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IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE


In re:
eTOYS DIRECT 1, LLC, et al.,
1
Debtors.
) Chapter 11
)
) Case No. 08-13412(BLS)
) (Jointly Administered)
)
DISCLOSURE STATEMENT WITH RESPECT TO
JOINT PLAN OF LIQUIDATION OF THE DEBTORS AND
THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS
PURSUANT TO CHAPTER 11 OF THE BANKRUPTCY CODE
Counsel for Debtors and Debtors in Possession:
PACHULSKI STANG ZIEHL & JONES LLP
Laura Davis Jones (Bar No. 2436)
Jeffrey W. Dulberg (CA Bar No. 181200)
Michael R. Seidl (Bar No. 3889)
919 N. Market Street, 17th Floor
P.O. Box 8705
Wilmington, DE 19899-8705
Telephone: 302-652-4100
Facsimile: 302-652-4400
Dated: June 9, 2010
Counsel for Official Committee of Unsecured
Creditors:
ARENT FOX LLP
Schuyler G. Carroll
1675 Broadway
New York, NY 10019
Telephone: 212-484-3900
Facsimile: 212-484-3990
-and-
ELLIOTT GREENLEAF
Rafael X. Zahralddin-Aravena (Bar No. 4166)
1105 Market Street, Suite 1700
Wilmington, DE 19801
Telephone: 3 02-3 84-9400
Facsimile: 302-384-9399
1
The Debtors in these cases, along with the last four digits of each Debtor's federal tax identification number, if
applicable, are: eToys Direct 1, LLC (N/A); The Parent Company (7093); BabyUniverse, Inc. (7990); Dreamtime
Baby, Inc. (8047); eToys Direct, Inc. (7296); PoshTots, Inc. (8660); eToys Direct 2, LLC (N/A); eToys Direct 3,
LLC (N/A); Gift Acquisition, L.L.C. (0297); and My Twinn, Inc. (1842). The address for each ofthe Debtors is 717
17th Street, Suite 1300, Denver, CO 80202, with the exception ofPoshTots, Inc., the address for which is 5500 Cox
Road, Suite M, Glenn Allen, VA 23060.
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I.
INTRODUCTION
The above-captioned debtors and debtor in possession (the "Debtors") together
with the Official Committee of Unsecured Creditors (the "Committee") in the Debtors' cases
have filed their proposed Joint Plan of Liquidation of the Debtors and the Official Committee of
Unsecured Creditors Pursuant to Chapter 11 of the Bankruptcy Code, dated June 9, 2010 (the
"Plan"), with the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court"). A copy of the Plan is attached hereto as Exhibit A.
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The Debtors and the Committee
hereby submit this Disclosure Statement with Respect to Joint Plan of Liquidation of the Debtors
and the Official Committee of Unsecured Creditors Pursuant to Chapter 11 of the Bankruptcy
Code, dated June 9, 2010 (the "Disclosure Statement"), pursuant to Section 1125 of the
Bankruptcy Code in connection with the solicitation of acceptances or rejections of the Plan from
certain holders of Claims against the Debtors.
Following a hearing held on June 8, 2010, the Disclosure Statement was approved
by the Bankruptcy Court as containing "adequate information" in accordance with Section 1125
of the Bankruptcy Code. Pursuant to Section 1125(a)(1) of the Bankruptcy Code, "adequate
information" is defined as "information of a kind, and in sufficient detail, as far as is reasonably
practicable in light of the nature and the history of the debtor and the condition of the debtor's
books and records, including a discussion of the potential material Federal tax consequences of
the plan to the debtor, and a hypothetical investor typical of the holders of claims or interests in
the case, that would enable such a hypothetical investor of the relevant class to make an
informed judgment about the plan." NO STATEMENTS OR INFORMATION CONCERNING
THE PLAN AND THE TRANSACTIONS CONTEMPLATED THEREBY HAVE BEEN
AUTHORIZED, OTHER THAN THE STATEMENTS AND INFORMATION CONTAINED
IN THIS DISCLOSURE STATEMENT AND THE INFORMATION ACCOMPANYING THIS
DISCLOSURE STATEMENT. ALL OTHER STATEMENTS REGARDING THE PLAN AND
THE TRANSACTIONS CONTEMPLATED THEREBY, WHETHER WRITTEN OR ORAL,
ARE UNAUTHORIZED.
APPROVAL OF THE DISCLOSURE STATEMENT BY THE BANKRUPTCY
COURT DOES NOT INDICATE THAT THE BANKRUPTCY COURT RECOMMENDS
EITHER ACCEPTANCE OR REJECTION OF THE PLAN, NOR DOES SUCH APPROVAL
CONSTITUTE A DETERMINATION BY THE BANKRUPTCY COURT OF THE FAIRNESS
OR MERITS OF THE PLAN OR OF THE ACCURACY OR COMPLETENESS OF THE
INFORMATION CONTAINED IN THE DISCLOSURE STATEMENT.
THE DISCLOSURE STATEMENT CONTAINS IMPORTANT
INFORMATION THAT MAY BEAR UPON YOUR DECISION TO ACCEPT OR REJECT
THE PLAN. EACH HOLDER OF A CLAIM OR INTEREST SHOULD READ THIS
DISCLOSURE STATEMENT AND THE PLAN IN THEIR ENTIRETY. AFTER
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Capitalized terms used herein that are not otherwise defined herein shall have the meanings ascribed to them in the
Plan.
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CAREFULLY REVIEWING THESE DOCUMENTS, IF YOU ARE A CLAIM HOLDER
ENTITLED TO VOTE, PLEASE INDICATE YOUR VOTE WITH RESPECT TO THE PLAN
ON THE ENCLOSED BALLOT AND RETURN IT IN THE ENVELOPE PROVIDED.
A. Disclosure Statement Enclosures
Accompanying this Disclosure Statement are copies of the following materials:
1. The Plan (Exhibit A to the Disclosure Statement);
2. A Notice (a) fixing the time for filing of acceptances or rejections of the
Plan and objections to Confirmation of the Plan and (b) scheduling a hearing on Confirmation of
the Plan (the "Notice");
3. For Creditors entitled to vote, a ballot for acceptance or rejection of the
Plan (the "Ballot"); and
4. a liquidation analysis (Exhibit B to the Disclosure Statement).
B. Only Impaired Classes Vote
Pursuant to the provisions of the Bankruptcy Code, only Classes of Claims and
Interests that are "impaired" under the Plan may vote to accept or reject the Plan. Generally, a
claim or interest is impaired under a plan if the holder's legal, equitable, or contractual rights are
changed under such plan. In addition, if the holders of claims or interests in an impaired class do
not receive or retain any property under the Plan on account of such claims or interests, such
impaired class is deemed to have rejected the Plan and shall not be afforded an opportunity to
vote to accept or reject the plan.
Under the Plan, Claims and Interests in Classes 1, 3, and 4 are impaired. Holders
of Interests in Class 4 will receive no distribution, and, accordingly, such Interest Holders are
deemed to reject the Plan, and their votes are not being solicited. Under the Plan, Claims in
Classes 2 are Unimpaired and conclusively deemed to have accepted the Plan, and their votes are
likewise not being solicited. ACCORDINGLY, A BALLOT FOR ACCEPTANCE OR
REJECTION OF THE PLAN IS BEING PROVIDED ONLY TO HOLDERS OF CLAIMS IN
CLASS 1 AND CLASS 3.
C. Confirmation Hearing
The Bankruptcy Court has scheduled a hearing to consider confirmation of the
Plan for August 17, 2010, at 2:30p.m. (ET) in the Bankruptcy Court, located at 824 N. Market
Street, 6
1
h Floor, Courtroom 1, Wilmington, DE 19801 (the "Confirmation Hearing"). The
Bankruptcy Court has directed that objections, if any, to Confirmation of the Plan be served and
filed on or before August 6, 2010, at 4:00p.m. (ET) in the manner described in the Notice. The
date of the Confirmation Hearing may be adjourned from time to time without further notice
except for an in-court announcement at the Confirmation Hearing.
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D. Overview of the Plan
THE FOLLOWING IS A BRIEF SUMMARY OF THE TREATMENT OF
CLAIMS AND INTERESTS UNDER THE PLAN. CREDITORS AND OTHER PARTIES IN
INTEREST ARE URGED TO REVIEW THE MORE DETAILED DESCRIPTION OF THE
PLAN CONTAINED IN THIS DISCLOSURE STATEMENT AND THE PLAN ITSELF.
The Plan is a plan of liquidation, pursuant to which the net proceeds of the sale or
other disposition of the Debtors' assets are being pooled and distributed, first to holders of
Allowed Secured Claims, if any, as their interests may appear, then to the holders of
Administrative and Priority Claims in accordance with the scheme of priorities set forth in the
Bankruptcy Code, and thereafter to holders of General Unsecured Claims. Holders of Interests
are not receiving any distribution under the Plan.
Under the Plan, Administrative Claims and Priority Tax Claims are unclassified
and are to be paid in full, or upon such other terms as the Debtors and the affected Holders may
agree. Class 1 Priority Claims are impaired and are to be paid in full or upon such other terms as
the Debtors and the affected Holders may agree. Class 2 Secured Claims, if any, are
Unimpaired, and at the option of the Debtors, either (i) the legal, equitable, and contractual rights
to which such Claim entitles the Holder thereof shall be left unaltered, (ii) the Claim shall be left
Unimpaired in the manner described in Section 1124(2) ofthe Bankruptcy Code, or (iii) the
Holder of such Claim shall receive or retain the collateral securing such Claim. Class 3 General
Unsecured Claims are impaired and each Holder of an Allowed Class 3 will receive its Pro Rata
distribution of the liquidated assets ofthe estates after the payment or reserve for Administrative
Claims, Priority Tax Claims, Priority Claims, Secured Claims, and Plan Expenses. Class 4
Interests are impaired and will not receive a distribution.
Set forth below is a table summarizing the classification and treatment of Claims
and Interests under the Plan and the estimated distributions to be received by the holders of such
Claims and Interests thereunder. The actual distributions may differ from those set forth in the
table depending on the amount of Claims ultimately allowed in each category or Class and the
amount of Cash ultimately available for distribution.
DESCRIPTIO:N/eeAsS< , . EsTIMATED .......
. '' ; , , ' < ... AMooo'f: . . = ,> ritsrRi:Bi;_rioN .(%) ;/:.'
Administrative Claims $88,000.00:; 100%
Priority Tax Claims $155,013.00 100%
Class 1 $11,232.00 100%
Class 2 $0.00 100%
Class 3 $18,415,000.00 <1%
Class 4 NIA 0.0%
3
This figure does not include fees and expenses of Professionals, which the Debtors estimate will total
approximately $790,000.00 through confirmation.
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:,
II.
BACKGROUND;CHAPTERllCASES
A. General Background and History
The Debtors' history dates to 1997 and the incorporation ofEverything But the
Baby Inc. In 1999, the Debtors began marketing products under the BabyUniverse brand, and in
2001 the corporate name was changed to BabyUniverse, Inc. In 2004, the Debtors purchased the
online assets ofKB Toys, acquired the My Twinn doll company, and re-launched the My Twinn
website. In 2006, the Debtors made an initial public offering ofthe stock ofBabyUniverse, Inc.
and also acquired Dreamtime Baby. In 2006, BabyUniverse, Inc. acquired PoshTots (and
introduced PoshLiving and PoshCravings), acquired ePregnancy.com, and launched
BabyTV.com. In 2007, BabyUniverse, Inc. completed a merger with eToys Direct, Inc. In
2008, BabyUniverse, Inc. changed its name to TPC, and a new subsidiary with the name
BabyUniverse, Inc. was incorporated.
Prior to the Petition Date, The Parent Company ("TPC") was a leading commerce,
content, and new media company for growing families. TPC provided comprehensive
eCommerce and eContent resources to help families plan, play, and grow, including seven
eCommerce sites and three revenue generating eContent sites. TPC's toy business offered
thousands of toys and children's products through its eToys.com and KBtoys.com web sites,
catalogs, and strategic retail partnerships. Through its My Twinn brand, TPC marketed
personalized dolls-custom-built according to specifications, including hair color and style, eye
color, skin tone, and face shape to resemble a customer's child-and related accessories.
Through its baby business, TPC was a leading online retailer of brand-name baby, toddler, and
maternity products sold through the BabyUniverse.com and DreamtimeBaby.com web sites.
TPC's luxury brands, PoshTots.com and PoshLiving.com, reached the country's most affluent
consumers with luxury baby apparel and furnishings. With its eContent sites, Baby TV .com,
PoshCravings.com and ePregnancy.com, TPC established a recognized platform for the delivery
of content and new media resources to a national audience of expectant parents. Collectively,
the Debtors received over 59 million annual web-site visits and sold to approximately 5.9 million
unique customers. Through their various eCommerce venues, the Debtors' businesses offered
over 35,000 products from more than 500 manufacturers. TPC was publicly traded on the
NASDAQ under the ticker symbol KIDS.
TPC is the direct or indirect 100% shareholder of each of the Debtors. TPC is the
direct 100% shareholder of debtors BabyUniverse, Inc.; Dreamtime Baby, Inc.; eToys Direct,
Inc.; and PoshTots, Inc. Etoys Direct, Inc. in turn is the 100% shareholder ofeToys Direct 1,
LLC; eToys Direct 2, LLC; eToys Direct 3, LLC; Gift Acquisition, L.L.C.; and MyTwinn, Inc.
The majority ofTPC's common stock is owned by D.E. Shaw Laminar Acquisition Holdings 3,
L.L.C.
The Debtors' headquarters and corporate offices were located in Denver,
Colorado. The Debtors also leased office space in Glen Allen, Virginia, with respect to PoshTots
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and maintained a merchant buyers' office in Pittsfield, Massachusetts. The Debtors leased two
distribution and fulfillment centers, one in Blairs, Virginia, which held inventory and shipped
product directly to customers and one in Ringgold, Virginia, which was used primarily for ship-
alone items and off-site storage.
As of December 1, 2008, the Debtors employed approximately 946 people,
including 742 temporary seasonal warehouse and customer service workers. On December 15,
2008, the Debtors commenced a reduction in force; on December 23, 2008, the Debtors further
reduced their employment. As of the Petition Date, the Debtors employed approximately ninety
full-time employees in salaried and administrative positions, including customer service, and
four independent contractors (collectively, the "Employees"). None ofthe Employees is
represented by a union or other labor organization.
For fiscal year 2006, the Debtors' net sales were approximately $116 million and
for fiscal year 2007 they were approximately $106 million. Net sales for the first half of2008
were approximately $20 million. For fiscal year 2006, the Debtors' EBITDA reflected a loss of
approximately $4 million, EBITDA for fiscal year 2007 reflected a loss of approximately $10.5
million, and EBITDA for the first half of fiscal 2008 reflected a loss of approximately $11
million.
B. Debt
Until shortly before the Petition Date, the Debtors' principal secured indebtedness
consisted of: (a) $25 million revolving credit facility with The CIT Group/Business Credit, Inc.
("CIT"), pursuant to an October 2007 credit facility (the "CIT Credit Facility"), secured by
principally all ofthe Debtors' assets; and (b) a $25 million subordinated senior secured (second
lien) term note with Laminar Direct Capital, L.L.C. ("Laminar Direct"), an affiliate ofthe D.E.
Shaw Laminar Acquisition Holdings 3, L.L.C., the majority stock holder ofTPC, of which $10
million has been funded, secured by a second lien on principally all of the Debtors' assets (the
"Term Loan") and due December 27, 2010. The Term Loan is also the subject of a guarantee by
John C. Textor, a member ofTPC's board of directors.
In February 2008, the CIT Credit Facility was amended to provide, inter alia, for
a limited guaranty of$15 million of the Debtors' obligations by D.E. Shaw Laminar Lending,
Inc. ("Laminar Lending"), an affiliate ofthe D.E. Shaw Laminar Acquisition Holdings 3, L.L.C,
the majority stock holder of TPC. In connection therewith, Laminar Lending deposited $15
million with HSBC Bank USA, National Association, which amount was pledged to CIT and in
which CIT was granted a lien and security interest.
On or about December 12, 2008, the Debtors, Laminar Lending, and CIT entered
into an Assignment and Acceptance Agreement (the "Assignment Agreement") pursuant to
which Laminar Lending acquired all outstanding indebtedness under the CIT Credit Facility. In
connection therewith, Laminar Lending became the administrative agent and collateral agent
under the CIT Credit Facility and succeeded to CIT's rights thereunder, and the guaranty by
Laminar Lending to CIT was terminated.
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Consequently, on the Petition Date, the Debtors' principal indebtedness consisted
of (a) the CIT Credit Facility, in principal amount of $8,641,236, as to which Laminar Lending
was the administrative and collateral agent, and (b) the Term Loan, in principal amount of $10
million. In addition, as of the Petition Date, the Debtors estimated that they owed approximately
$15,772,000 in accounts payable (which figure includes both invoices vouched for payment and
an amount for invoices not yet received or processed for payment), the largest single portion of
which is owed for delivery services. In total, the Debtors estimated the book value oftheir
consolidated assets to be approximately $20,633,447, and the book value oftheir consolidated
liabilities to be approximately $35,722,280.
C. Events Leading to Bankruptcy
Compared to prior years, TPC has been impacted by a sharp drop in sales due to
reduced consumer recessionary spending and lower TPC inventory selection as a result of the
TPC's tight liquidity position and reduced terms from its vendors. In addition, after significant
current and prior year losses, a lack of supporting collateral and poor capital market conditions,
TPC's ability to raise new capital to restructure its operations is limited.
The Debtors' restructuring efforts commenced in the beginning of2008. The
Debtors initially retained Gibson & Rechan, LLC ("G&R"), from July 10, 2008, to July 31,
2008, so that David Gibson could assess the Debtors' business, financial condition, liquidity
position, and long-term prospects. On August 21, 2008, Mr. Gibson was engaged (on a half-time
basis) to review and assess liquidity, assist with development of a reporting package, and to
review and assess cost reductions and working capital. In October 2008, the Debtors retained
Oppenheimer & Co. Inc. as financial advisors and investment bankers to assist in a search for
one or more purchasers for the Debtors' assets. In December 2008, the Debtors retained Clear
Thinking Group LLC as financial advisors to actively lead the financial management of these
Chapter 11 cases and perform related duties on behalf of the Debtors. On December 15, 2008,
the Debtors amended the G&R retention to engage Mr. Gibson full-time and to revise the work
scope to include the following tasks: review and assess the Debtors' liquidity position, assist
with lender negotiations, and assist with bankruptcy planning. On December 24, 2008, the
Debtors further revised the retention to engage Mr. Gibson as chief restructuring officer (the
"CRO").
On December 1, 2008, the Debtors' exposure under the CIT Credit Facility
exceeded the borrowing base resulting in an overadvance and CIT's demand for immediate
payment of the overadvance. The Debtors were unable to immediately repay the overadvance,
and, thereafter, the Debtors and CIT entered into a letter agreement to permit further borrowings.
Thereafter, the Debtors, CIT, and Laminar Lending entered into the Assignment Agreement as
described above, terminating CIT's role as a lender.
In December 2008, faced with the exhaustion of availability under the CIT Credit
Agreement, declining sales, and limited prospects for additional financing, the Debtors
commenced the reduction in force described above. Thereafter, the Debtors and D. E. Shaw
Laminar Lending 3 (C), L.L.C., as Agent, and D. E. Shaw Laminar Portfolios L.L.C., as Lenders,
reached an agreement to provide funding for the Debtors through a sale process.
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Consequently, the Debtors commenced the Chapter 11 Cases to avail themselves
of the provisions of the Bankruptcy Code and preserve the status quo of their businesses through
their cases while seeking sale by auction of substantially all of their assets.
D. Commencement of Chapter 11 Cases
On December 28, 2008 (the "Petition Date"), each of the Debtors filed a petition under
Chapter 11 of the Bankruptcy Code and continued in the management and possession of its
businesses and properties as a debtor in possession, pursuant to Sections 1107 and 1108 of the
Bankruptcy Code. No trustee or examiner was appointed.
E. Retention of Key Professionals/ Appointment of Committee
a. Retention of Bankruptcy Counsel
By Order of the Bankruptcy Court, the Debtors retained Pachulski Stang Ziehl &
Jones LLP to serve as bankruptcy counsel in the Chapter 11 Cases.
b. Retention of CRO, Financial Advisors, Investment Bankers, and Claims Agent
By various Orders of the Bankruptcy Court, (a) David Gibson was retained by the
Debtors as their CRO and G&R was retained to assist him, (b) Clear Thinking Group, LLC, was
retained by the Debtors as their financial advisor, (c) Oppenheimer & Co, Inc., was retained by
the Debtors as their financial advisor and investment banker, and (d) Omni Management Group,
LLC, was retained by the Debtors as their claims, noticing, and balloting agent.
c. Appointment of Official Committee of Unsecured Creditors
and Retention of Advisors
On July 8, 2009, the Office of the United States Trustee appointed the Committee.
The members ofthe Committee are United Parcel Service; Quad/Graphics, Inc.; Zheijang
Xinyun Wood Industry Group; The Step2 Company LLC; MADD International, Ltd.; National
Products, Ltd.; and Chicco USA, Inc.
By Orders ofthe Bankruptcy Court, Arent Fox LLP and Elliott Greenleaf were
retained as bankruptcy counsel to the Committee, and CBIZ Accounting, Tax & Advisory of
New York, LLC and CBIZ, Inc., were retained as financial advisors to the Committee.
F. First-Day Motions and Related Relief
On the Petition Date, the Debtors filed certain motions seeking emergency relief to
allow their efficient and effective continued operations in the Chapter 11 Cases. On
December 30, 2008, the Bankruptcy Court, inter alia, entered orders (i) authorizing the joint
administration of the Debtors' Chapter 11 Cases for procedural purposes only, (ii) permitting the
Debtors' continued use of their existing cash management system, (iii) permitting the Debtors to
pay prepetition shipping and freight charges up to an aggregate total of $5,000, (iv) permitting
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the Debtors to continue to honor certain prepetition customer programs, including with respect to
gift cards, returns, price matching, coupons, contests, and appeasement programs, (v) permitting
the Debtors to pay prepetition sales and use taxes up to an aggregate total of $30,000, (vi)
permitting the Debtors to pay certain prepetition wages and benefits to their employees up to an
aggregate total of$30,750, and (vii) establishing procedures for providing adequate assurance of
future performance to the Debtors' utility providers.
In addition, on December 30, 2008, the Bankruptcy Court entered an order
authorizing, on an interim basis (the "Interim DIP Order"), the Debtors to enter into a debtor-in-
possession financing agreement (the "DIP") with D. E. Shaw Laminar Lending 3 (C), L.L.C., as
Agent, and D. E. Shaw Laminar Portfolios L.L.C., as Lenders (collectively, the "Lenders").
Pursuant to the Interim DIP Order and the associated DIP Credit Agreement, and in accordance
with the terms and conditions thereof, the Debtors were authorized, on an interim basis, to obtain
post-petition loans up to the amount of $3,531,000 (the "Interim Facility"). The Interim Facility
was calculated to provide the Debtors with the liquidity necessary to pursue their Chapter 11
Cases and effectuate a sale of assets.
G. Schedules of Assets and Liabilities and Statements of Financial Affairs
On January 14, 2009, and January 15, 2009, the Debtors filed their Schedules of Assets
and Liabilities and Statements of Financial Affairs with the Bankruptcy Court, which set forth,
inter alia, scheduled prepetition claims against the Debtors based on their books and records.
H. Liquidation Process and Asset Sales
Both before and after the Petition Date, the Debtors engaged in an intensive effort
to identify and attract entities interested in purchasing the Debtors' business or its assets. In
order to maximize the value of their assets, on January 2, 2009, the Debtors filed the Debtors'
Motion Pursuant to Sections 105, 363 and 365 ofthe Bankruptcy Code for Orders (A) Approving
Sale Procedures and Bid Protections, Including Break-Up Fees, in Connection With Sale of
Substantially All Assets; (B) Scheduling an Auction for and Hearing to Approve One or More
Sales; (C) Approving Notice of Respective Date, Time and Place for Auction and for Hearing on
Approval of Sale(s); (D) Authorizing the Debtors (X) to Sell Substantially All Assets, Free and
Clear of Liens, Claims, and Encumbrances and to Conduct Sales at the Debtors' Headquarters
and Warehouse Locations and (Y) to Assume and Assign Executory Contracts and Unexpired
Leases of Nonresidential Real Property; (E) Establishing Procedures in Connection with the
Rejection of Executory Contracts and Unexpired Leases ofNonresidential Real Property; and
(F) Granting Other Related Relief (the "Sale and Sale Procedures Motion"). The Sale and Sale
Procedures Motion sought authority to conduct one or more auction (the "Auction") of the
Debtors' business operations and related properties and assets, including the Debtors' intellectual
property and internet domain names.
On January 16, 2009, in connection with the relief requested by the Sale and Sale
Procedures Motion, the Court entered the Order (A) Approving Sale Procedures and Bid
Protections, Including Break-Up Fee(s), in Connection with Sale of Substantially All Assets; (B)
Scheduling an Auction for and Hearing to Approve One or More Sales; (C) Approving Notice of
Respective Date, Time and Place for Auction and for Hearing on Approval of Sale(s) (the "Sale
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Procedures Order," Docket No. 143). The Sale Procedures Order approved certain bid
procedures (the "Bid Procedures") and fixed certain deadlines, including a bid deadline of
February 2, 2009, at 5:00p.m. (EST), an auction date of February 4, 2009, at 10:00 a.m. (EST),
and a sale hearing date of February 6, 2009, at 9:00a.m. (EST).
The Debtors received multiple bids with respect to the assets and subsets of the
assets, many of which overlapped in whole or in part with other bids. Consequently, at the
auction on February 4, 2009, the Debtors divided their assets among multiple lots and solicited
bids on those lots, individually and in combination with certain other lots. At the conclusion of
the auction, the Debtors, in consultation with the Debtors' pre-petition and post-petition lenders
(the "Lenders") and the Committee, identified provisional prevailing bidders with respect to
substantially all of their assets as distributed over sixteen lots.
At the sale hearing on February 6, 2009, the Debtors sought approval of the sale
of the assets in Lot 1 (substantially all the assets of Debtor PoshTots, Inc.) to Posh Ventures,
LLC, which relief was granted, and reported that they would continue to move forward with
prevailing bidders and expected to seek approval of such sales at a future hearing date. On
February 11, 2009, the Bankruptcy Court held a continued sale hearing, at which the sales of all
other assets, other than the domain name toys.com and related assets (the "Toys.com Assets"),
were approved.
Subsequent to the February 4, 2009, auction, the Debtors received additional
inquiries from bidders interested in the Toys.com Assets, including satisfactory asset purchase
agreement forms and superior bids, that led them to believe that the auction ofthe Toys.com
Assets should be re-opened to maximize recoveries to these estates. The auction with respect to
the Toys.com Assets was re-opened, conducted on February 27, 2009, and resulted in a
substantially higher sale price for the Toys.com Assets. The sale of the Toys.com Assets was
approved by the Bankruptcy Court on March 4, 2009. In aggregate, the Debtors' obtained
approximately $9,056,000 in connection with the sales of their assets.
I Claims Bar Date
On April9, 2009, the Bankruptcy Court entered an order fixing (i) June 15, 2009,
as the last day by which creditors were permitted to file proofs of claim with respect to claims
against the Debtors arising prior to the Petition Date, (ii) June 26, 2009, as the last date by which
governmental units were permitted to file proofs of claim with respect to claims against the
Debtors arising prior to the Petition Date, and (iii) June 26, 2009, at the last date by which all
parties were permitted to assert any administrative claim arising between the Petition Date and
May 15,2009.
J. Settlement with the Lenders
The final hearing with respect to the DIP was continued from time to time
pursuant to stipulations among the Debtors, Lenders, and the Committee. Notwithstanding
efforts among the Debtors, the Lenders, and the Committee to resolve certain objections asserted
by the Committee, no resolution could be reached, and on February 20, 2009, the Debtors
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received from the Lenders written notice of the Interim Facility Maturity Date, demand for
repayment, and of the triggering of the Carve-Out (as defined in the Interim DIP Order). Faced
with insufficient unencumbered assets to continue the administration of the Chapter 11 Case, on
February 23, 2009, the Debtors filed the Debtors' Motion to Convert Cases from Chapter 11 to
Chapter 7 of the Bankruptcy Code (the "Conversion Motion"). On February 24, 2009, the
Committee filed the Motion of the Official Committee of Unsecured Creditors for Entry of an
Order Granting Leave, Standing and Authority to Prosecute Causes of Action on Behalf of the
Debtors' Estates (the "Standing Motion").
Negotiations among the Debtors, the Lenders, and the Committee continued. On
or about March 10, 2009, the Debtors, the Lenders, the Committee, and the other parties
identified on the Settlement Agreement With Mutual Release (the "Agreement") entered into the
Agreement, which Agreement resolved the Conversion Motion and the Standing Motion,
allowed the Chapter 11 Cases to remain in Chapter 11, supplied liquidity for administration and
other expenses, and, upon the effective date of the Agreement, completely resolved all claims of
the Lenders in the Chapter 11 C ~ s e s . On that same date, the Debtors filed a motion seeking
approval of the Agreement, and the Bankruptcy Court entered an order approving the Agreement
on March 18,2009.
K. A voidance Actions
Under sections 547, 548, and 550 ofthe Bankruptcy Code, a debtor may seek to
avoid and recover certain pre-petition payments made by the debtor to or for the benefit of a
creditor, in the ninety days prior to the petition date, in respect of an antecedent debt if such
transfer was made when the debtor was insolvent; transfers made to a creditor that was an
"insider" of the debtor are subject to these provisions if the payment was made within one year
of the debtor's filing of a petition under Chapter 11 (collectively, the "Avoidance Actions").
By agreement of the Debtors and the Committee approved by the Bankruptcy
Court on June 5, 2009, the Debtors' right to pursue certain Avoidance Actions, other than any
such actions against members of the Committee or their affiliates, was assigned to the
Committee. Thereafter, the Bankruptcy Court entered an order establishing certain settlement
procedures with respect to Avoidance Actions, and the Committee retained Receivables
Management Services Corporation to assist it with pursuit and litigation of the Preference
Actions. Upon the Effective Date, all A voidances Actions, together with other Litigation, shall
vest in the Post-Confirmation Debtors.
III.
SUMMARY OF THE PLAN
A. General
The Plan is a plan of liquidation that contemplates the distribution of the
remaining net proceeds realized from the earlier complete liquidation of the assets of the
Debtors. As a result of the Debtors' asset disposition efforts, the Debtors presently have
68781-001\DOCS_DE: 158033.5
11
approximately $503,000 in cash and, after other collections and satisfaction of claims of higher
priority, expect to have less than $50,000 available for distribution to Class 3 General Unsecured
Claims under the Plan.
Under the Plan, available proceeds will be distributed first to satisfy the Allowed
Administrative Claims, Priority Tax Claims, Class 1 Priority Claims, and Class 2 Secured Claims
in accordance with the scheme of priorities under the Bankruptcy Code. After payment in full of
such Claims and Plan Expenses, the net cash available shall be paid Pro Rata to satisfy the
Class 3 General Unsecured Claims. Class 4 Equity Interests shall receive no distribution under
the Plan. For ease of reference, the Debtors have appended a liquidation analysis to this
Disclosure Statement as Exhibit B which shows the amounts expected to be available for
distribution as well as the amounts projected to be distributed to each class of Creditors under the
Plan.
B. Classification and Treatment of Claims and Interests
1. Unclassified Claims.
The Bankruptcy Code does not require administrative and certain priority claims to be
classified under a Chapter 11 plan. Accordingly, Administrative Claims and Priority Tax Claims
are not classified in the Plan.
The Plan provides for the payment of Allowed Administrative Claims in full, without
post-petition interest or penalties, in Cash, as soon as practicable after the later of the Effective
Date and the date on which each such Claim becomes an Allowed Claim. The Plan provides for
payment of Allowed Priority Tax Claims either (a) in full, without post-petition interest or
penalties, in Cash, as soon as practicable after the later of the Effective Date and the date on
which each such Claim becomes an Allowed Claim or (b) in such lesser amount as the Holder of
an Allowed Priority Tax Claim and the Debtors might otherwise agree.
Administrative Claims include any actual and necessary costs and expenses of preserving
the estate, any actual and necessary expenses of operating and liquidating the business of the
Debtors after the Petition Date, and any indebtedness or obligations incurred by the Debtors as
debtors in possession in connection with the conduct of the business of the debtor in possession.
Ordinary course post-petition liabilities shall be paid pursuant to their terms. Compensation or
reimbursement of expenses to Professionals retained by the Debtors or the Committee (as
approved by the Bankruptcy Court) will be paid to the extent allowed as an Allowed
Administrative Claim by the Bankruptcy Court. The Debtors estimate that the total amount of
unpaid Allowed Administrative Claims as of the Effective Date will be approximately
$88,000.00, excluding the fees and expenses of Professionals, which the Debtors estimate total
approximately $790,000.00 through Confirmation and which have been satisfied in part through
interim fee applications.
Priority Tax Claims consist of any Claims for taxes, interest and penalties against the
Debtors entitled to priority pursuant to Section 507(a)(8) of the Bankruptcy Code. The Debtors
68781-001 \DOCS_ DE: 158033.5
12
estimate that the total amount of Allowed Priority Tax Claims will be approximately
$155,000.00.
2. Classification and Treatment of Claims and Interests.
The Plan classifies and treats other Claims and Interests as follows:
Class 1 Claims - Priority Claims. Class 1 Claims are impaired. Class 1 consists of all
Claims other than Administrative Claims and Priority Tax Claims entitled to priority in payment
under Section 507(a) of the Bankruptcy Code. Each Holder of an Allowed Class 1 Claim shall
receive either (a) payment in full in Cash as soon as practicable after the later of (i) the Effective
Date, and (ii) the date on which such Claim becomes an Allowed Claim or (b) as otherwise
agreed by the Holder of such Allowed Class 1 Claim. The Debtor anticipates that only
approximately $11,232.00 of Priority Claims will be Allowed Claims.
Class 2 Claims - Secured Claims. Class 2 Claims may be Impaired. Class 2 consists of
all remaining Secured Claims. The Debtors believe that all valid Secured Claims were paid in
full or otherwise released or satisfied during the course of the Chapter 11 Cases and that there are
no valid Allowed Claims in this class. To the extent there are any Claims in this class, each such
Claim shall be deemed to be a separate subclass. To the extent there are any Allowed Class 2
Claims, at the option of the Debtors, either (i) the legal, equitable, and contractual rights to which
such Claim entitles the Holder thereof shall be left unaltered, (ii) the Claim shall be left
Unimpaired in the manner described in Section 1124(2) of the Bankruptcy Code, or (iii) the
Holder of such Claim shall receive or retain the collateral securing such Claim. The Holders of
Claims in this Class, if any, are not entitled to vote. The Debtors anticipate that no Secured
Claims will be Allowed Claims
Class 3 Claims- General Unsecured Claims. Class 3 General Unsecured Claims are
impaired. Class 3 consists of all unsecured Claims not included in any other class. Each holder
of an Allowed Class 3 Claim shall receive in respect of such Claim its Pro Rata distribution of
the liquidated assets of the estates after the payment or reserve for Administrative Claims,
Priority Tax Claims, Priority Claims, Secured Claims, and Plan Expenses. The holders of
Claims in this Class are entitled to vote.
Approximately $160,000,000.00 of General Unsecured Claims have been filed against
the Debtors' estates or scheduled by the Debtors. The Debtors estimate that approximately $18.5
million in unsecured claims will ultimately be Allowed Class 3 Claims. The Debtors anticipate
that Allowed Class 3 Claims will receive a distribution of less than 1% on account of their
Allowed Claims.
Class 4 - Interests. Class 4 Interests are impaired. Class 4 Interests consist of all equity
ownership interests in any of the Debtors. On the Effective Date, all Interests will be deemed
canceled, null and void and of no force and effect. Under the Plan, the Interest holders will
receive no distribution and are deemed to reject the Plan.
68781-00 I \DOCS_ DE: 158033.5
13
C. Means for Implementation of the Plan; Distributions
1. Corporate Action.
On the Effective Date and automatically and without further action, (i) each existing
member of the Board of Directors of the Debtors will resign or be terminated by the Plan
Administrator and (ii) the Plan Administrator shall be deemed the sole shareholder, officer, and
director of the Post-Confirmation Debtors. The Plan will be administered by the Plan
Administrator, and all actions taken thereunder in the name of the Post-Confirmation Debtors
shall be taken through the Plan Administrator.
2. Plan Administrator.
On the Effective Date, the Plan Administrator shall begin acting for the Post-
Confirmation Debtors in the same fiduciary capacity as applicable to a board of directors, subject
to the provisions hereof. The Plan Administrator shall be compensated at the rate of $450 per
hour and may be paid without further order of the Bankruptcy Court. The Plan Administrator
shall be entitled to reimbursement for his actual, reasonable, and necessary expenses incurred in
connection with the performance of his duties, without the need for further Bankruptcy Court
approval. The Plan Administrator shall not be liable for any action he takes or omits to take that
he believes in good faith to be authorized or within his rights or powers, absent gross negligence
or willful misconduct on his/her part. All distributions to be made to Creditors under the Plan
shall be made by the Plan Administrator, who shall deposit and hold all Cash in trust for the
benefit of Creditors (including Professionals) receiving distributions under the Plan
3. Rights of Action.
On the Effective Date, any right, claim or cause of action, belonging to the Debtors or
their estates or to the Committee against any Person or Entity, including without limitation, any
Litigation, and including specifically preference actions that, by agreement ofthe Debtors and
the Committee approved by the Bankruptcy Court on June 5, 2009, were previously assigned to
the Committee shall be vested in and retained by the Post-Confirmation Debtors. The Plan
Administrator shall pursue, settle, or release all reserved Litigation, as appropriate, in accordance
with the best interest of and for the benefit of the Creditors entitled to receive distributions under
the Plan.
4. Distributions Under the Plan.
(a) Payment on Account of Allowed Claim. Unless expressly provided
otherwise, all Plan distributions shall be made by the Plan Administrator to the holder of each
Allowed Claim as set forth in the claims register maintained by the Debtors' claims agent.
Payments of Cash made by the Plan Administrator (or an agent thereof) pursuant to the Plan will
be in U.S. Dollars by check or by wire transfer. Nothing set forth in the Plan will be deemed a
waiver of the Debtor's statutory or common law setoff rights. If any distribution remains
unclaimed for a period of sixty ( 60) days after it has been delivered (or attempted to be
delivered) in accordance with the Plan to the holder entitled thereto, such unclaimed property
68781-001\DOCS_DE: 158033.5
14
shall be forfeited by such Holder whereupon all right, title and interest in and to the unclaimed
property shall be held in reserve by the Plan Administrator to be distributed to other Creditors in
accordance with this Plan. Any distribution that remains unclaimed for a period of sixty (60)
days after the Plan Administrator's making of the final distribution under the Plan shall, after
satisfaction of any accrued but unpaid Plan Expenses, be contributed by the Post-Confirmation
Debtor to a charitable organization to be selected by the Plan Administrator.
(b) Reserve for Plan Expenses. Prior to making any distributions, the Plan
Administrator shall set aside, deduct and reserve an amount of Cash equal to the estimated
amount of Plan Expenses. Any Cash in such Plan Expense reserve that the Plan Administrator
deems to be excess prior to the closing of the Chapter 11 Case shall be distributed to Holders of
Allowed Claims and Interests pursuant to Article 4 of the Plan.
Plan Expenses shall mean all actual and necessary costs and expenses to
be incurred after the Effective Date in connection with the administration of the Plan at the
direction of the Plan Administrator, including the fees and expenses of the Plan Administrator
and any professionals retained by the Plan Administrator, the reasonable fees and expenses of
legal counsel engaged under Article 5 of the Plan. The Plan Administrator shall be compensated
at the rate of$450 per hour and may be paid without further order ofthe Bankruptcy Court. The
Plan Administrator shall be entitled to reimbursement for his actual, reasonable, and necessary
expenses incurred in connection with the performance of his duties, without the need for further
Bankruptcy Court approval. The amount of funds to be reserved to cover Plan Expenses will be
determined just prior to the Effective Date. The Debtors presently estimate that the sum of
$230,000.00 will be reserved from existing distributable assets to cover Plan Expenses.
(c) Disputed Claim Reserves. On and after the Effective Date, the Plan
Administrator shall establish and maintain reserves for all Disputed Claims. For purposes of
establishing a reserve, Cash will be set aside equal to the amount that would have been
distributed to the Holders of Disputed Claims in such Class had their Disputed Claims been
deemed Allowed Claims on the Effective Date or such other amount as may be approved by the
Bankruptcy Court upon motion of the Plan Administrator. If, when, and to the extent any such
Disputed Claim becomes an Allowed Claim by Final Order or by settlement by the Plan
Administrator, the relevant portion of the Cash held in reserve therefor shall be distributed by the
Plan Administrator to the Creditor. The balance of such Cash, if any, remaining after all
Disputed Claims have been resolved, shall be distributed Pro Rata to all Holders of Allowed
Claims in accordance with Article 4 of the Plan. No payments or distributions shall be made
with respect to a Claim which is a Disputed Claim pending the resolution of the dispute by
settlement or Final Order.
D. Unexpired Leases and Executory Contracts
Any and all pre-petition leases or executory contracts not previously rejected by the
Debtors, unless specifically assumed pursuant to order(s) of the Bankruptcy Court prior to the
Confirmation Date or the subject of a motion to assume or assume and assign pending on the
Confirmation Date, shall be deemed rejected by the Debtors on the Confirmation Date.
68781-001\DOCS_DE: 158033.5
15
Proofs of claim for rejection damages for any lease or executory contract rejected
pursuant to the Plan shall, unless another order of the Bankruptcy Court provides for an earlier
date, be filed with the Bankruptcy Court and served in accordance with procedures set forth in
the Confirmation Order within thirty (30) days after the mailing of notice of the entry ofthe
Confirmation Order.
E. Retention of Jurisdiction
Following the Confirmation Date and until such time as all payments and distributions
required to be made and all other obligations required to be performed under the Plan have been
made and performed by the Plan Administrator, the Bankruptcy Court shall retain jurisdiction as
is legally permissible, including, without limitation, for the purposes described in Article 9 of the
Plan.
F. Conditions to Effectiveness
The conditions to the confirmation and effectiveness of the Plan are set forth in Article 8
of the Plan. In the event that the condition specified in Section 8.1(b) of the Plan has not
occurred or been waived on or before ninety (90) days after the Confirmation Date, the
Confirmation Order may be vacated upon order of the Court after motion made by the Debtors or
any party in interest.
G. Substantive Consolidation The Plan serves as a motion seeking entry of an order
substantively consolidating the Chapter 11 Cases for distribution and voting purposes. Unless an
objection to substantive consolidation is made in writing by any Creditor affected by the Plan on
or before the Plan Objection Deadline, an order substantively consolidating these Chapter 11
Cases for distribution and voting purposes may be entered by the Bankruptcy Court, which order
may be the Confirmation Order. In the event any such objections are timely filed, a hearing with
respect thereto shall be scheduled by the Bankruptcy Court, which hearing may, but need not,
coincide with the Confirmation Hearing. In effectuation of such substantive consolidation, on
the Effective Date: (a) no Distributions will be made under the Plan on account of the
Intercompany Claims; (b) the guarantees of the Debtors will be deemed eliminated so that any
Claim against the Debtors and any guarantee thereof executed by any Debtor and any joint and
several liability of the Debtors with one another will be deemed to be one obligation of these
Debtors; (c) each and every Claim against the Debtors will be deemed asserted as a single Claim
against the Debtors as a whole, and will be treated in the same Class regardless of the Debtor;
and (d) all distributions on account of Allowed Claims will be made from The Parent Company.
Additionally, notwithstanding the substantive consolidation herein, substantive consolidation
shall not affect the obligation of each and every one of the Debtors under 28 U.S.C. 1930(a)(6)
until a particular case is closed, converted, or dismissed.
H. Modification or Revocation of the Plan
The Debtors reserve the right, in accordance with the Bankruptcy Code, to amend or modify the
Plan at or any time prior to the Confirmation Date, as provided in Section 1127 of the
Bankruptcy Code or as provided in Bankruptcy Rule 3019. Ifthe Plan, as altered, amended or
68781-001 \DOCS_DE: 158033.5
16
modified, is not consummated on or before the Effective Date or such other date as the
Bankruptcy Court fixes, all holders of Claims and Interests shall be returned to the status quo
ante, as if the Plan had not been filed, and the Confirmation Order shall be deemed vacated ab
initio.
The Plan Administrator and/or Post-Confirmation Debtors may, with the approval of the
Bankruptcy Court and without notice to all holders of Claims and Interests, insofar as it does not
materially and adversely affect the interest ofholders of Claims, correct any defect, omission or
inconsistency in the Plan in such manner and to such extent as may be necessary to expedite
consummation of this Plan.
I. Miscellaneous
1. Committee. Upon the occurrence of the Effective Date, the Committee shall be
dissolved, and each individual member and any retained Professional shall be discharged from
any further activities in the Chapter 11 Cases. The professionals retained by the Committee and
the members thereof will not be entitled to assert any fee claims for services rendered or
expenses incurred after the Effective Date, except for reasonable fees for (i) services rendered,
and actual and necessary expenses incurred, in connection with any applications for allowance of
compensation and reimbursement of expenses pending on the Effective Date or filed and served
after the Effective Date for services provided prior to the Effective Date or (ii) services rendered,
and actual and necessary expenses incurred, in connection the selection of any successor Plan
Administrator pursuant to Section 5.3 of the Plan.
2. Exculpation. Except as otherwise provided by the Plan or the Confirmation
Order or other Final order of the Bankruptcy Court, on the Effective Date, the Debtors,
certain of the Debtors' officers and directors expressly limited to Charles Goodrich, Philip
Manoff and Michael Miyaki, the Committee and its individual members, the Plan
Administrator, and their respective bankruptcy professionals including attorneys and
financial advisors, and their successors and assigns, shall be deemed released by each of
them against the other of and from any claims, obligations, rights, causes of action and
liabilities for any act or omission in connection with, or arising out of, the Chapter 11
Cases, including, without limiting the generality of the foregoing, all sales of assets, the
Disclosure Statement, the pursuit of approval of the Disclosure Statement, the pursuit of
confirmation of the Plan, the consummation of the Plan or the administration of the Plan
or the property to be distributed under the Plan, except for acts or omissions that
constitute willful misconduct, gross negligence or fraud, and all such Persons, in all
respects, shall be entitled to rely upon the advice of counsel with respect to their duties and
responsibilities under the Plan and under the Bankruptcy Code.
3. Injunction. Except as otherwise provided in the Plan, on and after the
Confirmation Date, all Entities who have held, hold or may hold Claims against the
Debtors or Interests in the Debtors are, with respect to any such Claims or Interests,
permanently enjoined from and after the Confirmation Date from: (a) commencing,
conducting or continuing in any manner, directly or indirectly, any suit, action or other
proceeding of any kind (including, without limitation, any proceeding in a judicial,
68781-001 \DOCS_DE: 158033.5
17
arbitral, administrative or other forum) against or affecting the Debtors' Estates, the Post-
Confirmation Debtors, any of their property, or any direct or indirect transferee of any
property of, or direct or indirect successor in interest to, any of the foregoing Entities,
including without limitation the Plan Administrator, or any property of any such
transferee or successor; (b) enforcing, levying, attaching (including, without limitation, any
pre-judgment attachment), collecting or otherwise recovering by any manner or means
whether directly or indirectly, of any judgment, award, decree or order against the
Debtors' Estates, the Post-Confirmation Debtors, any of their property, or any direct or
indirect transferee of any property of, or direct or indirect successor in interest to any of
the foregoing Entities, including without limitation the Plan Administrator; (c) creating,
perfecting or otherwise enforcing in any manner, directly or indirectly, any encumbrance
of any kind against the Debtors' Estates, the Post-Confirmation Debtors, any of their
property, or any direct or indirect transferee of any property of, or direct or indirect
successor in interest to any of the foregoing Entities, including without limitation the Plan
Administrator; (d) asserting any right of setoff, of any kind, directly or indirectly, against
any obligation due the Debtors' Estates, the Post-Confirmation Debtors, any of their
property, or any direct or indirect transferee of any property of, or successor in interest to,
any of the foregoing Entities, including without limitation the Plan Administrator; and
(e) taking any actions in any place and in any manner whatsoever that do not conform to or
comply with the provisions of the Plan. Provided, however, that this section 10.7 shall not in
any way limit Ernst & Young LLP's right to respond (including, without limitation, the
right assert counterclaims or setoff) to Litigation or Claims initiated by or asserted by the
Post-Confirmation Debtors, the Plan Administrator or any other party entitled to pursue
the Debtors' Claims.
IV.
VOTING REQUIREMENTS; ACCEPTANCE
AND CONFIRMATION OF THE PLAN
The Bankruptcy Code requires that, in order to confirm the Plan, the Bankruptcy
Court must make a series of findings concerning the Plan and the Debtors, including that (i) the
Plan has classified Claims and Interests in a permissible manner, (ii) the Plan complies with
applicable provisions of the Bankruptcy Code, (iii) the Debtors have complied with applicable
provisions of the Bankruptcy Code, (iv) the Debtors have proposed the Plan in good faith and not
by any means forbidden by law, (v) the disclosure required by Section 1125 ofthe Bankruptcy
Code has been made, (vi) the Plan has been accepted by the requisite votes of creditors (except to
the extent that cramdown is available under Section 1129(b) ofthe Bankruptcy Code), (vii) the
Plan is feasible and confirmation is not likely to be followed by the liquidation or the need for
further financial reorganization of the Debtors, (viii) the Plan is in the "best interests" of all
holders of Claims or Interests in an impaired Class by providing to such holders on account of
their Claims or Interests property of a value, as of the Effective Date, that is not less than the
amount that such holder would receive or retain in a chapter 7 liquidation, unless each holder of
a Claim or Interest in such Class has accepted the Plan, and (ix) all fees and expenses payable
under 28 U.S.C. 1930, as determined by the Bankruptcy Court at the hearing on Confirmation,
have been paid or the Plan provides for the payment of such fees on the Effective Date.
68781-001\DOCS_DE: 158033.5
18
A. Parties in Interest Entitled to Vote
Pursuant to the Bankruptcy Code, only Classes of Claims and Interests that are
"impaired" (as defined in Section 1124 of the Bankruptcy Code) under the Plan are entitled to
vote to accept or reject the Plan. A Class is impaired if the legal, equitable, or contractual rights
to which the Claims or Interests of that Class entitled the holders of such Claims or Interests are
modified, other than by curing defaults and reinstating the debt. Classes of Claims and Interests
that are not impaired are not entitled to vote on the Plan and are conclusively presumed to have
accepted the Plan. In addition, Classes of Claims and Interests that receive no distributions
under the Plan are not entitled to vote on the Plan and are deemed to have rejected the Plan.
B. Classes Impaired Under the Plan
The following Classes of Claims and Interests are impaired under the Plan:
Class 1: Priority Claims
Class 3: General Unsecured Claims
Class 4: Interests
Acceptances ofthe Plan are being solicited only from those holders of Claims or Interests
in Impaired Classes that will or may receive a distribution under the Plan. Accordingly, the
Debtors are soliciting acceptances from members of Class 1 Priority Claims and Class 3 General
Unsecured Claims. Class 4 Interests are receiving no distribution under the Plan and are
therefore deemed to reject the Plan.
C. Voting Procedures and Requirements
In voting for or against the Plan, please use only the Ballot or Ballots sent to you with
this Disclosure Statement. If you are a member of Class 3 and did not receive a Ballot, if your
Ballot is damaged or lost, or if you have any questions concerning voting procedures, please call
Debtor's voting agent, Omni Management Group LLC, at (818) 906-8300. PLEASE FOLLOW
THE DIRECTIONS CONTAINED ON THE ENCLOSED BALLOT CAREFULLY.
YOU SHOULD COMPLETE AND SIGN YOUR BALLOT AND RETURN IT IN THE
ENCLOSED ENVELOPE TO:
68781-001 \DOCS_DE: 158033.5
ETOYS DIRECT 1, LLC-BALLOT PROCESSING
C/0 OMNI MANAGEMENT GROUP LLC
16161 VENTURA BLVD.
SUITE C, PMB 439
ENCINO, CA 91436-2522
19
VOTES CANNOT BE TRANSMITTED ORALLY. FACSIMILE BALLOTS WILL NOT BE
ACCEPTED. TO BE COUNTED, ORIGINAL SIGNED BALLOTS MUST BE RECEIVED
ON OR BEFORE AUGUST 6, 2010, AT 4:00P.M., PREVAILING EASTERN TIME. IT IS
OF THE UTMOST IMPORTANCE TO THE DEBTORS AND THE COMMITTEE THAT
YOU VOTE PROMPTLY TO ACCEPT THE PLAN.
D. Confirmation Without Acceptance of All Impaired Classes
The Bankruptcy Code contains provisions for confirmation of the Plan even if the Plan is
not accepted by all Impaired Classes, as long as at least one Impaired Class of Claims has
accepted it. These so-called "cramdown" provisions are set forth in Section 1129(b) ofthe
Bankruptcy Code.
A plan may be confirmed under the cramdown provisions if, in addition to satisfying all
other requirements of Section 1129(a) of the Bankruptcy Code, it (a) "does not discriminate
unfairly" and (b) is "fair and equitable," with respect to each class of claims or interests that is
impaired under, and has not accepted, the Plan. As used by the Bankruptcy Code, the phrases
"discriminate unfairly" and "fair and equitable" have specific meanings unique to bankruptcy
law.
AS CLASS 4 INTERESTS ARE DEEMED TO REJECT THE PLAN, THE DEBTORS
INTEND TO SEEK CONFIRMATION OF THE PLAN UNDER THE CRAMDOWN
PROVISIONS OF SECTION 1129(b) OF THE BANKRUPTCY CODE WITH RESPECT TO
SUCH CLASS.
E. Best Interests Test
In order to confirm the Plan, the Bankruptcy Court must independently determine that the
Plan is in the best interests of each Holder of a Claim or Interest in any such impaired Class who
has not voted to accept the Plan. Accordingly, if an impaired Class does not unanimously accept
the Plan, the best interests test requires the Bankruptcy Court to find that the Plan provides to
each member of such impaired Class a recovery on account of the Class member's Claim or
Interest that has a value, as of the Effective Date, at least equal to the value of the distribution
that each such member would receive if the Debtor was liquidated under Chapter 7 of the
Bankruptcy Code on such date.
F. Liquidation Analysis
In this case, the Debtors have liquidated substantially all of their assets other than
Preference Actions, resulting in approximately $503,000.00 in net liquidation proceeds presently
available to distribution to creditors holding priority, secured, and unsecured claims against the
Debtors' estates. Based upon the Debtor's current projections, administrative, priority and
secured claims would be paid in full under the Plan, while Holders of Class 3 General Unsecured
Claims would receive a projected distribution of less than 1%.
20
68781-001\DOCS_DE: 158033.5
If the Chapter 11 Cases were converted to Chapter 7 cases, the Debtors' estate would
incur the costs of payment of a statutorily allowed commission to the Chapter 7 trustee, as well
as the costs of counsel and other professionals retained by the trustee. The Debtors believe that
such amounts would exceed the amount of Plan Expenses that will be incurred in implementing
the Plan and winding up the affairs of the Debtors. Additionally, the Debtors' estates would
suffer substantial additional delays, as a Chapter 7 trustee and his/her counsel took time to
develop a necessary learning curve in order to complete the administration of the estates. The
Debtors' estates would also be obligated to pay all unpaid expenses incurred by the Debtors
during the Chapter 11 Cases (such as compensation for professionals) which will constitute
Allowed Claims in any Chapter 7 cases.
Based upon these reasons, the Debtors believe that creditors will receive at least as much
under the Plan and likely more, than they would receive if the Chapter 11 Cases were converted
to Chapter 7 cases. Toward this end, the Debtors have appended hereto as Exhibit B their
liquidation analysis that supports the Debtors' view that creditors will receive at least as much
under the Plan and likely more, than they would receive if the Chapter 11 Cases were converted
to Chapter 7 cases. A summary of Exhibit B appears in the table immediately below.
68781-001 \DOCS_DE: 158033.5
$590,000 (expected
recovery)
($200,000)
21
G. Feasibility
Under Section 1129(a)(11) of the Bankruptcy Code, the Debtors must show that
confirmation of the Plan is not likely to be followed by the liquidation, or the need for further
financial reorganization, of the Debtors or any successor to the Debtors (unless such liquidation
or reorganization is proposed in the Plan). The Plan clearly complies with this requirement
because all of the Debtors' remaining assets will be distributed to Creditors pursuant to the terms
of the Plan and, provided the Plan is confirmed and consummated, the estates will no longer exist
to be subject to future reorganization or liquidation. Furthermore, feasibility under Section
1129(a)(11) is supported by the liquidation analysis attached as Exhibit Band by the analysis in
Article IV, Section F, of this Disclosure Statement, above.
H. Compliance with the Applicable Provisions of the Bankruptcy Code
Section 1129(a)(1) ofthe Bankruptcy Code requires that the Plan comply with the
applicable provisions of the Bankruptcy Code. The Debtors have considered each of these issues
in the development of the Plan and believes that the Plan complies with all applicable provisions
of the Bankruptcy Code.
v.
ALTERNATIVES TO CONFIRMATION
AND CONSUMMATION OF THE PLAN
The Debtors believe the Plan affords Holders of Claims the potential for the maximum
distribution on account of their claims and, therefore, is in the best interests of such Holders. If
the Plan is not confirmed, the only viable alternatives are dismissal ofthe Chapter 11 Cases or
conversion to Chapter 7 of the Bankruptcy Code. For the reasons described herein, neither of
these alternatives is preferable to confirmation and consummation of the Plan.
If the Chapter 11 Cases were dismissed, creditors would revert to a "race to the
courthouse," the result being that creditors would not receive a fair and equitable distribution of
the Debtors' remaining assets. As set forth above, the Debtors and the Committee believe this
Plan provides a greater recovery to Creditors than would be achieved in Chapter 7 cases.
Therefore, a Chapter 7 case is not an attractive or superior alternative to the Plan. Thus, the Plan
represents the best available alternative for maximizing returns to creditors.
22
68781-001 \DOCS _DE: 158033.5
VI.
RISK FACTORS
A. Allowed Claims May Exceed Estimates
The projected distributions set forth in this Disclosure Statement are based upon the
Debtors' good faith estimate of the amount of Plan Expenses, as defined in the Plan, that will be
incurred and total amount of Claims in each Class that will ultimately be Allowed. The actual
amount of Plan Expenses could be greater than expected for a variety of reasons, including
greater than anticipated administrative and litigation costs associated with resolving disputed
claims. Additionally, the actual amount of Allowed Claims in any class could be greater than
anticipated, which will impact the distributions to be made to holders of Claims.
B. Plan May Not Be Accepted or Confirmed
While the Debtors believe the Plan is confirmable under the standards set forth in Section
1129 of the Bankruptcy Code, there can be no guarantee that the Bankruptcy Court will agree.
Additionally, the Plan as drafted requires acceptance by Class 3 General Unsecured Claims. If
Class 3 votes to reject the Plan, the Plan cannot be confirmed without modification.
C. Recoveries Are Uncertain
The estimated amount of assets available for distribution to Holders of Allowed Class 3
Claims is contingent upon recovery upon the Litigation and, specifically, the Avoidance Actions.
VII.
CERTAIN FEDERAL INCOME
TAX CONSEQUENCES OF THE PLAN
The following discussion addresses certain United States federal income tax
consequences of the consummation of the Plan. This discussion is based upon the Internal
Revenue Code of 1986, as amended (the "Tax Code"), existing and proposed regulations
thereunder, current administrative rulings, and judicial decisions as in effect on the date hereof,
all of which are subject to change, possibly retroactively. No rulings or determinations by the
Internal Revenue Service have been obtained or sought by the Debtors with respect to the Plan.
An opinion of counsel has not been obtained with respect to the tax aspects of the Plan. This
discussion does not purport to address the federal income tax consequences of the Plan to
particular classes of taxpayers (such as foreign persons, S corporations, mutual funds, small
business investment companies, regulated investment companies, broker-dealers, insurance
companies, tax -exempt organizations and financial institutions) or the state, local, or foreign
income and other tax consequences ofthe Plan. NO REPRESENTATIONS ARE MADE
REGARDING THE PARTICULAR TAX CONSEQUENCES OF THE PLAN TO ANY
HOLDER OF A CLAIM OR INTEREST. EACH HOLDER OF A CLAIM OR INTEREST IS
23
68781-001 \DOCS _DE: 158033.5
STRONGLY URGED TO CONSULT AT AX ADVISOR REGARDING THE FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE TRANSACTIONS
DESCRIBED HEREIN AND IN THE PLAN.
A. Federal Income Tax Consequences to Holders of Claims and Interests
A Holder of an Allowed Claim or Interest will generally recognize ordinary income to
the extent that the amount of Cash or property received (or to be received) under the Plan is
attributable to interest that accrued on a Claim but was not previously paid by the Debtors or
included in income by the Holder of the Allowed Claim or Interest. A Holder of an Allowed
Claim or Interest will generally recognize gain or loss equal to the difference between the
Holder's adjusted basis in its Claim and the amount realized by the Holder upon consummation
of the Plan that is not attributable to accrued but unpaid interest. The amount realized will equal
the sum of Cash and the fair market value of other consideration received (or to be received).
The character of any gain or loss that is recognized will depend upon a number of
factors, including the status of the Creditor, the nature of the Claim or Interest in its hands,
whether the Claim was purchased at a discount, whether and to what extent the Creditor has
previously claimed a bad debt deduction with respect to the Claim, and the Creditor's holding
period of the Claim or Interest. If the Claim or Interest in the Creditor's hands is a capital asset,
the gain or loss realized will generally be characterized as a capital gain or loss. Such gain or
loss will constitute long-term capital gain or loss if the Creditor is a non-corporate taxpayer and
held such Claim or Interest for longer than one year or short-term capital gain or loss if the
Creditor held such Claim or Interest for less than one year.
A Holder of an Allowed Claim or Interest who receives, in respect of its Claim, an
amount that is less than its tax basis in such Claim or Interest may be entitled to a bad debt
deduction if either: (i) the Holder is a corporation; or (ii) the Claim or Interest constituted (a) a
debt created or acquired (as the case may be) in connection with a trade or business ofthe
holder or (b) a debt the loss from the worthlessness of which is incurred in the Holder's trade or
business. A holder that has previously recognized a loss or deduction in respect of its Claim or
Interest may be required to include in its gross income (as ordinary income) any amounts
received under the Plan to the extent such amounts exceed the holder's adjusted basis in such
Claim or Interest.
Holders of Claims or Interests who were not previously required to include any accrued
but unpaid interest with respect to in their gross income on a Claim or Interest may be treated as
receiving taxable interest income to the extent any consideration they receive under the Plan is
allocable to such interest. Holders previously required to include in their gross income any
accrued but unpaid interest on a Claim may be entitled to recognize a deductible loss to the
extent such interest is not satisfied under the Plan.
Holders of a Claim constituting any installment obligation for tax purposes may be
required to currently recognize any gain remaining with respect to such obligation if, pursuant
24
68781-001 \DOCS_ DE: 158033.5
to the Plan, the obligation is considered to be satisfied at other than its face value, distributed,
transmitted, sold or otherwise disposed of within the meaning of section 453B of the Tax Code.
The Holders of Class 3 General Unsecured Claims are expected to receive only a partial
distribution of their Allowed Claims and Class 4 Interests will not receive any distributions
under the Plan on account of their Interests. Whether the Holder of such Claims or Interests
will recognize a loss, a deduction for worthless securities or any other tax treatment will depend
upon facts and circumstances that are specific to the nature of the Holder and its Claims or
Interests. Accordingly, the Holders of Class 3 Claims and Class 4 Interests should consult their
own tax advisors.
B. Federal Income Tax Consequences to the Debtors
Under the Tax Code, a taxpayer generally must include in gross income the amount of
any cancellation of indebtedness income ("COD income") realized during the taxable year.
Section 108 ofthe Tax Code provides an exception to this general rule, however, ifthe
cancellation occurs in a case under the Bankruptcy Code but only if the taxpayer is under the
jurisdiction of the bankruptcy court and the cancellation is granted by the court or is pursuant to
a plan approved by the court.
Section 108 ofthe Tax Code requires the amount of COD income so excluded from
gross income to be applied to reduce certain tax attributes of the taxpayer. The tax attributes
that may be subject to reduction include the taxpayer's net operating losses and net operating
loss carryovers (collectively, "NOLs"), certain tax credits and most tax credit carryovers, capital
losses and capital loss carryovers, tax bases in assets, and foreign tax credit carryovers.
Attribute reduction is calculated only after the tax for the year ofthe discharge has been
determined. Section 108 of the Tax Code further provides that a taxpayer does not realize COD
income from cancellation of indebtedness to the extent that payment of such indebtedness
would have given rise to a deduction.
Under the Plan, holders of Claims are expected to receive less than full payment on their
Claims. The Debtors' liability to the holders of Claims in excess of the amount satisfied by
distributions under the Plan will be canceled and therefore, will result in COD income to the
Debtors. The Debtors should not realize any COD income, however, to the extent that payment
of such Claims would have given rise to a deduction to the Debtors had such amounts been
paid. In addition, any COD income that the Debtors realize should be excluded from the
Debtors' gross income pursuant to the bankruptcy exception to Section 108 of the Tax Code
described in the immediately preceding paragraph.
The exclusion of COD income, however, will result in a reduction of certain tax
attributes of the Debtors. Because attribute reduction is calculated only after the tax for the year
of discharge has been determined, the COD income realized by the Debtors under the Plan
should not diminish the NOLs and other tax attributes that may be available to offset any
income and gains recognized by the Debtors in the taxable year that includes the Effective Date.
25
68781-001 \DOCS_DE: 158033.5
C. Importance of Obtaining Professional Tax Assistance
The foregoing is intended to be only a summary of certain of the United States federal
income tax consequences of the Plan and is not a substitute for careful tax planning with a tax
professional. Holders of Claims or Interests are strongly urged to consult with their own tax
advisors regarding the federal, state, local and foreign income and other tax consequences of the
Plan, including, in addition to the issues discussed above, whether a bad debt deduction may be
available with respect to their Claims and if so, when such deduction or loss would be available.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX
ADVICE. ACCORDINGLY, HOLDERS OF CLAIMS OR INTERESTS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF
THE PLAN, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS.
VIII.
RECOMMENDATION
The Debtors and the Committee strongly recommend that all creditors receiving a Ballot
vote in favor of the Plan. The Debtors and the Committee believe that the Plan is in the best
interests of Creditors. The Plan as structured, among other things, allows Creditors with
Allowed Claims to participate in distributions believed to be in excess of those that would
otherwise be available were the Chapter 11 Cases dismissed or converted under Chapter 7 of the
Bankruptcy Code and minimizes delays in recoveries to creditors.
FOR ALL THE REASONS SET FORTH IN THIS DISCLOSURE STATEMENT, THE
DEBTORS AND THE COMMITTEE BELIEVE THAT THE CONFIRMATION AND
CONSUMMATION OF THE PLAN IS PREFERABLE TO ALL OTHER ALTERNATIVES.
THE DEBTORS AND THE COMMITTEE URGES ALL CREDITORS ENTITLED TO
VOTE TO ACCEPT THE PLAN AND TO EVIDENCE SUCH ACCEPTANCE BY
RETURNING THEIR BALLOTS SO THAT THEY WILL BE RECEIVED BY 4:00P.M.
EASTERN STANDARD TIME ON AUGUST 6, 2010.
26
68781-00 I \DOCS_DE: 158033.5
Dated: June 9, 2010
Submitted by:
Counsel for Debtors and Debtors in
Possession:
Is! Michael R. Seidl
eToys Direct 1, LLC; The Parent Company; BabyUniverse,
Inc.; Dreamtime Baby, Inc.; eToys Direct, Inc.; PoshTots,
Inc.; eToys Direct 2, LLC; eToys Direct 3, LLC; Gift
Acquisition, L.L.C.; and My Twinn, Inc.
By: /s/ Charles A. Goodrich
N arne: Charles A. Goodrich
Title: CEO
Counsel for Official Committee ofUnsecured
Creditors:
Is/ Schuyler G. Carroll
PACHULSKI STANG ZIEHL & JONES LLP
Laura Davis Jones (Bar No. 2436)
ARENT FOX LLP
Schuyler G. Carroll
1675 Broadway Jeffrey W. Dulberg (CA Bar No. 181200)
Michael R. Seidl (Bar No. 3889)
919 N. Market Street, 17th Floor
P.O. Box 8705
Wilmington, DE 19899-8705
Telephone: 302-652-4100
Facsimile: 302-652-4400
68781-001 \DOCS_DE: 158033.5
New York, NY 10019
Telephone: 212-484-3900
Facsimile: 212-484-3 990
-and-
ELLIOTT GREENLEAF
Rafael X. Zahralddin-Aravena (BarNo. 4166)
1105 Market Street, Suite 1700
Wilmington, DE 19801
Telephone: 302-384-9400
Facsimile: 302-384-9399
27
68781-00 I \DOCS_DE: 158033.5
EXHIBIT A
(THE PLAN)
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re:
eTOYS DIRECT 1, LLC, et al.,
1
Debtors.
) Chapter 11
)
) Case No. 08-13412(BLS)
) (Jointly Administered)
)
JOINT PLAN OF LIQUIDATION OF THE DEBTORS AND
THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS
PURSUANT TO CHAPTER 11 OF THE BANKRUPTCY CODE
Counsel for Debtors and Debtors in
Possession:
PACHULSKI STANG ZIEHL & JONES LLP
Laura Davis Jones (Bar No. 2436)
Jeffrey W. Dulberg (CA Bar No. 181200)
Michael R. Seidl (Bar No. 3889)
919 N. Market Street, 17th Floor
P.O. Box 8705
Wilmington, DE 19899-8705
Telephone: 302-652-4100
Facsimile: 302-652-4400
Dated: June 9, 2010
Counsel for Official Committee of Unsecured
Creditors:
ARENT FOX LLP
Schuyler G. Carroll
1675 Broadway
New York, NY 10019
Telephone: 212-484-3900
Facsimile: 212-484-3990
-and-
ELLIOTT GREENLEAF
Rafael X. Zahralddin-Aravena (Bar No. 4166)
1105 Market Street, Suite 1700
Wilmington, DE 19801
Telephone: 302-384-9400
Facsimile: 302-384-9399
1
The Debtors in these cases, along with the last four digits of each Debtor's federal tax identification number, if
applicable, are: eToys Direct l, LLC (N/A); The Parent Company (7093); BabyUniverse, Inc. (7990); Dreamtime
Baby, Inc. (8047); eToys Direct, Inc. (7296); PoshTots, Inc. (8660); eToys Direct 2, LLC (N/A); eToys Direct 3,
LLC (N/A); Gift Acquisition, L.L.C. (0297); and My Twinn, Inc. (1842). The address for each of the Debtors is 717
17th Street, Suite 1300, Denver, CO 80202, with the exception ofPoshTots, Inc., the address for which is 5500 Cox
Road, Suite M, Glenn Allen, VA 23060.
DOCS_DE: 156322.6
Date 6 . ._q-r ()
Docket# 1 0 ~ ( _
JOINT PLAN OF LIQUIDATION OF THE DEBTORS AND
THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS
PURSUANT TO CHAPTER 11 OF THE BANKRUPTCY CODE
The above-captioned debtors and debtor in possession (the "Debtors") together with the
Official Committee of Unsecured Creditors (the "Committee") in the Debtors' cases hereby
propose the following Joint Plan of Liquidation of the Debtors and the Committee pursuant to 11
U.S.C. 1121
2
:
Preliminary Statement
The Plan sets forth a proposal for the satisfaction of all Claims against the Debtors.
Along with the Plan, Creditors entitled to vote will receive a Ballot for voting on the Plan and a
Disclosure Statement that provides information concerning the Debtors and the Plan.
The Disclosure Statement accompanying the Plan, and the exhibits thereto, include a
discussion of the Debtors' history, business, results of operations and properties, the post-petition
liquidation of substantially all of the Debtors' assets, a summary of the assets and liabilities of
the Debtors, a summary of what Creditors and Interest Holders can expect to receive under the
Plan, a summary of the procedures and voting requirements necessary for confirmation of the
Plan and a discussion of certain alternatives to the Plan in the event that the Plan is not
confirmed. All Holders of Claims and Interests should read the Disclosure Statement and the
Plan carefully-and consult with their counsel and other applicable professionals-before voting
to accept or reject the Plan.
As more fully described in the Disclosure Statement, the Plan must be approved by the
requisite number of Creditors, and the Bankruptcy Court must find that the Plan meets the
applicable legal standards before it can be confirmed.
3
If the Plan is not confirmed, the
Bankruptcy Court may order the cases dismissed, or converted to liquidating cases under
Chapter 7 of the Bankruptcy Code, or the Debtors or other parties in interest may propose a
different plan.
The Plan proposes to substantively consolidate the Debtors' estates and to vest all of the
assets of the consolidated Debtors into a single estate for distribution in accordance with the
Plan.
ARTICLE 1
DEFINITIONS
1.1 As used in this Plan, the following terms shall have the respective meanings
specified below. Unless otherwise indicated, the singular shall include the plural.
2
Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in
Article 1 of this Plan.
3
Interest Holders will receive nothing under the Plan, and therefore, the Class of Interests is deemed to
have rejected the Plan. Accordingly, acceptances are not being solicited from the Holders of Interests.
DOCS_DE: 156322.6
2
1.2 "Administrative Claim" shall mean a Claim under Section 503(b) of the
Bankruptcy Code that is entitled to priority under Section 507(a)(l) ofthe Bankruptcy Code, for
costs or expenses of administration of the Chapter 11 Cases, including, without limitation, any
actual and necessary expenses of operating the business of the Debtors or preserving the estates,
and any and all fees and expenses of Professionals to the extent allowed by the Bankruptcy Court
under Sections 330, 331, or 503 of the Bankruptcy Code.
1.3 "Allowed Claim" or "Allowed [ ] Claim" shall mean: (a) any Claim, proof
of which is/was filed with the Bankruptcy Court on or before the applicable Bar Date, or which
has been or hereafter is scheduled by the Debtors as liquidated in amount and not disputed or
contingent and which, in either case, is a Claim as to which no objection to the allowance thereof
has been filed within the applicable period of limitation (if any) for objection to Claims fixed by
the Bankruptcy Court, or as to which any objection has been determined by an order or judgment
of the Bankruptcy Court (allowing such Claim in whole or in part) that is no longer subject to
appeal or certiorari proceedings, and as to which no appeal or certiorari proceeding is pending, or
(b) a Claim that is allowed (i) in a Final Order or (ii) pursuant to the terms of the Plan.
1.4 "Avoidance Actions" mean all claims and causes of action that the Debtors or the
Committee have or had the power to assert pursuant to any or all of Sections 510, 544, 545, 54 7,
548, 549, 550, 551 and 553 ofthe Bankruptcy Code.
1.5 "Assets" means any and all real property or personal property assets, rights or
interests of Debtors, whether tangible or intangible, and any proceeds realized therefrom,
including without limitation, all cash of the Debtors and any right, claim or cause of action,
belonging to the Debtors or their estates or to the Committee.
1.6 "Ballot" shall mean the form or forms of ballot that will be distributed along with
the Disclosure Statement to Holders of Allowed Claims in classes that are Impaired under the
Plan and entitled to vote, with which the Holders of impaired Claims may use to vote to accept
or reject the Plan.
1.7 "Bankruptcy Code" shall mean the United States Bankruptcy Code, 11 U.S.C.
101 et. seq., as now in effect or hereafter amended with regard to the Chapter 11 Cases.
1.8 "Bankruptcy Court" shall mean the United States Bankruptcy Court for the
District of Delaware.
1.9 "Bankruptcy Rules" shall mean the means the Federal Rules of Bankruptcy
Procedure, as amended from time to time, as applicable to the Chapter 11 Cases, promulgated
under 28 U.S.C. 2075 and the General and Local Rules ofthe Bankruptcy Court.
1.1 0 "Bar Date" shall mean the date (or dates) set by the Bankruptcy Court as the last
day for filing proofs of Claim and Administrative Claims against the Debtors.
DOCS_ DE: 156322.6
3
1.11 "Business Day" shall mean any day other than a Saturday, Sunday, legal holiday
(as such term is defined in Bankruptcy Rule 9006), or any other day that the Bankruptcy Court is
closed.
1.12 "Cash" shall mean cash and cash equivalents, including, but not limited to, wire
transfers, checks and other readily marketable direct obligations of the United States of America
and certificates of deposit issued by banks.
1.13 "Chapter 11 Cases" shall mean the above-captioned Chapter 11 Cases pending
for the Debtors.
1.14 "Claim" shall mean a claim as defined in Section 101(5) ofthe Bankruptcy Code,
or any portion thereof.
1.15 "Claims Agent" means Omni Management Group, LLC, which was appointed as
the Debtors' claims, notice, and balloting agent.
1.16 "Class" shall mean a category of Claims or Interests that are substantially similar
in nature to each other, as classified pursuant to the Plan.
1.17 "Committee" shall mean the Official Committee of Unsecured Creditors
appointed by the Office of the United States Trustee on January 8, 2009.
1.18 "Confirmation" shall mean the entry of the Confirmation Order on the docket of
the Bankruptcy Court.
1.19 "Confirmation Date" shall mean the date of entry of an order of the Bankruptcy
Court confirming this Plan in accordance with the provisions of the Bankruptcy Code.
1.20 "Confirmation Order" shall mean the order of the Bankruptcy Court confirming
the Plan pursuant to Section 1129 of the Bankruptcy Code.
1.21 "Creditor" shall mean any person or entity having a Claim against the Debtors,
including without limitation a Claim that arose on or before the Petition Date or a Claim against
the Debtors' estates of any kind specified in Sections 502(g), 502(h), or 502(i) of the Bankruptcy
Code.
1.22 "Debtors" shall mean, collectively, eToys Direct 1, LLC; The Parent Company;
BabyUniverse, Inc.; Dreamtime Baby, Inc.; eToys Direct, Inc.; PoshTots, Inc.; eToys Direct 2,
LLC; eToys Direct 3, LLC; Gift Acquisition, L.L.C.; and My Twinn, Inc. The Parent Company
is the direct or indirect 100% shareholder of each of the Debtors. The Parent Company is the
direct 100% shareholder of debtors BabyUniverse, Inc.; Dreamtime Baby, Inc.; eToys Direct,
Inc.; and PoshTots, Inc. Etoys Direct, Inc., in turn, is the 100% shareholder of eToys Direct 1,
LLC; eToys Direct 2, LLC; eToys Direct 3, LLC; Gift Acquisition, L.L.C.; and MyTwinn, Inc.
DOCS_DE:l56322.6
4
1.23 "Debtors in Possession" shall mean the Debtors in their capacity and with the
status and rights conferred by Sections 1107 and 1108 of the Bankruptcy Code.
1.24 "Disclosure Statement" shall mean the disclosure statement respecting the Plan,
as approved by the Bankruptcy Court as containing adequate information in accordance with
Section 1125 of the Bankruptcy Code, all exhibits and annexes thereto and any amendments or
modifications thereof.
1.25 "Disputed Claim" or "Disputed [ ] Claim" shall mean any Claim (i) as to
which an objection, unless withdrawn, has been interposed and (ii) that has not been allowed or
disallowed pursuant to a Final Order.
1.26 "Effective Date" shall mean the date designated by the Debtors in a notice filed
with the Bankruptcy Court, which is at least eleven days after the date on which each of the
conditions set forth in Section 8.1 of the Plan have been satisfied or waived (ifwaivable).
1.27 "Entity" shall have the meaning set forth in Section 101 ofthe Bankruptcy Code.
1.28 "Final Order" shall mean an order entered by the Bankruptcy Court or any other
court exercising jurisdiction over the subject matter and the parties, as to which (i) no appeal,
certiorari proceeding, or other review or rehearing has been requested or is still pending, and
(ii) the time for filing a notice of appeal or petition for certiorari or further review or rehearing
has expired.
1.29 "General Unsecured Claim" shall mean any Claim against the Debtors other
than an Administrative Claim, Priority Tax Claim, Priority Claim, or Secured Claim.
1.30 "Holder" means an Entity holding a Claim or Interest.
1.31 "Intercompany Claim" means a Claim held by any ofthe Debtors against any of
the other Debtors.
1.32 "Interest" shall mean, with respect to any of the Debtors, any equity interest
therein.
1.33 "Litigation" means the interest of the Debtors, the Plan Administrator, or the
Committee, as applicable, in any and all claims, rights and causes of action that have been or
may be commenced by the Debtors, the Plan Administrator, or the Committee, as applicable.
Litigation includes, without limitation, any: (i) Avoidance Action; (ii) any causes of actions
against Ernst & Young LLP and any of its officers or directors; (iii) any causes of action against
Posh Ventures, LLC, its affiliates or subsidiaries and its officers or directors. (iv) action for the
turnover of property to the Debtors, the Plan Administrator, or the Committee, as applicable;
(v) for the recovery of property or payment of money that belongs to or can be asserted by the
Debtors, the Plan Administrator, or the Committee, as applicable; (vi) for compensation for
damages incurred by the Debtors; and (vii) equitable subordination actions against Creditors.
DOCS_DE:l56322.6
5
1.34 "Person" means a natural person or any legal entity or organization including,
without limitation, any corporation, partnership (general or limited), limited liability company,
business trust, unincorporated organization or association, joint stock company, trust,
association, governmental body (or any agency, instrumentality or political subdivision thereof),
or any other form of legal entity.
1.35 "Petition Date" shall mean December 28, 2008, the date upon which the Debtors
each filed a petition under Chapter 11 of the Bankruptcy Code.
1.36 "Plan" shall mean this Joint Plan of Liquidation of the Debtors and the
Committee, all exhibits hereto, and any amendments or modifications hereof.
1.37 "Plan Administrator" shall mean Steven Sass or such successor thereto
approved by the Bankruptcy Court in the Confirmation Order as the representative of the estates
for purposes of administering the Plan.
1.38 "Plan Expenses" shall mean all actual and necessary costs and expenses to be
incurred after the Effective Date in connection with the administration of the Plan at the direction
of the Plan Administrator, including the fees and expenses of the Plan Administrator and any
professionals retained by the Plan Administrator.
1.39 "Plan Objection Deadline" shall mean the deadline established by the
Bankruptcy Court for filing and serving objections to Confirmation of the Plan.
1.40 "Post-Confirmation Debtors" shall mean the Debtors in their post-Effective
Date status as provided for in this Plan.
1.41 "Priority Claim" shall mean any Claim against the Debtors other than an
Administrative Claim or Priority Tax Claim entitled to priority in payment under Section 507(a)
of the Bankruptcy Code.
1.42 "Priority Tax Claim" shall mean any Claim for taxes against the Debtors,
including without limitation any interest and penalties due thereon, entitled to priority in
payment pursuant to Section 507(a)(8) of the Bankruptcy Code.
1.43 "Professionals" shall mean those Persons (i) employed pursuant to an order of
the Bankruptcy Court in accordance with Sections 327 and 1103 of the Bankruptcy Code and to
be compensated for services rendered prior to the Effective Date, pursuant to Sections 327, 328,
329, 330 and 331 of the Bankruptcy Code, or (ii) for which compensation and reimbursement
has been allowed by the Bankruptcy Court pursuant to Section 503(b)(4) of the Bankruptcy
Code.
1.44 "Property" means all property of the Debtors' estates of any nature whatsoever,
real or personal, tangible or intangible, previously or now owned by the Debtors, or acquired by
the Debtors' estates, as defined in section 541 of the Bankruptcy Code.
DOCS_DE:156322.6
6
1.45 "Pro Rata" means, as of any certain date, with respect to any Allowed Claim in
any Class, the proportion that such Allowed Claim bears to the aggregate amount of all Claims,
including Disputed Claims, in such Class.
1.46 "Reserve Fund" shall mean the segregated interest bearing account(s) into which
all reserved cash provided for in the Plan shall be deposited on the Effective Date, or as soon
thereafter as is practicable.
1.47 "Schedules" shall mean the Debtors' Schedules of Assets and Liabilities filed
with the Bankruptcy Court pursuant to Bankruptcy Rule 1007 as they may be amended from
time to time.
1.48 "Secured Claim" means all or that portion of a debt existing on the Petition
Date, as finally allowed and approved by the Bankruptcy Court, to the extent that such debt is
not greater than the value of the assets of the Debtors that the Bankruptcy Court finds are valid
security for such debt.
1.49 "Unimpaired" means any Claim that is not impaired within the meaning of
Section 1124 ofthe Bankruptcy Code.
1.50 "Voting Deadline" means the deadline established by Final Order of the
Bankruptcy Court for receipt of Ballots voting to accept or reject the Plan.
1.51 "Voting Record Date" means the date as of which the identity of Holders of
Claims is set for purposes of determining the Entities entitled to receive and vote on the Plan.
Pursuant to Bankruptcy Rules 3017(d) and 3018(a). The Voting Record Date shall be the date of
entry ofthe Bankruptcy Court's order approving the Disclosure Statement or such other date as
the Bankruptcy Court may set.
1.52 All terms not expressly defined herein shall have the respective meanings given
such terms in Section 101 of the Bankruptcy Code or as otherwise defined in applicable
provisions of the Bankruptcy Code, the Plan, or the Disclosure Statement. Defined terms
importing the plural only shall also include the singular where the context requires. Unless
otherwise specified herein, any reference to an Entity as a Holder of a Claim includes that
Entity's successors, assigns, and affiliates. The rules of construction set forth in Section 102 of
the Bankruptcy Code will apply. In computing any period of time prescribed or allowed by the
Plan, the provisions of Bankruptcy Rule 9006(a) shall apply.
DOCS_DE:l56322.6
7
ARTICLE2
PROVISIONS FOR PAYMENT OF ALLOWED
ADMINISTRATIVE AND PRIORITY TAX CLAIMS
2.1 Administrative Claims and Priority Tax Claims are not classified in this Plan.
The treatment of and consideration to be received by Holders of Allowed Administrative Claims
and Allowed Priority Tax Claims pursuant to this Article II of the Plan shall be in full and
complete satisfaction, settlement, release and discharge of such Claims. The Debtors'
obligations in respect of such Allowed Administrative and Priority Tax Claims shall be satisfied
in accordance with the terms of this Plan.
2.2 Treatment of Administrative Claims. Except to the extent the Holder of an
Allowed Administrative Claim agrees otherwise, each Holder of an Allowed Administrative
Claim shall be paid in respect of such Allowed Claim the full amount thereof, without interest, in
Cash, as soon as practicable after the later of (i) the Effective Date or (ii) the date on which such
Claim becomes an Allowed Claim.
2.3 Treatment of Priority Tax Claims. Each Holder of an Allowed Priority Tax Claim
will be paid in respect of such Allowed Priority Tax Claim either (a) the full amount thereof,
without post-petition interest or penalty, in Cash, as soon as practicable after the later of (i) the
Effective Date or (ii) the date on which such Priority Tax Claim becomes an Allowed Claim or
(b) such lesser amount as the Holder of an Allowed Priority Tax Claim and the Debtors might
otherwise agree.
ARTICLE3
CLASSIFICATION OF CLAIMS AND INTERESTS
3.1 Administrative Claims and Priority Tax Claims are unclassified. For purposes of
this Plan, all other Claims and Interests are classified as follows:
4
Each Holder of a Class 2 Claim constitutes a separate subclass under the Plan.
DOCS_DE:l56322.6
8
ARTICLE4
TREATMENT OF CLAIMS AND INTERESTS
4.1 The Debtors' obligations in respect of such Claims and Interests shall be satisfied
in accordance with the terms of this Plan.
4.2 Treatment of Class 1 Claims - Priority Claims. Class 1 Claims are impaired.
Each Holder of an Allowed Class 1 Claim shall receive either (a) payment in full in Cash as soon
as practicable after the later of (i) the Effective Date, and (ii) the date on which such Claim
becomes an Allowed Claim or (b) as otherwise agreed by the Holder of such Allowed Class 1
Claim. The Holders of Claims in this Class are entitled to vote.
4.3 Treatment of Class 2 Claims - Secured Claims. Class 2 Secured Claims are
Unimpaired. The Debtors believe that all valid Secured Claims were paid in full or otherwise
released or satisfied during the course of the Chapter 11 Cases and that there are no valid
Allowed Claims in this class. To the extent there are any Claims in this class, each such Claim
shall be deemed to be a separate subclass. To the extent there are any Allowed Class 2 Claims,
at the option of the Debtors, either (i) the legal, equitable, and contractual rights to which such
Claim entitles the Holder thereof shall be left unaltered, (ii) the Claim shall be left Unimpaired in
the manner described in Section 1124(2) of the Bankruptcy Code, or (iii) the Holder of such
Claim shall receive or retain the collateral securing such Claim. The Holders of Claims in this
Class, if any, are not entitled to vote.
4.4 Treatment of Class 3 Claims - General Unsecured Claims. Class 3 General
Unsecured Claims are impaired. Each Holder of an Allowed Class 3 Claim shall receive in
respect of such Claim its Pro Rata distribution of the liquidated assets of the estates after the
payment or reserve for Administrative Claims, Priority Tax Claims, Priority Claims, Secured
Claims, and Plan Expenses. The Holders of Claims in this Class are entitled to vote.
4.5 Treatment of Class 4 Interests. Class 4 Interests are impaired. The Holders of
Class 4 Interests shall receive no distribution. On the Effective Date, all Class 4 Interests shall
be deemed canceled, null and void, and of no force and effect. The Holders of Class 4 Interests
are deemed to reject the Plan and are not entitled to vote
4.6 Voting Classes. Each Holder of an Allowed Claim in Class 1 and in Class 3 is
entitled to vote either to accept or to reject the Plan. Only those votes cast by Holders of
Allowed Claims shall be counted in determining whether acceptances have been received
sufficient in number and amount to obtain Confirmation.
4.7 Acceptance by Impaired Classes. An Impaired Class of Claims shall have
accepted the Plan if: (a) the Holders (other than any Holder designated under section 1126(e) of
the Bankruptcy Code) of at least two-thirds in amount of the Allowed Claims actually voting in
such Class have voted to accept the Plan, and (b) the Holders (other than any Holder designated
under section 1126( e) of the Bankruptcy Code) of more than one-half in number of the Allowed
DOCS_DE: 156322.6
9
Claims actually voting in such Class have voted to accept the Plan. Class 2 is deemed to have
accepted the Plan and is not entitled to vote thereon.
4.8 Presumed Rejection of Plan. The Holders of Class 4 Interests shall not receive
any distributions under the Plan and are therefore deemed to reject the Plan and are not entitled
to vote.
4.9 Nonconsensual Confirmation. Because Class 4 is deemed to reject the Plan by
operation of law, the Debtors will request that the Bankruptcy Court confirm the Plan in
accordance with section 1129(b) of the Bankruptcy Code. Without limiting the foregoing, in the
event that any Class of Claims entitled to vote on the Plan fails to accept the Plan as required by
section 1129(a) of the Bankruptcy Code, the Plan may be amended and, in any event, the
Debtors reserve the right to seek confirmation of the Plan over such rejection pursuant to section
1129(b) of the Bankruptcy Code.
4.1 0 How to Vote. A form of Ballot is being provided to Creditors in Class 1 and in
Class 3 that hold Allowed Claims by which Creditors in such Class may vote their acceptance or
rejection of the Plan. The Ballot for voting on the Plan gives you one important choice to make
with respect to the Plan-you can vote for or against the Plan. To vote on the Plan, please
complete the Ballot, as indicated thereon by, (1) indicating on the enclosed Ballot that (a) you
accept the Plan or (b) you reject the Plan and (2) signing your name and mailing the Ballot in the
envelope provided for this purpose. The Claims Agent will count the Ballots.
IN ORDER TO BE COUNTED, BALLOTS MUST BE COMPLETED, SIGNED AND
RECEIVED NO LATER THAN 4:00P.M. PREVAILING EASTERN TIME ON AUGUST 6,
2010, AT THE FOLLOWING ADDRESS:
If by first class mail, overnight mail, or hand delivery:
eToys Direct 1, LLC-Ballot Processing
c/o Ornni Management Group LLC
16161 Ventura Blvd.
Suite C, PMB 439
Encino, CA 91436-2522
DO NOT SEND YOUR BALLOT VIA FACSIMILE OR E-MAIL.
IF YOUR BALLOT IS NOT PROPERLY COMPLETED, SIGNED AND RECEIVED
AS DESCRIBED, IT WILL NOT BE COUNTED. IF YOUR BALLOT IS DAMAGED OR
LOST, YOU MAY REQUEST A REPLACEMENT BY ADDRESSING A WRITTEN
REQUEST TO THE ADDRESS SHOWN ABOVE. FACSIMILE OR ELECTRONICALLY
SUBMITTED BALLOTS WILL NOT BE COUNTED.
DOCS_DE: 156322.6
10
ARTICLES
MEANS FOR IMPLEMENTATION OF THE PLAN
5.1 Corporate Action. On the Effective Date and automatically and without further
action, (i) each existing member of the Board of Directors of the Debtors will resign or be
terminated by the Plan Administrator and (ii) the Plan Administrator shall be deemed the sole
shareholder, officer, and director of the Post-Confirmation Debtors. The Plan will be
administered by the Plan Administrator, and all actions taken thereunder in the name of the Post-
Confirmation Debtors shall be taken through the Plan Administrator.
5.2 Plan Administrator. On the Effective Date, the Plan Administrator shall begin
acting for the Post-Confirmation Debtors in the same fiduciary capacity as applicable to a board
of directors, subject to the provisions hereof. The Plan Administrator shall be compensated at
the rate of $450 per hour and may be paid without further order of the Bankruptcy Court. The
Plan Administrator shall be entitled to reimbursement for his actual, reasonable, and necessary
expenses incurred in connection with the performance of his duties, without the need for further
Bankruptcy Court approval. The Plan Administrator shall not be liable for any action he takes or
omits to take that he believes in good faith to be authorized or within his rights or powers, absent
gross negligence or willful misconduct on his/her part. All distributions to be made to Creditors
under the Plan shall be made by the Plan Administrator, who shall deposit and hold all Cash in
trust for the benefit of Creditors (including Professionals) receiving distributions under the Plan.
The duties and powers of the Plan Administrator shall include the following:
(a) To exercise all power and authority that may be exercised, to commence all
proceedings (including the power to continue any actions and proceedings that may have been
commenced by the Debtors or the Committee prior to the Effective Date) that may be
commenced, and to take all actions that may be taken by any officer, director, or shareholder of
the Post-Confirmation Debtors with like effect as if authorized, exercised, and taken by
unanimous action of such officers, directors, and shareholders, including consummating the Plan
and all transfers thereunder on behalf of the Post-Confirmation Debtors;
(b) To maintain all accounts, make distributions, and take other actions consistent
with the Plan, including the maintenance of appropriate reserves, in the name of the Post-
Confirmation Debtors;
(c) To take all steps necessary to terminate the corporate existence of the Debtors;
(d) To prosecute objections to Claims and compromise or settle any Claims
(Disputed or otherwise);
(e) To prosecute any and all Litigation and compromise or settle any Litigation;
(f) To employ and compensate any and all such professionals as the Plan
Administrator, in his sole discretion, deems reasonably necessary to perform his duties under the
Plan without further order of the Bankruptcy Court; and
DOCS_DE:l56322.6
11
(g) To take all other actions not inconsistent with the provisions of the Plan that the
Plan Administrator deems reasonably necessary or desirable in connection with the
administration of the Plan, including, without limitation, filing all motions, pleadings, reports,
and other documents in connection with the administration and closing of the Chapter 11 Cases.
5.3 Resignation, Death, or Removal. The Plan Administrator may be removed by the
Bankruptcy Court upon application for good cause shown. In the event of the resignation,
removal, death, or incapacity of the Plan Administrator, the Committee shall be deemed
reconstituted for the sole purpose of designating another Person to become Plan Administrator,
subject to Bankruptcy Court approval, and thereupon the successor Plan Administrator without
any further act shall become fully vested with all of the rights, powers, duties, and obligations of
his or her predecessor.
5.4 Winding Up Affairs. Following the Confirmation Date, the Post-Confirmation
Debtors shall not engage in any business activities or take any actions, except those necessary to
effectuate the Plan and wind up the affairs of the Debtors. On and after the Effective Date, the
Plan Administrator may, in the name of the Post-Confirmation Debtor, take such actions without
supervision or approval by the Bankruptcy Court and free of any restrictions of the Bankruptcy
Code or the Bankruptcy Rules, other than any restrictions expressly imposed by the Plan or the
Confirmation Order. Without limiting the foregoing, the Plan Administrator may, without
application to or approval of the Bankruptcy Court, pay the charges that he or she incurs after the
Effective Date for professional fees and expenses that, but for the occurrence of the Effective
Date, would constitute Allowed Administrative Claims.
5.5 Release of Liens. Except as otherwise provided in the Plan or in any contract,
instrument or other agreement or document created in connection with the Plan, on the Effective
Date, all mortgages, deeds of trust, liens or other security interests against the Property of the
Debtors' estates shall be released, and all the right, title, and interest of any Holder of such
mortgages, deeds of trust, liens, or other security interests shall revert to the Post-Confirmation
Debtors and their successors and assigns.
5.6 Rights of Actions. On the Effective Date, any right, claim or cause of action,
belonging to the Debtors or their estates or to the Committee against any Person or Entity,
including without limitation, any Litigation, and including specifically preference actions that, by
agreement ofthe Debtors and the Committee approved by the Bankruptcy Court on June 5, 2009,
were previously assigned to the Committee shall be vested in and retained by the Post-
Confirmation Debtors. The Plan Administrator shall pursue, settle, or release all reserved
Litigation, as appropriate, in accordance with the best interest of and for the benefit of the
Creditors entitled to receive distributions under the Plan.
5.7 Professional Fees and Expenses.
(a) Each Professional retained or requesting compensation in the Chapter 11
Cases, pursuant to sections 327, 328, 330, 331 or 503(b) of the Bankruptcy Code, in connection
with fees incurred prior to the Effective Date shall file an application for allowance of final
DOCS_DE:l56322.6
12
compensation and reimbursement of expenses in the Chapter 11 Case before the forty-fifth (45th)
day after the Effective Date. Objections to such applications may be filed on or before the sixty-
fifth (65th) day after Effective Date.
(b) Professionals that perform post-Confirmation Date services for the Post-
Confirmation Debtors or the Plan Administrator shall provide monthly invoices to the Plan
Administrator describing the services rendered and the fees and expenses incurred in connection
therewith, on or before the 20th day following the end of the calendar month during which such
services were performed. Professional Persons who tender such invoices shall be paid by the
Plan Administrator for such services from the Plan Expense Reserve Fund created under Section
6.1 of the Plan on or after the date that is fifteen (15) days after the submission to the Plan
Administrator by such Professional Persons of said monthly invoices, unless, within said fifteen
(15) day period, a written objection to said payment is made, in which event such payment shall
be made only upon either (a) agreement of the parties or (b) Order ofthe Bankruptcy Court.
5.8 Dissolution of Committee. Upon the occurrence of the Effective Date, the
Committee shall be dissolved, and each individual member and any retained Professional shall
be discharged from any further activities in the Chapter 11 Cases. The professionals retained by
the Committee and the members thereof will not be entitled to assert any fee claims for services
rendered or expenses incurred after the Effective Date, except for reasonable fees for (i) services
rendered, and actual and necessary expenses incurred, in connection with any applications for
allowance of compensation and reimbursement of expenses pending on the Effective Date or
filed and served after the Effective Date for services provided prior to the Effective Date or
(ii) services rendered, and actual and necessary expenses incurred, in connection the selection of
any successor Plan Administrator pursuant to Section 5.3 of the Plan.
5.9 Dissolution. As soon as practicable after the Effective Date, the Debtors shall be
dissolved for all purposes without the necessity for any other or further actions to be taken by or
on behalf of the Debtors or payments to be made in connection therewith, provided, however,
that the Plan Administrator shall be authorized to file the Debtors' final tax returns and shall be
authorized to file and shall file with the official public office for keeping corporate records in the
Debtors' states of incorporation a certificate of dissolution or equivalent document. From and
after the Effective Date, the Debtors (i) for all purposes shall be deemed to have withdrawn their
business operations from any state in which there were previously conducting or are registered or
licensed to conduct their business operations, and the Debtors shall not be required to file any
document, pay any sum or take any other action, in order to effectuate such withdrawal, (ii) shall
not be liable in any manner to any taxing authority for franchise, business, license or similar
taxes accruing on or after the Effective Date.
5.10 On or as soon as practicable after the Effective Date, the Post-Confirmation
Debtors and the Plan Administrator may obtain a fidelity bond or similar insurance in the
estimated amount of the Assets on the Effective Date. In addition, the Plan Administrator may
obtain (if available) directors' and officers' liability insurance or errors and omission insurance
(or equivalent insurance), provided that such insurance is available at a reasonable price.
DOCS_DE: 156322.6
13
ARTICLE6
DISTRIBUTIONS
6.1 Reserve for Plan Expenses. Prior to making any distributions, the Plan
Administrator shall set aside, deduct and reserve an amount of Cash equal to the estimated
amount of Plan Expenses. Any Cash in such Plan Expense reserve that the Plan Administrator
deems to be excess prior to the closing of the Chapter 11 Case shall be distributed to Holders of
Allowed Claims and Interests pursuant to Article 4 of the Plan.
6.2 Objections to Claims. Objections to Claims shall be filed with the Bankruptcy
Court and served upon affected Creditors no later than one hundred twenty (120) days after the
Effective Date, provided, however, that this deadline may be extended by the Bankruptcy Court
upon motion of the Plan Administrator. Notwithstanding the foregoing, in the event that a party
filing any Claim after the applicable Bar Date shall obtain the written consent of the Plan
Administrator to file such Claim late or obtains an order of the Bankruptcy Court upon notice to
the Plan Administrator that permits the late filing of the Claim, then the Plan Administrator and
Post-Confirmation Debtors shall have one hundred twenty (120) days from the date of such
written consent or order to object to such Claim, which deadline may be extended by the
Bankruptcy Court upon motion of the Plan Administrator. Subject to Bankruptcy Court
approval, objections to Claims may be litigated to judgment, settled, or withdrawn by the Plan
Administrator consistent with Article 5.2 of this Plan.
6.4 Distributions on Disputed Claims. Distributions with respect to and on account of
Disputed Claims will be made as soon as practicable after an order, judgment, decree or
settlement agreement with respect to such Claim becomes a Final Order rendering such Claim
and Allowed Claim, provided that (a) the applicable Creditor shall not receive interest on its
Allowed Claim, despite anything contained herein to the contrary, from the date the objection is
filed and served to the date of allowance of such Claim and (b) nothing herein shall require the
Plan Administrator to make a distribution other than in accordance with Article 6.1 of this Plan.
6.5 Disputed Claim Reserves. On and after the Effective Date, the Plan
Administrator shall establish and maintain reserves for all Disputed Claims. For purposes of
establishing a reserve, Cash will be set aside equal to the amount that would have been
distributed to the Holders of Disputed Claims in such Class had their Disputed Claims been
deemed Allowed Claims on the Effective Date or such other amount as may be approved by the
Bankruptcy Court upon motion of the Plan Administrator. If, when, and to the extent any such
Disputed Claim becomes an Allowed Claim by Final Order or by settlement by the Plan
Administrator, the relevant portion of the Cash held in reserve therefor shall be distributed by the
Plan Administrator to the Creditor. The balance of such Cash, if any, remaining after all
Disputed Claims have been resolved, shall be distributed Pro Rata to all Holders of Allowed
Claims in accordance with Article 4 of the Plan. No payments or distributions shall be made
with respect to a Claim which is a Disputed Claim pending the resolution of the dispute by
settlement or Final Order.
DOCS_DE:I56322.6
14
6.6 Unclaimed Property. Within forty ( 40) days after any distribution, the Plan
administrator shall file with the Bankruptcy Court and serve upon all parties requesting notice a
report of undeliverable distributions. If any distribution remains unclaimed for a period of
sixty (60) days after it has been delivered (or attempted to be delivered) in accordance with the
Plan to the Holder entitled thereto, or if such distribution is returned to the Plan Administrator by
the United States Postal Service marked as undeliverable, such unclaimed property shall be
forfeited by such Holder absent further order of the Bankruptcy Court. Furthermore, all right,
title and interest in and to the unclaimed property shall be held in reserve by the Plan
Administrator to be distributed to other Creditors in accordance with this Plan. Any distribution
that remains unclaimed for a period of sixty (60) days after the Plan Administrator's making of
the final distribution under the Plan shall, after satisfaction of any accrued but unpaid Plan
Expenses, be contributed by the Plan Administrator to a charitable organization to be selected by
the Plan Administrator.
6.7 Withholding Taxes. Any federal, state, or local withholding taxes or other
amounts required to be withheld under applicable law shall be deducted from distributions
hereunder. All Persons holding Claims shall be required to provide any information necessary to
effect the withholding of such taxes. Allowed Claims of Holders otherwise entitled to receive a
distribution under the Plan but who fail to provide a complete IRS W-9 form within thirty (30)
days after request is made by the Plan Administrator shall be entitled to no distribution without
further order of the Bankruptcy Court; provided, however, that where any such Holder would be
entitled to receive a distribution of $10,000 or more, the Plan Administrator shall seek an order
of the Bankruptcy Court expunging the Claim.
6.8 Fractional Cents. Any other prov1s1on of this Plan to the contrary
notwithstanding, no payment of fractions of cents will be made. Whenever any payment of a
fraction of a cent would otherwise be called for, the actual payment shall reflect a rounding down
of such fraction to the nearest whole cent.
6.9 Payments of Less than Twenty-Five Dollars. If a cash payment otherwise
provided for by this Plan with respect to an Allowed Claim or Interest would be less than twenty-
five ($25.00) dollars (whether in the aggregate or on any payment date provided in this Plan),
notwithstanding any contrary provision of this Plan, the Plan Administrator shall not be required
to make such payment and such funds shall be otherwise distributed to Holders of Allowed
Claims in accordance with Article 4 of the Plan. The Plan Administrator may decide to make a
charitable donation with undistributed funds if in the reasonable judgment of the Plan
Administrator the cost of calculating and making the final distribution of the remaining
distributable funds is excessive in relation to the benefits to Creditors who would otherwise be
entitled to such funds, and the Claims of any such Holders shall be entitled to no further
distribution without further order of the Bankruptcy Court.
6.10 Setoffs. Except as otherwise provided for herein, the Plan Administrator may, but
shall not be required to, set off against any Claim and the payments to be made pursuant to this
Plan in respect of such Claim, claims of any nature whatsoever that the Debtors or their estates
may have against the Creditor, but neither the failure to do so nor the allowance of a Claim
DOCS_DE:IS6322.6
15
hereunder shall constitute a waiver or release by the Debtors or their estates of any claim it may
have against the Creditor.
ARTICLE7
UNEXPIRED LEASES AND EXECUTORY CONTRACTS
7.1 Any and all pre-petition leases or executory contracts not previously rejected by
the Debtors, unless specifically assumed pursuant to order(s) of the Bankruptcy Court prior to
the Confirmation Date or the subject of a motion to assume or assume and assign pending on the
Confirmation Date, shall be deemed rejected by the Debtors on the Confirmation Date; provided,
however, that nothing in this Article shall cause the rejection, breach, or termination of any
contract of insurance benefiting the Debtors and their estates.
7.2 All proofs of claim with respect to claims arising from the rejection of executory
contracts or leases shall, unless another order of the Bankruptcy Court provides for an earlier
date, be filed with the Bankruptcy Court within thirty (30) days after the mailing of notice of
entry of the Confirmation Order.
ARTICLES
CONDITIONS PRECEDENT EFFECTIVENESS OF THE PLAN
8.1 Conditions to Consummation. The Plan shall not become effective unless and
until each of the following conditions has been satisfied:
(a) The Bankruptcy Court shall have entered the Confirmation Order; and
(b) The Confirmation Order shall have become a Final Order.
8.2 Waiver of Conditions. The Debtors, in their sole discretion, may at any time,
without notice or authorization of the Bankruptcy Court, waive the conditions set forth in Section
8.1(b) above. The failure of the Debtors to satisfy or waive such condition may be asserted by
the Debtors regardless of the circumstances giving rise to the failure of such condition to be
satisfied (including any action or inaction by the Debtors). The Debtors reserve the right to
assert that any appeal from the Confirmation Order shall be moot after consummation of the
Plan.
8.3 Effect of Failure of Condition. In the event that the condition specified in Section
8.1(b) of the Plan has not occurred or been waived on or before ninety (90) days after the
Confirmation Date, the Confirmation Order may be vacated upon order of the Bankruptcy Court
after motion made by the Debtors or any party in interest.
8.4 Substantive Consolidation Order. The Plan shall serve as a motion seeking entry
of an order substantively consolidating these Chapter 11 Cases for distribution and voting
purposes. Unless an objection to substantive consolidation is made in writing by any Creditor
DOCS_DE:l56322.6
16
affected by the Plan as herein provided on or before the Plan Objection Deadline, an order
substantively consolidating these Chapter 11 Cases for distribution and voting purposes may be
entered by the Bankruptcy Court, which order may be the Confirmation Order. In the event any
such objections are timely filed, a hearing with respect thereto shall be scheduled by the
Bankruptcy Court, which hearing may, but need not, coincide with the Confirmation Hearing.
8.5 Effect/Extent of Substantive Consolidation. In effectuation of such substantive
consolidation, on the Effective Date: (a) no Distributions will be made under the Plan on
account of the Intercompany Claims; (b) the guarantees of the Debtors will be deemed
eliminated so that any Claim against the Debtors and any guarantee thereof executed by any
Debtor and any joint and several liability of the Debtors with one another will be deemed to be
one obligation of these Debtors; (c) each and every Claim against the Debtors will be deemed
asserted as a single Claim against the Debtors as a whole, and will be treated in the same Class
regardless of the Debtor; and (d) all distributions on account of Allowed Claims will be made
from The Parent Company. Additionally, notwithstanding the substantive consolidation herein,
substantive consolidation shall not affect the obligation of each and every one of the Debtors
under 28 U.S.C. 1930(a)(6) until a particular case is closed, converted, or dismissed.
8.6 Reservation of Rights. The Debtors reserve the right at any time up to the
conclusion of the Confirmation Hearing to withdraw their request for substantive consolidation
of these Chapter 11 Cases, to seek Confirmation of the Plan as if there were no substantive
consolidation, and to seek Confirmation of the Plan with respect to one Debtor even if
Confirmation with respect to the other Debtors is denied.
ARTICLE9
RETENTION OF JURISDICTION
9.1 Following the Confirmation Date and until such time as all payments and
distributions required to be made and all other obligations required to be performed under this
Plan have been made and performed by the Plan Administrator, the Bankruptcy Court shall
retain jurisdiction as is legally permissible, including, without limitation, for the following
purposes:
(a) Claims. To determine the allowability, classification, or priority of
Claims against the Debtors upon objection by the Plan Administrator or any other party in
interest.
(b) Injunction, etc. To issue injunctions or take such other actions or make
such other orders as may be necessary or appropriate to restrain interference with the Plan or its
execution or implementation by any Person, to construe and to take any other action to enforce
and execute the Plan, the Confirmation Order, or any other order of the Bankruptcy Court, to
issue such orders as may be necessary for the implementation, execution, performance and
consummation of the Plan and all matters referred to herein, and to determine all matters that
may be pending before the Bankruptcy Court in the Chapter 11 Cases on or before the Effective
Date with respect to any Entity.
DOCS_DE:l56322.6
17
(c) Professional Fees. To determine any and all applications for allowance of
compensation and expense reimbursement of Professionals for periods before or after the
Effective Date, as provided for in the Plan.
(d) Dispute Resolution. To resolve any dispute arising under or related to the
implementation, execution, consummation or interpretation of the Plan and the making of
distributions thereunder, including, without limitation, any dispute concerning payment of
professional fees and expenses of the Plan Administrator.
(e) Leases and Executory Contracts. To determine any and all motions for
the rejection, assumption, or assignment of executory contracts or unexpired leases, and to
determine the allowance of any Claims resulting from the rejection of executory contracts and
unexpired leases.
(f) Actions. To determine all applications, motions, adversary proceedings,
contested matters, actions, and any other litigated matters instituted prior to the closing of the
Chapter 11 Cases, including any remands.
(g) Litigation. To determine any and all "Litigation" as defined under
Section 1.33, including, but not limited to, any causes of action against Ernst & Young LLP and
its officers and directors, and Posh Ventures, LLC, and any of its affiliates or subsidiaries and its
officers or directors. Provided, however, that nothing in this Article 9 shall limit or in any way
impact any rights Ernst & Young LLP may have to arbitration of any Claim asserted against
Ernst & Young LLP.
(h) General Matters. To determine such other matters, and for such other
purposes, as may be provided in the Confirmation Order or as may be authorized under
provisions of the Bankruptcy Code.
(i) Plan Modification. To modify the Plan under Section 1127 of the
Bankruptcy Code, remedy any defect, cure any omission, or reconcile any inconsistency in the
Plan or the Confirmation Order so as to carry out its intent and purposes.
G) Aid Consummation. To issue such orders in aid of consummation of the
Plan and the Confirmation Order notwithstanding any otherwise applicable non-bankruptcy law,
with respect to any Entity, to the full extent authorized by the Bankruptcy Code.
(k) Implementation of Confirmation Order. To enter and implement such
orders as may be appropriate in the event the Confirmation Order is for any reason stayed,
revoked, modified or vacated.
(1) Final Decree. To enter a Final Decree closing these Chapter 11 Cases.
DOCS _DE: 156322.6
18
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 Pre-Confirmation Modification. The Plan may be altered, amended or modified
by the Debtors before the Confirmation Date as provided in Section 1127 of the Bankruptcy
Code.
10.2 Post-Confirmation Immaterial Modification. The Plan Administrator and/or Post-
Confirmation Debtors may, with the approval of the Bankruptcy Court and without notice to all
Holders of Claims and Interests, insofar as it does not materially and adversely affect the interest
of Holders of Claims, correct any defect, omission or inconsistency in the Plan in such manner
and to such extent as may be necessary to expedite consummation of this Plan.
10.3 Post-Confirmation Material Modification. The Plan may be altered or amended
after the Confirmation Date by the Plan Administrator and/or Post-Confirmation Debtors in a
manner which, in the opinion of the Bankruptcy Court, materially and adversely affects Holders
of Claims, provided that such alteration or modification is made after a hearing as provided in
Section 1127 ofthe Bankruptcy Code.
10.4 Withdrawal or Revocation of the Plan. The Debtors reserve the right to revoke or
withdraw the Plan prior to the Effective Date. If the Debtors revoke or withdraw the Plan, then
the result shall be the same as if the Confirmation Order had not been entered and the Effective
Date had not occurred.
10.5 Successors and Assigns. The rights, benefits and obligations of any Entity named
or referred to in the Plan shall be binding on, and shall inure to the benefit of, the heirs,
executors, administrators, successors and/or assigns of such Entities.
10.6 Exculpation. Except as otherwise provided by the Plan or the Confirmation
Order or other Final order of the Bankruptcy Court, on the Effective Date, the Debtors,
certain of the Debtors' officers and directors expressly limited to Charles Goodrich, Philip
Manoff and Michael Miyaki, the Committee and its individual members, the Plan
Administrator, and their respective bankruptcy professionals including attorneys and
financial advisors, and their successors and assigns, shall be deemed released by each of
them against the other of and from any claims, obligations, rights, causes of action and
liabilities for any act or omission in connection with, or arising out of, the Chapter 11
Cases, including, without limiting the generality of the foregoing, all sales of assets, the
Disclosure Statement, the pursuit of approval of the Disclosure Statement, the pursuit of
confirmation of the Plan, the consummation of the Plan or the administration of the Plan
or the property to be distributed under the Plan, except for acts or omissions that
constitute willful misconduct, gross negligence or fraud, and all such Persons, in all
respects, shall be entitled to rely upon the advice of counsel with respect to their duties and
responsibilities under the Plan and under the Bankruptcy Code.
DOCS_DE:l56322.6
19
10.7 Injunction. Except as otherwise provided in the Plan, on and after the
Confirmation Date, all Entities who have held, hold or may hold Claims against the
Debtors or Interests in the Debtors are, with respect to any such Claims or Interests,
permanently enjoined from and after the Confirmation Date from: (a) commencing,
conducting or continuing in any manner, directly or indirectly, any suit, action or other
proceeding of any kind (including, without limitation, any proceeding in a judicial,
arbitral, administrative or other forum) against or affecting the Debtors' Estates, the Post-
Confirmation Debtors, any of their property, or any direct or indirect transferee of any
property of, or direct or indirect successor in interest to, any of the foregoing Entities,
including without limitation the Plan Administrator, or any property of any such
transferee or successor; (b) enforcing, levying, attaching (including, without limitation, any
pre-judgment attachment), collecting or otherwise recovering by any manner or means
whether directly or indirectly, of any judgment, award, decree or order against the
Debtors' Estates, the Post-Confirmation Debtors, any of their property, or any direct or
indirect transferee of any property of, or direct or indirect successor in interest to any of
the foregoing Entities, including without limitation the Plan Administrator; (c) creating,
perfecting or otherwise enforcing in any manner, directly or indirectly, any encumbrance
of any kind against the Debtors' Estates, the Post-Confirmation Debtors, any of their
property, or any direct or indirect transferee of any property of, or direct or indirect
successor in interest to any of the foregoing Entities, including without limitation the Plan
Administrator; (d) asserting any right of setoff, of any kind, directly or indirectly, against
any obligation due the Debtors' Estates, the Post-Confirmation Debtors, any of their
property, or any direct or indirect transferee of any property of, or successor in interest to,
any of the foregoing Entities, including without limitation the Plan Administrator; and
(e) taking any actions in any place and in any manner whatsoever that do not conform to or
comply with the provisions of the Plan. Provided, however, that this section 10.7 shall not in
any way limit Ernst & Young LLP's right to respond (including, without limitation, the
right assert counterclaims or setoff) to Litigation or Claims initiated by or asserted by the
Post-Confirmation Debtors, the Plan Administrator or any other party entitled to pursue
the Debtors' Claims.
10.8 Cramdown. To the extent any Impaired Class of Claims or Interest Holders
entitled to vote on the Plan votes to reject the Plan, the Debtors reserves the right to request
confirmation of the Plan under Section 1129(b) of the Bankruptcy Code with respect to such
Class(es).
10.9 Governing Law. Except to the extent that the Bankruptcy Code is applicable, the
rights and obligations arising under this Plan shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware.
10.10 United States Trustee Fees. All outstanding amounts due under 28 U.S.C. 1930
that have not been paid shall be paid by the Debtors on or before the Effective Date. Thereafter,
the Plan Administrator shall pay any statutory fees due pursuant to 28 U.S.C. 1930(a)(6) and
such fees shall be paid until entry of a final decree or an order converting or dismissing these
Chapter 11 Cases.
DOCS_DE: 156322.6
20
10.11 Notices. Any notice required or permitted to be provided under the Plan shall be
in writing and served by either (a) certified mail, return receipt requested, postage prepaid,
(b) hand delivery or (c) reputable overnight courier service, freight prepaid, to be addressed as
follows:
To: The Post-Confirmation Debtors
and Plan Administrator:
Steven D. Sass LLC
Plan Administrator
P.O. Box 45
Clarksville, MD 21029
Email: stevendsassllc@grnail.corn
lynnksrnalley@aol.corn
With a copy to:
Pachulski Stang Ziehl & Jones LLP
Laura Davis Jones
Jeffrey W. Dulberg
Michael R. Seidl
919 N. Market Street, 17th Floor
P.O. Box 8705
Wilmington, DE 19899-8705
Email: ljones@pszjlaw.corn
jdulberg@pszjlaw.corn
rnseidl@pszj law. corn
To: The Committee:
ARENT FOX LLP
Schuyler G. Carroll
1675 Broadway
New York, NY 10019
Telephone: 212-484-3900
Facsimile: 212-484-3990
Email: Schuyler.Carroll@arentfox.com
10.12 Non-Voting Equity Securities. To the extent applicable, the Debtors shall comply
with the provisions of Section 1123(a)(6) of the Bankruptcy Code.
10.13 Retiree Benefits. From and after the Effective Date, to the extent required by
Section 1129(a)(13) of the Bankruptcy Code, the Post-Confirmation Debtors shall continue to
pay all retiree benefits (as defined in Section 1114 of the Bankruptcy Code), if any, established
or maintained by the Debtors prior to the Effective Date. The Debtors believe that there are no
such benefits.
DOCS_DE:l56322.6
21
10.14 Saturday, Sunday, or Legal Holiday. If any payment or act under the Plan is
required to be made or performed on a date that is not a Business Day, then the making of such
payment or the performance of such act may be completed on the next succeeding Business Day
but shall be deemed to have been completed as of the required date.
10.15 Section 1146 Exemption. Pursuant to Section 1146(c) of the Bankruptcy Code,
the issuance, transfer, or exchange of any security under the Plan or the making or delivery of
any instrument of transfer pursuant to, in implementation of, or as contemplated by, the Plan or
the revesting, transfer or sale of any real or personal property of the Debtors pursuant to, in
implementation of, or as contemplated by, the Plan shall not be taxed under any state or local law
imposing a stamp tax, transfer tax, or similar tax or fee.
10.16 Severability. If any term or provision of the Plan is held by the Bankruptcy Court
prior to or at the time of Confirmation to be invalid, void, or unenforceable, the Bankruptcy
Court shall have the power to alter and interpret such term or provision to make it valid or
enforceable to the maximum extent practicable, consistent with the original purpose of the term
or provision held to be invalid, void, or unenforceable, and such term or provision shall then be
applicable as so altered or interpreted. In the event of any such holding, alteration, or
interpretation, the remainder ofthe terms and provisions of the Plan may, at the Debtors' option
remain in full force and effect and not be deemed affected. However, the Debtors reserve the
right not to proceed to Confirmation or consummation of the Plan if any such ruling occurs. The
Confirmation Order shall constitute a judicial determination and shall provide that each term and
provision of the Plan, as it may have been altered or interpreted in accordance with the
foregoing, is valid and enforceable pursuant to its terms.
10.17 Headings. The headings used in this Plan are inserted for convenience only and
neither constitute a portion of the Plan nor in any manner affect the provisions of the Plan.
10.18 Waiver of Stay. The Debtors request as part of the Confirmation Order a waiver
from the Bankruptcy Court of the ten day stay of Bankruptcy Rule 3020( e) and, to the extent
applicable, a waiver of the ten day stay of Bankruptcy Rule 6004(g).
10.19 Substantial Consummation. On the Effective Date, the Plan shall be deemed
substantially consummated for voting and distribution purposes under Bankruptcy Code sections
1101 and 1127(b).
DOCS_DE:l56322.6
22
ARTICLE 11
CONFIRMATION REQUEST
11.1 The Debtors and the Committee hereby request confirmation of the Plan pursuant
to Section 1129(a) and Section 1129(b) ofthe Bankruptcy Code.
Dated: June 9, 2010
DOCS_DE:l56322.6
eToys Direct 1, LLC; The Parent Company; BabyUniverse,
Inc.; Dreamtime Baby, Inc.; eToys Direct, Inc.; PoshTots,
Inc.; eToys Direct 2, LLC; eToys Direct 3, LLC; Gift
Acquisition, L.L.C.; and My Twinn, Inc.
By: Is/ Charles A. Goodrich
Name: Charles A. Goodrich
Title: CEO
23
Submitted by:
Counsel for Debtors and Debtors in
Possession:
Is! Michael R. Seidl
PACHULSKI STANG ZIEHL & JONES LLP
Laura Davis Jones (Bar No. 2436)
Jeffrey W. Dulberg (CA Bar No. 181200)
Michael R. Seidl (Bar No. 3889)
919 N. Market Street, 17th Floor
P.O. Box 8705
Wilmington, DE 19899-8705
Telephone: 302-652-4100
Facsimile: 302-652-4400
DOCS_DE:l56322.6
Counsel for Official Committee of Unsecured
Creditors:
Is/ Schuyler G. Carroll
ARENT FOX LLP
Schuyler G. Carroll
1675 Broadway
New York, NY 10019
Telephone: 212-484-3900
Facsimile: 212-484-3990
-and-
ELLIOTT GREENLEAF
Rafael X. Zahralddin-Aravena (Bar No. 4166)
1105 Market Street, Suite 1700
Wilmington, DE 19801
Telephone: 302-384-9400
Facsimile: 302-384-9399
24
Internal CM/ECF Live Database
Page 1 of6
File a Plan:
08-I34I2-BLS eToys Direct I, LLC
Type: bk Chapter: II v Office: 1 (Delaware)
Assets: y Judge: BLS Case Flag: LEAD, CLMSAGNT
U.S. Bankruptcy Court
District of Delaware
Notice of Electronic Filing
The following transaction was received from Michael Seidl entered on 6/9/20IO at 2:22PM EDT and
filed on 6/9/2010
Case Name: eToys Direct I, LLC
Case Number: 08-I34I2-BLS
Document Number: 1061
Docket Text:
Chapter I1 Plan of Liquidation Filed by eToys Direct I, LLC (Seidl, Michael)
The following document(s) are associated with this transaction:
Document description:Main Document
Original filename:W:\DE Bankruptcy\E Toys\2010\June 20I0\06-09-IO\Plan and DS\eToys Joint
Plan. pdf
Electronic document Stamp:
[STAMP bkecfStamp _ID=983460418 [Date=6/9/20 1 0] [FileNumber=8525217 -0]
[88f54fea9e54cd027e184a00e85bebe1c48863d7f689ea230100491e4bf38b020031e
194e32003e1902cbd806a77ba1c83ead5eb2a4efda0a940555776c327D]]
08-13412-BLS Notice will be electronically mailed to:
Justin R. Alberto on behalf of Defendant Lego Systems, Inc
jalberto@bayardlaw.com,
bankserve@bayardlaw.com,unorrnan@bayardlaw.com,tmatihews@bayardlaw.com
Richard A. Barkasy on behalf of Creditor Commerce Technologies, Inc.
rbarkasy@schnader .com
Charles J. Brown on beha1fofDefendant AT&T
cbrown@archerlaw .com, dabernathy@archerlaw.com
Stuart M. Brown on behalf of Interested Party BA Merchant Services, LLC and Bank of America, N .A.
sbrown@eapdlaw.com, DEbankruptcy@eapdlaw.com
David L. Buchbinder
https://ecf.deb.uscourts.gov/cgi-bin/Dispatch.pl?251990046854083 6/9/2010
EXHIBITB
(LIQUIDATION ANALYSIS)
68781-001 \DOCS_DE: 158033.5
ASSETS as of May 29,2010
Category
eTOYS DIRECT 1, LLC, et al.
Case No. 08-13412(BLS)
Liquidation Analysis
Gross Value
Cash on hand (includes recovery of $241,126 in credit card deposits) 602,037
Secured
Creditor
None
Due from sales partners 1,064,852 Various sales
Miscellaneous recoveries
Collection of open avoidance actions
Other Causes of Action - See Plan and Disclosure Statement -Value
unknown
Total Expected Asset Realization
ESTIMATED COSTS, CLAIMS AND DISTRIBUTIONS
ESTIMATED SECURED CLAIMS- NONE
ESTIMATED COSTS FROM May 29, 2010 UNTIL CONFIRMATION
ESTIMATED ADMINISTRATIVE CLAIMS
Professional Fees
503{b){9) and reclamation claims
Other postpetition accounts payable
Filed administrative claims
US Trustee Fees
Total Expected Administrative Claims
ESTIMATED PRIORITY CLAIMS
ESTIMATED COSTS OF LIQUIDATION & ADMINISTRATION
Estimated costs of liquidation & administration in Chapter 11
Estimated additional costs of liquidation and administration in Chapter 7
ESTIMATED FUNDS AVAILABLE TO GENERAL UNSECURED CREDITORS
ESTIMATED GENERAL UNSECURED CLAIMS
Scheduled and filed general unsecured claims as of May 1, 2010 per Omni
Less likely duplicates and amended claims per Omni analysis
Add likely wrong class claims per Omni analysis
Less likely redundant multi-debtor claims per Omni analysis
Less likely books and records objections per Omni analysis
Less proposed amendments/objections to Scheduled amounts per Omni analysis
Less likely unsecured claims from Wyndcrest Baby Universe Holdings II, LLC
and from John C. Textor which the debtor believes will be reclassified as an
equity interest and/or expunged.
Total Estimated General Unsecured Claims before objections as to amount, etc.
56,000
1,025,000
Estimated Percentage Recovery to General Unsecured Creditors in Chapter 7 Liquidation
partners
None
None
Estimated Percentage Recovery to General Unsecured Creditors in Chapter 11 Liquidating Plan
Estimated Percentage Recovery to Equity Interests
Expected
Realization
602,037
160,617
31,869
590,000
763,747
33,457
35,240
35,019
14,900
230,000
200,000
374,160,972
(4,966,319)
118,224
(602,071)
(5,598,907)
(22,396,969)
(322,300,000)
1,384,524
0
14,710
882,362
166,245
430,000
(108,793)
18,414,930
-0.6%
0.5%
0.0%