Glossary of Terms

Listed below are definitions of the common terms used in the Chapter 11 process.

Administrative Claim: An "Administrative Claim" is a Claim that arises after the Filing Date, which is granted priority treatment under the bankruptcy Code and such claims are required to be paid in full, unless otherwise agreed, in order to confirm a plan of reorganization.

Automatic Stay: The "Automatic Stay" is an injunction that takes effect immediately upon the filing of a Chapter 11 petition. It prohibits, among other things, all collection actions against a Debtor and all actions to exercise control over property of a Debtor. The Automatic Stay also affects lawsuits commenced prior to the date of filing, preventing them from moving forward until the Chapter 11 case is over or as otherwise authorized by the Bankruptcy Court.

Bankruptcy Judge: The "Bankruptcy Judge" presides over the administration of a bankruptcy case and decides contested aspects of that case related to the reorganization of a Debtor.

Bankruptcy Petition: The "Bankruptcy Petition" is the legal document that is filed with the Bankruptcy Court and initiates a bankruptcy case. The Bankruptcy Petition is, in most cases, filed with a variety of other supporting documents that contain information on the Debtor.

Bar Date: The "Bar Date" is the last date on which a "Proof of Claim" (see below) can be filed. The Bankruptcy Court will establish the Bar Date and then notice of the Bar Date will be announced and sent to creditors.

Business Plan: A "Business Plan" is a strategic plan prepared by management that sets forth the company's objectives as well as the specific steps that will be taken to achieve those goals.

Cash Collateral: "Cash Collateral" means cash in which an entity other than the Debtor has an interest, e.g., a lien.

Chapter 11: The chapter of the U.S. Bankruptcy Code that contains the provisions relating to a Court-supervised reorganization of a company.

Claim: A "Claim" is a right to payment, whether that right is fixed, liquidated, potential, or contingent (i.e., based on the outcome of litigation). Claims can fall into different categories: administrative, priority, secured, unsecured, contingent, liquidated, unliquidated, disputed or matured.

Confirmation: "Confirmation" is the official approval of the Plan of Reorganization by the Bankruptcy Court.

Creditor: A "Creditor" is an entity, such as a vendor, bank lender or bondholder, to whom a debt is owed by the Debtor and therefore has a Claim against the Debtor.

Committee: The "Creditors' Committee" is appointed by the U.S. Trustee (see below) and is composed of representatives of the unsecured creditors. This Committee represents the unsecured creditors, consults with the Debtor-in-Possession (see below), reviews and gathers information about the Debtor-in-Possession's activities and financial condition, and participates in the formulation and negotiation of a Chapter 11 plan of reorganization.

Debtor: A "Debtor" is a person or company who files a voluntary petition for reorganization.

Debtor-in-Possession: In most Chapter 11 cases, a Debtor is a "Debtor-in-Possession" meaning that it continues to operate its business while retaining possession of its assets and property. In other words, no trustee is appointed to operate the business or manage the property of a Debtor-in-Possession.

Debtor-in-Possession (DIP) Financing: "DIP Financing" is special financing available only to companies in Chapter 11 and is used to fund post-petition trade and employee obligations, as well as the ongoing operating needs of the company during the reorganization process.

Disclosure Statement: The "Disclosure Statement" is a document that is presented to the Bankruptcy Court, and ultimately to creditors, that discloses the terms of the Debtor's Plan of Reorganization, as well as sufficient information about the company and other matters so that holders of Claims against or interests in the company can make an informed decision as to whether to vote for or against the Plan.

Discharge: "Discharge" is the legal term for the elimination of the Debtor's liabilities or its debt through the Chapter 11 process.

Filing Date: The "Filing Date" is the date on which the Chapter 11 petition is filed.

First Day Motions: "First Day Motions" are motions typically filed on the same day that the Chapter 11 petition is filed which are designed to provide the Debtor with narrow relief to ensure operations continue without interruption. First Day Motions are intended to provide support to the company's employees, vendors and customers.

First Day Orders: "First Day Orders" are the Orders entered by the Bankruptcy Court granting the requests made by the Debtor in the First Day Motions.

Plan of Reorganization: The "Plan of Reorganization" is the formal plan setting forth in detail how the Claims of each class of Creditors and interest holders will be treated. The Plan must be voted on and approved by a certain percentage of Creditors and then be approved or "Confirmed" by the Bankruptcy Court in order to become effective.

Pre-petition: "Pre-petition" refers to the period of time preceding a Chapter 11 filing. It is also typically used to identify Claims that existed prior to the Filing Date.

Post-petition: "Post-petition" refers to the period of time following a Chapter 11 filing. It is also typically used to identify business transactions that occur on or after the Filing Date.

Priority Claim: Certain classes of claims are given priority by the Bankruptcy Code, such as certain claims for unpaid wages or taxes. Claims must be paid in order of priority.

Proof of Claim: The "Proof of Claim" is the form filed with the Bankruptcy Court that provides the details of a Creditor's Pre-petition Claim.

Reorganized Debtor: After the Debtor receives Bankruptcy Court approval of a Plan of Reorganization, the Plan becomes effective and the company emerges from Chapter 11. The company is then considered "reorganized."

Schedule of Assets and Liabilities: A Debtor's Schedule of Assets and Liabilities lists its assets (what it has or owns) and its liabilities (what it owes) as of the Filing date. Every Debtor is required to file a Schedule of Assets and Liabilities with the Bankruptcy Court, unless the Court orders otherwise.

Secured Claim: A "Secured Claim" is a Claim that is based on a debt or obligation that is secured by a lien on certain assets. A mortgage is an example of a debt that is secured by a lien on certain assets (i.e., real property).

Section 363: Under Section 363 of the Bankruptcy Code, any agreement to purchase the assets of a company in Chapter 11 is subject to a competitive bidding process through which other parties may submit “higher and better offers.” If additional bids are received, the Court will then hold an auction to ensure that the company receives the best possible offer. The Section 363 process often stimulates interest on the part of additional prospective buyers and can result in a different transaction with a different purchaser.

Stalking Horse: A stalking horse is a company chosen from a pool of bidding companies to make the first bid on a company in Chapter 11. This method allows the distressed company to avoid low bids on their assets. Once the stalking horse bidder has made their bid, other potential buyers may submit competing bids for the company's assets. In essence, the stalking horse sets the bar so that other bidders can't "low-ball" the purchase price.

United States Trustee: The "U.S. Trustee" is part of the U.S. Department of Justice and supervises all bankruptcy cases filed in a particular district. The role of the U.S. Trustee is to interview the Debtor shortly after the filing of the case, to schedule the first meeting of Creditors (the "341 Meeting"), to inform the Debtor of its duties and responsibilities, to ensure that the Debtor complies with its duties and responsibilities, to appoint Creditors', bondholder and equityholder committees, to apply to the Bankruptcy Court for appropriate relief and to make recommendations to the Bankruptcy Court.