I would highly recommend that any one involved with this company obtain full copy of the reorg plan. It is a public document and available via the NM Bankruptcy clerks office. There are many issues including creditors, debenture holders, financial reports and future business plans. Any investment decision should be based an understanding on the full plan.
I do not think it would be appropriate to answer your question as stated as to possibly create omission to the context of the new structure. I have scanned and OCRed pages part 32,33,34 (only one sentence on page),35, 36,37, 38, and part of 39. Sometimes dyslexic OCR (8-point type on a copy doesn't help much) may cause recognition errors.
I would again urge all to put this section in context of the entire reorg plan.
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3. Classif cation and Treatment of Convertible Debenture Claims and Interests Under the Plan
a. Class 4A Claims and Interests (Convertible Debentures)
Class 4A Claims and Interests consist of all Allowed non-insider Convertible
against and in Solv-Ex inpriciple amountsDebenture Claims and Interests principal amounts as existed on me date of the filing of Debtor's petition in reorganization, together with any and all Allowed Claims of the members of such Class 4A against the estate for damages or rescission based on the sale of securities which claims are subordinated to the claims of general unsecured creditors, pursuant to 11 U.S.C. 510(b). Further per Section 510(b), the Class 4A Claims and Interests are subordinate to the claims of general unsecured creditors and the Classes set forth above, but are not impaired.
The Convertible Debentures consist of: (1) that Debenture memorialized in that certain Convertible Loan Agreement between Solv-Ex and Phemex Establishment, dated April 16, 1996, in the amount of USD$33 Million;
(2) the 5% Convertible Debenture Due March 31.1999. issued by Solv-Ex and purchased by Kalamur Enterprises Ltd., on March 31, 1997, in the amount of USD$5 Million: (3) those 5% Convertible Debentures Due March 31 1999, issued by Solv-Ex and purchased by Altamira Management Ltd.. through Gee 8 & Company and Groome Capital Advisory, Inc., on April 3, 1997. totaling the amount of USD$2.5Million: and. (4) that 5% Convertible Debenture Due March 31, 1999, issued by Solv-Ex and purchased by ABN-AMRO Bank (Switzerland) AG. On April 7, 1997, in the amount of USD$2.5 Million.
The claim of Phemex Establishment was disputed by the Debtor based upon the Company's claims and defenses arising in connection with the Deutsche Bank AG Schedule 13D filing. Phemex Establishment has filed no proof of claim in the reorganization case or in the Canadian case and, thereby, is deemed to have waived its Claim entire!'. Therefore, by operation of the Plan, the claim of Phemex Establishment is and will be disallowed. including any claim of any security or collateral interest whatsoever in the 1,016,000 Treasury shares of Existing Solv-Ex Common Stock.
At the option of the Debtor, or by agreement or compromise between the Debtor and any holder of a Class 4A Claim, the holder of a particular Class 4A Claim shall be treated as follows:
Said holder shall receive, upon surrender of the instrument(s) representing such Convertible Debenture to the Debtor or to the Debtor's Disbursing or Transfer Agent in accord with the written instructions given by the Debtor to the holder prior to the Record Date, issuance of a replacement, New Solv-Ex Series 1998 Convertible Debenture under which the holder of such Allowed Class 4A Claim will retain and/or be reinstated fully to any and all rights which it held under any existing, underlying Convertible Debenture agreement with the Debtor. including retention of any security which it may have held on account of its claim or interest prior to the Effective Date, and the Debtor will be deemed to have cured such defaults, if any, as may have existed on the Effective Date under such underlying Convertible Debenture agreement. The Debtor shall perform under such Series 1998 Convertible Debenture in accordance with the terms thereof after the Effective Date.
In the alternative, at Debtor's option or by agreement or compromise between the Debtor and such Convertible Debenture holder, such holder shall receive the following on conversion of its claim:
(i) Such holder shall be converted to and issued shares of New Solv-Ex Common Stock, to be issued at the same formula/ratio for shares of New Solv-Ex Common Stock to principal indebtedness converted as contained in the Class 4A Existing Convertible Debenture agreements and the new Series 1998 Convertible Debentures, plus warrants for New Solv-Ex Common Stock at the same ratio and on the same terms given to holders of Class 5A Interests in Article 3.11 of the Plan. (Certain holders of class 4A Debenture Interests, namely Kalamur, have previously sought authority from the Bankruptcy Court for conversion of their Debentures to Solv-Ex Common Stock); or (ii) cash or cash buyers of such class 4A interests, on a Distribution Date not later than (30) days following the Effective Date, in an amount equal to the fac principal amount of the Debenture investment, (without reference to conversion price and less interest and costs), conditional upon the availability of adequate, additional new cash funds to the Debtor prior to such Distribution Date. (The Debtor has previously represented to certain holders of class 4A Debenture Interests, namely Altamira & ABN AMRO Bank, that it will diligently undertake, using its best efforts. Prior to and following confirmation
cash buyer).
In the event that a holder of a disputed Class 4A Convertible Debenture is to receive shares of new Solv-Ex Common Stock in satisfaction of its Allowed Class 4A Interest, it will receive, if such Interest becomes allowed after the Effective Date, as soon as practicable after such Interest is allowed, its Pro Rata portion of the shares of New Solv-Ex Common Stock reserved in a Disputed Claims Share Fund for or issued to holders of allowed Class 4A Interests under the Plan. The Court will determine the aggregate number of shares of New Solv-Ex Common Stock to be reserved for or issued to holders of such Class 4A Interests under the Plan and the Court may estimate the maximum amount of any such interest or claim in order to make such determination. Such determination may be made by the Court both before or after Confirmation. In no event will the number of shares of New Solv-Ex Common Stock allocated to the holders of Class 4A Interests, or to the disputed claims share fund for such class be proportionately changed in relationship of one class to another in order to provide New Solv-Ex Common Stock to the holders of Class 4A Interests. Class 4A Interests whose interests or claims have been estimated shall have
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recourse only to shares of New Solv-Ex Common Stock reserved for issuance on account of the Class 4A Interests.
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. Class 4B Claims (Certain Insider Debenture Interests)
Class 4B Claims consist of the Allowed Claim of USD 2 Million. together with associated charges and amounts, advanced to the Debtor by its insider, Chairman and CEO of the Company. John S. Rendall. which was intended by the parties to have been documented as a convertible debenture, but which was not. The Class 4B Claim shall be treated as unimpaired.
The Class 4B Claimant shall be issued shares of new Solv-Ex Common Stock and warrants, to be issued at a like forrnula/ratio for shares of New Solv-Ex Common Stock to principal indebtedness converted as contained in the treatment of Class 4A Convertible Debenture agreements and the New Series 1998 Convertible Debentures.
4. Classifcation and Treatment of Other Interests under the Plan
a. Class 5A interests (Existing Sol - Ex Common Stock)
Class 5A Interests are comprised of Allowed Interests consisting of all authorized, issued and outstanding shares of Existing Solv-Ex Common Stock. The Existing Solv-Ex Common Stock is the USD$.01 I par value common stock of the Company issued and outstanding on the Petition Date and/or per order of the Court in the reorganization case. There are (excluding any treasury shares) 25, 259, 373 shares of Existing Solv-Ex Common Stock currently outstanding. Class 5A Interests are impaired under the Plan.
Each holder of an Allowed Class 5A Interest will receive on the Effective Date, or on a date as soon as practicable following and upon the surrender of their shares of Existing Solv-Ex Common Stock. one share of New Solv-Ex Common Stock for every one share of Existing Solv-Ex Common Stock as they may beneficially own and hold. In addition, each holder shall receive warrant, to expire two (2) years from the Effective Date, for the purchase of one share of New Solv-Ex Common Stock for every three shares issued and received on account of its Interest. at a price of USD$ 10.00 per share. The number of shares of New Solv-Ex Common Stock to be distributed to the Class 5A Interest holders will equal a percentage (to be determined prior to the hearing on Confirmation) of all shares of New Solv-Ex Common Stock to be issued on the Effective Date.
Each holder of a disputed Class 5A Interest will receive, if such interest becomes allowed after the Effective
Date, as soon as practicable after such interest is allowed, its Pro Rata portion of the shares of New Solv-Ex Common Stock reserved in a Disputed Claims/lnterests Share Reserve Fund for or issued to holders of allowed Class 5A Claims under the Plan. The Court will determine the aggregate number of shares of New Solv-Ex Common Stock to be reserved for or issued to holders of such Class 5A Interest under the Plan and the Court may estimate the maximum amount of any such claim in order to make such determination. Such determination may be made by the Court both before or after Confirmation. In no event will the number of shares of New Solv-Ex Common Stock allocated to the holders of Class 5A Interest, or to the disputed claims share fund for such class be proportionately changed in relationship of one class to another in order to provide New Solv-Ex Common Stock to the holders of Class 5A Interests. Class 5A claimants whose Claims, or Interests have been estimated shall have recourse only to shares of New Solv-Ex Common Stock reserved for issuance on account of the Class 5A Interests.
The rights of holders of Existing Solv-Ex Common Stock that receive New Solv-Ex Common Stock on account of their Class 5A Interests to elect directors of the Reorganized Solv-Ex will not be altered.
The Record Date for tender and surrender of Existing Securities, including the existing convertible debentures and Solv-Ex Common Stock and for distribution of New Solv-Ex Common Stock securities including New Series 1998 Convertible Debentures and New Solv-Ex Common Stock to the holders of allowed claims and Interests will be, the Effective Date, or as close to the Effective Date, as practicable.
IF THE HOLDERS OF ALLOWED INTERESTS IN CLASS 5A DO NOT VOTE TO ACCEPT THE PLAN, SOLV-EX WILL SEEK CONFIRMATION OF THE PLAN WITH REGARD TO CLASS 7 UNDER
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THE CRAMDOWN PROVISIONS OF BANKRUPTCY CODE, SECTION 1129(b) AND THE HOLDERS OF THE CLASS 5A INTERESTS WILL RECEIVE NO DISTRIBUTIONS AND WILL RETAI.N NO PROPERTY UNDER THE PLAN ON ACCOUNT OF THEIR INTERESTS.
b. Class 5B Claims (Class Claims Based on Sale of Securities)
Class 5B Claims consist of Claims for damages or rescission based on the sale of securities (including any such claims in the form of class actions or as stated in any purported class proof of claim) and are subordinated to the claims general unsecured creditors, pursuant to 11 U.S.C 510(b) Class 5B Claims are impaired
Allowed Class 5B Claims will be treated as follows:
Each holder of an Allowed Class 5B Claim will receive on the Effective Date or, if such claim becomes allowed after the Effective Date. as soon as practicable after such Claim is allowed. its Pro Rata portion of the shares of New Solv-Ex Common Stock reserved in a Disputed Claims/lnterests Share Reserve Fund for or issued to holders of allowed Class 5B Claims under the Plan. The Court will determine the aggregate number of shares of New Solv-Ex Common Stock to be reserved for or issued to holders of such Class 5B Claims under the Plan and the Court may estimate the maximum amount of any such claim in order to make such determination. Such determination may be made by the Court both before and after Confirmation. In no event will the number of shares of New Solv-Ex Common Stock allocated to the holders of Class 5B Claims, or to the Disputed Claims/lnterests, Share Fund for such class be proportionately changed in relationship of one class to another in order to provide New Solv-Ex Common Stock to the holders of Class 5B claims. Class 5B claimants whose claims have been estimated shall have recourse only to shares of New Solv-Ex Common Stock reserved for issuance on account of he Class 5B claims. In addition, the satisfaction and recovery of the Class 5B claimants may be augmented by a possible assignment of a portion of the company's claims against Deutsche Bank, AG and its affiliates only in the event the Debtor reaches a comprise approved by the Court in settlement of the Class 5B Claims, if any .
IF THE HOLDERS OF ALLOWED INTERESTS IN CLASS SA DO NOT VOTE TO ACCEPT THE PLAN, SOLV-EX WILL SEEK CONFIRMATION OF THE PLAN WITH REGARD TO CLASS 7 UNDER THE CRAMDOWN PROVISIONS OF BANKRUPTCY CODE, SECTION 1129(b) AND THE HOLDERS OF THE CLASS SA INTERESTS WILL RECEIVE NO DISTRIBUTIONS AND WILL RETAIN NO PROPERTY UNDER THE PLAN ON ACCOUNT OF THEIR INTERESTS.
5. Stock Options and Warrants
Any existing stock option or warrant relating to Existing Solv-Ex Common Stock which was outstanding and unexercised on the Filing Date shall continue in force according to its terms and may be exercised at any time prior to or after the Effective Date.
B. Description of Property To Be Distributed
1. Cash Proceeds of Koch Sale
a. Limited Partnership/Koch Sale Distribution Fun"
On or before the Effective Date the Canadian Monitor, Price Waterhouse, will establish and maintain an escrow account, segregated from other prior accounts which it has maintained on the Company's behalf during the course of the CCAA and reorganization cases, for the purpose of making distribution, as soon as practicable after the Effective Date of the Plan and the effectiveness and operation of the plan of arrangement adopted in the Canadian proceeding, of the net cash Koch sales proceeds. Such distribution shall be first to the holders of the Class 2B and 3B Claims, then concurrently to holders of allowed administrative expense claims. priority tax claims. and Allowed
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Claims in Classes 1, 2A, 2C and 3A substantially connected to Canada under the terms of the Cross-Border Insolvency Protocol. Such distribution to Classes 2B and 3B was contemplated. along with Plan confirmation. as a condition to the final closing of the pending escrow of the Koch Sale itself so that all Solv-Ex Canada Limited Partnership claims can be satisfied and paid in connection with the dissolution and windup of the Solv-Ex Canada Limited Partnership. All other amounts of the net cash sales proceeds from the Koch Sale not estimated to be necessary for distribution by the Monitor from the Limited Partnership Distribution Fund shall be concurrently transferred to the Other General Unsecured Claims Distribution Fund for distribution by the Debtor. itself. or through its Disbursing or Transfer Agent, as set forth below.
Solv-Ex and the Monitor shall establish and fund a Disputed Claims Reserve for the payment of disputed claims in these classes. The Canadian Court will estimate and determine the amount of funds sufficient to fund such reserve and may estimate the disputed claims in order to enable the Canadian Court to make such determination.
Upon determination of their Claim, any claimant whose disputed Claim in such classes is so estimated shall have recourse only to the Disputed Claims Reserve for satisfaction of their Claim by payment from the Monitor.
b. Other General Unsecured Claims Distribution Fund
On or before the Effective Date, or as soon thereafter as may be practicable, Solv-Ex Will establish and maintain an escrow account, segregated from the Debtor's prior accounts maintained by the Company during the course of the reorganization cases, for the purpose of making distribution, as soon as practicable after the Effective Date, and concurrently with the distributions by the Monitor from the Limited Partnership/Koch Sale Distribution Fund of amounts in satisfaction and payment to the holders of allowed administrative expense claims, priority tax claims, and Allowed Claims in Classes 1, 2A, 2C and 3A substantially connected to the U.S. under the terms of the CrossBorder Insolvency Protocol.
Solv-Ex shall establish and fund a Disputed Claims Reserve for the payment of disputed claims in these classes. The Court will estimate and determine the amount of funds sufficient to fund such reserve and may estimate the disputed claims in order to enable the Court to make such determination. Upon determination of their claim, any claimant whose disputed claim in such classes is so estimated shall have recourse only to the Disputed Claims Reserve for satisfaction of their claim.
2. New Solv-Ex Series 1998 Convertible Debentures
As set forth above. certain holders of Allowed Interests in Class 4A may receive, upon surrender of the instrument(s) representing their Convertible Debenture to the Debtor or to the Transfer Agent on the Record Date in accord with the written instructions given by the Debtor to the holder not later than the Effective Date, issuance of a replacement, new Solv-Ex Series 1998 Convertible Debenture under which the holder of such Allowed Class 4A Claim will retain and/or be reinstated fully to any and all rights which it held under any existing, underlying Convertible Debenture agreement with the Debtor, including retention of any security which it may have held on account of its claim or interest prior to the Effective Date, and the Debtor will be deemed to have cured such defaults, if any, as may have existed on the Effective Date under such underlying Convertible Debenture . The Debtor shall perform under such Series 1998 Convertible Debenture in accordance with the terms thereof after the Effective Date. The New Solv-Ex Series 1998 Convertible Debentures shall be in the forms attached on or prior to the Confirmation Date as exhibits to the Plan.
3. New Solv-Ex Common Stock and New Certificate of Incorporation and Bylaws
Reorganized Solv-Ex shall adopt on or before the Effective Date, to be effective on the Effective Date, new, amended articles and certificate of incorporation and bylaws in the forms to be attached on or prior to the Confirmation Date as exhibits to the Plan. It is expected that the Board of Directors will authorize 100 million shares of new Solv-Ex Common Stock on the Effective Date and, further, will authorize issuance under the Plan of
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the number of necessary shares of New Solv-Ex Common Stock to satisfy the holders of certain allowed Claims and Interests. The New Solv-Ex Common Stock will be a voting security . The New Solv-Ex Common Stocl; will not be subject to conversion or redemption and when issues will be fully paid and non-assessable. Under the new articles, certificates and bylaws, dividends may be declared in respect of the New Solv-Ex Common Stocl; b! the Board of Directors to the extent permitted by applicable law. Subject to and only to the extent allowed b! applicable law, the new articles, certificate and bylaws will provide that no director of Solv-Ex will be personally liable to Solv-Ex or its stockholders for damages for breach of fiduciary duty.
The Debtor plans to apply for listing of the New Solv-Ex Common Stock will trade on the Nasdaq National Market System although application for such trading has not yet been made. There can be no assurance that the New Solv-Ex Common Stock will constitute a liquid investment or that an established trading market for the New Solv-Ex Common Stock will exist on and after the Effective Date.
4. New Solv - Ex Preferred (Non- Voting) Stock
It is expected that the Board of Directors will authorize 50 Million shares of New Solv-Ex Preferred (Nonvoting) Stock in accordance with the amended articles and certificate of incorporation and bylaws of the Reorganized Solv-Ex.
5. Securities Low, and Issuance of Securities under the Plan
In accordance with the Bankruptcy Code, shares of New Solv-Ex Common Stock issued to various holders of Claims and Interests under the Plan should be exempt from the registration requirements of the Securities Act and from the registration requirements of any state or local securities laws. Moreover, unless the recipient of such securities is an "underwriter" as defined in section 1145 of the Bankruptcy Code, such securities should be deemed to have been acquired by the recipient in a "public offering". Securities acquired in a public offering by a person or entity which is not an underwriter as defined in Section 1145 of the Bankruptcy Code or a "dealer" as defined in the Securities Act of 1933, as amended (the "Securities Act") are not subject to resale restrictions and may be sold immediately. In general, subject to certain exceptions, an underwriter is defined under section 1145 of the Bankruptcy Code as a person or entity who (a) purchases claims against, interests in or claims for administrative expenses in a case concerning a debtor with a view toward distribution of the securities to be received in exchange for those claims or interests, (b) offers to sell securities offered or sold under the plan for holders of such securities, (c) offers to buy securities offered or sold under the plan from the holders of such securities with a view towards distribution and under an agreement made in connection with the plan, or (d) is an "issuer" as that term is used in section 2(1 1 ) of the Securities Act. Creditors or shareholders who are deemed to be underwriters can only sell their securities if such securities are registered pursuant to a registration statement or qualify for an exemption from registration. The question of which creditors or shareholders (if any) are "underwriters" is in large part a factual analysis depending on the facts and circumstances of each creditor's or shareholder's individual situation. There is no fixed percentage for determining whether a holder or recipient of stock will be deemed to be an "underwriter", and, therefore. any creditor or shareholder who will receive a significant percentage of the New Solv-Ex Common Stock should make an individual analysis. In particular. creditors and shareholders who will hold more than 5% of the New Solv-Ex Common Stock upon consummation of the Plan, should consider the effect of the restrictions described above. Any creditor or shareholder who is concerned that he might be found to be an underwriter under section 1145 of the Code should consult with his own counsel. Creditors or shareholders who are deemed underwriters can only sell their securities if they register them or sell them pursuant to a registration exemption.
THE DISCUSSION ABOVE IS A SUMMARY OF THE GENERAL EFFECT OF THE REGISTRATION PROVISIONS OF THE SECURITIES LAWS UPON ISSUANCE AND RESALE OF SECURITIES RECEIVED UNDER THE PLAN. THE EFFECTS MAY VARY BASED ON THE INDIVIDUAL CIRCUMSTANCES OF EACH HOLDER OF A CLAIM OR INTEREST RECEIVING SECURITIES. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED OR PASSED UPON ANY ASPECT OF THESE MATTERS. EACH RECIPIENT OF SECURITIES UNDER
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THE PLAN IS URGED TO CONSULT WITH HIS OWN COUNSEL WITH RESPECT TO THE EFFECT OF FEDERAL, STATE AND FOREIGN SECURITIES LAWS UPON HIM, INCLUDING BUT not NOT LIMITED TO WHETHER OR NOT HE IS AN UNDERWRITER AS DEFINED IN SECTION I 145(b)) OF THE BANKRUPTCY CODE (WHETHER BY VIRTUE OF BEING AN AFFILIATE OF THE ISSUER OR OTHERWISE) AND THE EFFECT OF ANY APPLICABLE FOREIGN OR STATE LAW RESTRICTIONS ON RESALES OF SECURITIES. |
