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UNITED STATES BANKRUPTCY COURT


WESTERN DISTRICT OF WASHINGTON

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In re
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No. 14-14505
SOLAVEI, LLC,

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Debtor.
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EX PARTE ORDER CONDITIONALLY


APPROVING DISCLOSURE
STATEMENT AND SETTING
EXPEDITED PLAN CONFIRMATION
SCHEDULE

THIS MATTER came before the Court upon the ex parte motion (Motion) of Solavei LLC,

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debtor-in-possession herein, for an order (1) conditionally approving the adequacy of the Revised

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Disclosure Statement (Disclosure Statement), while reserving rights to all parties to object to the

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Disclosure Statement at the Plan confirmation hearing; and (2) setting an expedited schedule for final

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approval of the Disclosure Statement and Plan confirmation. The Court has reviewed the files and

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records herein, including the Disclosure Statement and the Amended Plan of Reorganization (Plan)

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filed contemporaneously herewith at Docket Nos. 261 and 262, and finds that cause exists for the

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requisite relief.

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EX PARTE ORDER CONDITIONALLY APPROVING


DISCLOSURE STATEMENT AND SETTING EXPEDITED
PLAN CONFIRMATION SCHEDULE Page 1

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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Now, therefore, it is hereby

ORDERED that:

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The Motion is granted;

2.

The Disclosure Statement, in the form attached hereto as Exhibit A, is conditionally

approved as to its adequacy, while reserving rights to all parties to object as to the adequacy of the

Disclosure Statement at the Plan confirmation hearing, and Solavei may now solicit acceptance or

rejections of the Plan pursuant to 11 U.S.C. 1125;

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3.

Solavei is authorized to set a single hearing for final approval of the Disclosure

Statement and confirmation of the Plan on the Courts calendar on _____________, 2015, at _____.
4.

Solavei shall cause to be placed in the mail to all creditors and other parties in interest

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indicated on the official mailing matrix maintained by the Clerk of the Court a copy of the Planand the

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Disclosure Statement, along with a ballot on which creditors may indicate acceptance or rejection of

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the Plan.

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5.

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The deadline for parties to cast voting ballots as to Solaveis proposed Plan shall be

_______________, 2015, at _______.


6.

The deadline for parties to file objections as to the adequacy of the Disclosure

Statement and confirmation of the Plan shall be ______________, 2015, at _______.


7.

Solavei shall file its Pre-Confirmation Report and the Ballot Summary by

________________ 2015, at ______.

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/ / /End of Order/ / /
[SIGNATURES ON THE FOLLOWING PAGE]

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EX PARTE ORDER CONDITIONALLY APPROVING


DISCLOSURE STATEMENT AND SETTING EXPEDITED
PLAN CONFIRMATION SCHEDULE Page 2

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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Presented by:

BUSH STROUT & KORNFELD LLP

By
/s/ Armand J. Kornfeld
Armand J. Kornfeld, WSBA #17214
Christine M. Tobin-Presser, WSBA #27628
Attorneys for Solavei, LLC

Approved as to Form by:

MILLER NASH GRAHAM & DUNN LP

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By
Mark D. Northrup
Mark D. Northrup, WSBA #16947
Attorneys for Opus Bank

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HILLIS CLARK MARTIN & PETERSON P.S.
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By
/s/ Bradley R. Duncan
Bradley R. Duncan, WSBA #36436
Attorneys for T-Mobile USA Inc.

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SCHWABE, WILLIAMSON & WYATT, P.C

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By
/s/ Lawrence R. Ream
Lawrence R. Ream, WSBA #18159
Attorneys for the Official Unsecured Creditors Committee

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EX PARTE ORDER CONDITIONALLY APPROVING


DISCLOSURE STATEMENT AND SETTING EXPEDITED
PLAN CONFIRMATION SCHEDULE Page 3

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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HONORABLE TIMOTHY W. DORE

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UNITED STATES BANKRUPTCY COURT


WESTERN DISTRICT OF WASHINGTON

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In re
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No. 14-14505
SOLAVEI, LLC,

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REVISED DISCLOSURE STATEMENT


FOR DEBTOR'S PLAN OF
REORGANIZATION

Debtor.
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IMPORTANT: THIS DISCLOSURE STATEMENT CONTAINS INFORMATION THAT


MAY BEAR UPON YOUR DECISION TO ACCEPT OR REJECT THE PLAN OF
REORGANIZATION (PLAN) OF SOLAVEI, LLC (DEBTOR). PLEASE READ THIS
DOCUMENT WITH CARE. THIS DOCUMENT SUMMARIZES THE TERMS OF THE
PLAN. THE DEBTOR MAY CONTINUE TO NEGOTIATE PAYMENT TERMS WITH ITS
CREDITORS, AND THE SPECIFIC TREATMENT OF CLAIMS MAY CHANGE AS A
RESULT, BUT THE PAYMENT TERMS WHICH THE DEBTOR WILL ASK THE COURT
TO APPROVE WILL IN NO CASE BE MATERIALLY LESS FAVORABLE THAN THOSE
DESCRIBED HEREIN.
TO ALL PARTIES IN INTEREST:
On June 11, 2014 (Petition Date), the Debtor filed a voluntary petition under Chapter 11 of
the Bankruptcy Code.

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This Disclosure Statement contains information with respect to the Debtors proposed Plan.
Pursuant to 1125 of the Bankruptcy Code, the Disclosure Statement is being distributed to you along
with a copy of the Plan to allow you to make an informed decision in exercising your right to accept
or reject the Plan. This Disclosure Statement has been conditionally approved by order of the Court
pursuant to 1125 of the Bankruptcy Code as containing information of a kind, and in sufficient
detail, as far as is reasonably practicable under the circumstances, that would enable a hypothetical
REVISED DISCLOSURE STATEMENT FOR DEBTOR'S
PLAN OF REORGANIZATION Page 1

EXHIBIT A

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
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reasonable investor to make an informed judgment about the Plan. In the event of inconsistencies
between the Plan and the Disclosure Statement, however, the terms of the Plan shall control. The
Courts approval of this Disclosure Statement does not constitute an endorsement of the Plan by the
Court.

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The Debtor urges you to accept the proposed Plan and to promptly return your completed
ballot to enable your vote to be counted.

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I.

SUMMARY OF PLAN

Pursuant to the Plan, Aspider Solutions, Inc. (Aspider) will form a new entity (Newco) to
acquire substantially all of the assets of the Debtor. Newco plans to continue the Debtors operations,
uninterrupted, post-confirmation. In exchange for the Debtors assets, Newco will pay or transfer the
following value to the Debtor for distribution to its creditors, and/or assume and pay the following
liabilities:
1. Newco will provide the Debtor cash at Closing (the Purchase Price Cash), which will
fund the proposed cash distributions to creditors proposed in the Plan;

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2. Newco will execute a combined $4.75 million in promissory notes in favor of Opus Bank
($750,000 note) and T-Mobile USA, Inc. (T-Mobile) ($4,000,000 note);
3. Newco will make available 40% of the ownership interests in Newco, with estimated value
of $1,771,136;

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4. Newco will assume and pay the Debtors post-petition Ordinary Course Administrative
Expense Claims (excluding the post-petition claim of T-Mobile discussed in the next
paragraph) which are comprised primarily of trade credit extended to the Debtor post-petition
by its trade creditors and vendors, as well as personnel expenses, taxes, and other similar
expenses, all in an amount estimated to be $1,000,000 - $1,400,000, depending on the actual
closing date; and
5. Newco will also assume and pay T-Mobiles Administrative Expense Claim accruing from
January 1, 2015 through the Effective Date of the Plan, estimated to be $1,500,000 or more. TMobile has agreed to waive its estimated $1,400,000 unpaid Administrative Expense Claim
that accrued prior to December 31, 2014.

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The above-described transaction (the Aspider Transaction) is the product of significant


efforts by the Debtor to locate a potential party interested in acquiring its going concern business and
continuing operations and represents the outcome that provides the greatest value to the Debtors
creditors, including pre-petition and post-petition obligations. The Debtor had discussions with over
21 interested parties and provided meaningful due diligence information to 9 of those parties.
Ultimately, Aspider emerged as the most strategic party and the one willing to provide by far the
highest and best value to the estate.

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REVISED DISCLOSURE STATEMENT FOR DEBTOR'S


PLAN OF REORGANIZATION Page 2

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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T-Mobile provides the backbone that allows the Debtor to provide cellular and data services to
its customers. T-Mobile has consented to accept a significant discount of its prepetition secured
claims and post-petition administrative claims in order to support the Aspider Transaction. Without
T-Mobiles consent and cooperation, it would be impossible for the Debtor to continue its operations
and no creditors, with the possible exception of very nominal value to Opus Bank, will receive any
value.

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Likewise, Opus Bank, the Debtors senior secured lender has also agreed to accept a
significant discount of its secured claim in order to support the Plan and the Aspider Transaction.
Under the Plan and assuming closing of the Aspider Transaction, distributions to Holders of
prepetition Allowed Claims will be made in the following manner:

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Opus Bank Secured Claim
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T-Mobile Secured Claim
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Noteholder Claims

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Priority Wage and Tax Claims

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General Unsecured Claims

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$1,750,000 cash, plus a $750,000


unsecured note from Newco
$1,000,000 cash, plus a $4,000,000
note from Newco, secured by a
security interest in Newcos assets
40% of the ownership interests in
Newco plus 20% of any Trade
Secret Lawsuit Proceeds, plus a
possible Cost Reimbursement
Benefit if Noteholders reimburse
Contingent Fee Counsels expenses
Paid in full at Closing (Estimated to
be $331,767)
$1,000,000 cash to be paid Pro Rata
to Allowed Holders of Class 6
Claims (the Class 6 Cash); plus
80% of any Trade Secret Claims
Proceeds (without any sharing in
any Cost Reimbursement Benefit
resulting from Noteholders
reimbursement of Contingent Fee
Counsels expenses); plus a note
from Newco in the principal
amount of the lesser of (a) 5% of
the Rejected Contract Claims or (b)
$250,000 (the Class 6 Note).

Finally, the remaining cash paid to the estate as part of the Aspider Transaction will be used
1) to pay negotiated amounts to Cure Claims with respect to those of the Debtors executory contracts
to be assumed and assigned to Newco at Closing, 2) to pay allowed Administrative Expense Claims
(excluding the T-Mobile Administrative Expense Claims, the treatment of which is described above)

REVISED DISCLOSURE STATEMENT FOR DEBTOR'S


PLAN OF REORGANIZATION Page 3

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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not assumed by Newco, including fees of the Professionals employed by the Debtor and the
Committee, and 3) to create the Post-Confirmation Administrative Fund.

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Absent the Aspider Transaction, the Debtor would be required to immediately cease
operations, leaving virtually no value for any of its creditors and leaving substantial Administrative
Expense Claims unpaid.

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ARTICLE II.
DEFINITIONS

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Terms used in this Disclosure Statement not specifically defined herein or in the Bankruptcy
Code shall be defined as set forth in the Plan that accompanies this Disclosure Statement. In
particular, capitalized terms shall have the meanings prescribed for such terms in Section II of the
Plan.

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ARTICLE III.
BACKGROUND INFORMATION

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A.

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Founded in late 2011, the Debtor sells mobile phone service to consumers using an innovative
online, mobile and social model the company refers to as Social Commerce. As of the Petition
Date, the Debtors equity was held by the individuals and entities set forth in Exhibit A hereto, in the
amounts set forth therein. Instead of using traditional advertising and a traditional sales force, the
Debtor relies on individual consumers, communicating with each other and other potential customers
using social networks such as Facebook and Twitter, to sell its products online. The Debtors
approach allows consumers to receive goods and services they use every day at a discounted price,
and also rewards consumers with the opportunity to earn income by referring the Debtors products to
others.

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Historical Background and Events Leading to Bankruptcy

The Debtor launched its first product, nationwide mobile phone service, approximately 30
months ago, in September 2012. Prior to the Petition Date, the Debtor has signed up over 250,000
total members and operated at a current annual revenue rate of approximately $65 million. The
Debtor buys its mobile phone service on a wholesale basis from T-Mobile USA, Inc. and then sells it
to its customers starting at $29 per month for unlimited 4G LTE voice, text, and data service.
As of the Petition Date, the Debtor was headquartered in Bellevue, Washington, had 51
employees and contracted for an additional 160 dedicated call center representatives and offshore
development resources that provide member support and technology services respectively.
Because of its Social Commerce model and innovative technology, the Debtor was named a
winner of the 2014 Red Herring Top 100 Award, a prestigious award honoring the year's most
promising and innovative private technology companies. See
https://sg.finance.yahoo.com/news/solavei-named-winner-2014-red-231100902.html.

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REVISED DISCLOSURE STATEMENT FOR DEBTOR'S


PLAN OF REORGANIZATION Page 4

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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The Debtor created a technology platform to facilitate its Social Commerce model. All of the
Debtors customers, referred to by the company as members, have access to this technology
platform, which includes proprietary tools allowing members to communicate with each other,
purchase and sell the Debtors products, keep track of potential referral prospects, and manage their
referral commissions.
The Debtor also rewards its members by paying them each month for every mobile subscriber
they personally refer to the Debtor and for building significant networks of mobile subscribers. As of
the Petition Date, the Debtor paid a $5 referral commission each month for every subscriber a member
personally referred to the Debtor and this monthly commission continues for as long as the referred
subscriber remains a customer. Members that have built large networks of customers can receive
significant monthly commission payments ranging from $100 and more based on the size of their
network. Network size is based on the number of active mobile subscribers that is directly related to
the growth from those that they had referred to the Debtor. Members receive their commissions as a
discount to their mobile service bill, and earnings beyond the cost of their monthly bill are deposited
onto a Solavei branded Visa debit card or transmitted directly to their checking account. Referral fees
that do not take the form of billing discounts are paid to members monthly.
As of the Petition Date, approximately 35,000 of the Debtors members had built networks
qualifying for commissions. Many members are families with less than $45,000 in annual income,
meaning that the cost of essential cell/data service and the ability to receive income through the
Debtors referral system are meaningful issues for these customer/members.

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In spite of its rapid growth and ability to generate substantial revenues, the Debtor encountered
financial challenges. The Debtor initially scaled its business infrastructure to support a larger network
of members than was actually needed. In addition, vendor costs, in particular the cost of wholesale
mobile services purchased from T-Mobile, exceeded expectations due to higher than anticipated
customer usage. Over time, the company was able to restructure many costs and vendor obligations,
and in the summer of 2013, it reached agreement with its major service providers, including T-Mobile,
on cost revisions that were better aligned with projected revenues.

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Due to the unique and innovative social referral distribution model, the Debtor struggled with
structuring the appropriate member commission model. The amount of commission payments owed
to members for referrals and network building activities exceeded initial expectations. The Debtor
had initially targeted and agreed to pay 50 percent of its gross profit to members in the form of
commissions. However, as members found ways to maximize their commissions in ways not
anticipated under the commission plan, the company was actually paying some 83 percent or more of
its gross profits to members. The Debtor substantially revised the commission plan in March 2013
and again in January 2014, to bring its overall payout closer to the sustainable 50 percent level.
The combination of these issues stressed the companys working capital and liquidity as it
worked to recover from initial vendor costs and member commission structures that proved
unsustainably high. As a result of this stress on working capital and liquidity, the company found it
necessary to file its Chapter 11 bankruptcy with the intention of restructuring its existing liabilities
and growing its business.
REVISED DISCLOSURE STATEMENT FOR DEBTOR'S
PLAN OF REORGANIZATION Page 5

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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B.

Events Since Bankruptcy


1.

Bankruptcy Court Filings.

The Debtor previously filed detailed schedules of its assets and liabilities and a statement of its
financial affairs. These documents may be reviewed at the Bankruptcy Court clerks office during
normal business hours. In addition, the following material orders have been entered by the Court.
a.
Authority to Use Cash Collateral. On July 16, 2014, the Court authorized the
Debtor to use, on an interim basis, the asserted cash collateral of Opus Bank, T-Mobile and the
Noteholders pursuant to a court-approved budget. On July 10, 2014, the Court entered an order
granting final approval of the Debtors use of cash collateral. On September 23, 2014, the Court
entered an order extending the Debtors use of cash collateral through December 31, 2014. On
December 31, 2014, the Court entered an order extending the Debtors use of cash collateral through
February 28, 2015. On February 26, 2015, the Court entered an order extending the Debtors cash
collateral usage through April 30, 2015.

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b.
Utilities; Cash Management. On July 16, 2014, the Court entered orders
approving the Debtors proposed adequate assurances of payment to utility providers, and authorizing
the Debtor to continue to use prepetition bank accounts on a going-forward basis subject to the United
States Trustee requirements regarding collateralization.
c.
Employment of Professionals. The Court approved employment of (1) Bush
Strout & Kornfeld, LLP as the Debtors bankruptcy counsel by order entered July 9, 2014 (Dkt. No.
74); (2) Melendez Torres Law PSC as the Debtors special counsel in Puerto Rico by order dated July
18, 2014 (Dkt. No. 89); (3) Schwabe Williamson & Wyatt as counsel for the Official Unsecured
Creditors Committee by final order dated August 14, 2014 (Dkt. No. 116); (4) KPMG LLP as the
Debtors accountants by order dated August 20, 2014 (Dkt. No. 128); (5) Piper Jaffray & Co. as the
Debtors financial advisors by order dated September 26, 2014 (Dkt. No. 160); and (6) FTI
Consulting, Inc. as financial advisors for the Official Unsecured Creditors Committee by order dated
October 7, 2014 (Dkt. No. 170); (7) Lee & Hayes PLLC as the Debtors intellectual property counsel
by order dated December 23, 2014 (Dkt. No. 201); (8) Schiffer Odom Hicks & Johnson PLLC as the
Debtors litigation counsel by order dated February 4, 2015 (Dkt. No. 226); and (9) Schlemlein Goetz
Fick & Scruggs, PLLC as additional counsel for the Official Unsecured Creditors Committee by order
dated February 10, 2015 (Dkt. No. 236).
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Case Management Order. On July 16, 2014, the Court entered a Case
Management Order providing that notice of certain motions may be limited as provided in the order.

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e.
Claims Bar Date. By order entered June 18, 2014, the Court established
August 8, 2014, as the deadline for the filing of Proofs of Claim in this case.

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REVISED DISCLOSURE STATEMENT FOR DEBTOR'S


PLAN OF REORGANIZATION Page 6

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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f.
Rejection of Office Lease. By order entered September 26, 2014, the Court
authorized the Debtor to reject its office lease as of July 31, 2014. Post-rejection, the Debtor has been
leasing office space on a month-to-month basis from Regus Management Group, LLC for
approximately $30,000 per month.

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Events Leading to the Sale Transaction

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Post-filing, the Debtor worked diligently to operationally restructure its business. The
operational restructure has included substantial expense reductions of approximately $380,000 per
month, achieved through modifications of various relationships with vendors, reduction in personnel
(from approximately 100 personnel on site to 36) and reduced lease costs (from approximate $71,000
per month to $30,000 per month), among others.

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The Debtor also meaningfully revised its compensation plan for member/customers in order to
drive expansion of its customer base. The new compensation plan began October 1, 2014.
Unfortunately, serious technology issues outside of the Debtors control were encountered in
implementing the new compensation plan, in large part due to an unprecedented total outage suffered
by the Debtors billing partner, which occurred on the day before the Debtors main promotional event
in October. Customer retention and additions have finally stabilized.
Notwithstanding the new compensation plan and the reduction in costs achieved by the
Debtor, the Debtors cash flow has been insufficient to fund its budgeted post-petition obligations.
Without the ability to fund its ongoing expenses, the Debtor would have been required to immediately
cease operations. Fortunately, T-Mobile, the Debtors largest vendor and supplier, has been willing to
allow the Debtor to pay less than the full amount of its invoices, which has allowed the Debtor to
continue operations and remain current with all of its other post-petition obligations to its other
vendors, suppliers, taxing authorities, customer/members, and employees. Had it been necessary to
cease operations, because the Debtors assets consist primarily of its subscriber-members, who would
have needed to immediately migrate to other networks to obtain cellular service, and of the technology
developed to enable social commerce distribution, there would have been virtually no value remaining
in the Debtors assets for the first-position lien holder, Opus Bank, or any other creditors.
3.

The Benefits of the Proposed Aspider Transaction.

The Debtor offers mobile service to its members as a mobile virtual network operator
(MVNO), a service provider that does not own the mobile network infrastructure. The Debtor has
developed its industry leading Social Commerce platform that leverages the power of social media to
facilitate the buying and selling of mobile service and directly rewards participating consumers.
Aspider is a leading global mobile virtual network enabler (MVNE) that provides the necessary
mobile network infrastructure to MVNOs. Aspider currently serves as MVNE to over 70 MNO
(Mobile Network Operator)/MVNO customers and provides service to millions of subscribers. As a
full service organization with hundreds of employees and a solid 12-year track record of providing
comprehensive mobile enablement, Aspider is integrated with some of the largest mobile operators in
the world such as Vodafone, Orange, and Deutsche Telecom across Europe, Asia, Africa and Latin
America.
REVISED DISCLOSURE STATEMENT FOR DEBTOR'S
PLAN OF REORGANIZATION Page 7

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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The Aspider Transaction will combine the strength of the Debtors Social Commerce platform
with Aspiders mobile service enabling platform, resulting in significant benefit to Solaveis
members. Solavei will be able to deliver enhanced mobile service to a far broader global member
base. Solavei will have the advantage of Aspiders significantly greater network utilization in terms
of negotiating carrier pricing which will, in turn, allow Solavei to deliver more competitive offerings
and enhanced services for its members. Through the Aspider Transaction, Solavei will be able to
offer in-network pricing and capabilities to a global member base on country-to-country calling,
which will be groundbreaking for Solavei and a competitive advantage against other MVNOs.
Because Aspider can provide many of the services for which Solavei currently obtain through
contracts with third parties, the proposed transaction will allow Solavei to significantly streamline and
enhance its business. The mobile service platform provided by Aspider provides advanced
capabilities that will allow Solavei to rapidly deploy various mobile services to its members. For its
part, Aspider will integrate Solaveis social commerce platform into its existing technology platform,
making it available to millions of subscribers and the MVNOs and MNOs providing them service.
This platform will create a fully managed mobile service ecosystem including network wholesale,
retail infrastructure and social engagement.
Ryan Wuerch will remain CEO and Chairman, along with other executives from Solavei
continuing to lead its growth and expansion.

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ARTICLE IV.
ASSETS AND LIABILITIES OF THE DEBTOR

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A.

Assets

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1.

Scheduled Assets.

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As of the Petition Date, the Debtor held the following personal property:
15
Personal Property Type

16
Cash in Bank Accounts

Value as of
Petition Date
$1,223,004

17
Security Deposit (Restricted)

$200,057

18
19

22

100% Ownership Interest in Solavei


Puerto Rico, LLC*
100% Ownership Interest in Dosh,
LLC*
Receivable from Jeff Dahl (collected
on 2/23/15)
Receivable Jim Zimmerman

23

Patents

20
21

24
25
26

$0.00
$0.00
$44,543
$30,000
Unknown

Encumbrances/Restrictions
UCC-1 in favor of Opus
UCC-1s in favor of Noteholders
Withheld and applied to unpaid
rents by Bellevue Place Offices,
LLC upon lease termination
UCC-1 in favor of Opus
UCC-1s in favor of Noteholders
UCC-1 in favor of Opus
UCC-1s in favor of Noteholders
UCC-1 in favor of Opus
UCC-1s in favor of Noteholders
UCC-1 in favor of Opus
UCC-1s in favor of Noteholders
UCC-1 in favor of Opus

REVISED DISCLOSURE STATEMENT FOR DEBTOR'S


PLAN OF REORGANIZATION Page 8

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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Personal Property Type

Value as of
Petition Date

2
Trademarks

Unknown

Customer List

Unknown

3
4
5

SCCP Software Platform (Book


Value as of 4/30/14)
Furniture and Fixtures (Book Value
as of 5/31/14)
Computer Equipment (Book Value as
of 5/31/14)
Video Equipment (Book Value as of
5/31/14)
Inventory (as of May 2014)

6
7
8
9
10
11

Prepaid Expenses

14
15
16
17
18
19
20
21
22
23
24
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26

$9,511
$55,085
$19,391
$111,764

UCC-1s in favor of Noteholders


UCC-1 in favor of Opus
UCC-1s in favor of Noteholders
UCC-1 in favor of T-Mobile
UCC-1 in favor of Opus
UCC-1s in favor of Noteholders
UCC-1 in favor of Opus
UCC-1s in favor of Noteholders
UCC-1 in favor of Opus
UCC-1s in favor of Noteholders
UCC-1 in favor of Opus
UCC-1s in favor of Noteholders
UCC-1 in favor of Opus
UCC-1s in favor of Noteholders
UCC-1 in favor of Opus
UCC-1s in favor of Noteholders

$112,243

* Solavei Puerto Rico, LLC and Dosh, LLC have no assets and no operations.

12
13

$3,530,798

Encumbrances/Restrictions

2.

Trade Secret Lawsuits.

During the case, the Debtor learned that some of the parties involved in the failed prepetition
merger discussions, as well as some of the Debtors former employee(s), may have unlawfully used
trade secrets and other confidential information to build and promote competing businesses.
Pursuant to this Courts employment order (Docket No. 226), the Debtor engaged litigation
counsel at the Texas law firm of Schiffer Odom Hicks & Johnson PLLC (Contingent Fee Counsel)
to pursue claims against these individuals and entitles (the Trade Secret Claims) and has filed two
lawsuits in which it is represented by counsel on a contingency fee basis: Solavei, LLC vs. SGE
Management LLC, et al, pending in the Dallas County 192nd District Court, Case No. DC-15-00782
(the Stream Lawsuit); and Solavei, LLC v. Robert McFadden, Social Mobile, pending in King
County Superior Court, Case No. 15-2-00505-7 SEA (the McFadden Lawsuit), (together, the
Trade Secret Lawsuits). Any net proceeds, after payment of fees and costs, generated by the Trade
Secret Lawsuits (the Trade Secret Lawsuit Proceeds) will be preserved for and distributed to
creditors pursuant to the terms of the Plan.
B.

Liabilities
1.

Secured Claims

a.
Opus Bank. As of the Petition Date, pursuant to a July 1, 2013 Credit
Agreement, Note and Security Agreement entered into by the Debtor and Opus Bank, the Debtor was
REVISED DISCLOSURE STATEMENT FOR DEBTOR'S
PLAN OF REORGANIZATION Page 9

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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indebted to Opus in the principal amount of $4,800,000, plus interest. Pursuant to the Security
Agreement and a UCC-1 financing statement filed with the state of Delaware on July 11, 2013 (File
No. 2013 2658962), Opus Bank holds a first position security interest in all of the Debtors personal
property.

3
4
5
6
7
8

b.
T-Mobile. T-Mobile U.S.A., Inc. (T-Mobile) holds a prepetition claim in the
amount of approximately $21,615,653 arising from the prepetition relationship between the parties
pursuant to which the Debtor purchased mobile service from T-Mobile on a wholesale basis. The
prepetition claim consists of the Debtors unpaid deferred balance due to T-Mobile as of the Petition
Date. A UCC-1 financing statement in favor of T-Mobile was filed on October 4, 2013 (DE file no.
2013 3905248) with respect to the following collateral:
[a]ll mobile service customer accounts, all contract rights relating to Debtors mobile
service customer agreements, all Receivables (rights to payment from Debtors mobile
service customers), all data, mobile service customer lists and books and records and
proceeds relating to the foregoing.

9
10
11
12
13
14

Post-petition, T-Mobile holds accrued unpaid claims for services provided to the Debtor. In
the post-petition period ending with December 31, 2014, this amount totaled approximately $1.4
million. Since January 1, 2015, T-Mobile has continued to accrue an Administrative Expense Claim
for unpaid services, with its agreement. Assuming the Plan is confirmed, T-Mobile will waive its
Administrative Expense Claim through December 31, 2014, and its remaining Administrative
Expense Claim will be paid according to the terms set forth in the Plan.
c.
Noteholders. Numerous individuals and entities (collectively, the
Noteholders) loaned funds to the Debtor in connection with two tranches of financing identified as
Bridge and Tranche B. The Debtors cumulative principal obligations on these tranches of
financing are as follows:

15
Principal

16

Approximate Balance with


interest and Fees as of 6/11/2014

17

Bridge

10,973,984.00

Tranche B

2,850,000

11,476,408
3,294,140
14,770,548

18
19

The Noteholders that loaned funds as part of the Bridge financing (the Bridge Noteholders)
and the Noteholders that loaned funds as part of the Tranche B financing (the Tranche B
Noteholders) are identified on Exhibit B hereto, along with the principal amounts loaned.

20
21
22

Security Agreements were executed in favor of all of the Noteholders with respect to the
Bridge and Tranche B financings, and two UCC-1 financing statements were filed in favor of the
Noteholders, one on September 24, 2013 (DE file no. 2013 3723526) and one on October 11, 2013
(DE file no. 2013 4010352). Pursuant to the UCC-1 filings, the Noteholders hold perfected security
interests in all of the Debtors assets.

23
24
25
26

REVISED DISCLOSURE STATEMENT FOR DEBTOR'S


PLAN OF REORGANIZATION Page 10

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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2.
Priority Tax Claims. The nature of the Debtors business in telecommunications
operations involves operations in numerous tax reporting jurisdictions around the United States.
Many of these jurisdictions reflect nominal tax amounts incurred from one-time customers in
locations where mobile service was not adequate to sustain a customer base. All claims for taxing
authorities due on the Petition Date were scheduled as Disputed, meaning that in order to assert a
claim, a taxing authority needed to file a timely Proof of Claim.

4
5
6
7
8

Taxing entities filed total of 62 Proofs of Claim in the case asserting priority tax claims in the
total amount of $306,012.52.
3.

Wage Claims.

A number of the Debtors former employees hold Priority Wage Claims for amounts incurred
within 180 days of the Petition Date. Under the Bankruptcy Code, these prepetition claims are
entitled to priority treatment up to the amount of $12,475.00 or less per employee (each, a Priority
Wage Claim). According to the Debtors records, Priority Wage Claims total $25,755.00.

9
10
11
12
13
14

Additionally, the Debtors current employees who will be employed by Newco postconfirmation are have claims against the Debtor related to their employment with the Debtor (the
Continuing Employment Claims). The Continuing Employment Claims will be assumed and paid
by Newco.
4.

General Unsecured Claims ( including Ascentium Corporation).

The Debtors schedules reflect that, as of the Petition Date, there were $19,759,380.47 in
general unsecured claims. Claimants filing proofs of claim have asserted $20,791,808.69 in general
unsecured claims. This amount does not include potential claims related to rejection of executory
contracts or claims for deficiency, if any, by Claimants holding Allowed Secured Claims.

15
16
17
18
19
20
21
22

On or about April 17, 2013, the Debtor executed a promissory note in favor of Ascentium
Corporation (Ascentium), an unsecured creditor, in the amount of $899,211.63. The Debtor never
executed a security agreement or other document describing any collateral or containing a grant of a
security interest in favor of Ascentium. Over nine months later and without notifying the Debtor,
Ascentium, without authority, caused a UCC-1 financing statement to be filed in Delaware in which
Ascentium Corporation identified itself as the secured party and the Debtor as the debtor and
inaccurately and improperly indicated that Ascentium holds a security interest in all of the Debtors
assets. The Debtor did not prepare, execute or authorize Ascentium to file the financing statement.
Ascentium Corporation filed a proof of claim in the Bankruptcy asserting a secured claim in the
amount of $1,001,360.32 (the Ascentium Proof of Claim). At the time it files its Plan or shortly
thereafter, the Debtor has filed or will file an objection to the Ascentium Proof of Claim on the basis
that the Debtor never granted a security interest to Ascentium in anything and that Ascentium
improperly filed a UCC-1 financing statement. The Plan properly treats Ascentium as an unsecured
claim in Class 6.

23
24
25
26

REVISED DISCLOSURE STATEMENT FOR DEBTOR'S


PLAN OF REORGANIZATION Page 11

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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ARTICLE V.
SUMMARY OF PROPOSED PLAN OF REORGANIZATION

2
3

A complete copy of the proposed Plan accompanies this Disclosure Statement. The discussion
of the Plan that follows constitutes a summary only. You are urged to read the Plan itself with care
before deciding to accept or reject the Plan.

4
A.

Explanation of Impaired and Unimpaired Claims

5
6
7

The term Impaired as used herein refers to those creditors to whom this Disclosure
Statement (and the related Ballots and other materials delivered together herewith) are being furnished
and who are entitled to accept or reject the Plan. Holders of claims in impaired classes are entitled to
vote to accept or reject the Plan.

10

The term Unimpaired refers to those creditors whose claims or interests remain unaltered by
the reorganization effectuated by the Plan. Because of this favorable treatment, these creditors are
conclusively deemed to have accepted the Plan. Accordingly, under Section 1126(f) of the
Bankruptcy Code, it is not necessary to solicit acceptances from the holders of claims or interests in
such classes.

11

B.

8
9

12

Classification of Claims and Interests


1.

13
14
15
16
17
18

Unclassified Claims
a.

Administrative Claims

As defined under the Plan, Administrative Expense Claims are Allowed Claims for costs or
expenses of the Chapter 11 Case that are allowed under sections 503(b) and 507(a)(1) of the
Bankruptcy Code. Unless such Holder agrees to different treatment, each Holder of an Allowed
Administrative Expense Claim against the Debtor shall receive payment of such claim from the Plan
Administrator, either upon, or as promptly as practicable after the Distribution Date provided,
however, that each Allowed Administrative Expense Claim which is an Ordinary Course
Administrative Expense Claims shall be deemed Allowed in the amount shown in the Debtors
records unless such claim is a Disputed Claim, and shall be assumed by Newco and paid in the
ordinary course of business by Newco in accordance with the terms and conditions of the particular
agreement(s) governing such Ordinary Course Administrative Expense Claim.

19
b.

T-Mobile Administrative Expense Claim

20
21
22
23
24
25
26

Notwithstanding anything in the foregoing to the contrary, by agreement with T-Mobile, the TMobile Administrative Expense Claim, subject to liquidation as to the amount, shall be deemed
Allowed and paid in cash, in full, at Closing, provided, however, that if Closing occurs on or before
the Effective Date, the T-Mobile Administrative Expense Claim shall be deemed satisfied by payment
of an amount equal to the Debtors then-outstanding payment obligation to T-Mobile for services
provided from January 1, 2015 through Closing, less $352,000.
REVISED DISCLOSURE STATEMENT FOR DEBTOR'S
PLAN OF REORGANIZATION Page 12

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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c.

Priority Tax Claims

As defined under the Plan, Priority Tax Claims are Allowed Claims of taxing agencies that are
entitled to priority in accordance with section 507(a)(8) of the Bankruptcy Code. Priority Tax Claims
include the principal portion of the applicable tax and interest accrued thereon through the Petition
Date but do not include any penalties. Priority Tax Claims against the Debtor shall be paid in full as
soon as practicable after allowance of such claims. Claims of taxing agencies incurred post-petition
shall be assumed and paid when due by Newco. Claims of taxing agencies for penalties against the
Debtor shall be Class 6 claims to the extent they are Allowed Claims and shall not be treated under
this paragraph.

6
2.

Classified Claims and Interests

7
8
9

The Plan establishes six (6) Classes of Claims and one (1) Class of Interests with respect to the
Debtor. If the Plan is confirmed by the Court and becomes effective, the class into which each
Allowed Claim and Allowed Prepetition Interest fits will determine the manner in which such claim or
interest will be treated. The classes defined in the proposed Plan are summarized below.

10

Class 1: Allowed Secured Claim of Opus Bank


Class 2: Allowed Secured Claim of T-Mobile
Class 3: Allowed Secured Claim of Noteholders
Class 4: Allowed Priority Wage Claims
Class 5: Continuing Employment Claims
Class 6: Allowed General Unsecured Claims
Class 7: Allowed Prepetition Interests

11
12
13
14

C.

15

The Treatment of Classified Claims and Interests Under the Plan, and the Means for Execution
of the Plan, are set forth in Sections V and VI, respectively, of the Plan and are summarized below.
Notwithstanding the summary provided below, the terms of the Plan shall control the classification
and treatment of claims and all other aspects of the Debtors rights and obligations as to matters
governed by the Plan following the Effective Date. Parties are urged to read the Plan with care to
determine the treatment proposed for their Claim or Interest.

16
17

Treatment of Classified Claims and Interests Under the Plan

18
In summary, the Plan treats the various classes as follows:
19
1.

Class 1: Opus Bank Secured Claim.

20
21

Class 1 is Impaired and consists of the Opus Bank Allowed Secured Claim (Class 1 Claim).
Pursuant to the Plan, the Class 1 Claim shall be deemed an Allowed Secured Claim and shall be
treated and satisfied as follows:

22
23
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REVISED DISCLOSURE STATEMENT FOR DEBTOR'S


PLAN OF REORGANIZATION Page 13

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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4

a.
Cash. The Holder of the Class 1 Claim shall be paid cash in the amount of one
million seven hundred and fifty thousand dollars ($1,750,000) on the Effective Date or as soon as
practicable thereafter.
b.
Note. Newco shall execute a promissory note in favor of the Holder of the
Class 1 Claim in the amount of seven hundred and fifty thousand dollars ($750,000) (the Opus
Note). Payments on the Opus Note shall commence in January 2016 and shall continue thereafter in
24 monthly installments. The Opus Note shall accrue interest at a rate of 8.25% per annum.

5
6

c.
Waiver of Certain Proceeds. The Holder of the Class 1 Claim shall be
deemed to have waived any unsecured deficiency claim and any rights to receive Trade Secret
Lawsuit Proceeds, if any, and/or any portion of the Class 6 Cash, and/or the Class 6 Note.

7
2.

Class 2: Allowed T-Mobile Secured Claim.

8
9

Class 2 is Impaired and consists of the T-Mobile Secured Claim (Class 2 Claim), which
shall be deemed to be an Allowed Secured Claim. The Class 2 Claim shall be treated and satisfied as
follows:

10
11
12
13
14
15
16
17
18

a.
Cash. The Holder of the Class 2 Claim shall be paid cash in the amount of one
million dollars ($1,000,000) on the Effective Date or as soon as practicable thereafter;
b.
Note. Newco shall execute a promissory note in favor of the Holder of the
Class 2 Claim in the amount of four million dollars ($4,000,000) (the T-Mobile Note). Payments on
the T-Mobile Note shall commence on the later of (a) April 30, 2015 and (b) Closing, and shall
continue thereafter in 21 monthly installments. The T-Mobile Note shall be secured by a first position
security interest in all of Newcos assets.
c.
Waiver of Certain Proceeds. The Holder of the Class 2 Claim shall be
deemed to have waived any unsecured deficiency claim and any rights to receive Trade Secret
Lawsuit Proceeds, if any, and/or any portion of the Class 6 Cash, and/or the Class 6 Note.
3.

Class 3: Allowed Noteholder Claims.

Class 3 is Impaired and consists of all Allowed Noteholder Claims (each Allowed
Noteholder Claim is a Class 3 Claim).

19
20
21

a.
Allowed Secured Class 3 Claims. The Holders of the Class 3 Claims shall be
deemed to hold Allowed Secured Claims equal to the value of the Newco Equity Interests. Under the
Plan, the Newco Equity Interests are valued at one million, seven hundred and seventy one thousand,
one hundred and thirty six dollars ($1,771,136) (each individual Claim, calculated on a Pro Rata basis,
a Secured Class 3 Claim).

22
23
24
25
26

REVISED DISCLOSURE STATEMENT FOR DEBTOR'S


PLAN OF REORGANIZATION Page 14

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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6
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15

b.
Satisfaction of Allowed Secured Class 3 Claims. On the Effective Date or as
soon as practicable thereafter, each Holder of a Class 3 Claim shall receive its Pro Rata share of forty
percent (40%) of the Newco Equity Interests in full satisfaction of its Secured Class 3 Claim.
c.
Payment of Allowed Unsecured Class 3 Claim. The amount remaining
unpaid on each Class 3 Claim after payment of its Secured Class 3 Claim shall be an unsecured claim
(each, an Unsecured Class 3 Claim). Each Holder of an Unsecured Class 3 Claim shall be paid its
Pro Rata Share of 20% of the Trade Secret Lawsuit Proceeds, if any, however, if, pursuant to the terms
of the Contingent Fee Agreement, the Holders of Unsecured Class 3 Claims reimburse Contingent Fee
Counsel for its expenses thereby insuring the lower applicable contingent fee, then the Holders of
Unsecured Class 3 Claims shall receive the marginal benefit due to such cost reimbursement (Cost
Reimbursement Benefit). Attached as Exhibit B to the Plan is a chart that shows the percentage
sharing of the Trade Secret Lawsuit Proceeds under the possible scenarios, taking into account
whether the Holders of Class 3 Unsecured Claims have or have not reimbursed Contingent Fee
Counsels costs. The Holder of an Allowed Unsecured Class 3 Claim shall not be entitled to receive
any portion of the Class 6 Cash, the Class 6 Note, or any of Class 6s 80% share of the Trade Secret
Lawsuit Proceeds.
4.

Class 4: Priority Wage Claims

Class 4 is Unimpaired and consists of each Priority Wage Claim (each a Class 4 Claim).
Each Holder of a Class 4 Claim will be paid in full on the Effective Date or as soon as practicable
thereafter after such Claim becomes an Allowed Claim.
5.

Class 5: Continuing Employment Claims

Class 5 is Unimpaired and consists of each Continuing Employment Claim (each a Class 5
Claim). Newco shall assume the amounts due each Holder of a Class 5 Claim, and each Holder shall
be paid its Class 5 Claim by Newco in the ordinary course of business of and between Newco and the
Holder of the Class 5 Claim.

16
6.

Class 6: Allowed General Unsecured Claims

17
18
19

Class 6 is Impaired and consists of Allowed General Unsecured Claims (each a Class 6
Claim).
a.
Class 6 Cash. On the Effective Date or as soon as practicable thereafter, each
Holder of a Class 6 Claim shall be paid its Pro Rata share of the Class 6 Cash ($1,000,000).

20
21
22

b.
Class 6 Note. Newco shall execute a promissory note in the principal amount
of the lesser of (a) 5% of the Allowed Rejected Contract Claims or (2) two hundred and fifty thousand
dollars ($250,000) (the Class 6 Note). Payments on the Class 6 Note shall commence in January
2016 and shall be paid over the next twenty four (24) months. Interest shall accrue from January 2016
forward at the rate of four percent (4%) per annum.

23
24
25
26

REVISED DISCLOSURE STATEMENT FOR DEBTOR'S


PLAN OF REORGANIZATION Page 15

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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6

c.
Trade Secret Lawsuit Proceeds. Each Holder of a Class 6 Claim shall receive
its Pro Rata share of eighty percent (80%) of the Trade Secret Lawsuit Proceeds, if any. The Holder
of Class 6 Claims shall not share in any Cost Reimbursement Benefit resulting from reimbursement of
Contingent Fee Counsels costs by the Holders of Class 3 Unsecured Claims. Attached as Exhibit B
to the Plan is a chart that shows the percentage sharing of the Trade Secret Lawsuit Proceeds under the
possible scenarios, taking into account whether the Holders of Class 3 Unsecured Claims have or have
not reimbursed Contingent Fee Counsels costs.
7.

Class 7: Allowed Interests.

Class 7 is Impaired and consists of the Allowed Interests. All Interests shall be deemed
cancelled as of the Effective Date.

7
ARTICLE VI.
MEANS FOR IMPLEMENTATION; DISTRIBUTIONS;
RETENTION OF CLAIMS

8
9
10
11
12
13

1.
Aspider Transaction. On the Effective Date, the Aspider Transaction, on the terms
and conditions set forth in the Aspider Agreement, a true copy of which is attached as Exhibit A to the
Plan, shall be consummated. Pursuant to the Plan, the Aspider Agreement and its terms, including the
terms of any additional documents related to the Aspider Agreement, shall be fully incorporated into
the Plan by reference such that all of the terms of the Aspider Agreement shall be considered part of
the Plan. Aspider will pay to the Debtor the Purchase Price in exchange for the Acquired Assets. The
Purchase Price, exclusive of the Opus Note, the T-Mobile Note, the Class 6 Note, and the Newco
Equity Interest, which will be transferred at Closing, will be distributed by the Plan Administrator in
accordance with the provisions of Section VII of the Plan.

14
15
16
17
18
19
20

2.
Corporate Governance of Newco. Upon its formation, Newco will be a separate
legal entity from the Debtor, the Reorganized Debtor, and the Estate. It shall be owned by the
Noteholders (through their receipt of 40% of the Newco Equity Interests) and by Aspider and/or other
investors who fund the cash to consummate the Aspider Transaction (60% of the Newco Equity
Interests). The Aspider Agreement provides for a management incentive program to be instituted by
the Newco Board, after formation of Newco and the Closing/Effective Date. Currently, there is no
written or oral agreement as to the terms of this management incentive program, though the program
will incentivize management with respect to forward looking performance and success and will not
compensate any person due to that persons existing role with the Debtor. The Newco Board will be
comprised of directors and governed as set forth in the Aspider Agreement. With respect to current
members of the Debtors senior management team, it is assumed that the following individuals will be
employed by Newco in the same or similar roles as their current roles at similar compensation levels:

21

Ryan K. Wuerch, CEO


Nathan A. Gooden, CFO
Jamie Kuhnhausen, Head of Human Resources
Kris Lentz, Head of Product
Dennis Korevitski, Head of Technology & Operations

22
23
24
25
26

REVISED DISCLOSURE STATEMENT FOR DEBTOR'S


PLAN OF REORGANIZATION Page 16

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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Ed Mock, Head of Strategic Innovations


Rudy Bourcelot, Head of Marketing

2
3
4
5
6
7
8
9

3.
Plan Administrator. The Committee shall designate the Plan Administrator prior to
entry of the Confirmation Order, subject to the Debtors consent which shall not be unreasonably,
withheld. The identity of the Plan Administrator and the terms of compensation will be set forth in
the Confirmation Order. The Plan Administrator, on behalf of the Debtor, shall have responsibility
for administering Claims, including making objections where appropriate and obtaining necessary
claims orders; paying taxes; distributing payments required to be made under the Plan; ensuring the
completion of any necessary tax returns; filing any necessary post-confirmation reports; making
decisions about the settlement and or continued pursuit of the Trade Secret Lawsuits; obtaining a final
decree and performing such other tasks as may be necessary to fully administer the foregoing. To the
extent necessary, the Plan Administrator shall be authorized to continue to employ and utilize the
services of the Debtors Professionals or such other professionals as the Plan Administrator may deem
necessary which expenses shall be paid from the Post-Confirmation Administrative Fund. The Plan
Administrator shall also pay any post-confirmation United States Trustee fees (incurred in any quarter
after the Effective Date occurs). The Plan Administrator shall have the sole authority to pay the
expenses associated with the foregoing without the need for further Court approval.

10
11
12

4.
Effectuating Documents/Further Transactions. The Debtor and its officers and
designees are authorized to execute, deliver, file, or record such contracts, instruments, releases,
indentures, and other agreements or documents, and take such actions as may be necessary or
appropriate to effectuate and further evidence the terms and conditions of the Plan or to otherwise
comply with applicable law.

13
14
15

5.
Exemption from Transfer Taxes and Certain Recording Fees. Pursuant to
Bankruptcy Code 1146(a), any transfers from the Debtor to the Reorganized Debtor or to any other
person or entity pursuant to the Plan, or any agreement regarding the transfer of title to or ownership
of any of the Debtors personal property or issuance of membership interests will not be subject to any
stamp tax or similar tax.

16
17
18
19
20
21

6.
Continued Estate Existence/Further Authorization. The Debtor and/or the
Reorganized Debtor, as well as the Plan Administrator, shall be entitled to seek such orders,
judgments, injunctions and rulings as they deem necessary to carry out the intentions and purposes,
and to give full effect to the provisions, of the Plan. The Estate will continue to exist after the
Effective Date.
7.
Creditors Committee. On the Effective Date, the Creditors Committee shall
dissolve automatically, whereupon its members, professionals, and agents shall be released from any
further duties and responsibilities in the Bankruptcy Case and under the Bankruptcy Code, except for
the limited purposes of filing applications for compensation in accordance with the Plan.

22
23
24
25
26

REVISED DISCLOSURE STATEMENT FOR DEBTOR'S


PLAN OF REORGANIZATION Page 17

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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B.

Unless otherwise waived under the Plan, all rights, claims and causes of action, whether
equitable or legal, and all defenses, counterclaims and setoffs, whether equitable or legal, of the
Debtor or the Reorganized Debtor against all persons are reserved for the Reorganized Debtor,
including but not limited to the Trade Secret Claims. Notwithstanding the foregoing, the Debtor and
the Estate shall be deemed to have waived and released all Avoidance Actions against all parties as of
the Effective Date.

3
4

Retention of Claims and Causes of Action/Waiver of Avoidance Actions

5
6
7
8
9
10

The Debtor has provided to the Committee its analysis of potential Avoidance Actions. In
large part, these would be based on payments to non-insider creditors, primarily the Debtors vendors
and suppliers, within 90 days of the Petition Date. Such payments may be recovered as preferences, if
late, and if no defenses existed. The total amount of late payments to non-insiders within 90 days
prior to the Petition Date totaled approximately $2,630,000. Many of these payments may be subject
to defenses, including unpaid new value outstanding on the Petition Date. In addition, Aspider
disfavors preference actions against the Debtors former vendors and suppliers, as this may negatively
impact Aspiders ability to maintain going-forward relationships with these key vendors. With
respect to payments to insiders during the year before the Petition Date, the Debtors analysis,
provided to the Committee, shows all such payments were 1) made timely according to the terms of
the relevant instrument(s); or were 2) for salary or expense reimbursements.

11
Based on the above, the Plan provides for waiver of all Avoidance Claims.
12
C.

Distributions Under the Plan

13
14
15
16
17
18
19

1.
Sources of Funds for Distribution. The distributions provided for in the Plan shall be
made from: a) the Purchase Price and b) the Trade Secret Lawsuit Proceeds, if any.
2.
Disputed Claims. Notwithstanding any provision of the Plan specifying the time for
payment of distributions to holders of Claims, no payment or distribution shall be made to the Holder
of any Disputed Claim until the time such Claim has been determined to be an Allowed Claim.
Notwithstanding the existence of a Disputed Claim in a Class to which a distribution under the Plan is
due, such distribution to other creditors shall not be affected by any delay in the resolution of the
Disputed Claim. Upon the allowance of any Disputed Claim, the Holder shall be paid the amount that
such Holder would have received had its Claim been an Allowed Claim on the Effective Date.
3.
Distributions by the Plan Administrator. The Plan Administrator shall make all
distributions required to be distributed under the Plan.

20
21

4.
De Minimus Distributions. The Plan Administrator shall not have an obligation to
make a distribution if the amount to be distributed to the specific Holder of the Allowed Claim is or
has a value of less than fifty dollars ($50.00).

22
23
24
25
26

5.
Interest on Claims. Unless otherwise specifically provided for or contemplated in the
Plan, the Confirmation Order, or required by applicable bankruptcy law, postpetition interest shall not
REVISED DISCLOSURE STATEMENT FOR DEBTOR'S
PLAN OF REORGANIZATION Page 18

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
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Facsimile (206) 292-2104

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accrue or be paid on any Claims and no Holder of a Claim shall be entitled to interest accruing on or
after the Petition Date on any Claim.

2
ARTICLE VII.
CLAIMS OBJECTIONS AND TREATMENT OF DISPUTED CLAIMS

3
4

A.

Except as otherwise provided for in the Plan, each Claim shall be Allowed or disallowed, as
the case may be, in such amount as the Court shall determine, whether prior to or following
Confirmation, and whether pursuant to this Plan or otherwise, upon such notice as the Bankruptcy
Court or Bankruptcy Rules shall permit except that, after the bankruptcy case is closed, the Plan
Administrator may settle or compromise any controversies regarding Claims without notice or further
order of the Court.

6
7

Administration of Claims

8
B.

Affirmative Claims, Defenses and Counterclaims Assigned to the Reorganized Debtor

9
10
11
12

On the Effective Date, the Debtor shall be deemed to have assigned to the Reorganized Debtor
and its continuing bankruptcy estate, and the Reorganized Debtor and its continuing bankruptcy estate
shall be deemed to have acquired and become the successor to, all defenses, counterclaims and setoffs,
whether equitable or legal, of the Debtor to Claims held or asserted to be held against the Debtor, and
all claims of the Debtor for relief against any other party. Any objection to Claims must be filed and
served in accordance with Bankruptcy Rule 3007; provided, however, that the foregoing limitations
do not apply to any claims filed subsequent to Confirmation.

13
ARTICLE VIII.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES

14
15
16
17
18
19
20
21
22
23
24
25
26

Attached to the Plan as Exhibit C is a list of all of the executory contracts and/or unexpired
leases to which the Debtor is a party, along with the Debtors calculation of the pre-petition amounts
owed with respect to each such executory contract or unexpired lease. At least seven (7) days prior to
the deadline for filing objections to the Plan, Debtor shall file a list (the Designated Contracts List)
setting forth each executory contract and/or unexpired lease that the Debtor proposes to assume and
assign to Newco under the Plan (each, a Designated Contract) and shall serve the Designated
Contracts List on the non-debtor parties to the relevant Designated Contracts. The Plan constitutes a
motion to assume the Designated Contracts set forth on the Designated Contracts List. As to each
Designated Contract, the Debtor proposes that the amount of the Cure Claim shall be either the
amount set forth in Exhibit C or such lower amount as may be included on the Designated Contracts
List. Entry of the Confirmation Order by the Bankruptcy Court shall constitute approval, as of the
Effective Date, of the Debtors assumption of each Designated Contract and its assignment of each
Designated Contract to Newco (each, an Assumed Contract). The Confirmation Order shall further
effectuate the rejection of the contracts and leases set forth on Exhibit C that are not Designated
Contracts (each, a Rejected Contract). With respect to T-Mobiles existing Wholesale Supply
Agreement (WSA) in place with the Debtor, pursuant to the terms of the Aspider Transaction and
assuming such transaction Closes, and subject to the terms of the Plan Support Agreement between TREVISED DISCLOSURE STATEMENT FOR DEBTOR'S
PLAN OF REORGANIZATION Page 19

B USH S TROUT & K ORNFELD


LAW OFFICES

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Seattle, Washington 98101-2373
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Facsimile (206) 292-2104

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Mobile and Aspider, T-Mobiles WSA will be assigned to Newco in exchange for the payments and
T-Mobile Note contemplated in the Plan, and T-Mobile will not hold a Rejection Claim.

2
3
4

All claims arising from the rejection of a Rejected Contract pursuant to the Plan (each, a
Rejection Claim), must be filed with the clerk of the Bankruptcy Court and served upon the Plan
Administrator and the Debtors counsel within thirty (30) days after the date of entry of the
Confirmation Order. Allowed Rejection Claims constitute Class 6 Claims under the Plan.

ARTICLE IX.
LIQUIDATION ANALYSIS

6
7
8
9
10
11
12

The Bankruptcy Code requires that a creditor with a right to vote either accept the Plan, or that
such creditor receive under the Plan at least as much as it would receive if the debtors assets were
liquidated in and the proceeds distributed under a Chapter 7 liquidation. This is generally known as
the best interests test. To apply the test, a debtors assets are valued at the dollar amount that would
be generated from their distressed liquidation in the context of a Chapter 7 case by a trustee appointed
by the Bankruptcy Court. The estimated values take into account the costs and expenses of the
liquidation, and such additional administrative and priority claims that may result from the
termination of the debtors business and the use of Chapter 7 for the purpose of liquidation. Net
liquidation proceeds would be paid to general unsecured creditors only to the extent funds are
available after secured creditors have been paid the full value of their collateral and priority creditors
receive full payment on their claims. In the event of conversion to a case under Chapter 7 of the
Code, in order to complete the distribution to creditors, the estate would incur a Chapter 7 trustees fee
paid in the percentages indicated by 11 U.S.C. 326.

13
14
15
16
17

In the event of a Chapter 7 liquidation, the Debtors business would immediately cease and, its
customers would immediately migrate to a new carrier in order to continue uninterrupted service.
Because the Debtors customers are essentially invisible to T-Mobile, the provider of the backbone
to the Debtor, T-Mobile would be unable to migrate the Debtors customers to its platform. The value
of the Debtors customer base would be lost. The Debtors remaining assets would likely have little
or no value, as the remaining assets are primarily software and intellectual property designed by the
Debtor to support its customer base. The only potential assets available in a Chapter 7 liquidation
would likely be any Trade Secret Lawsuit Proceeds and Avoidance Claims, all of which are
unencumbered assets, meaning that no existing creditor holds a lien or first right to these assets.

18
19
20
21

The Plan proposes to distribute twenty percent (20%) of the Trade Secret Lawsuit Proceeds to
Class 3 Claims, after reduction for the value of the 40% Newco Equity Interests distributed to those
Claims, and eighty percent (80%) of the Trade Secret Lawsuit Proceeds to Class 6 Claims. In a
liquidation, all creditors, not just Class 6 and Class 3 would be entitled to share in the Trade Secret
Lawsuit Proceeds, if any. This would substantially dilute the percentage of the Trade Secret Lawsuit
Proceeds that would go to Class 3 Claims or Class 6 Claims. The following shows the pool of
creditors that will share in the Trade Secret Lawsuit Proceeds in a liquidation (all creditors):

22
23
24
25
26

REVISED DISCLOSURE STATEMENT FOR DEBTOR'S


PLAN OF REORGANIZATION Page 20

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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In a Liquidation: Total Pool to Share = $61,977,000

Class 1 (Opus)
Class 2 (T-Mobile)
Class 3 (Noteholders)
Class 6 (General Unsecured)
Total Claims to Share

3
4
5
6

If the Debtor abruptly closed its business operations and converted its case to a Chapter 7,
there would be significant unpaid Administrative Expense Claims without any funds to pay them,
estimated as follows:

T-Mobile (unpaid post-petition credit)


Trade Credit, Taxes and Other Ordinary
Course Administrative Expenses
Professional Fees
Opus Adequate Protection Claims Per
Cash Collateral Orders
Total Estimated Ch 11 Admin Claims

8
9
10
11
12
13
14
15
16
17
18

$4,800,000 (7.7% of Pool)


$21,616,000 (34.9% of Pool)
$14,770,000 (23.8% of Pool)
$20,791,000 (33.6% of Pool)
$61,977,000

$3,000,000
$1,400,000
$100,000 to $200,000
Unknown
$3,500,000 +

In a Chapter 7 scenario, before any funds would be distributed on account of prepetition


claims, these Administrative Expense Claims would need to be paid, along with the Chapter 7
trustees expenses. This would include any Trade Secret Lawsuit Proceeds and any recoveries from
Avoidance Claims. As discussed herein, the Debtors analysis is that there is not a likelihood of
substantial recovery from Avoidance Claims. At best, the proceeds generated by a Chapter 7 trustee
from avoidance claims would be only a small reduction in the approximately $3,500,000 in Chapter
11 Administrative Claims detailed above. This essentially means that the only potential recovery for
creditors in a Chapter 7 would be from the Trade Secret Lawsuit Proceeds, if any. Even ignoring the
Chapter 11 Administrative Expense Claims, the proposed Plan treats all creditors far better than they
would be treated in a liquidation.
Following is a comparison of the proposed Plan treatment of various Classes and the outcome
in a liquidation, again, ignoring the $3,500,000 of Chapter 11 Administrative Expense Claims that
would likely further dilute the recoveries in a liquidation:

19

Class/Creditor(s)
Class 1 (Opus)

Under Plan Terms


$2.5million cash/note

In a Liquidation
7.6% of Trade Secret Lawsuit Proceeds

20

Class 2 (T-Mobile)

$5million cash/note

36.3% of Trade Secret Lawsuit Proceeds

21

Class 3 (Nholders)

40% Newco equity and


23.3% of Trade Secret Lawsuit Proceeds
20% of Trade Secret Lawsuit
Proceeds

22
23
24
25
26

Class 6 (Unsecureds) $1,000,000 cash and

32.8% of Trade Secret Lawsuit Proceeds

REVISED DISCLOSURE STATEMENT FOR DEBTOR'S


PLAN OF REORGANIZATION Page 21

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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80% of Trade Secret Lawsuit


Proceeds

2
3

Based on this analysis, the proposed Plan treats all Classes of creditors far better than they
would be treated in a liquidation. Therefore, the best interest of creditors test is satisfied.

ARTICLE X.
TAX CONSEQUENCES

5
A.

Tax Consequences for Debtor

6
7
8
9

The Debtor is a Delaware limited liability company taxed as a partnership for federal income
tax purposes. As such, any federal income tax liability is incurred and paid, if due, by its members.
While the Plan anticipates significant cancellation of indebtedness (COD), it is not anticipated that
this COD will create any federal income tax liability for the Debtor or its Estate. The Debtor is unable
to offer an opinion as to whether partnership minimum gain will be triggered under Treas. Reg.
1.704-1(b)(2) and (d), whether partnership minimum gain chargeback would be triggered under Treas.
Reg. 1.704-2, or any other effect under Subchapter K of the IRC.

10
11

The Plan may or may not create tax consequences to the Equity Holders in connection with the
inclusion in their allocable shares of partnership income, gain, loss, deduction, credit and other items
in their taxable income. The Debtor offers no opinion on these matters.

12
13
14
15
16
17
18

EACH AND EVERY EQUITY HOLDER IS STRONGLY URGED TO CONSULT A


PROFESSIONAL TAX ADVISOR REGARDING THE FEDERAL, STATE AND LOCAL TAX
CONSEQUENCES OF THE TRANSACTIONS DESCRIBED HEREIN AND IN THE PLAN.
B.

Tax Consequences to Creditors

The Debtor expects that creditors will report any payments received under the Plan and any
amounts disbursed in accordance with their normal method of accounting. The Debtor is unable to
provide any opinion to creditors with respect to any tax consequences as a result of the Plan being
confirmed on the terms set forth herein. CREDITORS ARE STRONGLY URGED TO CONSULT A
PROFESSIONAL TAX ADVISOR REGARDING ANY TAX CONSEQUENCES OF THE
TRANSACTIONS DESCRIBED HEREIN AND CONTEMPLATED BY THE PLAN.
XI.
CONFIRMATION OF THE PLAN

19
20
21
22
23
24
25
26

A.

Voting Procedures

A ballot to be used for voting your acceptance or rejection of the Plan of Reorganization is
being mailed to you together with this Disclosure Statement and Plan. Holders of claims should read
the instructions carefully, complete, date and sign the ballot, and transmit it in the envelope enclosed.
IN ORDER TO BE COUNTED, YOUR BALLOT MUST BE RECEIVED AT THE INDICATED
ADDRESS NOT LATER THAN ______________________, 2015. FAILURE TO VOTE OR A
REVISED DISCLOSURE STATEMENT FOR DEBTOR'S
PLAN OF REORGANIZATION Page 22

B USH S TROUT & K ORNFELD


LAW OFFICES

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VOTE TO REJECT THE PLAN WILL NOT AFFECT THE TREATMENT TO BE ACCORDED A
CLAIM OR INTEREST IF THE PLAN NEVERTHELESS IS CONFIRMED.

If more than one-half in number of claimants voting and at least two-thirds in amount of the
Allowed Claims of such claimants in each Class of Claims vote to accept the Plan, such Classes will
be deemed to have accepted the Plan. If at least two-thirds in amount of the shares voted in a Class of
Interests are voted to accept the Plan, such Class will be deemed to have accepted the Plan. For
purposes of determining whether a Class of Claims or Interests has accepted or rejected the Plan, only
the votes of those who have timely returned their ballots will be considered.

B.

The hearing on confirmation of the Plan has been set for ____________________, 2015
before the Honorable Timothy W. Dore, United States Bankruptcy Judge, Courtroom 8106, 700
Stewart St., Seattle, WA, 98101. The Bankruptcy Court shall confirm the Plan at that hearing only if
certain requirements, as set forth in 1129 of the Bankruptcy Code, are satisfied.

3
4

Hearing on Confirmation

9
C.

Best Interests of Creditors

10
11
12
13
14
15

As previously indicated herein, in order to satisfy one of the requirements under 1129, the
Debtor must establish that with respect to each Class 1 through Class 6, each holder of a Claim in that
Class has accepted the Plan or will receive or retain under the Plan on account of such Claim property
of a value that is not less than the amount that such Holder would receive if the Debtor were to be
liquidated under Chapter 7 of the Bankruptcy Code. Based upon the liquidation analysis set forth in
Section VII above, the Debtor believes that the Plan satisfies the requirements of the best interests of
creditors standard. Accordingly, the Debtor anticipates that the Court will find that the Plan satisfies
the best interests of creditors standard at the time of the hearing on Confirmation.
The Plan contemplates full payment to creditors, and thus, it satisfies the best interests of
creditors standard.

16
D.

Feasibility

17
18
19
20
21

The Debtor must also establish that confirmation of the Plan is not likely to be followed by the
Debtors liquidation, or the need for further financial reorganization. For purposes of determining
whether the Plan meets this requirement, the Debtor has analyzed Newcos ability to meet the
obligations it is assuming under the Plan and has prepared projections (the "Projections") through
December 2017. The Projections, and the significant assumptions upon which they are based, are
attached as Exhibit C to this Disclosure Statement. Based on the Projections, the Debtor believes that
Confirmation is not likely to be followed by the liquidation or further financial reorganization of the
Debtor. To the extent necessary, the Debtor will present additional evidence at the hearing on
Confirmation in support of such a finding.

22
23
24
25
26

REVISED DISCLOSURE STATEMENT FOR DEBTOR'S


PLAN OF REORGANIZATION Page 23

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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E.

The Bankruptcy Code requires the Bankruptcy Court to find that the Plan does not
discriminate unfairly, and is fair and equitable, with respect to each class of claims or interests that is
impaired under, and has not accepted, the Plan. Upon such a finding, the Bankruptcy Court may
confirm the Plan despite the objections of a dissenting class. The Debtor has requested that the Court
confirm the Plan even if creditors holding claims in Impaired Classes do not accept the Plan. The
Debtor has negotiated with and reached agreed terms for treatment of the claims in Classes 1, 2, 3, and
6 (with the Committee).

F.

11

Confirmation of the Plan shall operate on the Effective Date as a discharge of the Debtor from
all Claims and indebtedness that arose before the Effective Date, except for those unclassified Claims
that the Debtor agrees to pay as a continuing obligation. All such discharged Claims and indebtedness
shall be satisfied by the cash payment or other consideration provided under the Plan. Upon
Confirmation, all property of the Debtor shall be free and clear of all Claims and Interests of creditors,
except as otherwise provided in the Plan or the order of the Bankruptcy Court confirming the Plan.
The Reorganized Debtor shall be vested with all assets of the Debtor. The provisions of the Plan shall
bind the Debtor and all other parties in interest, including any creditor of the Debtor, whether or not
such creditor is impaired under the Plan and whether or not such creditor has accepted the Plan.

12

G.

13

In the event the Court declines to confirm the Plan, whether due to a failure of creditor support
or otherwise, the Court may approve a competing plan. Alternatively, a liquidation of the Debtors
assets might ultimately result, either through a revised Plan under Chapter 11 or conversion of this
Chapter 11 case to a bankruptcy under Chapter 7 of the Bankruptcy Code with the increased trustee
fees and delays that will follow.

3
4

8
9
10

14
15
16

Treatment of Dissenting Classes of Creditors

Effect of Confirmation

Consequences of the Failure to Confirm the Plan

RESPECTFULLY SUBMITTED this 13th day of March, 2015.

17

SOLAVEI, LLC

18
19

By
/s/ Ryan Wuerch
Ryan Wuerch
Its CEO and President

20
21
22
23
24
25
26

REVISED DISCLOSURE STATEMENT FOR DEBTOR'S


PLAN OF REORGANIZATION Page 24

B USH S TROUT & K ORNFELD


LAW OFFICES

601 Union St., Suite 5000


Seattle, Washington 98101-2373
Telephone (206) 292-2110
Facsimile (206) 292-2104

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Case
Case14-14505-TWD
14-14505-TWD Doc
Doc261-1
267 Filed
Filed03/13/15
03/13/15 Ent.
Ent.03/13/15
03/13/1517:53:04
15:14:18 Pg.
Pg.38
11ofof40
13

Case
Case14-14505-TWD
14-14505-TWD Doc
Doc261-1
267 Filed
Filed03/13/15
03/13/15 Ent.
Ent.03/13/15
03/13/1517:53:04
15:14:18 Pg.
Pg.39
12ofof40
13

Case
Case14-14505-TWD
14-14505-TWD Doc
Doc261-1
267 Filed
Filed03/13/15
03/13/15 Ent.
Ent.03/13/15
03/13/1517:53:04
15:14:18 Pg.
Pg.40
13ofof40
13