committee of Unsecured Creditors support these
positions.
Laches and Equitable Estoppel
It is true that the State of North Carolina's claim for costs
of administration was made two years after the State of North
Carolina undertook an inspection of the Statesville site.
Furthermore, the EPA did not direct a clean up of the Washington
site until more than two years after confirmation of the plan even
though it received the Notification of Hazardous Waste Site prior
to confirmation. However, there has been no showing that these
delays have prejudiced the debtor or any of the debtor's creditors.
Clearly, the debtor knew of the potential environmental problems at
6 rf the clean up costs do constitute costs of administration, the Committee of Subordinated Debenture Holders maintains that payment should be made from assets otherwise available to pay unsecured claims. The issue of how costs of administration should be allocated among the classes provided for in the plan is not before the court at this time.
6
AO 72A ©
(Aov. B/8'.l)
• •
Statesville and Washington. In fact, the debtor has acknowledged
responsibility for clean up costs on a number of occasions. For
example, the disclosure statement states:
Creditors and other parties in interest should be aware that the Debtor has been advised of possible environ-mental considerations at the Statesville and Washington, North Carolina and Sumter, facility sites. While the attendant costs of "clean-up", if any. are yet specula-tive. the same would constitute a cost of administration in this case. While it is not possible to accurately estimate such costs, the same may exceed One Hundred Thousand and No/100 Dollars ($100,000.00).
Disclosure Statement of FCX, Inc., June 6, 1986 at page 36 (emphasis added) .7
The claims for clean up of the Statesville and Washington
sites should come as no surprise to any of the parties to these
proceedings. The debtor and creditors may have underestimated the
costs, but the existence of the potential claims ~as well known.
The defenses of laches and equitable estoppel are simply not
applicable to the circumstances of this case.8
Costs of Administration
The United States Supreme Court has held that a state's
prepetition injunction directing the clean up of a hazardous waste
site created no more than a general, unsecured claim not entitled
7The debtor's quarterly reports and the debtor's first application to distribute funds to unsecured creditors also recognized potential claims for environmental clean up. See Motion for Authority to Distribute Funds to Unsecured Creditors (September 23, 1987) at paragraph 7(c).
8see Judge Fox's Order of December 29, 1988, at p.13, footnote 2.
7
AO 72A 0
(1-lev. 8/a7)
• •
to priority. Ohio v. Kovacs, 469 U.S .. 274, 282-83; 105 S. Ct. 705,
709-10, 83 L. Ed. 2d 649 (1985); see also Southern Railway Co. v.
Johnson Bronze Co., 758 F.2d 137, 141 (3rd Cir. 1985) and In re
Dant & Russell, Inc., 853 F.2d 700 (9th Cir. 1988). The Bankruptcy
Code does not provide a priority for environmental damage caused by
the debtor's prepetition acts, and, even when public policy may
favor a priority, the court may not create one when one does not
exist. Dant & Russell, Inc., 853 F.2d at 709; 3 L. King, Collier
on Bankruptcy ,I507.02, at 507-17 (15th ed. 1988). Bankruptcy
courts, however, "have broad discretion in dete.rmining whether to
award administrative expense priority,'' Dant & Russell, Inc., 853
F.2d at 707, and the circumstances of a case may be such that the
hazardous wastes clean up costs resulting from the debtor's
prepetition acts may be given cost of administration status.
A claim for administrative expenses may be warranted "when
the clean up costs result from monies expended for the preservation
of the bankruptcy estate." Id. at 709. As a general rule,
however, a claim for administrative costs must benefit the estate
to be allowed. See id. at 706. Consequently, if the clean up
costs exceed the projected "post clean up" value of the property,
the debtor will typically attempt to abandon the property because
the estate will derive no benefit from the clean up costs. 9 In
the present case, the debtor announced at the hearing its intention
to abandon the Statesville site and a notice of abandonment was in
9see In re 82 Milbar Boulevard Inc., 91 B.R. 213 (Bankr. E.D. N.Y. 1988).
8
0 72A ID
, ... 8/811
• •
fact filed three days later on October 21. The Washington site was
sold shortly after the plan was confirmed.lo
The United States Supreme Court has held that the court "does
not have the power to authorize an abandonment without formulating
conditions that will adequately protect the public's health and
safety." Midlantic National Bank v. New Jersey Department of
Environmental Protection, 474 U.S. 494, 106 S. Ct. 755, 762, 88 L.
Ed. 2d 859 ( 1986) . The Fourth Circuit Court of Appeals recently
has held that the limit which Midlantic places on the ability of
the trustee or debtor in possession to abandon property is a narrow
one. In re Smith-Douglass, Inc., 856 F. 2d 12 (4th Cir. 1988) .11
Full compliance with all environmental laws is not required prior
to abandonment, but abandonment is not authorized where there is an
immediate threat to the public heal th and safety and an imminent
danger of death or illness. Id. at 16. If the property cannot be
abandoned, the trustee or debtor in possession must comply with the
environmental laws and clean up costs may be entitled to cost of
administration priority even though the pollution was caused by the
debtor's prepeti tion acts and even though, in the final analysis,
10on August 4, 1986, shortly after confirmation debtor's plan, an order was entered approving the sale Washington site to Fred Webb, Inc. and the property was August 18, 1986.
of the
of the
sold on
11The Ninth Circuit has also read the Midlantic exception narrowly. In re Dant & Russell, Inc., 853 F.2d 700 (9th Cir. 1988). Other courts, however, have given the Midlantic exception a broader interpretation. In re Wall Tube & Metal Products Co., 831 F.2d 118 (6th Cir. 1987); In re Stevens, 68 B.R. 774 (D. Me. 1987); In re Peerless Plating Co., 70 B.R. 943 (Bankr. W.D. Mich. 1987).
9
\Q 72A ED
Hrv. 8/82)
• •
the clean up costs may exceed the value of the property involved.
Id. at 17.
At the conclusion of the hearing on October 18, 1988, the
court stated that the governments had not shown that there was an
immediate threat to the public health and safety with respect to
the Statesville site and that therefore there was a high proba-
bility that abandonment of the Statesville site would be allowed.
As Judge Fox states in his Order of December 29, 1988, any
determination regarding the abandonment of the Statesville site was
premature ·and that decision can only be made af_ter the procedures
of 11 U.S.C. §554 are followed. However, one aspect of the State
of North Carolina's request for an administrative claim with
respect to Statesville, the costs of investigation, can be deter-
mined at this time without regard to the abandonment issue.
Statesville Costs of Investigation
For many years, beginning in the early 1940's, the debtor
operated a feed mill and pesticide blending plant on a five acre
site in Statesville, North Carolina. FCX buried 5 to 10 tons of
"off spec" pesticides including Chlordane, DDT, DDE, Dieldrin and
Lindane at the site. The pesticides were removed from their
containers and dumped into a pit believed to be 10 feet deep, 8
feet long and 8 feet wide. The pit was covered with soil and later
by a warehouse with a reinforced concrete floor.
The debtor submitted the Notification of Hazardous Waste Site
concerning the Statesville site to EPA on May 2, 1986, the State of
North Carolina made a site inspection on May 7, 1986, and the
10
,O 72A <l>
'""· 8/82)
• •
inspection report was completed on March 30, 1987. The site has
been proposed for inclusion on the National Priorities List
established pursuant to 42 U.S.C. §9605.12 The State of North
Carolina, according to the testimony of toxicologist Stan Atwood,
considers this site one of the state's top priority clean up sites,
but to date neither EPA nor the state of North Carolina has ordered
the debtor to clean up the Statesville site and neither has
undertaken any removal actions.
There is no doubt that the chemicals buried by FCX at
Statesville are hazardous substances, some of which are deadly in
minute levels.13 The question to be considered at the hearing to
be scheduled on the notice of abandonment, however, is whether
those dangerous chemicals pose an immediate danger in the present
circumstance.
The State of North Carolina filed a cost of administration
claim in the amount of $9,312.01 for the investigation it conducted
in connection with determining the extent of the States~ille
problem. Whether or not abandonment is ultimately authorized, the
court agrees that the State of North Carolina should be compensated
for these postpetition costs because they directly benefitted the
debtor's estate.
l 2statesville has been assigned a Hazard 3 7. 94 a site is generally included on the List if its Hazard Rating Score exceeds 28.5.
Rating
National
Score of
Priority
13For example, according to the testimony of Mr. Atwood, the safe drinking water standard for Lindane is 4 parts per billion. One drop of Dieldrin can contaminate 10 million gallons of water.
11
10 72A '1>
Rt\,, 81821
• •
The debtor's confirmed plan provides for the sale of certain
assets of the estate including the Statesville site. The value of
the Statesville property (which is property of the estate until it
is abandoned) could not be determined unless the environmental
problems were evaluated and the governments' position known. The
postpetition investigation into the magnitude of the hazardous
waste problem by the State of North Carolina provided a valuable
benefit to the estate. If the investigation had disclosed no
hazardous waste problem, ·the property could have been sold and the
proceeds distributed to creditors. The investigation, however,
showed that the clean up costs will exceed the value of the
property and the debtor's course of action to seek abandonment
became clear. Accordingly, the State of North Carolina will be
allowed an administrative claim in the amount of $9,312.00.
Washington Site
It is the court's opinion that the clean up costs for the
Washington site qualify for cost of administration priority. This
treatment is warranted for several reasons --the benefit previous-
ly derived by the estate from the property, the high probability
that abandonment would not have been permitted had it been
requested, and the debtor's representations that it would pay for
the clean up as a cost of administration.
The Washington site was included in the list of properties
which the debtor proposed to sell after confirmation of the plan.
In fact, the property was sold to Fred Webb, Inc. on August 18,
12
\0 71A (D ~ ..... 81'82)
• •
1986.14 The property was treated as property of the estate and
the debtor and its creditors received the benefit of the property's
sale proceeds. In accepting the benefits of the estate property,
the debtor should not be able to avoid the environmental obliga-
tions associated with the property --even if those obligations
later turn out to exceed the sales proceeds received.15 The debtor
could have sought an abandonment, but it elected instead to sell
the property and retain the proceeds. It, in effect, was a gamble
that the clean up costs would be less than the sales price --in
this case the bet was lost.
Even if abandonment of the property had been sought, however,
there is a high probability that it would have been denied.
Basically, the same substances 16 that were buried in Statesville
are involved at Washington. The chemicals are buried over a wide
area and the proximity of the ground water to the hazardous
substances creates an imminent danger to the three thousand people
who are served by wells within a three mile radius of the site.
Even the debtor's expert witness, Mr. Edward Brazier, agreed
that an expeditious removal operation should be undertaken.
14 Fred Webb,
rescind the sale.
proper allocation
Webb, Inc. and the
Inc. has filed an adversary proceeding to Whether the sale should be rescinded and the of the clean up responsibility between Fred debtor is not before the court.
15That is not to say that every sale of property will cause the clean up costs of the property to rise to the level of cost of administration priority.
16soil samples taken at the Washington site showed the presence of Chlordane, Aldrin, DDT, DDE, Dieldrin, and Mercury.
13
,o 72A <B
Rov. 8/82)
• •
FCX reportedly dug a trench 12 feet wide, 250 feet long, and
10 to 12 feet deep in which it buried pesticides and herbicid_es.
There is also evidence that there is a second trench 12 feet wide
by 200 feet long and two smaller holes 20 feet by 20 feet and 10
feet by 10 feet at the site, all of which contain hazardous sub-
stances. The trenches and holes are covered with dirt, not a
concrete slab as in Statesville. Testimony was presented by Mr.
William Kluttz of the Atlanta Superfund Branch of EPA that,
although the exact amount of hazardous materials buried at
Washington is apparently unknown, it is estimated that 2,500 tons
of soil will need to be excavated to clean up the Washington site.
A sample from a nearby well showed no contamination, but
hazardous substances were detected at ground level and water was
found to be in contact with the hazardous materials. The govern-
ments' expert, Grover Nicholson, testified that the hazardous
materials in the soil were dangerously close to the ground water,
if not already in it.
As is the case with the Statesville site, the Washington site
has been proposed for inclusion on the National Priorities List,17
However, unlike the case with the Statesville site, EPA issued a
clean up order for the Washington site on September 13, 1988,
because of the hazardous substances' likely contamination of the
ground water. Although the order was rescinded pending this
proceeding, EPA has scheduled an immediate clean up.
17The Washington site has been assigned a Hazard Rating Score of 31.98.
14
\0 72A EB
Aov. 81821
• •
The swampy terrain of the Washington location facilitates the
migration of the hazardous substances to other areas and, based_ on
the likely spreading of the carcinogenic pesticides through the
ground water, the court finds that there is an immediate threat to
the public health and safety at the Washington site.
Another factor which supports the conclusion that the clean up
costs for the Washington site should be considered costs of
administration is that the debtor has consistently represented its
intention to pay for hazardous waste removal. See the disclosure
statement (June 6, 1986), the quarterly reports, and the debtor's
first application to distribute $5,000,000 to unsecured creditors.
Confirmation of Plan
The Committee of Unsecured Creditors argues that the confirma-
tion of the debtor's plan fixed the rights of the parties and that
the governments cannot now, two years after confirmation, assert
cost of administration claims which would greatly affect the
agreement embodied in the plan among the secured creditor,
unsecured creditors and the debenture holders. No doubt awarding
cost of administration status for clean up costs will significantly
reduce the funds available for other creditors, but that pos-
sibility was known to all at the time of confirmation. The fact
that the sole secured creditor compromised its secured claim to
permit distribution to holders of unsecured claims does not change
things. The costs of environmental clean up may have been
underestimated, but the problem was known and the plan was
15
~O 72A ID {R,v, 8/821
• •
confirmed and the agreement put into effect notwithstanding that
knowledge and risk.
Summary
The State of North Carolina shall be given a cost of ad-
ministration priority claim for $9,312.01 which represents its
investigative costs in connection with the Statesville site. The
State of North Carolina and EPA shall have a cost of administration
priority claim for the clean up costs in connection with the
debtor's Washington site including the $12,960 already expended for
investigation. Whether the State of North Carolina or EPA shall
have a cost of administration claim for future clean up costs of
the Statesville site will be determined after a decision has been
made concerning the abandonment of the Statesville property. Until
that time, in accordance with Judge Fox's Order of December 29,
1988, the second distribution of funds is stayed.18
Any future distribution to other creditors will not be
authorized unless provisions are made for the clean up costs
allowed by the court.
SO ORDERED.
DATED: DEC 3 n 1988
A. Thomas Small
Bankruptcy Judge
18The court will also not authorize the payment of attorney fees until the issue is resolved.
16
LACY 11. THORNUCR<:i
A TTl>HNEY GENER.\l.
• •
State of North Carolina
Department of J11slicc
P.()_ !,ox ti:.!!,
H.-\LEICI t
--MEMORANDUM--
TO:
FROM:
DATE:
RE:
Al Cole
Reggie Watkins
Dan Oakley
Nancy E. Scott
August 28, 1989
Summary of FCX. Settlement Agreeme11 t
This is a $2 mill.ion settlement among the FCX, rnc., Bankruptcy Estate, U.S. EPA, and the N.C. Department of Environment, Health and Natural Resources, Division of So.i.id Waste Management, Superfund Section, for env.ironmentaJ. respo11se costs incurred or to be incurred at two s.itr?.s where FCX iluricsd pesticides and other hazardous chemicals. The F'CX-1,ashingt,;n, N.C., site is listed on the National Priorities List for Superfund clean-up; the FCX-Statesville site has been norn.i 11iltc,d for the National Priorities List. The governments have esti.111atrc,d that response costs at the two sites will exceed $3 rn.i.11.ion. ·rtre Settlement Agreement will become the basis of a Consent OnJ,_c:,,: tc, be entered by the Bankruptcy Court after the Agreement Ls published in the Federal Register and the statutory comment period has expired.
The Settlement is entered into by U.S. EPJ\ pursuant t.,:, tlHe Comprehensive Environmental Response and Li.abLc i.ty Act ( "CERCLA"), 42 U.S.C. §9601 et ~§'_g., and by the State pur,;uant to CERCLA and the State Inactive Hazardous Sites Jaw, G.S. Chapter: 130A-310. Under terms of the Settlement, the Bankruptcy Estate will establish the "FCX Environmental SettJ.ernent Trust" in tl,e amount of $2 million to be held by the Trustrc,e for re.i.nrbllr:senir?rH. of response costs incurred by EPA on the State at botl1 of the sites. $200,000 of the trust corpus wi.ll iY' rc~sr,rved for !)il)'t1<rc1il. of the State's mandatory ten percent stiarA of Superfund r<:,lll'.,ri.i.,.1i
• Al Cole
Reggie Watkins
Dan Oakley
Page 2
August 28, 1989
•
action costs at the sites. l. The $200, DOO mily a.I,;,:, l)e u:;,c,d , ,, reimburse the State for response costs incurred or: to be incurn-·,d at either of the sites pursuant to St.ate Ja,.., and not oLIJen1i :;,:, paid by EPA. Finally, should EP/\ ten11i.n;it.c, cr,»pun:;,c, ,·1c:tiu1::-; under Superfund wh.i.le money ren1ui.11s in t:1:c· Ln,st fund, t.lJ,, 111r,11,·y shall be available to reirnburs•,, th<? !;t.atE, fr,,-f:ur:Llwr-n•,:,vm.,,.,-. activit.ies qeemecl rH3cessarr u1H.ii:--:"i: ~-;:L,011.e l.(i 1.,:. r r L•ut l1 F:P:\ r11;1.J ; !1•• State complete al1 response ,::cti_,:;ns ·.-1.i L!1ouc 1.:'}:hiit1~:;Li1ll:J L.Ji,:: tr:1:~1. fund, remaining money shall bn n~tu . .-:11f~d tr, l•'l.~X., t:111(1 1.t:;.: tn1::;t_ shall terminate.
In consideration of the $2 mi.l.L.i_c1n trust:, tt1e ':V)V1~cnrn1~r1L~.:, agree to release all cla.ims, e ... ..._cer,L ct.-im.i.na.1 ,:J.d'i.rns anct nat•.1ra1 resources damages claims, U(Jdi.nsl:. 1::.r1t:~ FCX l.:'.>c.111kr·11ptcy Ei-,Lat:•.: !1,1::1r_:1i upon release of hazardous substances at th,:~ :::~.i.tJ::::i, .'ind t:o t:c,1.j·l:i11 from inte-r.ference wj_ th tht~ Cha pt.er ]. J J. i.qu.i.daL.i.c:-n and distribution of funds to cn~d.i.Lor::'.
All parties to the Sett.lem,:,nt· /\r1r:cr:,11ent 1-:.i .11 1-1i.t:hd1·,_1·,-1 u,,,; ,· respective appeals from orders of t.he J.\anknq,tcy CourL upon ,c1,t.,:y of the Consent Order.
NES:ffh
I f
lNothing in this /\gcee.ment, huVl'E':vr::r, ,:-_:ornn1 it~, Llir:: ~.iLt1tl: !'.•,.• guaranteeing the tf:?Il. perc8nt. shan~ of rem1.:~diaJ dt:tJ(:n t: .. ·o:")t:-~ (~1L either site.
IN RE:
FCX, INC. ,
Debtor.
)
)
)
)
)
CASE NO. S-85-01574-5
CHAPTER 11
OBJECTION TO MOTION FOR AUTHORITY TO MAKE A SECOND
DIVIDEND DISTRIBUTION TO UNSECURED CREDITORS AND CBC
NOW COMES the Committee of Subordinated Debenture Holders (the
"Committee"), by and through the undersigned counsel, and hereby
objects to the Motion For Authority To Make A Second Dividend
Distribution To Unsecured Creditors And CBC served by Debtor herein
on April 7, 1988 as follows:
1. On April 7, 1988, Debtor herein filed a Motion For
Authority To Make A Second Dividend Distribution To Unsecured
Creditors And CBC (the "Motion"). The deadline for responding to
the Motion was May 7, 1988.
2. On May 11, 1988, the Solid Waste Management Section,
North Carolina Department of Human Resources, filed a response
opposing the Motion on the grounds that substantial costs would be
involved in the clean-up of the Statesville and Washington, N.C.
FCX sites. The Response requested that the Court ensure, by
denying the Motion, that sufficient funds were available from
Debtor's estate to pay the costs of clean-up.
3. Upon information and belief, the Environmental Protection
Agency filed a similar response to the Motion shortly thereafter.
4. Prior to the filings of the responses by the North
Carolina Department of Human Resources and the Environmental
• • Protection Agency, counsel for the Connnittee did not oppose
Debtor's Motion as it was unaware that substantial FCX assets may
be needed to clean-up these two sites. However, after reviewing
the responses and following discussion with Debtor; counsel for the
Connnittee has determined that it may be necessary for some or all
of the funds proposed to be distributed to unsecured creditors and
CBC pursuant to the Motion to be made available to fund the
clean-up of the Washington and Statesville, N.C. sites.
WHEREFORE, the Connnittee prays the Court as follows:
1. To enter an Order denying Debtor's Motion at this time,
so that the funds proposed to be distributed to unsecured creditors
and CBC may be retained by Debtor's estate until the costs, if any,
of the alleged clean-up of the Washington and Statesville, . N. C.
sites are determined;
2. For a hearing upon Debtor's Motion and this Objection
thereto; and
3. For such other and further relief as the Court deems
necessary and proper.
This the~ day of May, 1988.
451: 125/A
SHITH, ANDERSON, BLOUNT, DORSETT,
MITCHELL & JERNIGAN
By:
By:
2
Attorneys for the Colillllittee of
Subordinated Debenture Holders
P.O. Box 12807
Raleigh, NC 27605
[phone]
• •
CERTIFICATE OF SERVICE
I, Amos U. Priester, IV, of P. 0. Box 12807, Raleigh, North
Carolina 27605 certify:
That I am, and at all times hereinafter mentioned· was, more
than eighteen (18) years of age;
That on the ).~ ri. day of May, 1988, I served copies of the
attached on
Douglas Q. Wickham, Esq.
P. O. Box 389
Raleigh, NC 27602-0389
Lacy H. Reaves, Esq.
P.O. Box 10096
Raleigh, NC 27605-0096
Nancy Ebert Scott, Esq.
P. 0. Box 629
Raleigh, NC 27602-0629
Harold T. Glassman, Esq.
Blank, Rome, Comiskey & McCauley.
4 Penn Center Plaza
Philadelphia, Pennsylvania• 19103
by depositing copies thereof in the United States mail, postage
prepaid.
I certify under penalty of perjury that the foregoing is true
and correct.
This the ..&:tJ_day of May, 1988.
&. !L;.£4=
451:125/B