Copied From Edgar Filing
II. OVERVIEW OF THE PLAN
The Plan is the product of extensive negotiations over the
course of several months among the Debtor, the Committee and the
Preletz Group (Michael O. Preletz and affiliated investors) to
design a plan which maximizes the recoveries to creditors and
other parties in interest and creates a sound capital structure
for the reorganized entity. Under the Plan, the reorganized
Debtor will emerge from bankruptcy recapitalized and prepared to
implement a business plan that, if fulfilled, will result in
increased value and profitability, to the benefit of both its new
investors and the estate herein.
Under the terms of the Plan, the reorganized Debtor will
retain certain core assets of its Hammer business, the Hammer
Assets, and the remaining estate will retain and sell all other
assets, the Non-Hammer Assets. The assets of the remaining
estate, including the Non-Hammer Assets and a block of 3,500,000
shares of stock of the reorganized Debtor, will be managed by a
bonded Distribution Agent and sold for the benefit of creditors.
Former shareholders, consistent with the priority scheme set
forth in the Bankruptcy Code and the present lack of equity in
the Debtor, will receive nothing under the terms of the Plan.
All existing shares of stock of the Debtor will be cancelled
on the Plan's Effective Date, and the reorganized Debtor will issue new shares in favor of the estate, the company's new investors and others. In particular, the remaining estate will receive 3,500,000 shares; the Preletz Group will receive 2,000,000 shares in exchange for a cash investment of $650,000; 2,000,000 shares will be distributed to creditors in exchange for cash investments of $650,000 in the aggregate, pursuant to a creditors' rights offering, as explained below; and 2,500,000 shares will be available for distribution pursuant to stock options granted to management and nonmanagement employees. Thereafter, an additional 10,000,000 shares may be issued by the reorganized Debtor for various stock options or sales, within limitations described in the Plan.
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