October 15, 1998
AGREEMENT BETWEEN HARVARD INDUSTRIES, INC.
AND THE PENSION BENEFIT GUARANTY CORPORATION
I. Preliminary Statement
The following are the terms of the agreement ("Agreement") between: (a)
Harvard Industries, Inc. and the members of its controlled group (as that term
is defined by section 4001(a)(14) of the Employee Retirement Income Security Act
of 1974, as amended, 29 U.S.C. xx.xx. 1301-1461 ("ERISA")) ("Harvard") and (b)
the Pension Benefit Guaranty Corporation ("PBGC"), regarding the single employer
defined benefit pension plans for which Harvard is a contributing sponsor (as
that term is defined by section 4001(a)(13) of ERISA) ("Harvard Plans").(1) This
Agreement is enforceable pursuant to its terms, and is contingent on
consummation of Harvard's "Consolidated Plan under Chapter 11 of the Bankruptcy
Code" (as may be amended or modified, the "Plan of Reorganization") in the
Chapter 11 cases captioned In re Xxxxxxx-Xxxxxx, Inc., et al., Case Nos. 97-953
through 97-962 (SLR) (Bankr. D. Del.), The Plan of Reorganization shall
expressly provide for implementation of the provisions of this Agreement. A copy
of this Agreement shall be annexed to the Plan of Reorganization. The Official
Committee of Unsecured Creditors of Xxxxxxx-Xxxxxx, Inc., et al. (the
"Committee") has accepted the terms of this Agreement, but shall have no
obligations thereunder. This Agreement shall be effective on confirmation of the
Plan of Reorganization, subject to the occurrence of the effective date thereof.
Provided such effective date shall have occurred, the effective date of this
Agreement shall be the confirmation date of the Plan of Reorganization (the
"Effective Date").
II. PBGC Obligations
A. Standstill on Remedies. In consideration of the performance by
Harvard of its obligations hereunder, PBGC will forbear from using the remedies
provided by section 4042(a)(4) or 4062(e) of ERISA in connection with (i) the
cessation of operations at the Toledo, Ohio facility of Xxxxxxx-Xxxxxx Toledo,
Inc., the cessation of operations at the Xxxxxx Avenue facility
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(1) The single employer defined benefit pension plans for which Harvard is
a contributing sponsor as of the effective date of this Agreement are
set forth in Exhibit A attached hereto. The term "Harvard Plans" as
used herein includes any successor plans or any single employer defined
benefit pension plans of which Harvard becomes a contributing sponsor.
of the Company's Harvard Interiors Division in St. Louis, Missouri, the
cessation of operations at the Bolivar, Tennessee facility of Xxxxxx Automotive,
Inc., the sale or assets of the Greeneville, Tennessee facility of
Xxxxxxx-Xxxxxx Greeneville, Inc., or (ii) the implementation of initial
post-confirmation exit financing (the "Initial Post-Confirmation Exit
Financing"), or any subsequent refinancing thereof within five years from the
Effective Date which does not increase the amount of principal indebtedness of
Harvard subject to security interests in any of the assets or properties of
Harvard, unless any of the following take place:
1. Harvard fails to make a required quarterly or annual
minimum funding contribution for any of the Harvard Plans, provided,
however, that if any unpaid minimum funding contribution is paid within
sixty days of the due date for the payment, then PBGC shall cease
pursuing said remedies under section 4042(a)(4) or section 4062(e) of
ERISA then pending and this standstill shall be reinstated;
2. Harvard commences a proceeding or petition for the winding
up of any of its business affairs or otherwise proposes to sell all or
substantially all of its assets, unless the conditions contained in
section IV.C. below are met; or
3. Harvard or any member of the Harvard controlled group files
or has filed against it a petition for relief under title 11 of the
United States Code, provided that this standstill shall be reinstated
should an involuntary petition for relief be withdrawn or dismissed
within 90 days of filing.
B. Termination of 1994 Settlement Agreement. In consideration for
Harvard's entering into this Agreement and upon consummation of the Plan of
Reorganization in a manner consistent with the provisions of this Agreement, the
Settlement Agreement (the "Prior Agreement") dated July 26, 1994, by and between
the Harvard Companies and PBGC, shall be terminated, and the consideration
provided to the PBGC by Harvard as set forth in this Agreement shall be in full
settlement, release and discharge of any and all rights and claims of the PBGC
against Harvard, directly or indirectly, related to or arising under the Prior
Agreement. In addition, PBGC hereby acknowledges that it shall have no pre- or
post-termination claim against Harvard by reason of the termination, settlement,
release and discharge of the Prior Agreement.
III. Harvard Obligations
A. The Plan of Reorganization and the confirmation order shall provide
that on the confirmation date, Harvard, as reorganized, shall be a contributing
sponsor of all of the Harvard Plans.
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B. Notwithstanding the notice requirements set forth in Article V.B.
herein, there shall be no plan merger or other transfer of plan assets or
liabilities between: (a) the Xxxxxxx-Xxxxxx Pension Plan for Wage Basis
Employees ("Xxxxxxx-Xxxxxx Plan"); and (b) any of the other Harvard Plans. In no
event shall there be any use of any credit balance maintained in the funding
standard account of any of the other Harvard Plans for the benefit of the
funding standard account of the Xxxxxxx-Xxxxxx Plan. Further, no defined benefit
pension plan that is covered by Title IV of ERISA that is not listed on Exhibit
A to this Agreement shall be merged into any of the Harvard Plans without PBGC's
consent.
C. In order to secure minimum funding contributions required for the
Xxxxxxx-Xxxxxx Plan and underfunding of the Xxxxxxx-Xxxxxx Plan, Harvard shall
provide PBGC, for the benefit of the Xxxxxxx-Xxxxxx Plan and PBGC, with a pledge
of new common stock of Reorganized Harvard ("New Common Stock"), in an amount
equal to what the PBGC would have received as an unsecured general creditor of
Harvard having an allowed Class 5 Claim (as such term is defined in the Plan of
Reorganization) of $18.7 million, less the amount of all contributions made to
the Xxxxxxx-Xxxxxx Plan after April 15, 1998 and prior to the Effective Date
(the number of shares of New Common Stock received by the PBGC pursuant to this
provision, taking into account all such contributions made prior to the
Effective Date, is referred to herein as the "Harvard Stock Pledge"). The
Harvard Stock Pledge shall be held in escrow, which shall be established and be
subject to the following terms and conditions:
1. The identity of the bank or other financial institution
acting as escrow agent for the Harvard Stock Pledge shall be designated
by the PBGC, subject to Harvard's consent, and the form of escrow
agreement shall be subject to approval of Harvard and PBGC;
2. Except to the extent released in accordance with
Article III.C.4. below, the Harvard Stock Pledge shall be maintained
and continue to be held in escrow until the earlier of (a) five years
from the Effective Date of the Plan of Reorganization or (b) the date
on which this Agreement is terminated in accordance with Article IV
hereof (such earlier date described in (a) or (b) hereof, the "Release
Date"). On the Release Date the Harvard Stock Pledge shall be delivered
to Harvard;
3. Subject to the limitations that (a) no sales of any shares
of New Common Stock may be made during the 90-day period commencing
with the consummation of the Plan of Reorganization and (b) all sales
of shares of New Common Stock after such 90-day period shall be in
compliance with and subject to the limitations set forth in Rule
144(e)(1) and (f) of the Securities Act of 1933 as if the same applied
to the PBGC, shares of New Common Stock held by the escrow
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agent will be subject to sale at any time, in the discretion of a third
party approved by Harvard and PBGC, based on prudent investment
standards. The proceeds of all such sales shall continue to be held in
escrow or delivered from escrow in accordance with the provisions of
this Agreement relating to the Harvard Stock Pledge. All references in
this Agreement to the Harvard Stock Pledge shall be deemed to include
the proceeds of any such sales of New Common Stock, and all property in
which such proceeds may be reinvested from time to time, as increased
or decreased by the investment earnings or losses thereon and any
release in accordance with Article III.C.4 below thereof.
4. The escrow agent shall deliver all property held in escrow
under the Harvard Stock Pledge, together with any accumulated dividends
or distributions, from escrow to the PBGC in the event any one of the
following has occurred: (a) Harvard has failed to make a required
quarterly or annual minimum funding contribution for the Xxxxxxx-Xxxxxx
Plan, and such failure has continued for sixty days from the due date
for the contribution; (b) PBGC receives a Notice of Intent to Terminate
the Xxxxxxx-Xxxxxx Plan in a distress termination under section 4041(c)
of ERISA; (c) Harvard commences a proceeding or petition for the
winding up of any of its business affairs or otherwise consummates the
sale of all or substantially all of its assets, unless the conditions
contained in Article IV.C. of this Agreement are met; or (d) Harvard,
in whole or in part, files or has filed against it a petition for
relief under title 11 of the United States Code, and such petition for
relief has not been withdrawn or dismissed within 90 days of filing.
5. Amounts received by PBGC from the escrow agent shall be:
(a) used to pay minimum funding contributions due from time to time to
any of the Harvard Plans; (b) used to satisfy any liability under
section 4062 of ERISA with respect to the Harvard Plans; or (c) held
until the Agreement is terminated. PBGC shall return the excess and
unused amounts so distributed, if any, to Harvard. Taxes on earnings on
the escrowed amounts so distributed shall be charged to the escrow
account. After-tax interest earned on escrowed amounts shall be
available for distribution to Harvard, PBGC, or the Harvard Plans, as
the case may be.
6. (a) In the event that, during the term of the Initial
Post-Confirmation Exit Financing, any dividend or other distributions
are paid to Harvard shareholders within five years from the Effective
Date that would cause an event of default under the Initial
Post-Confirmation Exit Financing, Harvard will not use the credit
balances that existed under the Harvard Plans on the last day of the
plan year preceding the plan year in which the dividend or distribution
was paid in determining the contribution required to be made to satisfy
the minimum funding standard
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of section 412 of the Internal Revenue Code ("IRC") for the plan year
in which the dividend or distribution was paid.
(b) In the event that, after the term of the Initial
Post-Confirmation Exit Financing, any dividend or other distributions
are paid to Harvard shareholders within five years from the Effective
Date, Harvard will not use the credit balances that existed under the
Harvard Plans on the last day of the plan year preceding the plan year
in which the dividend or distribution was paid in determining the
contribution required to be made to satisfy the minimum funding
standard of section 412 of the IRC for the plan year in which the
dividend or distribution was paid.
IV. Termination of Agreement
This Agreement shall terminate upon the earliest of A., B., C. or D.
below; but in the case of B., no earlier than five years after the confirmation
date of the Plan of Reorganization or September 30,2003, whichever is later, and
in the case of A., B. and C., only if Harvard is then current on its minimum
funding obligations to the Harvard Plans:
A. The date on which none of the Harvard Plans have any unfunded
benefit liabilities, as determined under section 4001(a)(18) of ERISA, as of the
last day of the plan year for each plan for any two consecutive plan years (the
last day of the plan year in the second consecutive year being the measurement
date); provided, however, that if the sum of the aggregate unfunded liabilities
of all Harvard Plans that have unfunded benefits as of the last day of any two
consecutive plan years is less than $1 million ("Aggregate Underfunding"),
Harvard will have satisfied the conditions of this paragraph provided it has
contributed in cash an amount equal to such Aggregate Underfunding by no later
than September 15 of the first calendar year following the end of the second
such plan year;
B. The date on which Harvard obtains ratings on its unsecured debt from
Standard & Poor's and Xxxxx'x of at least BBB- and Baa3, respectively;
C. If there is a change of the Harvard controlled group, and the
unsecured debt of the new controlled group has been rated BBB- by Standard &
Poor's and Baa3 by Xxxxx'x, or better, for the two consecutive years prior to a
rating date (which rating date is subsequent to the date of the change of the
controlled group), and such ratings are reaffirmed taking into account the
change of controlled group; or
D. The date on which all of the Harvard Plans have been successfully
terminated in standard terminations under section 4041(b) of ERISA.
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V. Notice Requirements
Harvard shall provide to the Director of PBGC's Corporate Finance and
Negotiations Department ("CFND"):
A. Copies of any notices otherwise required to be filed with the
Internal Revenue Service ("IRS") or PBGC concerning any of the Harvard Plans
within 20 days of the time the filing is made;
B. Written notice 30 days prior to any plan merger or any transfers of
liabilities or assets described in section 414(1) of the IRC to or from any of
the Harvard Plans (other than mergers or transfers involving amounts less than
three percent of assets or liabilities in any plan year);
C. Written notice 30 days prior to any change in any of the Harvard
Plan's actuarial assumptions or methods for the purposes of the minimum funding
standard of section 412 of the IRC (other than changes that are required by
law), which changes shall be subject to PBGC's consent, with consent not to be
unreasonably withheld;
D. Written notice as soon as practicable after delivery or receipt of
any notice of default under any debt instrument of Harvard;
E. A copy of plan amendments for any of the Harvard Plans within ten
days after adoption;
F. Written notice within ten days of any missed quarterly or annual
minimum funding contribution required to be made to any of the Harvard Plans;
G. During periods when Harvard's common stock is publicly traded and
its filings with the Securities and Exchange Commission are current, copies of
SEC Forms 10-K and 10-Q, within 20 days of filing; if such Forms are not timely
filed, quarterly and audited annual financial statements for Harvard;
H. Written notice, including the status of affected employees, 30 days
prior to any: (a) cessation of operations at any Harvard facility; or (b) any
sale, transfer or other disposition of assets of Harvard where such assets
represent ten percent or more of the book value of the assets of Harvard on a
consolidated basis, or have generated ten percent or more of the consolidated
revenues, or have generated ten percent or more of the consolidated operating
income of Harvard in the preceding fiscal year;
I. Written notice 30 days (or as soon as practicable) prior to any
change of the identity of any contributing sponsor of any of the Harvard Plans,
or if a contributing sponsor of any
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of the Harvard Plans is to become a member of any other controlled group;
J. Annual Actuarial Valuation Reports for each of the Harvard Plans for
each plan year when prepared, but in any event by no later than December 1 of
the current plan year; and
X. A certified actuarial statement specifying each of the Harvard
Plans' credit balance at the end of the preceding plan year, and supporting
calculations, by no later than seven months after the end of each plan year,
commencing with the 1998 plan year (i.e., the initial statement must be filed no
later than August 1, 1999).
VI. Acceptance of Plan of Reorganization
The PBGC hereby agrees to support confirmation of, and vote to accept,
the Plan of Reorganization, provided such Plan continues to contain provisions
that require implementation of this Agreement. Upon consummation of the Plan of
Reorganization, all proofs of claim of the PBGC shall be deemed withdrawn, with
prejudice.
VII. Preservation of Rights
Neither the operation of the Agreement (e.g., release of Harvard Stock
Pledge) nor termination of the Agreement in accordance with the provisions
hereof shall, in and of itself, constitute a basis for PBGC to take any adverse
action against any of the Harvard Plans. Nothing in the Agreement shall restrict
or diminish Harvard's right to dispute or contest any basis that PBGC may
thereafter raise to terminate any one or more of the Harvard Plans and/or the
amount of the termination liability asserted by the PBGC in the event of the
involuntary termination of any one or more of the Harvard Plans.
VIII. Execution of Ancillary Agreement
Harvard and the PBGC shall use their best efforts to select an escrow
agent and finalize and execute a definitive escrow agreement consistent with the
provisions of this Agreement as soon as practicable and in no event later than
ten (10) days prior to confirmation of the Plan of Reorganization.
IX. General
A. Nothing in this Agreement shall relieve Harvard or any other person
of their obligations under ERISA or the IRC.
B. This Agreement and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with ERISA, the IRC,
and the laws of the District of Columbia (except the laws of the District of
Columbia governing
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choice of laws), except to the extent such laws are preempted by federal law.
C. No failure of any of the parties to this Agreement to enforce at any
time any of the provisions of this Agreement and no course of dealing between or
among any of the members of Harvard and/or the PBGC shall be construed to be a
waiver of any such provision, or shall in any way affect the validity of this
Agreement or the right of any party to enforce each and every one of the
provisions of this Agreement.
D. This Agreement constitutes the entire final agreement with respect
to the matters provided for herein, and no other agreement or understanding
exists except as expressly set forth herein.
E. This Agreement shall not be modified or amended, except by written
instrument signed by the parties hereto.
F. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
or provisions of this Agreement, which shall remain in full force and effect.
G. This Agreement shall inure to the benefit of, and may be enforced
solely by, the parties hereto, and, in each case, their respective successors
and assigns.
H. This Agreement may be executed in any number of identical
counterparts, each of which shall be deemed an original as against the party who
signed it, and all of which together shall constitute one and the same
instrument.
I. Any notices, requests or other communications hereunder shall be in
writing, and shall be deemed to have been duly given when mailed by United
States registered or certified mail postage prepaid, or upon receipt if
overnight delivery service, telegraph, telecopy, or telex is used, addressed as
follows:
To the PBGC:
Chief Negotiator and Director
Corporate Finance and Negotiations Department
Pension Benefit Guaranty Corporation
Suite 000
0000 X Xxxxxx X.X.
Washington, D.C. 20005-4026
(000) 000-0000 (telefacsimile number)
General Counsel
Pension Benefit Guaranty Corporation
Suite 000
0000 X Xxxxxx X.X.
Washington, D.C. 20005-4026
(000) 000-0000 (telefacsimile number)
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To Harvard:
Xxxxxx X. Xxxxxxxxx
Senior Vice President and Chief Financial Officer
Harvard Industries, Inc.
0 Xxxxxx Xxx, Xxxxx 000
Xxxxxxx, XX 00000
with a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxx
(000) 000-0000 (telefacsimile number)
To Official Committee of
Unsecured Creditors of
Xxxxxxx-Xxxxxx, Inc., et al. (so long as the Committee has not been dissolved):
c/o Fried, Xxxxx, Xxxxxx, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxxx X. First
(000) 000-0000 (telefacsimile number)
J. All of the parties to this Agreement hereby represent and warrant
that they have full power and authority to enter into this Agreement, that all
necessary corporate approvals or other appropriate action has been taken to
cause them to possess such power and authority and that this Agreement
constitutes a legal, valid and binding obligation of each of the parties hereto
enforceable against each of the parties hereto.
K. The captions set forth in this Agreement have been inserted for
convenience of reference only and shall not in any way affect the meaning or
construction of any of the provisions of this Agreement.
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Accepted and Agreed:
Harvard Industries, Inc. Pension Benefit Guaranty Corporation
on its own behalf and on
behalf of all of the members
of its Controlled Group:
By: /s/ Xxxxx Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------------- ---------------------------------
Xxxxx Xxxxxxxx Xxxxxx X. Xxxxxxxxx
Its: President and Chief Its: Chief Negotiator, and
Operating Officer Director, Corporate Finance and
Negotiations Department
Dated: November 24, 1998 Dated: November 17, 1998
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Accepted and Acknowledged:
Official Committee of Unsecured
Creditors of Xxxxxxx-Xxxxxx, Inc.,
et al.
By: /s/ Xxxxxxx Xxxxxxxxxxx
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Xxxxxxx Xxxxxxxxxxx
Its: Co-Chairman
Dated: November 19, 1998
-----------------
By: /s/ Xxx Xxxxxxx
---------------
Xxx Xxxxxxx
Its: Co-Chairman
Dated: November 19, 1998
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EXHIBIT A TO AGREEMENT BETWEEN HARVARD INDUSTRIES, INC.
AND THE PENSION BENEFIT GUARANTY CORPORATION
SINGLE EMPLOYER DEFINED BENEFIT PENSION PLANS
FOR WHICH HARVARD IS A CONTRIBUTING SPONSOR
Xxxxxxx-Xxxxxx Pension Plan for Wage Basis Employees
Harvard Industries Albion Division Hourly-Rate Employees' Pension Plan
Harvard Industries, Inc. Xxxxx Division Hourly-Rate Employees' Pension Plan
Harvard Industries, Inc. Spencerville Division Hourly-Rate Employees' Pension
Plan
Harvard Industries Xxxxxxx Division Hourly-Rate Employees' Pension Plan
Harvard Retirement Plan
Harvard Retirement Plan for Frozen Pension Benefits
Retirement Plan for Union Employees, Xxxxxx Automotive, Inc.
