Sunteți pe pagina 1din 19


In re:

Chapter 11 Case No. 11-11795 (KG)


Jointly Administered
Related to Docket Nos. 222 and 601 Hearing Date: August 22, 2011, at 2:00 a.m. Objection Deadline: August 15, 2011, at 4:00 p.m.


OBJECTION TO APPROVAL OF DEBTORS DISCLOSURE STATEMENT FOR DEBTORS JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE 1 Omega Trust #1, Omega Trust #2 and Omega Trust #3 (collectively, the Omega Trust), by undersigned counsel, object to the request (Docket No. 601) of the Debtors, Perkins & Marie Callenders, Inc., et al. (the Debtors) for approval of the Disclosure Statement for Debtors' Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (the Disclosure Statement) (Docket No. 222). In support of this Objection, the Omega Trust respectfully states as follows:

PRELIMINARY STATEMENT 1. The Omega Trust submits that the Disclosure Statement contains material

omissions which preclude unsecured creditors from fully understanding their treatment under the Plan, most importantly, their proposed post-confirmation rights as equity interest holders in the Reorganized Debtors, making them unable to make informed judgments about the Plan. The

Capitalized terms not defined herein shall have the meanings given to them in Debtors' Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (the Plan) (Docket No. 221)
08/15/2011 SL1 1091604v4 106745.00001

Disclosure Statement, in its current form, is not adequate and should not be approved. Accordingly, the Omega Trust requests that the Court decline approval of the Disclosure Statement. BACKGROUND A. Commencement of the Cases 2. On June 13, 2011 (the Petition Date), the Debtors each filed a voluntary

petition for relief under chapter 11 of title 11 of the United States Code (the Bankruptcy Code). The cases are jointly administered pursuant to an order of the Court. 3. The Debtors continue to operate their businesses and manage their properties as

debtors-in-possession pursuant to 11 U.S.C. 1107(a) and 1108. No trustee or examiner has been appointed in the Debtors bankruptcy cases. 4. On June 24, 2011, the Office of the United States Trustee appointed an Official

Committee of Unsecured Creditors (the Committee) pursuant to 11 U.S.C. 1102. B. The Omega Trust Pre-Petition Agreements With Debtors 5. On or about September 26, 1969, Perkins Pancake House, Inc., acting as agent on

behalf of Perkins Foods, Inc., entered into a franchise development agreement with Wyman D. Nelson (the Franchise Development Agreement) pursuant to which Mr. Nelson obtained the exclusive right to develop Perkins restaurants in the states of Iowa and Wisconsin. In December 1976, Mr. Nelson assigned his rights in the Franchise Development Agreement to the predecessors of the Omega Trust. 6. On or about February 1, 1977, the predecessors of the Omega Trust entered into

an agreement with Perkins Cake and Steak, Inc. (which, together with subsequent amendments is referred to herein as the Royalty Agreement) pursuant to which their rights in the Franchise

-208/15/2011 SL1 1091604v4 106745.00001

Development Agreement were assigned to Perkins in return for payment of royalties on the gross sales of certain Perkins restaurants. Among other things, the Royalty Agreement requires

Debtors to make royalty payments so long as they operate, own or franchise restaurants in Iowa and Wisconsin. 7. One or more of the Debtors are the successors to the entities that entered into the

Franchise Development Agreement and the Royalty Agreement. 8. Regular royalty payments have been made by Debtors from 1977 to the Omega

Trust until approximately one month prior to the Petition Date. No payments have been made since the Petition Date. 9. Whether either the Franchise Development Agreement or the Royalty Agreement

is an executory contract, an issue on which the Omega Trust takes no position herein, if the Debtors can validly reject either or both of the Franchise Development Agreement or the Royalty Agreement, or if Debtors otherwise fail to make royalty payments or otherwise breach, the Omega Trust projects that its claim would be in the magnitude of $55 million. 10. The Omega Trust believes that the discussion on page 19 of the Disclosure Territorial Exclusivity relates to its rights under the Franchise

Statement entitled 6.

Development Agreement and the Royalty Agreement. However, the Disclosure Statement does not specifically identify the Omega Trust as one of the three parties generally identified as the counter-parties to territorial exclusivity agreements with Debtors nor does it anywhere identify Debtors position on (i) what class of claim the Omega Trust may have against Debtors based on their possible breach of the Franchise Development Agreement or the Royalty Agreement, (ii) whether Debtors believe the Franchise Development Agreement or the Royalty Agreement are executory contracts subject to assumption or rejection, or (iii) what position(s) Debtors have with

-308/15/2011 SL1 1091604v4 106745.00001

respect to their or the Omega Trusts respective rights, obligations and claims under the Franchise Development Agreement or the Royalty Agreement. 11. For the purpose of this objection, the Omega Trust assumes, without conceding,

that the majority of its claims against Debtors would be Class 5 general unsecured claims under the Plan. C. The Debtors Pre-Petition Restructuring Support Agreement And Proposed Plan 12. Prior to the Petition Date, the Debtors negotiated the basic terms of a plan of

reorganization with the Restructuring Support Parties, which is set forth in the Restructuring Support Agreement. The Restructuring Support Parties are comprised of at least 80% of the holders of the Senior Notes. See Disclosure Statement at pages 27-29. 13. Among other things, the Restructuring Support Agreement requires the

conversion of Debtor Perkins & Marie Callenders Holding, Inc., the ultimate parent of all the entities that commenced this case, into a Delaware limited liability company (PMC Holding LLC). The Restructuring Support Agreement also gives the Restructuring Support Parties the right to determine material aspects of the Plan, including, without limitation, the form and substance of the PMC Holding LLC Agreement. See Disclosure Statement at page 28. 14. The Plan proposes that Class 5 general unsecured claims receive either (i) their

pro-rata share (along with the Senior Notes claims) of the membership interests in PMC Holding LLC, or (ii) a cash-out payment which, given the small and capped amount of the cash payment ($50,000 or less, see Disclosure Statement at page 25), and the large amount of the Omega Trusts claim in the event its contracts are breached, likely would not be elected by the Omega Trust.

-408/15/2011 SL1 1091604v4 106745.00001


In addition, the Disclosure Statement discloses that the Senior Notes claims are in

the neighborhood of $190,000,000.00 and Class 5 general unsecured claims are in the range of $20 to 25,000,000.00. The Omega Trust asserts that this amount is wildly understated because its claim alone would be approximately $55 million. Nevertheless, Class 5 general unsecured claims, even in the aggregate and even if giving effect to the Omega Trusts potential claim, likely would represent a small minority interest in PMC Holding LLC. Further, and although the PMC Holding LLC Agreement has not yet been filed, the Disclosure Statement discloses, generally, that holders of membership interests in PMC Holding LLC would be subject to mandatory capital calls. 2

OBJECTIONS 3 A. Applicable Standards 16. Section 1125 of the Bankruptcy Code prohibits the solicitation of votes on a

reorganization plan prior to court approval of a written disclosure statement (after notice and a hearing) which contains adequate information. 11 U.S.C. 1125(b). 17. The adequate information requirement is designed to assist creditors in their

negotiations with debtors over the plan. See Century Glove, Inc. v. First American Bank, 860 F.2d 94, 100 (3d Cir. 1988) (The necessity of adequate information was intended to help

Other terms of the as yet unfiled and undisclosed PMC Holding LLC Agreement are generally described at pages 49-50 of the Disclosure Statement. However, of course, such general descriptions are subject to the actual terms of the PMC Holding LLC Agreement. To the extent that any objection, in whole or part, contained herein is deemed to be an objection to confirmation rather than, or in addition to, an objection to the adequacy of the Disclosure Statement, the Omega Trust reserves the right to assert such objection, or have the objection deemed an objection, to confirmation of the Plan. The Omega Trust also reserves the right to assert any and all objections to confirmation of the Plan or any plan proposed in this case. -508/15/2011 SL1 1091604v4 106745.00001

creditors in their negotiations with the debtor.); In re Ferretti, 128 B.R. 16, 18 (Bankr. D.N.H. 1991) (the purpose of a disclosure statement is to provide adequate information to creditors to enable them to determine whether to accept or reject a proposed plan). 18. The Third Circuit has emphasized the importance of adequate information, and

that what is adequate information must be determined by the facts and circumstances of each case. Oneida Motor Freight, Inc. v. United Jersey Bank (In re Oneida Motor Freight, Inc.), 848 F. 2d 414, 417 (3rd Cir. 1988), cert. denied, 488 U.S. 967 (1988), citing, H.R. Rep. No. 595, 97th Cong., 2nd Sess. 266 (1977). In Oneida Motor Freight, Inc. the Third Circuit stated that: the importance of full disclosure is underlaid by the reliance placed upon the disclosure statement by the creditors and the court. Given this reliance, we cannot overemphasize the debtors obligation to provide sufficient data to satisfy the Code standard of adequate information. See In re Oneida Motor Freight, Inc., 848 F.2d 414, 417 (3d Cir. 1988). 19. Adequate information is defined by the Bankruptcy Code as: information of a kind, and in sufficient detail, as far as is reasonably practicable in light of the nature and history of the debtor and the condition of the debtors books and records, including a discussion of the potential material Federal tax consequences of the plan to . . . a hypothetical investor typical of the holders of claims or interests in the case, that would enable such a hypothetical investor of the relevant class to make an informed judgment about the plan . . . . 11 U.S.C. 1125(a). 20. A typical investor, in turn, is defined as an investor having (i) a claim or interest

in the relevant class, (ii) a relationship with the debtor such as the holders of other claims or interests in the class generally have, and (iii) an ability to obtain information from sources other than the 1125 disclosures such as holders of claims or interests in the class generally have. See

-608/15/2011 SL1 1091604v4 106745.00001

11 U.S.C. 1125(a)(2). In weighing the extent of necessary disclosure under 1125, courts must take into account the creditor body and others for whose enlightenment the disclosure statement is designed. See In re Zenith Electronics Corp., 241 B.R. 92, 99 (Bankr. D. Del. 1999) (in determining adequacy of disclosure statement, courts must consider the intended audience); In re CDECO Maritime Const. Inc., 101 B.R. 499, 500 (Bankr. N.D. Ohio 1989). 21. Although the term adequate information is not specifically defined, courts have

identified the following categories of information as the type of information that should be included in a typical disclosure statement: (i) The circumstances that gave rise to the filing of the bankruptcy petition; (ii) A complete description of the available assets and their value; (iii) The anticipated future of the debtor;

(iv) The source of the information provided in the disclosure statement; (v) A disclaimer, which typically indicates that no statements or information concerning the debtor or its assets or securities are authorized, other than those set forth in the disclosure statement; (vi) (vii) The condition and performance of the debtor in Chapter 11; Information regarding claims against the estate;

(viii) A liquidation analysis setting forth the estimated return that creditors would receive under Chapter 7; (ix) The accounting and valuation methods used to produce the financial information in the disclosure statement; (x) Information regarding the future management of the debtor including the amount of compensation to be paid to any insiders, directors, and/or officers of the debtor; (xi). A summary of the proposed plan;

-708/15/2011 SL1 1091604v4 106745.00001

(xii) An estimate of all administrative expenses, including attorneys fees and accountants fees; (xiii) The ability to collect any accounts receivable; (xiv) Any financial information, valuations or pro forma projections that would be relevant to creditors determinations of whether to accept or reject the plan; (xv) Information relevant to the risks being taken by the creditors and interest holders; (xvi) The actual or projected value that can be obtained from avoidable transfers; (xvii) The existence, likelihood and possible success of nonbankruptcy litigation; (xviii) The tax consequences of the plan; and (xix) The relationship of the debtor with its affiliates.

See In re U.S. Brass Corp., 194 B.R. 420, 424 (Bankr. E.D. Tex. 1996); In re Ferretti, 128 B.R. 16, 18-19 (Bankr. D.N.H. 1991); In re Cardinal Congregate I, 121 B.R. 760, 765 (Bankr. S.D. Ohio 1990); In re Metrocraft Publg Servs., Inc., 39 B.R. 567, 568 (Bankr. N.D. Ga. 1984). 22. Mere statements of opinion or belief, without accompanying factual support, are

inadequate to support a disclosure statement. See In re Beltrami Enters., 191 B.R. 303, 304 (Bankr. M.D. Pa. 1995) (conclusory allegations or opinions without supporting facts are generally not acceptable); Ferretti, 128 B.R. at 21 (statement that projection of restaurants income and expenses was virtually impossible to provide, but debtor believed plan to be feasible based on experience, was inadequate).

-808/15/2011 SL1 1091604v4 106745.00001

B. 1.

The Disclosure Statement Should Not Be Approved Because It Lacks Adequate Information Critical Information Has Not Been And Will Not Be Disclosed On A Timely Basis 23. Significant and material information is not included in the Disclosure Statement.

First, although referred to in the document, no liquidation analysis or financial projections are included with the proposed Disclosure Statement. Clearly, without such information, the

Disclosure Statement does not contain adequate information and cannot be approved. 24. Second, Debtors indicate that they will file at a later date a supplement to the Plan

(the Plan Supplement) which will contain, among other information (i) a description in the PMC Holding LLC Agreement of the mandatory capital call and other rights and obligations of the members of PMC Holding LLC, (ii) the identities of the board members and officers of the reorganized entity PMC Holding LLC in which unsecured creditors are to become members, and (iii) the list of contracts that Debtors will seek to reject 4, as well as other information required under 1125 of the Bankruptcy Code. See Disclosure Statement at pages 4, 48 and 64. 25. Debtors propose to file the Plan Supplement as late as 10 calendar days prior to

the Plan confirmation hearing, or at such later time as allowed by the Court. See Disclosure Statement at pages 4. As a matter of disclosure, without this crucial information the Disclosure Statement lacks adequate information and cannot be approved. Also, with respect to

confirmation, the proposed timing of filing of the Plan Supplement could effectively disenfranchise creditors, as ten days prior to the confirmation hearing is after the proposed deadline for creditors to vote on the Plan and is only a few days before the requested deadline to Under the Plan, executory contracts will be assumed by confirmation of the Plan unless to the extent the contract (i) previously has been assumed or rejected, (ii) previously has expired or terminated by its terms, (iii) is included in a list of rejected contracts to be filed with the Plan Supplement, or (iv) is subject of a pending motion to assume or reject. See Disclosure Statement at page 64. -908/15/2011 SL1 1091604v4 106745.00001

submit objections to confirmation. This time frame deprives creditors of critical information until it is too late to be of any meaningful use. Debtors should be required to file the Plan Supplement prior to making any determination that the Disclosure Statement contains adequate information. 2. The Disclosure Statement Inadequately Describes Class 5 - General Unsecured Creditors 26. The Disclosure Statement fails to adequately address the impact, if any, on Class

5, from rejections of executory contracts, including, without limitation, the Franchise Development Agreement and the Royalty Agreement, in the event such are deemed to be executory and validly can be rejected by Debtors or otherwise from ordinary breaches of contract. Thus, the holders of Class 5 claims cannot determine their pro-rata shares of the PMC Holding LLC membership interests or their cash-out rights. 3. The Disclosure Statement Fails To Identify The Debtors Post-Confirmation Management. 27. To comply with 1125 of the Bankruptcy Code, a disclosure statement must

contain a description of future management which includes their identities, experience and past relationship with the company including the amount of compensation to be paid to any insiders, directors and/or officers of the debtor. See Microwave Prods., 100 B.R. at 378 (declining to approve disclosure statement because, inter alia, the plan did not set forth in sufficient detail the management of the reorganized debtor); U.S. Brass Corp., 194 B.R. at 424 (Bankr. E.D. Tex. 1996); In re Scioto Valley Mortg. Co., 88 B.R. 168, 170-71, 172 (Bankr. S.D. Ohio 1988) (holding that at minimum, disclosure of information regarding future ownership and management debtor, including any compensation to be paid insiders, directors and/or officers is required by 1125).

-1008/15/2011 SL1 1091604v4 106745.00001


The Debtors Disclosure Statement fails entirely to identify members of the

Reorganized Debtors board of managers or their compensation, stating only that managers will be appointed by the Restructuring Support Parties and identified in the Plan Supplement. See Disclosure Statement at page 48. Debtors disclosure does not comply with 1125 because it fails to provide the necessary information about its management with sufficient time to evaluate the information prior to the objection and voting deadlines. Waiting to disclose this information in the Plan Supplement is not only inherently unfair, it is unwarranted, as Debtors and the Restructuring Support Parties agreed to the terms of the Plan, at the latest, on June 6, 2011. See Disclosure Statement at page 27. 29. Additionally, managers and officers appointed by the Restructuring Support

Parties could be subject to a conflict of interest. It is axiomatic that they owe a fiduciary duty to act in the best interests of the entire company. On the other hand, the Restructuring Support Parties presumably are acting in their self-interest in this case and in respect of the Plan, including in their appointment of officers and managers. Thus, the identities of, and the details in connection with, the Restructuring Support Parties selection of officers and managers and any potential conflicts must be disclosed. 5

One of the features of the Plan, presumably requested by the Plan Support Parties, is the Management Incentive Plan, pursuant to which membership interests in PMC Holding LLC will, on terms and conditions not disclosed (but which are to be included in the as yet unfiled PMC Holding LLC Agreement), be provided to the officers of the Reorganized Debtors. Of course, not only will such plan dilute the equity interest of Class 5 creditors, it could, depending on the terms and conditions, serve to exacerbate any inherent conflict that may exist vis a vis the Senior Note claims and the Class 5 claims in the context of the post-confirmation equity ownership of the Reorganized Debtors. -1108/15/2011 SL1 1091604v4 106745.00001


The Disclosure Statement Fails To Disclose Whether And To What Extent, Class 5 Creditors Who Receive Membership Interests Will Be Protected As Minority Membership Interest Holders. 30. The Restructuring Support Parties hold, in the aggregate, at least 80% of the

Senior Notes and 100% of the Senior Secured Notes. Collectively, the Senior Note claims would hold the vast majority of the membership interests of, and thus, the controlling stake in, PMC Holding LLC. See Disclosure Statement at pages 84-85. Debtors acknowledge that any Class 5 claimants who obtain membership interests in PMC Holding LLC easily will be out-voted by the Restructuring Support Parties who have a clear conflict of interest as holders of both postconfirmation secured debt and as holders of controlling membership interests. There is no disclosure as to whether the minority members will have any protection and whether that protection is sufficient in the face of this conflict of interest. For example, under Delaware law, a membership agreement such as the PMC Holding LLC Agreement may have an impact on the fiduciary duties of officers, directors and members of a limited liability company toward minority members. See 18 Del. Code. 18-1101; Kelly v. Bloom, 2010 WL 629850 (Del. Ch. 2010). 5. The Disclosure Statement Fails To Provide An Analysis Of The Debtors Possible Avoidance Actions 31. Reorganized Debtors intend to preserve their Litigation Rights (which include

Causes of Action, which in turn includes avoidance actions) and for such to vest in the Reorganized Debtors. See Disclosure Statement at page 66. However, aside from the general statement that Debtors do not anticipate that the Litigation Rights will yield any substantial value, see Disclosure Statement at page 67, which is not adequate disclosure, see Paragraph 22, supra, the Disclosure Statement is silent as to the projected or actual value of any of Debtors

-1208/15/2011 SL1 1091604v4 106745.00001

Litigation Rights that could be brought on behalf of the estate. An identification and discussion of Causes of Action which the Debtors (or the Committee, or a post-confirmation trust) may pursue under the Bankruptcy Code or other applicable law should be included in the Disclosure Statement. See Krystal Cadillac-Oldsmobile GMC Truck, Inc. v. General Motors Corp. 337 F.3d 314, 321 (3d Cir. 2003) (disclosure statement must identify and disclose all property of the estate including contingent assets such as causes of action); see also Cardinal Congregate, 121 B.R. at 767 (Bankr. S.D. Ohio 1990) (holding that disclosure statement must identify and discuss all causes of action which the debtor may pursue under the Bankruptcy Code). 6. The Disclosure Statement Fails To Provide An Analysis Of Potential Claims And Litigation Against the Debtors. 32. The Disclosure Statement is inadequate because it fails to set forth information

regarding claims against the estate. See Cardinal Congregate I, 121 B.R. at 767 (accurate disclosure of the amount and nature of any claims against the debtor, and of the proposed treatment of those claims is a necessary element in the courts determination of the debtors ability to consummate its proposed plan of reorganization, and thus, is requisite to disclosure statement approval); In re Fierman, 21 B.R. 314, 315 (Bankr. E.D. Pa. 1982) (explanation of effect that lawsuits may have on the disposition of property or claim is required); In re Malek, 35 B.R. 443, 444 (Bankr. E.D. Mich. 1983) (holding that all pending or contemplated litigation of whatever nature must be described fully, completely, and in detail). 7. The Disclosure Statement Lacks Adequate Information On Plan Releases and the Mechanics of Balloting In Connection With Releases. 33. The Plan provides broad releases of claims held by the Debtors and third-parties

against Released Parties. See Disclosure Statement at page 68. The Released Parties, as defined in the Plan, includes the direct and indirect holders of Equity Interests in the Debtors, the -1308/15/2011 SL1 1091604v4 106745.00001

Restructuring Support Parties, the Pre-Petition Secured Credit Facility Lenders, the Pre-Petition Administrative Agent, the Senior secured Notes Trustee, the Senior Secured Notes Collateral Agent, and the Senior Notes Trustee, and various unnamed officers, directors, employees and professional advisors of such entities. There is no discussion of whether there are any potential claims against the Released Parties that may affect the Plan, or what, if any, consideration was given for the releases. The releases proposed are greater than permitted under 1125(e) of the Bankruptcy Code. 34. The Disclosure Statement states that Persons who (a) hold a Claim, and (b) vote

to accept the Plan, and (c) do not mark their Ballot to indicate their refusal to grant the releases provided for in the Plan, will have consented to the releases. See Disclosure Statement at page 68. Unimpaired classes are deemed to have accepted the Plan and are not entitled to vote. It is unclear whether the unimpaired classes deemed acceptance of the Plan includes a deemed consent to the release provisions. Further, because a voting party must opt-out of, rather than opt-in to, the releases, it is unclear whether one who votes to reject the Plan is deemed to reject the release provisions by way of the vote, or if they must also indicate on the ballot that it does not consent to the proposed releases. C. The Disclosure Statement Should Not Be Approved Because The Plan Is Not Confirmable 35. Even if the Disclosure Statement provides adequate information, which it does

not, a disclosure statement that describes a plan of reorganization that is unconfirmable on its face should not be approved. See John Hancock Mutual Life Insurance Co. v. Route 37 Business Park Associates, 987 F.2d 154, 157 (3d Cir. 1993); see also In re, 289 B.R. 138, 140 (Bankr. N.D. Cal. 2003) (denying approval of disclosure statement where plan cannot be confirmed); In re Phoenix Petroleum Co., 278 B.R. 385, 394 (Bankr. D. Pa. 2001) (If the -1408/15/2011 SL1 1091604v4 106745.00001

disclosure statement describes a plan that is so fatally flawed that confirmation is impossible, the court should exercise its discretion to refuse to consider the adequacy of disclosures.); In re Main Street AC, Inc., 234 B.R. 771, 775 (Bankr. N.D. Cal 1999) (noting that it is well accepted that a court may disapprove a disclosure statement, even if it contains adequate information, where plan is not confirmable). 36. In effect, the Plan purports to make the holders of Class 5 claims, which will be

significantly in the minority in respect of the membership in PMC Holding LLC, involuntary investors in the Reorganized Debtors post-confirmation. Class 5 creditors are not being given an effective choice in the matter their claims will become equity and then for the privilege of having their claim wiped out in return for an interest with no control and no prospect of control they will be required to provide further investment capital in the Reorganized Debtors (perhaps to re-pay obligations owed to the holders of Senior Secured Notes?). 37. Nowhere in the Bankruptcy Code is authority given to a debtor to force creditors

to lend it money or to make an investment in the debtors enterprise. To the contrary, the only section of the Bankruptcy Code that touches on the subject section 365(c)(2) relating to financial accommodation contracts makes clear that a debtor cannot force a party to lend it money or provide it credit post-petition. Nothing in section 1123 of the Bankruptcy Code gives a debtor this authority. Thus the plan is not fair and equitable as it relates to Class 5 claims and, in the post-confirmation structure, discriminates unfairly against Class 5 vis a vis the Senior Notes claims, which are of the identical priority with Class 5. 38. Further, the Management Incentive Plan proposed in the Plan is not in good faith

as required by 11 U.S.C. 1129(a)(3). At the same time Debtors are forcing Class 5 creditors to accept, in effect, de minimus treatment of their claims, they are proposing for as yet undisclosed

-1508/15/2011 SL1 1091604v4 106745.00001

officers receiving equity in PMC Holding LLC, which will further dilute the treatment of Class 5. This further demonstrates that the Plan is neither fair nor equitable to Class 5 creditors. 39. The Plan also is unconfirmable to the extent that it purports to release claims that

might be asserted by third parties against non-debtors. See In re Genesis Health Ventures, Inc., 266 B.R. 591, 606-07 (Bankr. D. Del. 2001). Non-debtor releases of direct claims are

permissible only if consensual and affirmative. See, e.g., In re Continental Airlines, 203 F.3d 203, 214 n.11 (3d Cir. 2000); In re Zenith Electronics, Inc., 241 B.R. 92, 111 (Bankr. D. Del. 1999) (holding that releases of non-derivative third-party claims against non-debtor cannot be accomplished without the affirmative agreement of the creditor affected); In re Arrowmill Dev. Corp., 211 B.R. 497, 506-507 (Bankr. D.N.J. 1997) (Where the creditor consents to the release, and presumably receives consideration in exchange for that agreement, it has not been forced by virtue of the discharge provisions of the code ... [A]s the settlements arise by agreement and not by operation of law, they do not run afoul of section 524(e)); In re West Coast Video Enters., Inc., 174 B.R. 906, 911 (Bankr. E.D. Pa. 1994) (refusing to enforce releases with respect to movants who did not vote on plan because each creditor bound by the terms of the [non-debtor] release must individually affirm same, either with a vote in favor of a plan including such a provision, or otherwise). 6 40. Based on these features, without limitation, the Plan cannot be found to generally

comply with Title 11 as required by section 1129(a)(3) of the Bankruptcy Code nor is it proposed in good faith as required by section 1129(a)(1) of the Bankruptcy Code.

Debtors proposed Ballot presumes each voting party consents to the releases unless the party indicates on their ballot that they do not. This requires an affirmative rejection of the provisions, not an affirmative consent and is improper. -1608/15/2011 SL1 1091604v4 106745.00001

RESERVATION OF RIGHTS 41. The Omega Trust reserves its rights to (i) object further or to supplement this

objection in the event that Debtors should revise the Disclosure Statement or provide any additional information (including, without limitation, a liquidation analysis and other financial information), and (ii) adopt any objection to the Disclosure Statement raised by any other party in interest. CONCLUSION For the reasons stated above, the Omega Trust submits that the Debtors Disclosure Statement does not contain adequate information, which precludes creditors from making informed judgments about the Plan, and thus should not be approved. Therefore, the Omega Trust requests that the Court deny approval of the Disclosure Statement. Dated: August 15, 2011 Respectfully submitted, STEVENS & LEE, P.C. /s/ John D. Demmy John D. Demmy (DE Bar No. 2802) 1105 North Market Street, 7th Floor Wilmington, DE 19801 Telephone: (302) 425-3308 Facsimile: (610) 371-8515 E-mail: -andJames A. Rubenstein Moss & Barnett 4800 WELLS FARGO CENTER 90 South Seventh Street Minneapolis, MN 55402 Telephone: 612-877-5363 Facsimile: 612-877-5999 E-mail: Attorneys for Omega Trust #1, Omega Trust #2, and Omega Trust #3,

-1708/15/2011 SL1 1091604v4 106745.00001

CERTIFICATE OF SERVICE I hereby certify that, in addition to the notice and service provided through the Courts CM/ECF system, on this 15th day of August, 2011, true and correct copies of the foregoing OBJECTION TO APPROVAL OF DEBTORS DISCLOSURE STATEMENT FOR DEBTORS JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE were served by electronic mail and regular United States first class mail on the parties listed below: U.S. Trustees Office Richard Schepacarter, Esq., 844 King Street, Suite 2207 Wilmington, Delaware 19801 USTPREGION03.WL.ECF@USDOJ.GOV Mitchel H. Perkiel, Esq Brett D. Goodman, Esq. Troutman Sanders LLP The Chrysler Building 405 Lexington Avenue New York, NY 10174 Perkins & Marie Callenders Inc. Joseph F. Trungale 6075 Poplar Avenue, Suite 800 Memphis, TN 38119

Robert S. Brady, Esq. Robert F. Poppiti, Jr., Esq., Young Conaway Stargatt & Taylor, LLP The Brandywine Building 1000 West Street, 17th Floor Wilmington, DE 19801

Mark R. Somerstein, Esq. Benjamin L. Schneider, Esq. Ropes & Gray LLP 1211 Avenue of the Americas New York, New York 10036-8704

William E.Chipman, Jr., Esq. Mark D. Olivere, Esq. Landis Rath & Cobb LLP 919 Market Street, Suite 1800 Wilmington, DE 19801

Jesse H. Austin, III, Esq. Paul, Hastings, Janofsky & Walker LLP 600 Peachtree Street, N.E. Twenty-Fourth Floor Atlanta, GA 30308

Edward P.Zujkowski, Esq. Emmet, Marvin & Martin, LLP 120 Broadway, 32nd Floor New York, NY 10271

08/15/2011 SL1 1092527v1 106745.00001

Douglas Spelfogel, Esq. Foley & Lardner LLP 90 Park Avenue New York, NY 10016-1314

Ira Dizengoff, Esq. Akin Gump Strauss Hauer & Feld LLP One Bryant Park New York, NY 10036

Scott L. Alberino, Esq. Akin Gump Strauss Hauer & Feld LLP 1333 New Hampshire Avenue, N.W. Washington, D.C. 20036 By: /s/ John D. Demmy______________ John D. Demmy

08/15/2011 SL1 1092527v1 106745.00001