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__ I ~.
. '. I
IN TH UNTED ST ATES~'l'ÚP1ièý:cétmT FOR TH DISTRC~ ?~ ::U-L9~~O ~ ~
~ r i ~ ~ ; c: :, ~ - ~ '~ . .: ~-;+
In re:
)
)
INRSTATE SWEEPING, LTD.
EIN: 84-145-8582
IG SERVICES GROUP, LLC
EIN: 84-141-2960
) ) ) ) ) ) )
Case No. 99-11500-MSK
Case No. 99-11501-MSK
Jointly Administered Under
Case No. 99-11500-MSK
FIT AMNDED DISCLOSUR STATEMENT TO
INTERSTATE SWEEPING, LTD., IG SERVICES GROUP, LLC AND SWEEPCO, LLC SECOND AMENDED JOINT PLA OF REORGANI nON
\o ..
I
DAVIS, GRA & STUBS LLP
Glen E. Keller, Jr. Chrstopher L. Richardson
370 17th St., #4700
P.O. Box 185 Denver, Colorado 80201-0185 (303) 892-9400
ATTORNYS FOR INRSTATE SWEEPING
LTD. and IG SERVICES GROUP, LLC
DOS- 1ll79.9
l .. 5
J
~ GOVERNMENT .; EXHIBIT
11~
(¡TJ
AI 17, 199 8:0 am
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TABLE OF CONTNTS
Page
i. INODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. REPRESENTATIONS... . .. ................ .... . ... . . .. . .... .. .. ......1
m. GENERA INORMTION ............................................ 2
A DESCRITION OF TH DEBTORS ................................ 2
B. TH BANUPTCY CASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 C. mSTORICAL FINANCIA PERFORMCE OF TH DEBTOR ......... 4
D. DESCRITION OF TH DEBTOR'S ASSETS ........................ 6 E. DESCRITION OF TH DEBTOR'S LIAILITIES .................... 9
F. SUMY OF SIGNIICAN LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . 9
IV. SUMY OF TH
PLAN ............................................10
A DESCRITION OF TH INSTMNT BY SWEEPCO ............... 10
1. The Plan Provisions ....................................... 10
2. Who is Sweepco? .......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3. Sweepco' s abilty to meet the commtment ...................... 11
B. TRATMNT OF CLAIS AN INRESTS UNER THE PLAN ...... 12
1. Class 1 ................................................. 12
Fino
2. Class 2-Secured Claims of Automotive Management Group . . . . . . . . 12
3. Class 3-Secured Clai of 4. .. Class 4-Secured Claim of
va ............................ 12
Community First. . . . . . . . . . . . . . . . . . . . . 13
5. CLASS 5-Secured Claim ofGMAC . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6. Class 6-Secured Clai of Ori .............................. 13 Denver ..................... 14 Ban of 7. Class 7-Secured Clai of
8. Class 8-Secured Claim of Autonet ........................... 14
9. Class 9-Secured Clai of 10. Class ia-Secured Clai of 11. Class ll-Secured Clai of 12. Class I2-Secured Clai of
Deere Credit. . . . . . . . . . . . . . . . . . . . . . . . 14
Michael Mier ..................... 14
the City and County of the Colorado Deparment of
Denver . . . . . . . . . 15
Revenue . . . . 15
13. Class 13-Sierra Leasing Co. LLC .......... . . . . . . . . . . . . . . . . . . 15
14. Class 14-National Factorig Servces, Inc. ..................... 15
15. Class IS-Unsecured Clais ................................ 15 16. Class 16-Equity Interests ................................,. 16
17. Unclassifed Clai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
a. Admistrative Clais ................ . . . . . . . . . . . . . . . . 16
c. Secured Tax Clais . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
b. Priority Tax Clai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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C. OTHR PROVISIONS UNER TH PLAN ......................... 18
1. Provisions Governg Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
a. Requirement For Alowance Of
Claims And Equity Interests. . . 18
b. Disbursing Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
c. Date Of d. Delivery Of
Distribution ................................. 19
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 e. Setoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2. Treatment Of
a. sump ion an ejec ion ..........................
a. Provisions Concernng Clais Scheduled As Disputed,
"As t'" d "R' t' " 20
Implementation Of The
Executory Contracts And Unexpired Leases .......... 20
b. Assumed If
Not Rejected. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
c. Clais Arsing Upon Assumption Or Rejection Of Contract ... 20
3. Contested And Contingent Clais . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Unlquidated Or Contingent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
b. Procedure For Resolvig Contested And Contingent Clais ... 21
4. Means For
Plan ........................22
6. Final Decree ........................... . . . . . . . . . . . . . . . . . . 22
5. Discharge ................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7. Payment to United States Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 D. LIQUIATIONOFTHDEBTOR'SASSETS....................... 22
1. Liquidation Analysis ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
E. CERTAI RISK
FACTORS ......................................23
V. FEDERA INCOME TAX CONSEQUENCES ............................. 24
VI. INORMTION ABOUT TH CLAIS ALLOWANCE, OBJECTION AN ESTIMTION PROCEDURS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 A. TH SIGNIICANCE OF ALLOWANCE AN IMAINT .......... 25
1. Allowance Of Clais ...................................... 25
2. Impairment Of Clais . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
B. OBJECTIONS TO CLAIS ...................................... 26
1. Objecion Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 a. Objections . . . . . . . . . . . . . . . . . . . '.' . . . . . . . . . . . . . . . . . . . . 26
b. Responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
c. Bar Date For Filg Objections to Clais. . . . . . . . . . . . . . . . . . 27
VI. VOTING PROCEDUR AN CONFIRTION OF TH PLAN. . . . . . . . . . . . . . . 27
A BALLOTS AN VOTING DEADLIN ............................. 27
1. Balot ................. . . . . . . , . . . . . , . . . , . . . . . . . . , . . . . . . . 27
2. Voting Deadlie .......................................... 28
3. Clai Amounts On Ballot For Voting Purposes Only .............. 28
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4. Questions On Voting Procedures ............................. 28
B. VOTING REQUIMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
1. Paries In Interest Entitled To Vote. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 2. Vote Required For A Class To Accept The Plan. . . . . . . . . . . . . . . . . . 29
C. CONFIRTION OF TH PLAN ................................. 29
1. Confation Hearg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2. Objections To Confation Of 3. Requirements For Confation Of 4. "Cramdown" Of
The Plan. . . . . . . . . . . . . . . . . . . . . . . . 29 The Plan. . . . . . . . , . . . . . . . . . , . . 30 The Plan. . . . . . . . . . . . . . . . . . . . : . . . . . . . . . . . . . . 30
VI. CONCLUSION...................................................... 30
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I.
INTRODUCTION
Attached to this Disclosure Statement as Exhbit 1 is the Second Amended Joint Plan of
Reorgantion (the "Plan") proposed by Interstate Sweeping, Ltd. ("Interstate"), IG Servces this Group, LLC ("IGS") (collectively, the "Debtors"), and Sweepco, LLC. The purpose of
Disclosure Statement is to provide the Creditors of
the Debtors with adequate inormation to make an inormed judgment about the Plan. This inormation includes, among other matters, a the Debtors' Chapter 11 banptcy case, a description the Debtors, a summar of history of brief the Debtors' assets and liabilties, the funds that wi be avaiable to make distrbutions under of how the Plan wi work. the Plan and an explantion of
CAPITALIZD TERMS USED BUT NOT DEFIND IN TlS DISCLOSUR STATEMENT AR DEFIND IN TH PLAN. YOU SHOULD READ TIS DISCLOSUR
STATEME AN TH PLAN IN THIR ENTIRTY BEFORE VOTING ON TH PLAN. TIS DISCLOSUR STATEMENT SUMS CERTAI TERMS OF TH PLAN, BUT TH PLAN ITSELF WIL BE TH GOVERNG DOCUMNT. IF AN INCONSISTENCY EXISTS BETWEN TH PLAN AN TlS DISCLOSUR STATEMENT, TH TERMS OF TH PLAN AR CONTOLLING.
IT REPRESENTATIONS
This Disclosure Statement is intended for the sole use of Creditors and other paries in interest, and for the sole purpose of assisting them in makg inormed decisions about the Plan. Each Creditor is urged to review the Plan in full prior to voting on the Plan to ensure a complete the Plan and this Disclosure Statement. understanding of
TIS DISCLOSUR STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY TH SECURTIES AN EXCHAGE COMMSSION, NOR HAS TH
'A EXCHAGE COMMSSION PASSED UPON TH ACCURCY OR ADEQUACY OF TH STATEMES CONTAID IN TH DISCLOSUR STATEMENT. TH UN STATES BANUPTCY COURT FOR TH DISTRCT OF COLORAO APPROVED TlS DISCLOSUR STATEMENT ON ~ HOWEVER, TH BANUPTCY COURT'S APPROVAL OF TIS DISCLOSUR STATEMENT DOES NOT
SECURIES
CONSTI EITR A GUARY OF TH ACCURCY OR COMPLETENESS OF TH INORMTION IT CONTAIS OR AN ENORSEMENT OF TH PLAN BY TH BANUPTCY COURT.
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m. GENERA INORMTION
This par ofthe Disclosure Statement provides general inormation about the Debtors,
their business, their assets and liabilties, and the Banptcy Cases. The banptcy cases of the two Debtors have been administratively consolidated.
A. DESCRITION OF TH DEBTORS
Interstate is a Colorado corporation engaged in the business of industnal sweeping
servces for commercial and municipal clients.
Interstate is the largest provider of sweeping servces for commercial parkig lots and municipal roadways in the Greater Denver Metropolitan Area with over 300 Company customers
representing leading nationa and loca fis. To supplement its core sweeping business and to
capitalize on its extensive marketing relationships, Interstate provides its customers with a wide
range of propert maitenance servces such as snow plowing and removal and special customer
requested projecs such as power washig, parkig lot striping, and parkig lot policing.
Members of
The Inovation Group ("IG"), a Colorado company specialng in the
structrig, managig, acquisition and development of undervalued companes and assets, acted
as consultants to Al Star Maitenance, dba Maintech in the December 31, 1996 acquisition of the Denver Sweeping Division of Browning Ferris Industries ("BFr'), with certai nghts to acquire
other BFI sweeping operations in selected cities throughout the United States. With the BFI
acquisition, All Star Maintenance becae recogned as a leader in propert maintenance in the
Denver metropolitan area. Through this BFI acquisition and the divestiture of its landscape construction business, All Star Maitenance replaced the $1.3 Millon anualized revenue discontinued business segment with the strategic, profitable BFI sweeping business of the same
size.
In May 1997, IG formed IG Servces Group, LLC, ("IGS") and by an asset purchase
June 1, 1997, acquied the Al Star Matenace assets and its trade name. IG Servces Group, LLC employed certai of the Al Star Matenance executive and operational talent with the expection that together they could enhance the corporate opportnities with strategic fiancial plang.
effective as of
Consistent with its strategic plan IGS consuted the acquisition on May 2, 1998, of
the assets of
Redlands, Calorna-based Interstate Sweeping, Inc. which subsequently changed its its assets, to Ai Sweeping, Inc, The Redlands Division post-acquisition name, afer the sae of pedormance compared unfavorably to expecations. The Redlands acquisition was projected to
increase anual revenue by $1,741,000 and net profit of
over $80,000 anually. Instead, the
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operations lost over $100,000 in the first four months of operations with expenses like fuel and
repais varg greatly from the analyses prepared pre-acquisition based on the seller's
information previously provided to IGS. This disparty caused negotiations between the seller and Interstate in the late summer to amend the terms of the purchase agreement and that resulted in an amendment agreed and signed between the paries in October of 1998.
On Apri 28, 1998, IG formed Interstate Sweeping, Ltd., a Colorado corporation, on advice of counse~ in order to faciltate an anticipated private placement investment fundraising effort that was intiated in May of 1998. The new company name was also perceived as an advantageous use of a name accurately befitting the operations of the business. On May 1, 1998 the Voting Members ofIG Servces Group, LLC contributed its assets and liabilties to Interstate Sweeping, Ltd. Interstate then continued the business operations as previously conducted.
In addition to management actions taken to correct the Calorna situation operationaly,
Interstate also entered into negotiations later in the summer of 1998 to acquire the assets of Pacifc States, Inc. in neay Hemet, Calorna, which added over eight hundred thousand dollars
anual revenues to Interstate. More importantly, since the assets were consolidated with the
existing Redlands facilties, the absorption of overhead brought the Californa operations to a nominal break-even position. The cash consumed by these acquisitions and operational losses, however, placed the company in a severe cash bind by November of 1998. Through the period up Interstate contributed capital or loaned Interstate short term until November, the shareholders of funds or left short term loans with Interstate, when they were able, to alleviate its cash flow needs.
Between May 1998 and November 1998, Interstate circulated a Private Placement Memorandum among a number of sophisticated investors and commenced discussions with a number of
these paries, Bace Industries, entered into negotiations that resulted in an offer of equity and debt capital to be provided or aranged by Bace to Interstate. Whe Interstate's mangement supported and recommended this offer, two
those potential investors. In November 1998, one of
miority shareholders, Ms. Cerand and Mr. Thar, apparently disagreed with that
recommendation and proceeded with their own plan. At the board meeting of
Interstate on
December 10, 1998, Ms. Cerand, through her attorney, anounced that she had commenced a
lawsuit and received a temporar restraig order (TRO) agaist the transaction. In a subsequent
heag, Messrs. Sunhie and Thar were named co-maagers and Mr. Hickel was restraied
from parcipatig in magement.
Mr. Hickel pursuant to the temporar restaig order contrbuted to a further deterioration of the financial condition
The arangement for court-ordered co-managers and the exclusion of of
Interstte. Interstate was unable to meet its debt obligation to secured creditors afer
December 10, 1998, prior to the fig. By the thid week of Januar, Bace had withdrawn its offer. Several secured creditors were preparg to foreclose and Mr. Thar and Ms. Cerand
determed that the lawsuit should be withdrawn the TRO removed, Mr. Thar removed from
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management and Mr. Hickel returned to management. That was all accomplished by the paries in
late Januar.
The Debtor's management simultaneously explored whether any other investor might offer
and, if not, what options were avaiable to protect creditors. Due to increasing threat of
repossession of collateral, the Debtors fied their Chapter 11 petitions on Februar 11, 1999.
Interstate's executive and operational offces are at 350 Valejo Street in the Denver Economic Industrial Development zone in a 5,000 square foot single-story offce building and a 10,000 square foot vehicle matenance shop and a one-acre yard for vehicle parkig. Interstate
is an emergig leader in the envionmental servce industry, with its logo "Cleaning the
Environment. "
The Directors of Interstate are Kelly T. Hickel and David Sunshine. The shareholders of
the Debtor are, in addition to Messrs. Hickel and Sunshine, Judith B. Cerand, A Vern Thar, Jr.,
Duane "Butch" Har Ai Sweeping, Inc., and Julie Belden.
B. TH BANUPTCY CASE
The Debtors filed their banptcy petitions on Februar 11, 1999. The two cases are being jointly admistered by the Banptcy Court. Since that date, Interstate has remaied in
possession of its propert and continues to operate. The Debtors, together with Sweepco, LLC,
filed a Plan of represents the Plan of
Reorgantion on June -' 1999 which has been amended twce. Exhbit 1
Reorgantion to which this Disclosure Statement relates.
C. HITORICAL FIANCIA PERFORMCE OF TH DEBTOR
losses and cash consumed by acquisitions caused a severe cash flow problem in November, 1998. On or about May 1, 1998, $100,000 was transferred to Interstate Sweeping, the purchase price for those assets. Yet another Inc. (now Ai Sweeping, Inc.) as a portion of $100,000 payment was made to Sierra Leing Co., LLC pursuant to a Redemption Agreement debt repayments 12, 1998.1 Between August and October, 1998, a series of entered into on Apri were made totalg $415,644.91, including $367,000 to Community First National Ban. Furthermore, 1998 resulted in an actal operating loss of$361,689 for the Debtor.
Operational The followig table detais the net Profits/(Lsses) of
the Debtors adjusted to remove the
Gaoss on the sale of equipment, a non-operating, non-cash profit, which distorts the operational results.
lSee signcant litigation summar on p. 9.
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~
IGS IGS
~
6/1/97 - 12/31/97 1/1/98 - 04/30/98 5/1/98 - 11/31/98
Net Profit!
(Lss)
$ 194,004
Gain on Sale
Actual Operating Loss
$ 183,974
($ 35,911)
$ 10,030
$ 72,373
is
1998
Tota
1/1/99 - 02/11/99
($180,341) ($107,973)
($ 39,918)
$108,294 $145,427 $253,721
($325,768) ($361,689)2
($ 39,928)
is
the Debtors were largely paid by IG which was reimbursed for those saares by IGS. The funds transferred in 11 separate transfers totaled $129,816.97. IGS also transferred certai non-cash assets valued at $20,742.00 from the these transactions were recorded either as par of a Al Star Maitenance purchase to IG. Al of the regular limted note payable from IG to IGS or in Member Draw Accounts used as par of liabilty corporation accounting in place for IG Servces Group, LLC. Afer June 1, 1997, the total compensation paid to members of IG Servces Group, LLC was:
Durig 1997, members of the management team of
David Sunshie Kelly Hickel Judy Cerand Vem Thar
$ 49,155.52
64,500.00 20,700.00
29.70000
$ 163,455.52
Of
this total, $129,816.97 compensation for Hickel, Cerand and Thar was paid by the
transfers to IG. IGS also paid $27,388.35 to Sierra Leasing, LLC in 1997. The June 1, 1997 10 was increased to $337,727.59, $324,968. Promissory Note from IG to IGS in the amount of whie IGS's total other receivables increased to $600,651.15.
In 1997, Judith Cerand had a difcult tax liabilty and, by agreement of transferred substantial
the paries, IGS
liabilties to IG. The members ofIG then assigned to Judith Cerand their member ta attributes which she used to reduce her tax liabilty. The liabilties transferred included obligations for the assumed Al Star Matenance, LLC accounts payable, and obligations to CS Capital, Norm Brown Dan Mier and Community First Ban. Then, in 1998, IGS transferred cah to IG in the amount of$415,644.91 to servce these debts.
The begig balance ofIGS's "Other Receivables" account was $600,651.15. The
endig balance was $744,033.08. The increae durig 1998 was a net amount of$143,381.43.
2The 1998 total operational losses of$361,689 had a deleterious effect on Interstate's cash
position. See fiancial statements presented as Exhbit 8.
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This net amount is a result of: 1) debt payments through the IG accounts in the amount of $415,644.9; 2) tax payments through the IG accounts in the amount of$94,133.09; and 3) reversals of cash transfers to IG returng compensation and acquisition costs to the Interstate
balance sheet, capitaled in the category of" Acquisition Costs" to more accurately reflect what
transpired, credited in the amount of$356,396.57.
In 1998, compensation in the aggregate of $288,259.59 was paid to the Interstate
pricipals. Individual payments included:
Kelley Hickel Vem Thar
$ 123,241.00
Judy Cerand David Sunshie
34,052.00 20,314.00
11065200
$ 288,259.00
Kelly Hickel and David Sunshie were paid by Interstate through the above shown reversals.
Durig the operating history of the Debtors, it was a necessar ordinar practice to obtain
short-term loan to pay operating expenses and payrolL. These loans were frequently obtained
from the offcers, members or shareholders of the Debtors and were predicated upon promised repayment out of expected receipts which could be identifed. Their repayments generaly the loans is
occurred withi 1 to 30 days of the loan. A char depicting the history and source of
set forth in Exhibit 10, attached hereto.
In sum, the detailed analysis of the insider transactions discussed above show four activity: 1) compensation; 2) debt repayments and reductions; 3) expense business.
categories of
reimbursement; and 4) repayments ofloans from insiders in the ordinar course of
D. DESCRITION OF TH DEBTOR'S ASSETS
The priar assets held by Interstate are items of The Debtors own no rea propert. Most of
persona propert. IGS ha no assets.
the contracts for servces to be provided by Interstate
contai termation clauses which make the contracts of questionable value. The most valuable
persona propert owned by Interstate consists of sweepers and related vehicles. In addition, the
Debtors have a reserve accunt with Nationa Factorig Servces, Inc. which pre-petition totaled $112,000, and the post petition reserve totals $175,000. Interstte also has scheduled Other
Receivables totalg $782,091, including a receivable from The Inovation Group, LLC in the
amount of $568,502, which are deemed uncollectble.
As of
Februar 11, 1999, the date offilig, Interstate had automobiles, trucks, traiers and
other vehicles including sweepers, pickup trucks, and related equipment which had an appraised
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liquidation value of$1,612,850.00. See Exhbit 2 (attached hereto) for a detailed schedule of Interstate's automobiles, trucks, trailers, and other vehicles. In addition, the business held offce
equipment, furnshigs, machiery and equipment al of which are located at its principal place of
business in Denver or at its operations in Redlands Calorna. These items had an appraised these
liquidation value of $25, 140. See Exhbit 3 (attached hereto) for a detaied schedule of assets. Interstate also had $155,368 in physica inventory of located priary at its pricipal place of
spare pars and consumable items
business in Denver.
the date offilig, accounts receivable with a face value of$102,359. those accounts were those with Gunther Toody's, Westland Town Center, Among the largest of Meadows Maket Place, Todd Matenance, and iSS. Interstate continues to sell its accounts receivable under a factorig agreement with Nationa Factorig Servces, Inc.
Interstate had, as of
Interstate also has over $52,000 in security deposits with public utilities, telephone
companes, landlords and others. The largest security deposits are $10,000 with General Electric,
$7,000 with the Pepsi Center, $35,000 as a performance bond for the DIA contract, and $6,000
with Diamond Shamock.
Finaly, Interstate is evaluating a pending legal clai agaist Bace Industries for tortious
business interference arsing out of activities taken by Bace prior to and afer the termation of its
financing agreement in Januar, 1999. Interstate has asserted certai counter-clais in litigation
fied by Judith Cerand and Sierra Leasing LLC.3
The Company completed between September 1, 1997 and October 31, 1998 a complete upgrade of all its sweeping equipment, including the acquired equipment. A description of certain items included in the Debtor's sweeping equipment follows.
The Schware M5000 model is a mechanca road sweeper designed to clea moderately to extremely heavy debris. Schware has designed the sweeper so that they ca mount it onto a varety of standard production cab over or conventiona truck chassis models. The sweeper can get from point ~'A" to point "B" at normal highway speeds, providing more sweeping time per
shi. Becuse the sweeper ca be mounted onto a varet of commercial truck chassis, no special
driver's traig is requied. Its short wheelbase also alows the MSOOO to maneuver easily
around parked cas ahd other had to reach area. The Schware M5000 hopper has a five cubic
yard capacity. Becuse of
this large holding capacity, fewer trips to a dumping facilty are
requied. Its 9 feet 6 inches dump height enables the sweeper to empty into standard dump
trcks, and those outftted with sideboards. The auger and conveyor elevator system handles the
heaviest of debris. As the auger moves debris to the conveyor, it chews up larger objecs. Ths
3 See signcant litigation summar at p. 9.
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the hopper for an
reduces the potential for jamng. The conveyor loads debris into the center of
even fi. This system uses the hopper's full capacity, reducing trips to the dump site and increasing sweeping time. The hydraulicay driven gutter brooms are 49 inches in diameter and consist offive individual segments. Their large size requires fewer revolutions compared with smaler brooms, and their free floating design alows them to follow the contour of the pavement.
This eliates excessive wear and extends the lie of the gutter broom segments.
The Schware A 7000 is a regenerative ai sweeper. Schware has equipped the sweeper
with a 110 horse power engie. The six-bladed, 32 inch blower moves 13,000 cubic feet of air per nñute. The hopper has a capacity of8.4 cubic yards and double action, hydraulic cylinders
li it at a 51-degree angle.. The 44 inch steel-wie gutter brooms feature a 90 inch sweeping
hood. This creates one of the widest sweeping paths of
any recirculating sweeper. With both
gutter brooms in operation, the sweeper ca achieve an 11th foot wide sweeping path. Schware
designed the A7000 model to sweep in reverse. By sealing the sweeping head to the pavement
sudace before starp, the sweeper reduces the ai quality degradation by dramaticaly reducing
pariculate emissions.
The Schware A3000 is a regenerative air sweeper designed for road sweeping that does not require large payload capacity. Because it ca be mounted onto a 109-inch wheelbase chassis,
this sweeper has a turng radius of less than 19 feet. The hopper has a capacity of 3.1 cubic
yards and features high dumping at 70 inches.
The Schware S348-I are sweepers were designed to handle al tyes of debris found in parkig areas, mals, etc., and is also able to do some construction cleaup or minor street sweeping. This sweeper has an open internal fiter system that keeps debris from entenng the fan. Schware has designed the pickup head so that the machie can sweep in reverse. Cleang in reverse is important when cleanng smal parkig lots. The auxiliar engine powers a thirt-inchdiameter bladed radial turbine fan that creates a high velocity blast and suction pressure under the sweeping head. Fans are housed in a rubber-lied housing to prevent premature wear. Overall sweeping width is 90 inches with a hopper capacity of 3.1 cubic yards.
Interstate intiated a plan to intal trackig computer systems into its sweepers. The Windows 95 softare application tracks and displays vehicle locations on a computer at the dispatcher home base, in rea time, on supplied computer maps. A VCR-like playback function
ca be used to review activity for effciency anysis. Vehicle location data is captured and stored
in computer fies tht ca be exported to varous formats for use by other applications such as
costing analysis and customer bilg. Ths upgrade is only parialy complete and requires
$25,000 to fish, but ha aleady improved Denver operations.
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E. DESCRITION OF TH DEBTOR'S LIABILITS
The liabilties oflG Servces Group, LLC were assumed by Interstate Sweeping, Ltd. in 1998 as par of the agreement whereby the assets of IG Servces Group LLC were acquired. Notwthstanding the assumption agreement, novation agreements may not have been entered with
certai creditors and taxg agencies may not recognze an assumption. See Section 12(b) and (c)
on page 14. For the purposes of proofs of clai wi be treated as creditors of accordance with the terms of the Plan of this Plan of
Reorgantion, Creditors of either Debtor who file Interstate Sweeping, Ltd. and wi be paid in
Reorgantion.
that
The Debtors owe Creditors holding secured clais a total of$3,I10,276.70. Of
amount, the largest clais are Automotive Management Group (Class 2 Clais under the Plan); Finova Capital Corporation (Class 3 Clais under the Plan); and Community First National Ban
(Class 4 Clai under the Plan).
$346,772. Of The Debtors owe Creditors holding unsecured priority clais a total of
that
total, the largest clais are Internal Revenue Servce, Withholding Taxes ($235,102), Colorado
Labor and Employment ($17,713), and the Calforna Employment Development Deparment ($26,505.15). There are also employee clais entitled to priority which total $21,239.36 as are set forth in Exhbit 5 attached.
Deparment of
The Debtors owe Creditors holding unsecured nonpriority claims a total of$I,678,629.30. $200,000), Roy Bai
Of that total, the largest clais are First Financial Corporation (in excess of
and/or Ai Sweeping, Inc.(in excess of$IOO,OOO) and Pacifc States Corporation (in excess of $100,000).
The Debtors are par to several unexpired leases and executory contracts primarly for
offce equipment, telephones and for the premises occupied by Interstate in Denver, Redlands and Mesa where Interstate has business operations. In addition, Interstate has numerous contracts to provide sweeping servces to its varous customers
In several caes, the Debtors had guarantors or co-obligors for varous liabilties. These
pares and the debts to which they are obligated are listed in Exhbit 4. Because Interstate
Sweeping ha assumed the liabilties ofIG Servces, the list incorporates the co-obligors and both companes. guarantors of
F. SUMY OF SIGNICANT LmGATION
a) The scheduled unsecured creditor, First Financial Servces, has tiled an adversa
proceeding claig a security interest under a theory of constructive trust in certai unidentified assets of Interstate. The complait asserts that Al Star Maitenance, LLC promised a security
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interest in certai equipment which IG Servces Group, LLC acquired from Al Star Maintenance. The complait further describes an alleged course of conduct purporting to make IG Servces Group LLC a successor to Al Star Maitenance. The Debtor disputes the allegations and asserts that it is a bona fide purchaser from Al Star Maitenance.
b) Judith Cerand and Sierra Leasing LLC fied an adversar proceeding agaist
Interstate Sweeping, Ltd. and IG Servces Group, LLC asserting the right to impose a constructive trust upon assets in which the plaitifs clai they were offered a lien for certain loans. Debtors have responded that the loans were converted into equity in IG Servces Group
LLC and have been redeemed under a redemption agreement. Debtors have also counter-claied
for certai preferential payments, for damages arsing from an abusive lawsuit agaist Interstate
and to set aside certai claied liens. Plaitifs have not yet responded to the counter-claims.
IV.
SUMY OF TH PLA
A. DESCRITION OF TH INSTMNT BY SWEEPCO
1. The Plan Provisions
The Plan provides that followig confation of the Plan Sweepco, LLC wil pay to the Reorganed Interstate a sum of money suffcient to pay the admistrative clais incurred during the Chapter 11 proceeding, the intial payments to the secured creditors called for under the Plan
the sums necessar to cure and assume the executory contracts and unexpired leases which are
not rejected under the Plan the sums commtted under the Plan to be paid to the class of $300,000 to allow the unsecured creditors and additional working capital up to the amount of
Reorganed Interstate to continue its operations. The existing common stock of Interstate wil be caceled under the Plan and new common stock will be issued to Sweepco upon the Effective
Date under the Plan.
2. Who is Sweep
co?
Sweepco is a Colorado Limted Liabilty Company which has three members: Richard S. Frar, Joel A Mael and James R Hi. Sweepco ha obtaied commtments from individuals to act as CEO and CFO of the Reorganed Interstate upon the Effecive Date of the Plan; these individuals each possess graduate degrees from outstanding universities and combine over
25 yeas of experience in related businesses. The background and interests of the principals of
Sweep
co are set fort below:
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Richard S. Frary
Mr. Frar is one of
the founding parners ofTallwood Associates, Inc., a merchant
bang fi. At Talwood, Mr. Frar's focus is on i) pricipal transactions for Talwood and
outside investors and ü) advising public and private rea estate companes on capital market
transactions and acquisition and restructurig opportnities. Prior to staring Talwood,
Mr. Frar was managig director at Drexel Burnam Lambert, Inc. During his eleven years at the Corporate Finance Deparment's rea estate group which was responsible for in excess of$15 bilon for corporate and mortgage fiancing for public and
Drexel, Mr. Frar was Head of
private rea estate companes and corporate clients and was a member of the deparment's
Executive Commttee. Mr. Frar has also had experience as a CPA with a big eight accounting
The Johns
fi as CFO ofa NYSE listed REIT, and as a national homebuilder. A graduate of
Hopkis University, Mr. Frar holds an MBA from Harard Business SchooL.
Joel A. Mael
wood. At Tallwood, Mr. Mael develops relationships with and advises rea estate clients as well as general corporate clients. Previously, Mr. Mael was with Drexel's Corporate Finance Deparment where he was involved in over
Mr. Mael is also a founding parner of Tal
$3 bilon ofrea estate related fiancing in addition to being a member of the deparent's
Executive Commttee. Mr. Mael specialed in corporate finance and corporate restructrig. Mr. Mael eared a B.A. in Economics from Yeshiva College and an MBA from Harard Business
SchooL.
James R. Hil
Prior to formg Hi Companes, LLC, Mr. Hi was the Mangig Director of
the Broe
Companes, Inc. based in Denver, Colorado. Mr. Hill's responsibilities include the identification, negotiation and fiancing of rea estate projects of al tyes with paricular focus on commercial
and multi-famly assets and identifg operating companes for investment purposes. Whe at
Broe, Mr. Hi was responsible for the acquisition and fiancig in excess of $300 mion of
rea
estate. Prior to joing Broe, Mr. Hi served as a senior offcer of Triec Corporation, Ltd., a
$10 bilon publicly traded rea estate company based in Calgar, Alberta where he was
responsible for the acquisition of commercial and corporate assets. Transactions completed by
Mr. Hi durg his tenure exceeded $1 bilon. Mr. Hi holds a BBA from the University of
Western Ontao and an MBA from York University.
3. Sweepco's abilty to meet the commtment
Sweepco has made a commtment to fund the obligations to be paid on or about the Effective Date under the Plan estimated to be $704,642 and to provide necessar working capital
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up to the sum of
$300,000. Trade payables which are due to be paid at the time of
wi be paid in the ordinar course of
confrmation business from the working capital so contributed and from
operational incomes. Its abilty to qieet the commtment is confrmed by Colorado Business Ban
which has represented in wrting to the Debtors that the pricipals of Sweepco maintain adequate cash balances to meet the commtment. Attached as Exhbit 9 are projected balance sheets and statements of income and statements of cash flows as of and for the years ending July 3 i, 2000
through 2005 together with the assumptions which include the composition of
the obligations to
be paid upon the Effectve Date.
B. TRTMNT OF CLS AN INTERESTS UNER TH PLA
1. Class 1
Class 1 Clais include clais entitled to priority under 11 U.S.C. §§ S07(a)(3), (a)(4) and
(a)(6). The Debtors are aware only of claims falg under § 507(a)(3) in this case. The total of such clais is in the amount of$21,239.36. This class, to the extent the clais are allowed, wi
be paid in full, in cah, as soon as practicable afer the Effective Date. Individual claimants and
amounts are contaied in Exhbit S. Because Interstate Sweeping has assumed the liabilities oflG both Servces, the exhbit incorporates the priority clais under 11 U.S.C. § 507(a)(3) of companes.
2. Class 2-Secured Clais of Automotive Management Group
Class 2 is comprised of several subclasses of Secured Clais held by Automotive Management Group. Al Class 2 Claims are secured by propert as described in Class 2A through
2S under the Plan and al Class 2 Clais except Classes 2L and 2R are impaired Claims under the
Plan. Automotive Management Group asserts a total secured clai in the amount of $1,189,093.32. Each impaied Class 2A through 2S clai wi be paid the prorata amount ora the monthly payment of$I6,OOO over 66 months based upon the appraised liquidation value of collateral held for each class. The payments wil include an imputed interest rate of9.75% per
anum.
3. Class 3-Secured Clai of Fino
va
Fino
Class 3 is comprised solely of
the impaied Alowed Secured Clai of
va. Finova is
secured by trcks, traiers, offce and shop equipment, eleconic equipment and 10 sweepers.
Under the PLan Finova sha receive an intial payment on the Effecive Date of the Plan in the
amount of
$65,000, monthly payments of$I1,675 for 72 months and an additional payment of
its clai. Finova asserts a secured clai in the
$25,000 in the 72nd month in fu satisfacton of
amount of$I,I85,747. Finova shal retai its liens upon its collateral until the clai is satisfied. Finova has agreed to forbear from proceeding agaist any guarantors of its obligations and to
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waive any deficiency claim against the unsecured creditors' fund established in Class 15. Any adequate protection payments made dunng the pendency of the Chapter 11 case shall be deducted from the numbers of payments to be made under the Plan.
4. Class 4-Secured Clai of Community First
Class 4 is comprised solely of the impaied Allowed Secured Claim of Community First. $60,000 upon the Effective Date Under the PLan Community First shall receive a cash payment of plus 60 monthly payments in the amount of $8,000 per month in full satisfaction of al claims.
Community First asserts a secured clai in the amount of
$698,665. Community First is secured
by machiery, equipment, accounts receivable, life insurance, and certain trucks and trailers, and it
shal retai its liens upon such collateral until the claim is satisfied. Community First has agreed to forbear from proceeding agaist any guarantors of its obligations and to waive any deficiency
clai agaist the unsecured creditors' fund established in Class 15. Any adequate protection
payments made durig the pendency of the Chapter 1 I case shall be deducted from the numbers of payments to be made under the PIan.
5. CLASS 5-Secured Claim ofGMAC
Class 5 is comprised solely of the impaired Allowed Secured Claim of GMAC. Under the Plan GMAC shall receive 60 monthly installments of $942.12 which shall represent the present the allowed secured claim ofGMAC discounted with an imputed interest rate of9.5%. value of The first payment of this promissory note shall be due on the first day of the month beginnng not less than 30 days afer the Effective Date. GMAC asserts a secured claim in the amount of 1500 EXT GMC Truck/4x4/Plow SB $33,826. GMAC shal retain its lien upon a 1998 Model
and a 1998 Model 1500 GMC Truck/4x4/Plow CS. GMAC, by its acceptance of
the plan shal
release and waive any right it might have to assert under 11 U.S.C. S06(a) for a deficiency claim under Class 15 of the Plan. Any adequate protection payments made durig the pendency of the
Chapter 11 case shal be deducted from the number of payments to be made under the Plan.
6. Class 6-Secured Clai of Ori
Class 6 is comprised solely of the impaied Alowed Secured Clai of Ori. Under the
Plan Ori shal be paid in 42 monthly payments in the amount of$1,250 which shal represent the
present value of the Alowed Secured Claim of Ori discounted with an imputed interest rate of
9.5%. The fist payment sha be due on the fist day of
the month beging not less than 30 days afer the Effective Date. Ori asserts a secured clai in the amount of$55, 110. The Class 6 Claimant shal retai its fist lien on a 1993 Model 4052 GMC 40S2/Murphy Sweeper. Ori shall,
11 U.S.C. S06(a) for a deficiency claim under Class 15 of
by its acceptance of the plan releae and waive any nght it might have to assert under
the Plan. Any adequate protection
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payments made durig the pendency of the Chapter 11 case shal be deducted from the number of payments to be made under the Plan,
7. Class 7-Secured Clai of Ban of
Denver
Ban of
Class 7 is comprised solely of
the Alowed Secured Clai of
Denver which is not
impaired. The Class 7 Claimant shal retai its lien in a Chevrolet Tahoe and be paid in
accordance with the terms of its contract.
8. Class 8-Secured Clai of Autonet
Class 8 is comprised solely of the impaied Alowed Secured Clai of Autonet. Under the $459.64 per month which Plan Autonet shal be paid in 42 monthly instalents in the amount of
sha represent the Alowed Secured Clai of Autonet discounted with an imputed interest rate of
9.5%. The fist payment of this promissory note shal be due on the fist day of
the month
begig not less than 30 days afer the Effective Date. Autonet asserts a secured clai in the
amount of$17,602. The Class 8 Claimat shal retai its fist lien on a 1998 Model S-348-1
GMC/W-4N AC/Schware. Autonet, by its acceptance of
the plan shal releae and waive any
the Plan. Any adequate protection payments made during the Chapter 11 case shal be deducted from the number of payments to be made under the Plan.
right it might have to assert under 11 U.S.C. § 506(a) for a deficiency clai under Class 15 of 9. Class 9-Secured Clai of
Deere Credit
the impaied Alowed Secured Clai of
Class 9 is comprised solely of
Deere Credit.
Under the Plan Deere Credit shall be paid in 42 monthly payments in the amount of $346.50 per
month which shall represent the Allowed Secured Clai of imputed interest rate of9.5%. The fist payment shal be due on the fist day of
Deere Credit discounted with an the month
begig not less than 30 days afer the Effective Date. Deere asserts a secured claim in the
amount of$12,336. The Class 9 Claiant shal retai its fist lien on a 1995 Utilty TractorTraier. Deere Credit, by its accptance of
the plan shall releae and waive any right it might the Plan. Any have to assert under 11 U.S.C, 506(a) for a deficiency clai under Class 15 of
adequate protecton payments made durig the Chapter 11 cae shal be deducted from the number of payments to be made under the Plan.
10. Class ia-Secued Clai of
Michael Mier
the impaied Alowed Secured Clai of
Michael Miler which sha be paid in 60 equal monthy inalents of$556.30 which shal represent the Allowed Michael Mier discounted with an imputed interest rate of9%. The holder of Secured Clai of
Class 10 is comprised solely of
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the clai shall retai his lien on the 1998 GMC/Schwarze 348 Sweeper VI
J8DCYB 1KYW7005942.
11. Class 1 I-Secured Clai of the City and County of
Denver
the City and County of Denver which shal be paid in six equal anual instalents commencing with the anual anversar of the Effective Date together with interest on such clai at 9% per anum.
Class 11 is comprised solely of the impaied Alowed Secured Clai of 12. Class 12-Secured Claim of the Colorado Deparment of
Revenue
Class 12 is comprised solely of Deparment of
the Colorado Revenue which sha be paid in six equal anual installments commencing with the
the impaied Alowed Secured Clai of
anual anversar of the Effecive Date together with interest on such clai at 9% per anum.
13. Class 13-Sierra Leaing Co. LLC
Class 13 is comprised solely of the Alowed Secured Clai of
Sierra Leasing Co. LLC.
Under the PLan the collateral securig the clai under Class 13 which includes a power washer,
a time clock and certai computer hardware and softare shall be returned to the holder of the
Class 13 claims in full satisfaction of the Class 13 clais.
14. Class 14-National Factorig Servces, Inc.
Class 14 is comprised of
any Alowed Secured Clai of
National Factoring Servces, Inc.
which has filed a secured clai against pre-petition accounts receivable, intangibles and inventory.
The Debtor's dispute the clai and wi attempt resolution of the claim prior to the Effective Date. The Class 14 Claiant holds a reserve accunt from pre-petition factored receivables
agaist which a set offwi be alowed as to any Alowed Secured Clai. If
the reserve account is
inuffcient to satisfy the Alowed Secured Clai in full, additiona collateral having a value as of
the Effective Date wi be surrendered to satisfy the clai.
15. Class 15-Unsecured Clai
Class 15 is comprised of al Alowed Clai of the Debtors not otherwse included in any other class in the PLan includig Alowed Clai based upon the rejecton of executory contracts
or unexired leaes. The clai in ths class are in the aggegate of$I,678,629.30 and are
impaied. Holders of
Class 15 Unsecred Alowed Clai sha receive a pro-rata share of
$175,000 as soon as practica on or afer the Effective Date, With respec to any Class 15 Unsecued Clai tht is not an Alowed Clai as of the Effecive Date, payment thereof shal be
made no later tha 20 days afer such clai is Alowed by Final Order. Exhbit 6 contains a
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schedule of all known Unsecured Claims and identifes any claims in dispute. Because Interstate
Sweeping has assumed the debts oflG Servces, the schedule incorporates the Unsecured Claims and Creditors of both entities.
16. Class 16-Equity Interests
Class 16 is comprised of al Alowed Interests of the Equity Security Holders. Equity Security Holders shal neither receive nor retain anythig under the Plan and their Equity Interests shal be caceled upon the Effective Date of the Plan. The Clais in Class 16 are deemed to have rejected the Plan pursuant to 1 i U.S.C. 1126(g).
17, Unclassifed Clai
a. Administrative Claims
Alowed Admistrative Clais accorded priority pursuant to Banptcy Code § 507(a)(I) are unclassifed Clai under the Plan. These Clais are Clais for the
admistrative expenses of preservg the Debtors' banptcy estates. Under the Plan a Holder of an Alowed Admistrative Clai shal receive an amount equal to such Clai as soon as
practicable followig the later of the Effective Date or the date on which an Order of the
Banptcy Court alowig such Clai becomes a Final Order, or cash or deferred cash payments
paid in such amounts and on such other terms as may be agreed to by each Holder of such an the Allowed Clai and the Debtor. These clais include the ordinar operating expenses of business. Interstate has accrued post Interstate incurred in the ordinar course of business of
petition withholding tax obligations which, at June 30, 1999 totalled $183,673.87. Signficant
reductions in that amount occurred in July, 1999, and additional obligations were incurred as June 30, 1999, Interstate had accounts payable payroll was eared and paid. In addition, as of $272,559.59 (which amount includes business in the amount of arsing in the ordinar course of
$175,000 in legal fees owig to Debtor's counsel), which sums are entitled to admistrative clai
treatment under the plan to the extent they have not been paid in the ordinar course of the business of Interstate.
Other Admistrative Clai include Clai arsing from the employment of
professional persons in the Banptcy Case. Professionals employed at the expense of the Estate or the Debtor and entities who may be entitled to reimbursement or the alowance of fees and expenses from the Estte or the Debtor pursuant to 11 U.S.C. S03(b)(2-6), shal receive cash in the amount awarded in accordance with a Fin Order entered pursuant to i 1 U.S.C. 330, 331 or S03(b)(2-6). Such Clai include attorneys' fees for Interstate's counsel which had accrued on i 5,000 although application ha not been made for this amount June 30, 1999 in the amount of$2 nor has a court order entered approvig any fees to counseL. Additionaly, the Offcial Unsecured Creditors' Commttee counsel has accrued fees in the amount of$16,000.00 but no application
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for nor alowance of these fees has been made. Additional fees may be eared by counsel for Interstate and the Creditors' Commttee as the case progresses. Any such fees wil necessarly be
applied for and must be awarded by the Court afer Notice before any fees can be paid. Counsel
for Interstate holds a $40,000 secunty retaier which may be applied to reduce fees when they are alowed and the court grants permssion. Interstate has also incurred an appraisal fee pursuant to
the Order of the Court authorig the employment of an appraiser. The amount of fees and
expenses which have been biled, but not yet alowed, is $5,862.13.
accordance with § 1
Admistrative Clais are unclassifed under the Plan. Ths class will be treated in the Banptcy Code, and for that reason, the Clais in this
1 29(a)(9) of
class are unipaied. Holders of these Clai wi receive 100% repayment with respec to their
Alowed Clais.
b. Priority Tax Claims
Priority Tax Clais also are unclassifed under the Plan. In accordance with
11 U.S.C. 507(a)(8), Holders of
such Clais wi receive six equal anual deferred payments from
the Reorganed Interstate commencing with the first anual anversar of the Effective Date
together with interest at the rate of 9% per anum, provided that any such Clai may be prepaid
in whole or in par at any time without notice, penalty, or premium. Any of
these clais may be
objected to by either of the Debtors or Reorganed Interstate and only the clais alowed afer
the objection wi be paid. If
the claims are allowed in full they will be paid as follows:
agaist IG Servces, of
The Internal Revenue Servce has fied a total Unsecured Tax Claim of$17,643.13 which $1,522.04 is claied as priority. It wil be paid in six equal anual
$262,407.23 agaist
instalents of $3 i 1.28 commencing on the fist anual anversar of the Effective Date. The
Internal Revenue Servce also has fied a Total Unsecured Tax Clai of Interstate Sweeping, of instalents of Colorado Deparment of
which $233,579.97 is a Priority Clai. It will be paid in six equal anual
$47,770.27 commencing on the fist anual anversar of
the Effective Date. The
$2,022.82 commencing on
Labor and Employment has fied a Priority Tax Clai of$9,890.87
agaist IG Servces. It wi be paid in six equal anual instalents of
the fist anual anversa of the Effective Date. It also has fied a priority ta clai of
$7,822.60 agai Interstate Sweeping. It wi be paid in six equal anual inalents of
the Effectve Date. The State of Calorna Employment Development Deparment also ha fied an Unsecured Priority Tax Clai
$1,599.83 commencing on the fist anual anversa of
agaist Interstate Sweeing in the amount of$26,SOS.I5. It wi be paid in six equal anual the Effective Date. The $5,420.66 commencig on the fist anual anversa of instalents of
amount of these Clai may be diferent from those listed on the Banptcy Schedules due to interest and penalties assessed agai the Debtors.
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c. Secured Tax Claims
The City and County of
Denver holds a secured tax clai of$6,712.87 against
Interstate Sweeping (See Class 11). They wi be paid in six equal anual instalents of
$1,372.87 commencing on the fist anual anversa of Colorado Deparment of Revenue has fied secured tax clais of
the Effective Date. In addition, the
$44,078.36 and $61,820.69 agai IG Servces Group and Interstate Sweeping, respectively (See Class 12). The Debtors Revenue's Clai of$61,820.69 agaist Interstate Sweeping includes the amount claied agait IG Servces Group LLC. Interstate proposes to pay six equal anual instents of$I2,643.I7 including interest at the rate of9% per anum both
believe that the Colorado Deparment of commencig on the fist anual anversa of the Effective Date in fu satisfaction of
clai. If the Court determes that both clais are separate and distinct tht anual payment wi
increase by $9,014.62 for a total of$21,657.79.
The amount of secured tax clai may difer from those listed in the Banptcy Schedules due to interest and penalties assessed agaist the Debtors. These revised clais wi be
paid in equal anual intalents over a six yea period together with interest at the rate of 9% per
anum.
C. OTHR PROVIIONS UNER TH PLA
1. Provisions Governng Distributions
8. Requirement For Allowance Of Claims And Equity Interests
No payments or other distributions wi be made on account of any Clai that is
not Allowed. For inormtion concerng the defition and mechancs of Alowed Claims, see
Section VI of this Disclosure Statement.
b. Disbursing Agent
The Disbursing Agent under the Plan is to be a disinterested individual with a
fiancial and accunting background to be seleced by the Reorganed Interstate and approved by the Unsecured Creditor's Commttee. If no selecion or approval ha been made with
30 days afer the Effective Date, either Reorganed Interstte or the Unsecured Creditors Commttee may apply to the Cour for appointment by the Court of a Disbursing Agent. The
costs and expenses of the Disbursing Agent sha be born by the fund provided under the plan for payment to the unseced credtors.
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c. Date Of Distribution
The Distribution Date established by the Plan is 30 days afer the Effective Date.
Distributions under the Plan wi be made by the Reorganed Interstate on the Distribution Date
or as soon as practicale but no later tha ten days from the Distribution Date.
d. Delivery Of Distributions
The Disbursing Agent wi make distributions to Holders of Alowed Clais in
Class 15 at the addresses set forth on the proofs of clai fied by such Holders or to the last
known addresses of such Holders. If any Holder's distribution is returned as undeliverable, no further distribution to such Holder wi be made unless and unti the Disbursing Agent is notifed
of such Holder's then-current address, at which time all missed distributions wi be made to such
Holder without interest. Al clai for undeliverable distributions must be made on or before the
second anversa date of the Distribution Date. Afer such date, al unclaied distributions wi revert to the Reorganed Interstate and the Alowed Clais whose distributions were not
delivered wi be discharged and forever bared. Checks issued by the disbursing agent in respect of Alowed Clais wi be null and void if not cahed withi 90 days afer the date of issuance. Requests for reissuance of any check must be made direcly to the disbursing agent by the Holder of the Alowed Clai with respect to which the check was originaly issued. Any clai in respect of such voided check wi be made on or before the second anversar date of the Distribution
Date. Afer such date, al clai in respect to voided checks will be discharged and forever bared
and the unclaied propert will revert to the Reorganed Interstate. The Disbursing Agent wi
charge for his or her time and expenses at the rate established by agreement between the
Unsecured Creditors' Commttee for Reorganed Interstate and the Disbursing Agent. It is
estimated that these charges wi not exceed $5,000.
e. Setoffs
The Reorganed Interstate may, but wi not be required to, set off agaist any
Clai and the payments or distributions to be made pursuant to this Plan in respect of such CLai
clai of any natue whatsoever assertable agai the Holder of such Clai by the Debtor, the
Estate or the Reorganed Interstate. Alowance of a clai or faiure to exercise any right to setoff with respec to a clai does not constitute a waiver or releae by the Reorganed Interstate of
any such clai tht is assertable agaist such Holder. Any clait agait whom a setoff is asserted sha have recurse to the United States Banptcy Court for the District of Colorado to
determe the valdity and amount of any setoff
which is contested.
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2. Treatment Of
Executory Contracts And Unexpired Leases
a. "Assumption" and "Rejection"
The Banptcy Code provides that certai executory contracts and unexpired
leases may be assumed or rejected. In this context, "assumption" means that the debtor agrees to
perform its obligations and cure al existing defaults under the contract or leae, and "rejection"
means that debtor is relieved of its obligations to perform further under the contract or lease but is the the contract or lease. Under § 365(d)(2) of subject to a clai for damges for the breach of
Banptcy Code, the debtor may assume or reject certai executory contracts until a plan of
reorgantion is confed.
b. Assumed ¡fNot Rttected
The Banptcy Code gives a debtor the power, subject to the approval of the Banptcy Cour, to assume or reject executory contracts and unexpired leases. Rejection or
assumption may be effected pursuant to a plan of reorgantion. Under the Plan the
Interstate that constituted exectory contracts or unexpired leaes as of the Petition Date except the consulting agreement with Roy Bai and Ai Sweeping, Inc., any unexpired leases with Sierra Leasing Co. LLC, certai agreements to issue or purchase shares and employee benefit agreements which are rejected. If a dispute exists as to whether a contract is executory or a lease unexpired, the Debtor
Reorganed Interstate assumes, as of the Effective Date, al contracts and leaes of
has 30 days afer the entry of an order of the Banptcy Court makng such a determation to
assume or reject the executory contract or the unexpired lease.
c. Claims Arising Upon Assumption Or R~jection Of Contract
The Plan requires that al Clais for damages arsing from the rejection of an executory contract or unexpired lease be forever bared and unenforceable against the Estate unless evidenced by a proof of clai that is fied by the par whose executory contract or unexpired leae is rejected with the Banptcy Court and served upon counsel for Debtors and the the Unsecured Credtors' Commttee no later tha 20 days afer the Confation Date, if
Clai arses from the rejecon of an exectory contract or unexpired leae by operation of any
provision of the Plan or 30 days afer the entr of a Final Order approvig the rejecon of such an exectory contract or unexpired the rejecton of the Clai arses out of contract or lea, if
leae puruant to the Fin Order. Al Alowed Clai arsing from the rejection of an executory
contract or unexpired leae shal be treated as Unsecred Clais pursuant to Section 4 unless
otherwse ordered by Final Order of the Banptcy Court.
Upon the assumption of any executory contract or unexpired leae pursuant to
Aricle 7 of
the Plan al defaults by Interstate under such contract or leae shal be deemed cured,
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except to the extent timely wrtten demand is made pursuant to the provisions of Section 7.5 of
the Plan. If such demand is appropnately served, and a Debtor objects in wrting within thirt
days thereaer, the Banptcy Court, by issuance of a Final Order, shall determne any amount
due and owig, or shal approve a settlement.
All Alowed Clais arsing from the assumption of an executory contract or
unexpired leae wi be treated as Admistrative Clais pursuant to Aricle 3.1 of the Plan. All Alowed Clais arsing from the rejection of an executory contract or unexpired lease shal be the Plan unless otherwse ordered by the treated as unsecured clais pursuant to Aricle 5.31 of
Banptcy Cour in the Fin Order.
3. Contested And Contingent Clais
a. Provisions Concerning Claims Scheduled As Disputed. Unliquidated Or
Continient
Pursuant to § 521(1) of schedules of
the Banptcy Code, the Debtors were required to fie
liabilties with the Banptcy Court upon the filig of
the Banptcy Case.
Pursuant to § 1111(a) of
the Banptcy Code, a proof of claim is deemed fied for any Claim that appears in these schedules ~ the Clai is scheduled as disputed, contingent, or unliquidated.
The Debtors' schedules list each Clai in certai classes as either disputed, contigent, or
unlquidated; accordingly the Holder of each such Claim .m file a proof of claim with the
Banptcy Court to be eligible to vote on the Plan and receive a distribution. The Banptcy Court has set as the date by which all proofs of clai must be filed with the Banptcy
Court in the Banptcy Case. No distributions will be made with respect to any Claim for which
no proof of clai has been fied by the applicable bar date.
b. Procedure For Resolving Contested And Contingent Claims
The Debtors (or any other interested par) may object to any Claim by filing an
objection with the Banptcy Court and servg the objection upon the Debtor and the Holders
of each of the Clais to which objections are made no later than 10 days prior to the Distribution
Date or the date that is 60 days afer the applicale proof of clai (or request for payment in the cae of Admistrative Clai) has been fied, whichever is later. Ifno objection is filed by the
applicable deadlies to any Clai tht is otherwse alowable, the Clai wi be treated as an
Alowed Clai. If an objecion is fied to a Clai no distbution wi be made with respect to the Clai unless and until al objecions to the Clai have been determed by Final Order. A
Contigent Clai wi be treated in the sae maer; no payment or distribution wi be made on
a Contingent Clai unti the contigency occs and the Clai becomes fied and absolute. The
debtor may litigate to judgment, settle or withdraw objections to Contested Clais.
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4. Meas For Implementation Of
The Plan
Upon the Effective Date, al issued and outstanding Equity Interests in Interstate shall be
canceled and the ReorgaIed Interstate shal issue to Sweepco 5,000 shares of
new common
stock with a par value of$O.OI. The ReorgaIed Interstate sha then become a wholly-owned
subsidiar of Sweepco.
S. Discharge
If the Plan is confed, Interstate shal receive a Discharge pursuant to § 1141 of the
Banptcy Code and IG Servces Group LLC is dissolved. The Discharge wil be effective
agaist al Claits regardless of whether they received notice of the reorgantion proceedings.
Any creditor who did not receive notice of the reorgantion proceeding wi have recourse only
agaist the assets in the Liquidatig Trust.
6. Final Decree
The Reorganed Interstate wi fie a motion with the Banptcy Court to close the Banptcy Case withi twelve months of the Effecive Date. The Reorganed Interstate
believes that this wi alow suffcient time to resolve any clais objections and fee applications.
7. Payment to United States Trustee
ReorgaIed Interstate shal comply with 28 U.S.C. § 1930(a)(6) and the United States Trustee's Operating Guidelies and Reportg Requirements makg the required quarerly
payment offees to the Offce of
the United States Trustee and fig the appropriate reports.
D. LIQUIATION OF TH DEBTOR'S ASSETS
If no plan ca be confed, the Banptcy Case may be converted to a cae under
Chapter 7 of the Banptcy Code. In Chapter 7 caes, a trustee would be appointed to liquidate
the debtor's assets. The proceeds of the liquidation would be distributed to the respective holders
of Alowed Clai agaist the debtor in accrdance with the priorities established by the
Banptcy Code.
Under