1 2 3 4 5 6 7 UNITED STATES BANKRUPTCY COURT 8 CENTRAL DISTRICT OF CALIFORNIA 9 10 11 12 13 14 15 16 17 18 19 20 21 CENTRAL DISTRICT OF CALIFORNIA 22 APPROVED FORM FOR PRODUCING A 23 24 25 CHAPTER 11 DISCLOSURE STATEMENT 26 27 28 Revised August 2005 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 3 NAME OF ATTORNEY - State Bar No. NAME OF ATTORNEY - State Bar No. NAME OF LAW FIRM Address City, State Zip Code Telephone ( ) - 4 Attorneys for 1 2 5 6 UNITED STATES BANKRUPTCY COURT 7 CENTRAL DISTRICT OF CALIFORNIA 8 9 10 In re Bk. No. NAME OF DEBTOR, In a Case Under Chapter 11 of the Bankruptcy Code (11 U.S.C. § 1101 et seq.) Debtor 11 - - 1 DISCLOSURE STATEMENT 2 DESCRIBING CHAPTER 11 PLAN 12 13 Disclosure Statement Hearing 14 Date: Time: Ctrm: 15 16 17 18 {Insert Courtroom #} {Insert Full Court Address Here} Plan Confirmation Hearing Complete This Section When Applicable Date: Time: Ctrm: {Insert Courtroom #} {Insert Full Court Address Here} 19 20 21 22 23 24 25 26 27 28 Revised August 2005 F 3017-1 American LegalNet, Inc. www.USCourtForms.com TABLE OF CONTENTS I. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 II. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . A. Purpose of This Document . . . . . . . . . . . . . B. Deadlines for Voting and Objecting; Date of Plan Confirmation Hearing . . . . . . . . . . . . . . . 1. Time and Place of the Confirmation Hearing . . . . . . . . . . . . . . . . . . . 2. Deadline for Voting For or Against the Plan . . . . . . . . . . . . . . . . . . . . . 3. Deadline for Objecting to the Confirmation of the Plan . . . . . . . . . . . . . . . . . 4. Identity of Person to Contact for More Information Regarding the Plan . . . . . . . C. Disclaimer . . . . . . . . . . . . . . . . . . . . 1 1 BACKGROUND . . . . . . . . . . . . . . . . . . . . . A. Description and History of the Debtor’s Business . . . . . . . . . . . . . . . . . . . . B. Principals/Affiliates of Debtor’s Business . . . C. Management of the Debtor Before and After the Bankruptcy . . . . . . . . . . . . . . . . . . . D. Events Leading to Chapter 11 Filing . . . . . . E. Significant Events . . . . . . . . . . . . . . . 1. Bankruptcy Proceedings . . . . . . . . . . 2. Other Legal Proceedings . . . . . . . . . . 3. Actual and Projected Recovery of Preferential or Fraudulent Transfers . . . 4. Procedures Implemented to Resolve Financial Problems . . . . . . . . . . . . . . . . . 5. Current and Historical Financial Conditions . . . . . . . . . . . . . . . . . 4 . . 4 4 . . . . . 4 4 4 4 4 . 4 . 5 . 5 . 5 . . . . . . . . . . . . . . . . . . 5 5 6 7 7 7 8 9 10 10 10 10 10 10 11 11 11 11 . . . 12 12 12 III. SUMMARY OF THE PLAN OF REORGANIZATION . . . . . . . . A. What Creditors and Interest Holders Will Receive Under the Proposed Plan . . . . . . . . . . . . B. Unclassified Claims . . . . . . . . . . . . . . 1. Administrative Expenses . . . . . . . . . . 2. Priority Tax Claims . . . . . . . . . . . . C. Classified Claims and Interests . . . . . . . . 1. Classes of Secured Claims . . . . . . . . . 2. Classes of Priority Unsecured Claims . . . 3. Classes of General Unsecured Claims . . . . 4. Class(es) of Interest Holders . . . . . . . D. Means of Effectuating the Plan . . . . . . . . . 1. Funding for the Plan . . . . . . . . . . . 2. Post-Confirmation Management . . . . . . . 3. Disbursing Agent . . . . . . . . . . . . . E. Risk Factors . . . . . . . . . . . . . . . . . . F. Other Provisions of the Plan . . . . . . . . . . 1. Executory Contracts and Unexpired Leases . a. Assumptions . . . . . . . . . . . . . b. Rejections . . . . . . . . . . . . . . 2. Changes in Rates Subject to Regulatory Approval . . . . . . . . . . . . . . . . . 3. Retention of Jurisdiction . . . . . . . . . G. Tax Consequences of Plan . . . . . . . . . . . . 2 3 3 3 3 3 28 Revised August 2005 i F 3017-1 American LegalNet, Inc. www.USCourtForms.com IV. 1 2 3 4 5 6 7 8 9 15 VI. SUPPORTING DECLARATIONS . . . . . . . . . . . . . . . . 25 EXHIBIT EXHIBIT EXHIBIT EXHIBIT EXHIBIT EXHIBIT EXHIBIT EXHIBIT EXHIBIT 26 27 28 29 30 31 32 38 39 16 17 18 19 A B C D E F G H I - LIST OF ALL ASSETS . . . . . . . . . FINANCIAL STATEMENT . . . . . . . . . UNEXPIRED LEASES TO BE ASSUMED . . . EXECUTORY CONTRACTS TO BE ASSUMED . . LIQUIDATION ANALYSIS . . . . . . . . LIST OF ADMINISTRATIVE EXPENSE CLAIMS LIST OF PRIORITY UNSECURED CLAIMS . . LIST OF GENERAL UNSECURED CLAIMS . . LIST OF EQUITY INTERESTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 17 20 22 22 22 22 23 23 23 24 13 . . . . . . . . 16 16 . . . . . . . . 12 . . . . . . . . 13 13 13 14 15 15 16 EFFECTS OF CONFIRMATION OF PLAN . . . . . . A. Discharge . . . . . . . . . . . . . . B. Revesting of Property in the Debtor . C. Modification of Plan . . . . . . . . . D. Post-Confirmation Status Report . . . E. Quarterly Fees . . . . . . . . . . . . F. Post-Confirmation Conversion/Dismissal G. Final Decree . . . . . . . . . . . . . 11 . . . . . . . . 13 13 V. 10 14 CONFIRMATION REQUIREMENTS AND PROCEDURES . . . . . . . A. Who May Vote or Object . . . . . . . . . . . . . . 1. Who May Object to Confirmation of the Plan . . . . . . . . . . . . . . . . . . . . 2. Who May Vote to Accept/Reject the Plan . . . a. What is an Allowed Claim/Interest . . . b. What Is an Impaired Claim/Interest . . . 3. Who is Not Entitled to Vote . . . . . . . . . 4. Who Can Vote in More Than One Class . . . . . 5. Votes Necessary to Confirm the Plan . . . . . 6. Votes Necessary for a Class to Accept the Plan . . . . . . . . . . . . . . . . . . . . 7. Treatment of Nonaccepting Classes . . . . . . 8. Request for Confirmation Despite Nonacceptance by Impaired Class(es) . . . . . . . . . . . . B. Liquidation Analysis . . . . . . . . . . . . . . . C. Feasibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 21 22 23 24 25 26 27 28 Revised August 2005 ii F 3017-1 American LegalNet, Inc. www.USCourtForms.com I. 1 INTRODUCTION 2 3 3 4 5 6 7 8 9 10 11 12 13 6 16 17 18 19 20 21 22 23 24 25 26 , 5 commenced a bankruptcy case by filing Chapter 11 6b petition under the United States Bankruptcy Code (“Code”), 11 U.S.C. § 101 et seq., Chapter 11 allows the Debtor, and under some circumstances, creditors and others parties in interest, to propose a plan of reorganization (“Plan”). The Plan may provide for the Debtor to reorganize by continuing to operate, to liquidate by selling assets of the estate, or a combination of both. 7 is the party proposing the Plan sent to you in the same envelope as this document. THE DOCUMENT YOU ARE READING IS THE DISCLOSURE STATEMENT FOR THE ENCLOSED PLAN. 14 15 4 On is the Debtor in a Chapter 11 bankruptcy case. This is a 8 plan. In other words, the Proponent 9 seeks to accomplish payments under the Plan by Effective Date of the proposed Plan is A. 10 . The . Purpose of This Document This Disclosure Statement summarizes what is in the Plan, and tells you certain information relating to the Plan and the process the Court follows in determining whether or not to confirm the Plan. READ THIS DISCLOSURE STATEMENT CAREFULLY IF YOU WANT TO KNOW ABOUT: (1) WHO CAN VOTE OR OBJECT, (2) WHAT THE TREATMENT OF YOUR CLAIM IS (i.e., what your claim will receive if the Plan is confirmed), AND HOW 27 28 Revised August 2005 1 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 1 THIS TREATMENT COMPARES TO WHAT YOUR CLAIM WOULD 2 RECEIVE IN LIQUIDATION, (3) 3 THE HISTORY OF THE DEBTOR AND SIGNIFICANT EVENTS DURING THE BANKRUPTCY, 4 (4) 5 WHAT THINGS THE COURT WILL LOOK AT TO DECIDE WHETHER OR NOT TO CONFIRM THE PLAN, 6 7 (5) WHAT IS THE EFFECT OF CONFIRMATION, AND 8 (6) WHETHER THIS PLAN IS FEASIBLE. 9 This Disclosure Statement cannot tell you everything about 10 your rights. You should consider consulting your own lawyer to 11 obtain more specific advice on how this Plan will affect you and 12 what is the best course of action for you. Be sure to read the Plan as well as the Disclosure 13 14 Statement. If there are any inconsistencies between the Plan and 15 the Disclosure Statement, the Plan provisions will govern. The Code requires a Disclosure Statement to contain 16 17 “adequate information” concerning the Plan. The Bankruptcy Court 18 (“Court”) has approved this document as an adequate Disclosure 19 Statement, containing enough information to enable parties 20 affected by the Plan to make an informed judgment about the Plan. 21 Any party can now solicit votes for or against the Plan. 22 B. 23 Confirmation Hearing Deadlines for Voting and Objecting; Date of Plan 24 THE COURT HAS NOT YET CONFIRMED THE PLAN DESCRIBED IN THIS 25 DISCLOSURE STATEMENT. IN OTHER WORDS, THE TERMS OF THE PLAN ARE 26 NOT YET BINDING ON ANYONE. 27 THE PLAN, THEN THE PLAN WILL BE BINDING ON THE DEBTOR AND ON ALL 28 CREDITORS AND INTEREST HOLDERS IN THIS CASE. Revised August 2005 HOWEVER, IF THE COURT LATER CONFIRMS 2 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 1 1. Time and Place of the Confirmation Hearing 2 The hearing where the Court will determine whether or not to 11 3 confirm the Plan will take place on 4 P.M.}, in Courtroom 5 , at {A.M./ Court Address, City, State, Zip Code}. , {Insert Courthouse Name}, {Insert Full 6 2. Deadline For Voting For or Against the Plan 7 If you are entitled to vote, it is in your best interest to 8 timely vote on the enclosed ballot and return the ballot in the 9 enclosed envelope to 12 . 13 Your ballot must be received by 10 or it will not 11 be counted. 12 3. 13 Objections to the confirmation of the Plan must be filed 14 Deadline For Objecting to the Confirmation of the Plan 4. 15 by 15 . Identity of Person to Contact for More Information Regarding the Plan 16 Any interested party desiring further information about the 17 18 Plan should contact 19 C. 20 14 with the Court and served upon 16 . Disclaimer The financial data relied upon in formulating the Plan is 17 21 based on . The information contained in this 22 Disclosure Statement is provided by 23 Proponent represents that everything stated in the Disclosure 24 Statement is true to the Proponent’s best knowledge. 25 has not yet determined whether or not the Plan is confirmable and 26 makes no recommendation as to whether or not you should support 27 or oppose the Plan. 18 . The Plan The Court 28 Revised August 2005 3 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 1 II. 2 BACKGROUND 3 A. Description and History of the Debtor’s Business 19 4 The Debtor is a 5 The Debtor is in the business of 6 The Debtor has been in this business since 7 B. 22 C. 23 D. . 21 . . Management of the Debtor Before and After the Bankruptcy 10 11 20 Principals/Affiliates of Debtor’s Business 8 9 . . Events Leading to Chapter 11 Filing Here is a brief summary of the circumstances that led to the 12 13 14 E. 24 filing of this Chapter 11 case: . Significant Events During the Bankruptcy 15 1. 16 The following is a chronological list of significant events 17 18 19 20 21 Bankruptcy Proceedings which have occurred during this case: 25 The Court has approved the employment of the following professionals: 26 Currently, the following significant adversary proceedings 27 and motions are still pending: . 22 2. Other Legal Proceedings 23 In addition to the proceedings discussed above, the Debtor 24 is currently involved in the following nonbankruptcy legal 25 proceedings: 26 3. 27 28 . Actual and Projected Recovery of Preferential or Fraudulent Transfers 29 28 Revised August 2005 4 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 30 1 is estimated to be realized from the recovery 2 of fraudulent and preferential transfers. The following is a 3 summary of the fraudulent conveyance and preference actions filed 4 or to be filed in this case: 31 5 4. 6 To attempt to fix the problems that led to the bankruptcy 7 Procedures Implemented to Resolve Financial Problems filing, Debtor has implemented the following procedures: 5. 8 Current and Historical Financial Conditions 33 9 32 . The identity and fair market value of the estate’s assets 10 11 are listed in Exhibit A. 12 See also the Debtor’s financial history set forth in Exhibit B. 13 III. 14 SUMMARY OF THE PLAN OF REORGANIZATION 15 A. 16 Proposed Plan 17 18 19 20 21 22 23 24 25 26 27 28 What Creditors and Interest Holders Will Receive Under The As required by the Bankruptcy Code, the Plan classifies claims and interests in various classes according to their right to priority. The Plan states whether each class of claims or interests is impaired or unimpaired. The Plan provides the treatment each class will receive. B. Unclassified Claims Certain types of claims are not placed into voting classes; instead they are unclassified. They are not considered impaired and they do not vote on the Plan because they are automatically entitled to specific treatment provided for them in the Bankruptcy Code. As such, the Proponent has not placed the following claims in a class. Revised August 2005 5 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 1 1. Administrative Expenses 2 Administrative expenses are claims for costs or expenses of 3 administering the Debtor’s Chapter 11 case which are allowed 4 under Code section 507(a)(1). 5 administrative claims be paid on the Effective Date of the Plan, 6 unless a particular claimant agrees to a different treatment.34 7 The following chart lists all of the Debtor’s § 507(a)(1) 8 administrative claims and their treatment under the Plan35 (see 9 Exhibit F for detailed information about each administrative 10 11 The Code requires that all expense claim): Name Amount Owed Treatment 12 13 14 15 16 Clerk’s Office Fees Paid in full on Effective Date Office of the U.S. Trustee Fees 36 Paid in full on Effective Date TOTAL 17 Court Approval of Fees Required: 18 The Court must rule on all fees listed in this chart before 19 the fees will be owed. For all fees except Clerk’s Office fees 20 and U.S. Trustee’s fees, the professional in question must file 21 and serve a properly noticed fee application and the Court must 22 rule on the application. Only the amount of fees allowed by the 23 Court will be owed and required to be paid under this Plan. 24 As indicated above, the Debtor will need to pay 37 25 worth of administrative claims on the Effective Date of the Plan 26 unless the claimant has agreed to be paid later or the Court has 27 not yet ruled on the claim. As indicated elsewhere in this 28 Revised August 2005 6 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 38 1 Disclosure Statement, Debtor will have 2 cash on hand on the Effective Date of the Plan. 3 this cash will be 39 amount of The source of . 4 2. Priority Tax Claims 5 Priority tax claims are certain unsecured income, 6 employment and other taxes described by Code Section 507(a)(8)40. 7 The Code requires that each holder of such a 507(a)(8) 8 priority tax claim receive the present value of such claim in 9 deferred cash payments, over a period not exceeding six years 10 from the date of the assessment of such tax. The following chart lists all of the Debtor’s Section 11 12 507(a)(8)41 priority tax claims and their treatment under the 13 Plan: 14 Description Treatment42 Amount Owed 43 15 16 Type of tax = 17 Pymt interval 44 Pymt amt/interval 45 Begin date 46 End date 47 Interest Rate % 48 Total Payout Amount Name = Date tax assessed = 18 19 20 Type of tax = 21 Pymt interval Pymt amt/interval Begin date End date Interest Rate % Total Payout Amount % Name = Date tax assessed = 22 23 C. % = = = = = = $ = = = = = = $ Classified Claims and Interests 24 1. 25 Secured claims are claims secured by liens on property of Classes of Secured Claims 26 the estate. The following chart lists all classes containing 27 Debtor’s secured pre-petition claims and their treatment under 28 Revised August 2005 7 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 1 2 this Plan48a: CLASS# DESCRIPTION IMPAIRED (Y/N) 3 INSIDERS (Y/N) 49 Secured claim of: Name = Collateral description = Collateral value = Priority of security int. = Principal owed = Pre-pet. arrearage amount = Post-pet. arrearage amount = Total claim amount = 4 5 6 7 8 9 10 11 12 14 15 16 17 18 19 20 Pymt interval = Pymt amt/interval = Balloon pymt 50 = Begin date = End date = Interest rate % = 50a Total payout % =$ Treatment of Lien = Pymt interval = Pymt amt/interval = Balloon pymt = Begin date = End date = Interest rate % = Total payout % =$ Treatment of Lien Secured claim of: Name = Collateral description = Collateral value = Priority of security int. = Principal owed = Pre-pet. arrearage amount = Post-pet. arrearage amount = Total claim amount = 13 TREATMENT = 21 2. 22 Certain priority claims that are referred to in Code 23 Sections 507(a)(3), (4), (5), (6), and (7)51 are required to be 24 placed in classes. These types of claims are entitled to priority 25 treatment as follows: the Code requires that each holder of such 26 a claim receive cash on the Effective Date equal to the allowed 27 amount of such claim. Classes of Priority Unsecured Claims However, a class of unsecured priority 28 Revised August 2005 8 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 1 claim holders may vote to accept deferred cash payments of a 2 value, as of the Effective Date, equal to the allowed amount of 3 such claims. 4 The following chart lists all classes containing Debtor’s 5 507(a)(3), (a)(4), (a)(5), (a)(6), and (a)(7)52 priority 6 unsecured claims and their treatment under this Plan (see Exhibit 7 G for more detailed information about each priority unsecured 8 claim)53. 9 CLASS# IMPAIRED DESCRIPTION TREATMENT (Y/N) 10 Priority unsecured claim pursuant 11 Paid in full in cash 54 to on Effective Date 56 Total amt of claims = 12 55 13 Priority unsecured claim pursuant to 14 Paid in full in cash 57 on Effective Date Total amt of claims = 15 58 16 3. 17 General unsecured claims are unsecured claims not entitled Class of General Unsecured Claims 18 to priority under Code Section 507(a). 19 identifies this Plan’s treatment of the class containing all of 20 Debtor’s general unsecured claims (see Exhibit H for detailed 21 information about each general unsecured claim): The following chart 22 CLASS# DESCRIPTION IMPAIRED 23 TREATMENT (Y/N) 24 General unsecured 59 Pymt interval Pymt amt/interval Begin date End date Interest rate % 59a Total payout % claims 25 Total amt of 26 claims = = = = = = = $ 27 59b. 28 59c. Revised August 2005 9 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 1 4. Class(es) of Interest Holders 2 Interest holders are the parties who hold ownership interest 3 (i.e., equity interest) in the Debtor. 4 corporation, entities holding preferred or common stock in the 5 Debtor are interest holders. 6 interest holders include both general and limited partners. 7 the Debtor is an individual, the Debtor is the interest holder. 8 The following chart identifies the Plan’s treatment of the 9 class60 of interest holders (see Exhibit I for more detailed 10 If the Debtor is a If the Debtor is a partnership, the If information about each interest holder): 11 CLASS # IMPAIRED (Y/N) DESCRIPTION 12 TREATMENT 61 Interest holders 13 14 D. Means of Effectuating the Plan 15 1. Funding for the Plan 16 The Plan will be funded by the following: 17 2. 62 . Post-confirmation Management 63 18 3. 19 Disbursing Agent 64 20 shall act as the disbursing agent for the 21 purpose of making all distributions provided for under the Plan. 22 The Disbursing Agent shall serve 23 receive 24 expenses incurred pursuant to the Plan. 25 E. 26 66 65 bond and shall for distribution services rendered and Risk Factors The proposed Plan has the following risks: 67 27 28 Revised August 2005 10 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 1 F. Other Provisions of the Plan 2 1. Executory Contracts and Unexpired Leases 3 a. Assumptions 4 The following are the unexpired leases and executory 5 contracts to be assumed as obligations of the reorganized Debtor 6 under this Plan (see Exhibit C for more detailed information on 7 unexpired leases to be assumed and Exhibit D for more detailed 8 information on executory contracts to be assumed): 68 9 10 On the Effective Date, each of the unexpired leases and 11 executory contracts listed above shall be assumed as obligations 12 of the reorganized Debtor. 13 Plan shall constitute an Order approving the assumption of each 14 lease and contract listed above. 15 or contract to be assumed and you object to the assumption of 16 your lease or contract, you must file and serve your objection to 17 the Plan within the deadline for objecting to the confirmation of 18 the Plan. See Section {I.B.3.} of this document for the specific 19 date. The Order of the Court confirming the If you are a party to a lease 20 b. 21 On the Effective Date, the following executory contracts and 22 23 24 Rejections unexpired leases will be rejected: 69 The order confirming the Plan shall constitute an Order 25 approving the rejection of the lease or contract. 26 party to a contract or lease to be rejected and you object to the 27 rejection of your contract or lease, you must file and serve your 28 objection to the Plan within the deadline for objecting to the Revised August 2005 11 If you are a F 3017-1 American LegalNet, Inc. www.USCourtForms.com 1 confirmation of the Plan. See Section {I.B.3.} of this document 2 for the specific date. THE BAR DATE FOR FILING A PROOF OF CLAIM BASED ON A CLAIM 3 70 4 ARISING FROM THE REJECTION OF A LEASE OR CONTRACT IS 5 Any claim based on the rejection of a contract or lease will be 6 barred if the proof of claim is not timely filed, unless the 7 Court later orders otherwise. 2. 8 Changes in Rates Subject to Regulatory Commission Approval 9 This Debtor 10 11 . 71 subject to governmental regulatory commission approval of its rates71a. 12 3. 13 The Court will retain jurisdiction to the extent provided 14 by law.71b 15 G. Retention of Jurisdiction. 16 Tax Consequences of Plan CREDITORS AND INTEREST HOLDERS CONCERNED WITH HOW THE PLAN 17 MAY AFFECT THEIR TAX LIABILITY SHOULD CONSULT WITH THEIR OWN 18 ACCOUNTANTS, ATTORNEYS, AND/OR ADVISORS. The following disclosure 19 of possible tax consequences is intended solely for the purpose 20 of alerting readers about possible tax issues this Plan may 21 present to the Debtor. 22 represent that the tax consequences contained below are the only 23 tax consequences of the Plan because the Tax Code embodies many 24 complicated rules which make it difficult to state completely and 25 accurately all the tax implications of any action. 26 27 The Proponent CANNOT and DOES NOT The following are the tax consequences which the Plan will have on the Debtor’s tax liability: 72 28 Revised August 2005 12 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 1 IV. 2 CONFIRMATION REQUIREMENTS AND PROCEDURES PERSONS OR ENTITIES CONCERNED WITH CONFIRMATION OR THIS PLAN 3 4 SHOULD CONSULT WITH THEIR OWN ATTORNEYS BECAUSE THE LAW ON 5 CONFIRMING A PLAN OF REORGANIZATION IS VERY COMPLEX. 6 following discussion is intended solely for the purpose of 7 alerting readers about basic confirmation issues, which they may 8 wish to consider, as well as certain deadlines for filing claims. 9 The proponent CANNOT and DOES NOT represent that the discussion 10 contained below is a complete summary of the law on this topic. The Many requirements must be met before the Court can confirm a 11 12 Plan. Some of the requirements include that the Plan must be 13 proposed in good faith, acceptance of the Plan, whether the Plan 14 pays creditors at least as much as creditors would receive in a 15 Chapter 7 liquidation, and whether the Plan is feasible. 16 requirements are not the only requirements for confirmation. 17 A. These Who May Vote or Object 18 1. Who May Object to Confirmation of the Plan 19 Any party in interest may object to the confirmation of the 20 Plan, but as explained below not everyone is entitled to vote to 21 accept or reject the Plan. 22 2. Who May Vote to Accept/Reject the Plan 23 A creditor or interest holder has a right to vote for or 24 against the Plan if that creditor or interest holder has a claim 25 which is both (1) allowed or allowed for voting purposes and (2) 26 classified in an impaired class. 27 a. What Is an Allowed Claim/Interest 28 As noted above, a creditor or interest holder must first Revised August 2005 13 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 1 have an allowed claim or interest to have the right to vote. 2 Generally, any proof of claim or interest will be allowed, unless 3 a party in interest brings a motion objecting to the claim. 4 an objection to a claim or interest is filed, the creditor or 5 interest holder holding the claim or interest cannot vote unless 6 the Court, after notice and hearing, either overrules the 7 objection or allows the claim or interest for voting purposes. 8 THE BAR DATE FOR FILING A PROOF OF CLAIM IN THIS CASE WAS 9 73 When . A creditor or interest holder may have an allowed 10 claim or interest even if a proof of claim or interest was not 11 timely filed. 12 on the Debtor’s schedules and such claim is not scheduled as 13 disputed, contingent, or unliquidated, and (2) no party in 14 interest has objected to the claim. An interest is deemed allowed 15 if it is scheduled and no party in interest has objected to the 16 interest. Consult Exhibits F through L to see how the Proponent 17 has characterized your claim or interest. 18 19 b. A claim is deemed allowed if (1) it is scheduled What Is an Impaired Claim/Interest As noted above, an allowed claim or interest only has the 20 right to vote if it is in a class that is impaired under the 21 Plan. A class is impaired if the Plan alters the legal, 22 equitable, or contractual rights of the members of that class. 23 For example, a class comprised of general unsecured claims is 24 impaired if the Plan fails to pay the members of that class 100% 25 of what they are owed. 26 In this case, the Proponent believes that classes 74 27 are impaired and that holders of claims in each of these classes 28 are therefore entitled to vote to accept or reject the Plan. The Revised August 2005 14 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 75 1 Proponent believes that classes are unimpaired and that 2 holders of claims in each of these classes therefore do not have 3 the right to vote to accept or reject the Plan. Parties who 4 dispute the Proponent’s characterization of their claim or 5 interest as being impaired or unimpaired may file an objection to 6 the Plan contending that the Proponent has incorrectly 7 characterized the class. Who is Not Entitled to Vote 8 3. 9 The following four types of claims are not entitled to vote: 10 (1) claims that have been disallowed; (2) claims in unimpaired 11 classes; (3) claims entitled to priority pursuant to Code 12 sections 507(a)(1), (a)(2), and (a)(8)76; and (4) claims in 13 classes that do not receive or retain any value under the Plan. 14 Claims in unimpaired classes are not entitled to vote because 15 such classes are deemed to have accepted the Plan. Claims 16 entitled to priority pursuant to Code sections 507(a)(1), (a)(2), 17 and (a)(7) are not entitled to vote because such claims are not 18 placed in classes and they are required to receive certain 19 treatment specified by the Code. Claims in classes that do not 20 receive or retain any value under the Plan do not vote because 21 such classes are deemed to have rejected the Plan. 22 CLAIM IS OF THE TYPE DESCRIBED ABOVE, YOU MAY STILL HAVE A RIGHT 23 TO OBJECT TO THE CONFIRMATION OF THE PLAN. EVEN IF YOUR 24 4. Who Can Vote in More Than One Class 25 A creditor whose claim has been allowed in part as a secured 26 claim and in part as an unsecured claim is entitled to accept or 27 reject a Plan in both capacities by casting one ballot for the 28 secured part of the claim and another ballot for the unsecured claim. Revised August 2005 15 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 1 5. Votes Necessary to Confirm the Plan 2 If impaired classes exist, the Court cannot confirm the Plan 3 unless (1) at least one impaired class has accepted the Plan 4 without counting the votes of any insiders within that class, and 5 (2) all impaired classes have voted to accept the Plan, unless 6 the Plan is eligible to be confirmed by “cramdown” on non- 7 accepting classes, as discussed later in Section {IV.A.8.}. 8 6. Votes Necessary for a Class to Accept the Plan 9 A class of claims is considered to have accepted the Plan 10 when more than one-half (1/2) in number and at least two-thirds 11 (2/3) in dollar amount of the claims which actually voted, voted 12 in favor of the Plan. 13 accepted the Plan when at least two-thirds (2/3) in amount of the 14 interest-holders of such class which actually voted, voted to 15 accept the Plan. A class of interests is considered to have 16 7. Treatment of Nonaccepting Classes 17 As noted above, even if all impaired classes do not accept 18 the proposed Plan, the Court may nonetheless confirm the Plan if 19 the nonaccepting classes are treated in the manner required by 20 the Code. 21 to be bound by the terms of the Plan is commonly referred to as 22 “cramdown.” 23 nonaccepting classes of claims or interests if it meets all 24 consensual requirements except the voting requirements of 25 1129(a)(8) and if the Plan does not “discriminate unfairly” and 26 is “fair and equitable” toward each impaired class that has not 27 voted to accept the Plan as referred to in 11 U.S.C. § 1129(b) 28 and applicable case law. The process by which nonaccepting classes are forced The Code allows the Plan to be “crammed down” on Revised August 2005 16 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 8. 1 Request for Confirmation Despite Nonacceptance by 2 Impaired Class(es) 3 The party proposing this Plan 77 asks the Court to 4 confirm this Plan by cramdown on impaired classes 5 77a if any of these classes do not vote to accept the Plan. Please note that the proposed Plan treatment described by 6 7 this Disclosure Statement cannot be crammed down on the following 8 classes : 9 NOT VOTE TO ACCEPT THE PLAN, THE PLAN WILL NOT BE CONFIRMED.79 10 B. 78 . AS A RESULT, IF ANY OF THESE CLASSES DOES Liquidation Analysis Another confirmation requirement is the “Best Interest 11 12 Test”, which requires a liquidation analysis. Under the Best 13 Interest Test, if a claimant or interest holder is in an impaired 14 class and that claimant or interest holder does not vote to 15 accept the Plan, then that claimant or interest holder must 16 receive or retain under the Plan property of a value not less 17 than the amount that such holder would receive or retain if the 18 Debtor were liquidated under Chapter 7 of the Bankruptcy Code. In a Chapter 7 case, the Debtor’s assets are usually sold by 19 20 a Chapter 7 trustee. Secured creditors are paid first from the 21 sales proceeds of properties on which the secured creditor has a 22 lien. 23 creditors are paid from any remaining sales proceeds, according 24 to their rights to priority. 25 priority share in proportion to the amount of their allowed claim 26 in relationship to the amount of total allowed unsecured claims. 27 Finally, interest holders receive the balance that remains after 28 all creditors are paid, if any. Administrative claims are paid next. Revised August 2005 Next, unsecured Unsecured creditors with the same 17 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 1 For the Court to be able to confirm this Plan, the Court 2 must find that all creditors and interest holders who do not 3 accept the Plan will receive at least as much under the Plan as 4 such holders would receive under a Chapter 7 liquidation. The 5 Plan Proponent maintains that this requirement is met here for 6 the following reasons: 7 80 . Below is a demonstration, in balance sheet format, that all 8 creditors and interest holders will receive at least as much 9 under the Plan as such creditor or interest holder would receive 10 under a Chapter 7 liquidation. (See Exhibit E for a detailed 11 explanation of how the following assets are valued. This 12 information is provided by 18 .) 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Revised August 2005 18 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 1 ASSETS VALUE AT LIQUIDATION VALUES81: 2 CURRENT ASSETS a. Cash on hand b. Accounts receivable c. Inventories 3 4 TOTAL CURRENT ASSETS 7 8 FIXED a. b. c. d. 9 10 11 14 15 16 17 18 19 ASSETS Office furniture & equipment Machinery & equipment Automobiles Building & Land82 $ $ $ $ $ OTHER ASSETS a. Customer list b. Other intangibles $ $ $ TOTAL OTHER ASSETS 12 13 $ TOTAL FIXED ASSETS 5 6 $ $ $ TOTAL ASSETS AT LIQUIDATION VALUE Less: Secured creditor’s recovery1 Less: Chapter 7 trustee fees and expenses Less: Chapter 11 administrative expenses Less: Priority claims, excluding administrative expense claims Less: Debtor’s claimed exemptions $ ========= $ $ $ $ (1) Balance for unsecured claims (2) Total amt of unsecured claims 20 21 $ ========= $ $ 22 % OF THEIR CLAIMS WHICH UNSECURED CREDITORS WOULD RECEIVE 83 OR RETAIN IN A CH. 7 LIQUIDATION2: = % OF THEIR CLAIMS WHICH UNSECURED CREDITORS WILL RECEIVE 84 OR RETAIN UNDER THIS PLAN: = 23 24 25 26 1/ Note: The deficiency portion of a secured recourse claim must be added to the total amount of unsecured claims. 2/ Note: If this percentage is greater than the amount to be paid to the unsecured creditors on a “present value basis” under the Plan, the Plan is not confirmable unless Proponent acceptance by every creditor in the general unsecured class. 27 28 obtains Revised August 2005 19 F 3017-1 American LegalNet, Inc. www.USCourtForms.com Below is a demonstration, in tabular format, that all 1 2 creditors and interest holders will receive at least as much 3 under the Plan as such creditor or holder would receive under a 4 Chapter 7 liquidation. 5 CLAIMS & CLASSES85 PAYOUT PERCENTAGE UNDER THE PLAN PAYOUT PERCENTAGE IN CHAPTER 7 LIQUIDATION 6 Administrative Claims 7 8 Priority Tax Claims Class 1 - 86 9 Class 2 - 87 10 Class 3 - 88 11 Class 4 - 89 12 C. 13 Feasibility Another requirement for confirmation involves the 14 feasibility of the Plan, which means that confirmation of the 15 Plan is not likely to be followed by the liquidation, or the need 16 for further financial reorganization, of the Debtor or any 17 successor to the Debtor under the Plan, unless such liquidation 18 or reorganization is proposed in the Plan. 19 There are at least two important aspects of a feasibility 20 analysis. The first aspect considers whether the Debtor will have 21 enough cash on hand on the Effective Date of the Plan to pay all 22 the claims and expenses which are entitled to be paid on such 23 date. 24 feasibility is satisfied as illustrated here: The Plan Proponent maintains that this aspect of 25 26 27 28 Revised August 2005 20 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 1 Cash Debtor will have on hand by Effective Date90 $ 2 To Pay: Administrative claims - 3 To Pay: Statutory costs & charges - 4 To Pay: Other Plan Payments due on Effective Date - Balance after paying these amounts............... $ 5 6 7 The sources of the cash Debtor will have on hand by the Effective 8 Date, as shown above are: 9 $ 10 + Cash in DIP Account now Additional cash DIP will accumulate from net earnings between now and Effective Date 11 + Borrowing 12 + Capital Contributions 13 + Other 14 $ Total91 15 16 17 Borrowing is from 93 follows: 92 and will be paid back as . The second aspect considers whether the Proponent will have 18 enough cash over the life of the Plan to make the required Plan 19 payments.94 20 The Proponent has provided financial statements which 21 include both historical and projected financial information. 22 Please refer to Exhibit B for the relevant financial statements. 23 YOU ARE ADVISED TO CONSULT WITH YOUR ACCOUNTANT OR FINANCIAL 24 ADVISOR IF YOU HAVE ANY QUESTIONS PERTAINING TO THESE FINANCIAL 25 STATEMENTS. 26 27 28 In summary, the Plan proposes to pay 96 . 95 each As Debtor’s financial projections demonstrate, Debtor will have an average cash flow, after paying operating Revised August 2005 21 F 3017-1 American LegalNet, Inc. www.USCourtForms.com 97 98 1 expenses and post-confirmation taxes, of 2 for the life of the Plan. 3 be paid on 4 financial projections are feasible. 5 historical financial statements, Debtor’s average 6 cash flow, after paying operating expenses and post-confirmation 7 taxes, in the three years preceding the filing of this bankruptcy 8 case is 9 paying operating expenses and post-confirmation taxes, during the 99 101 each The final Plan payment is expected to . The Plan Proponent contends that Debtor’s . As shown by Debtor’s 102 Debtor’s average 103 . 100 cash flow, after Furthermore, as discussed 10 bankruptcy case is 11 earlier in the Disclosure Statement at Section {II.E.4}, Debtor 12 has implemented procedures to 104 . 13 V. 14 EFFECT OF CONFIRMATION OF PLAN 15 A. Discharge105 This Plan provides that upon 16 106 , Debtor shall be 17 discharged of liability for payment of debts incurred before 18 confirmation of the Plan, to the extent specified in 11 U.S.C.§ 19 1141. 20 imposed by the Plan. 21 B. However, the discharge will not discharge any liability Revesting of Property in the Debtor Except as provided in Section {V.E.}, and except as provided 22 23 elsewhere in the Plan, the confirmation of the Plan revests all 24 of the property of the estate in the Debtor. 25 C. 26 Modification of Plan The Proponent of the Plan may modify the Plan at any time 27 before confirmation. 28 disclosure statement and/or revoting on the Plan. Revised August 2005 However, the Court may require a new 22 F 3017-1 American LegalNet, Inc. www.USCourtForms.com The Proponent of the Plan may also seek to modify the Plan 1 2 at any time after confirmation only if (1) the Plan has not 3 been substantially consummated and (2) the Court authorizes the 4 proposed modifications after notice and a hearing. 5 D. Post-Confirmation Status Report Within 120 days of the entry of the order confirming the 6 7 Plan, Plan Proponent shall file a status report with the Court 8 explaining what progress has been made toward consummation of the 9 confirmed Plan. The status report shall be served on the United 10 States Trustee, the twenty largest unsecured creditors, and those 11 parties who have requested special notice. Further status reports 12 shall be filed every 120 days and served on the same entities. 13 E. Quarterly Fees Quarterly fees accruing under 28 U.S.C. § 1930(a)(6) to date 14 15 of confirmation shall be paid to the United States Trustee on or 16 before the effective date of the plan. 17 under 28 U.S.C. § 1930(a)(6) after confirmation shall be paid to 18 the United States Trustee in accordance with 28 U.S.C. 19 § 1930(a)(6) until entry of a final decree, or entry of an order 20 of dismissal or conversion to chapter 7. 21 F. Quarterly fees accruing Post-Confirmation Conversion/Dismissal 22 A creditor or party in interest may bring a motion to 23 convert or dismiss the case under § 1112(b), after the Plan is 24 confirmed, if there is a default in performing the Plan. 25 Court orders, the case converted to Chapter 7 after the Plan is 26 confirmed, then all property that had been property of the 27 Chapter 11 estate, and that has not been disbursed pursuant to 28 the Plan, will revest in the Chapter 7, estate. The automatic Revised August 2005 23 If the F 3017-1 American LegalNet, Inc. www.USCourtForms.com 1 stay will be reimposed upon the revested property, but only to 2 the extent that relief from stay was not previously authorized by 3 the Court during this case. The order confirming the Plan may also be revoked under very 4 5 limited circumstances. The Court may revoke the order if the 6 order of confirmation was procured by fraud and if the party in 7 interest brings an adversary proceeding to revoke confirmation 8 within 180 days after the entry of the order of confirmation. 9 G. Final Decree Once the estate has been fully administered as referred to 10 11 in Bankruptcy Rule 3022, the Plan Proponent, or other party as 12 the Court shall designate in the Plan Confirmation Order, shall 13 file a motion with the Court to obtain a final decree to close 14 the case. 15 16 Date: 17 18 Name and Identity of Plan Proponent 19 20 21 Signature of Plan Proponent (optional unless party is pro se) 22 23 Signature of Attorney for Plan Proponent 24 25 Name of Attorney for Plan Proponent 26 27 Name of Law Firm for Plan Proponent 28 Revised August 2005 24 F 3017-1 American LegalNet, Inc. www.USCourtForms.com VI. 1 SUPPORTING DECLARATIONS107 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Revised August 2005 25 F 3017-1 American LegalNet, Inc. www.USCourtForms.com EXHIBIT A - LIST OF ALL ASSETS108 Revised August 2005 26 F 3017-1 American LegalNet, Inc. www.USCourtForms.com EXHIBIT B - FINANCIAL STATEMENTS As directed by the Court, the historical financial statements for the three years preceding the petition date and projected financial statements for the life of the Plan are attached.109 This information is supplied by based on the Revised August 2005 17 18 and is . 27 F 3017-1 American LegalNet, Inc. www.USCourtForms.com EXHIBIT C - UNEXPIRED LEASES TO BE ASSUMED109a LEASES Description = 110 Lessor’s name = ARREARS/DMGS Default amt = Actual pecuniary 111 loss = METHODS OF CURE Method of curing default & loss = Means of assuring 112 future performance = Lessee’s name = Expiration date = Description = Default amt = Actual pecuniary loss = Method of curing default & loss = Lessor’s name = Means of assuring future performance = Lessee’s name = Expiration date = Description = Default amt = Actual pecuniary loss = Method of curing default & loss = Lessor’s name = Means of assuring future performance = Lessee’s name = Expiration date = Revised August 2005 28 F 3017-1 American LegalNet, Inc. www.USCourtForms.com EXHIBIT D - EXECUTORY CONTRACTS TO BE ASSUMED CONTRACT Contract description = DEFAULT/DMGS Default amt = Actual pecuniary loss = Contracting parties = 1. 2. Contract description = Default amt = Actual pecuniary loss = Method of curing default & loss = Means of assuring performance = Default amt = Actual pecuniary loss = Contracting parties = 1. 2. Revised August 2005 Method of curing default & loss = Means of assuring performance = Contracting parties = 1. 2. Contract description = METHODS OF CURE Method of curing default & loss = Means of assuring performance = 29 F 3017-1 American LegalNet, Inc. www.USCourtForms.com EXHIBIT E - LIQUIDATION ANALYSIS SUPPORTING VALUATION CURRENT ASSETS: CASH ON HAND113 a. Acct Number: b. Acct Number: c. Total Cash $ $ ACCOUNTS RECEIVABLE a. Accounts receivable b. Less: uncollectible accounts c. Net Accounts Receivables $ $ $ INVENTORIES114 $ $ FIXED ASSETS: OFFICE FURNITURE, MACHINERY & EQUIPMENT115 $ TRANSPORTATION EQUIPMENT116 $ BUILDINGS, LAND & OTHER REAL PROPERTY117 a. Real Property at: $ b. Real Property at: $ c. Total $ OTHER ASSETS:118 $ TOTAL ASSETS AT LIQUIDATION VALUE Revised August 2005 30 $ ============ F 3017-1 American LegalNet, Inc. www.USCourtForms.com EXHIBIT F - LIST OF ADMINISTRATIVE EXPENSE CLAIMS UNCLASSIFIED CLAIMS: ADMINISTRATIVE CLAIMS Amounts (Allowed + Estimated = Total Amount - Paid = Total Due) Name Code § Allowed to date Estimated Total Amount Paid Total Due ==> Insert rows here. TOTAL AMOUNTS Revised August 2005 31 F 3017-1 American LegalNet, Inc. www.USCourtForms.com EXHIBIT G - LIST OF PRIORITY UNSECURED CLAIMS CLASSIFIED CLAIMS: §507(a)(3) PRIORITY CLAIMS SCHEDULED CLAIMS Class Name Insider Amount Impaired D/C/U* FILED CLAIMS Amount Objection