Lead Case No. 8:10-bk-16743-TA

Case 8:10-bk-16743-TA
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RON BENDER (SBN 143364) TODD M. ARNOLD (SBN 221868) JOHN-PATRICK M. FRITZ (SBN 245240) LEVENE, NEALE, BENDER, YOO & BRILL L.L.P. 10250 Constellation Boulevard, Suite 1700 Los Angeles, California 90067 Telephone: (310) 229-1234; Facsimile: (310) 229-1244 Email: rb@LNBYB.com; tma@LNBYB.com; jpf@LNBYB.com Attorneys for Chapter 11 Debtors and Debtors in Possession
UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF CALIFORNIA (SANTA ANA DIVISION) In re: WESTCLIFF MEDICAL LABORATORIES, INC., Debtor. __________________________________ BIOLABS, INC., Debtor. __________________________________ Affects Both Debtors Affects WESTCLIFF MEDICAL LABORATORIES, INC. only Affects BIOLABS, INC. only Lead Case No. 8:10-bk-16743-TA Jointly Administered with Case No. 8:10-bk16746-TA Chapter 11 Cases MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CONFIRMATION OF FIRST AMENDED CHAPTER 11 LIQUIDATING PLAN OF REORGANIZATION Plan Confirmation Hearing: Date: February 8, 2012 Time: 10:00 a.m. Place: Courtroom 5B 411 West Fourth Street Santa Ana, CA 92701-4593
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TABLE OF CONTENTS I. II. INTRODUCTION .............................................................................................................2 BACKGROUND OF THE DEBTORS AND THE STATUS OF THEIR CHAPTER 11 CASES ..........................................................................................2 A. Description and History of the Debtors Business and Events Leading to the Debtors Chapter 11 Filings ..............................................................................2 B. The Present Status of the Debtors Chapter 11 Cases .................................................6 III. IV. PLAN SUMMARY .........................................................................................................13 THE ELEMENTS NECESSARY FOR PLAN CONFIRMATION ARE PRESENT AND THE COURT SHOULD CONFIRM THE PLAN ..............................21 A. The Plan complies with all of the provisions of Section 1129(a) of the Code ......................................................................................21 1. Section 1129(a)(1) of the Code ...........................................................................21 1.1 Section 1122 of the Code ..............................................................................22 1.2 Section 1123(a) of the Code ..........................................................................22 1.3 Section 1123(b) of the Code ..........................................................................24 2. Section 1129(a)(2) of the Code ...........................................................................25 2.1 Section 1121 of the Code ..............................................................................25 2.2 Section 1125 of the Code ..............................................................................25 2.3 Section 1127 of the Code ..............................................................................26 3. Section 1129(a)(3) of the Code ...........................................................................26 4. Section 1129(a)(4) of the Code ...........................................................................28 5. Section 1129(a)(5) of the Code ...........................................................................28 6. Section 1129(a)(6) of the Code ...........................................................................29 7. Section 1129(a)(7) of the Code ...........................................................................29 8. Section 1129(a)(8) of the Code ...........................................................................33 9. Section 1129(a)(9) of the Code ...........................................................................34 10. Section 1129(a)(10) of the Code. ........................................................................36 11. Section 1129(a)(11) of the Code .........................................................................36 12. Section 1129(a)(12) of the Code .........................................................................37 13. Section 1129(a)(13) of the Code .........................................................................37 B. The provisions of Section 1129(a)(8) of the Code with respect to Class 6 have been satisfied ........................................................................................37 V. CONCLUSION ...............................................................................................................39
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TABLE OF AUTHORITIES Page(s) FEDERAL CASES Cane v. Johns-Manville Corp. 843 F.2d 636 (2nd Cir. 1988) ................................................................................................ 21 In re Acequia, Inc. 787 F.2d 1352 (9th Cir.1986) ................................................................................................ 36 In re American Solar King Corp. (American Solar) 90 B.R. 808 (Bankr. W.D. Tex. 1988) .................................................................................. 26 In re Apex Oil Co. 118 B.R. 683 (Bankr. E.D. Mo. 1990) .................................................................................. 36 In re Downtown Inv. Club III 89 B.R. 59 (B.A.P. 9th Cir. 1988) ......................................................................................... 25 In re General Teamsters, Warehousemen & Helpers Union Local 890 225 B.R. 719 (Bankr.N.D.Cal.1998) ..................................................................................... 27 In re Howard Marshall 298 B.R. 670 (Bankr. C.D. Cal 2003) ................................................................................... 27 In re Parks Lumber Co., Inc. 19 B.R. 285 (Bankr. W.D. La. 1982) .................................................................................... 28 In re Pikes Peak Water Co. 779 F.2d 1456 (10th Cir. 1985) ............................................................................................. 36 In re Produce Hawaii, Inc. 41 B.R. 301 (Bankr. D. Hawaii 1984) ................................................................................... 28 In Re Sylmar Plaza, L.P. 314 F.3d 1070 (9th Cir. 2002) ............................................................................................... 27 In re Texaco, Inc. 84 B.R. 893 (Bankr. S.D. N.Y. 1988) ................................................................................... 25 Madison Hotel 749 F.2d at 425 ...................................................................................................................... 27 Ryan v. Loui (In re Corey) 892 F.2d 829 (9th Cir.1989) .................................................................................................. 27
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Stolrow v. Stolrow's, Inc. (In re Stolrow's, Inc.) 84 B.R. 167 (9th Cir.BAP 1988) ........................................................................................... 27 FEDERAL STATUTES 11 U.S.C. 326 ..................................................................................................................... 30, 32 11 U.S.C. 365 ........................................................................................................................... 24 11 U.S.C. 507(a)(l) ................................................................................................................... 34 11 U.S.C. 507(a)(1), (2) and (8) ............................................................................................... 23 11 U.S.C. 507(a)(3), (4), (5), (6) ............................................................................................ 35 11 U.S.C. 507(a)(2) .................................................................................................................. 35 11 U.S.C. 507(a)(8) .................................................................................................................. 35 11 U.S.C. 1107 and 1108.......................................................................................................... 6 11 U.S.C. 1121 ......................................................................................................................... 25 11 U.S.C. 1121 and 1127........................................................................................................ 25 11 U.S.C. 1121(c) ..................................................................................................................... 25 11 U.S.C. 1122 ......................................................................................................................... 22 11 U.S.C. 1122(a) ..................................................................................................................... 22 11 U.S.C. 1122 and 1123.............................................................................................. 21, 25, 26 11 U.S.C. 1123(a) ..................................................................................................................... 22 11 U.S.C. 1123(a)(1) ................................................................................................................ 23 11 U.S.C. 1123(a)(2) ................................................................................................................ 23 11 U.S.C. 1123(a)(3) ................................................................................................................ 23 11 U.S.C. 1123(a)(4) ................................................................................................................ 23 11 U.S.C. 1123(a)(5) ................................................................................................................ 23 11 U.S.C. 1123(a)(6) ................................................................................................................ 23 11 U.S.C. 1123(a)(7) ................................................................................................................ 23 11 U.S.C. 1123(b) ..................................................................................................................... 24 11 U.S.C. 1123(b)(1) ................................................................................................................ 24 11 U.S.C. 1123(b)(2) ................................................................................................................ 24 11 U.S.C. 1123(b)(3) ................................................................................................................ 24 11 U.S.C. 1123(b)(4) ................................................................................................................ 25 11 U.S.C. 1125 ................................................................................................................... 25, 26 11 U.S.C. 1125(b) ............................................................................................................... 25, 26 11 U.S.C. 1126(g) ......................................................................................................... 21, 34, 38 11 U.S.C. 1129(a) .............................................................................................................. passim 11 U.S.C. 1129(b) ................................................................................................................. 2, 39 11 U.S.C. 1129(b)(2)(C) ..................................................................................................... 34, 38 11 U.S.C. 1126(c) ............................................................................................................... 33, 36 11 U.S.C. 1126(d) ..................................................................................................................... 33 11 U.S.C. 1127 ......................................................................................................................... 26 11 U.S.C. 1127(b) ..................................................................................................................... 26 11 U.S.C. 1129(a)(1) .......................................................................................................... 21, 25 11 U.S.C. 1129(a)(2) ................................................................................................................ 25 11 U.S.C. 1129(a)(3) .......................................................................................................... 26, 27 11 U.S.C. 1129(a)(4) ................................................................................................................ 28 11 U.S.C. 1129(a)(5) 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11 U.S.C. 1129(a)(5)(A)(i) ....................................................................................................... 28 11 U.S.C. 1129(a)(5)(A)(ii) ...................................................................................................... 28 11 U.S.C. 1129(a)(5)(B) ........................................................................................................... 29 11 U.S.C. 1129(a)(6) ................................................................................................................ 29 11 U.S.C. 1129(a)(7) ................................................................................................................ 29 11 U.S.C. 1129(a)(7)(A) ........................................................................................................... 29 11 U.S.C. 1129(a)(8) .......................................................................................................... 33, 37 11 U.S.C. 1129(a)(9) .......................................................................................................... 34, 36 11 U.S.C. 1129(a)(10) .............................................................................................................. 36 11 U.S.C. 1129(a)(11) ........................................................................................................ 36, 37 11 U.S.C. 1129(a)(12) .............................................................................................................. 37 11 U.S.C. 1129(a)(13) .............................................................................................................. 37 11 U.S.C. 1129(b)(1) ................................................................................................................ 37 11 U.S.C. 1129(b)(2)(C)(ii) ...................................................................................................... 38 11 U.S.C. 1930 ......................................................................................................................... 37 OTHER AUTHORITIES H.R. Rep. No. 95-595, 9th Cong., 1st Sess. 412 (1977) .............................................................. 22 Jorgesen, 66 B.R. at 108-09......................................................................................................... 27
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I. INTRODUCTION This Memorandum of Points and Authorities (Memorandum) (i) presents an analysis
of the legal issues before the Bankruptcy Court (the "Court") with regard to confirmation of the
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First Amended Chapter 11 Liquidating Plan of Reorganization (the "Plan") which has been proposed by Westcliff Medical Laboratories, Inc. (Westcliff) and BioLabs, Inc. (BioLabs), (collectively, the Debtors), and (ii) provides the basis necessary for the Court to confirm the Plan pursuant to Section 1129(a) of the Bankruptcy Code (and, where applicable, Section 1129(b) of the Bankruptcy Code). The Plan has been overwhelmingly accepted (nearly unanimously) by both of the two
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impaired classes of creditors, which are comprised of class 4 (general unsecured creditors) and
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class 5 (the deficiency claim of the Senior Lenders). As set forth in the Disclosure Statement and below, it is clear that general unsecured creditors will be receiving more under the Plan than they would receive in a Chapter 7 liquidation. The Plan is therefore clearly the best possible alternative available to general unsecured creditors. The Debtors believe that the confirmation of the Plan is in the overwhelming best interests of creditors and therefore requests the Court to confirm the Plan.
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II. BACKGROUND OF THE DEBTORS AND THE STATUS OF THEIR CHAPTER 11 CASES A. Description and History of the Debtors Business and Events Leading to the
Debtors Chapter 11 Filings BioLabs is the parent company to Westcliff, which was the operating company. The
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only material asset owned by BioLabs is its stock interest in the Debtor. Biolabs was organized for the purposes of acquiring 100% of the capital stock and other equity interests of Westcliff. Westcliff was founded in 1964 as a community-based laboratory and was headquartered
in Santa Ana, California. Westcliff was the operator of approximately 170 branded, stand5 6 7 8 9 10 11
alone, patient service center laboratories and STAT labs that provide various services, including clinical testing, pathology, reporting and support services for the benefit of thousands of out-patients throughout California. The Debtors had nearly 1,000 employees. The Debtors main clinical hub was an 80,000 square foot facility located in Santa Ana, California that opened in 2006. The Debtors primary anatomical pathology lab was a 12,800 square foot facility located in Monrovia, California that opened in 2008.
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Working directly with patients and with contracted payors, including United Health,
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Aetna, Cigna, Blue Cross, Medi-Cal and Medicare, Westcliff grew and became a leading outpatient laboratory service company. Westcliffs lab operations demonstrated industry-leading results, with low testing turn-around times, high quality control scores, and a strong and experienced sales and marketing team. Westcliff averaged approximately 8,500 clinical requests per day and approximately 1,200 pathology requests per day, and performed approximately 250,000 cytology and 70,000
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biopsy tests on an annual basis. Based on this performance, the Debtors had approximately $97 million in net revenue in 2009 and were the third largest clinical laboratory in California. The California clinical laboratory testing market is the largest in the nation, with estimated revenues of approximately $2 billion. Approximately 8% of the nations tests are performed in California, and over 200 million of Californias tests are conducted by
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independent labs (excluding hospital based labs). approximately 5% of the California market.
The Debtors business accounted for
Much of the Debtors growth came from the acquisition of other labs, which caused the
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Debtors to incur a substantial amount of debt. The Debtors owed approximately $56 million
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(the Senior Debt) to a group of lenders (the Senior Lenders) for whom GE Business Financial Services, Inc. acts as agent (in such capacity, the Senior Loan Agent). The Senior Debt was secured by a first priority security interest and lien against all or substantially all of the Debtors assets. Any other secured debt of the Debtors was relatively small in nature and related to liens against only certain of the Debtors equipment. The Debtors also have a substantial amount of unsecured debt.
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While the Debtors revenue was significant, due to the small profit margins in this
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business, despite substantial and continuing cost cutting measures undertaken by the Debtors, the Debtors were simply not able to operate sufficiently profitably to enable the Debtors to repay their debts. The Debtors suffered a net loss of approximately $87 million in 2008 (including expenses and write offs of approximately $171 million) on net revenue of approximately $84 million. The Debtors suffered a net loss of approximately $13 million in 2009 (including expenses and write offs of approximately $110 million) on net revenue of
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approximately $97 million. While the Debtors instituted as many expense reductions as were reasonably possible, the Debtors losses continued. Since the beginning of 2009, the Debtors were unable to make any debt service payments to the Senior Lenders, and the Debtors were unable to remain current with their other debt obligations, including payments owing to former owners of companies the Debtors previously purchased as part of the Debtors overall growth strategy.
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Indeed, the Debtors were only able to survive financially since the beginning of 2009 because the Senior Loan Agent provided the Debtors with emergency funding to cover payroll and other vital expenses.
The only way the Debtors could have survived as a stand alone going concern business
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would have been for the Debtors to raise many millions of dollars of additional equity which was not possible given the Debtors extensive debt structure. It therefore became clear to the Debtors in early 2009 that the only viable option available to the Debtors to avoid a shut down of their business and the loss of employment by all of the Debtors employees would be for the Debtors to sell their business as a going concern to the highest bidder. The Debtors therefore engaged in an active sale process since early 2009.
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To assist the Debtors with this sale process, the Debtors engaged MTS Health Partners,
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LP (MTS) in October, 2009 as a financial advisor to assist the Debtors with their sale process.1 MTS, working closely with the Debtors, conducted an exhaustive sale process, having prepared detailed sale materials and having had extensive discussions and interactions with numerous prospective buyers, both strategic buyers and financial buyers. After having engaged in substantial due diligence and negotiations with a number of different prospective buyers over many months, MTS and the Debtors collectively concluded
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that LabCorp was the optimal buyer of the Debtors assets for three primary reasons. First, LabCorp, which is in the same business as Westcliff but is a much larger company, expressed the greatest interest in purchasing the Debtors assets. Second, it was clear that LabCorp as a strategic buyer was willing to pay a substantially higher price for the Debtors assets than any
1 The Debtors had used other professionals for this same purpose in the past.
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other prospective buyer. Third, LabCorp clearly had the financial means to consummate its purchase of the Debtors assets. The Debtors engaged in extensive negotiations with LabCorp prior to the Petition Date
over the details of an asset sale and the terms of a written asset purchase agreement (the
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LabCorp APA) and related documents. Shortly prior to the Petition Date, the Debtors and LabCorp executed the LabCorp APA and related documents. The Debtors bankruptcy cases were commenced on the Petition Date to enable the Debtors to consummate their asset sale to LabCorp, as obtaining a bankruptcy free and clear sale order was a fundamental deal point for LabCorp. B. The Present Status of the Debtors Chapter 11 Cases
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The Debtors operated their business through the sale process and until the sale closing,
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and have managed their financial affairs and operated their bankruptcy estates as debtors in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code throughout these Chapter 11 cases. With the approval of the Court, Matthew Pakkala of FTI Consulting, Inc. has served as the Debtors Chief Restructuring Officer (CRO) during the pendency of the Debtors Chapter 11 cases. Laura Contreras has served as the Debtors Chief Financial Officer (CFO) during the pendency of the Debtors Chapter 11 cases. An Official Committee of
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Unsecured Creditors (the Committee) was formed shortly after the Petition Date comprised of seven members (Specialty Laboratories; Siemens Healthcare Diagnostics; Roche Diagnostics Corporation; Diasorin Inc.; Qiagen; Irvine Corporate Center, LLC; and Genzyme Corporation). The Debtors and the Committee have worked very closely throughout these cases in an effort to maximize the sale price paid for the Debtors assets, to insure a prompt closing of the
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sale, to maximize the recovery from the Debtors remaining assets, and to maximize the recovery for general unsecured creditors. LabCorps pre-petition purchase price offer in the LabCorp APA was $57.5 million
subject to certain adjustments, while leaving with the Debtors, among other things, all of the
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Debtors accounts receivable (which the Debtors estimated would result in an additional net recovery of approximately $8,000,000 for the Debtors estates) and all of the Debtors cash. The LabCorp APA provided that the purchase price would be adjusted downward if there was a meaningful reduction in Westcliffs post-petition business volume pending the closing of the sale and if that reduction became too large LabCorp had the ability to walk away from this transaction completely.
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The possibility of the Debtors suffering a reduction in revenue as a result of their

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bankruptcy filings in this very competitive industry and the resulting negative impact on the purchase price to be paid by LabCorp, or, worse, a complete walk away by LabCorp, is the reason why it was so critical that this sale transaction occur on a very expedited basis. The Debtors also agreed with LabCorp that in connection with the sale closing, the Debtors would be required to enter into a Transition Agreement with LabCorp. The purpose of the Transition Agreement was to facilitate as smooth a transition of the Debtors business and
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their employees to LabCorp as possible under the circumstances at no additional cost to the Debtors estates. To make absolutely certain that the highest price possible was paid for the Debtors assets, the Debtors and LabCorp agreed to various overbid procedures which were approved by the Court. As the Debtors and MTS expected (given the extensive pre-petition marketing effort which was undertaken by MTS), no overbid was submitted.
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The Debtors requested and urged the Court to approve the Debtors asset sale to LabCorp on a very expedited basis because of the severe risk of a deterioration of Westcliffs business resulting from the Debtors bankruptcy filings. This is a highly sensitive and
extremely competitive industry, and the Debtors were extremely concerned that Westcliff
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would not be able to retain its customer base for any extended period of time while operating as a debtor in bankruptcy. At the urging of the Debtors (with the full support of the Committee and the Senior Lenders), the Court approved the Debtors asset sale to LabCorp at a hearing held on June 3, 2010, and the Court entered an order approving the sale on Wednesday, June 9, 2010. Prior to the sale hearing and after extensive negotiations (which negotiations commenced between just
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the Debtor and the Senior Lenders prior to the Petition Date), the Debtors, the Committee and
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the Senior Lenders reached a critically important agreement on an allocation of the LabCorp purchase price and the balance of the Debtors assets (the Asset Allocation Agreement), which was acceptable to all parties and which was subsequently approved by the Court. The Asset Allocation Agreement paved the way for general unsecured creditors to receive a sizeable recovery in these cases. If not for the Asset Allocation Agreement, all or nearly all of the sale proceeds and other assets of these estates would have been paid to the Senior Lenders as they
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held a perfected security interest against all or nearly all of the assets of these estates. The LabCorp APA required LabCorp to consummate its purchase of the Debtors assets within two days following entry of the LabCorp sale order, which was Friday, June 11, 2010. However, at some point prior to June 11, 2010, the Federal Trade Commission (the FTC) staff contacted Labcorp and the Debtors to request information related to the Debtors asset sale to LabCorp. The Debtors did not believe that this inquiry made by the FTC staff
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constituted a Proceeding as that term is defined in the LabCorp APA that would have given LabCorp any legitimate basis to refuse to close its purchase by Friday, June 11, 2010. Notwithstanding the foregoing, as a result of the FTC situation, LabCorp did not close its
purchase of the Debtors assets as scheduled, and LabCorp initially advised the Debtors that it
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was not willing to close its purchase of the Debtors assets until the FTC situation was resolved. The Debtors were deeply concerned that such a delay would have resulted in the disintegration of the Debtors business. Quest is the largest participant in the marketplace of the Debtors' business (with significantly more market share than any other party); LabCorp is the second largest participant in the marketplace of the Debtors' business; and Westcliff was the third largest participant in
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the marketplace of the Debtors' business. The FTC staff told the Debtors that the FTC staff had
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concerns about whether a sale to LabCorp would lessen competition. The FTC staff told the Debtors that the FTC staff would not have concerns if the Debtors sold their assets to a buyer other than LabCorp or Quest. However, the FTC staff told the Debtors that they recognized the Debtors' grave financial predicament and dire financial need to consummate an asset sale on a very expedited basis. The FTC staff suggested that the Debtors and MTS formulate a new sale process to be
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conducted on a very expedited basis to see if there were any buyers other than Quest or LabCorp who could consummate a sale quickly and receive Court approval of that sale (which necessarily would have required the consent of the Senior Lenders). The FTC staff approved the form of letter (the New Buyer Solicitation Letter) to be sent to parties who previously submitted a formal written indication of interest in purchasing Westcliffs business or its assets. The FTC staff gave the Debtors a preliminary indication that if no party other than Quest or
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LabCorp could satisfy the foregoing, the FTC staff would likely not challenge the Debtors sale to LabCorp, which the Court had already approved, and the Debtors sale to LabCorp could close immediately.
Given that LabCorp had indicated to the Debtors that it was not going to close its
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purchase until the FTC situation was resolved, the Debtors had no choice but to proceed as the FTC suggested. The New Buyer Solicitation Letter provided that prospective new buyers had until 5:00 p.m. Eastern Time on Thursday, June 17, 2010 to submit a written qualifying purchase offer to the Debtors. As requested by the FTC, MTS sent the New Buyer Solicitation Letter to all parties who previously submitted a formal written indication of interest in purchasing Westcliffs business or its assets, and MTS (and the Debtors) facilitated due
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diligence with all such prospective buyers who desired to conduct due diligence.
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Given the extreme time exigencies in these cases, as the LabCorp APA set an outside closing date of June 23, 2010 and in any event the Debtors were on the brink of running out of money, the Debtors requested the Court to schedule a hearing to be held on Friday, June 18, 2010 to consider a sale of the Debtors assets to an alternative buyer if LabCorp refused to close without the consent of the FTC. The Court accommodated the Debtors and scheduled a hearing on the Debtors second sale motion to be held on Friday, June 18, 2010 at 2:00 p.m.
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The Debtors advised the Court that the Debtors would not know until the bid deadline of June 17, 2010 at 5:00 p.m. Eastern Time passed whether any new bids would be made for the Debtors assets and, if any new bids were made, the terms of those bids. The Debtors made clear in their second sale motion that the Debtors did not believe that they had the legal ability to sell their assets to a new buyer unless the net sale proceeds enabled the Debtors to pay the
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full approximately $56 million owing to the Senior Lenders or the Senior Lenders consented to that alternative sale. These were facts and legal standards that the FTC chose to ignore. On June 16, 2010, LabCorp elected to consummate its purchase of the Debtors assets,
which rendered the Debtors second sale motion moot. The Debtors therefore withdrew their
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second sale motion. An important condition to the LabCorp APA was the ability of the Debtors to obtain Court approval of a pre-bankruptcy settlement the Debtors reached with various qui tam litigants. The qui tam litigants asserted claims against the Debtors of more than $56 million. Absent a negotiated settlement, resolution of those litigation claims would have taken years, which would have made it impossible for the Debtors to consummate a going concern sale of
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their business. All other buyers would have required the same closing condition because any
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buyer of the Debtors business would have insisted on knowing that it had no monetary liability to the qui tam claimants and no ongoing reporting requirements to the State of California. It would therefore not have been possible for the Debtors to have obtained LabCorps agreement to enter into the LabCorp APA had the Debtors not been able to obtain a pre-bankruptcy settlement with the qui tam claimants, and LabCorp would never have been willing to close its purchase of the Debtors assets had the Court not approved the Debtors pre-bankruptcy
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settlement agreement with the qui tam claimants. Fortunately, the Court approved the Debtors pre-bankruptcy settlement agreement with the qui tam claimants, pursuant to which the qui tam claimants were paid 10% of the net sale proceeds (after a deduction for all transaction expenses). Particularly given the expedited nature of this sale, both the Debtors and the Senior Lenders recognized that it was very important that the sale of the Debtors assets to LabCorp
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inure to the benefit of all creditors. The Debtors, the Senior Lenders and the Committee after it was formed therefore engaged in a substantial amount of discussion in order to achieve this result.
While the Senior Lenders were owed approximately $56 million secured by a first
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priority lien against the Debtors assets, the Senior Lenders agreed to leave behind for the benefit of these estates a substantial amount of money to be used to pay to other creditors. This was accomplished through the Asset Allocation Agreement reached between the Debtors, the Committee and the Senior Lenders which is referenced above and which was approved by the Court. Since the closing of the Debtors asset sale to LabCorp, the Debtors have distributed the
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sale proceeds in accordance with the terms of the sale order and the Asset Allocation
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Agreement, and the Debtors continued to operate in accordance with the terms of the Transition Agreement with LabCorp. The Debtors continued with the wind down and liquidation of the Debtors' remaining assets, including the Debtors' accounts receivable, which were not sold to LabCorp. The Debtors' management team has done a masterful job in these efforts as all financial results have come in well ahead of projections, which is going to result in a very sizeable recovery for general unsecured creditors.
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Other than any litigation recoveries which are obtained by these estates, the Debtors have already liquidated all of the assets of these estates. As of September 30, 2011, the Debtors were in possession of approximately $8.7 million of cash (the Estates Funds), comprised primarily from the Debtors retained portion of the sale proceeds and collections from outstanding accounts receivable, which surpassed all estimations. All of the Estates Funds are unencumbered and available for distribution to holders of remaining allowed claims. All
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subsequent references herein to the Estates Funds shall refer to the remaining cash in these estates exclusive of any recoveries from the pursuit of litigation, including any avoidance actions.
III.
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PLAN SUMMARY Secured Claims, Administrative Claims and Priority Claims Under the Plan, all allowed secured claims, all allowed administrative claims and all allowed priority claims will be paid in full out of the Estates Funds. Administrative Claims As set forth in the Disclosure Statement, the Debtors estimate that there will be a total of approximately $1,326,045 of allowed administrative claims2,
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comprised of the allowed fees and expenses of the professionals who were employed in these cases and allowed reclamation claims. A list of all known administrative claims which are not for professional fees or expenses is set forth in the chart which is attached as Exhibit 3 to the Disclosure Statement. Under the Plan, any party in interest who desires to dispute any of these administrative claims (excluding professional fees and expenses which will be dealt with through normally noticed fee applications) must file their objection with the Court prior to the Effective Date. If no such objection is timely filed, on the Effective Date all of the claims
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contained in Exhibit 3 to the Disclosure Statement will be deemed to be allowed administrative claims and will be paid in full out of the Estates Funds on the Effective Date (or as soon thereafter as is practical).
2 As with all of the claims figures contained in the Disclosure Statement, the Debtors have continued with their analysis of the claims filed and have filed a number of claims objections. As a result, the final allowed claims in these cases will likely differ, to a degree, from the figures estimated in the Disclosure Statement, but the ultimate recovery for creditors should not change in a material way.
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Priority Tax Claims As set forth in the Disclosure Statement, the Debtors estimate that there will be a total of approximately $14,486 of allowed priority tax claims. A list of all known priority tax claims is attached as Exhibit 2 to the Disclosure Statement (the "Priority
Claims Chart")3. Any party in interest who desires to dispute any of these tax claims must file
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their objection with the Court prior to the Effective Date. If no such objection is timely filed, on the Effective Date all of the tax claims contained in the Priority Claims Chart will be deemed to be allowed priority tax claims and will be paid in full out of the Estates Funds on the Effective Date (or as soon thereafter as is practical). In the event that a timely objection is filed to any such tax claims, then those disputed tax claims will be paid in full out of the Estates Funds on the later of the Effective Date and the date the Court enters an order allowing any
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such disputed priority tax claims (or as soon thereafter as is practical). Class 1 Claims - Secured Claims Not Belonging to the Senior Lenders (Not Impaired) - Attached as Exhibit 4 to the Disclosure Statement is a chart (the "Secured Claims Chart")4 that shows all known remaining secured claims, exclusive of any remaining secured claim of the Senior Lenders, which is addressed below. All such secured claims identified in the Secured Claims Chart will be deemed to be collectively included in class 1 under the Plan. As indicated in the Secured Claims Chart, the Debtors estimate that the total
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amount of outstanding class 1 secured claims that will be allowed is approximately $79,053 (comprised entirely of secured tax claims). Under the Plan, any party in interest who desires to dispute any of these class 1 secured claims must file their objection with the Court prior to the
3 Notwithstanding any comments on claims in the Priority Claims Chart, the Debtors reserve the right to object to any such claims within the deadline set forth herein. 4 Notwithstanding any comments on claims in the Secured Claims Chart, the Debtors reserve the right to object to any such claims within the deadline set forth herein.
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Effective Date. If no such objection is timely filed, on the Effective Date all of the secured claims contained in the Secured Claims Chart will be deemed to be allowed class 1 secured claims and will be paid in full out of the Estates Funds on the Effective Date (or as soon
thereafter as is practical). In the event that a timely objection is filed to any such class 1
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secured claims, then those disputed class 1 secured claims will be paid in full out of the Estates Funds on the later of the Effective Date and the date the Court enters an order allowing any such disputed class 1 secured claims (or as soon thereafter as is practical). All class 1 secured claims will be considered to be not impaired under the Plan since they are being paid in full in cash on the Effective Date (or upon entry of a Court order allowing such class 1 secured claims if a timely objection is filed to them).
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Class 2 Claims Remaining Secured Claims of the Senior Lenders (Not Impaired) - In accordance with the terms of the Asset Allocation Agreement, the Senior Lenders will continue to retain their lien and security interest in all General Litigation (as defined in the Asset Allocation Agreement as any litigation rights owned by the Debtors other than litigation constituting avoidance actions under the Bankruptcy Code and litigation to collect any of the Debtors accounts receivable). Also in accordance with the terms of the Asset Allocation Agreement, the Senior Lenders will continue to retain their lien and security interest in any of
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their collateral still in existence on the Effective Date (recognizing that the Debtors do not believe that any such collateral still exists). The Debtors do not have any pending General Litigation and do not currently intend to commence any General Litigation. As a result, the Debtors do not expect to receive any proceeds from any General Litigation. However, if the Debtors do receive any proceeds from any General Litigation, then in accordance with the terms of the Asset Allocation Agreement, 50% of such net proceeds (with net proceeds being
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defined as any gross proceeds less any litigation fees and expenses incurred by the Debtors from the pursuit of such General Litigation) will be disbursed to the Senior Loan Agent for the benefit of the Senior Lenders, and 50% of such proceeds will be retained by the Debtors (with
the 50% portion being retained by the Debtors defined in the Disclosure Statement as the
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Debtors General Litigation Recoveries). The class 2 claim is not impaired under the Plan because the Plan leaves unaltered the legal, equitable and contractual rights of the Senior Lenders with respect to the class 2 claim. Class 3 Claims Priority Unsecured (Non-Tax) Claims (Not Impaired) - As set forth in the Disclosure Statement, the Debtors estimate that there will be a total of approximately $54,030 of allowed non-tax priority claims. A list of all known non-tax priority
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claims is set forth in the Priority Claims Chart. Any party in interest who desires to dispute any
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of these non-tax priority claims must file their objection with the Court prior to the Effective Date. If no such objection is timely filed, on the Effective Date all of the non-tax priority claims contained in the Priority Claims Chart will be deemed to be allowed non-tax priority claims and will be paid in full out of the Estates Funds on the Effective Date (or as soon thereafter as is practical). In the event that a timely objection is filed to any such non-tax priority claims, then those disputed non-tax priority claims will be paid in full out of the Estates
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Funds on the later of the Effective Date and the date the Court enters an order allowing any such disputed non-tax priority claims (or as soon thereafter as is practical). Class 4 Claims All General Unsecured Claims Excluding the General Unsecured Deficiency Claim of the Senior Lenders (Impaired) The Debtors have filed objections to most of their disputed general unsecured claims. Based upon the outcome of these claims objections and the Debtors analysis of their books and records and claims asserted, the Debtors
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currently estimate that there will be a total of approximately $13,087,870 of class 4 allowed claims, inclusive of the class 4 claims of any parties to rejected executory contracts and unexpired leases. All Estates Funds remaining after all allowed secured claims, all allowed
administrative claims, all allowed priority tax claims, and all allowed priority (non-tax) claims
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have been paid in full and the Administrative Reserve Fund has been funded (Net Estates Funds) will be distributed to holders of class 4 allowed claims on a pro rata basis based upon the allowed amount of their class 4 claims until each holder of a class 4 allowed claim has received payment equal to 10% of the amount of their class 4 allowed claim. The Net Estates Funds remaining after each holder of a class 4 allowed claim has received payment equal to 10% of the amount of their class 4 allowed claim (Remaining Net Estates Funds) will be
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distributed to holders of class 4 allowed claims and to the Senior Lenders on account of their
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class 5 allowed claim on a pro rata basis based upon the remaining allowed amounts of their respective class 4 and class 5 allowed claims after taking into account the 10% distribution received by holders of class 4 allowed claims as described immediately above. The Debtors estimate that holders of class 4 allowed claims will receive a total of approximately $4,679,745 of the Estates Funds under the Plan.5 This total represents the estimated portion of the Estates Funds for class 4 as of the Effective Date, after funding of the Administrative Reserve Fund, and payment of all allowed secured, administrative and priority claims. With an estimated
$13,087,870 of class 4 allowed claims, the Debtors estimate that holders of class 4 allowed
5 This figure is based on the following assumptions: (i) there will be total Estates Funds on the Effective Date of $8,600,000; (ii) there will be a total of $1,326,045 of allowed administrative claims; (iii) there will be a total of $14,486 of allowed priority tax claims; (iv) there will be a total of $79,053 of allowed class 1 secured claims; and (v) there will be a total of $54,030 of allowed non-tax priority claims. If any of these assumptions proves to be incorrect, then the total amount of Estates Funds that will be available for distribution to holders of class 4 allowed claims will be impacted (either up or down) accordingly.
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claims will receive a distribution equal to approximately 35.75% of the amount of their class 4 allowed claims before taking into account any Net Avoidance Action Recoveries (defined below) or the Debtors General Litigation Recoveries. The distribution to holders of class 4
allowed claims of their portion of the Net Estates Funds will be made within thirty days
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following the entry of a Court order resolving the final remaining disputed claim, unless the Estate Representative obtains an order of the Court following notice and a hearing authorizing the Estate Representative to make an interim distribution to holders of class 4 allowed claims because of the time delay that is expected to be incurred in resolving any outstanding disputed claims. The Debtors estimate that the initial distribution to holders of class 4 allowed claims will be made by or around March 31, 2012. The foregoing estimated figures do not include any
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Net Avoidance Action Recoveries or the Debtors General Litigation Recoveries. All Net
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Avoidance Action Recoveries will be distributed to holders of class 4 allowed claims and to the Senior Lenders on account of their class 5 allowed claim on a pro rata basis based upon the remaining allowed amounts of their respective class 4 and class 5 allowed claims after taking into account the 10% distribution received by holders of class 4 allowed claims as described above. The Net Avoidance Action Recoveries will be disbursed by the Estate Representative to holders of class 4 and class 5 allowed claims once the pursuit of Avoidance Actions has been
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completed. The Estate Representative will have the right at his discretion to make an interim distribution of Net Avoidance Action Recoveries to holders of class 4 and class 5 allowed claims if the Estate Representative concludes that the cost of doing so is reasonable compared to the amount of Net Avoidance Action Recoveries to be distributed. In accordance with the terms of the Asset Allocation Agreement, all of the Debtors General Litigation Recoveries will be distributed just to holders of class 4 allowed claims on a pro rata basis based upon the
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allowed amounts of their respective class 4 allowed claims. The Debtors do not believe that there will be any Debtors General Litigation Recoveries. Under the Plan, all objections to any
remaining disputed class 4 claims must be filed prior to the Effective Date.
Class 5 Claims The Deficiency Claim of the Senior Lenders (Impaired) The
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Debtors were required to separately classify this claim in accordance with the terms of the Asset Allocation Agreement. The Debtors believe that the class 5 claim of the Senior Lenders is in the amount of $7,675,801.66, after taking into account all of the post-petition payments the Debtors have made to the Senior Lenders. As indicated above, the Remaining Net Estates Funds (which consists of the Net Estates Funds remaining after each holder of a class 4 allowed claim has received payment equal to 10% of the amount of their class 4 allowed claim) will be distributed to holders of class 4 allowed claims and to the Senior Lenders on account of their
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class 5 allowed claim on a pro rata basis based upon the remaining allowed amounts of their respective class 4 and class 5 allowed claims after taking into account the 10% distribution received by holders of class 4 allowed claims as described above. Since the Debtors estimate that there will be a total of approximately $13,087,870 of class 4 allowed claims, the Debtors estimate that there will be a total of approximately $11,779,083 of class 4 allowed claims after each holder of a class 4 allowed claim has received payment equal to 10% of the amount of
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their class 4 allowed claim. The Debtors therefore estimate that approximately 60.546% of the
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Remaining Net Estates Funds will be distributed to holders of class 4 allowed claims and that approximately 39.454% of the Remaining Net Estates Funds will be distributed to the Senior Lenders on account of their class 5 allowed claim. The Debtors estimate that Senior Lenders will receive a total of approximately $2,196,640 of the Remaining Net Estates Funds under the
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Plan.6 With a class 5 allowed claim in the amount of $7,675,801.66, the Debtors estimate that the Senior Lenders will receive a distribution equal to approximately 28.6% of the amount of their class 5 allowed claim before taking into account any Net Avoidance Action Recoveries.
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The distribution to the Senior Lenders of their portion of the Remaining Net Estates Funds will be made within thirty days following the entry of a Court order resolving the final remaining disputed claim, unless the Estate Representative obtains an order of the Court following notice and a hearing authorizing the Estate Representative to make an interim distribution to the Senior Lenders on account of their class 5 allowed claim because of the time delay that is expected to be incurred in resolving any outstanding disputed claims. The Debtors estimate
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that the initial distribution to the Senior Lenders on account of their class 5 allowed claim will
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be made by around March 31, 2012. The foregoing estimated figures do not include any Net Avoidance Action Recoveries. All Net Avoidance Action Recoveries will be distributed to holders of class 4 allowed claims and to the Senior Lenders on account of their class 5 allowed claim on a pro rata basis based upon the remaining allowed amounts of their respective class 4 and class 5 allowed claims after taking into account the 10% distribution received by holders of class 4 allowed claims as described above. The Net Avoidance Action Recoveries will be
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disbursed by the Estate Representative to holders of class 4 and class 5 allowed claims once the pursuit of Avoidance Actions has been completed. The Estate Representative will have the
6 This figure is based on the following assumptions: (i) there will be total Estates Funds on the Effective Date of $8,600,000; (ii) there will be a total of $1,326,045 of allowed administrative claims; (iii) there will be a total of $14,486 of allowed priority tax claims; (iv) there will be a total of $79,053 of allowed class 1 secured claims; and (v) there will be a total of $54,030 of allowed non-tax priority claims. If any of these assumptions proves to be incorrect, then the total amount of Remaining Net Estates Funds that will be available for distribution to the Senior Lenders on account of their class 5 allowed claim will be impacted (either up or down) accordingly.
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right at his discretion to make an interim distribution of Net Avoidance Action Recoveries to holders of class 4 and class 5 allowed claims if the Estate Representative concludes that the cost of doing so is reasonable compared to the amount of Net Avoidance Action Recoveries to
be distributed.
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Class 6 Interests All Equity Interests in the Debtors (Impaired) holders of Class 6 interests are not entitled to vote on the Plan because they are deemed to have not accepted the Plan pursuant to Section 1126(g) of the Bankruptcy Code. Holders of class 6 interests will not receive any property under the Plan or any portion of the Estates Funds. Holders of class 6
interests will continue to own their equity interests in the Debtors following the Effective Date, but the Debtors will no longer own any assets of any value as all of the Debtors tangible assets
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have been sold or liquidated and none of the Estates Funds will be paid to the holders of class 6
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interests. IV. THE ELEMENTS NECESSARY FOR PLAN CONFIRMATION ARE PRESENT AND THE COURT SHOULD CONFIRM THE PLAN A. The Plan complies with all of the provisions of Section 1129(a) of the Code. 1. Section 1129(a)(1) of the Code.
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Section 1129(a)(1) of the Code provides that a court may confirm a plan of reorganization only if the plan complies with the applicable provisions of this title. The phrase applicable provisions has been interpreted to mean Section 1122 and 1123 of the Code which govern the classification of claims and interests and the contents of a plan of reorganization. Cane v. Johns-Manville Corp., 843 F.2d 636, 648-9 (2nd Cir. 1988); 5 Collier
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on Bankruptcy 1129.02 (15th ed. 1986); H.R. Rep. No. 95-595, 9th Cong., 1st Sess. 412 (1977). 1.1 Section 1122 of the Code.
Section 1122 of the Code governs the classification of claims and interests. Section
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1122(a) requires that a plan place a claim or an interest in a particular class only if such claim or interest is substantially similar to the other claims or interests in such class. The Plan designates five classes of claims and one class of interests. Class 1 consists of all known remaining secured claims, exclusive of any remaining secured claim of the Senior Lenders, who are receiving the identical treatment under the Plan and are therefore appropriately classified within the same class.
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Class 2 consists of the secured claim of the Senior Lenders.

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Class 3 consists of all non-tax priority claims, who are receiving the identical treatment under the Plan and are therefore appropriately classified within the same class. Class 4 consists of all non-priority general unsecured claims excluding the unsecured deficiency claim of the Senior Lenders. They are all receiving the identical treatment under the Plan and are therefore appropriately classified within the same class. Class 5 consists of the unsecured deficiency claim of the Senior Lenders.
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Class 6 consists of all equity interests in the Debtors. Based on the foregoing, the Plan complies with the provisions of Section 1122 of the Code. 1.2 Section 1123(a) of the Code.
The Plan complies with the seven (7) mandatory provisions of Section 1123(a) of the Code.
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Section 1123(a)(1) of the Code requires that a plan of reorganization designate classes of claims other than claims of the kind specified in Section 507(a)(1), (2) and (8) of the Code. The Plan satisfies the requirements of Section 1123(a)(1) of the Code by designating all classes
of claims other than claims specified in Sections 507(a)(1), (2) and (8) of the Code.
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Section 1123(a)(2) of the Code requires that a plan of reorganization specify those classes of claims or interests that are not impaired and Section 1123(a)(3) of the Code requires that a plan specify those classes of claims or interests that are impaired. The Plan satisfies this requirement by indicating whether each class under the Plan is impaired or not impaired. Section 1123(a)(4) of the Code requires that a plan provide the same treatment for each claim or interest of a particular class, unless the holder of a particular claim or interest agrees to
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less favorable treatment. The Plan satisfies this requirement as no claim holder or interest
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holder is receiving treatment under the Plan different from any other claim holder or interest holder in the same class. Section 1123(a)(5) of the Code requires that a plan provide adequate means for the Plans implementation. The Plan sets forth the implementation and means of execution of the Plan. Section 1123(a)(6) of the Code requires that a plan provide for appropriate distribution
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of power among all voting equity classes. This provision of the Plan is not relevant as the Plan is a liquidating plan. Section 1123(a)(7) of the Code requires that a plan contain only provisions that are consistent with the interests of creditors and equity security holders and with public policy with respect to the manner of selection of any officer, director, or trustee. The Debtor submits that this has been accomplished by having Matthew Pakkala, the Debtors current CRO, serve as the
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representative of the Debtors bankruptcy estates (the Estate Representative) for purposes of administering the Plan, and having the Estate Representative utilize the services of Laura Contreras, the Debtors current CFO, to assist him in this process. As indicated in the Plan, the
Estate Representative will serve as the disbursing agent for purposes of making all distributions
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under the Plan and will do so without charging these estates any disbursing agent fee. In addition, the Plan provides for the members of the Committee to have the right, but not the obligation, to form a post-confirmation committee (the Post-Confirmation Committee) for purposes of monitoring the post-confirmation activities of the Estate Representative and these estates. 1.3 Section 1123(b) of the Code.
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Section 1123(b) of the Code contains five permissive provisions.

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Section 1123(b)(1) of the Code provides that a plan may impair or leave any class of claims, whether secured or unsecured, or of interests unimpaired under the plan. Classes 4 and 5 are impaired. Classes 1,2 and 3 under the Plan is not impaired. Section 1123(b)(2) of the Code specifies that, subject to Section 365, a plan may provide for the assumption, rejection or assignment of any executory contract or unexpired lease not previously rejected. The Plan provides on the Effective Date, all of the Debtors'
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remaining executory contracts and unexpired leases which have not previously been assumed or rejected by the Debtors will be deemed rejected on the Effective Date. Section 1123(b)(3) of the Code specifies that a plan may provide for the settlement or adjustment of any claim or interest belonging to the debtor or to the estate, and/or the retention and enforcement by the debtor, by the trustee, or by a representative of the estate appointed for such purpose, of any such claim or interest. This Section of the Code is
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inapplicable to the Debtors because the Plan does not provide for the settlement or adjustment of any claims or interests, other than the treatment of claims and interests provided for in the Plan.
Section 1123(b)(4) of the Code specifies that a plan may provide for the sale of all or
5 6 7 8 9 10 11
substantially all of the property of the estate, and the distribution of the proceeds of such sale among holders of claims or interests. This provision of the Code is inapplicable to the Plan. Based upon the foregoing, the Plan complies with all of the provisions of Section 1122 and 1123 of the Code and, therefore, complies with Section 1129(a)(1) of the Code. 2. Section 1129(a)(2) of the Code.
Section 1129(a)(2) of the Code provides that a court may confirm a plan only if [t]the
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proponent of the plan complies with applicable provisions of the title. The principal purpose
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of 11 U.S.C. 1129(a)(2) is to insure that the proponents have complied with the requirements of 11 U.S.C. 1125 in the solicitation of acceptances to the plan, In re Texaco, Inc. 84 B.R. 893, 906-7 (Bankr. S.D. N.Y. 1988), and with the requirements of Section 1121 and 1127 of the Code. In re Downtown Inv. Club III, 89 B.R. 59, 65 (B.A.P. 9th Cir. 1988). 2.1 Section 1121 of the Code.
Section 1121(c) of the Code provides that [a]ny party in interest including the debtor
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..., may file a plan ... . Since the Debtors are the proponents of the Plan, and the Debtors are clearly parties in interest, the requirements of Section 1121 of the Code have been satisfied. 2.2 Section 1125 of the Code.
Section 1125(b) of the Code provides, in part, that: An acceptance or rejection of a plan may not be solicited after the commencement of the case under this title from a holder of a claim or interest with respect to such claim or
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interest, unless, at that time or before such solicitation, there is transmitted to such holder the plan or a summary of the plan, and a written disclosure statement approved, after notice and hearing, by the Court as containing adequate information.
At a hearing held on November 30, 2012, the Court approved the Disclosure Statement
5 6 7 8 9 10 11
relating to the Plan and found that the Disclosure Statement contains adequate information pursuant to Section 1125(b) of the Code. As evidenced by the Declaration of Service filed with the Court, a copy of the Plan, the Disclosure Statement and notice of confirmation of the Plan, together with a ballot for creditors and interest holders to use to vote on the Plan, was sent to each known party in interest in these cases. The Plan therefore complies with the provisions of Section 1125 of the Code.
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2.3
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Section 1127 of the Code.
Section 1127 of the Code sets forth certain requirements that a plan proponent must satisfy in order to modify a plan. Section 1127(b) of the Code authorizes a plan proponent to modify the plan at any time before confirmation of the plan provided the plan as modified satisfies the requirements of Sections 1122 and 1123 of the Code. A modification to a plan does not mandate the preparation of a new disclosure statement and resolicitation of the plan. In re American Solar King Corp. (American Solar), 90 B.R. 808, 823 (Bankr. W.D. Tex.
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1988). Additional disclosure to creditors is required only when and to the extent that the debtor intends to solicit votes from previously dissenting creditors or when the modification materially and adversely impacts parties who previously voted for the plan. This Section is inapplicable because the Debtors are not seeking to make any modifications to the Plan. 3. Section 1129(a)(3) of the Code.
Section 1129(a)(3) of the Code provides that a court may confirm a plan only if the plan
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is proposed in good faith and not by any means forbidden by law. Section 1129(a)(3) of the Code does not define good faith in the context of proposing a plan of reorganization. However, the Ninth Circuit recently defined that standard in the case of In Re Sylmar Plaza, L.P., 314
F.3d 1070 (9th Cir. 2002), by holding that "a plan is proposed in good faith where it achieves a
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result consistent with the objectives and purposes of the Code." Id., at 1074. Accord, Ryan v. Loui (In re Corey), 892 F.2d 829, 835 (9th Cir.1989); and Madison Hotel, 749 F.2d at 425 The Ninth Circuit in Sylmar further held that "the requisite good faith determination is based on the totality of the circumstances." Id., at 1074. Accord, Stolrow v. Stolrow's, Inc. (In re Stolrow's, Inc.), 84 B.R. 167, 172 (9th Cir.BAP 1988). This Court adopted the same Ninth Circuit standards for good faith in the proposing of a
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plan of reorganization in the case of In re Howard Marshall, 298 B.R. 670, 675-676 (Bankr.
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C.D. Cal 2003). In the Marshall case, this Court found that "the good faith evaluation must be made on a case by case basis". Id., at 676. See Sylmar Plaza, 314 F.3d at 1075; Jorgensen, 66 B.R. at 108-09. This Court further held that "this court must make its own independent evaluation of the debtors' good faith for the purpose of plan confirmation." Id., at 676. This Court found that "[p]art of the good faith analysis is that the plan must deal with the creditors in a fundamentally fair manner. Id., at 676. See, e.g., Jorgensen, 66 B.R. at 108-
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09. However, a debtor need not consider every feasible alternative form of plan, so long as the proposed plan meets the requirements of 1129(a). Id., at 676. See In re General Teamsters, Warehousemen & Helpers Union Local 890, 225 B.R. 719, 729 (Bankr.N.D.Cal.1998). Here, the Debtors, working closely with the Committee, the Senior Lenders and various individual creditors, have filed the Plan in good faith. The Plan clearly satisfies the good faith standards referenced above.
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4.
Section 1129(a)(4) of the Code.
Section 1129(a)(4) of the Code provides that a court may confirm a plan only if [a]ny payment made or to be made by the proponent, by the debtor, or by a person issuing securities
or acquiring property under the plan, for services or for costs and expenses in connection with
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the case, or in connection with the plan and incident to the case, has been approved by, or is subject to the approval of, the Court as reasonable. None of the professionals employed in the Debtors bankruptcy cases will be paid their outstanding post-petition fees and expenses until such fees and expenses have been approved by the Court. 5. Section 1129(a)(5) of the Code.
Section 1129(a)(5)(A)(i) of the Code provides that a court may confirm a plan only if
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the plan proponent discloses the identity and affiliations of any individual proposed to serve,
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after confirmation of the plan, as a director, officer of voting trustee of the debtor . . . or a successor to the Debtor under the plan. The Plan discloses the identity of the Estate
Representative and the concept of the Post-Confirmation Committee. Section 1129(a)(5)(A)(ii) of the Code requires that the appointment to, or continuance of a director, officer or voting trustee be consistent with the best interests of creditors and equity holders and with public policy. In re Produce Hawaii, Inc., 41 B.R. 301, 304 (Bankr.
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D. Hawaii 1984); In re Parks Lumber Co., Inc., 19 B.R. 285, 291 (Bankr. W.D. La. 1982). The Debtors believe that having Mr. Pakkala serve as the Estate Representative (with the likely assistance of Ms. Contreras) and the oversight of the Post-Confirmation Committee (if the Committee members so choose) is clearly in the best interests of these estates and consistent with the best interests of creditors, equity holders and with public policy. Mr. Pakkala and Ms.
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Contreras have done an outstanding job with these estates and have worked exceptionally well with all constituencies. Section 1129(a)(5)(B) of the Code provides that a Court may confirm a plan only if the
plan proponent discloses the identity of any insider that will be employed or retained by the
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reorganized debtor, and the nature of any compensation for such insider. The Plan discloses the compensation that will be paid to Mr. Pakkala and Ms. Contreras. Based on the foregoing, the Plan satisfies the requirements of Section 1129(a)(5) of the Code. 6. Section 1129(a)(6) of the Code.
Section 1129(a)(6) of the Code requires that after confirmation of a plan, any
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governmental regulatory commission with jurisdiction over the rates of the debtor has
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approved any rate change provided for in the plan ... This Section of the Code is inapplicable to the Debtors since no governmental regulatory commission has jurisdiction over the rates the Debtors charge. 7. Section 1129(a)(7) of the Code.
Section 1129(a)(7)(A) of the Code (commonly referred to as the best interest of creditors test) requires that, with respect to each impaired class under the Plan, each member
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of the class must either accept the Plan or receive under the Plan property having a value, as of the Effective Date, that is not less than the amount that such claim holder would receive if the Debtors Chapter 11 case was converted to a Chapter 7 liquidation. In a Chapter 7 case, the debtor's assets are usually sold by a Chapter 7 trustee. Secured creditors are paid first from the sales proceeds of properties on which the secured creditor has a lien. Administrative claims are paid next. Next, unsecured creditors are paid from any
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remaining sales proceeds, according to their rights to priority. Unsecured creditors with the same priority share in proportion to the amount of their allowed claim in relationship to the amount of total allowed unsecured claims. Finally, interest holders receive the balance, if any,
that remains after all creditors are paid in full.

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For the Court to be able to confirm the Plan, the Court must find that all creditors and interest holders who do not accept the Plan will receive at least as much under the Plan as such holders would receive under a Chapter 7 liquidation of the Debtors. Below is a demonstration, in balance sheet format, that all creditors will receive at least as much under the Plan as such creditors would receive under a Chapter 7 liquidation of the Debtors:
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ASSETS VALUED AT LIQUIDATION VALUES (ESTIMATED AS OF JANUARY 31, 2012): CURRENT ASSETS Estates Funds
$8,600,000
TOTAL ASSETS AT LIQUIDATION VALUE

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$8,600,000 $79,053 $750,000
Less: Secured claims (class 1) Less: Chapter 7 trustee fees and expenses (including the fees and expenses of the Chapter 7 trustees professionals)7
Less: Chapter 11 administrative expenses Less:
$1,326,045
7 The statutory fee which a Chapter 7 trustee would be entitled to seek pursuant to Section 326 of the Bankruptcy Code would amount to approximately $281,250 for disbursing $8,600,000, and this fee would be increased by 3% of any Net Avoidance Action Recoveries. In contrast, the Estate Representative is not charging these estates any disbursing agent fee.
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Priority tax claims and priority non-tax claims Balance for general unsecured claims Total amount of unsecured claims (est.)
$ 68,516 $6,376,386 $20,763,6718
% OF THEIR CLAIMS WHICH GENERAL UNSECURED CREDITORS WOULD RECEIVE OR RETAIN IN A CH. 7 LIQUIDATION: = 33.44% FOR HOLDERS OF CLASS 4 ALLOWED CLAIMS AND 26.05% FOR THE HOLDER OF THE CLASS 5 ALLOWED CLAIM9 % OF THEIR CLAIMS WHICH UNSECURED CREDITORS WILL RECEIVE OR RETAIN UNDER THE PLAN: = 35.75% FOR HOLDERS OF CLASS 4 ALLOWED CLAIMS AND 28.6% FOR THE HOLDER OF THE CLASS 5 ALLOWED CLAIM Below is a demonstration, in tabular format, that all creditors will receive at least as much under the Plan as they would receive under a Chapter 7 liquidation.
CLAIMS & CLASSES
PAYOUT PERCENTAGE UNDER THE PLAN
PAYOUT PERCENTAGE IN CHAPTER 7 LIQUIDATION 100% 100% 100% 33.44%
Secured Claims Administrative Claims Priority Claims Class 4 General Unsecured Claims Excluding Senior Lenders Class 5 General Unsecured Claim of Senior Lenders
100% 100% 100% 35.75%
28.6%
26.05%
The Debtors believe that it is clear that all general unsecured creditors (i.e., class 4
8 This is comprised of an estimated $13,087,870 of class 4 allowed claims and an estimated $7,675,801 class 5 allowed claim. 9 This is after taking into account the initial 10% payment to holders of class 4 allowed claims before the Senior Lenders are entitled to a pro rata distribution on account of their class 5 allowed claim.
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and class 5) will receive more money under the Plan than they would receive in a Chapter 7 liquidation of the Debtors because confirmation of the Plan avoids the substantial additional costs that would be associated with a Chapter 7 liquidation, and the Estate
Representative has agreed to disburse the Estates Funds (and the Net Avoidance Action
5 6 7 8 9 10 11
Recoveries) under the Plan without receiving any disbursing agent fee which will save the estates the fee that a Chapter 7 trustee would be entitled to receive under Section 326 of the Bankruptcy Code, which is estimated to be approximately $281,250 before including any additional fee associated with the distribution of Net Avoidance Action Recoveries.10 In addition, the Debtors estimate that general unsecured creditors (i.e., class 4 and class 5) will receive their cash distribution from the Estates Funds under the Plan by around
12 13 14 15 16 17 18 19
March 31, 2012. In stark contrast, the Debtors believe that in a Chapter 7 liquidation, general unsecured creditors (i.e., class 4 and class 5) would not receive their cash
distribution from the Estates Funds until 2013 or even later given the time delay involved with closing out a Chapter 7 bankruptcy case and obtaining Court approval of the Chapter 7 trustees final report. In a chapter 7 liquidation of the Debtors, holders of class 6 interests would clearly receive no distribution. While the Debtors would certainly have preferred to deliver a recovery
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to their existing equity holders, given the large amount of debt and limited assets in these
10 While the Estate Representative will not receive any disbursing agent fee for disbursing the Estates Funds, the Estate Representative will be receiving his normal hourly rate for work related to disbursing the Estates Funds, including reconciling the bank account, but this cost will amount to a small fraction of what a chapter 7 trustees statutory fee would be and has already been taken into account in the computation of the Administrative Reserve Fund. The actual costs incurred in disbursing the Estates Funds such as mailing and postage costs would likely be the same under the Plan and in a chapter 7 liquidation of the Debtors.
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estates, that was simply not possible. Under the Plan, holders of class 6 interests will not receive any distribution, which is the same result they would have received in a chapter 7 liquidation of the Debtors. Holders of class 6 interests will therefore receive not less under the
Plan than they would receive in a chapter 7 liquidation of the Debtor.

5 6 7 8 9 10 11
The Debtors have therefore satisfied the best interests of creditors test with respect to any class 4 or class 5 claim holder who votes against the Plan and with respect to class 6 interests. The Debtors submit that the Plan provides fair and equitable treatment of all classes of creditors and the greatest feasible recovery to all creditors. 8. Section 1129(a)(8) of the Code.
Section 1129(a)(8) of the Code provides that a court may confirm a plan only if [w]ith
12
respect to each class of claims or interests:

13 14 15 16 17 18 19
(A) (B)
such class has accepted the plan; or such class is not impaired under the plan.
As described above, the impaired classes under the Plan consist of class 4 (general unsecured creditors excluding the unsecured deficiency claim of the Senior Lenders), class 5 (the unsecured deficiency claim of the Senior Lenders), and class 6 (Interests). Section 1126(c) of the Code provides that a class of claims has accepted a plan if the
20 21 22 23 24 25 26
plan has been accepted by creditors that hold at least two-thirds in amount and more than one-half in number of the allowed claims of such class held by creditors that have accepted or rejected the plan. Section 1126(d) of the Code provides that a class of interests has accepted a plan if the plan has been accepted by holders of interests that hold at least two-thirds in amount of the allowed interests of such class that have accepted or rejected the plan.
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Filed concurrently herewith is the Declaration of Lourdes Cruz, which sets forth the results of the voting on the Plan. The results of the voting are as follows: Class 4 - (all non-priority general unsecured claims excluding the unsecured deficiency
claim of the Senior Lenders) a total of 47 class 4 claim holders, asserting total class 4 claims
5 6 7 8 9 10 11
of $6,745,915.41, voted on the Plan. Of those 47 class 4 claim holders, 46 of them, asserting total class 4 claims of $6,745,665.41, voted to accept the Plan. As a result, 97.87% in number and 99.996% in amount of the class 4 claim holders who voted on the Plan voted to accept the Plan. Class 5 (the unsecured deficiency claim of the Senior Lenders) there is only one member of this class and that member voted to accept the Plan.
12
Class 6 - (interests) Class 6 is deemed to have rejected the Plan pursuant to Section
13 14 15 16 17 18 19
1126(g) of the Bankruptcy Code since the members of class 6 are not receiving any property under the Plan on account of their class 6 interests. However, as explained more below, the Plan should nevertheless be confirmed by cramdown in that the Plan satisfies the cramdown requirements of Section 1129(b)(2)(C) of the Bankruptcy Code with respect to class 6 interests. 9. Section 1129(a)(9) of the Code.
20 21 22 23 24 25 26 27 28
Section 1129(a)(9) of the Code provides that a court may confirm a plan only if the plan complies with the following: a. Each holder of a priority claim under Section 507(a)(l) or 507(a)(2) of
the Code must receive cash equal to the allowed amount of such claim or agree to a different treatment.
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b.
Each holder of a priority claim under Sections 507(a)(3), (4), (5), (6) or
(7) of the Code must receive, on account of such claim: i. deferred cash payments of a value, as of the effective date, equal
to the allowed amount of such claim, if such class has accepted the plan; or
5 6 7 8 9 10 11
ii.
cash on the effective date equal to the allowed amount of such
claim, if such class has not accepted the plan. c. Each holder of a priority claim under Section 507(a)(8) of the Code must
receive, on account of such claim, deferred cash payments, over a period not exceeding five years after the Petition Date, of a value, as of the effective date of the plan, equal to the allowed amount of such claim.
12
Under the Plan, each holder of an allowed administrative claim (i.e., claims arising
13 14 15 16 17 18 19
under Section 507(a)(2) of the Code) will be paid in full upon the later of (i) the effective date of the Plan and (ii) the date upon which the administrative claim becomes an allowed claim, except for the small amount of the Debtors post-petition accounts payable, which will be paid in the Reorganized Debtors normal course of business. Under the Plan, each holder of an allowed non-tax priority claim (i.e., claims arising under Sections 507(a)(3), (4), (5), (6) or (7) of the Code), will be paid in full upon the later of
20 21 22 23 24 25 26 27 28
(i) the effective date of the Plan and (ii) the date upon which the non-tax priority claim becomes an allowed claim. Under the Plan, each holder of an allowed tax claim (i.e., claim arising under Section 507(a)(8) of the Code) will be paid in full upon the later of (i) the effective date of the Plan and (ii) the date upon which the priority tax claim becomes an allowed claim.
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Based upon the foregoing, the Plan satisfies the requirements of Section 1129(a)(9) of the Code. 10. Section 1129(a)(10) of the Code.
Section 1129(a)(10) of the Code provides that a court may confirm a plan only if at
5 6 7 8 9 10 11
least one class of claims that is impaired under the plan has accepted the plan, determined without including any acceptance of the plan by any insider. Section 1126(c) of the Code provides that [a] class of claims has accepted a plan if such plan has been accepted by creditors ... that hold at least two-thirds in amount and more than one-half in number of the allowed claims of such class held by creditors ... that have accepted or rejected such plan. The Debtors have satisfied this requirement in that class 4 and class 5 are both impaired classes
12
under the Plan which have accepted the Plan without including the votes of any insiders.
13 14 15 16 17 18 19
11.
Section 1129(a)(11) of the Code.
Section 1129(a)(11) of the Code provides that a court may confirm a plan only if [c]onfirmation of the plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor or any successor to the debtor under the plan, unless such liquidation or reorganization is proposed in the plan. In order to meet this feasibility standard, a debtor need only demonstrate that the plan has a reasonable probability
20 21 22 23 24 25 26
of success. In re Acequia, Inc., 787 F.2d 1352, 1364 (9th Cir.1986); In re Pikes Peak Water Co., 779 F.2d 1456, 1460 (10th Cir. 1985); In re Apex Oil Co., 118 B.R. 683, 708 (Bankr. E.D. Mo. 1990). There are at least two important aspects of a feasibility analysis. The first aspect considers whether the Debtors will have enough cash on hand on the Effective Date to pay all the claims and expenses which are entitled to be paid on the Effective Date. Since all payments
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to be made under the Plan will be funded out of the Estates Funds (which already exist), there is no issue as to the cash funding feasibility of the Plan. The second aspect considers whether there will be enough cash over the life of the Plan to make the required Plan payments. Since
the Plan is a liquidating plan, this aspect of the feasibility analysis is irrelevant and not
5 6 7 8 9 10 11
applicable to these cases. Based upon the foregoing, the feasibility requirement of Section 1129(a)(11) of the Code has been satisfied. 12. Section 1129(a)(12) of the Code.
Section 1129(a)(12) of the Code provides that a court may confirm a plan only if [a]ll fees payable under Section 1930, as determined by the court at the hearing on confirmation of
12
the plan, have been paid or the plan provides for the payment of all such fees on the effective
13 14 15 16 17 18 19
date of the plan. The Debtors are in compliance with all of the fee requirements set forth in Section 1930 of the Code. The Debtors will promptly pay any additional fees or costs owing to the Clerk of the Court or the Office of the United States Trustee. 13. Section 1129(a)(13) of the Code.
Section 1129(a)(13) of the code provides that a court may confirm a plan only if [t]he plan provides for the continuation after its effective date of payment of all retiree benefits ... for
20 21 22 23 24 25 26
the duration of the period the debtor has obligated itself to provide such benefits. This provision is inapplicable as the Debtors do not have any retiree benefits. B. The provisions of Section 1129(a)(8) of the Code with respect to Class 6 have been satisfied. Section 1129(b)(1) of the Code provides that if all of the applicable requirements of [Section 1129(a) of the Code] other than [Section 1129(a)(8)] are met with respect to a plan,
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the court, on request of the proponent of the plan, shall confirm the plan ... if the plan does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or interests that is impaired under, and has not accepted, the plan. These are commonly referred to as the
cramdown provisions of the Bankruptcy Code.

5 6 7 8 9 10 11
Class 6 (equity interests) is deemed to have rejected the Plan pursuant to Section 1126(g) of the Bankruptcy Code because the members of Class 6 will not receive or retain any property under the Plan on account of such claims or interests. The Plan by definition does not discriminate unfairly against any class 6 interest holder as all holders of class 6 interests are receiving the identical treatment under the Plan. Section 1129(b)(2)(C) of the Code provides that a plan of reorganization is fair and
12
equitable and therefore satisfies the cramdown requirements for a class of interests if:
13 14 15 16 17 18 19
(i) the plan provides that each holder of an interest of such class receive or retain on account of such interest property of a value, as of the effective date of the plan, equal to the greatest of the allowed amount of any fixed liquidation preference to which such holder is entitled, any fixed redemption price to which such holder is entitled, or the value of such interest; or (ii) the holder of any interest that is junior to the interests of such class will not
20 21 22 23 24 25 26
receive or retain under the plan on account of such junior interest any property. Since these two provisions of Section 1129(b)(2)(C) of the Code are separated by the word or, they are written in the disjunctive, meaning that only one of the two provisions needs to be satisfied in order for the Court to confirm the Plan over the dissent of class 6. Here, the Court can and should confirm the Plan over the dissent of class 6 because the second provision of Section 1129(b)(2)(C) of the Code (i.e., Section 1129(b)(2)(C)(ii) of the
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Code) is clearly satisfied for class 6 in that no holder of any interest that is junior to the interests of class 6 will receive or retain any property under the Plan on account of such junior interests. Indeed, there are no holders of any interests that are junior to the interests of class 6.
V.
5 6 7 8 9 10 11
CONCLUSION Based upon all of the foregoing, all of the requirements of Section 1129(a) [and Section 1129(b) with respect to class 6] of the Bankruptcy Code necessary for confirmation of the Plan have been satisfied. Confirmation of the Plan is clearly in the overwhelming best interests of creditors, as evidenced by the fact that the general unsecured creditors (both class 4 and class5) voted overwhelmingly (nearly unanimously) in favor of the Plan. The Debtors therefore
12
respectfully request that the Court confirm the Plan.

13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Dated: February 1, 2012
LEVENE, NEALE, BENDER, YOO & BRILL L.L.P.
By:
/s/ Ron Bender Ron Bender Todd M. Arnold John-Patrick M. Fritz Attorneys for Chapter 11 Debtors and Debtors in Possession
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NOTE: When using this form to indicate service of a proposed order, DO NOT list any person or entity in Category I. Proposed orders do not generate an NEF because only orders that have been entered are placed on the CM/ECF docket.
PROOF OF SERVICE OF DOCUMENT

I am over the age of 18 and not a party to this bankruptcy case or adversary proceeding. My business address is: 10250 Constellation Boulevard, Suite 1700, Los Angeles, CA 90067 A true and correct copy of the foregoing document described as MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CONFIRMATION OF FIRST AMENDED CHAPTER 11 LIQUIDATING PLAN OF REORGANIZATION will be served or was served (a) on the judge in chambers in the form and manner required by LBR 5005-2(d); and (b) in the manner indicated below: I. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF) Pursuant to controlling General Order(s) and Local Bankruptcy Rule(s) (LBR), the foregoing document will be served by the court via NEF and hyperlink to the document. On February 1, 2012, I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the following person(s) are on the Electronic Mail Notice List to receive NEF transmission at the email address(es) indicated below: Raymond G Alvarado ralvarado@alvaradosmith.com Todd M Arnold tma@lnbrb.com Phillip Ashman mgolod@mcqueenashman.com, pashman@mcqueenashman.com;bkumamoto@mcqueenashman.com Richard L Barnett rick@barnettrubin.com, rlbsec@barnettrubin.com Ron Bender rb@lnbrb.com Eric S Bershatski ericbershatski@tilemlaw.com Ronald K Brown rkbgwhw@aol.com Jennifer Witherell Crastz jcrastz@hemar-rousso.com Carol J Fogleman mfrost@bwslaw.com Anthony A Friedman aaf@lnbrb.com John-patrick M Fritz jpf@lnbrb.com Jeffrey K Garfinkle bkgroup@buchalter.com, jgarfinkle@buchalter.com;jmealeyhatch@buchalter.com;docket@buchalter.com Fredric Glass fglass@fairharborcapital.com Nancy S Goldenberg nancy.goldenberg@usdoj.gov D Edward Hays ehays@marshackhays.com Michael J Heyman michael.heyman@klgates.com Mark D Houle mark.houle@pillsburylaw.com Jacqueline L James jlj@lnbyb.com Jeff D Kahane jkahane@duanemorris.com Andy Kong Kong.Andy@ArentFox.com Rodger M Landau rlandau@lgbfirm.com, kmoss@lgbfirm.com Matthew A Lesnick matt@lesnicklaw.com Michael B Lubic michael.lubic@klgates.com Frank F McGinn ffm@bostonbusinesslaw.com Elissa Miller emiller@sulmeyerlaw.com, asokolowski@sulmeyerlaw.com Aram Ordubegian ordubegian.aram@arentfox.com Ernie Zachary Park ernie.park@bewleylaw.com Richard Park Richard.Park@usdoj.gov Justin E Rawlins jrawlins@winston.com, docketla@winston.com Benjamin Seigel bseigel@buchalter.com, IFS_filing@buchalter.com David B Shemano dshemano@pwkllp.com Philip E Strok pstrok@wgllp.com United States Trustee (SA) ustpregion16.sa.ecf@usdoj.gov
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Howard J Weg hweg@pwkllp.com Sharon Z Weiss sharon.weiss@hro.com, raul.morales@hro.com Joseph M Welch jwelch@buchalter.com, jmealeyhatch@buchalter.com;docket@buchalter.com Johnny White , seb@blakeleyllp.com;bblakeley@blakeleyllp.com;rclifford@blakeleyllp.com Service information continued on attached page
II. SERVED BY U.S. MAIL(indicate method for each person or entity served): On February 1, 2012, I served the following person(s) and/or entity(ies) at the last known address(es) in this bankruptcy case or adversary proceeding by placing a true and correct copy thereof in a sealed envelope in the United States Mail, first class, postage prepaid, and/or with an overnight mail service addressed as follows. Listing the judge here constitutes a declaration that mailing to the judge will be completed no later than 24 hours after the document is filed. Service information continued on attached page III. SERVED BY PERSONAL DELIVERY (indicate method for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on February 1, 2012, I served the following person(s) and/or entity(ies) by personal delivery, or (for those who consented in writing to such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration that personal delivery on the judge will be completed no later than 24 hours after the document is filed. The Hon. Theodor C. Albert United States Bankruptcy Court 411 West Fourth Street, Room 5085 Santa Ana, CA 92701 Service information continued on attached page I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. February 1, 2012 Date Lourdes Cruz Type Name /s/ Lourdes Cruz Signature
This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.
18 19 20 21 22 23 24 25 26 27 28
August 2010
F 9013-3.1.PROOF.SERVICE
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II. SERVED BY U.S. MAIL or NEF if marked with *

In re Westcliff Medical Laboratories In re BioLabs, Inc. File No. 4367 RSN Service by U.S. MAIL or NEF if marked with * Debtors Westcliff Medical Laboratories, Inc. BioLabs, Inc. c/o FTI Consulting 633 West Fifth Street, 16th Floor Los Angeles, CA 90071 Counsel for LGSM Laguna Hills, LLC Ronald K. Brown, Jr. NEF* Law Offices of Ronald K. Brown, Jr. 901 Dove Street, Suite 120 Newport Beach, CA 92660
Committee-RSN Benjamin Seigel/Jeffrey Garfinkle NEF * Buchalter Nemer 1000 Wilshire Boulevard, Suite 1500 Los Angeles, California 90017-2457 Counsel for Health Net, Inc.-RSN Pillsbury Winthrop Shaw Pittman LLP Attn: Mark D. Houle, Esq. NEF * 650 Town Center Drive, Suite 700 Costa Mesa, CA 92626-7122 RSN Rita A. Woodard Treasurer-Tax Collector 221 S. Mooney Blvd., Room 104-E Visalia, CA 93291-4593 RSN City and County of San Francisco Treasurer/Tax Collector-Legal Section; Attn Robert L. Fletcher, Jr. P.O. Box 7426 San Francisco, CA 94120-7426 Counsel for ACE Jeff Kahane NEF * Duane Morris LLP 865 S. Figueroa Street, Suite 3100 Los Angeles, CA 90017-5450
Frank Cadigan Nancy Goldenberg Terry Biers Office of the U.S. Trustee 411 West Fourth St. Suite 9041 Santa Ana, CA 92701 RSN Los Angeles County Treasurer and Tax Collector P.O. Box 54110 Los Angeles, CA 90054-0110 RSN Robert Brill, Of Counsel Grant Callison, VP Cambridge Healthcare Properties, Inc. 1717 Main Street, 59th Floor Dallas, TX 75201 Counsel for Hologic, Inc. and Third Wave Technologies Jonathan Braverman Baker, Braverman & Barbadoro P.C. 50 Braintree Hill Office Park, Suite 108 Braintree, MA 02184-8734
Steven A. Oldham, Sr. Staff Atty State of CA, Dept. of Health Care Serv Office of Legal Services-MS 0010 P.O. Box 997413 Sacramento, CA 95899-7413 RSN Counsel to Creditor Google Scott E. Blakeley/Johnny White NEF * Blakeley & Blakeley 2 Park Plaza, Suite 400 Irvine, CA 92614 Counsel for ACE Ron Oliner Duane Morris LLP Suite 2200 One Market Plaza, Spear Tower San Francisco, CA 94105-1127
42

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The Debtors business accounted for

The possibility of the Debtors suffering a reduction in revenue as a result of their

Class 2 consists of the secured claim of the Senior Lenders.

Section 1123(b) of the Code contains five permissive provisions.

Section 1127 of the Code.

Section 1129(a)(4) of the Code.

that remains after all creditors are paid in full.

TOTAL ASSETS AT LIQUIDATION VALUE

$8,600,000 $79,053 $750,000

Less: Chapter 11 administrative expenses Less:

$ 68,516 $6,376,386 $20,763,6718

CLAIMS & CLASSES

PAYOUT PERCENTAGE UNDER THE PLAN

PAYOUT PERCENTAGE IN CHAPTER 7 LIQUIDATION 100% 100% 100% 33.44%

100% 100% 100% 35.75%

Plan than they would receive in a chapter 7 liquidation of the Debtor.

respect to each class of claims or interests:

cash on the effective date equal to the allowed amount of such

Section 1129(a)(11) of the Code.

cramdown provisions of the Bankruptcy Code.

respectfully request that the Court confirm the Plan.

Dated: February 1, 2012

LEVENE, NEALE, BENDER, YOO & BRILL L.L.P.

PROOF OF SERVICE OF DOCUMENT

II. SERVED BY U.S. MAIL or NEF if marked with *

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