1994-02-08_GENERAL DOCUMENTS - C1981017

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Effective Date, a cash amount equal to five percent of the allowed claim (which claim is limited to $10,000 or the actual amount of the claim, whichever is less) . For creditors with claims exceeding $10,000, the enclosed Plan ballot contains a box to elect treatment as a Class 8 claim. In Section III.A.5, "Class 7 -- General Unsecured Claims Not Exceeding $200, " immediately above, the Debtor assumed that all general creditors with claims not exceeding $4,000 would opt for treatment as Class 7 claims, because the amount paid to them as Class 7 creditors would equal or exceed the amount which they would receive as Class 8 creditors. Assuming that the Class 7 election is made by such creditors, 36 scheduled creditors would remain in Class 8, holding claims in the total amount of $234,831. The total amount distributed to these creditors under the Plan would be $11,741. General unsecured creditors with claims greater than $10,000 fall into Class 9, and under the Plan will be paid over time from the liquidation of the Debtor's assets. The ultimate return to Class 9 creditors is estimated to be 5%. The delay in receiving payment, and the small amounts of money involved, may cause such a creditor to prefer treatment as a Class 8 claim, in order to receive an immediate cash payment. The Plan permits general creditors with claims greater than $10,000 to voluntarily elect treatment as Class 8 claimants by reducing the amount of their claim to $10,000. By reducing its claim to $10,000, such a creditor would receive a fixed cash payment of $500 on the Effective Date. 9. Class 9 -- General Unsecured Claims Exceeding $10,000 Class 9 consists of each allowed claim which is not otherwise classified under the Plan. Class 9 specifically excludes any claim of Sanwa, the Class 5 reclamation claims, and the Class 6 environmental claims. Class 9 specifically includes all claims which are secured by consensual liens, judgment liens, mechanics' liens, or other liens whose priority under state law is junior to Sanwa. Section 506(a) of the Bankruptcy Code provides that a claim secured by a lien on property in a bankruptcy estate is a secured claim only to the extent that there is sufficient value in the property to give value to the creditor's lien. The amount of Sanwa's claim is $$15,005,015 as of December 31, 1993, which exceeds the value of all assets in the bankruptcy estate. Accordingly, no value remains to secure any liens junior to Sanwa, and those claims appropriately are treated as general unsecured claims in the Debtor's bankruptcy. 24