-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OE2AGAaxj4m98uxNysGz1F7qPTASQkHGPrXuREplRgQFdQCU4KMcQBCSyeGgrVMT gvgHZs6cLs3KIdCWhnmGDA== 0000914121-06-000550.txt : 20060306 0000914121-06-000550.hdr.sgml : 20060306 20060306162931 ACCESSION NUMBER: 0000914121-06-000550 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20060227 ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060306 DATE AS OF CHANGE: 20060306 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABLE LABORATORIES INC CENTRAL INDEX KEY: 0000857171 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 330659916 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11352 FILM NUMBER: 06667533 BUSINESS ADDRESS: STREET 1: 1 ABLE DRIVE CITY: CRANBURY STATE: NJ ZIP: 08512 BUSINESS PHONE: 609-495-2800 MAIL ADDRESS: STREET 1: 1 ABLE DRIVE CITY: CRANBURY STATE: NJ ZIP: 08512 FORMER COMPANY: FORMER CONFORMED NAME: DYNAGEN INC DATE OF NAME CHANGE: 19950817 8-K 1 ab88818-8k.txt FORM 8K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 27, 2006 ----------------- ABLE LABORATORIES, INC. (Exact name of registrant as specified in its charter)
- ------------------------------------- ----------------------------------- ----------------------------------- Delaware 001-11352 04-3029787 - ------------------------------------- ----------------------------------- ----------------------------------- (State or other jurisdiction of (Commission File Number) (IRS Employer Identification incorporation) Number) - ------------------------------------- ----------------------------------- -----------------------------------
1 Able Drive, Cranbury, NJ 08512 (Address of Principal Executive Offices) (Zip Code) (609) 495-2800 (Registrant's telephone number, including area code) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [_] Pre-commencement communications pursuant to Rue 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ Item 8.01 Other Events. On July 18, 2005, Able Laboratories, Inc. filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey. On February 27, 2006, the Company filed a proposed plan of reorganization and disclosure statement with the Bankruptcy Court, which plan was amended and filed with the Bankruptcy Court on March 3, 2006. A copy of the press release announcing the filing of the plan and disclosure statement is attached as exhibit 99.1 A copy of the proposed plan of reorganization and disclosure statement are attached as Exhibits 99.2 and 99.3, respectively, and incorporated in this Current Report on Form 8-K by reference. All information in the disclosure statement is subject to change, whether as a result of amendments to the plan, actions of third parties or otherwise. Bankruptcy law does not permit solicitation of acceptances of the Plan until the bankruptcy court approves the disclosure statement. Accordingly this Current Report on Form 8-K is not intended to me, nor should it be construed as, a solicitation for a vote on the plan. The plan will become effective only if it receives the requisite approval of the holders of claims and is confirmed by the bankruptcy court. Item 9.01 Financial Statements and Exhibits (a) Financial Statements of Businesses Acquired: Not Applicable. (b) Pro Forma Financial Information: Not Applicable. (c) Exhibits: 99.1 Press Release, dated March 3, 2006 99.2 Plan of Reorganization 99.3 Disclosure Statement SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ABLE LABORATORIES, INC. By: /s/ Richard M. Shepperd ------------------------------------- Name: Richard M. Shepperd Dated: March 6, 2006 Title: Director of Restructuring INDEX TO EXHIBITS Sequentially Exhibit Numbered Number Exhibit Page ------ ------- ---- 99.1 Press Release, dated March 3, 2006 99.2 Plan of Reorganization 99.3 Disclosure Statement EX-99.1 2 ab88818-ex99_1.txt PRESS RELEASE Exhibit 99.1 [LOGO - ABLE LABORATORIES INC.] Company Contact: Investor Relations (609) 495-2800 Email: IR@ablelabs.com Able Laboratories, Inc. Files Proposed Plan of Reorganization and Disclosure Statement Cranbury, NJ, March 3, 2006 - Able Laboratories, Inc. announced that it had filed a proposed Plan of Reorganization and Disclosure Statement relating to the Plan with the United States Bankruptcy Court for the District of New Jersey. The Plan provides for the continuation of Able's business in order for it to complete its ongoing recall of products and other measures required by the FDA, for it to assist other government agencies with inquiries regarding Able's prior operations and to sell any remaining assets and wind down its operations. Under the proposed Plan, claims secured by collateral or rights of setoff and claims entitled to priority in payment will be paid in full, to the extent they have not already been paid. The Plan provides that holders of general unsecured claims will receive a pro-rata portion of "Available Cash", as defined in the Plan. The percentage distribution to be paid to holders of general unsecured claims is uncertain and will depend upon the amount of general unsecured claims that are allowed and the amount of Available Cash. In addition, under the Plan, general unsecured claims in amounts of $500 or less will be paid in full. The Plan and Disclosure Statement also provide that holders of subordinated claims, if any, will not receive any distributions unless all general unsecured claims are paid in full, and that it is extremely remote that general unsecured claims will paid in full. Furthermore, the Plan and Disclosure Statement state that equity interests will not receive any distributions unless all general unsecured claims and subordinated claims are paid in full, which also is extremely remote, and that the equity of the company has no value. The Plan will be funded from the assets held by Able, which primarily consists of cash remaining from the sale of the majority of Able's assets to Sun Pharmaceutical Industries, Inc. The Plan also provides for the creation of a litigation trust to hold and assert, for the benefit of Able's creditors, certain claims and causes of action held by Able. The Bankruptcy Court has scheduled a hearing to approve the Disclosure Statement on April 6, 2006 at the United States Bankruptcy Court in Trenton, New Jersey. Should the Disclosure Statement be approved at that time, it is anticipated that a hearing on confirmation of the Plan will be scheduled in May, 2006. There can be no assurance at this time that the Disclosure Statement will be approved or that the Plan proposed by Able will be confirmed by the Bankruptcy Court either on the schedule set forth above or at all, or that, if confirmed and consummated, the Plan will achieve its objectives as described above. Further information on the company may be found on the company's web site, www.ablelabs.com.This release contains statements that are forward-looking within the meaning of applicable federal securities laws and are based upon the company's current expectations and assumptions. The forward-looking statements are subject to risks and uncertainties that include, but are not limited to, those identified in Able's press releases and the Disclosure Statement. You should not place undue reliance on those statements because they speak only as of the date of this release, and many factors could affect actual results, which could differ materially from the forward-looking statements. All future written and oral forward-looking statements made by the company or persons acting on the company's behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. Except for the company's ongoing obligations to disclose material information as required by the federal securities laws, we do not have any obligation or intention to release publicly any revisions to any forward-looking statements to reflect events or circumstances in the future or to reflect the occurrence of unanticipated events. EX-99.2 3 ab88818-ex99_2.txt PLAN OF REORGANIZATION Exhibit 99.2 CADWALADER, WICKERSHAM & TAFT LLP One World Financial Center New York, New York 10281 Telephone: (212) 504-6000 Facsimile: (212) 504-6666 Deborah Piazza (DP 6640) - and- 1201 F Street N.W., Suite 1100 Washington, DC 20004 Telephone: (202) 862-2200 Facsimile: (202) 862-2400 Mark C. Ellenberg (ME 6927) - and- LOWENSTEIN SANDLER PC 65 Livingston Avenue Roseland, NJ 07068 Telephone: (973) 597-2500 Facsimile: (973) 597-2400 Kenneth A. Rosen (KR 4963) Sharon L. Levine (SL 2109) Co-Counsel for the Debtor and Debtor-in-Possession UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEW JERSEY | IN RE: | TRENTON VICINAGE | ABLE LABORATORIES, INC., | CHAPTER 11 | DEBTOR. | CASE NO. 05-33129 (RTL) | - ----------------------------------------- FIRST AMENDED CHAPTER 11 PLAN OF REORGANIZATION The Debtor respectfully submits its First Amended Plan of Reorganization pursuant to chapter 11, title 11 of the United States Code, in the form annexed hereto and made a part hereof. Dated: Cranbury, New Jersey As of March 3, 2006 ABLE LABORATORIES, INC By: /s/Richard M. Shepperd --------------------------------- Name: Richard M. Shepperd Title: Director of Restructuring TABLE OF CONTENTS Page SECTION 1. INTRODUCTION AND DEFINITIONS..................................... A. Introduction.......................................................... B. General Overview...................................................... C. Definitions........................................................... 1.1 Administrative Claims Bar Date.................................. 1.2 Administrative Expense Claim.................................... 1.3 Allowed......................................................... 1.4 Allowed Amount.................................................. 1.5 Available Cash.................................................. 1.6 Avoidance Action................................................ 1.7 Ballot.......................................................... 1.8 Bankruptcy Code................................................. 1.9 Bankruptcy Court................................................ 1.10 Bankruptcy Rules................................................ 1.11 Business Day.................................................... 1.12 Cash............................................................ 1.13 Cash Pool....................................................... 1.14 Causes of Action................................................ 1.15 Chapter 11 Case................................................. 1.16 Claim........................................................... 1.17 Class........................................................... 1.18 Collateral...................................................... 1.19 Commencement Date............................................... 1.20 Committee....................................................... 1.21 Confirmation Date............................................... 1.22 Confirmation Hearing............................................ 1.23 Confirmation Order.............................................. 1.24 Convenience Claim............................................... 1.25 Cure............................................................ 1.26 Debtor.......................................................... 1.27 Derivative Claims............................................... 1.28 Disallowed...................................................... 1.29 Disbursing Agent................................................ 1.30 Disclosure Statement............................................ 1.31 Disputed Claim.................................................. 1.32 Disputed Claims Reserve......................................... 1.33 Distribution Record Date........................................ 1.34 Distributions................................................... 1.35 Effective Date.................................................. 1.36 Equity Interest................................................. 1.37 Equity Security................................................. 1.38 Estate.......................................................... 1.39 Executory Contract.............................................. 1.40 FDA............................................................. 1.41 Fee Claim....................................................... 1.42 Final Distribution Date......................................... 1.43 Final Order..................................................... 1.44 General Unsecured Claim......................................... 1.45 Initial Distribution Date....................................... 1.46 Interim Distribution Date....................................... 1.47 Liabilities..................................................... 1.48 Lien............................................................ 1.49 Litigation Trust................................................ 1.50 Litigation Trustee.............................................. 1.51 Litigation Trust Agreement...................................... 1.52 Litigation Trust Claims......................................... 1.53 Litigation Trust Interests...................................... 1.54 Person.......................................................... 1.55 Plan............................................................ 1.56 Plan Supplement................................................. 1.57 Priority Non-Tax Claim.......................................... 1.58 Priority Tax Claim.............................................. 1.59 Professional.................................................... 1.60 Pro Rata Share.................................................. 1.61 Reclamation Claim............................................... 1.62 Rejection Claim................................................. 1.63 Releasees....................................................... 1.64 Representatives................................................. 1.65 Reserves........................................................ 1.66 Schedule of Assumed Contracts................................... 1.67 Schedules....................................................... 1.68 Secured Claim................................................... 1.69 Subordinated Claim.............................................. 1.70 Tort Claim...................................................... 1.71 Unsecured Claim................................................. SECTION 2. ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS............ 2.1 Administrative Expense Claims................................... 2.2 Compensation and Reimbursement Claims........................... 2.3 Priority Tax Claims............................................. SECTION 3. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS.................... 3.1 Classes......................................................... 3.2 Subclasses for Class 1.......................................... SECTION 4. TREATMENT OF CLAIMS AND EQUITY INTERESTS......................... 4.1 Secured Claims (Class 1)........................................ 4.2 Priority Non-Tax Claims (Class 2)............................... 4.3 General Unsecured Claims (Class 3).............................. 4.4 Convenience Claims (Class 4).................................... 4.5 Subordinated Claims (Class 5)................................... 4.6 Equity Interests (Class 6)...................................... SECTION 5. ACCEPTANCE OR REJECTION OF PLAN.................................. 5.1 Voting of Claims................................................ 5.2 Acceptance by a Class........................................... 5.3 Presumed Acceptance of Plan..................................... 5.4 Presumed Rejection of Plan...................................... SECTION 6. MEANS FOR IMPLEMENTATION......................................... 6.1 Process for Orderly Wind Up of the Debtor's Estate.............. 6.2 Funding for the Plan............................................ SECTION 7. DISTRIBUTIONS.................................................... 7.1 Distribution Record Date........................................ 7.2 Distributions................................................... 7.3 Disbursing Agent................................................ 7.4 Rights and Powers of Disbursing Agent........................... 7.5 Surrender of Instruments........................................ 7.6 Delivery of Distributions....................................... 7.7 Manner of Payment Under Plan.................................... 7.8 De Minimis Distributions........................................ 7.9 Setoffs......................................................... 7.10 Allocation of Plan Distribution Between Principal and Interest.. 7.11 Withholding and Reporting Requirements.......................... 7.12 Time Bar to Cash Payments....................................... 7.13 Transactions on Business Days................................... 7.14 Closing of Chapter 11 Case...................................... SECTION 8. PROCEDURES FOR RESOLVING AND TREATING DISPUTED CLAIMS............ 8.1 Payments and Distributions with Respect to Disputed Claims...... 8.2 Preservation of Insurance....................................... 8.3 Resolution of Disputed Claims................................... 8.4 Distributions After Allowance................................... 8.5 Estimation of Claims............................................ 8.6 Disputed Claims Reserve......................................... 8.7 Investments of the Disputed Claims and Other Reserves........... 8.8 Release of Amounts in the Disputed Claims Reserves.............. 8.9 Mediation of Disputed Claims.................................... 8.10 Removal of Civil Actions........................................ SECTION 9. THE LITIGATION TRUST............................................. 9.1 Establishment of the Trust...................................... 9.2 Purpose of the Litigation Trust................................. 9.3 Funding Expenses of the Litigation Trust........................ 9.4 Transfer of Assets.............................................. 9.5 Valuation of Assets............................................. 9.6 Litigation; Responsibilities of Litigation Trustee.............. 9.7 Investment Powers............................................... 9.8 Annual Distribution; Withholding................................ 9.9 Reporting Duties................................................ 9.10 Trust Implementation............................................ 9.11 Registry of Beneficial Interests................................ 9.12 Termination..................................................... 9.13 Net Litigation Trust Recovery/Assignment of Claims.............. SECTION 10. EXECUTORY CONTRACTS AND UNEXPIRED LEASES......................... 10.1 General Treatment............................................... 10.2 Cure of Defaults................................................ 10.3 Approval of Rejection of Executory Contracts and Unexpired Leases.......................................................... 10.4 Bar Date for Filing Proofs of Claim Relating to Executory Contracts and Unexpired Leases Rejected Pursuant to Plan........ 10.5 Survival of Debtor's Corporate Indemnities...................... SECTION 11. CONDITIONS PRECEDENT TO EFFECTIVE DATE........................... 11.1 Conditions to Effective Date.................................... 11.2 Waiver of Conditions............................................ SECTION 12. EFFECT OF CONFIRMATION........................................... 12.1 Jurisdiction and Venue.......................................... 12.2 Release of Assets............................................... 12.3 Binding Effect.................................................. 12.4 Termination of Stays............................................ 12.5 Injunction Against Asserting Claims or Interests................ 12.6 Injunction Against Interference with Plan....................... 12.7 Discharge of Claims and Cancellation of Equity Interests........ 12.8 Exculpation..................................................... 12.9 Releases by Holders of Claims and Interests..................... 12.10 Rights of Action................................................ 12.11 Release by Debtor............................................... 12.12 Release of Releasees by Other Releasees......................... 12.13 Claims of the United States Government.......................... 12.14 Post-Confirmation Conversion/Dismissal.......................... SECTION 13. RETENTION OF JURISDICTION........................................ SECTION 14. MISCELLANEOUS PROVISIONS......................................... 14.1 No Retiree Benefits............................................. 14.2 Deletion of Classes and Subclasses.............................. 14.3 Post-Effective Date Committee; Dissolution of Committee......... 14.4 Post-Confirmation Date Fees and Expenses of Professionals....... 14.5 Exemption from Transfer Taxes................................... 14.6 Abandonment of Records.......................................... 14.7 Substantial Consummation........................................ 14.8 Payment of Statutory Fees....................................... 14.9 Effectuating Documents and Further Transactions................. 14.10 Modification of Plan............................................ 14.11 Revocation or Withdrawal of Plan................................ 14.12 Cramdown........................................................ 14.13 Severability.................................................... 14.14 Request for Expedited Determination of Taxes.................... 14.15 Courts of Competent Jurisdiction................................ 14.16 Governing Law................................................... 14.17 Time............................................................ 14.18 Headings........................................................ 14.19 Exhibits........................................................ 14.20 Notices......................................................... 14.21 Changes in Rates Subject to Regulatory Commission Approval...... SECTION 1. INTRODUCTION AND DEFINITIONS A. Introduction Able Laboratories, Inc. ("Able" or the "Debtor") is the debtor in a chapter 11 bankruptcy case. On July 18, 2005, Able commenced a bankruptcy case by filing a voluntary chapter 11 petition under the United States Bankruptcy Code ("Bankruptcy Code"), 11 U.S.C. ss. 101 et seq. The Debtor, with the support of the Official Committee of Unsecured Creditors (the "Committee"), proposes the following chapter 11 plan pursuant to section 1121(a) of the Bankruptcy Code for the resolution of Able's outstanding Claims, Demands and Equity Interests (the "Plan"). Sent to you in the same envelope as this document is the Disclosure Statement which has been approved by the United States Bankruptcy Court for the District of New Jersey (the "Court"), and which is provided to help you understand the Plan. No solicitation materials, other than the Disclosure Statement and related materials transmitted therewith and approved by the Bankruptcy Court, have been authorized by the Bankruptcy Court for use in soliciting acceptances or rejections of the Plan. The Plan provides for the completion of FDA compliance, wind up of affairs and conversion of all of the Debtor's assets to cash and the distribution of the net proceeds realized therefrom to creditors in accordance with the priorities established by the Bankruptcy Code. The Debtor is the proponent of the Plan within the meaning of section 1129 of the Bankruptcy Code (as that term is defined herein). Subject to certain restrictions and requirements set forth in section 1127 of the Bankruptcy Code and Rule 3019 of the Bankruptcy Rules and Section 14.10 of the Plan, Able reserves the right to alter, amend or modify the Plan, as Able deems necessary, prior to substantial consummation with the consent of the Committee. B. General Overview As required by the Bankruptcy Code, the Plan classifies claims and interests in various classes according to their right to priority of payments as provided in the Bankruptcy Code. The Plan states whether each class of claims or interests is impaired or unimpaired. The Plan provides the treatment each class will receive under the Plan. C. Definitions For purposes of the Plan, except as expressly otherwise provided or unless the context otherwise requires, all capitalized terms not otherwise defined shall have the meanings assigned to them in this Section of the Plan. In all references herein to any parties, persons, entities, or corporations, the use of any particular gender or the plural or singular number is intended to include the appropriate gender or number as the text may require. 1.1 Administrative Claims Bar Date means the deadline for filing Administrative Claims, including Fee Claims, which date shall be thirty (30) days after the Effective Date. 1.2 Administrative Expense Claim means any right to payment constituting a cost or expense of administration of the Chapter 11 Case allowed under sections 503(b) and 507(a)(1) of the Bankruptcy Code, including, without limitation, any actual and necessary costs and expenses of preserving the Debtor's Estate, any actual and necessary costs and expenses of operating the Debtor's business as a debtor-in-possession, any indebtedness or obligations incurred or assumed by the Debtor, as a debtor-in-possession, during the Chapter 11 Case (including, without limitation, (i) for the acquisition or lease of property or an interest in property or (ii) the rendition of services, including, without limitation, salaries, expenses and bonuses payable to ordinary course professionals), and any allowances of compensation and reimbursement of expenses to the extent allowed by a Final Order under sections 330 or 503 of the Bankruptcy Code. 1.3 Allowed means, with reference to any Claim or Equity Interest, (i) any Claim against or Equity Interest in the Debtor that has been listed by the Debtor in the Schedules, as such Schedules may be amended by the Debtor from time to time in accordance with Bankruptcy Rule 1009, as liquidated in amount and not disputed or contingent and for which no contrary proof of claim or equity interest has been filed, (ii) any timely filed Claim or Equity Interest as to which no objection to allowance has been interposed in accordance with section 8.3 hereof or such other applicable period of limitation fixed by the Bankruptcy Code, the Bankruptcy Rules or the Bankruptcy Court, or as to which any objection has been determined by a Final Order to the extent that such objection is determined in favor of the respective holder, or (iii) any Claim or Equity Interest allowed by a Final Order or expressly provided for under the Plan. 1.4 Allowed Amount means, with respect to any Claim: the lesser of (i) the dollar amount of such Claim as Allowed; (ii) the estimated amount of such Claim; and (iii) the dollar amount agreed to by Able. Unless otherwise provided in the Plan or a Final Order of the Bankruptcy Court, the Allowed Amount of an Allowed Claim shall not include interest or penalties accruing on such Allowed Claim from and after the Commencement Date. In addition, unless an order of the Bankruptcy Court provides otherwise, the Allowed Amount of an Allowed Claim shall not, for any purpose under the Plan, include interest at any default rate of interest. 1.5 Available Cash means the actual aggregate sum of cash available in the Debtor's Estate for distribution to its Unsecured Creditors (after the payment of any allowed secured, administrative and priority claims against the Debtor and after the establishment of the necessary Reserves to administer the wind-down of the Debtor's Estate). 1.6 Avoidance Action means any and all avoidance or recovery actions under sections 502(d), 542, 544, 547, 548, 549, 550, 551 and 553 of the Bankruptcy Code, or under related state or federal statutes and common law, whether or not litigation has been commenced with respect to such causes of action as of the Effective Date. 1.7 Ballot means each of the ballots and/or master ballots distributed with the Disclosure Statement to holders of Impaired Claims against or Equity Interests in Able (other than to holders of Impaired Claims or Equity Interests deemed to have rejected the Plan or otherwise not entitled to vote on the Plan) on which such ballot such holder of a Claim or Equity Interest may, among other things, vote to accept or reject the Plan. 1.8 Bankruptcy Code means title 11 of the United States Code, as in effect on the Commencement Date, together with all amendments, modifications and replacements of the foregoing, as the same may exist on any relevant date to the extent applicable to the Chapter 11 Case. 1.9 Bankruptcy Court means the United States Bankruptcy Court for the District of New Jersey having jurisdiction over this Chapter 11 Case and, to the extent that the reference of the Chapter 11 Case is withdrawn pursuant to 28 U.S.C. ss. 157(d), the United States District Court for the District of New Jersey. 1.10 Bankruptcy Rules means, collectively: (a) the Federal Rules of Bankruptcy Procedure as promulgated by the United States Supreme Court under section 2075, title 28, United States Code; (b) the Federal Rules of Civil Procedure, as applicable to the Chapter 11 Case or proceedings therein; and (c) the local rules of the Bankruptcy Court, all as amended from time to time and applicable in this Chapter 11 Case. 1.11 Business Day means any day other than a Saturday, a Sunday, or any other day on which banking institutions in New Jersey are required or authorized to close by law or executive order. 1.12 Cash means legal tender of the United States of America. 1.13 Cash Pool means Available Cash allocated to the holders of Allowed General Unsecured Claims. 1.14 Causes of Action means any and all actions, causes of action, Liabilities, obligations, accounts, controversies, rights to legal remedies, rights to equitable remedies, rights to payment, suits, debts, sums of money, damages, judgments, Claims, and Demands, whatsoever, whether known or unknown, reduced to judgment, not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or which may be brought on behalf of Able and/or the Estate, arising under any provisions of the Bankruptcy Code or other applicable law. 1.15 Chapter 11 Case means the voluntary case commenced by the Debtor under chapter 11 of the Bankruptcy Code on the Commencement Date in the United States Bankruptcy Court for the District of New Jersey, styled In re Able Laboratories, Inc., Case No. 05-33129-RTL, which is currently pending before the Bankruptcy Court. 1.16 Claim means (i) any right to payment from the Debtor, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, known or unknown, or (ii) any right to an equitable remedy for breach of performance if such breach gives rise to a right of payment from the Debtor, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured, known or unknown. 1.17 Class means a class of Claims or Equity Interests established pursuant to Section 3. 1.18 Collateral means any property or interest in property of the Debtor's Estate subject to a valid and properly perfected lien, charge or other encumbrance to secure the payment or performance of a Claim, which lien, charge or other encumbrance is not subject to avoidance under the Bankruptcy Code or other applicable law. 1.19 Commencement Date means July 18, 2005. 1.20 Committee means the official committee of general unsecured creditors appointed by the Office of the United States Trustee in the Chapter 11 Case pursuant to section 1102 of the Bankruptcy Code, as the membership of such Committee may be altered from time to time. 1.21 Confirmation Date means the date on which the Clerk of the Bankruptcy Court enters the Confirmation Order. 1.22 Confirmation Hearing means the hearing to be held by the Bankruptcy Court pursuant to section 1128 of the Bankruptcy Code to consider confirmation of the Plan, as such hearing may be adjourned from time to time. 1.23 Confirmation Order means the order of the Bankruptcy Court confirming the Plan pursuant to section 1129 of the Bankruptcy Code. 1.24 Convenience Claim means (i) Allowed General Unsecured Claims of a holder of Allowed Claims against the Debtor in an aggregate amount equal to or less than $500, (ii) the Allowed General Unsecured Claims against the Debtor of a holder that has irrevocably elected on its ballot to reduce all such Claims against the Debtor to $500, or (iii) Disputed Claims against the Debtor that become Allowed General Unsecured Claims in an aggregate amount equal to or less than $500, with the consent of, and in the amount agreed to by, the Debtor or pursuant to a Final Order, provided, however, that in no event shall the distributions to a holder of an Allowed Convenience Claim exceed 100% of the amount of the Allowed Claim if less than the amount of the Convenience Class treatment. 1.25 Cure means the distribution of Cash, or such other property as may be agreed upon by the parties and/or ordered by the Bankruptcy Court, with respect to the assumption of an Executory Contract pursuant to section 365(b) of the Bankruptcy Code, in an amount equal to all accrued, due, and unpaid monetary obligations, without interest, or such other amount as may be agreed upon by the parties or ordered by the Bankruptcy Court, under such Executory Contract, to the extent such obligations are enforceable under the Bankruptcy Code and applicable non-bankruptcy law. 1.26 Debtor means Able Laboratories, Inc., including in its capacity as a debtor-in-possession pursuant to sections 1101, 1107(a) and 1108 of the Bankruptcy Code. 1.27 Derivative Claims means those present and future actions and claims seeking a determination of director and officer liability for, among other things, breach of fiduciary duties. 1.28 Disallowed means, when used with respect to a Claim against Able, a Claim that: (a) is disallowed in whole or in part (but solely to the extent of such disallowance) by an order of the Bankruptcy Court or other court of competent jurisdiction; or (b) has been withdrawn, in whole or in part, by the holder thereof. 1.29 Disbursing Agent means any entity (including the Debtor if it acts in such capacity) in its capacity as a disbursing agent under Section 7.3 hereof. 1.30 Disclosure Statement means the written disclosure statement that relates to the Plan, including the exhibits and schedules thereto, as approved by the Bankruptcy Court as containing adequate information pursuant to section 1125 of the Bankruptcy Code and Rule 3017 of the Bankruptcy Rules, as such disclosure statement may be amended, modified, or supplemented from time to time. 1.31 Disputed Claim means any Claim that has not been Allowed pursuant to the Plan or a Final Order, including, without limitation: (a) if no proof of claim has been timely and properly filed, a Claim that has been or hereafter is listed on the Schedules as other than disputed, contingent or unliquidated, but as to which the Debtor, Committee, or any other party in interest has interposed an objection or request for estimation which has not been withdrawn or determined by a Final Order; or (b) if a proof of claim (whether relating to a Claim arising before or after the Commencement Date), or request for payment of an Administrative Expense Claim, has been timely and properly filed by the applicable deadline: (i) a Claim for which no corresponding Claim has been or hereafter is listed on the Schedules; (ii) a Claim for which a corresponding Claim has been or hereafter is listed on the Schedules as other than disputed, contingent or unliquidated, but for which the nature or amount of the Claim as asserted in the proof of claim varies from the nature and amount of such Claim as listed on the Schedules; (iii) a Claim for which a corresponding Claim has been or hereafter is listed on the Schedules as disputed, contingent or unliquidated and which has not been resolved by written agreement of the parties or a Final Order; (iv) a Claim for which a timely objection or request for estimation is interposed by the Debtor, Committee, or any other party in interest, which has not been withdrawn or determined by a Final Order; or (v) any Tort Claim. Further, a creditor who timely and properly filed a Cure Claim under section 365(b) of the Bankruptcy Code relating to the assumption and/or assumption and assignment of an executory contract or unexpired lease during the Chapter 11 Case, which Cure Claim has not been resolved by written agreement of the parties or a Final Order, shall be deemed to have a Disputed Claim to the extent that such timely and properly filed Claim differs from the amount, if any, of such Claim in the Debtor's books and records. (c) Because it is not anticipated that the holders of Allowed Equity Interests will receive any distribution on account of such Equity Interests, it is unnecessary to characterize any Equity Interests, or any portion thereof, as Disputed. (d) Further, notwithstanding anything to the contrary in the Plan, if a Claim is or has been deemed disallowed for failure to comply with the Bar Date, such Claim will not receive any distribution on account of such Claim, and, thus, it is unnecessary to characterize or otherwise treat any such Claims as Disputed under the Plan. (e) For purposes of determining whether a particular Claim is a Disputed Claim prior to the expiration of any period of limitation fixed for the interposition by the Debtor or the Committee, as the case may be, of any objections to the allowance of Claims, any Claim that is not identified by the Debtor as an Allowed Claim shall be deemed a Disputed Claim. 1.32 Disputed Claims Reserve means, in the event there exists any Disputed Claim on or after the Effective Date, Cash to be set aside by the Debtor in an interest-bearing account, in amounts sufficient to pay all such Disputed Claims in accordance with the provisions of the Plan, if such Disputed Claims become Allowed Claims, and to be maintained under the Plan, as set forth more fully in Section 8.6 of the Plan. For Disputed Claims in Class 3, the amount of Cash to be set aside by the Debtor on the Effective Date shall not exceed the amount of the Class 3 Cash Pool. 1.33 Distribution Record Date means the date fixed as the "Distribution Record Date" by order of the Bankruptcy Court approving, inter alia, procedures to solicit acceptances or rejections of the Plan. 1.34 Distributions means the properties or interests in property to be paid or distributed hereunder pursuant to the priority scheme as set forth in the Bankruptcy Code to holders of allowed claims. 1.35 Effective Date means a Business Day on or after the Confirmation Date specified by the Debtor on which (i) no stay of the Confirmation Order is in effect, and (ii) the conditions to the effectiveness of the Plan specified in Section 11.1 of the Plan have been satisfied or waived. 1.36 Equity Interest means the rights of a holder of an Equity Security. 1.37 Equity Security means authorized capital stock, membership interests, partnership interests or similar ownership interests, whether or not transferable, including any option, warrant or right, contractual or otherwise, to acquire any such interest. 1.38 Estate means the estate created pursuant to section 541 of the Bankruptcy Code upon the commencement of the Debtor's Chapter 11 Case. 1.39 Executory Contract means any unexpired lease or executory contract that is subject to treatment under section 365 of the Bankruptcy Code. 1.40 FDA means the Food and Drug Administration. 1.41 Fee Claim means collectively, any Claim of a: (a) Professional for allowance of compensation and reimbursement of costs and expenses, and (b) member of the Creditors' Committee for reimbursement of costs and expenses, incurred in the Chapter 11 Case prior to and including the Effective Date. 1.42 Final Distribution Date means, in the event that there exist on the Effective Date any Disputed Claims, a date selected by the Debtor, in its sole discretion, on which all such Disputed Claims have been resolved by or in accordance with a Final Order. 1.43 Final Order means an order or judgment of the Bankruptcy Court entered by the Clerk of the Bankruptcy Court on the docket in the Chapter 11 Case, whether prior to or after the Effective Date, as to which no appeal, petition for certiorari, or move for reargument or rehearing has expired and as to which no appeal, petition for certiorari or other proceeding for reargument or rehearing shall be pending; provided, however, if an appeal, writ of certiorari, reargument or rehearing thereof has been filed or sought, such order shall have been affirmed by the highest court to which such order was appealed, or certiorari shall have been denied or reargument or rehearing shall have been denied or resulted in no modification of such order, and the time to take any further appeal, petition for certiorari or move for reargument or rehearing shall have expired. 1.44 General Unsecured Claim means any Claim against the Debtor that (i) is not an Administrative Claim, a Priority Tax Claim, a Secured Claim, a Priority Non-Tax Claim, or a Subordinated Claim, or (ii) is otherwise determined by the Bankruptcy Court to be a General Unsecured Claim. 1.45 Initial Distribution Date means the first date on or after the Effective Date, as scheduled by the Debtor, in its sole discretion, that a distribution of Cash is made to holders of Allowed Claims under the Plan. 1.46 Interim Distribution Date means one or more dates as scheduled by the Debtor, in its sole discretion, that a distribution of Cash is made to the holders of Allowed Claims under the Plan after the Initial Distribution Date but before the Final Distribution Date. 1.47 Liabilities means any and all costs, expenses, actions, causes of action, suits, controversies, damages, claims, demands, debts, liabilities or obligations of any nature, whether known or unknown, foreseen or unforeseen, existing or hereinafter arising, liquidated or unliquidated, matured or unmatured, contingent or direct, whether arising at common law, in equity, or under any statute, based in whole or in part on any act or omission or other occurrence arising or taking place on or prior to the Effective Date. 1.48 Lien has the meaning ascribed to such term in section 101(37) of the Bankruptcy Code (but a lien that has been or may be avoided pursuant to an Avoidance Action shall not constitute a Lien). 1.49 Litigation Trust means the trust created by the Debtor in accordance with the provisions of Section 9 hereof and the Litigation Trust Agreement for the benefit of holders of Allowed Claims. 1.50 Litigation Trustee means the party appointed by the Committee to administer the Litigation Trust in accordance with the terms and provisions of Section 9 hereof and the Litigation Trust Agreement. 1.51 Litigation Trust Agreement means the trust agreement, which agreement shall be in form and substance satisfactory to the Committee and substantially in the form contained in the Plan Supplement, pursuant to which the Litigation Trust shall pursue the Litigation Trust Claims, if applicable, and distribute the proceeds thereof, if any. 1.52 Litigation Trust Claims means all claims and causes of action asserted, or which may be asserted, by or on behalf of the Debtor or the Debtor's estate arising under or pursuant to sections 544, 545, 547, 548, 549, 550, 551 and 553 of the Bankruptcy Code; provided, however, that, under no circumstances, shall such claims and causes of action include any claims and causes of action of the estate of the Debtor waived and released; and, provided, further, that, in the event that the Debtor and the Committee jointly determine not to form the Litigation Trust, the claims and causes of action referred to herein shall be deemed to be assets of the estate, notwithstanding the inclusion of the Debtor or its estate as a plaintiff in such litigation and without the execution and delivery of any additional documents or the entry of any order of the Bankruptcy Court or such other court of competent jurisdiction. 1.53 Litigation Trust Interests means the beneficial interests in the Litigation Trust to be deemed distributed ratably to holders of Allowed Claims pursuant to the terms and conditions of Section 9 of the Plan. 1.54 Person means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority, governmental unit or other entity of whatever nature. 1.55 Plan means this chapter 11 plan of the Debtor, including the Plan Supplement and the exhibits hereto and thereto, if any such Plan Supplement or exhibits are filed, as the same may be amended or modified from time to time in accordance with the provisions of the Bankruptcy Code and the terms hereof. 1.56 Plan Supplement means a supplemental appendix to the Plan to be filed seven (7) days before the date of the Confirmation Hearing. 1.57 Priority Non-Tax Claim means any Claim other than an Administrative Expense Claim or a Priority Tax Claim, entitled to priority in payment as specified in section 507(a)(3), (4), (5), (6), (7) or (9) of the Bankruptcy Code. 1.58 Priority Tax Claim means any Claim of a governmental unit of the kind entitled to priority in payment as specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code. 1.59 Professional means any person retained or to be compensated pursuant to section 327, 328, 330, 503(b), or 1103 of the Bankruptcy Code. 1.60 Pro Rata Share means, with respect to any Claim, a proportionate share, so that the ratio of the consideration distributed on account of an Allowed Claim in a Class to the amount of such Allowed Claim is the same as the ratio of the amount of the consideration distributed on account of all Allowed Claims in such Class to the amount of all Allowed Claims in such Class. 1.61 Reclamation Claim means a reclamation claim as determined either (i) by agreement between the Debtor and the claimant; or (ii) by order of the Bankruptcy Court under section 546(c) of the Bankruptcy Code and applicable law. 1.62 Rejection Claim means a Claim for damages under section 502(g) of the Bankruptcy Code resulting from the rejection of an executory contract or unexpired lease by Able. 1.63 Releasees means, collectively, (i) any director, officer, agent or employee of any Debtor who was employed or otherwise serving in such capacity on or after the Commencement Date, (ii) the outside directors of the Debtor serving in such capacity on the Commencement Date, namely David Tierney, Elliot Hahn, Harry Silverman, and Jerry Treppel, (iii) the Committee; and (iv) any member of the Committee, any member, director, officer, agent or employee of a member of the Committee, or the Debtor's or the Committee's attorneys or advisors who were acting, employed or otherwise serving in such capacity on or after the Commencement Date. 1.64 Representatives means the officers, directors, employees, agents, attorneys, accountants, financial advisors, other representatives, subsidiaries, affiliates, or any person who controls any of these within the meaning of the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. 1.65 Reserves means one or more reserves of Cash established by the Debtor, in its sole discretion, in such amounts as determined by the Debtor from time to time in its sole discretion, to adequately fund the administration of the Plan and the Chapter 11 Case on and after the Effective Date. 1.66 Schedule of Assumed Contracts means the schedule listing the executory contracts and unexpired leases to be assumed by the Debtor, to be filed in the Plan Supplement. 1.67 Schedules means the schedules of assets and liabilities and the statement of financial affairs filed by the Debtor under section 521 of the Bankruptcy Code, Bankruptcy Rule 1007 and the Official Bankruptcy Forms of the Bankruptcy Rules, as such schedules and statements have been or may be supplemented or amended. 1.68 Secured Claim means a Claim to the extent (i) secured by Collateral, the amount of which is equal to or less than the value of such Collateral (A) as set forth in the Plan, (B) as agreed to by the holder of such Claim and the Debtor, or (C) as determined by a Final Order in accordance with section 506(a) of the Bankruptcy Code, or (ii) validly secured by the amount of any rights of setoff of the holder thereof under section 553 of the Bankruptcy Code, which right of setoff is not subject to avoidance under the Bankruptcy Code or other applicable law. 1.69 Subordinated Claim means any Claim against the Debtor, whether secured or unsecured, for any fine, penalty, forfeiture, attorneys' fees (to the extent that such attorneys' fees are punitive in nature), or for multiple, exemplary or punitive damages, to the extent that such fine, penalty, forfeiture, attorneys' fees or damages are not compensation for actual pecuniary loss suffered by the holder of such Claim and not statutorily prescribed, and all claims against the Debtor of the type described in Section 510 of the Bankruptcy Code relating to equity interests (including all Equity Interests). 1.70 Tort Claim means any Claim related to personal injury, property damage, products liability, wrongful death, employment litigation or other similar Claims against the Debtor arising out of events that occurred, in whole or in part, prior to the Commencement Date, which have not previously been compromised and settled or otherwise resolved. 1.71 Unsecured Claim means a Claim against Able that is not secured by a valid and enforceable Lien against property of Able and that is not an Administrative Claim, a Priority Non-Tax Claim or a Priority Tax Claim. Other Definitions. Any term used and not defined herein but that is defined in the Bankruptcy Code shall have the meaning set forth therein. The words "herein", "hereof'", "hereto", "hereunder", and others of similar import refer to the Plan as a whole and not to any particular section, subsection, or clause contained in the Plan. Moreover some terms defined herein are defined in the section in which they are used. SECTION 2. ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS Certain types of claims are not placed into voting classes; instead they are unclassified. They are not considered impaired and they do not vote on the Plan because they are automatically entitled to specific treatment provided for them in the Bankruptcy Code. As such, the Proponents have not placed the following claims into classes. The treatment of these claims is provided below. 2.1 Administrative Expense Claims. Administrative expenses are claims for costs or expenses of administering the Debtor's Chapter 11 case which are allowed under Code Section 503(b). Fees payable to the Clerk of the Bankruptcy Court and the Office of the United States Trustee were also incurred during the Chapter 11 Case. The Code requires that all administrative expenses be paid on the Effective Date of the Plan, unless a particular claimant agrees to a different treatment. Except to the extent that the Debtor and a holder of an Allowed Administrative Expense Claim agree to a different treatment, the Debtor shall pay to each holder of an Allowed Administrative Expense Claim, in full satisfaction of such Claim, Cash in an amount equal to such Claim on, or as soon thereafter as is reasonably practicable, the later of (i) the Initial Distribution Date and (ii) the first Business Day after the date that is thirty (30) calendar days after the date such Administrative Expense Claim becomes an Allowed Administrative Expense Claim; provided, however, that Allowed Administrative Expense Claims representing liabilities incurred in the ordinary course of business by the Debtor, as a debtor-in-possession, or liabilities arising under loans or advances to or other obligations incurred by the Debtor, as debtor-in-possession, whether or not incurred in the ordinary course of business, shall be paid by the Debtor in the ordinary course of business, consistent with past practice and in accordance with the terms and subject to the conditions of any agreements governing, instruments evidencing, or other documents relating to such transactions. 2.2 Compensation and Reimbursement Claims. The Court must approve all professional compensation and expenses. Nothing herein shall prohibit each professional person from requesting interim compensation during the course of this case pending Confirmation of the Plan. No motion or application is required to fix fees payable to the Clerk's Office or the Office of the United States Trustee, as those fees are determined by statute. All entities seeking an award by the Bankruptcy Court of compensation for services rendered or reimbursement of expenses incurred through and including the Confirmation Date under sections 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy Code shall: (a) file their respective final applications for allowance of compensation for services rendered and reimbursement of expenses incurred by the date that is forty-five (45) days after the Effective Date, and (b) be paid in full in such amounts as are allowed by the Bankruptcy Court (i) upon the later of (A) the Effective Date and (B) the date upon which the order relating to any such Administrative Expense Claim is entered, or (ii) upon such other terms as may be mutually agreed upon between the holder of such an Administrative Expense Claim and the Debtor. The Debtor is authorized to pay compensation for services rendered or reimbursement of expenses incurred from and after the Confirmation Date in the ordinary course of business and without the need for Bankruptcy Court approval. 2.3 Priority Tax Claims. Priority tax claims are certain unsecured income, employment and other taxes described by Code Section 507(a)(8). The Code requires, and thus the Plan provides, that each holder of such a 507(a)(8) priority tax claim receives the present value of such claim in deferred cash payments, over a period not exceeding six years from the date of the assessment of such tax. Except to the extent that the Debtor and the holder of an Allowed Priority Tax Claim against the Debtor agree to a different treatment, the Debtor shall pay to each holder of an Allowed Priority Tax Claim Cash in an amount equal to such Allowed Priority Tax Claim on the later of (i) the Initial Distribution Date and (ii) the fifteenth Business Day of the first month following the month in which such Priority Tax Claim becomes an Allowed Priority Tax Claim, or as soon after such dates as is practicable. All Allowed Priority Tax Claims that are not due and payable on or before the Initial Distribution Date shall be paid in the ordinary course of business as such obligations become due. SECTION 3. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS Except for Administrative Expense Claims and Priority Tax Claims, all Claims against and Equity Interests in the Debtor are placed in the following Classes. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Expense Claims and Priority Tax Claims, as described in Section 2, have not been classified and thus are excluded from the following Classes. The following table designates the Classes of Claims against and Equity Interests in the Debtor and specifies which of those Classes are (i) impaired or unimpaired by the Plan and (ii) entitled to vote to accept or reject the Plan in accordance with section 1126 of the Bankruptcy Code or deemed to reject the Plan. 3.1 Classes. - ------------- -------------------------- ------------- ------------------------- Class Designation Impairment Entitled to Vote - ------------- -------------------------- ------------- ------------------------- Class 1 Secured Claims [Impaired] [Yes] Class 2 Priority Non-Tax Claims Unimpaired No (deemed to accept) Class 3 General Unsecured Claims Impaired Yes Class 4 Convenience Claims Impaired Yes Class 5 Subordinated Claims Impaired No (deemed to reject) Class 6 Equity Holders Impaired No (deemed to reject) - ------------- -------------------------- ------------- ------------------------- 3.2 Subclasses for Class 1. For convenience of identification, the Plan classifies the Allowed Claims in Class 1 as a single Class. In the event that Allowed Claims in Class 1 would contain as elements thereof two or more Allowed Secured Claims collateralized by different properties or interests in property or collateralized by liens against the same property or interest in property having different priority, such Allowed Claims shall be divided into separate subclasses of Class 1. SECTION 4. TREATMENT OF CLAIMS AND EQUITY INTERESTS In full satisfaction and discharge of all of the Claims against or Equity Interests in the Debtor, Claims shall be paid pursuant to the priority scheme as set forth in the Bankruptcy Code: 4.1 Secured Claims (Class 1). Secured claims are Claims secured by liens on property of the estate. All Secured Claims are included in Class 1 and will receive the following treatment under the Plan: (a) On or as soon as reasonably practicable after the Initial Distribution Date, each holder of an Allowed Claim in Class 1 shall receive, at the election of the Debtor: (i) Cash equal to 100% of the amount of the Allowed Claim; (ii) the net proceeds of sale of Collateral up to the amount of Allowed Claim; (iii) the Collateral securing the Allowed Claim; (iv) such treatment that leaves unaltered the legal, equitable and contractual rights of the holder; or (v) such other treatment as the Bankruptcy Court shall approve in connection with confirmation of the Debtor's Plan through a "cram down" under section 1129(b) of the Bankruptcy Code. (b) Class 1 Claims are impaired, and any holders of Allowed Claims in Class 1 are entitled to vote to accept or reject the Plan. In the event that Class 1 rejects the Plan, the Debtor reserves the right to request, pursuant to Section 13.12, confirmation of its Plan through a "cram down" of such Subclass under section 1129(b) of the Bankruptcy Code and modification of the Plan to the extent, if any, confirmation under section 1129(b) requires modification. 4.2 Priority Non-Tax Claims (Class 2). Certain priority non-tax claims that are referred to in Code Sections 507(a)(3), (4), (5), (6), (7) and (9) are entitled to priority treatment. These claims are to be treated as follows: On or as soon as reasonably practicable after the Initial Distribution Date, to the extent not already paid, each holder of an Allowed Claim in Class 2 shall receive Cash equal to the amount of such Allowed Claim, except to the extent that a holder of an Allowed Claim in Class 2 and the Debtor have agreed to a different treatment. 4.3 General Unsecured Claims (Class 3). General unsecured claims are unsecured claims not entitled to priority under Code Section 507(a). These claims are to be treated as follows: (a) On or as soon as reasonably practicable after the Initial Distribution Date, each holder of an Allowed Claim shall receive a Pro Rata Share of Available Cash in the Class 3 Cash Pool. (b) Any Tort Claim determined and liquidated pursuant to a judgment obtained in accordance with Section 8.1(b) and applicable non-bankruptcy law, which is no longer appealable or subject to review, shall be deemed an Allowed Claim in Class 3 against the Debtor in such liquidated amount, provided, however, that only the amount of such Allowed Claim that is less than or equal to the Debtor's self-insured retention or deductible in connection with the applicable insurance policy and is not satisfied from proceeds of insurance payable to the holder of such Allowed Claim under the Debtor's insurance policies shall be treated as an Allowed Claim for the purposes of distributions under the Plan. 4.4 Convenience Claims (Class 4). On or as soon as reasonably practicable after the Initial Distribution Date, each holder of an Allowed Convenience Claim in Class 4 shall be paid an amount in Cash equal to one-hundred percent (100%) of such Allowed Claim. 4.5 Subordinated Claims (Class 5). There shall be no distribution to holders of Allowed Claims in Class 5, unless all Allowed Claims in Class 3 are paid in full. The likelihood that all Allowed Class 3 claims will be paid in full is extremely remote. 4.6 Equity Interests (Class 6). There shall be no distribution to holders of Allowed Interests in Class 6, unless all Allowed Claims in Classes 3 and 5 are paid in full. The likelihood that all Allowed Claims in Classes 3 and 5 will be paid in full is extremely remote. SECTION 5. ACCEPTANCE OR REJECTION OF PLAN 5.1 Voting of Claims. Each holder of an Allowed Claim in Classes 1, 3, and 4 (and only holders of Allowed Claims in these Classes) shall be entitled to vote to accept or reject the Plan. For purposes of calculating the number of Allowed Claims in a Class of Claims that have voted to accept or reject the Plan under section 1126(c) of the Bankruptcy Code, all Allowed Claims in such Class held by one entity or any affiliate thereof (as defined in the Securities Act of 1933 and the rules and regulations promulgated thereunder) shall be aggregated and treated as one Allowed Claim in such Class. 5.2 Acceptance by a Class. Consistent with section 1126(c) of the Bankruptcy Code and except as provided for in section 1126(e) of the Bankruptcy Code, a Class of Claims shall have accepted the Plan if it is accepted by at least two-thirds in dollar amount, and more than one-half in number of the holders, of Allowed Claims of such Class that have timely and properly voted to accept or reject the Plan. 5.3 Presumed Acceptance of Plan. Pursuant to section 1126(f) of the Bankruptcy Code, any Class that is unimpaired under a plan is conclusively presumed to accept a plan. Accordingly, under the Plan, Class 2 is unimpaired and is conclusively presumed to accept the Plan. 5.4 Presumed Rejection of Plan. In accordance with section 1126(g) of the Bankruptcy Code, any Class that is to receive no distribution under a plan is conclusively presumed to reject a plan. Accordingly, Class 5 and Class 6 are conclusively presumed to reject the Plan and the votes of such holders will not be solicited with respect to such Claims. SECTION 6. MEANS FOR IMPLEMENTATION 6.1 Process for Orderly Wind Up of the Debtor's Estate. (a) From and after the Confirmation Date, the Debtor shall continue in existence for the purpose of (i) completing its product recall, (ii) ensuring compliance with all FDA regulations and procedures, (iii) winding up its affairs as expeditiously as reasonably possible, (iv) liquidating, by conversion to Cash or other methods, any remaining assets of its Estate, as expeditiously as reasonably possible, (v) enforcing and prosecuting claims, interests, rights and privileges of the Debtor, including, without limitation, the prosecution of avoidance actions in conjunction with the marshalling of the Debtor's assets, as agreed upon by the Debtor, (vi) resolving Disputed Claims, (vii) administering the Plan, and (viii) filing appropriate tax returns. (b) From and after the Confirmation Date, and subject to the Effective Date, the Debtor may, without further approval of the Bankruptcy Court, use, sell, assign, transfer, abandon or otherwise dispose of at a public or private sale any the Debtor's remaining assets for the purpose of liquidating and converting such assets to cash, making distributions and fully consummating the Plan. (c) From and after the Confirmation Date, the then current officers and directors of the Debtor shall continue to serve in their respective capacities through the earlier of the date the Debtor is dissolved in accordance with the Plan or the date such officer or director resigns, is replaced or is terminated. 6.2 Funding for the Plan. The Plan will be funded from the Debtor's sale proceeds, the collection of outstanding receivables, other miscellaneous assets not sold, and Litigation Trust proceeds. SECTION 7. DISTRIBUTIONS 7.1 Distribution Record Date. (a) As of 5:00 p.m. prevailing Eastern time on the Distribution Record Date, the Debtor's books and records for each of the Classes of Claims or Equity Interests as maintained by such Debtor or its respective agent (the "Final Claims Registers") shall be deemed closed, and there shall be no further changes in the record holders of any of the Claims or Equity Interests. (b) The Debtor, the Committee and their respective agents, successors, and assigns shall have no obligation to recognize for any purpose any transfer of Claims occurring on or after 5:00 p.m. prevailing Eastern time on the Distribution Record Date. Instead, they all shall be entitled to recognize and deal for all purposes hereunder only with those record holders stated in the Final Claims Registers, including, without limitation, with respect to any and all distributions to be made under the Plan, irrespective of the number of distributions to be made or the date of distributions. 7.2 Distributions. (a) All distributions will be paid pursuant to the priority scheme as set forth in the Bankruptcy Code. (b) (i) On the Initial Distribution Date, the aggregate amount of Available Cash deposited into the applicable Class 3 Cash Pool and distributed to the holders of Allowed Class 3 Claims on such date shall be divided among them in proportion to their respective Pro Rata Share on such date; and (ii) On each Interim Distribution Date and on the Final Distribution Date, distributions on account of Allowed Claims in Class 3 shall be distributed to Allowed Claim holders on a Pro Rata basis; provided, however, that in no event shall the aggregate distributions to a holder of an Allowed Claim exceed 100% of the amount of such Allowed Claim. In no event shall the Debtor be obligated to make a distribution if, in the discretion of the Debtor, there is insufficient Available Cash to make a cost-efficient distribution, taking into account the size of the distribution to be made and the number of recipients of such distribution in which event such funds shall, in the Debtor's discretion, be donated to a reputable charitable organization; and provided further, however, that in no event shall the foregoing impair the rights of the Debtor under Section 8.8 of the Plan to use excess funds to satisfy the cost of administering the Plan. (c) In the event that at the date of any distribution of Available Cash to Unsecured Creditors there are any Disputed Claims held by Unsecured Creditors, then there shall be reserved for future distributions to the Unsecured Creditors pursuant to Section 7.2(b)(ii) a sufficient amount of Available Cash so that if all Disputed Claims subsequently become Allowed Claims, there will be adequate Available Cash to distribute to the Unsecured Creditors so that, upon making the final distribution to the Unsecured Creditors who become holders of Allowed Class 3 Claims, each such Unsecured Creditor will receive its full share of the aggregate Available Cash then and theretofore distributed to the holders of Allowed Class 3 Claims determined as provided in Section 7.2(b)(ii) above. 7.3 Disbursing Agent. (a) All distributions under the Plan shall be made by the Debtor as Disbursing Agent (or such other entity designated by the Debtor as a Disbursing Agent on or after the Effective Date). (b) A Disbursing Agent shall not be required to give any bond or surety or other security for the performance of its duties unless otherwise ordered by the Bankruptcy Court, and, in the event that a Disbursing Agent is so otherwise ordered, all costs and expenses of procuring any such bond or surety shall be borne by the Debtor. 7.4 Rights and Powers of Disbursing Agent. The Disbursing Agent shall be empowered to (i) effect all actions and execute all agreements, instruments and other documents necessary to perform its duties under the Plan, (ii) make all distributions contemplated hereby, (iii) employ professionals to represent it with respect to its responsibilities and (iv) exercise such other powers as may be vested in the Disbursing Agent by order of the Bankruptcy Court, pursuant to the Plan, or as deemed by the Disbursing Agent to be necessary and proper to implement the provisions hereof. 7.5 Surrender of Instruments. (a) In the discretion of the Debtor, each holder of an Allowed Claim represented by a certificated instrument or note may be required to surrender such instrument or note held by it to the Disbursing Agent or its designee. If so required by the Debtor, then any holder of such instrument or note that fails to (i) surrender such instrument or note or (ii) execute and deliver an affidavit of loss and/or indemnity reasonably satisfactory to the Disbursing Agent and furnish a bond in form, substance and amount reasonably satisfactory to the Disbursing Agent before the first anniversary of the Effective Date, shall be deemed to have forfeited all rights and Claims and may not participate in any distribution under the Plan in respect of such Claim. (b) If so required by the Debtor under section 7.5(a), any other holder of an Allowed Claim who fails to take such action required by the Disbursing Agent or its designee to receive its distribution hereunder before the first anniversary of the Effective Date, or such earlier time as otherwise provided for in the Plan, may not participate in any distribution under the Plan in respect of such Claim. Any distribution forfeited hereunder shall in the Debtor's discretion, be included in the Reserves and/or become Available Cash. 7.6 Delivery of Distributions. Distributions to holders of Allowed Claims shall be made at the address of each such holder as set forth on the Schedules filed with the Bankruptcy Court unless superseded by the address as set forth on the proofs of claim and equity interest filed by such holders or other writing, which is actually received by the Debtor after the Commencement Date at its headquarters facility or by the Debtor's attorneys in the Chapter 11 Case, notifying the Debtor of a change of address. If any holder's distribution is returned as undeliverable, no further distributions to such holder shall be made unless and until the Debtor is notified of such holder's then current address, at which time all missed distributions shall be made to such holder, without interest; provided, however, that all claims for undeliverable distributions shall be made on or before one hundred twenty (120) days after the date such undeliverable distribution was initially made. After such date, all unclaimed property shall, in the Debtor's discretion, be included in the Reserves and/or become Available Cash, and the holder of any such Claim shall not be entitled to any other or further distribution under the Plan on account of such Claim. Any unclaimed property or other distributions on account of Allowed Claims which are forfeited or otherwise deemed abandoned under any provision of the Plan, including without limitation, this Section 7.6, shall not be subject to any applicable state or other law or requirements (including, without limitation, reporting requirements) relating to such abandoned property or other similar property subject to escheat or reversionary interests. 7.7 Manner of Payment Under Plan. (a) All distributions to the holders of Allowed Claims against the Debtor under the Plan shall be made by, or on behalf of, the Debtor. (b) At the option of the Debtor, any Cash payment to be made hereunder may be made by a check or wire transfer or as otherwise required or provided in applicable agreements. 7.8 De Minimis Distributions. The Debtor as Disbursing Agent or such other entity designated by such Debtor as a Disbursing Agent on or after the Effective Date will not be required to distribute Cash to the holder of an Allowed Claim in an impaired Class if the amount of Cash to be distributed on any distribution date under the Plan (including the Initial Distribution Date and the Final Distribution Date) on account of such Claim is less than $25. Any holder of an Allowed Claim on account of which the amount of Cash to be distributed is less than $25 will have its Claim for such distribution discharged and will be forever barred from asserting any such Claim against the Debtor or its respective property. Any Cash not distributed pursuant to this Section 7.8 will, in the Debtor's discretion, be included in the Reserves and/or become Available Cash, free of any restrictions thereon, and any such Cash held by a third-party Disbursing Agent will be returned to the Debtor. 7.9 Setoffs. The Debtor may, in accordance with the provisions of the Plan, the Bankruptcy Code, including, without limitation section 553, and/or applicable non-bankruptcy law, set off against any Allowed Claim and the distributions to be made pursuant to the Plan on account of such Allowed Claim (before any distribution is made on account of such Allowed Claim), the Claims, rights and causes of action of any nature that the Debtor may hold against the holder of such Allowed Claim; provided, however, that neither the failure to effect such a setoff nor the allowance of any Claim hereunder shall constitute a waiver or release by the Debtor of any such Claims, rights and causes of action that the Debtor may possess against such holder; and provided further, however, that any Claims of the Debtor arising before the Commencement Date shall first be set off against Claims against the Debtor arising before the Commencement Date. 7.10 Allocation of Plan Distribution Between Principal and Interest. All distributions in respect of any Allowed Claim shall be allocated first to the principal amount of such Allowed Claim, as determined for federal income tax purposes, and thereafter, to the remaining portion of such Allowed Claim comprising interest (but solely to the extent that interest is an allowable portion of such Allowed Claim). 7.11 Withholding and Reporting Requirements. In connection with the Plan and all instruments issued in connection therewith and distributed thereon, the Debtor shall comply with all applicable withholding and reporting requirements imposed by any federal, state or local taxing authority, and all distributions under the Plan shall be subject to any such withholding or reporting requirements. 7.12 Time Bar to Cash Payments. Checks issued by the Debtor in respect of Allowed Claims shall be null and void if not negotiated within sixty (60) days after the date of issuance thereof. Requests for reissuance of any check shall be made to the Debtor by the holder of the Allowed Claim to whom such check originally was issued. Any Claim in respect of such a voided check shall be made on or before thirty (30) days after the expiration of the sixty (60) day period following the date of issuance of such check. After such date, all funds held on account of such voided check shall, in the Debtor's discretion, be included in the Reserves and/or become Available Cash, and the holder of any such Allowed Claim shall not be entitled to any other or further distribution under the Plan on account of such Allowed Claim. 7.13 Transactions on Business Days. If the Effective Date or any other date on which a transaction may occur under the Plan shall occur on a day that is not a Business Day, the transactions contemplated by the Plan to occur on such day shall instead occur on the next succeeding Business Day. 7.14 Closing of Chapter 11 Case. When all Disputed Claims filed against the Debtor have become Allowed Claims or have been disallowed by Final Order, and all distributions in respect of Allowed Claims have been made in accordance with the Plan, or at such earlier time as the Debtor deems appropriate, the Debtor shall seek authority from the Bankruptcy Court to close its Chapter 11 Case in accordance with the Bankruptcy Code and the Bankruptcy Rules. SECTION 8. PROCEDURES FOR RESOLVING AND TREATING DISPUTED CLAIMS 8.1 Payments and Distributions with Respect to Disputed Claims. (a) Notwithstanding any other provision hereof, if any portion of a Claim is a Disputed Claim, no payment or distribution provided hereunder shall be made on account of such Claim unless and until such Disputed Claim becomes an Allowed Claim. (b) All Tort Claims are Disputed Claims. At the Debtor's option, any unliquidated Tort Claim as to which a proof of claim was timely filed in the Chapter 11 Case shall be determined and liquidated in the administrative or judicial tribunal(s) in which it is pending on the Effective Date or, if no action was pending on the Effective Date, in any administrative or judicial tribunal of appropriate jurisdiction. The Debtor may exercise the above option by service of a notice upon the holder of the applicable Tort Claim of a notice informing the holder of such claim that the Debtor has exercised such option. Upon the Debtor's service of such notice, the automatic stay provided under section 362 of the Bankruptcy Code, as extended under Section 12.4 of the Plan, shall be deemed modified, without the necessity for further Bankruptcy Court approval, solely to the extent necessary to allow the parties to determine or liquidate the Tort Claim in the applicable administrative or judicial tribunal(s). Notwithstanding the foregoing, at all times prior to or after the Effective Date, the Bankruptcy Court shall retain jurisdiction relating to Tort Claims, including the Debtor's right to have such Claims determined and/or liquidated in the Bankruptcy Court (or the United States District Court for the District of New Jersey pursuant to section 157(b)(2)(B) of title 28 of the United States Code, as may be applicable). Any Tort Claim determined and liquidated pursuant to a judgment obtained in accordance with this Section 8.1(b) and applicable non-bankruptcy law which is no longer appealable or subject to review shall be deemed an Allowed Claim in Class 3 against the Debtor in such liquidated amount, provided that only the amount of such Allowed Claim that is less than or equal to the Debtor's self-insured retention or deductible in connection with the applicable insurance policy and is not satisfied from proceeds of insurance payable to the holder of such Allowed Claim under the Debtor's insurance policies shall be treated as an Allowed Claim for the purposes of distributions under the Plan. In no event shall a distribution be made under the Plan to the holder of a Tort Claim on account of any portion of an Allowed Claim in excess of the Debtor's deductible or self-insured retention under any applicable insurance policy. In the event a Tort Claim is determined and liquidated pursuant to a judgment or order obtained in accordance with this Section 8.1(b) and applicable non-bankruptcy law provides for no recovery against the Debtor, which is no longer appealable or subject to review, such Tort Claim shall be deemed expunged without the necessity for further Bankruptcy Court approval upon the Debtor's service of a copy of such judgment or order upon the holder of such Tort Claim. Nothing contained in this Section 8.1(b) shall constitute or be deemed a waiver of any Claim, right or cause of action that the Debtor may have against any Person in connection with or arising out of any Tort Claim, including, without limitation, any rights under section 157(b)(5) of title 28 of the United States Code. This entire Section 8.1(b) is subject to the Debtor's right to elect to follow the procedures provided for in Sections 8.5 and 8.9. 8.2 Preservation of Insurance. Nothing in the Plan, including the discharge and release of the Debtor as provided in the Plan, shall diminish or impair the enforceability of any insurance policies that may cover Claims against the Debtor. 8.3 Resolution of Disputed Claims. (a) Unless otherwise ordered by the Bankruptcy Court after notice and a hearing, and except as otherwise expressly provided for below, the Debtor, in coordination and consultation with the Committee, shall have the exclusive right (except as to applications for allowances of compensation and reimbursement of expenses under sections 330 and 503 of the Bankruptcy Code) to make and file objections to Claims and shall serve a copy of each objection upon the holder of the Claim to which the objection is made as soon as practicable, but in no event later than ninety (90) days after the Effective Date; provided, however, that such ninety (90) day period may be automatically extended by the Debtor, without any further application to, or approval by, the Bankruptcy Court, for an additional thirty (30) days with the consent of the Committee (not to be unreasonably withheld). The foregoing deadlines for filing objections to Claims shall not apply to Tort Claims and, accordingly, no such deadline shall be imposed by the Plan. Notwithstanding any authority to the contrary, an objection to a Claim shall be deemed properly served on the holder thereof if the Debtor effects service in any of the following manners: (i) in accordance with Federal Rule of Civil Procedure 4, as modified and made applicable by Bankruptcy Rule 7004; (ii) to the extent that counsel for the holder is unknown, by first class mail, postage prepaid, on the signatory on the proof of claim or equity interest or other representative identified in the proof of claim or equity interest or any attachment thereto; or (iii) by first class mail, postage prepaid, on any counsel that has appeared on the holder's behalf in the Chapter 11 Case. (b) Notwithstanding the foregoing, the Committee shall also have the right to make and file objections to Claims filed against the Debtor, which objections shall be made in coordination and consultation with the Debtor and shall be made within the time frames provided for in this Section 8.3. From and after the Confirmation Date, subject to the Effective Date, all objections shall be litigated to a Final Order except to the extent that the Debtor (with the consent of the Committee not to be unreasonably withheld) or the Committee (with the consent of the Debtor not to be unreasonably withheld), as applicable, elects to withdraw any such objection or the Debtor (with the consent of the Committee not to be unreasonably withheld) or the Committee (with the consent of the Debtor not to be unreasonably withheld), as applicable, and the holder of the Disputed Claim elect to compromise, settle or otherwise resolve any such objection, in which event they may settle, compromise or otherwise resolve any such Disputed Claim without approval of the Bankruptcy Court. If requested by the Committee, the Debtor shall prepare, issue and deliver to the Committee, within forty-five (45) days following the end of each month, a report with respect to the status of the resolution of Disputed Claims, in a form to be agreed upon by the professionals for the Debtor and the Committee. Nothing in the Plan shall alter or impair any settlement authority, procedures and/or protocols used by the Debtor pursuant to orders of the Bankruptcy Court and/or agreement of the Committee prior to the Effective Date and the Debtor may continue, after the Effective Date, to enter into one or more settlements (including, without limitation, lump-sum Cash settlements) pursuant to such pre-Effective Date authority, procedures and/or protocols. (c) With respect to disputed Local Form Claims or interests, the Disbursing Agent will hold in a separate interest bearing reserve account such funds as would be necessary in order to make the required distribution on the Claim or interest, as listed either in the Debtor's schedules or the filed proof(s) of claim. 8.4 Distributions After Allowance. If, on or after the Effective Date, any Disputed Claim becomes an Allowed Claim, the Debtor shall distribute to the holder thereof the distributions, if any, to which such holder is then entitled under the Plan. Any distributions shall be made as soon as practicable after the date that (i) the order or judgment of the Bankruptcy Court allowing such Disputed Claim (or portion thereof) becomes a Final Order, or (ii) the parties enter into an agreement to compromise, settle or otherwise resolve such Disputed Claims in accordance with the procedures set forth herein (including, without limitation, any pre-Effective Date settlement authority, procedures and/or protocols), but in no event more than thirty (30) days thereafter. 8.5 Estimation of Claims. The Debtor or the Committee may, at any time, and in consultation with each other, request that the Bankruptcy Court estimate any contingent, unliquidated or Disputed Claim pursuant to section 502(c) of the Bankruptcy Code, regardless of whether the Debtor previously objected to such Claim or whether the Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court will retain jurisdiction to estimate any Claim at any time during litigation concerning any objection to any Claim, including, without limitation, during the pendency of any appeal relating to any such objection. In the event that the Bankruptcy Court estimates any contingent, unliquidated or Disputed Claim, the amount so estimated shall constitute either the allowed amount of such Claim or a maximum limitation on such Claim, as determined by the Bankruptcy Court. If the estimated amount constitutes a maximum limitation on the amount of such Claim, the Debtor or the Committee may pursue supplementary proceedings to object to the allowance of such Claim. All of the aforementioned objection, estimation and resolution procedures are intended to be cumulative and not exclusive of one another. On and after the Confirmation Date, subject to the Effective Date, Claims which have been estimated may be subsequently compromised, settled, withdrawn or otherwise resolved without further order of the Bankruptcy Court. 8.6 Disputed Claims Reserve. On and after the Effective Date, the Debtor shall hold in the Disputed Claims Reserve, Cash in an aggregate amount sufficient to pay to each holder of a Disputed Claim the amount of Cash that such holder would have been entitled to receive under the Plan if such Claim had been an Allowed Claim on the Effective Date. Cash withheld and reserved for payments to holders of Disputed Claims shall be held and deposited by the Debtor in one or more segregated interest-bearing reserve accounts, as determined by the Debtor, to be used to satisfy such Claims if and when such Disputed Claims become Allowed Claims. 8.7 Investments of the Disputed Claims and Other Reserves. The Debtor shall be permitted, from time to time, in its discretion to invest all or a portion of the Cash in the Disputed Claims Reserves (and any other reserves established by the Debtor, including one or more Reserves to fund the wind-down of the Debtor's Estate and implementation of the Plan) in United States Treasury Bills, interest-bearing certificates of deposit, tax exempt securities or investments permitted by section 345 of the Bankruptcy Code or otherwise authorized by the Bankruptcy Court. All interest earned on such Cash shall be held in the Disputed Claims Reserves and Reserves, after satisfaction of any expenses incurred in connection with the maintenance of the Disputed Claims Reserves and Reserves, including taxes payable on such interest income, if any, shall be transferred out of the Disputed Claims Reserves and Reserves, in the discretion of the Debtor, be used to satisfy the costs of administering and fully consummating the Plan or become Available Cash for distribution in accordance with the Plan. 8.8 Release of Amounts in the Disputed Claims Reserves. If at any time or from time to time after the Effective Date, there shall be Cash in the Disputed Claims Reserves in an amount in excess of the Debtor's maximum remaining payment obligations to the then existing holders of Disputed Claims against the Debtor under the Plan, such excess funds shall become available to the Debtor and shall, in the discretion of the Debtor, be deposited in the Reserves or become Available Cash for distribution in accordance with the Plan. Excess Cash in the Reserves shall become Available Cash for distribution in accordance with the Plan as and when agreed upon by the Debtor. 8.9 Mediation of Disputed Claims. The automatic stay of section 362 of the Bankruptcy Code shall remain in effect after the Effective Date with respect to all Disputed Claims. All holders of Disputed Claims (other than Tort Claims, except as otherwise provided for in Section 8.9(f) below) shall comply with the following procedures: (a) At its option, the Debtor may (i) request that the holder of a Disputed Claim provide documentation to evidence the validity and amount of such Claim, and/or (ii) submit a written counter-proposal to the holder of a Disputed Claim. In lieu of, or in addition to, the foregoing, the Debtor may file an objection to such Disputed Claim. (b) The holder of a Disputed Claim may accept the Debtor's counter-proposal at any time within fourteen (14) days of the Debtor's mailing of such counter-proposal. (c) If no settlement is reached pursuant to paragraphs (a) and (b) above, the Debtor, at its discretion (in consultation with the Committee), shall have the option to require the holder of a Disputed Claim to participate in a non-binding mediation process. All mediation pursuant to this Section 8.9 shall be conducted at the Debtor's option in either Newark, New Jersey or New York, New York, pursuant to the Local Bankruptcy Rules of the Bankruptcy Court. In the event that a mediation is scheduled and the holder of the Disputed Claim does not participate in the mediation, the Disputed Claim shall be disallowed in its entirety. (d) If the Debtor and the holder of a Disputed Claim are unable to reach an agreement on a Claim amount pursuant to the procedures set forth above, the Disputed Claim shall be submitted to the Bankruptcy Court for resolution. If it is determined that the United States Bankruptcy Court for the District of New Jersey does not have jurisdiction to resolve any Disputed Claim, then the Disputed Claim shall be submitted to the United States District Court for the District of New Jersey for resolution. (e) The Debtor (with the consent of the Committee) and the holder of a Disputed Claim may seek to settle, compromise or otherwise resolve any Disputed Claim at any time in accordance with the Plan or any order of the Bankruptcy Court approving a settlement procedure for Disputed Claims for the Debtor and the Committee. (f) At its option, the Debtor may require the holder of a Disputed Tort Claim to either (i) comply with the mediation procedures provided for in this Section 8.9 or (ii) comply with any other separate mediation and/or arbitration procedures approved in the Chapter 11 Case. 8.10 Removal of Civil Actions. To the extent the Debtor has any civil state court actions pending on or after the Confirmation Date, the Debtor shall retain the ability to remove such actions to the Bankruptcy Court pursuant to section 1452 of title 28 of the United States Code and Bankruptcy Rules 9006 and 9027 until the closure of the Chapter 11 Case of the Debtor. SECTION 9. THE LITIGATION TRUST 9.1 Establishment of the Trust. The Debtor, on its own behalf and on behalf of holders of Allowed Claims in Class 3, shall execute the Litigation Trust Agreement and shall take all other steps necessary to establish the Litigation Trust. The Debtor shall transfer to the Litigation Trust all of its right, title, and interest in the Litigation Trust Claims. In connection with the above-described rights and causes of action, any attorney-client privilege, work-product privilege, or other privilege or immunity attaching to any documents or communications (whether written or oral) shall be transferred to the Litigation Trust and shall vest in the Litigation Trustee and its representatives, and the Debtor. The Litigation Trustee is authorized to take all necessary actions to effectuate the transfer of such privileges. 9.2 Purpose of the Litigation Trust. The Litigation Trust shall be established for the sole purpose of liquidating its assets, in accordance with Treasury Regulation Section 301.7701-4(d), with no objective to continue or engage in the conduct of a trade or business. 9.3 Funding Expenses of the Litigation Trust. In accordance with the Litigation Trust Agreement and any agreements entered into in connection therewith, upon the creation of the Litigation Trust, the Debtor shall transfer such amounts of Cash as jointly determined by the Debtor and the Committee as necessary to fund the operations of the Litigation Trust. The Debtor shall have no further obligation to provide any funding with respect to the Litigation Trust. 9.4 Transfer of Assets. (a) The transfer of the Litigation Trust Claims to the Litigation Trust shall be made, as provided herein, for the ratable benefit of the holders of Allowed Claims in Class 3, only to the extent the holders in such Class are entitled to distributions under the Plan. In partial satisfaction of Allowed Claims in Class 3, the Litigation Trust Claims shall be transferred to such holders of Allowed Claims, to be held by the Debtor on their behalf. Immediately thereafter, on behalf of the holders of Allowed Claims in Class 3, the Debtor shall transfer such Litigation Trust Claims to the Litigation Trust in exchange for Litigation Trust Interests for the ratable benefit of holders of Allowed Claims in Class 3, in accordance with the Plan. Upon the transfer of the Litigation Trust Claims, the Debtor shall have no interest in or with respect to the Litigation Trust Claims or the Litigation Trust. Notwithstanding the foregoing, for purposes of section 553 of the Bankruptcy Code, the transfer of the Litigation Trust Claims to the Litigation Trust shall not affect the mutuality of obligations which may have otherwise existed prior to the effectuation of such transfer. (b) For all federal income tax purposes, all parties (including, without limitation, the Debtor, the Committee, the Litigation Trustee and the beneficiaries of the Litigation Trust) shall treat the transfer of assets to the Litigation Trust in accordance with the terms of the Plan, as a transfer to the holders of Allowed Claims in Class 3, followed by a transfer by such holders to the Litigation Trust and the beneficiaries of the Litigation Trust shall be treated as the grantors and owners thereof. 9.5 Valuation of Assets. As soon as possible after the creation of the Litigation Trust, but in no event later than thirty (30) days thereafter, the Litigation Trustee shall determine the value of the assets transferred to the Litigation Trust, based on its the good faith determination, and the Litigation Trustee shall apprise, in writing, the beneficiaries of the Litigation Trust of such valuation. The valuation shall be used consistently by all parties (including the Debtor, the Committee, the Litigation Trustee and the beneficiaries of the Litigation Trust) for all federal income tax purposes. 9.6 Litigation; Responsibilities of Litigation Trustee. (a) The Litigation Trustee, upon the exercise of its reasonable business judgment, shall, in an expeditious but orderly manner, liquidate and convert to Cash the assets of the Litigation Trust, make timely distributions and not unduly prolong the duration of the Litigation Trust. The liquidation of the Litigation Trust Claims may be accomplished either through the prosecution, compromise and settlement, abandonment or dismissal of any or all claims, rights or causes of action, or otherwise. The Litigation Trustee shall have the absolute right to pursue or not to pursue any and all Litigation Trust Claims as it determines is in the best interests of the beneficiaries of the Litigation Trust, and consistent with the purposes of the Litigation Trust, and shall have no liability for the outcome of its decision except for any damages caused by willful misconduct or gross negligence. The Litigation Trustee may incur any reasonable and necessary expenses in liquidating and converting the assets to Cash and shall be reimbursed in accordance with the provisions of the Litigation Trust Agreement. (b) The Litigation Trustee shall be named in the Litigation Trust Agreement and shall have the power (i) to prosecute for the benefit of the Litigation Trust all claims, rights and causes of action transferred to the Litigation Trust (whether such suits are brought in the name of the Litigation Trust or otherwise), and (ii) to otherwise perform the functions and take the actions provided for or permitted herein or in any other agreement executed by the Litigation Trustee pursuant to the Plan. Any and all proceeds generated from such claims, rights, and causes of action shall be the property of the Litigation Trust. 9.7 Investment Powers. The right and power of the Litigation Trustee to invest assets transferred to the Litigation Trust, the proceeds thereof, or any income earned by the Litigation Trust, shall be limited to the right and power to invest such assets (pending periodic distributions in accordance with Section 7 of the Plan) in Cash Equivalents; provided, however, that (a) the scope of any such permissible investments shall be limited to include only those investments, or shall be expanded to include any additional investments, as the case may be, that a liquidating trust, within the meaning of Treasury Regulation Section 301.7701-4(d) may be permitted to hold, pursuant to the Treasury Regulations, or any modification in the IRS guidelines, whether set forth in IRS rulings, other IRS pronouncements or otherwise, and (b) the Litigation Trustee may expend the assets of the Litigation Trust (1) as reasonably necessary to meet contingent liabilities and to maintain the value of the assets of the Litigation Trust during liquidation, (ii) to pay reasonable administrative expenses (including, but not limited to, any taxes imposed on the Litigation Trust or fees and expenses in connection with litigation), and (iii) to satisfy other liabilities incurred or assumed by the Litigation Trust (or to which the assets are otherwise subject) in accordance with the Plan or the Litigation Trust Agreement; and, provided further, that, under no circumstances, shall the Litigation Trust segregate the assets of the Litigation Trust on the basis of classification of the holders of Litigation Trust Interests, other than with respect to distributions to be made on account of Disputed Claims in accordance with the provisions hereof. 9.8 Annual Distribution; Withholding. The Litigation Trustee shall distribute at least annually to the holders of Litigation Trust Interests all net cash income plus all net cash proceeds from the liquidation of assets (including as Cash for this purpose, all Cash Equivalents); provided, however, that the Litigation Trust may retain such amounts (i) as are reasonably necessary to meet contingent liabilities and to maintain the value of the assets of the Litigation Trust during liquidation, (ii) to pay reasonable administrative expenses (including any taxes imposed on the Litigation Trust or in respect of the assets of the Litigation Trust), and (iii) to satisfy other liabilities incurred or assumed by the Litigation Trust (or to which the assets are otherwise subject) in accordance with the Plan or the Litigation Trust Agreement. All such distributions shall be pro rata based on the number of Litigation Trust Interests held by a holder compared with the aggregate number of Litigation Trust Interests outstanding, subject to the terms of the Plan and the Litigation Trust Agreement. The Litigation Trustee may withhold from amounts distributable to any Person any and all amounts, determined in the Litigation Trustee's reasonable sole discretion, to be required by any law, regulation, rule, ruling, directive or other governmental requirement. 9.9 Reporting Duties. (a) Federal Income Tax Subject to definitive guidance from the IRS or a court of competent jurisdiction to the contrary (including the receipt by the Litigation Trustee of a private letter ruling if the Litigation Trustee (or the Debtor or Committee) so requests one, or the receipt of an adverse determination by the IRS upon audit if not contested by the Litigation Trustee), the Litigation Trustee shall file returns for the Litigation Trust as a grantor trust pursuant to Treasury Regulation Section 1.671-4(a). The Litigation Trustee shall also annually send to each holder of a Litigation Trust Interest a separate statement setting forth the holder's share of items of income, gain, loss, deduction or credit and will instruct all such holders to report such items on their federal income tax returns. (b) Allocations of Litigation Trust Taxable Income: Allocations of Litigation Trust taxable income shall be determined by reference to the manner in which an amount of cash equal to such taxable income would be distributed (without regard to any restrictions on distributions described herein) if, immediately prior to such deemed distribution, the Litigation Trust had distributed all of its other assets (valued for this purpose at their tax book value) to the holders of the Litigation Trust Interests, taking into account all prior and concurrent distributions from the Litigation Trust (including all distributions held in escrow pending the resolution of Disputed Claims). Similarly, taxable loss of the Litigation Trust will be allocated by reference to the manner in which an economic loss would be borne immediately after a liquidating distribution of the remaining Litigation Trust Claims. The tax book value of the Litigation Trust Claims for this purpose shall equal their fair market value on the Effective Date or, if later, the date such assets were acquired by the Litigation Trust, adjusted in either case in accordance with tax accounting principles prescribed by the IRC, the regulations and other applicable administrative and judicial authorities and pronouncements. (c) Other: The Litigation Trustee shall file (or cause to be filed) any other statements, returns or disclosures relating to the Litigation Trust that are required by any governmental unit. 9.10 Trust Implementation. The Litigation Trust shall be established and become effective for the benefit of Allowed Claims in Class 3. The Litigation Trust Agreement shall be filed in the Plan Supplement and shall contain provisions customary to trust agreements utilized in comparable circumstances, including, but not limited to, any and all provisions necessary to ensure the continued treatment of the Litigation Trust as a grantor trust for federal income tax purposes. All parties (including the Debtor, the Litigation Trustee and holders of Allowed Claims in Class 3) shall execute any documents or other instruments as necessary to cause title to the applicable assets to be transferred to the Litigation Trust. 9.11 Registry of Beneficial Interests. The Litigation Trustee shall maintain a registry of the holders of Litigation Trust Interests. 9.12 Termination. The Litigation Trust shall terminate no later than the third (3rd) anniversary of the Effective Date; provided, however, that, on or prior to the date three (3) months prior to such termination, the Bankruptcy Court, upon motion by a party in interest, may extend the term of the Litigation Trust if it is necessary to the liquidation of the Litigation Trust Claims. Notwithstanding the foregoing, multiple extensions can be obtained so long as Bankruptcy Court approval is obtained at least three (3) months prior to the expiration of each extended term. 9.13 Net Litigation Trust Recovery/Assignment of Claims. (a) Net Judgment: Notwithstanding anything contained herein to the contrary, in the event that a defendant in a litigation brought by the Litigation Trustee for and on behalf of the Litigation Trust (i) is required by a Final Order to make payment to the Litigation Trust (the "Judgment Amount"), and (ii) is permitted by a Final Outer to assert a right of setoff under section 553 of the Bankruptcy Code or applicable non-bankruptcy law against the Judgment Amount (a "Valid Setoff"), (y) such defendant shall be obligated to pay only the excess, if any, of the amount of the Judgment Amount over the Valid Setoff and (z) none of the Litigation Trust, the holders or beneficiaries of the Litigation Trust Interests shall be entitled to assert a claim against the Debtor with respect to the Valid Setoff. (b) Assignment: Notwithstanding anything contained herein to the contrary, in the event that a compromise and settlement of a Litigation Trust Claim or a Final Order with respect to a Litigation Trust Claim provides for a waiver, subordination or disallowance of a defendant's Claim or Claims against the Debtor for purposes of computing amounts of distributions, (i) such Claim shall be deemed allowed at the lesser of (y) the "Estimated Allowed Amount" (which shall exclude duplicative Claims) of such Claim, as reflected on the Debtor's claims management system, and (z) the filed proof of claim with respect thereto; provided, however, that, in the event that such proof of claim was filed in a zero dollar ($0.00), contingent or unliquidated amount, such Claim shall be deemed allowed at the "Estimated Allowed Amount" of such Claim on the Debtor's claims management system, (ii) such defendant shall be deemed to have assigned such Claim or Claims and right to receive distributions in accordance with the Plan to the Litigation Trust, (iii) the Disbursing Agent shall make distributions with respect to such Allowed Claims to the Litigation Trust and (iv) such defendant shall not be entitled to receive distributions from the Litigation Trust on account thereof, and, provided, further, that, in the event that any modifications are made to the "Estimated Allowed Amount" of Claims as reflected in the Debtor's claims management system, and provided that the Committee shall have an opportunity to review such modifications. SECTION 10. EXECUTORY CONTRACTS AND UNEXPIRED LEASES 10.1 General Treatment. (a) On the Effective Date, all pre-petition executory contracts and unexpired leases to which the Debtor is a party shall be deemed rejected as of the Effective Date, except for an executory contract or unexpired lease that (i) is specifically designated as a contract or lease to be assumed on the Schedule of Assumed Contracts set forth in the Plan Supplement, provided, however, that the Debtor reserves the right to amend the Plan Supplement at any time on or before the Effective Date to amend the Schedule of Assumed Contracts to add or delete any executory contract or unexpired lease, thus providing for its assumption, assumption and assignment, or rejection, or (ii) is the subject of a separate motion to assume, assume and assign, or reject filed under section 365 of the Bankruptcy Code by the Debtor on or before the Effective Date. (b) The Debtor expressly reserves the right to reject any contract or lease in the event that there is a dispute concerning the amount necessary to cure defaults, notwithstanding the fact that such dispute may arise after the Effective Date of the Plan. (c) If you are a party to a contract or lease to be assumed or rejected and you object to the assumption or rejection of your lease or contract, you must file and serve your objection to the Plan within the deadline for objecting to the confirmation of the Plan. 10.2 Cure of Defaults. (a) Except to the extent that a different treatment has been agreed to by parties to any executory contract or unexpired lease to be assumed under the Plan pursuant to Section 10.1 hereof, the Debtor shall, pursuant to the provisions of sections 1123(a)(5)(G) and 1123(b)(2) of the Bankruptcy Code and consistently with the requirements of section 365 of the Bankruptcy Code, within thirty (30) days after the Effective Date, file and serve a pleading with the Bankruptcy Court listing the cure amounts of all executory contracts or unexpired leases to be assumed. The parties to such executory contracts or unexpired leases to be assumed by the Debtor shall have fifteen (15) days from service to object to the cure amounts listed by the Debtor. If there are any objections filed, the Bankruptcy Court shall hold a hearing. The Debtor shall retain the right to reject any of its executory contracts or unexpired leases, including contracts or leases that are subject to a dispute concerning amounts necessary to cure any defaults. Notwithstanding the foregoing, at all times through the date that is five (5) Business Days after the Bankruptcy Court enters an order resolving and fixing the amount of a disputed cure amount, the Debtor shall have the right to reject such executory contract or unexpired lease. (b) Subject to Section 10.1 of the Plan, the pre-petition executory contracts and unexpired leases on the Schedule of Assumed Contracts shall be assumed by the Debtor as indicated on such Schedule. Except as may otherwise be ordered by the Bankruptcy Court, the Debtor shall have the right to cause any assumed executory contract or unexpired lease to vest in the Debtor designated for such purpose by the Debtor. 10.3 Approval of Rejection of Executory Contracts and Unexpired Leases. Entry of the Confirmation Order shall constitute the approval, pursuant to section 365(a) of the Bankruptcy Code, of the rejection of any pre-petition executory contracts and unexpired leases to be rejected as and to the extent provided in Section 10.1 of the Plan. 10.4 Bar Date for Filing Proofs of Claim Relating to Executory Contracts and Unexpired Leases Rejected Pursuant to Plan. THE BAR DATE FOR FILING A PROOF OF CLAIM BASED ON A CLAIM ARISING FROM THE REJECTION OF A LEASE OR CONTRACT IS TWENTY (20) DAYS AFTER THE EFFECTIVE DATE. Claims arising out of the rejection of an executory contract or unexpired lease pursuant to Section 10.1 of the Plan must be filed with the Bankruptcy Court no later than twenty (20) days after the Effective Date. Any Claims not filed within such time period will be forever barred from assertion against the Debtor and/or the Estate. 10.5 Survival of Debtor's Corporate Indemnities. Any obligations of the Debtor pursuant to the Debtor's corporate charters and bylaws or agreements entered into any time prior to the Effective Date, to indemnify any Releasee, with respect to all present and future actions, suits and proceedings against the Debtor or such Releasee, based upon any act or omission for or on behalf of the Debtor, shall not be discharged or impaired by confirmation of the Plan. Such obligations shall be deemed and treated as executory contracts to be assumed by the Debtor pursuant to the Plan, and shall continue as obligations of the Debtor. SECTION 11. CONDITIONS PRECEDENT TO EFFECTIVE DATE 11.1 Conditions to Effective Date. The following are conditions precedent to the Effective Date: (a) The Bankruptcy Court shall have entered the Confirmation Order, in form and substance satisfactory to the Debtor; (b) No stay of the Confirmation Order shall then be in effect; and (c) All documents, instruments and agreements, in form and substance satisfactory to the Debtor, provided for under or necessary to implement the Plan shall have been executed and delivered by the parties thereto, unless such execution or delivery has been waived by the parties benefited thereby. 11.2 Waiver of Conditions. The Debtor may waive the conditions to effectiveness of the Plan set forth in Section 11.1(c) of the Plan without leave of or notice to the Bankruptcy Court and without any formal action other than proceeding with confirmation of the Plan SECTION 12. EFFECT OF CONFIRMATION 12.1 Jurisdiction and Venue. On the Commencement Date, the Debtor commenced the Chapter 11 Case by filing a voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtor was and is qualified to be a debtor under section 109 of the Bankruptcy Code. Venue in the District of New Jersey was proper as of the Commencement Date and continues to be proper. Confirmation of the Plan is a core proceeding under 28 U.S.C. ss. 157(b)(2). The Bankruptcy Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. ss. 1334 and the Bankruptcy Court has exclusive jurisdiction to determine whether the Plan complies with the applicable provisions of the Bankruptcy Code and should be confirmed. 12.2 Release of Assets. Until the Effective Date, the Bankruptcy Court shall retain jurisdiction of the Debtor, its assets and properties. Thereafter, jurisdiction of the Bankruptcy Court shall be limited to the subject matters set forth in Sections 12 and 13 of the Plan, and the Debtor shall perform and wind up their affairs as provided in the Plan. 12.3 Binding Effect. Except as otherwise provided in section 1141(d)(3) of the Bankruptcy Code, on and after the Confirmation Date, and subject to the Effective Date, the provisions of the Plan shall bind any holder of a Claim against, or Equity Interests in, the Debtor and its respective successors and assigns, whether or not the Claim or Equity Interest of such holder is impaired under the Plan and whether or not such holder has accepted the Plan. 12.4 Termination of Stays. Unless otherwise provided, all injunctions or stays provided for in the Chapter 11 Case pursuant to sections 105 or 362 of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the Final Distribution Date. 12.5 Injunction Against Asserting Claims or Interests. On and after the Confirmation Date, subject to the Effective Date, all Persons are permanently enjoined from commencing or continuing in any manner any action or proceeding (whether directly, indirectly, derivatively or otherwise) on account of or respecting any claim, debt, right or cause of action of the Debtor for which the Debtor retains sole and exclusive authority to pursue in accordance with Section 12.10 of the Plan. 12.6 Injunction Against Interference with Plan. Upon the entry of the Confirmation Order, all holders of Claims and Equity Interests and other parties in interest, along with their respective present or former employees, agents, officers, directors or principals, shall be enjoined from taking any actions to interfere with the implementation or consummation of the Plan. 12.7 Discharge of Claims and Cancellation of Equity Interests. The Plan provides that upon confirmation of the Plan, Debtor shall be discharged of liability for payment of debts incurred before Confirmation, to the extent specified in 11 U.S.C.ss. 1141. However, any liability imposed by the Plan will not be discharged. If Confirmation of the Plan does not occur, the Plan shall be deemed null and void. In such event, nothing contained in the Plan shall be deemed to constitute a waiver or release of any claims against the Debtor or its estate or any other persons, or to prejudice in any manner the rights of the Debtor or its estate or any person in any further proceeding involving the Debtor or its estate. The provisions of the Plan shall be binding upon Debtor, all Creditors and all Equity Interest Holders, regardless of whether such Claims or Equity Interest Holders are impaired or whether such parties accept the Plan, upon Confirmation thereof. Except as otherwise provided herein, the rights afforded in the Plan and the entitlement to receive payments and distributions to be made hereunder shall discharge all existing Claims, of any kind, nature or description whatsoever against the Debtor or any of its assets or properties. Except as provided in the Plan, on the Effective Date, all existing Claims against the Debtor and Equity Interests in the Debtor shall be, and shall be deemed to be, discharged or canceled and all holders of Claims and Equity Interests shall be precluded and enjoined from asserting against the Debtor, or any of its assets or properties, any other or further Claim or Equity Interest based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the Effective Date, whether or not such holder has filed a proof of claim or equity interest. 12.8 Exculpation. Neither the Debtor nor any Releasee shall have or incur any liability to any holder of a Claim or Equity Interest for any act or omission (and in the case of any director, officer, agent or employee of the Debtor who was employed or otherwise serving in such capacity on the Commencement Date, any claims against such Persons) in connection with, or arising out of, the Chapter 11 Case, the pursuit of confirmation of the Plan, transactions or relationships with the Debtor (either prior to or after the Commencement Date), securities claims, fiduciary and other similar claims, the consummation of the Plan, the administration of the Plan or the property to be distributed under the Plan and, in all respects, the Debtor and such Persons shall be entitled to rely upon the advice of counsel with respect to their duties and responsibilities during the Chapter 11 Case and under the Plan. Without limitation of the foregoing, each such Releasee shall be released and exculpated from any and all claims (as defined in section 101(5) of the Bankruptcy Code), obligations, suits, judgments, damages, rights, causes of action and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, that any holder of a Claim or Equity Interest is entitled to assert in its own right or on behalf of any other Person, based in whole or in part upon any act or omission, transaction, agreement, event or other occurrence taking place on or prior to the Effective Date in any way relating to the subject matter of this Section 12.8. Such release shall be based upon the contribution of available insurance proceeds in connection with any pending or future Derivative Claims. 12.9 Releases by Holders of Claims and Interests. Except as otherwise specifically provided in the Plan, on and after the Effective Date, Holders of Claims and Interests (a) voting to accept the Plan, or (b) abstaining from voting on the Plan and electing not to opt out of the release contained in this paragraph (which by definition, does not include holders of Claims and Interests who are not entitled to vote in favor of or against the Plan and in fact do not so vote) shall be deemed to have conclusively, absolutely, unconditionally, irrevocably, and forever, released and discharged the Releasees from any and all Claims, obligations, rights, suits, damages, Causes of Action, remedies, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, that such Person or Entity would have been legally entitled to assert (whether individually or collectively), based on or relating to, or in any manner arising from, in whole or in part, the Debtor, the Debtor's Chapter 11 Case, the Debtor's sale of assets, the purchase or sale of any security of the Debtor, any Releasee, the negotiation, formulation, or preparation of the Plan and Disclosure Statement, or related agreements, instruments, or other documents, upon any other act or omission, transaction, agreement, event, or other occurrence taking place on or before the Effective Date other than Claims or liabilities arising out of or relating to any act or omission of a Releasee that constitutes a failure to perform the duty to act in good faith, with the care of an ordinarily prudent person and in a manner the Releasee reasonably believed to be in the best interests of the corporation (to the extent such duty is imposed by the applicable non-bankruptcy law). The vote or election of a trustee or other agent under this paragraph acting on behalf of or at the discretion of a Holder of Claim or Interest shall bind such Holder to the same extent as if such Holder had itself voted or made such an election. 12.10 Rights of Action. (a) On and after the Effective Date, and except as may otherwise be agreed to by the Debtor, the Debtor will retain and have the exclusive right to enforce any and all present or future rights, claims or causes of action against any Person and rights of the Debtor that arose before or after the Commencement Date, including, but not limited to, rights, claims, causes of action, avoiding powers, suits and proceedings arising under sections 544, 545, 547, 548, 549, 550 and 553 of the Bankruptcy Code. The Debtor may pursue, abandon, settle or release any or all such rights of action, as they deem appropriate, without the need to obtain approval or any other or further relief from the Bankruptcy Court. The Debtor may, in their discretion, offset any such claim held against a Person against any payment due such Person under the Plan; provided, however, that any claims of the Debtor arising before the Commencement Date shall first be offset against Claims against the Debtor arising before the Commencement Date. (b) Nothing in the Plan or the Confirmation Order shall limit, impair or otherwise restrict the rights of the Debtor to bring any claim or cause of action against any Person for any reason whatsoever, including, without limitation, the failure of the Plan to identify and/or describe such potential claim(s) or cause of action(s) with specificity. In addition to the general reservation of rights, the Debtor reserves the right to modify the Plan at any time prior to or after substantial consummation of the Plan to include such specificity, if necessary, or otherwise desirable, without the necessity of complying with section 1127(b) of the Bankruptcy Code. (c) Without limiting the foregoing, the Bankruptcy Court shall retain jurisdiction over all matters and litigation commenced after the Confirmation Date as set forth in Section 13. 12.11 Release by Debtor. From and after the Effective Date, the Releasees, based on the contribution of available insurance proceeds, as the case may be, shall be released by the Debtor from any and all claims (as defined in section 101(5) of the Bankruptcy Code), obligations, suits, judgments, damages, rights, causes of action and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, that any Debtor is entitled to assert in its own right or on behalf of the holder of any Claim or Equity Interest or other Person, based in whole or in part upon any act or omission, transaction, agreement, event or other occurrence taking place on or prior to the Effective Date in any way relating to any Debtor, the Chapter 11 Case or the negotiation, formulation and preparation of the Plan or any related document, except for claims against or liabilities of directors, officers or employees of any Debtor in respect of any loan, advance or similar payment by any Debtor to any such Person or any contractual obligation owed by such Person to any Debtor. 12.12 Release of Releasees by Other Releasees. From and after the Effective Date, the Releasees shall release each other from any and all claims (as defined in section 101(5) of the Bankruptcy Code), obligations, suits, judgments, damages, rights, causes of action and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, that any Releasee is entitled to assert against any other Releasee, based in whole or in part upon any act or omission, transaction, agreement, event or occurrence taking place on or before the Effective Date in any way relating to any Debtor, the Chapter 11 Case or the negotiation, formulation and preparation of the Plan or any related document, except for claims or causes of actions against any Releasee resulting from the willful misconduct or gross negligence of such Releasee. 12.13 Claims of the United States Government. Nothing in the Plan shall effect a release of any non-Debtor from any claim by the United States Government or any of its agencies; nor shall anything in the Plan enjoin the United States from bringing any claim, suit, action or other proceeding against any non-Debtor; provided, however, that this Section 12.13 shall in no way affect or limit the discharge granted to any Debtor under Chapter 11 of the Bankruptcy Code. 12.14 Post-Confirmation Conversion/Dismissal A creditor or party in interest may bring a motion to convert or dismiss the case under ss. 1112(b), after the Plan is confirmed, if there is a default in performing under the Plan. If the Court orders the case converted to chapter 7 after the Plan is confirmed, then all property that had been property of the chapter 11 estate, and that has not been disbursed pursuant to the Plan, will revert in the chapter 7 estate, and the automatic stay will be reimposed upon the revested property only to the extent that relief from stay was not previously granted by the Court during this case. SECTION 13. RETENTION OF JURISDICTION On and after the Effective Date, the Bankruptcy Court shall retain jurisdiction of this case, pursuant to the provisions of chapter 11 of the Bankruptcy Code, over all matters arising in, arising under, or related to the Chapter 11 Case and the Plan for, among other things, the following purposes: (a) To hear and determine motions for the assumption or rejection of executory contracts or unexpired leases and the allowance of Claims resulting therefrom; (b) To determine any motion, adversary proceeding, application, contested matter, and other litigated matter pending on or commenced after the Confirmation Date; (c) To ensure that distributions to holders of Allowed Claims and Equity Interests are accomplished as provided herein; (d) To consider Claims and Equity Interests or the allowance, classification, priority, compromise, estimation or payment of any Claim or Equity Interest, Administrative Expense Claim, Disputed Claim or Equity Interest; (e) To remove to the Bankruptcy Court civil actions pending in state court; (f) To enter, implement or enforce such orders as may be appropriate in the event that the Confirmation Order is for any reason stayed, reversed, revoked, modified or vacated; (g) To hear and determine any issues arising from the Debtor's completion of the recall of its products and/or any other FDA compliance regulations; (h) To hear and determine any issues arising from the Debtor's sale of assets, including, without limitation, any issues relating to the escrow fund being held in connection with the sale of assets; (i) To issue injunctions, enter and implement other orders, and take such other actions as may be necessary or appropriate to restrain interference by any Person with the consummation, implementation or enforcement of the Plan, the Confirmation Order or any other order of the Bankruptcy Court; (j) To hear and determine any application to modify the Plan in accordance with section 1127 of the Bankruptcy Code, to remedy any defect or omission or reconcile any inconsistency in the Plan, the disclosure statement for the Plan, or any order of the Bankruptcy Court, including the Confirmation Order, in such a manner as may be necessary to carry out the purposes and effects thereof; (k) To hear and determine all applications under sections 330, 331 and 503(b) of the Bankruptcy Code for awards of compensation for services rendered and reimbursement of expenses incurred prior to the Confirmation Date; (l) To hear and determine disputes arising in connection with the interpretation, implementation or enforcement of the Plan, the Confirmation Order, any transactions or payments contemplated hereby, or any agreement, instrument, or other document governing or relating to any of the foregoing; (m) To take any action and issue such orders as may be necessary to construe, enforce, implement, execute and consummate the Plan or to maintain the integrity of the Plan following consummation; (n) To hear any disputes arising out of, and to enforce, the order approving alternative dispute resolution procedures to resolve personal injury, employment litigation and similar Claims pursuant to section 105(a) of the Bankruptcy Code; (o) To determine such other matters and for such other purposes as may be provided in the Confirmation Order; (p) To hear and determine matters concerning state, local, and federal taxes in accordance with sections 346, 505 and 1146 of the Bankruptcy Code (including any requests for expedited determinations under section 505(b) of the Bankruptcy Code filed, or to be filed, with respect to tax returns for any and all taxable periods ending after the Commencement Date through, and including, the Final Distribution Date); (q) To hear and determine any other matters related hereto and not inconsistent with the Bankruptcy Code and title 28 of the United States Code; (r) To recover all assets of the Debtor and property of the Debtor's Estate, wherever located; (s) To make such orders as are necessary or appropriate to carry out the provisions of the Plan; and (t) To enter a final decree closing the Chapter 11 Case. In addition, the Court shall retain jurisdiction to implement the provisions of the Plan in the manner as provided under Section 1142, sub-paragraphs (a) and (b) of the Bankruptcy Code. If the Court abstains from exercising, or declines to exercise jurisdiction, or is otherwise without jurisdiction over any matter set forth in this Section, or if the Debtor or the reorganized debtor elect to bring an action or proceeding in any other forum, then this Section shall have no effect upon and shall not control, prohibit or limit the exercise of jurisdiction by any other court, public authority or commission having competent jurisdiction over such matters. SECTION 14. MISCELLANEOUS PROVISIONS 14.1 No Retiree Benefits. The Debtor no longer funds or maintains any retiree benefit plans, funds or programs, as defined in section 1114 of the Bankruptcy Code, for the purpose of providing or reimbursing payments for retired employees and their spouses and dependents for medical, surgical, or hospital care benefits, or benefits in the event of sickness, accident, disability, or death under any plan, fund, or program (through the purchase of insurance or otherwise). 14.2 Deletion of Classes and Subclasses. Any Class or Subclass of Claims that does not contain as an element thereof an Allowed Claim or a Claim temporarily allowed under Bankruptcy Rule 3018 as of the date of the commencement of the confirmation hearing shall be deemed deleted from the Plan for purposes of voting to accept or reject the Plan and for purposes of determining acceptance or rejection of the Plan by such Class or Subclass under section 1129(a)(8) of the Bankruptcy Code. 14.3 Post-Effective Date Committee; Dissolution of Committee. (a) Post-Effective Date Committee. Until the Final Distribution Date, the Committee shall continue in existence; provided, however, that as of the Effective Date, the Committee shall be reconstituted and shall be comprised of at least three (3) members of the Committee prior to the Effective Date. The Committee members who are no longer members of the Committee as of the Effective Date shall be released and discharged of and from all further authority, duties, responsibilities, and obligations related to and arising from and in connection with the Chapter 11 Case of the Debtor. In the event of the death or resignation of any member of the Committee after the Effective Date, the remaining members of the Committee shall have the right to designate a successor from among the holders of Allowed Class 3 Claims. If a Committee member assigns its entire Claim or releases the Debtor from payment of the entire balance of its Claim, such act shall constitute a resignation from the Committee. Until a vacancy on the Committee is filled, the Committee shall function in its reduced number. The individual members of the Committee shall serve without compensation, except that they shall be entitled to reimbursement of reasonable expenses by the Debtor pursuant to the procedures set forth in Section 14.4 of the Plan. The post-Effective Date Committee may engage and retain professionals as needed. (b) On the Final Distribution Date and following all payments being made to holders of Allowed Class 3 Claims under the Plan, the Committee shall be dissolved and the remaining members thereof shall be released and discharged of and from all further authority, duties, responsibilities, and obligations related to and arising from and in connection with the Chapter 11 Case of the Debtor, and the retention or employment of the Committee's attorneys, and other professionals, shall terminate. 14.4 Post-Confirmation Date Fees and Expenses of Professionals. (a) After the Confirmation Date, the Debtor shall, in the ordinary course of business and without the necessity for any approval by the Bankruptcy Court, pay the reasonable fees and expenses of the professional persons employed by the Debtor and the Committee in connection with the implementation and consummation of the Plan, the claims reconciliation process and any other matters as to which such professionals may be engaged. The fees and expenses of such professionals shall be paid within fifteen (15) Business Days after submission of a detailed invoice therefor to the Debtor and the Committee. If the Debtor or the Committee disputes the reasonableness of any such invoice, the Debtor, Committee or the affected professional may submit such dispute to the Bankruptcy Court for a determination of the reasonableness of such invoice, and the disputed portion of such invoice shall not be paid until the dispute is resolved. The undisputed portion of such fees and expenses shall be paid as provided for herein. 14.5 Exemption from Transfer Taxes. (a) Pursuant to section 1146(c) of the Bankruptcy Code, neither (i) the issuance transfer or exchange of any security under, in furtherance of, or in connection with, the Plan, nor (ii) the assignment or surrender of any lease or sublease, or the delivery of any deed or other instrument of transfer under, in furtherance of, or in connection with, the Plan, including any deeds, bills of sale or assignments executed in connection with any disposition of assets contemplated by the Plan (including real and personal property), shall be subject to any stamp, real estate transfer, mortgage recording sales, use or other similar tax. 14.6 Abandonment of Records. On or after the Effective Date, pursuant to section 554(a) of the Bankruptcy Code, the Debtor is authorized, from time to time, with the consent of the Committee (not to be unreasonably withheld), to abandon or otherwise destroy documents and records (whether in electronic or paper format) that they determine, in their reasonable business judgment, are no longer necessary to administration of the Chapter 11 Case and the wind up of the Debtor's Estate. The Debtor shall be permitted to abandon or otherwise destroy such documents and records notwithstanding any federal, state or local law or requirement requiring the retention of the applicable documents or records. The Debtor may abandon or destroy such documents and records without further application to the Court or notice to any party. 14.7 Substantial Consummation. On the Effective Date, the Plan shall be deemed to be substantially consummated under sections 1101 and 1127(b) of the Bankruptcy Code. 14.8 Payment of Statutory Fees. (a) All fees payable pursuant to chapter 123 of title 28, United States Code, as determined by the Bankruptcy Court on the Confirmation Date, shall be paid on the Effective Date. Any statutory fees accruing after the Confirmation Date shall be paid by the Debtor as they become due. (b) Except as otherwise agreed by the Debtor and the Office of the United States Trustee assigned to the Chapter 11 Case, from and after the Effective Date, the Debtor shall file quarterly disbursement reports in lieu of monthly operating reports. 14.9 Effectuating Documents and Further Transactions. The Director of Restructuring, or if such person is unable or unwilling to do so, any other authorized officer of the Debtor shall be authorized to execute, deliver, file, or record such contracts, instruments, releases and other agreements or documents and take such actions on behalf of the Debtor as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan, without any further action by or approval of the board of directors of the Debtor. 14.10 Modification of Plan. The Debtor reserves the right, in accordance with the Bankruptcy Code and the Bankruptcy Rules, and with the consent of the Committee, to amend or modify the Plan at any time prior to the entry of the Confirmation Order. After the entry of the Confirmation Order, the Debtor may, upon order of the Bankruptcy Court, amend or modify the Plan, in accordance with section 1127(b) of the Bankruptcy Code, or remedy any defect or omission or reconcile any inconsistency in the Plan in such manner as may be necessary to carry out the purpose and intent of the Plan without the necessity of complying with section 1127(b) of the Bankruptcy Code. A holder of an Allowed Claim or Equity Interest that is deemed to have accepted the Plan shall be deemed to have accepted the Plan as modified if the proposed modification does not materially and adversely change the treatment of the Claim or Equity Interest of such holder. 14.11 Revocation or Withdrawal of Plan. The Debtor may withdraw or revoke the Plan at any time prior to the Confirmation Date. If the Debtor revokes or withdraws the Plan prior to the Confirmation Date, or if the Confirmation Date does not occur, then the Plan shall be deemed null and void. In such event, nothing contained herein shall be deemed to constitute a waiver or release of any Claim by or against the Debtor or any other Person or to prejudice in any manner the rights of the Debtor or any other Person in any further proceedings involving the Debtor. 14.12 Cramdown. The Debtor requests confirmation of the Plan under section 1129(b) of the Bankruptcy Code with respect to any Class that is deemed to have not accepted the Plan pursuant to section 1126(g) of the Bankruptcy Code. The Debtor reserves the right to (i) request confirmation of the Plan under section 1129(b) of the Bankruptcy Code with respect to any Class or Subclass that does not accept the Plan pursuant to section 1126 of the Bankruptcy Code and (ii) to modify the Plan to the extent, if any, that confirmation of the Plan under section 1129(b) of the Bankruptcy Code requires modification. 14.13 Severability. In the event that the Bankruptcy Court determines, prior to the Confirmation Date, that any provision of the Plan is invalid, void or unenforceable, the Bankruptcy Court shall, with the consent of the Debtor, have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistently with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision shall then be applicable as altered or interpreted. Notwithstanding any such holding, alteration or interpretation, the remainder of the terms and provisions of the Plan shall remain in full force and effect and shall in no way be affected, impaired or invalidated by such holding, alteration or interpretation. The Confirmation Order shall constitute a judicial determination and shall provide that each term and provision of the Plan, as it may have been altered or interpreted in accordance with the foregoing, is valid and enforceable pursuant to its terms. 14.14 Request for Expedited Determination of Taxes. The Debtor shall have the right to request an expedited determination under section 505(b) of the Bankruptcy Code with respect to tax returns filed, or to be filed, for any and all taxable periods ending after the Commencement Date through and including the Final Distribution Date. 14.15 Courts of Competent Jurisdiction. If the Bankruptcy Court abstains from exercising, or declines to exercise, jurisdiction or is otherwise without jurisdiction over any matter arising out of the Plan, such abstention, refusal or failure of jurisdiction shall have no effect upon and shall not control, prohibit or limit the exercise of jurisdiction by any other court having competent jurisdiction with respect to such matter. 14.16 Governing Law. Except to the extent that the Bankruptcy Code or Bankruptcy Rules are applicable, or to the extent that an Exhibit hereto or a Schedule in the Plan Supplement provides otherwise, the rights, duties and obligations arising under the Plan shall be governed by, and construed and enforced in accordance with, the laws of the State of New Jersey, without giving effect to the principles of conflict of laws thereof. 14.17 Time. In computing any period of time prescribed or allowed by the Plan, unless otherwise set forth herein or determined by the Bankruptcy Court, the provisions of Bankruptcy Rule 9006 shall apply. 14.18 Headings. Headings are used in the Plan for convenience and reference only and shall not constitute a part of the Plan for any other purpose. 14.19 Exhibits. All Exhibits and Schedules to the Plan are incorporated into and are a part of the Plan as if set forth in full herein. 14.20 Notices. Any notices to or requests of the Debtor by parties in interest under or in connection with the Plan shall be in writing and served either by (i) certified mail, return receipt requested, postage prepaid, (ii) hand delivery or (iii) reputable overnight delivery service, all charges prepaid, and shall be deemed to have been given when received by the following parties: ABLE LABORATORIES, INC. 1 Able Drive Cranbury, NJ 08512-0869 Attn: Richard M. Shepperd with copies to: CADWALADER, WICKERSHAM & TAFT LLP Co-Counsel for the Debtor and Debtor-In-Possession One World Financial Center New York, New York 10281 Attn: Deborah J. Piazza, Esq. - and- CADWALADER, WICKERSHAM & TAFT LLP Co-Counsel for the Debtor and Debtor-In-Possession 1201 F Street N.W., Suite 1100 Washington, DC 20004 Attn: Mark C. Ellenberg, Esq. -and- LOWENSTEIN SANDLER PC Co-Counsel for the Debtor and Debtor-In-Possession 65 Livingston Avenue Roseland, NJ 07068 Attn: Sharon Levine, Esq. -and- DUANE MORRIS LLP Attorneys for the Official Committee of Unsecured Creditors 744 Broad Street, Suite 1200 Newark, NJ 07102 Attn: Walter Greenhalgh, Esq. 14.21 Changes in Rates Subject to Regulatory Commission Approval. This Debtor is not subject to governmental regulatory commission approval of its rates. Dated: Cranbury, New Jersey As of March 3, 2006 ABLE LABORATORIES, INC By: /s/ Richard M. Shepperd ----------------------- Name: Richard M. Shepperd Title: Director of Restructuring EX-99.3 4 ab88818-ex99_3.txt DISCLOSURE STATEMENT Exhibit 99.3 CADWALADER, WICKERSHAM & TAFT LLP One World Financial Center New York, New York 10281 Telephone: (212) 504-6000 Facsimile: (212) 504-6666 Deborah Piazza (DP 6640) - and- 1201 F Street N.W., Suite 1100 Washington, DC 20004 Telephone: (202) 862-2200 Facsimile: (202) 862-2400 Mark C. Ellenberg (ME 6927) - and- LOWENSTEIN SANDLER PC 65 Livingston Avenue Roseland, NJ 07068 Telephone: (973) 597-2500 Facsimile: (973) 597-2400 Kenneth A. Rosen (KR 4963) Sharon L. Levine (SL 2109) Co-Counsel for the Debtor and Debtor-in-Possession UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEW JERSEY - --------------------------------------- IN RE: | TRENTON VICINAGE | ABLE LABORATORIES, INC., | CHAPTER 11 | DEBTOR. | CASE NO. 05-33129 (RTL) | - --------------------------------------- ORIGINAL DISCLOSURE STATEMENT PURSUANT TO SECTION 1125 OF THE BANKRUPTCY CODE DESCRIBING CHAPTER 11 PLAN OF REORGANIZATION PROPOSED BY THE DEBTOR PLEASE READ THIS DISCLOSURE STATEMENT CAREFULLY. THIS DISCLOSURE STATEMENT CONTAINS INFORMATION THAT MAY BEAR UPON YOUR DECISION TO ACCEPT OR REJECT THE DEBTOR'S PLAN OF REORGANIZATION WHICH IS ATTACHED HERETO AS EXHIBIT "B." THE DEBTOR BELIEVES THAT THE PLAN OF REORGANIZATION IS IN THE BEST INTEREST OF THE CREDITORS AND THAT THE PLAN IS FAIR AND EQUITABLE. THE DEBTOR URGES THAT THE VOTER ACCEPT THE PLAN. Dated: Cranbury, New Jersey As of February 27, 2006 ABLE LABORATORIES, INC. By: /s/Richard M. Shepperd ---------------------- Name: Richard M. Shepperd Title: Director of Restructuring IMPORTANT NOTICE This Disclosure Statement and its related documents are the only documents authorized by the Bankruptcy Court to be used in connection with the solicitation of votes to accept the Plan. No representations have been authorized by the Bankruptcy Court concerning the Debtor, its business operations or the value of its assets, except as explicitly set forth in this Disclosure Statement. Please refer to the Glossary which is annexed hereto as Exhibit A and the Plan for definitions of the capitalized terms used but not defined in this Disclosure Statement. The Debtor reserves the right to file an amended Plan and Disclosure Statement from time to time. The Debtor urges you to read this Disclosure Statement carefully for a discussion of voting instructions, recovery information, Classification of Claims and Equity Interests, the history of the Debtor and the Chapter 11 Case, the Debtor's business, properties and sale of its on-going business operations, historical and projected financial results and a summary and analysis of the Plan. The Plan and this Disclosure Statement have not been required to be prepared in accordance with federal or state securities laws or other applicable nonbankruptcy law. Neither the Securities and Exchange Commission, nor any state securities commission has approved or disapproved of the Plan or has passed on the accuracy or adequacy of this Disclosure Statement. Any representation to the contrary is a criminal offense. This Disclosure Statement contains only a summary of the Plan. This Disclosure Statement is not intended to replace the careful and detailed review and analysis of the Plan, only to aid and supplement such review. This Disclosure Statement is qualified in its entirety by reference to the Plan, the Plan Supplement and the exhibits attached thereto and the agreements and documents described therein. If there is a conflict between the Plan and this Disclosure Statement, the provisions of the Plan will govern. You are encouraged to review the full text of the Plan and Plan Supplement and to read carefully the entire Disclosure Statement, including all exhibits, before deciding how to vote with respect to the Plan. Except as otherwise indicated, the statements in this Disclosure Statement are made as of the date indicated on the cover and the delivery of this Disclosure Statement will not imply that the information contained in this Disclosure Statement is correct at any time after that date. Estimates of Claims and Equity Interests in this Disclosure Statement may vary from the final amounts of Claims or Equity Interests allowed by the Bankruptcy Court. You should not construe this Disclosure Statement as providing any legal, business, financial or tax advice. You should, therefore, consult with your own legal, business, financial and tax advisors as to any such matters in connection with the Plan, the solicitation of votes on the Plan and the transactions contemplated by the Plan. As to any contested matters, adversary proceedings or other actions or threatened actions, this Disclosure Statement is not, and is in no event to be construed as, an admission or stipulation. Instead, this Disclosure Statement is, and is for all purposes to be construed as, solely and exclusively a statement made in settlement negotiations. The settlements and compromises described in the Plan and this Disclosure Statement remain subject to ongoing negotiations with the respective parties. FORWARD-LOOKING INFORMATION This Disclosure Statement includes forward-looking statements based largely on the Debtor's current expectations and projections about future events affecting the wind-down of the Debtor's business and certain bankruptcy considerations. The words "may," "should," "expect," "believe," "anticipate," "project," "estimate" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this Disclosure Statement may not occur and actual results could differ materially from those anticipated in the forward-looking statements. Neither the Debtor nor any other person undertakes any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
IMPORTANT NOTICE................................................................................................ FORWARD-LOOKING INFORMATION..................................................................................... I. INTRODUCTION................................................................................................. A. Purpose of This Document...................................................................... B. Confirmation Procedures....................................................................... 1. Time and Place of the Confirmation Hearing........................................... 2. Deadline for Voting for or Against the Plan.......................................... 3. Deadline For Objecting to the Confirmation of the Plan............................... 4. Identity of Person to Contact for More Information Regarding the Plan................ C. Disclaimer.................................................................................... II. BUSINESS DESCRIPTION AND REASONS FOR CHAPTER 11............................................................. A. Historical Background......................................................................... 1. Commencement of Case................................................................. 2. Employment of the Debtor's Professionals............................................. 3. Formation of the Committee........................................................... 4. Description of the Business of the Debtor Prior to the Commencement Date............. 5. Events Leading up to the Chapter 11 Case............................................. 6. The Debtor's Capital Structure as of the Commencement Date........................... 7. Amerisource Security Interest........................................................ 8. The Debtor's New Management Team..................................................... 9. Summary of Certain Major Events Following the Commencement Date...................... B. Filing of Schedules/Bar Date For Filing Proofs of Claim and Equity Interests.................. III. CONTINUATION OF THE DEBTOR................................................................................. IV. THE PROPOSED PLAN: TREATMENT OF CREDITORS AND SHAREHOLDERS.................................................. A. Summary of the Plan........................................................................... B. Treatment of Creditors and Interest Holders Under the Proposed Plan........................... C. Unclassified Claims........................................................................... 1. Administrative Expenses and Fees of the Debtor....................................... 2. Allowed Priority Tax Claims.......................................................... D. Summary of Classification and Treatment....................................................... E. Description of the Classes.................................................................... 1. Secured Claims (Class 1)............................................................. 2. Priority Non-Tax Claims (Class 2).................................................... 3. General Unsecured Claims (Class 3)................................................... 4. Convenience Claims (Class 4)......................................................... 5. Subordinated Claims (Class 5)........................................................ 6. Equity Interests (Class 6)........................................................... F. Reservation of "Cram Down" Rights............................................................. G. Means of Effectuating the Plan................................................................ 1. Funding for the Plan................................................................. 2. Post-confirmation Management......................................................... V. OTHER ASPECTS OF THE PLAN.................................................................................... A. Distributions Under the Plan.................................................................. 1. Disbursing Agent..................................................................... 2. Timing and Conditions of Distributions............................................... 3. Procedures for Treating Disputed Claims Under the Plan............................... B. Treatment of Executory Contracts and Unexpired Leases......................................... 1. Contracts and Leases Not Expressly Assumed Are Rejected.............................. 2. Cure of Defaults..................................................................... 3. Rejection Claims..................................................................... C. Discharge and Releases........................................................................ D. Miscellaneous Provisions...................................................................... E. Changes in Rates Subject to Regulatory Commission Approval.................................... F. Retention of Jurisdiction..................................................................... G. Effective Date................................................................................ H. Modification.................................................................................. I. Risk Factors Attendant Upon Consummation of the Plan.......................................... VI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN......................................................... A. Tax Consequences to Holders of General Unsecured Claims....................................... 1. Gain or Loss......................................................................... 2. Disputed Claims Reserves............................................................. 3. Withholding and Reporting Requirements............................................... B. Consequences to the Debtor.................................................................... VII. CONFIRMATION REQUIREMENTS AND PROCEDURES................................................................... A. Who May Vote or Object........................................................................ 1. Who May Object to Confirmation of the Plan........................................... 2. Who May Vote to Accept/Reject the Plan............................................... 3. Who Is Not Entitled to Vote.......................................................... 4. Who Can Vote in More Than One Class.................................................. 5. Votes Necessary to Confirm the Plan.................................................. 6. Votes Necessary for a Class to Accept the Plan....................................... 7. Treatment of Nonaccepting Classes.................................................... 8. Request for Confirmation Despite Nonacceptance by Impaired Class(es)................. VIII. VOTING PROCEDURES AND REQUIREMENTS........................................................................ A. Vote Required for Acceptance by a Class....................................................... B. Classes Not Entitled to Vote.................................................................. C. Voting........................................................................................ IX. CONFIRMATION OF THE PLAN.................................................................................... A. Confirmation Hearing.......................................................................... B. Acceptance of the Plan........................................................................ C. No Unfair Discrimination/Fair and Equitable Test.............................................. D. The Best Interests Test and Liquidation Analysis.............................................. E. Feasibility................................................................................... F. Confirmation.................................................................................. 1. Conditions to the Effective Date..................................................... 2. Waiver of Conditions................................................................. X. ALTERNATIVES TO THE PLAN..................................................................................... A. Liquidation Under Chapter 7................................................................... B. Alternative Chapter 11 Plan................................................................... C. Certain Risk Factors.......................................................................... XI. EFFECT OF CONFIRMATION OF PLAN.............................................................................. A. Effect of Confirmation........................................................................ 1. Release of Assets.................................................................... 2. Binding Effect....................................................................... 3. Injunction Against Asserting Claims or Interests..................................... 4. Termination of Stays................................................................. 5. Rights of Action..................................................................... B. Discharge..................................................................................... C. Modification of Plan.......................................................................... D. Post-Confirmation Conversion/Dismissal........................................................ E. Payment of Statutory Fees..................................................................... XII. CONCLUSION................................................................................................. EXHIBIT A GLOSSARY............................................................................................. EXHIBIT B PLAN OF ABLE LABORATORIES, INC....................................................................... EXHIBIT C LIQUIDATION ANALYSIS................................................................................. EXHIBIT D LITIGATION SCHEDULE..................................................................................
I. INTRODUCTION Able Laboratories, Inc. ("Able" or, the "Debtor") is the Debtor in a Chapter 11 bankruptcy case. On July 18, 2005, Able commenced a bankruptcy case by filing a voluntary Chapter 11 petition under the United States Bankruptcy Code ("Code"), 11 U.S.C. ss.101, et seq. Chapter 11 of the Code allows the Debtor, and under some circumstances, creditors and other parties in interest, to propose a plan of reorganization (the "Plan"). The Plan may provide for the Debtor to reorganize by continuing to operate, to liquidate by selling assets of the estate, or a combination of both. The Debtor is proposing the Plan that was sent to you in the same envelope as this document. THE DOCUMENT YOU ARE READING IS THE DISCLOSURE STATEMENT FOR THE PLAN WHICH IS ANNEXED HERETO AS EXHIBIT B. The Plan is a plan of reorganization proposed by the Debtor. The proposed Plan provides for the completion of FDA compliance, wind up of affairs and conversion of all of the Debtor's assets to cash and the distribution of the net proceeds realized therefrom to creditors in accordance with the priorities established by the Bankruptcy Code. The projected Effective Date of the proposed Plan is [________], 2006. A. Purpose of This Document This Disclosure Statement summarizes the information contained in the Plan, and provides certain information relating to the Plan and the process the Court follows in determining whether or not to confirm the Plan. The Debtor is soliciting votes to accept or reject the Plan. The overall purpose of the Plan is to provide for the distribution of the Debtor's assets in accordance with the provisions of the Bankruptcy Code. Please refer to the Glossary and the Plan for definitions of terms used but not defined in this Disclosure Statement. The purpose of this Disclosure Statement is to provide sufficient information to enable each creditor who is entitled to vote to make an informed decision on whether to accept or reject the Plan. This Disclosure Statement describes: o the Plan and treatment of Allowed Claims (Section IV); o procedures for voting on the Plan, and who is entitled to vote (Sections VII and VIII); o the former business of the Debtor, the reasons for commencing its Chapter 11 Case and significant events that have occurred in the Chapter 11 Case (Section II); o how distributions under the Plan will be made and the manner in which Disputed Claims will be resolved (Section V); o the procedure and requirements for confirming the Plan (Section VII); o alternatives to the Plan (Section X); o certain federal tax considerations (Section VI). READ THIS DISCLOSURE STATEMENT CAREFULLY TO LEARN: (1) WHO CAN VOTE OR OBJECT, (2) THE PROPOSED TREATMENT OF YOUR CLAIM (i.e., what your claim will receive if the Plan is confirmed), AND HOW THIS TREATMENT COMPARES TO WHAT YOU WOULD RECEIVE IN LIQUIDATION, (3) THE HISTORY OF THE DEBTOR AND SIGNIFICANT EVENTS DURING THE BANKRUPTCY, (4) WHAT THE COURT WILL CONSIDER WHEN DECIDING WHETHER TO CONFIRM THE PLAN, (5) THE EFFECT OF CONFIRMATION, AND (6) THE FEASIBILITY OF THE PLAN. This Disclosure Statement cannot tell you everything about your rights. You should consider consulting your own lawyer to obtain more specific advice on how this Plan will affect you and what is the best course of action for you. Be sure to read the Plan as well as the Disclosure Statement. If there are any inconsistencies between the Plan and the Disclosure Statement, the Plan provisions will govern. Code Section 1125 requires a Disclosure Statement to contain "adequate information" concerning the Plan. The term "adequate information" is defined in Code Section 1125(a) as "information of a kind, and in sufficient detail," about a debtor and its operations "that would enable a hypothetical reasonable investor typical of holders of claims or interests" of the debtor to make an informed judgment about accepting or rejecting the Plan. The Bankruptcy Court (the "Court") has determined that the information contained in this Disclosure Statement is adequate, and it has approved this document in accordance with Code Section 1124. This Disclosure Statement is provided to each creditor whose claim has been scheduled by the Debtor or who has filed a proof of claim against the Debtor and to each interest holder of record as of the date of approval of this Disclosure Statement. Under the Bankruptcy Code, your acceptance of the Plan may not be solicited unless you receive a copy of this Disclosure Statement prior to or concurrently with such solicitation. The Plan Supplement will be filed with the Bankruptcy Court no fewer than seven (7) days prior to the deadline to file ballots for the Plan and objections to the Plan. This Disclosure Statement, the attached exhibits, the Plan and the Plan Supplement are the only materials that you should use in determining whether to vote to accept or reject the Plan. The summaries of the Plan and other information related to the wind up of the Debtor is qualified in its entirety by the Plan, its exhibits, and the documents and exhibits contained in the Plan Supplement. B. Confirmation Procedures Persons Potentially Eligible to Vote on the Plan In determining acceptance of the Plan, votes will only be counted if submitted by a creditor whose claim is duly scheduled by the Debtor as undisputed, non-contingent and liquidated, or who, prior to the hearing on confirmation of the Plan, has filed with the Court a proof of claim which has not been disallowed prior to computation of the votes on the Plan. The Ballot Form that you received does not constitute a proof of claim. If you are uncertain whether your claim has been correctly scheduled, you should check the Debtor's Schedules, which are on file at the office of the Clerk of the Bankruptcy Court located at: United States Bankruptcy Court, U.S. Court House, 402 East State Street, Trenton, New Jersey 08608. You may also review the Debtor's schedules via the Bankruptcy Court's electronic case management system at http://www.njb.uscourts.gov/. The Clerk of the Bankruptcy Court will not provide this information by telephone. THE COURT HAS NOT YET CONFIRMED THE PLAN DESCRIBED IN THIS DISCLOSURE STATEMENT. IN OTHER WORDS, THE TERMS OF THE PLAN ARE NOT YET BINDING ON ANYONE. HOWEVER, IF THE COURT LATER CONFIRMS THE PLAN, THEN THE PLAN WILL BE BINDING ON THE DEBTOR AND ON ALL CREDITORS AND INTEREST HOLDERS IN THIS CASE. - -------------------------------------------------------------------------------- Classes Entitled to Vote on the Plan o Classes 1 (Secured Claims), 3 (General Unsecured Claims) and 4 (Convenience Claims) are impaired under the Plan and entitled to vote on the Plan. o Class 2 (Priority Non-Tax Claims) is unimpaired under the Plan, is deemed to have accepted the Plan and will not be entitled to vote on the Plan. o Classes 5 (Subordinated Claims) and 6 (Stockholder Interests) likely will not receive any distribution under the Plan. The holders of Claims or Interests in these Classes are deemed to reject the Plan and are not entitled to vote on the Plan. See Section IV of this Disclosure Statement for a description of the Classes of Claims and Equity Interests and the treatment of each Class under the Plan. - -------------------------------------------------------------------------------- The Bankruptcy Code provides that only Claims actually voted will be counted for purposes of determining whether the requisite acceptances of the Plan are received. Failure to timely deliver a properly completed ballot with respect to any Claim entitled to vote will constitute an abstention and that Claim will not be counted for the purpose of approving the Plan. - -------------------------------------------------------------------------------- Voting Deadline and Record Date The last day to vote to accept or reject the Plan is [________], 2006. All votes must be received by Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey 07068, Attn: Timothy R. Wheeler, Esq., by 5:00 p.m. (Eastern Time) on that day. The record date for determining which creditors may vote on the Plan is [_______], 2006. - -------------------------------------------------------------------------------- The Debtor believes that the Plan provides the best opportunity for creditors to maximize their recoveries. The Debtor also believes that the Plan provides for the fair and equitable distribution of the Debtor's assets in accordance with the Bankruptcy Code. - -------------------------------------------------------------------------------- Voting Recommendations The Debtor believes that confirmation of the Plan is the best opportunity for creditors to maximize their recoveries. The Debtor encourages its creditors entitled to vote to accept the Plan. - -------------------------------------------------------------------------------- Please contact Timothy R. Wheeler, Esq. at Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey 07068, (973) 597-2500, with any questions relating to voting on the Plan. Additional copies of this Disclosure Statement and, when filed, copies of the Plan Supplement are available upon request made to Timothy Wheeler, Esq., at the following address: ------------------------------------------------- Lowenstein Sandler PC 65 Livingston Avenue Roseland, New Jersey 07068 ATTN: Timothy R. Wheeler, Esq. ------------------------------------------------- Important Deadlines and Information to Note 1. Time and Place of the Confirmation Hearing The hearing at which the Court will determine whether to confirm the Plan will take place on [__________], 2006, at ___ __.m., at the United States Bankruptcy Court, District of New Jersey, Clarkson S. Fisher U.S. Courthouse, Courtroom #8, 402 East State Street, Trenton, New Jersey 08608. 2. Deadline for Voting for or Against the Plan If you are entitled to vote, it is in your best interest to timely vote on the enclosed ballot and return the ballot in the enclosed envelope to Timothy R. Wheeler, Esq. at Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey 07068. Your ballot must be received by [_______], 2006 or it will not be counted. 3. Deadline For Objecting to the Confirmation of the Plan Objections to the confirmation of the Plan must be filed with the Court and served upon the following parties: (i) Able Laboratories, Inc., 1 Able Drive, Cranbury, New Jersey 08512-0869, Attn: Richard M. Shepperd; (ii) Cadwalader, Wickersham & Taft LLP, 1201 F Street N.W., Suite 1100, Washington, DC 20004, Attn: Mark C. Ellenberg, Esq., co-counsel to the Debtor and Debtor-in-Possession; (iii) Cadwalader, Wickersham & Taft LLP, One World Financial Center, New York, New York 10281, Attn: Deborah J. Piazza, Esq., co-counsel to the Debtor and Debtor-in-Possession; (iv) Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey 07068, Attn: Sharon Levine, Esq., co-counsel to the Debtor and Debtor-In-Possession, (v) Duane Morris LLP, 744 Broad Street, Suite 1200, Newark, New Jersey 07102, Attn: Walter Greenhalgh, Esq., counsel to the Committee, and (vi) Office of the United States Trustee, One Newark Center, Suite 2100, Newark, New Jersey 07102, Attn: Fran B. Steele, Esq., in each case so as to be actually received no later than 4 p.m. (Eastern Time) on [_________], 2006. 4. Identity of Person to Contact for More Information Regarding the Plan Any interested party desiring further information about the Plan should contact Timothy R. Wheeler, Esq. at Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey 07068, (973) 597-2500. C. Disclaimer The financial data relied upon in formulating the Plan is based on the books and records of the Debtor unless otherwise indicated. The information contained in this Disclosure Statement is provided by John Palmer, Controller; Richard Matthews Shepperd, Director of Restructuring; and Iva Klemick, Vice President of Operations. The Debtor represents that the information contained in the Disclosure Statement is true to the Debtor's best knowledge, information and belief as of the date of the submission of the Disclosure Statement. PLEASE NOTE THAT THE APPROVAL OF THIS DISCLOSURE STATEMENT BY THE BANKRUPTCY COURT DOES NOT CONSTITUTE A RULING ON THE MERITS, FEASIBILITY OR DESIRABILITY OF THE PLAN. II. BUSINESS DESCRIPTION AND REASONS FOR CHAPTER 11 A. Historical Background The following is a discussion of certain pertinent events that have occurred prior to and during this chapter 11 Case. 1. Commencement of Case On July 18, 2005, Able commenced a voluntary case under chapter 11 of the Bankruptcy Code in the Bankruptcy Court. 2. Employment of the Debtor's Professionals On the Commencement Date, the Debtor filed applications to retain Cadwalader, Wickersham & Taft LLP and Lowenstein Sandler PC, as counsel for the Debtor, and Arnold & Porter LLP, as special regulatory and law enforcement counsel for the Debtor. On July 28, 2005, the Bankruptcy Court entered final orders approving the retention of each of these professionals. 3. Formation of the Committee On August 2, 2005, the United States Trustee for the District of New Jersey appointed the Committee. The Committee currently consists of the following seven members: (i) Cardinal Health, (ii) Criterion Software, LLC, (iii) Ivax Corporation, (iv) McKesson Corporation, (v) Rite Aid Corporation, (vi) Siegfried (USA), Inc., and (vii) Waters Corporation. By order of the Bankruptcy Court dated August 19, 2005, the Committee retained Duane Morris LLP as its counsel. 4. Description of the Business of the Debtor Prior to the Commencement Date From its acquisition by DynaGen, Inc. ("DynaGen") in 1996, Able's business was to develop, manufacture and sell generic drugs. Until certain recent regulatory events, discussed below, Able's product line included a broad range of prescription pharmaceutical products in solid oral dosage, liquid oral dosage and suppository form. Able's products were sold primarily through direct sales efforts to drug wholesalers, distributors and retail drug chains. From DynaGen's inception in 1988 until 1996, DynaGen focused primarily on developing new drugs and licensing the resulting products and technologies to others. Beginning in 1996, DynaGen began shifting its focus and through acquiring three separate companies became a generic drug manufacturing and distribution business. Generic drug development, manufacturing and distribution is a highly competitive business, and there were several companies with substantially greater resources that competed with DynaGen. DynaGen's distribution businesses sold mostly its competitors' products and the combination of manufacturing and distribution business did not create the strategic advantages it was seeking. DynaGen found that it was divided both financially and managerially. As its financial performance failed to meet the expectations of Fleet Capital, its senior lender, Fleet restricted DynaGen's borrowing ability and as a result it faced a working capital shortage. After careful analysis, DynaGen decided to divest its distribution operations and continue only as a generic drug development and manufacturing company selling only its own products to customers. In May 2001, DynaGen merged with its wholly-owned subsidiary, Able, and changed its name to Able Laboratories, Inc. Because generic drugs are the chemical and therapeutic equivalents of brand-name drugs, they must meet the same governmental quality standards, including as prescribed by applicable United States Food and Drug Administration ("FDA") regulations, as the brand-name drugs for which they substitute. Able, as a generic drug manufacturer, could manufacture and market a generic drug only if the patent or other government-mandated exclusivity period for the brand-name equivalent has expired. Generic drugs are typically sold under their generic chemical names at prices significantly below those of their brand-name equivalents. Able marketed its generic drug products under its Able Laboratories label, as well as under private label arrangements. For the fiscal year ended December 31, 2004, Able reported revenues of $103.2 million and net income of $14.6 million. As of March 31, 2005, Able reported cash and cash equivalents of $16.8 million and total liabilities of $9.4 million. As of the Commencement Date, Able was not generating income or revenue and therefore its cash and cash equivalent amounts significantly decreased. As of July 17, 2005, Able had cash and cash equivalents of approximately $4 million. 5. Events Leading up to the Chapter 11 Case On May 23, 2005, Able announced that it had suspended manufacturing operations and was recalling its product line due to concerns by the FDA about laboratory practices and compliance with standard operating procedures. Able ceased manufacturing as an additional precaution while it completed an investigation and ensured that its operations were in compliance with regulatory guidelines. As Able stated in its press release issued on May 23, 2005, an internal review found "apparent departures from standard operating procedures with respect to certain laboratory testing practices." In addition to the suspension of shipments and manufacturing and the recall of all its products, Able withdrew ten (10) generic-drug applications pending approval. Further disruptions included the resignation of Able's chief executive officer and chairman of the board, and chief operating officer, all in May 2005. On or about July 6, 2005, Able received and quickly responded to an FDA list of Inspectional Observations (Form FDA 483) in connection with the events that led to the recall. Able actively pursued a consent decree with the FDA to provide an FDA-sanctioned means for Able to address inspectional observations, improve the quality of its systems and controls, and, subject to FDA authorization, reintroduce products to the market. 6. The Debtor's Capital Structure as of the Commencement Date Prior to the Commencement Date, Able had a $20 million revolving credit agreement with Citizens National Bank of Massachusetts ("Citizens"). Following the product recall, in or about May 2005, Citizens notified Able that it was in default on the credit facility and that all availability under the revolving credit facility was terminated. At that time, there were no unpaid amounts outstanding under the credit facility. There was, however, a $1.3 million letter of credit outstanding, which was issued in favor of the landlord for Able's headquarters building located in Cranbury, New Jersey. Able's contingent obligation to reimburse Citizens in the event the letter of credit was drawn was secured by substantially all of Able's assets, including accounts receivable, inventory, furniture, fixtures, equipment and intellectual property. The landlord subsequently drew down the letter of credit, and Able repaid Citizens $1.3 million. 7. Amerisource Security Interest Prior to the Commencement Date, Able and AmerisourceBergen Corporation ("AmerisourceBergen"), a distributor of pharmaceuticals, entered into an agreement for the purchase of products by Able for research purposes. The agreement included a security interest in all personal property of Able, which security interest AmerisourceBergen duly perfected. After the Commencement Date, AmerisourceBergen asserted that the security interest applied not only to amounts owed by Able under the agreement to purchase products from AmerisourceBergen, but also to amounts owed by Able under the agreements pursuant to which AmerisourceBergen purchased products from Able. Because the recall of Able's products required the return of products purchased by AmerisourceBergen, Able owed AmerisourceBergen substantial credits under the purchase agreements. On July 28, 2005, the Bankruptcy Court made a preliminary finding that the AmerisourceBergen security interest applied to the agreements pursuant to which AmerisourceBergen purchased products from Able and, accordingly, AmerisourceBergen's claim for credits for returned products was secured by all personal property of Able, including all of its cash. Able subsequently commenced an adversary proceeding to have the security interest avoided or declared inapplicable to the credits. The matter remains pending. Accordingly, the amount of AmerisourceBergen's secured claim, if any, is not yet determined. 8. The Debtor's New Management Team In or about July, 2005, Able hired a new management team to lead it through the chapter 11 process. The new management team consisted of Paul Cottone, as Chief Restructuring Officer, and Richard Shepperd, as Director of Restructuring. Mr. Cottone and Mr. Shepperd both have extensive knowledge of the chapter 11 process and the generic drug industry. On August 15, 2005, in light of the FDA's decision on the company's proposal, as discussed in Section 9(a) below, and in light of the company's need to reduce expenses, Mr. Cottone resigned as Able's Chief Restructuring Officer,. 9. Summary of Certain Major Events Following the Commencement Date (a) The FDA Proposal and Continued Recall Subsequent to the Commencement Date, the Debtor has continued with its recall of its product line. No deadline has been established to terminate the recall. Accordingly, as of this time, products continue to be returned. As of February 5, 2006, a total of $71,757,000 in products has been returned to the Debtor. However, the outside vendor coordinating Able's product recall has reported that it still has a significant quantity of unopened packages of returned goods, for which Able cannot yet assign a monetary value. Since identifying and voluntarily reporting to the FDA its concerns over the integrity of its product development data and commencing its internal review, Able's management worked proactively with the FDA to pursue the most efficient and effective manner in which to return its products to the market and resume normal operations. Towards this end, Able retained special counsel and consultants and formulated a proposal designed to address all regulatory concerns as well as those of the company's customers, users of its products, stockholder and creditors. Able proposed to the FDA, in essence, that it be permitted to re-validate the product development data included in the company's previously approved Abbreviated New Drug Applications ("ANDA"), under new management and with the data being verified by an independent outside consultant. Able proposed that it would relaunch products underlying these ANDAs upon completion of the revalidation work without the need for full FDA review and approval of all of the data supporting each ANDA. In or about August, 2005, the FDA declined Able's proposal and advised that the most expeditious relaunch of products would require withdrawal, resubmissions (with new data), and agency review of Abbreviated New Drug Applications for products that Able desired to manufacture in the future. In the view of Able's management, even under an expedited approach, FDA review could take up to eighteen (18) months for each drug. As a result of the FDA's decision, Able determined that, as a practical matter, it would not be able to return any of its products to market, and therefore produce any revenue or cash flow, for a significant period of time. Because Able's business plan for its reorganization depended on obtaining significant external financing, which in turn was predicated on its being able to return certain products to the market in a more timely manner, it determined that the best course of action to preserve value for its creditors would be to immediately reduce overhead and expenses as much as possible and to initiate the process of selling the company's business and assets to one or more third-party purchasers rather than attempt to obtain financing that would permit it to resume manufacturing and marketing on its own. (b) The Sale of the Debtor's Assets As discussed below, pursuant to a Bankruptcy Court-approved sale, the Debtor sold substantially all of its assets to a going-concern buyer. As a result of the review of the Debtor's business (as noted above), the Debtor and Committee determined that a stand-alone reorganization was neither in the Debtor's nor its creditors' best interests, and that the Debtor should pursue strategic alternatives. Accordingly, the Debtor marketed its assets to potential buyers. As a result of these marketing efforts, the Debtor received offers for the sale of all or part of its assets. After consulting with the Committee, and after extensive negotiations with potential buyers, the Debtor entered into an asset purchase agreement with Aurobindo Pharma USA, Inc. ("Aurobindo") for the sale of substantially all of the Debtor's assets for a purchase price of $21,500,000, subject to Able's receiving a higher or better offer at an auction of its assets. Aurobindo also required that the Debtor provide a break-up fee of $645,000, payable to Aurobindo if another buyer ended up purchasing the assets. On October 7, 2005, the Debtor filed a motion with the Bankruptcy Court seeking authorization for (i) authority to sell all or substantially all of its assets, (ii) authority to assume and assign certain executory contracts and unexpired leases, and (iii) approval of auction procedures related thereto. This motion was approved by an order of the Bankruptcy Court on October 21, 2005 (the "Procedures Order"). Pursuant to the Procedures Order, Able held an auction of its assets on November 1, 2005. At the conclusion of the auction, Able entered into an asset purchase agreement with the winning bidder at the auction, Sun Pharmaceutical Industries Limited, which agreement subsequently was assigned to Sun Pharmaceutical Industries, Inc., a subsidiary of Sun Pharmaceutical Industries Limited (collectively, "Sun"). By order entered on November 14, 2005 (the "Sale Order"), the Bankruptcy Court approved the sale to Sun. The sale was consummated on December 21, 2005. Sun paid a purchase price of $23,145,000 and assume specified liabilities. $3,000,000 of the purchase price was placed into an escrow account to back-up the obligation of Able to indemnify Sun for losses arising out of any breaches of representations, warranties or covenants under the Sun asset purchase agreement. The escrow account is maintained under an escrow agreement among Able, Sun and LaSalle National Bank, as escrow agent. Able's indemnification obligations terminate (and the escrow amount refunded to Able) on December 19, 2007, but may be terminated on confirmation of the plan if the plan provides for the discharge of Sun without impairment under 11 U.S.C. ss.1141(d)(3) from any debts or other obligations of Able including obligations that arose before the date of confirmation. Additionally, approximately $2,000,000 of the sale proceeds were reserved to satisfy valid, outstanding construction liens against Able's real property located at 1 Able Drive, Cranbury, New Jersey, which Able occupied pursuant to the terms of a lease. (c) Litigation A schedule of pending litigation to which Able is currently a party is annexed hereto as Exhibit D. (d) Settlement of Claims The Debtor has spent a substantial amount of time analyzing and reconciling the various claims against the Estate. Specifically, the Debtor received in excess of 170 proofs of claim as of the date hereof which (including claims listed on the Debtor's Schedules for which no proofs of claim need be filed), aggregate to approximately $396 million. The Debtor is in the process of reconciling and settling certain claims. (e) Recovery From Landlord As descried in II.A.6, the Debtor's landlord drew down on a letter of credit with Citizens. At the end of January 2006 all obligations owing the landlord were paid in full as a result of the sale of substantially all of the Debtor's assets. The Debtor has therefore recovered the $1.3 million paid to Citizens. (f) Projected Recovery of Preferential or Fraudulent Transfers The Debtor has conducted a preliminary analysis of preferential and/or fraudulent transfers. The Debtor estimates that the estate may realize a recovery of approximately $60,000 from preferential and fraudulent transferees. B. Filing of Schedules/Bar Date For Filing Proofs of Claim and Equity Interests On September 30, 2005, the Debtor filed its Schedules. The Debtor reserved the right to further amend the Schedules as may be necessary. The Debtor's Schedules can be viewed on the Bankruptcy Court's website: www.njb.uscourts.gov. The original Bar Date for the filing of proofs of claim was November 16, 2005, as established by the Notice of Chapter 11 Bankruptcy Case, Meeting of Creditors, & Deadlines (the "Notice to Creditors") issued by the Clerk of the Bankruptcy Court on July 26, 2005. However, given that the Debtor's Schedules were not filed until well after the Notice to Creditors was issued, a new Bar Date was fixed for those creditors who did not receive the Notice to Creditors. In particular, March 20, 2006, has been fixed as the Bar Date, the last date and time upon which proofs of claim or equity interest could be filed against the Debtor's Estate. Pursuant to Bankruptcy Rule 3003(c)(2), any creditor: (a) whose Claim (i) was not scheduled by the Debtor, or (ii) was scheduled as disputed, contingent or unliquidated, and (b) who failed to file a proof of claim on or before the Bar Date, will not be treated as a creditor with respect to that Claim for purposes of voting on the Plan or receiving a distribution under the Plan. In excess of 170 proofs of claim have been filed as of the date of the Disclosure Statement III. CONTINUATION OF THE DEBTOR From and after the Confirmation Date, the Debtor shall continue in existence for the purpose of (i) completing its product recall, (ii) ensuring compliance with all FDA regulations and procedures, (iii) winding up its affairs as expeditiously as reasonably possible, (iv) liquidating, by conversion to Cash or other methods, any remaining assets of its Estate, as expeditiously as reasonably possible, (v) enforcing and prosecuting claims, interests, rights and privileges of the Debtor, including, without limitation, the prosecution of avoidance actions in conjunction with the marshalling of the Debtor's assets, as agreed upon by the Debtor, (vi) resolving Disputed Claims, (vii) administering the Plan, and (viii) filing appropriate tax returns. From and after the Confirmation Date, the then current officers and directors of the Debtor shall continue to serve in their respective capacities through the earlier of the date the Debtor is dissolved in accordance with the Plan or the date such officer or director resigns, is replaced or is terminated. IV. THE PROPOSED PLAN: Treatment of Creditors and Shareholders This section summarizes the Plan and describes the different classification and treatment of Claims and Equity Interests established under the Plan. A. Summary of the Plan The Plan provides for the treatment of Claims against the Debtor and Equity Interests in the Debtor. As described in greater detail in Section II of this Disclosure Statement, the Debtor sold substantially all of its assets pursuant to the Sale Order. Thus, the Plan provides for the continuation of the Debtor's business for completion of FDA compliance, assisting other government agencies with inquiries regarding the Debtor, the wind up of affairs and conversion of all of the Debtor's remaining assets to cash and the distribution of the net proceeds realized therefrom to creditors in accordance with the priorities established by the Bankruptcy Code. The Plan establishes, among other things, the provisions governing such distributions to holders of Allowed Claims and the process for resolving Disputed Claims filed against the Debtor. B. Treatment of Creditors and Interest Holders Under the Proposed Plan The Plan classifies claims and interests in various classes. The Plan states whether each class of claims or interests is impaired or unimpaired. The Plan provides the treatment each class will receive. C. Unclassified Claims Certain types of claims are not placed into voting classes. They are not considered impaired and they do not vote on the Plan because they are automatically entitled to specific treatment provided for them in the Bankruptcy Code. As such, the Debtor has not placed the following claims in a class: 1. Administrative Expenses and Fees of the Debtor In order to confirm the Plan, Administrative Expense Claims and Allowed Tax Claims entitled to priority under the Bankruptcy Code must be paid in full or in a manner otherwise agreeable to the holders of those Claims. Administrative expenses are the actual and necessary costs and expenses of the Chapter 11 Case of the Debtor. Those expenses include, but are not limited to, cure payments in connection with the assumption of certain contracts and leases, post-petition salaries and other benefits for employees, post-petition rent for facilities and offices, amounts owed to vendors providing goods and services during the Chapter 11 Case, tax obligations incurred after the commencement of the Chapter 11 Case, and certain statutory fees and expenses. Other administrative expenses include the actual, reasonable and necessary professional fees and expenses of the professionals retained by the Debtor and the Committee. Consistent with the requirements of the Bankruptcy Code, the Plan generally provides for Allowed Administrative Expense Claims to be paid in full on the later of (i) the Initial Distribution Date and (ii) the first Business Day after the date that is thirty (30) calendar days after the date such Administrative Expense Claim becomes an Allowed Administrative Expense Claim; provided, however, that Allowed Administrative Expense Claims representing liabilities incurred in the ordinary course of business by the Debtor, as a debtor-in-possession, or liabilities arising under loans or advances to or other obligations incurred by the Debtor, as debtor-in-possession, whether or not incurred in the ordinary course of business, shall be paid by such Debtor in the ordinary course of business, consistently with past practice and in accordance with the terms and subject to the conditions of any agreements governing, instruments evidencing, or other documents relating to such transactions. Administrative Expense Claims relating to compensation of the professionals retained by the Debtor or the Committee or for the reimbursement of expenses of certain members of the Committee will, unless otherwise agreed by the claimant, be paid on the later of the Effective Date and the date on which an order allowing such Administrative Expense Claim is entered. Unless otherwise specified in the Plan or by order of the Bankruptcy Court, no interest will accrue or be paid in connection with an Allowed Administrative Expense Claim for any purpose, on or after the Commencement Date. The following chart lists all of the Debtor's estimated unpaid Administrative Expense Claims relating to professionals, an estimate of future professional fees through the projected Effective Date of the Plan and other administrative claims and fees and their treatment under the Plan:
- --------------------------------- ---------------------- --------------------------------- Name Amount estimated Treatment - --------------------------------- ---------------------- --------------------------------- - --------------------------------- ---------------------- --------------------------------- Professional fees $1,068,000 Will be paid in full as of the Effective Date - --------------------------------- ---------------------- --------------------------------- Disputed administrative claim $ 123,000 File objection (if not resolved) - --------------------------------- ---------------------- --------------------------------- Clerk's office fees $ 0 N/A - --------------------------------- ---------------------- --------------------------------- Office of U.S. Trustee fees $ 15,000 Will be paid in full as of the Effective Date - --------------------------------- ---------------------- --------------------------------- - --------------------------------- ---------------------- --------------------------------- Total $1,206,000 - --------------------------------- ---------------------- ---------------------------------
Court Approval of Professional Compensation Required: Pursuant to the Bankruptcy Code, the Court must rule on all professional compensation and expenses listed in this chart before the compensation and expenses will be owed. The professional in question must file and serve a properly noticed fee application for compensation and reimbursement of expenses and the Court must rule on the application. Only the amount of compensation and reimbursement of expenses allowed by the Court will be owed and required to be paid under this Plan as an Administrative Expense Claim. Each professional person who asserts a further Administrative Expense Claim that accrues before the Confirmation Date shall file with the Bankruptcy Court, and serve on all parties required to receive notice, an application for compensation and reimbursement of expenses no later than thirty (30) days after the Effective Date of the Plan. Failure to file such an application timely shall result in the professional person's claim being forever barred and discharged. Each and every other person asserting an Administrative Expense Claim shall be entitled to file a motion for allowance of the asserted administrative claim within ninety (90) days of the Effective Date of the Plan, or such Administrative Expense Claim shall be deemed forever barred and discharged. No motion or application is required to fix the fees payable to the Clerk's Office or Office of the United States Trustee. Such fees are determined by statute. As indicated above, the Debtor anticipates that it will need to pay approximately $938,000 of Administrative Expense Claims to professionals on the Effective Date of the Plan unless a claimant has agreed to be paid later or the Court has not yet ruled on the claim. 2. Allowed Priority Tax Claims Priority tax claims are certain unsecured income, employment and other taxes described by Bankruptcy Code Section 507(a)(8). The Bankruptcy Code requires that each holder of such a Section 507(a)(8) priority tax claim receive the present value of such claim in deferred cash payments, over a period not exceeding six (6) years from the date of the assessment of such tax. Allowed Priority Tax Claims under the Bankruptcy Code will be paid to each holder of an Allowed Priority Tax Claim Cash in an amount equal to such Allowed Priority Tax Claim on the later of (i) the Initial Distribution Date and (ii) the fifteenth Business Day of the first month following the month in which such Priority Tax Claim becomes an Allowed Priority Tax Claim, or as soon after such dates as is practicable. All Allowed Priority Tax Claims that are not due and payable on or before the Initial Distribution Date shall be paid in the ordinary course of business as such obligations become due. As of the date hereof, the Debtor is not aware of any Section 507(a)(8) priority tax claims against the Estate. D. Summary of Classification and Treatment The following table and the description in Section IV.E. divide the Claims against, and Equity Interests in the Debtor into separate Classes, state the estimated aggregate amount of the Claims in each Class and summarize the treatment of each Class. The table and descriptions also identify which Classes are entitled to vote on the Plan based on rules set forth in the Bankruptcy Code and the Voting Procedures Order. Finally, the table and descriptions indicate an estimated recovery for each Class. - -------------------------------------------------------------------------------- Important Note on Estimates and Valuations Because the final amount of allowed claims and the cash proceeds actually available for distribution may vary from the current estimates, the cash allocated to the Estate and, in turn, the actual recovery percentages may be materially higher or lower than projected. Accordingly, any excess or deficiency will be allocated among the unsecured creditors on a pro-rata basis. In other words, each Pro Rata Share will be adjusted up or down by multiplying such amount by an identical adjustment factor in order to allocate any excess or deficiency on a pro-rata basis. - -------------------------------------------------------------------------------- The Claim amounts and recoveries described in the following table and elsewhere in this Disclosure Statement represents the Debtor's reasonable best estimates of those amounts given the information available at this time. In excess of 170 proofs of claim were filed in the Debtor's Chapter 11 Case totaling approximately $396 million. The Debtor estimates that it will object to approximately 111 claims having an alleged aggregate value in the amount of $362 million. As of the date of this Disclosure Statement, the Debtor has completed a preliminary review of these Claims, including reconciliation with its own books and records. However, due to the number and amount of Claims in dispute, as well as the risk of error inherent in reconciling such a large number of proofs of claim with the books and records of the Debtor, it is possible that the actual amount of Allowed Claims may differ materially from the Debtor's estimates. The Debtor continues to seek to resolve Disputed Claims and further refine its claims analysis. Unless otherwise specified, the estimated Claim amounts and recoveries in the following table and elsewhere in this Disclosure Statement are based on the Debtor's claims analysis and financial projections as of the date of this Disclosure Statement. The estimation of recoveries makes the following assumptions: o The estimated aggregate amount of Allowed Secured Claims against the Debtor is less than $ 7 million. o The estimated aggregate amount of asserted Unsecured Claims against the Debtor is approximately $396 million. The actual amount of Allowed General Unsecured Claims, as well as the estimated recovery of creditors holding Allowed General Unsecured Claims will largely depend upon the outcome of certain Disputed Claims, including a disputed class action claim in the asserted amount of $280 million as well as the outcome of litigation with certain former employees of the Debtor. The Debtor cannot predict whether all or a portion of the Disputed Claims will be allowed. In the event all Disputed Claims are allowed, the percentage distribution to holders of Allowed General Unsecured Claims will be substantially diminished. Treatment of Claims and Equity Interests
- ---------- --------------------------------- ------------------------------------------- --------------- ------------------- Entitled Estimated Class Description Treatment to Vote Recovery - ---------- --------------------------------- ------------------------------------------- --------------- ------------------- 1 Secured Claims Each holder of an Allowed Claim in Class Yes 100% 1 shall receive, at the election of the Debtor, (i) Cash equal to 100% of the amount of the Allowed Claim; (ii) the net proceeds of sale of Collateral up to the amount of the Allowed Claim; (iii) the Collateral securing the Allowed Claim; (iv) such treatment that leaves unaltered the legal, equitable and contractual rights of the holder; or (v) such other treatment as the Bankruptcy Court shall approve in connection with confirmation of the Debtor's Plan through a "cram down" under section 1129(b) of the Bankruptcy Code. - ---------- --------------------------------- ------------------------------------------- --------------- ------------------- 2 Priority Non-Tax Claims Paid in full. No 100% - ---------- --------------------------------- ------------------------------------------- --------------- ------------------- 3 General Unsecured Claims Pro Rata Share of the Class 3 Cash Pool Yes approximately 27% against the Debtor - ---------- --------------------------------- ------------------------------------------- --------------- ------------------- 4 Convenience Claims Paid in full. Yes 100% - ---------- --------------------------------- ------------------------------------------- --------------- ------------------- 5 Subordinated Claims No distribution, unless class 3 is paid No (deemed to None in full. reject) - ---------- --------------------------------- ------------------------------------------- --------------- ------------------- 6 Equity Holders No distribution, unless classes 3 and 5 No (deemed to None are paid in full. reject) - ---------- --------------------------------- ------------------------------------------- --------------- -------------------
E. Description of the Classes Unless otherwise indicated, the characteristics and amount of the Claims in the following Classes are based on the books and records of the Debtor. Each Subclass is treated as a separate Class for purposes of the Plan and the Bankruptcy Code. However, the following discussion may refer to a group of Subclasses as a single Class for ease of reference. - -------------------------------------------------------------------------------- Interest Will Not Accrue After Commencement Date Unless otherwise specified in the Plan or by order of the Bankruptcy Court, no interest will accrue or be paid on an Allowed Claim, for any purpose, on or after the Commencement Date. - -------------------------------------------------------------------------------- 1. Secured Claims (Class 1) Description. Class 1 consists of Claims secured by Collateral of the Debtor or secured by the amount of any rights of setoff of the holder thereof under section 553 of the Bankruptcy Code. The estimated aggregate Secured Claims is less than $ 7 million as of the date of this Disclosure Statement. For convenience of identification, the Plan classifies the Allowed Claims in Class 1 as a single Class. In the event that Allowed Claims in Class 1 would contain as elements thereof two or more Allowed Secured Claims collateralized by different properties or interests in property or collateralized by liens against the same property or interest in property having different priority, such Allowed Claims shall be divided into separate subclasses of Class 1. Treatment. Allowed Claims in Class 1 are impaired. On or as soon as reasonably practicable after the Initial Distribution Date, each holder of an Allowed Claim in Class 1 shall receive, at the election of the Debtor, (i) Cash equal to 100% of the amount of the Allowed Claim; (ii) the net proceeds of sale of Collateral up to the amount of the Allowed Claim; (iii) the Collateral securing the Allowed Claim; (iv) such treatment that leaves unaltered the legal, equitable and contractual rights of the holder; or (v) such other treatment as the Bankruptcy Court shall approve in connection with confirmation of Debtor's Plan through a "cram down" under section 1129(b) of the Bankruptcy Code. 2. Priority Non-Tax Claims (Class 2) Description. The Claims in Class 2 are the types of Claims identified in section 507(a) of the Bankruptcy Code that are entitled to priority in payment (other than Administrative Expense Claims and Priority Tax Claims). These Claims relate primarily to pre-petition wages (limited to the period beginning ninety (90) days prior to the Commencement Date pursuant to section 507(a)) and employee benefit plan contributions that had not yet been paid as of the Commencement Date. The Debtor believes that many, if not all of these Claims have already been paid pursuant to an order entered by the Bankruptcy Court shortly after the Commencement Date. However, it should be noted that certain claims have been asserted on behalf of certain employees of the Debtor seeking priority status under the Worker Adjustment Retraining and Notification Act (the "WARN Act"). (See Section V.I.2.B below). Treatment. Allowed Claims in Class 2 are unimpaired. To the extent that they have not already been paid, they will be paid in full on or as soon as reasonably practicable after the Initial Distribution Date, except to the extent that the holders of such Claims agree to a different treatment. - -------------------------------------------------------------------------------- Important Note on Distributions to Class 3 Resolution of Disputed Claims May Affect Class 3 Recoveries The distributions received by holders of General Unsecured Claims against the Debtor could differ materially from the Estimated Recovery Percentages (See below) as described in this Disclosure Statement because the final amount of Allowed Claims and the cash proceeds actually available for distribution may vary from the current estimates. - -------------------------------------------------------------------------------- 3. General Unsecured Claims (Class 3) Description. General unsecured claims are uncollateralized claims not entitled to priority under Code Section 507(a). Class 3 consists of the Claims of suppliers and other vendors, personal injury and other litigation claimants to the extent not covered by insurance, parties to executory contracts or unexpired leases with the Debtor that were or are being rejected and other General Unsecured Claims. Class 3 includes unsecured Claims that are covered in whole or in part by insurance maintained by the Debtor. However, such Claims will share in the treatment of this Class only to the extent of the allowed amount of such Claims that is less than or equal to the Debtor's self-insured retention or deductible amount under the applicable insurance policy and not satisfied from proceeds of insurance payable to the holder of the Claim. Treatment. (a) Class 3 is impaired. All distributions will be paid pursuant to the priority scheme as set forth in the Bankruptcy Code. (b) (i) On the Initial Distribution Date, the aggregate amount of Available Cash deposited into the applicable Class 3 Cash Pool and distributed to the holders of Allowed Class 3 Claims on such date shall be divided among them in proportion to their respective Pro Rata Share on such date; and (ii) On each Interim Distribution Date and on the Final Distribution Date, distributions on account of Allowed Claims in Class 3 shall be distributed to Allowed Claim holders on a Pro Rata basis; provided, however, that in no event shall the aggregate distributions to a holder of an Allowed Claim exceed 100% of the amount of such Allowed Claim. In no event shall the Debtor be obligated to make a distribution if, in the discretion of the Debtor, there is insufficient Available Cash to make a cost-efficient distribution, taking into account the size of the distribution to be made and the number of recipients of such distribution in which event such funds shall, in the Debtor's discretion, be donated to a reputable charitable organization; and provided further, however, that in no event shall the foregoing impair the rights of the Debtor under Section 8.8 of the Plan to use excess funds to satisfy the cost of administering this Plan. (c) In the event that at the date of any distribution of Available Cash to Unsecured Creditors there are any Disputed Claims held by Unsecured Creditors, then there shall be reserved for future distributions to the Unsecured Creditors pursuant to Section 7.2(b)(ii) of the Plan a sufficient amount of Available Cash so that if all Disputed Claims subsequently become Allowed Claims, there will be adequate Available Cash to distribute to the Unsecured Creditors so that, upon making the final distribution to the Unsecured Creditors who become holders of Allowed Class 3 Claims, each such Unsecured Creditor will receive its full share of the aggregate Available Cash then and theretofore distributed to the holders of Allowed Class 3 Claims determined as provided in Section 7.2(b)(ii) of the Plan. 4. Convenience Claims (Class 4) Description. Class 4 consists of (a) Allowed General Unsecured Claims of holders of Allowed Claims against the Debtor in an aggregate amount equal to or less than $500 , (b) the Allowed General Unsecured Claims against the Debtor of a holder that has irrevocably elected on its ballot to reduce all such Claims against the Debtor to $500, or (c) Disputed Claims against the Debtor that become Allowed General Unsecured Claims in an aggregate amount equal to or less than $500, with the consent of, and in the amount agreed to by, the Debtor or pursuant to a Final Order, provided, however, that in no event shall the distributions to a holder of an Allowed Convenience Claim exceed 100% of the amount of the Allowed Claim if less than the amount of the Convenience Class treatment. Treatment. Class 4 is impaired. Each Class 4 Claim holder will receive cash in an amount equal to the Allowed amount of its Claim on or as soon as reasonably practicable after the Initial Distribution Date. 5. Subordinated Claims (Class 5) Description. Class 5 consists of any Claim against the Debtor for any fine, penalty, forfeiture or attorneys' fees (but only to the extent such attorneys' fees are punitive in nature), or for multiple, exemplary or punitive damages, to the extent that such fine, penalty, forfeiture, attorneys' fees or damages are not compensation for actual pecuniary loss suffered by the holder of such Claim and not statutorily prescribed, and all claims against the Debtor of the type described in Section 510 of the Bankruptcy Code relating to equity interests (including all Equity Interests). In general, punitive or exemplary damage Claims are intended to punish or make an example of a wrongdoer. However, in the context of an insolvent entity, such as the Debtor, the enforcement of punitive Claims would have the effect of punishing unsecured creditors by diluting the ultimate recovery to all unsecured creditors. Moreover, punitive and exemplary damage Claims differ significantly from other general unsecured Claims which are based upon pecuniary losses. For these reasons, such Claims have been classified separately from other unsecured Claims. The Debtor does not believe that there will be any Allowed Claims in this Class. Treatment. Class 5 is impaired. There shall be no distribution to holders of Allowed Claims in Class 5, unless all Allowed Claims in Class 3 are paid in full. The likelihood that all Allowed Class 3 claims will be paid in full is extremely remote. Class 5 is therefore deemed to reject the Plan and the Debtor will not solicit its vote. 6. Equity Interests (Class 6) Description. Class 6 consists of holders of Equity Interests in the Debtor. Equity Interest holders are the parties who hold an ownership interest in the Debtor. Entities holding preferred or common stock in the Debtor are Equity Interest holders. Treatment. Class 6 is impaired. There shall be no distribution to holders of Allowed Interests in Class 6, unless all Allowed Claims in Classes 3 and 5 are paid in full. The likelihood that all Allowed Claims in Classes 3 and 5 will be paid in full is extremely remote. Class 6 is therefore deemed to reject the Plan, and the Debtor will not solicit its vote. F. Reservation of "Cram Down" Rights The Bankruptcy Code permits the Bankruptcy Court to confirm a chapter 11 plan over the dissent of any class of claims or equity interests as long as the standards in section 1129(b) are met. This power to confirm a plan over dissenting classes - often referred to as "cram down" - is an important part of the confirmation process. It assures that no single group (or multiple groups) of claims or equity interests can block a restructuring that otherwise meets the requirements of the Bankruptcy Code and is in the interests of the other constituents in the case. The Debtor reserves the right to seek confirmation of the Plan, notwithstanding the rejection of the Plan by any Class entitled to vote. In the event that a Class votes to reject the Plan, the Debtor may requests the Bankruptcy Court to rule that the Plan meets the requirements specified in section 1129(b) of the Bankruptcy Code with respect to such Class. The Debtor will also seek such a ruling with respect to each Class that is deemed to reject the Plan. G. Means of Effectuating the Plan 1. Funding for the Plan The Plan will be funded from the Debtor's sale proceeds, the collection of outstanding receivables, other miscellaneous assets not sold, and from Litigation Trust proceeds. 2. Post-confirmation Management The Debtor's immediate post-confirmation management team will be comprised of the following individuals: (a) Richard Matthews Shepperd, Director of Restructuring (b) Iva Klemick, Vice President of Operations (c) John Palmer, Controller Mr. Shepperd shall continue as Director of Restructuring and shall continue to assist with activities concerning the FDA, DEA, DOJ and SEC as well as, customary financial and operating issues. In addition, he shall oversee the recall of Able's products. As a result of his efforts, it is expected that general unsecured claimholders will receive some distributions on their claims. His area of expertise is crisis management in emerging business and turnaround management assignments. Mr. Shepperd received $30,000 prior to the Commencement Date. He is currently compensated at a rate of approximately $50,000 per month and has received $253,000 subsequent to the Commencement Date. Mr. Shepperd's compensation will be decreasing starting the first or second week in March, again in April and finally upon the projected completion of the recall in May 2006. Ms. Klemick shall continue to serve as Vice President of Operations. Prior to the Commencement Date, Ms. Klemick received $97,596.15 in compensation from the Debtor. Subsequent to the Commencement Date, Ms. Klemick has received $100,000 in compensation from the Debtor. Her current responsibilities include assisting with the recall, interacting with the DEA and EPA, assisting with the transfer of permits, licenses, utilities and contracts to Sun as required by the asset purchase agreement, the retrieval of off-site equipment belonging to the Debtor, completing the forensic back-up of IT Data, and providing document and electronic retrieval for government agencies. Subsequent to Confirmation, Ms. Klemick's responsibilities shall include closing the recall, , dealing with concerns of the DEA, continued involvement with the EPA, completing data back-up, storage and retrieval for the DOJ, SEC, FDA, etc. Ms. Klemick's expertise includes: 25 year's pharmaceutical experience in operations, quality, regulatory, and compliance; FDA and compliance issues; recall and associated activities; DEA reporting and compliance issues; and being the local contact for EPA compliance reporting. Mr. Palmer shall continue as Controller. Mr. Palmer has over twenty years experience as a senior financial executive. Mr. Palmer will continue to be responsible for all phases of financial reporting. Mr. Palmer began his employment by the Debtor post-petition and therefore did not receive any compensation prior to the Commencement Date. Subsequent to the Commencement Date, Mr. Palmer has received $29,000 on account of services rendered to the Debtor. 3. The Litigation Trust On the Effective Date, the Debtor, on its own behalf and on behalf of holders of Allowed Claims in Class 3, shall execute the Litigation Trust Agreement and shall take all other steps necessary to establish the Litigation Trust. The Debtor shall transfer to the Litigation Trust all of its right, title, and interest in the Litigation Trust Claims. In connection with the above-described rights and causes of action, any attorney-client privilege, work-product privilege, or other privilege or immunity attaching to any documents or communications (whether written or oral) shall be transferred to the Litigation Trust and shall vest in the Litigation Trustee and its representatives, and the Debtor, the Debtor in Possession, and the Litigation Trustee are authorized to take all necessary actions to effectuate the transfer of such privileges. The Litigation Trust shall be established for the sole purpose of liquidating its assets, in accordance with Treasury Regulation Section 301.7701-4(d), with no objective to continue or engage in the conduct of a trade or business. The Litigation Trustee shall appointed by the Committee and shall be named in the Litigation Trust Agreement and shall have the power (i) to prosecute for the benefit of the Litigation Trust all claims, rights and causes of action transferred to the Litigation Trust (whether such suits are brought in the name of the Litigation Trust or otherwise), and (ii) to otherwise perform the functions and take the actions provided for or permitted herein or in any other agreement executed by the Litigation Trustee pursuant to the Plan. Any and all proceeds generated from such claims, rights, and causes of action shall be the property of the Litigation Trust. The Litigation Trustee, upon the exercise of its reasonable business judgment, shall, in an expeditious but orderly manner, liquidate and convert to Cash the assets of the Litigation Trust, make timely distributions and not unduly prolong the duration of the Litigation Trust. The liquidation of the Litigation Trust Claims may be accomplished either through the prosecution, compromise and settlement, abandonment or dismissal of any or all claims, rights or causes of action, or otherwise. The Litigation Trustee shall have the absolute right to pursue or not to pursue any and all Litigation Trust Claims as it determines is in the best interests of the beneficiaries of the Litigation Trust, and consistent with the purposes of the Litigation Trust, and shall have no liability for the outcome of its decision except for any damages caused by willful misconduct or gross negligence. The Litigation Trustee may incur any reasonable and necessary expenses in liquidating and converting the assets to Cash and shall be reimbursed in accordance with the provisions of the Litigation Trust Agreement. The transfer of the Litigation Trust Claims to the Litigation Trust shall be made, as provided herein, for the ratable benefit of the holders of Allowed Claims in Class 3, only to the extent the holders in such Class are entitled to distributions under the Plan. In partial satisfaction of Allowed Claims in Class 3, the Litigation Trust Claims shall be transferred to such holders of Allowed Claims, to be held by the Debtor on their behalf. Immediately thereafter, on behalf of the holders of Allowed Claims in Class 3, the Debtor shall transfer such Litigation Trust Claims to the Litigation Trust in exchange for Litigation Trust Interests for the ratable benefit of holders of Allowed Claims in Class 3, in accordance with the Plan. Upon the transfer of the Litigation Trust Claims, the Debtor shall have no interest in or with respect to the Litigation Trust Claims or the Litigation Trust. Notwithstanding the foregoing, for purposes of section 553 of the Bankruptcy Code, the transfer of the Litigation Trust Claims to the Litigation Trust shall not affect the mutuality of obligations which may have otherwise existed prior to the effectuation of such transfer. For all federal income tax purposes, all parties (including, without limitation, the Debtor, the Committee, the Litigation Trustee and the beneficiaries of the Litigation Trust) shall treat the transfer of assets to the Litigation Trust in accordance with the terms of the Plan, as a transfer to the holders of Allowed Claims in Class 3, followed by a transfer by such holders to the Litigation Trust and the beneficiaries of the Litigation Trust shall be treated as the grantors and owners thereof. The Litigation Trustee shall distribute at least annually to the holders of Litigation Trust Interests all net cash income plus all net cash proceeds from the liquidation of assets (including as Cash for this purpose, all Cash Equivalents); provided, however, that the Litigation Trust may retain such amounts (i) as are reasonably necessary to meet contingent liabilities and to maintain the value of the assets of the Litigation Trust during liquidation, (ii) to pay reasonable administrative expenses (including any taxes imposed on the Litigation Trust or in respect of the assets of the Litigation Trust), and (iii) to satisfy other liabilities incurred or assumed by the Litigation Trust (or to which the assets are otherwise subject) in accordance with the Plan or the Litigation Trust Agreement. All such distributions shall be pro rata based on the number of Litigation Trust Interests held by a holder compared with the aggregate number of Litigation Trust Interests outstanding, subject to the terms of the Plan and the Litigation Trust Agreement. The Litigation Trustee may withhold from amounts distributable to any Person any and all amounts, determined in the Litigation Trustee's reasonable sole discretion, to be required by any law, regulation, rule, ruling, directive or other governmental requirement. Notwithstanding anything contained herein to the contrary, in the event that a defendant in a litigation brought by the Litigation Trustee for and on behalf of the Litigation Trust (i) is required by a Final Order to make payment to the Litigation Trust (the "Judgment Amount"), and (ii) is permitted by a Final Order to assert a right of setoff under section 553 of the Bankruptcy Code or applicable non-bankruptcy law against the Judgment Amount (a "Valid Setoff'), (y) such defendant shall be obligated to pay only the excess, if any, of the amount of the Judgment Amount over the Valid Setoff and (z) none of the Litigation Trust, the holders or beneficiaries of the Litigation Trust Interests shall be entitled to assert a claim against the Debtor with respect to the Valid Setoff. Notwithstanding anything contained herein to the contrary, in the event that a compromise and settlement of a Litigation Trust Claim or a Final Order with respect to a Litigation Trust Claim provides for a waiver, subordination or disallowance of a defendant's Claim or Claims against the Debtor for purposes of computing amounts of distributions, (i) such Claim shall be deemed allowed at the lesser of (y) the "Estimated Allowed Amount" (which shall exclude duplicative Claims) of such Claim, as reflected on the Debtor's claims management system, and (z) the filed proof of claim with respect thereto; provided, however, that, in the event that such proof of claim was filed in a zero dollar ($0.00), contingent or unliquidated amount, such Claim shall be deemed allowed at the "Estimated Allowed Amount" of such Claim on the Debtor's claims management system, (ii) such defendant shall be deemed to have assigned such Claim or Claims and right to receive distributions in accordance with the Plan to the Litigation Trust, (iii) the Disbursing Agent shall make distributions with respect to such Allowed Claims to the Litigation Trust and (iv) such defendant shall not be entitled to receive distributions from the Litigation Trust on account thereof, and, provided, further, that, in the event that any modifications are made to the "Estimated Allowed Amount" of Claims as reflected in the Debtor's claims management system, and provided that the Committee shall have an opportunity to review such modifications. The Litigation Trust shall terminate no later than the third (3rd) anniversary of the Effective Date; provided, however, that, on or prior to the date three (3) months prior to such termination, the Bankruptcy Court, upon motion by a party in interest, may extend the term of the Litigation Trust if it is necessary to the liquidation of the Litigation Trust Claims. Notwithstanding the foregoing, multiple extensions can be obtained so long as Bankruptcy Court approval is obtained at least three (3) months prior to the expiration of each extended term. V. OTHER ASPECTS OF THE PLAN A. Distributions Under the Plan One of the key concepts under the Bankruptcy Code is that only claims against, and equity interests in, a debtor that are "Allowed" may receive distributions under a chapter 11 plan. This term is used throughout the Plan and the descriptions below. In general, an Allowed claim or Allowed equity interest simply means that the Debtor agrees, or in the event of a dispute, that the Bankruptcy Court determines, that the claim or equity interest, and the amount thereof, is in fact a valid obligation of the Debtor. 1. Disbursing Agent All distributions under the Plan shall be made by the Debtor as Disbursing Agent (or such other entity designated by the Debtor as a Disbursing Agent on or after the Effective Date). A Disbursing Agent shall not be required to give any bond or surety or other security for the performance of its duties unless otherwise ordered by the Bankruptcy Court, and, in the event that a Disbursing Agent is so otherwise ordered, all costs and expenses of procuring any such bond or surety shall be borne by the Debtor. 2. Timing and Conditions of Distributions (a) Date of Distribution Except as otherwise provided for in the Plan and as set forth in Section IV.C. above, distributions on account of Allowed Claims will be made on or as soon as practicable after the later of the Effective Date and the date an order allowing a Disputed Claim becomes a Final Order. Disputed Claims will be treated as set forth below. (b) De Minimis Distributions The Debtor as Disbursing Agent or such other entity designated by the Debtor as a Disbursing Agent on or after the Effective Date will not be required to distribute Cash to the holder of an Allowed Claim in an impaired Class if the amount of Cash to be distributed on any distribution date under the Plan (including the Initial Distribution Date and the Final Distribution Date) on account of such Claim is less than $25. Any holder of an Allowed Claim on account of which the amount of Cash to be distributed is less than $25 will have its Claim for such distribution discharged and will be forever barred from asserting any such Claim against the Debtor or its property. Any Cash not distributed pursuant to Section 7.8 of the Plan will, in the Debtor's discretion, be included in the Reserves and/or become Available Cash, free of any restrictions thereon, and any such Cash held by a third-party Disbursing Agent will be returned to the Debtor. 3. Procedures for Treating Disputed Claims Under the Plan For purposes of the following discussion, the term "Allowed" when it applies to a Claim means that the Claim has been recognized as a valid Claim against the Debtor and is entitled to participate in the Class to which such Claim belongs. (a) Disputed Claims Disputed Claims include, but are not limited to, any Claim which has not been Allowed pursuant to the Plan or a Final Order, including, without limitation, (i) if no proof of claim has been timely and properly filed, a Claim that has been or hereafter is listed on the Schedules as other than disputed, contingent or unliquidated, but as to which the Debtor or any other party in interest has interposed an objection or request for estimation which has not been withdrawn or determined by a Final Order; or (ii) if a proof of claim (whether relating to a Claim arising before or after the Commencement Date), or request for payment of an Administrative Expense Claim, has been timely and properly filed by the applicable deadline: (1) a Claim for which no corresponding Claim has been or hereafter is listed on the Schedules; (2) a Claim for which a corresponding Claim has been or hereafter is listed on the Schedules as other than disputed, contingent or unliquidated, but for which the nature or amount of the Claim as asserted in the proof of claim varies from the nature and amount of such Claim as listed on the Schedules; (3) a Claim for which a corresponding Claim has been or hereafter is listed on the Schedules as disputed, contingent or unliquidated and which has not been resolved by written agreement of the parties or a Final Order; (4) a Claim for which a timely objection or request for estimation is interposed by the Debtor or any other party in interest, which has not been withdrawn or determined by a Final Order; or (5) any Tort Claim. Further, a creditor who timely and properly filed a cure Claim under section 365(b) of the Bankruptcy Code relating to the assumption and/or assumption and assignment of an executory contract or unexpired lease during the Chapter 11 Case, which cure Claim has not been resolved by written agreement of the parties or a Final Order, shall be deemed to have a Disputed Claim to the extent that such timely and properly filed Claim differs from the amount, if any, of such Claim in the Debtor's books and records. (iii) Because it is not anticipated that the holders of Allowed Equity Interests will receive any distribution on account of such Equity Interests, it is unnecessary to characterize any Equity Interests, or any portion thereof, as Disputed. (iv) Further, notwithstanding anything to the contrary in the Plan, if a Claim is or has been deemed disallowed for failure to comply with the requirements to timely and properly file a proof of claim pursuant to a Final Order establishing a deadline for filing Claims, then, pursuant to such order(s), such Claim will not receive any distribution on account of such Claim, and, thus, it is unnecessary to characterize or otherwise treat any such Claims as Disputed under the Plan. (v) For purposes of determining whether a particular Claim is a Disputed Claim prior to the expiration of any period of limitation fixed for the interposition by the Debtor or the Committee, as the case may be, of any objections to the allowance of Claims, any Claim that is not identified by the Debtor as an Allowed Claim shall be deemed a Disputed Claim. (b) Objections to Claims Unless otherwise ordered by the Bankruptcy Court after notice and a hearing, and except as otherwise expressly provided for in the Plan, the Debtor, in coordination and consultation with the Committee, shall have the exclusive right (except as to applications for allowances of compensation and reimbursement of expenses under sections 330 and 503 of the Bankruptcy Code) to make and file objections to Claims and shall serve a copy of each objection upon the holder of the Claim to which the objection is made as soon as practicable, but in no event later than ninety (90) days after the Effective Date; provided, however, that such ninety (90) day period may be automatically extended by the Debtor, without any further application to, or approval by, the Bankruptcy Court, for an additional thirty (30) days with the consent of the Committee (not to be unreasonably withheld). The foregoing deadlines for filing objections to Claims shall not apply to Tort Claims and, accordingly, no such deadline shall be imposed by the Plan. Notwithstanding the foregoing, the Committee shall also have the right to make and file objections to Claims filed against the Debtor, which objections shall be made in coordination and consultation with the Debtor and shall be made within the time frames provided for in Section 8.3 of the Plan. From and after the Confirmation Date, subject to the Effective Date, all objections shall be litigated to a Final Order except to the extent that the Debtor (with the consent of the Committee not to be unreasonably withheld) or the Committee (with the consent of the Debtor not to be unreasonably withheld), as applicable, elects to withdraw any such objection or the Debtor (with the consent of the Committee not to be unreasonably withheld) or the Committee (with the consent of the Debtor not to be unreasonably withheld), as applicable, and the holder of the Disputed Claim elect to compromise, settle or otherwise resolve any such objection, in which event they may settle, compromise or otherwise resolve any such Disputed Claim without approval of the Bankruptcy Court. If requested by the Committee, the Debtor shall prepare, issue and deliver to the Committee, within forty-five (45) days following the end of each month, a report with respect to the status of the resolution of Disputed Claims, in a form to be agreed upon by the professionals for the Debtor and the Committee. Nothing herein or in the Plan shall alter or impair any settlement authority, procedures and/or protocols used by the Debtor pursuant to orders of the Bankruptcy Court and/or agreement of the Committee prior to the Effective Date and the Debtor may continue, after the Effective Date, to enter into one or more settlements (including, without limitation, lump-sum Cash settlements) pursuant to such pre-Effective Date authority, procedures and/or protocols. With respect to Claims or interests, the Disbursing Agent will hold in a separate interest bearing reserve account such funds as would be necessary in order to make the required distribution on the Claim or interest, as listed either in the Debtor's schedules or the filed proof(s) of claim. The Debtor has reviewed the proofs of claim that have been filed. As stated above, in excess of 170 proofs of claim were filed in the Debtor's Chapter 11 Case totaling $396,324,231.53. The Debtor estimates that it will object to 111 claims with an alleged value in the amount of $362,224,160.64. (c) No Distributions Pending Allowance If any portion of a Claim is a Disputed Claim, no payment or distribution shall be made on account of the Claim until the disputed portion of the Claim becomes an Allowed Claim or is otherwise resolved. Pending the allowance or disallowance of the Disputed Claims, the Debtor shall withhold from the payments and distributions made pursuant to the Plan to the holders of Allowed Claims the payments and distributions allocable to the Disputed Claims as if the Disputed Claims had been Allowed Claims. (d) Distributions After Allowance If, on or after the Effective Date, any Disputed Claim becomes an Allowed Claim, the Debtor shall distribute to the holder thereof the distributions, if any, to which such holder is then entitled under the Plan. Any distributions shall be made as soon as practicable after the date that (i) the order or judgment of the Bankruptcy Court allowing such Disputed Claim (or portion thereof) becomes a Final Order, or (ii) the parties enter into an agreement to compromise, settle or otherwise resolve such Disputed Claims in accordance with the procedures set forth herein (including, without limitation, any pre-Effective Date settlement authority, procedures and/or protocols), but in no event more than thirty (30) days thereafter. (e) No Recourse With Respect to Disputed Claims Notwithstanding that the Allowed amount of any particular Disputed Claim is reconsidered under the applicable provisions of the Bankruptcy Code and Bankruptcy Rules, no Claim holder will have recourse against the Disbursing Agent, the Debtor, the Committee, or any of its professional consultants, officers, directors or members or its successors or assigns, or any of its property. However, nothing in the Plan will modify any right of a holder of a Claim under section 502(j) of the Bankruptcy Code. B. Treatment of Executory Contracts and Unexpired Leases 1. Contracts and Leases Not Expressly Assumed Are Rejected On the Effective Date, all executory contracts and unexpired leases to which the Debtor is a party shall be deemed rejected as of the Effective Date, except for an executory contract or unexpired lease that (i) is specifically designated as a contract or lease to be assumed on the Schedule of Assumed Contracts set forth in the Plan Supplement, provided, however, that the Debtor reserves the right to amend the Plan Supplement at any time on or before the Effective Date to amend the Schedule of Assumed Contracts to add or delete any executory contract or unexpired lease, thus providing for its assumption, assumption and assignment, or rejection, or (ii) is the subject of a separate motion to assume, assume and assign, or reject filed under section 365 of the Bankruptcy Code by the Debtor on or before the Effective Date. The Debtor expressly reserves the right to reject any contract or lease in the event that there is a dispute concerning the amount necessary to cure defaults, notwithstanding the fact that such dispute may arise after the Effective Date of the Plan. If you are a party to a contract or lease to be assumed or rejected and you object to the assumption or rejection of your lease or contract, you must file and serve your objection to the Plan within the deadline for objecting to the confirmation of the Plan. 2. Cure of Defaults Generally, if there has been a default (other than a default specified in section 365(b)(2) of the Bankruptcy Code) under an executory contract or unexpired lease, the Debtor can assume the contract or lease only if the Debtor cures the default. Accordingly, a condition to the assumption of an executory contract or unexpired lease is that any default under an executory contract or unexpired lease that is to be assumed pursuant to the Plan will be cured in a manner consistent with the Bankruptcy Code and as set forth in Section 10.2 of the Plan. 3. Rejection Claims If an entity with a claim for damages arising from the rejection of an executory contract or unexpired lease under the Plan has not filed a proof of claim for such damages within twenty (20) days after the Effective Date, that Claim shall be barred and shall not be enforceable against the Debtor or its Estate. C. Discharge and Releases The Plan provides that the rights afforded in the Plan and the entitlement to receive payments and distributions to be made thereunder shall, except for liabilities imposed by the Plan, discharge all existing Claims, of any kind, nature or description whatsoever against the Debtor or any of its assets or properties from and after the Commencement Date and on or prior to the Effective Date. The Plan also provides for the release of all claims by the Debtor against (i) any director, officer, agent or employee of the Debtor who was employed or otherwise serving in such capacity on the Commencement Date, (ii) the outside directors of the Debtor serving in such capacity on the Commencement Date, namely David Tierney, Elliot Hahn, Harry Silverman, and Jerry Treppel, (iii) the Committee, and (iv) any member of the Committee, any member, director, officer, agent or employee of a member of the Committee, or any of the Debtor's or the Committee's attorneys or advisors, in each case who were acting, employed or otherwise serving in such capacity on the Confirmation Date, with respect to the activities of such releasees in the Chapter 11 Case, except for claims against directors, officers or employees of the Debtor in respect of any loan or other contractual obligation owed by these individuals person to the Debtor. The release is limited to claims that could be asserted by the Debtor and only applies to claims against such parties in their representative capacities. (a) Neither the Debtor nor any Releasee shall have or incur any liability to any holder of a Claim or Equity Interest for any act or omission (and in the case of any director, officer, agent or employee of the Debtor who was employed or otherwise serving in such capacity on the Commencement Date, any claims against such Persons) in connection with, or arising out of, the Chapter 11 Case, the pursuit of confirmation of the Plan, transactions or relationships with the Debtor, securities claims, fiduciary and other similar claims, the consummation of the Plan, the administration of the Plan or the property to be distributed under the Plan, and, in all respects, the Debtor and such Persons shall be entitled to rely upon the advice of counsel with respect to its duties and responsibilities during the Chapter 11 Case and under the Plan. Without limitation of the foregoing, each such Releasee shall be released and exculpated from any and all claims (as defined in section 101(5) of the Bankruptcy Code), obligations, suits, judgments, damages, rights, causes of action and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, that any holder of a Claim or Equity Interest is entitled to assert in its own right or on behalf of any other Person, based in whole or in part upon any act or omission, transaction, agreement, event or other occurrence taking place after the Commencement Date and on or before the Effective Date and in any way relating to the subject matter of Section 12.6 of the Plan. Such release shall be based upon the contribution of available insurance proceeds in connection with any pending or future Derivative Claims. (b) The purpose of the release of the personnel of the Debtor is to prevent a collateral attack against those individuals based on derivative actions for their conduct during the course of the Chapter 11 Case. Despite many obstacles, those officers, directors, employees and agents that remained with the Debtor, not only continued to stay with the company, but also made enormous contributions to the sale, recall and claim reconciliation efforts that have benefited the Debtor's Estate. In order for the Debtor to continue to retain those employed, it is important that they be relieved of the threat of any derivative actions against them personally by parties in the Chapter 11 Case that may be dissatisfied with the treatment provided in the Plan. (c) The purpose of the release of the representatives of the other major constituency in this Case, the Committee, is to protect the chapter 11 process for individuals who have contributed to the Debtor's efforts to maximize the recovery to the creditors. The Debtor is not aware of any pending or threatened actions against the representatives of the Committee. D. Miscellaneous Provisions The Plan contains provisions relating to retiree benefits, post-Confirmation fees and expenses, exemption from transfer taxes, abandonment of records, payment of statutory fees, substantial consummation, compliance with tax requirements, severability, revocation, and amendment of the Plan, governing law, and timing. For more information regarding these items, see the Plan attached hereto as Exhibit B. E. Changes in Rates Subject to Regulatory Commission Approval This Debtor is not subject to governmental regulatory commission approval of its rates. F. Retention of Jurisdiction The Court will retain jurisdiction as provided in Section 13 of the Plan. G. Effective Date The Plan will become effective on the Effective Date, which is the date on which the order of confirmation becomes final and the conditions precedent set forth in Plan Section 11.1 are satisfied. H. Modification The Debtor may alter, amend or modify the Plan at any time prior to the Confirmation Date and thereafter as provided in Section 1127(b) of the Bankruptcy Code. I. Risk Factors Attendant to the Plan Holders of Claims against and Interests in the Debtor who are entitled to vote to accept or reject the Plan should carefully consider the risk factors set forth below prior to voting to accept or reject the Plan. 1. Bankruptcy Considerations A. Failure to Receive Requisite Accepting Votes In order for the Plan to be accepted, of those Holders of Claims who cast ballots, the affirmative vote of at least two-thirds (2/3) in amount and more than one-half (1/2) in number of Allowed Claims in each voting class is required. If the requisite votes are not received to accept the Plan, the Chapter 11 Case could be converted chapter 7 of the Bankruptcy Code. There can be no assurance that the distributions under a liquidation under chapter 7 of the Bankruptcy Code would be similar to or as favorable to Holders of Claims as those proposed in the Plan. The Debtor believes that distributions to Creditors would be reduced under a chapter 7 proceeding, as demonstrated in the liquidation analysis annexed hereto as Exhibit C. B. Risk of Non-Confirmation of the Plan Although the Debtor believes that the Plan satisfies all legal requirements necessary for confirmation by the Bankruptcy Court, there can be no assurance that the Bankruptcy Court will confirm the Plan. There can also be no assurance that modifications of the Plan will not be required for confirmation or that such modifications would not necessitate re-solicitation of votes to accept or reject the Plan. 2. Business Considerations A. Variances from Projections As noted in the Plan and this Disclosure Statement, the Debtor has estimated distributions to creditors based upon certain financial projections. The projections reflect assumptions concerning, among other thing, the Debtor's ability to control expenses, the ultimate disposition of certain pending litigation and the completion of the ongoing recall of the Debtor's products. The Debtor believes the assumptions underlying the projections are reasonable; however, unanticipated events occurring subsequent to the preparation of the projections may affect the actual financial results of the Debtor. B. Adverse Effect of Pending Litigation As noted in the Plan and this Disclosure Statement, the outcome of certain pending litigation identified in the schedule attached hereto as Exhibit "D," may materially and adversely affect distributions under the Plan. In particular, Mehta et al. v. Able, Adv. Proc. 05-2756, is an adversary proceeding that seeks priority claim treatment on behalf of a class made up of approximately 340 former employees. Furthermore, Kirtley et al. v. Able, Adv. Proc. 05-6128, is an adversary proceeding that seeks damages in the amount of $280 million on behalf of a class made up of individuals who allegedly purchased Able products. If the plaintiffs in the Mehta and Kirtley cases are successful, the distributions to holders of Allowed Unsecured Claims will be materially and adversely affected. Moreover, the legal and other costs associated with litigating these claims may materially and adversely affect the distribution to holders of Allowed Unsecured Claim. C. Adverse Effect of the Recall As noted in the Plan and this Disclosure Statement, the Debtor is currently involved in a recall of its products (the "Recall"). The final accounting associated with the Recall may adversely affect distributions under the Plan. VI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN CREDITORS AND INTEREST HOLDERS CONCERNED WITH HOW THE PLAN MAY AFFECT THEIR TAX LIABILITY SHOULD CONSULT WITH THEIR OWN ACCOUNTANTS, ATTORNEYS, AND/OR ADVISORS. The following disclosure of possible tax consequences is intended solely for the purpose of alerting readers to possible tax issues this Plan may present to the Debtor. The Debtor CANNOT and DOES NOT represent that the tax consequences contained below are the only tax consequences of the Plan because the Tax Code embodies many complicated rules which make it difficult to state completely and accurately all the tax implications of any action. The following discussion is a summary of certain United States federal income tax consequences of the transactions described herein and in the Plan to holders of Allowed Claims. This discussion is based on the Internal Revenue Code of 1986, as amended, Treasury regulations promulgated thereunder, judicial decisions, and administrative rulings and practice, all as of the date of this Disclosure Statement, and all of which are subject to change, possibly with retroactive effect. This summary does not discuss all aspects of federal income taxation that may be relevant to a particular holder in light of its individual circumstances or to certain types of holders subject to special treatment under the federal income tax laws, such as o tax-exempt organizations, o insurance companies, o financial institutions, o brokers and dealers in securities or currencies, o partnerships and other pass-through entities, o holders that hold its Claims as part of a hedge, straddle, conversion, or other risk-reduction arrangement, and o holders whose functional currency is not the U.S. Dollar. This summary does not address any foreign, state, local, or other tax consequences of the consummation of the Plan. This discussion is limited to original holders of Allowed Claims and assumes that such holders hold its Claims as capital assets for federal income tax purposes. Also, this discussion applies only to holders that are United States persons. A "United States person" means (1) a citizen or resident of the United States (as defined for federal income tax purposes), (2) a corporation created or organized in or under the laws of the United States or any political subdivision thereof, (3) an estate the income of which is subject to United States federal income taxation regardless of its source, (4) a trust that is subject to the supervision of a court within the United States and the control of one or more United States persons, or (5) certain electing trusts that were in existence and treated as domestic trusts on August 20, 1996. The tax consequences described herein are uncertain. The Debtor has not sought and will not seek a ruling from the Internal Revenue Service (the "IRS"), or an opinion of counsel, regarding any of the matters discussed herein and there can be no assurance that the IRS will not challenge one or more of the conclusions set forth below. Each holder of a Claim is urged to consult its own tax advisor as to the specific tax consequences of the consummation of the Plan, including the applicability and effect of federal, state, local, and non-U.S. tax laws. A. Tax Consequences to Holders of General Unsecured Claims. 1. Gain or Loss. A holder of an Allowed Claim will generally recognize taxable gain or loss on the Effective Date equal to the difference between (i) the amount of cash or other consideration received, and (ii) the holder's adjusted tax basis in its Claim surrendered in exchange therefore, except to the extent described below with respect to accrued and unpaid interest. Such gain or loss, if any, will generally be capital gain or loss, and will be long-term capital gain or loss if the holder held its Claim for more than one year at the Effective Date. A holder of an Allowed Claim will recognize ordinary income to the extent that any consideration received or deemed received is allocable to accrued and unpaid interest on such Claim that has not previously been included in such holders gross income for federal income tax purposes. In the event that the consideration allocable to interest on an Allowed Claim is less than the amount previously included in the holder's gross income, the holder generally recognizes a loss to the extent of the unpaid interest. 2. Disputed Claims Reserves. The Debtor believes that interest earned in respect the Disputed Claims Reserves should be taxable to the Debtor. However, if the holder of a Disputed Claim that is subsequently Allowed receives a distribution of cash subsequent to the Effective Date the imputed interest provisions of the Tax Code may apply to treat a portion of the distribution received by such holder as imputed interest. With respect to certain holders, such imputed interest may accrue over time using the constant yield method, which could require such holders to include such imputed interest in income prior to the actual distribution. To the extent any holder holds both an Allowed Claim and a Disputed Claim, recognition of any loss, and a portion of any gain, realized by such holder may be deferred until all distributions to such holder are made. Any such holder is urged to consult its tax advisor regarding the possible application of (or ability to elect out of) the "installment method" of reporting any gain that may be recognized by such holder with respect to its Claims. If there are no Disputed Claims remaining other than Tort Claims, the Disputed Claims Reserves might be treated thereafter as a "qualified settlement fund." If so treated, the Disputed Claims Reserves would be a separate taxable entity such that any interest earned in respect of the Disputed Claims Reserves would be taxable to the entity, and not the Debtor or creditors, at a rate equal to the maximum rate applicable to trusts and estate. Further, if the Disputed Claims Reserves are treated as a qualified settlement fund, any interest income earned by the Disputed Claims Reserves could generally be offset to the extent of any administrative expenses incurred. Although regulations addressing certain aspects of qualified settlement funds have recently been issued, no regulations have been promulgated that specifically apply in the context of a bankruptcy. Depending on the facts, such accounts possibly could be treated as a grantor trust to the Debtor, as a grantor trust to the creditors, as a separately taxable trust, or otherwise. Each Claim holder is urged to consult its tax advisor regarding the potential taxation of the Disputed Claims Reserves. 3. Withholding and Reporting Requirements. The Debtor will withhold any amounts required by law to be withheld from payments to holders of Claims. In addition, information reporting requirements will generally apply to payments on the Effective Date, and to Distributions from the Disputed Claims Reserves in respect of interest. Such amounts may be subject to a backup withholding tax. Backup withholding generally does not apply to a holder who (1) is a corporation or comes within certain exempt categories and, when required, demonstrates this fact, or (2) furnishes a correct taxpayer identification number and makes certain other required certifications as provided by the backup withholding rules. Generally, a holder will provide such certifications on IRS Form W-9. A holder who does not furnish the Debtor with his or her correct taxpayer identification number may also be subject to penalties imposed by the IRS. Backup withholding is not an additional tax and may be claimed as a credit against a holder's United States federal income tax liability, provided that the required information is furnished to the IRS. B. Consequences to the Debtor Because of the existence and extent of the Debtor's net operating loss carryforwards, the Debtor believes that there will be no material federal income tax consequences to them as a result of the implementation of the Plan or the cancellation of its indebtedness with respect to Disputed Claims. As a result of the wind up of the Debtor, the Debtor's previously reported net operating losses, to the extent not already limited for federal income tax purposes and not utilized in connection with such liquidation or previously, will no longer be available. However, there is no assurance that the IRS would not take a contrary position. In particular, given the lack of authoritative guidance as to the survival and utilization of net operating loss carryforwards in the context of a liquidating chapter 11 plan, there is a risk that the Debtor's net operating loss carryforwards and any losses incurred through the end of the taxable year in which the Plan is confirmed would not be available in any subsequent taxable year to offset any income recognized by the Debtor (e.g., interest income earned with respect to the Disputed Claims Reserves) prior to the final completion of Plan. As indicated above, the foregoing discussion is intended to be a summary only and does not address all of the specific tax consequences of any particular holder based on its specific circumstances. The federal, state, local, and foreign tax consequences of the Plan are complex and, in many areas, uncertain. Accordingly, each holder is strongly urged to consult its own tax advisor regarding the specific tax consequences to them. VII. CONFIRMATION REQUIREMENTS AND PROCEDURES PERSONS OR ENTITIES CONCERNED WITH CONFIRMATION OF THIS PLAN SHOULD CONSULT WITH THEIR OWN ATTORNEYS BECAUSE THE LAW ON CONFIRMING A PLAN IS VERY COMPLEX. The following discussion is intended solely for the purpose of alerting readers about basic confirmation issues, that they may wish to consider, as well as certain deadlines for filing claims. The Debtor CANNOT and DOES NOT represent that the discussion contained below is a complete summary of the law on this topic. Many requirements must be met before the Court can confirm a Plan. Some of the requirements include that the Plan must be proposed in good faith, that creditors or interest holders have accepted the Plan, that the Plan pays creditors at least as much as creditors would receive in a Chapter 7 liquidation, and that the Plan is feasible. These requirements are not the only requirements for confirmation. A. Who May Vote or Object 1. Who May Object to Confirmation of the Plan Any party in interest may object to the confirmation of the Plan, but as explained below not everyone is entitled to vote to accept or reject the Plan. 2. Who May Vote to Accept/Reject the Plan A creditor or interest holder has a right to vote for or against the Plan if that creditor or interest holder has a claim that is both (1) allowed or allowed for voting purposes and (2) classified in an impaired class. (a) Allowed Claim/Interest As noted above, a creditor or interest holder must first have an allowed claim or interest to have the right to vote. Generally, any proof of claim or interest will be allowed, unless a party in interest brings a motion objecting to the particular claim or interest claims. When an objection to a claim or interest is filed, the creditor or interest holder holding the claim or interest cannot vote unless the Court, after notice and hearing, either overrules the objection or allows the claim or interest for voting purposes. THE BAR DATE FOR FILING A PROOF OF CLAIM FOR MOST CREDITORS IN THIS CASE IS MARCH 20, 2006. A creditor or interest holder may have an allowed claim or interest even if a proof of claim or interest was not timely filed. A claim is deemed allowed if (1) it is scheduled on the Debtor's schedules and such claim is not scheduled as disputed, contingent, or unliquidated, and (2) no party in interest has objected to the claim. An interest is deemed allowed if it is scheduled and no party in interest has objected to the interest. (b) Impaired Claim/Interest As noted above, an allowed claim or interest only has the right to vote if it is in a class that is impaired under the Plan. A class is impaired if the Plan alters the legal, equitable, or contractual rights of the members of that class. For example, a class comprised of general unsecured claims is impaired if the Plan fails to pay the members of that class 100% of their claim plus interest. In this case, the Debtor believes that classes 1, 3, and 4 are impaired and that holders of claims in each of these classes are therefore entitled to vote to accept or reject the Plan. The Debtor believes that class 2 is unimpaired and that holders of claims in this class therefore does not have the right to vote to accept or reject the Plan. The Debtor believes that classes 5 and 6 are impaired. However, there shall be no distribution to holders of class 5 and/or class 6 claims. Therefore, claims 5 and 6 are deemed to impact the Plan, and the Debtor will not solicit their votes. Parties who dispute the Debtor's characterization of their claim or interest as being impaired or unimpaired may file an objection to the Plan contending that the Debtor has incorrectly characterized the class. 3. Who Is Not Entitled to Vote The following four types of claims are not entitled to vote: (1) claims that have been disallowed; (2) claims in unimpaired classes; (3) claims entitled to priority pursuant to Code Section 507(a)(1), (a)(2), and (a)(8); and (4) claims in classes that do not receive or retain any value under the Plan. Claims in unimpaired classes are not entitled to vote because such classes are deemed to have accepted the Plan. Claims entitled to priority pursuant to Code Section 507(a)(1), (a)(2), and (a)(8) are not entitled to vote because such claims are not placed in classes and they are required to receive certain treatment specified by the Code. Claims in classes that do not receive or retain any value under the Plan do not vote because such classes are deemed to have rejected the Plan. EVEN IF YOUR CLAIM IS OF THE TYPE DESCRIBED ABOVE, YOU MAY STILL HAVE A RIGHT TO OBJECT TO THE CONFIRMATION OF THE PLAN. 4. Who Can Vote in More Than One Class A creditor whose claim has been allowed in part as a secured claim and in part as an unsecured claim is entitled to accept or reject a Plan in both capacities by casting one ballot for the secured part of the claim and another ballot for the unsecured claim. 5. Votes Necessary to Confirm the Plan If impaired classes exist, the Court cannot confirm the Plan unless (1) at least one impaired class has accepted the Plan without counting the votes of any insiders within that class, and (2) all impaired classes have voted to accept the Plan, unless the Plan is eligible to be confirmed by "cramdown" on non-accepting classes, as discussed in Section (VII.A.8.). 6. Votes Necessary for a Class to Accept the Plan A class of claims is considered to leave accepted the Plan when more than one-half (1/2) in number and at least two-thirds (2/3) in dollar amount of the allowed claims that actually voted, voted in savor of the Plan. A class of interests is considered to have accepted the Plan when at least two-thirds (2/3) in amount of the allowed interest-holders of such class which actually voted, voted to accept the Plan. 7. Treatment of Nonaccepting Classes As noted above, even if all impaired classes do not accept the proposed Plan, the Court may nonetheless confirm the Plan if the nonaccepting classes are treated in the manner required by the Code. The process by which nonaccepting classes are forced to be bound by the terms of the Plan is commonly referred to as "cramdown". The Code allows the Plan to be "crammed down" on nonaccepting classes of claims or interests if it meets all consensual requirements except the voting requirements of Section 1129(a)(8) and if the Plan does not "discriminate unfairly" and is "fair and equitable" toward each impaired class that has not voted to accept the Plan as referred to in 11 U.S.C. ss.1129(b) and applicable case law. 8. Request for Confirmation Despite Nonacceptance by Impaired Class(es) The Debtor asks the Court to confirm this Plan by cramdown on impaired classes if any of these classes do not vote to accept the Plan. VIII. VOTING PROCEDURES AND REQUIREMENTS Detailed voting instructions are provided with the ballot accompanying this Disclosure Statement. The following Classes are the only Classes entitled to vote to accept or reject the Plan. - --------------------------- ---------------------------------------------------- Class Description - --------------------------- ---------------------------------------------------- 1 Secured Claims - --------------------------- ---------------------------------------------------- 3 General Unsecured Claims - --------------------------- ---------------------------------------------------- 4 Convenience Claims - --------------------------- ---------------------------------------------------- If your Claim or Equity Interest is not in one of these Classes, you are not entitled to vote. If your Claim is in one of these Classes, you should read your ballot and follow the listed instructions carefully. Please only use the ballot that accompanies this Disclosure Statement. - -------------------------------------------------------------------------------- For Ballot Information, you may call Timothy R. Wheeler, Esq. at (973) 597-2500 - -------------------------------------------------------------------------------- A. Vote Required for Acceptance by a Class The Debtor has filed a motion seeking entry of the Voting Procedures Order to set certain procedures in connection with voting on the Plan. If the Voting Procedures Order is approved, it will set forth the procedures to be employed in tabulating acceptances and rejections of the Plan. - -------------------------------------------------------------------------------- Class Vote Required to Accept a Plan Acceptance of the Plan by a Class of Claims will be determined by calculating the number and the amount of Claims voting to accept, based only on the Claims in the Class actually voting. Acceptance by a Class of Claims requires an affirmative vote of a majority of the total Claims voting and two-thirds in amount of the total Claims in the Class voting. Any impaired Class that fails to achieve the specified majority vote will be deemed to have rejected the Plan. - -------------------------------------------------------------------------------- B. Classes Not Entitled to Vote Under section 1126(g) the Bankruptcy Code, holders of Claims or Equity Interests are not entitled to vote if its contractual rights are unimpaired by the Plan or if they will not receive any property under the Plan. Based on this standard, the holders of Claims in Class 2 are not being affected by the Plan and thus are not entitled to vote on the Plan. In addition, the holders of Claims or Equity Interests in Classes 5 and 6 are unlikely to receive any property under the Plan. Therefore, they are deemed to reject the Plan and are not entitled to vote. For a summary of the Classes entitled to vote, see the table and descriptions in Section IV.D. C. Voting In order for your vote to be counted, your vote must be received by Timothy R. Wheeler, Esq. at the following address before the voting deadline of 5:00 p.m., Eastern Time, on [______], 2006: ------------------------------------------------- Lowenstein Sandler PC 65 Livingston Avenue Roseland, New Jersey 07068 ATTN: Timothy R. Wheeler, Esq. ------------------------------------------------- If the instructions on your ballot require you to return the ballot to your bank, broker or other nominee, or to its agent, you must deliver your ballot to them in sufficient time for them to process it and return it to Timothy R. Wheeler, Esq. at Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey 07068 before the voting deadline. If a ballot is damaged or lost, you may contact Timothy R. Wheeler, Esq. by calling (973) 597-2500. Any ballot that is executed and returned but which does not indicate an acceptance or rejection will be treated as an acceptance. IX. CONFIRMATION OF THE PLAN A. Confirmation Hearing -------------------------------------------------------------------- Confirmation Hearing The Court will hold the confirmation hearing at the following time and place: Date and Time: commencing at [______], 2006. (Eastern Time), on [_______]. Place: The United States Bankruptcy Court, District of New Jersey, Clarkson S. Fisher US Courthouse, 402 East State Street, Trenton, NJ 08608. Judge: The Honorable Raymond T. Lyons The confirmation hearing may be adjourned from time to time by the Debtor or the Bankruptcy Court without further notice except for an announcement of the adjourned date made at the confirmation hearing or any subsequent adjourned confirmation hearing. -------------------------------------------------------------------- Section 1128(b) of the Bankruptcy Code provides that any party in interest may object to confirmation of a plan. Any objection to confirmation of the Plan must be in writing, state the name and address of the objecting party and the nature of the Claim or Equity Interest of such party, provide a concise statement of the basis for such objection or proposed modification, including, if applicable: (i) the specific page number of the Plan to which the objection refers; (ii) the specific language proposed to be deleted, if a deletion is sought; (iii) a draft of the precise language that the objecting party proposes be added or substituted; and (iv) the reasons and statutory or other authority therefor and be filed, together with proof of service, with the Bankruptcy Court (with a copy to the chambers of the Honorable Raymond T. Lyons), and must further be served upon the following parties: (1) Able Laboratories, Inc., 1 Able Drive, Cranbury, New Jersey 08512-0869, Attn: Richard M. Shepperd; (2) Cadwalader, Wickersham & Taft LLP, 1201 F Street N.W., Suite 1100, Washington, DC 20004, Attn: Mark C. Ellenberg, Esq., co-counsel to the Debtor and Debtor-in-Possession; (3) Cadwalader, Wickersham & Taft LLP, One World Financial Center, New York, New York 10281, Attn: Deborah J. Piazza, Esq., co-counsel to the Debtor and Debtor-in-Possession; (3) Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey 07068, Attn: Sharon Levine, Esq., co-counsel to the Debtor and Debtor-In-Possession; (4) Duane Morris LLP, 744 Broad Street, Suite 1200, Newark, New Jersey 07102, Attn: Walter Greenhalgh, Esq., counsel to the Committee; and (5) Office of the United States Trustee, One Newark Center, Suite 2100, Newark, New Jersey 07102, Attn: Fran B. Steele, Esq., in each case so as to be actually received no later than 4 p.m. (Eastern Time) on [_______], 2006. Objections to confirmation of the Plan are governed by Rule 9014 of the Federal Rules of Bankruptcy Procedure. UNLESS AN OBJECTION TO CONFIRMATION IS TIMELY SERVED AND FILED, IT MAY NOT BE CONSIDERED BY THE BANKRUPTCY COURT. The Bankruptcy Court will confirm the Plan only if all of the requirements of section 1129 of the Bankruptcy Code are met. Among the requirements for confirmation are that the Plan (i) is accepted by all impaired classes of Claims entitled to vote or, if rejected by an impaired Class, that the Plan "does not discriminate unfairly" and is "fair and equitable" as to such Class and as to the impaired Classes of Claims and Equity Interests that are deemed to reject the Plan, (ii) is feasible and (iii) is in the "best interests" of the holders of Claims and Equity Interests impaired under the Plan. B. Acceptance of the Plan The Bankruptcy Code defines acceptance of a chapter 11 plan by a class of creditors as acceptance by creditors holding two-thirds (2/3) in dollar amount and a majority in number of the claims in such class (other than any such creditor designated under section 1126(e) of the Bankruptcy Code), but for that purpose counts only those creditors that actually cast ballots. Holders of claims that fail to vote are not counted as either accepting or rejecting a plan. C. No Unfair Discrimination/Fair and Equitable Test In the event that any impaired Class of Claims does not accept the Plan, the Bankruptcy Court may still confirm the Plan at the request of the Debtor if, as to each impaired Class of Claims which has not accepted the Plan, the Plan "does not discriminate unfairly" and is "fair and equitable." Because the holders of Claims or Equity Interests in Classes 5 and 6 will not receive any distribution under the Plan and are, therefore, deemed to have rejected the Plan, the Bankruptcy Court may only confirm the Plan if the Plan "does not discriminate unfairly" and is "fair and equitable" with respect to such Classes of Claims and Equity Interests. A chapter 11 plan does not discriminate unfairly, within the meaning of the Bankruptcy Code, if the legal rights of a dissenting class are treated in a manner consistent with the treatment of other classes whose legal rights are substantially similar to those of the dissenting class and if no class of claims or equity interests receives more than it legally is entitled to receive for its claims or equity interests. Under the Bankruptcy Code, "fair and equitable" has different meanings for secured and unsecured claims. With respect to a secured claim, "fair and equitable" means (i) the impaired secured creditor retains its liens to the extent of its allowed claim and receives deferred cash payments at least equal in value to the allowed amount of its claim with a present value as of the effective date of the plan at least equal in value to such creditor's interest in the Debtor's interest in the property securing its claim, (ii) if property subject to the lien of the impaired secured creditor is sold free and clear of that lien, the lien attaches to the proceeds of the sale, and such lien proceeds are treated in accordance with clause (i) or (iii) of this paragraph, or (iii) the impaired secured creditor realizes the "indubitable equivalent" of its claim under the plan. With respect to an unsecured claim, "fair and equitable" means either (i) each impaired unsecured creditor receives or retains property of a value, as of the effective date of the plan, equal to the amount of its allowed claim, or (ii) the holders of claims or interests that are junior to the claims or interests of the dissenting class will not receive or retain any property under the plan. With respect to equity interests, "fair and equitable" means that each equity interest holder (i) will receive or retain property of a value, as of the effective date of the plan, equal to the greatest of (a) the allowed amount of any fixed liquidation preference to which such holder is entitled, (b) any fixed redemption price to which such holder is entitled, or (c) the value of such interest; or (ii) the holder of any interest that is junior to the interests of such class will not receive or retain any property under the plan on account of such junior interest. Under the Plan, no holder in a Class of Claims is to receive Cash or other property in excess of the full amount of its Allowed Claim. As to holders of Allowed Secured Claims, the Plan provides that each such holder will retain its liens to the extent of its Allowed Claim and will receive on the Initial Distribution Date a Cash payment or payment in kind equal in value to the Allowed Amount of its Secured Claim. As to holders of Allowed General Unsecured Claims, no holder of a Claim or Equity Interest with rights junior to holders of more senior Claims will receive any distributions or retain any property under the Plan until such senior creditors have received full payment on account of its Allowed Claims. As to holders of Allowed Equity Interests, although such holders will not receive or retain any property under the Plan, there is no class junior to such Equity Interests which receives or retains any property under the Plan. Accordingly, the Debtor believes that the Plan does not discriminate unfairly as to any impaired Class of Claims or Equity Interests and is fair and equitable with respect to each such Class. D. The Best Interests Test and Liquidation Analysis The Bankruptcy Code provides that the Plan will not be confirmed, regardless of whether or not anyone objects to Confirmation, unless the Bankruptcy Court finds that the Plan is in the "best interests" of all Classes of Claims and Equity Interests which are impaired. The "best interests" test will be satisfied by a finding of the Bankruptcy Court that either (i) all holders of impaired Claims or Equity Interests have accepted the Plan, or (ii) the Plan will provide such a holder that has not accepted the Plan with a recovery at least equal in value to the recovery such holder would receive if the Debtor were liquidated under chapter 7 of the Bankruptcy Code. THE DEBTOR BELIEVES THAT THE PLAN IS IN THE BEST INTERESTS OF EACH CLASS OF CLAIMS OR EQUITY INTERESTS WHICH IS IMPAIRED UNDER THE PLAN. The starting point in determining whether the Plan meets the "best interests" test is a determination of the amount of proceeds that would be generated from the liquidation of the Debtor's remaining assets in the context of a chapter 7 liquidation. Such value must then be reduced by the costs of such liquidation, including costs incurred during the Chapter 11 Case and allowed under chapter 7 of the Bankruptcy Code (such as professionals' fees and expenses), a trustee's fees, and the fees and expenses of professionals retained by a trustee. The potential chapter 7 liquidation distribution in respect of each Class must be further reduced by costs imposed by the delay caused by conversion to chapter 7. The net present value of a hypothetical chapter 7 liquidation distribution in respect of an impaired Class is then compared to the recovery in respect of such Class provided for in the Plan. In a chapter 7 case, the Debtor's assets are usually sold by a chapter 7 trustee. Secured creditors are paid first from the sales proceeds of properties on which the secured creditor has a lien. Administrative claims are paid next. Next, unsecured creditors are paid from any remaining sales proceeds, according to their rights to priority. Unsecured creditors with the same priority share in proportion to the amount of their allowed claims. Finally, interest holders receive the balance that remains after all creditors are paid, if any. A liquidation analysis is annexed hereto as Exhibit "C." In order for the Court to confirm this Plan, the Court must find that all creditors and interest holders who do not accept the Plan will receive at least as much under the Plan as such holders would receive under a chapter 7 liquidation. For the reasons set forth above, the Debtor submits that each impaired Class will receive under the Plan a recovery at least equal in value to the recovery such Class would receive pursuant to a liquidation of the Debtor under chapter 7 of the Bankruptcy Code. E. Feasibility Section 1129(a)(11) of the Bankruptcy Code provides that a chapter 11 plan may be confirmed only if the Bankruptcy Court finds that such plan is feasible. A feasible plan is one which will not lead to a need for further reorganization or liquidation of the debtor, unless such reorganization or liquidation is proposed in the Plan. Because the Plan provides for the liquidation of the Debtor, the Bankruptcy Court will find that the Plan is feasible if it determines that the Debtor will be able to satisfy the conditions precedent to the Effective Date and otherwise have sufficient funds to meet its post-Confirmation Date obligations to pay for the costs of administering and fully consummating the Plan and closing the chapter 11 Case. The Debtor maintains that it will have enough cash on hand on the projected Effective Date to pay all the claims and expenses that are entitled to payment on such date as illustrated here: Cash Debtor will have on hand - approximately $14,820,000 (This does not include the $3,000,000 cash Debtor has in escrow account to be paid as described above) To Pay: Administrative expense claims to professionals - approximately $800,000 To Pay: Statutory costs & charges - approximately $15,000 To Pay: Other Plan Payments due on Effective Date - n/a Balance of all Cash after paying these amounts - $17,820,000 (Cash on hand as of Effective Date is net of payments to be made) The sources of the available Cash Debtor will have on hand by the Effective Date, as shown above are: $14,820,000 Remaining proceeds of asset sale $14,820,000 Total Accordingly, the Debtor believes, on the basis of the foregoing, that the Plan satisfies the financial feasibility requirement imposed by the Bankruptcy Code. F. Effective Date 1. Conditions to the Effective Date. Under the Plan, the following conditions to the Effective Date must occur: (a) The Bankruptcy Court shall have entered the Confirmation Order, in form and substance satisfactory to the Debtor; (b) No stay of the Confirmation Order shall then be in effect; and (c) All documents, instruments and agreements, in form and substance satisfactory to the Debtor, provided for under or necessary to implement the Plan shall have been executed and delivered by the parties thereto, unless such execution or delivery has been waived by the parties benefited thereby. 2. Waiver of Conditions. The Debtor may waive the conditions to effectiveness of the Plan set forth in Section 11.2 of the Plan. X. ALTERNATIVES TO THE PLAN The Debtor has determined that the Plan is the most practical means of providing for maximum recoveries to creditors. Alternatives to the Plan which have been considered and evaluated by the Debtor during the course of the Chapter 11 case include (a) liquidation of the Debtor's remaining assets under chapter 7 of the Bankruptcy Code, and (b) an alternative chapter 11 plan. Thorough consideration of these alternatives to the Plan have led the Debtor to conclude that the Plan, in comparison, will likely provide a greater recovery to creditors on a more expeditious timetable, and in a manner which minimizes certain inherent risks in any other course of action available to the Debtor. A. Liquidation Under Chapter 7 If the Plan or any other chapter 11 plan for the Debtor cannot be confirmed under section 1129(a) and (b) of the Bankruptcy Code, the Chapter 11 Case may be converted to Case under chapter 7 of the Bankruptcy Code, in which case a trustee(s) would be elected or appointed to liquidate any remaining assets of the Debtor for distribution to creditors pursuant to chapter 7 of the Bankruptcy Code. If a trustee(s) is appointed and the remaining assets of the Debtor are liquidated under chapter 7 of the Bankruptcy Code, all creditors holding General Unsecured Claims may receive distributions of a lesser value on account of its Allowed Claims and may have to wait a longer period of time to receive such distributions than they would under the Plan. B. Alternative Chapter 11 Plan If the Plan is not confirmed, the Debtor, or any other party in interest, may attempt to formulate an alternative chapter 11 plan which might provide for the liquidation of its remaining assets other than as provided by the Plan. However, since substantially all of the Debtor's assets have already been converted to Cash and the Plan provides for the distribution of the proceeds in accordance with the statutory priorities established by the Bankruptcy Code, the Debtor believes that any alternative chapter 11 plan will necessarily be substantially similar to the Plan. Any attempt to formulate an alternative chapter 11 plan would unnecessarily delay creditors' receipt of distributions yet to be made and, due to the incurrence of additional administrative expenses during such period of delay, may provide for smaller distributions to holders of General Unsecured Claims than are currently provided for in the Plan. Accordingly, the Debtor believes that the Plan will enable all creditors to realize the greatest possible recovery on its respective Claims with the least delay. C. Certain Risk Factors In the event that the Plan is not confirmed the Debtor will incur substantial expenses related to the development and confirmation of a new plan of reorganization and possibly the approval of a new disclosure statement. This would only prolong unnecessarily the administration of the Debtor's assets and negatively affect creditors' recoveries on their Claims. Likewise, as described above in IX.D., in the event this matter is converted to a case under chapter 7 of the Bankruptcy Code, the Debtor will incur substantial expenses related to hiring additional professionals. As the Debtor's assets have already been liquidated, the additional cost will only serve to reduce distributions to creditors. In addition, the debtor agreed to indemnify Sun, as purchaser of its assets, against any losses, costs and expenses arising out of or relating to any misrepresentations or breaches of warranties or covenants in the asset purchase agreement between the Debtor and Sun. In the event Sun asserts it in fact had losses and was entitled to reimbursement from all or part of the funds in the escrow account, and Able does not believe Sun had such losses, Able would have to spend time and money litigating Sun's claims. As the Debtor is in the process of winding down its operation, any such litigation with Sun will become more complicated as personnel with knowledge of the Debtor's business and the asset purchase agreement with Sun depart the Debtor. XI. EFFECT OF CONFIRMATION OF PLAN A. Effect of Confirmation 1. Release of Assets. Until the Effective Date, the Bankruptcy Court shall retain jurisdiction of the Debtor, its assets and properties. Thereafter, jurisdiction of the Bankruptcy Court shall be limited to the subject matters set forth in Section 12 of the Plan, and the Debtor shall perform and wind up its affairs as provided in the Plan. 2. Binding Effect Except as otherwise provided in section 1141(d)(3) of the Bankruptcy Code, on and after the Confirmation Date, and subject to the Effective Date, the provisions of the Plan shall bind any holder of a Claim against, or Equity Interests in, the Debtor and its respective successors and assigns, whether or not the Claim or Equity Interest of such holder is impaired under the Plan and whether or not such holder has accepted the Plan. 3. Injunction Against Asserting Claims or Interests. On and after the Confirmation Date, subject to the Effective Date, all persons are permanently enjoined from commencing or continuing in any manner any action or proceeding (whether directly, indirectly, derivatively or otherwise) on account of or respecting any claim, debt, right or cause of action of the Debtor for which the Debtor retains sole and exclusive authority to pursue in accordance with Section 12.5 of the Plan. 4. Termination of Stays Unless otherwise provided, all injunctions or stays provided for in the Chapter 11 Case pursuant to sections 105 or 362 of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the Final Distribution Date. 5. Rights of Action On and after the Effective Date, and except as may otherwise be agreed to by the Debtor, the Debtor will retain and have the exclusive right to enforce any and all present or future rights, claims or causes of action against any Person and rights of the Debtor that arose before or after the Commencement Date, including, but not limited to, rights, claims, causes of action, avoiding powers, suits and proceedings arising under sections 544, 545, 547, 548, 549, 550 and 553 of the Bankruptcy Code. The Debtor may pursue, abandon, settle or release any or all such rights of action, as they deem appropriate, without the need to obtain approval or any other or further relief from the Bankruptcy Court. The Debtor may, in its discretion, offset any such claim held against a Person against any payment due such Person under the Plan; provided, however, that any claims of the Debtor arising before the Commencement Date shall first be offset against Claims against any of the Debtor arising before the Commencement Date. B. Discharge The Plan provides that upon confirmation of the Plan, the Debtor shall be discharged of liability for payment of debts incurred before confirmation of the Plan, to the extent specified in 11 U.S.C. ss.1141. However, any liability imposed by the Plan will not be discharged. If Confirmation of the Plan does not occur or if, after Confirmation occurs, the Debtor elects to terminate the plan, the Plan shall be deemed null and void. In such event, nothing contained in the Plan shall be deemed to constitute a waiver or release of any claims against the Debtor or its estate or any other persons, or to prejudice any manner the rights of the Debtor or its estate or any person in any further proceeding involving the Debtor or its estate. The provisions of the Plan shall be bidding upon Debtor, all Creditors and all Equity Interest Holders, regardless of whether such Claims or Equity Interest holders are impaired or whether such parties accept the Plan, upon Confirmation thereof. C. Modification of Plan The Debtor may modify the Plan at any time before confirmation. However, the Court may require a new disclosure statement and/or revoting on the Plan if the Debtor modifies the Plan before confirmation. The Debtor may also seek to modify the Plan at any time after confirmation so long as (1) the Plan has not been substantially consummated and (2) the Court authorizes the proposed modification after notice and a hearing. The Debtor further reserves the right to modify the treatment of any Allowed Claims at any time after the Effective Date of the Plan upon the consent of the Creditor whose Allowed Claim treatment is being modified, so long as no other Creditors are materially adversely affected. D. Post-Confirmation Conversion/Dismissal A creditor or party in interest may bring a motion to convert or dismiss the case under Section 1112(b), after the Plan is confirmed, if there is a default in performance of the Plan or if cause exists under Section 1112(b). If the Court orders the case converted to chapter 7 after the Plan is confirmed, then all property that had been property of the chapter 11 estate, and that has not been disbursed pursuant to the Plan, will revest in the chapter 7 estate, and the automatic stay will be reimposed upon the revested property only to the extent that relief from stay was not previously granted by the Court during this case. E. Payment of Statutory Fees Quarterly fees pursuant to 28 U.S.C. ss.1930(a)(6) continue to be payable to the Office of the United States Trustee post-confirmation until such time as the case is converted, dismissed, or closed pursuant to a final decree. XII. Conclusion The Debtor believes that the Plan is in the best interests of all of its creditors and equity holders and urges the holders of impaired Claims in Classes 1, 3 and 4 to vote to accept the Plan and to evidence such acceptance by returning its Ballots so that they will be received by Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey 07068, Attn: Timothy R. Wheeler, Esq., not later than 5:00 p.m. (Eastern Time) on [_______], 2006. Dated: As of February 27, 2006 Respectfully submitted, ABLE LABORATORIES, INC. By: /s/Richard M. Shepperd -------------------------- Name: Richard M. Shepperd Title: Authorized Officer Exhibit A GLOSSARY The terms in the following table are used in this Disclosure Statement and, in most cases, the Plan. The definitions given below of terms used in the Plan are summaries. Please refer to the Plan for the complete definitions of those terms and other defined terms used throughout this Disclosure Statement. Unless otherwise specified, all section references in this Disclosure Statement are to sections of this Disclosure Statement. - ------------------------------------ ------------------------------------------- Administrative Claims Bar Date The deadline for filing Administrative Claims, including Fee Claims, which date shall be thirty (30) days after the Effective Date. Administrative Expense Claim Any right to payment constituting a cost or expense of administration of the Chapter 11 Case allowed under sections 503(b) and 507(a)(1) of the Bankruptcy Code, including, without limitation, any actual and necessary costs and expenses of preserving the Debtor's Estate, any actual and necessary costs and expenses of operating the Debtor's business as a debtor-in-possession, any indebtedness or obligations incurred or assumed by the Debtor, as a debtor-in-possession, during the Chapter 11 Case, and any allowances of compensation and reimbursement of expenses to the extent allowed by a Final Order under sections 330 or 503 of the Bankruptcy Code. Allowed With reference to any Claim or Equity Interest, (i) any Claim against or Equity Interest in the Debtor that has been listed by the Debtor in the Schedules, as such Schedules may be amended by the Debtor from time to time in accordance with Bankruptcy Rule 1009, as liquidated in amount and not disputed or contingent and for which no contrary proof of claim or equity interest has been filed, (ii) any timely filed Claim or Equity Interest as to which no objection to allowance has been interposed in accordance with section V.A.3 hereof or such other applicable period of limitation fixed by the Bankruptcy Code, the Bankruptcy Rules or the Bankruptcy Court, or as to which any objection has been determined by a Final Order to the extent that such objection is determined in favor of the respective holder, or (iii) any Claim or Equity Interest allowed by a Final Order or expressly provided for under the Plan. Allowed Amount With respect to any Claim, the lesser of (i) the dollar amount of such Claim as Allowed; (ii) the estimated amount of such Claim; and (iii) the dollar amount agreed to by Able. Unless otherwise provided in the Plan or a Final Order of the Bankruptcy Court, the Allowed Amount of an Allowed Claim shall not include interest or penalties accruing on such Allowed Claim from and after the Commencement Date. In addition, unless an order of the Bankruptcy Court provides otherwise, the Allowed Amount of an Allowed Claim shall not, for any purpose under the Plan, include interest at any default rate of interest. Available Cash The actual aggregate sum of cash available in the Debtor's Estate for distribution to its Unsecured Creditors (after the payment of any allowed secured, administrative and priority claims against the Debtor and after the establishment of the necessary Reserves to administer the Debtor's Estate). Avoidance Action Any and all avoidance or recovery actions under sections 502(d), 542, 544, 547, 548, 549, 550, 551 and 553 of the Bankruptcy Code, or under related state or federal statutes and common law, whether or not litigation has been commenced with respect to such causes of action as of the Effective Date. Ballot Each of the ballots and/or master ballots distributed with the Disclosure Statement to holders of Impaired Claims against or Equity Interests in Able (other than to holders of Impaired Claims or Equity Interests deemed to have rejected the Plan or otherwise not entitled to vote on the Plan) on which such ballot such holder of a Claim or Equity Interest may, among other things, vote to accept or reject the Plan. Bankruptcy Code Title 11 of the United States Code, as in effect on the Commencement Date, together with all amendments, modifications and replacements of the foregoing, as the same may exist on any relevant date to the extent applicable to the Chapter 11 Case. Bankruptcy Court The United States Bankruptcy Court for the District of New Jersey having jurisdiction over this Chapter 11 Case and, to the extent of the reference of the Chapter 11 Case is withdrawn pursuant to 28 U.S.C. ss. 157(d), the United States District Court for the District of New Jersey. Bankruptcy Rules Collectively, (a) the Federal Rules of Bankruptcy Procedure as promulgated by the United States Supreme Court under section 2075, title 28, United States Code; (b) the Federal Rules of Civil Procedure, as applicable to the Chapter 11 Case or proceedings therein; and (c) the local rules of the Bankruptcy Court, all as amended from time to time and applicable in this Chapter 11 Case. Bar Date For most creditors, March 20, 2006, was established as the last date upon which proofs of claim and equity interests could be filed against the Debtor. With respect to the top 20 unsecured creditors, as set forth in the chapter 11 petition filed on July 18, 2005, the Bankruptcy Court established November 16, 2005 as the last date and time upon which proofs of claim or equity interest could be filed against the Debtor's Estate for those claimants. Business Day Any day other than a Saturday, a Sunday, or any other day on which banking institutions in New Jersey are required or authorized to close by law or executive order. Cash Legal tender of the United States of America. Cash Pool Available Cash allocated to the holders of Allowed General Unsecured Claims. Causes of Action Any and all actions, causes of action, Liabilities, obligations, accounts, controversies, rights to legal remedies, rights to equitable remedies, rights to payment, suits, debts, sums of money, damages, judgments, Claims, and Demands, whatsoever, whether known or unknown, reduced to judgment, not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or which may be brought on behalf of Able and/or the Estate, arising under any provisions of the Bankruptcy Code or other applicable law. Chapter 11 Case The voluntary case commenced by the Debtor under chapter 11 of the Bankruptcy Code on the Commencement Date in the United States Bankruptcy Court for the District of New Jersey, styled In re Able Laboratories, Inc., Case No. 05-33129-RTL, which is currently pending before the Bankruptcy Court. Claim Either (i) any right to payment from any of the Debtor, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, known or unknown, or (ii) any right to an equitable remedy for breach of performance if such breach gives rise to a right of payment from the Debtor, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured, known or unknown. Class A class of Claims or Equity Interests established pursuant to Section 3 of the Plan. Collateral Any property or interest in property of the Debtor's Estate subject to a valid and properly perfected lien, charge or other encumbrance to secure the payment or performance of a Claim, which lien, charge or other encumbrance is not subject to avoidance under the Bankruptcy Code or other applicable law. Commencement Date July 18, 2005, the date the Debtor's Chapter 11 case was commenced. Committee The official committee of general unsecured creditors appointed by the Office of the United States Trustee in the Chapter 11 Case pursuant to section 1102 of the Bankruptcy Code, as the membership of such Committee may be altered from time to time. Confirmation Date The date on which the Clerk of the Bankruptcy Court enters the Confirmation Order. Confirmation Hearing The hearing to be held by the Bankruptcy Court pursuant to section 1128 of the Bankruptcy Code regarding confirmation of the Plan, as such hearing may be adjourned or continued from time to time. Confirmation Order The order of the Bankruptcy Court confirming the Plan pursuant to section 1129 of the Bankruptcy Code. Cure The distribution of Cash, or such other property as may be agreed upon by the parties and/or ordered by the Bankruptcy Court, with respect to the assumption of an Executory Contract pursuant to section 365(b) of the Bankruptcy Code, in an amount equal to all accrued, due, and unpaid monetary obligations, without interest, or such other amount as may be agreed upon by the parties or ordered by the Bankruptcy Court, under such Executory Contract, to the extent such obligations are enforceable under the Bankruptcy Code and applicable non-bankruptcy law. Debtor Able Laboratories, Inc., including in its capacity as a debtor-in-possession pursuant to sections 1101, 1107(a) and 1108 of the Bankruptcy Code. Disallowed When used with respect to a Claim against Able, a Claim that: (a) is disallowed in whole or in part (but solely to the extent of such disallowance) by an order of the Bankruptcy Court or other court of competent jurisdiction; or (b) has been withdrawn, in whole or in part, by the holder thereof. Disbursing Agent Any entity (including the Debtor if it acts in such capacity) in its capacity as a disbursing agent under Section 7.3 of the Plan. Disclosure Statement This document together with the annexed exhibits. Disputed Claim Any Claim that has not been Allowed pursuant to the Plan or a Final Order, including, without limitation, (a) if no proof of claim has been timely and properly filed, a Claim that has been or hereafter is listed on the Schedules as other than disputed, contingent or unliquidated, but as to which the Debtor, the Committee or any other party in interest has interposed an objection or request for estimation which has not been withdrawn or determined by a Final Order; or (b) if a proof of claim (whether relating to a Claim arising before or after the Commencement Date), or request for payment of an Administrative Expense Claim, has been timely and properly filed by the applicable deadline: (i) a Claim for which no corresponding Claim has been or hereafter is listed on the Schedules; (ii) a Claim for which a corresponding Claim has been or hereafter is listed on the Schedules as other than disputed, contingent or unliquidated, but for which the nature or amount of the Claim as asserted in the proof of claim varies from the nature and amount of such Claim as listed on the Schedules; (iii) a Claim for which a corresponding Claim has been or hereafter is listed on the Schedules as disputed, contingent or unliquidated and which has not been resolved by written agreement of the parties or a Final Order; (iv) a Claim for which a timely objection or request for estimation is interposed by the Debtor, Committee, or any other party in interest, which has not been withdrawn or determined by a Final Order; or (v) any Tort Claim. Further, a creditor who timely and properly filed a Cure Claim under section 365(b) of the Bankruptcy Code relating to the assumption and/or assumption and assignment of an executory contract or unexpired lease during the Chapter 11 Case, which Cure Claim has not been resolved by written agreement of the parties or a Final Order, shall be deemed to have a Disputed Claim to the extent that such timely and properly filed Claim differs from the amount, if any, of such Claim in the Debtor's books and records. (c) Because it is not anticipated that the holders of Allowed Equity Interests will receive any distribution on account of such Equity Interests, it is unnecessary to characterize any Equity Interests, or any portion thereof, as Disputed. (d) Further, notwithstanding anything to the contrary in the Plan, if a Claim is or has been deemed disallowed for failure to comply with the Bar Date, such Claim will not receive any distribution on account of such Claim, and, thus, it is unnecessary to characterize or otherwise treat any such Claims as Disputed under the Plan. (e) For purposes of determining whether a particular Claim is a Disputed Claim prior to the expiration of any period of limitation fixed for the interposition by the Debtor or the Committee, as the case may be, of any objections to the allowance of Claims, any Claim that is not identified by the Debtor as an Allowed Claim shall be deemed a Disputed Claim. Disputed Claims Reserve In the event there exists any Disputed Claim on or after the Effective Date, Cash to be set aside by the Debtor in an interest-bearing account, in amounts sufficient to pay all such Disputed Claims in accordance with the provisions of the Plan, if such Disputed Claims become Allowed Claims, and to be maintained under the Plan, as set forth more fully in section 8.6 of the Plan. For Disputed Claims in Class 3, the amount of Cash to be set aside by the Debtor on the Effective Date shall not exceed the amount of the Cash Pool. Distribution Record Date The date fixed as the "Distribution Record Date" by order of the Bankruptcy Court approving, inter alia, procedures to solicit acceptances or rejections of the Plan. Distributions The properties or interests in property to be paid or distributed hereunder to the holders of allowed claims. Effective Date A Business Day on or after the Confirmation Date specified by the Debtor on which (i) no stay of the Confirmation Order is in effect, and (ii) the conditions to the effectiveness of the Plan specified in Section 11.1 thereof have been satisfied or waived. Equity Interest The rights of a holder of an Equity Security. Equity Security Authorized capital stock, membership interests, partnership interests or similar ownership interests, whether or not transferable, including any option, warrant or right, contractual or otherwise, to acquire any such interest. Estate The estate created pursuant to section 541 of the Bankruptcy Code upon the commencement of the Debtor's Chapter 11 Case. Estimated Recovery Percentage Projected recovery percentage to General Unsecured Creditors based upon (i) the estimated value of the Estate, (ii) the estimated net Proceeds available for distribution, (iii) the total amount of allowed claims estimated against the Estate, and (iv) the total claims against the combined assets. Executory Contract Any unexpired lease or executory contract that is subject to treatment under section 365 of the Bankruptcy Code. FDA The Food and Drug Administration. Fee Claim Collectively, any claim of a: (a) Professional for allowance of compensation and reimbursement of costs and expenses, and (b) member of the Creditors' Committee for reimbursement of costs and expenses, incurred in the Chapter 11 Case prior to and including the Effective Date. Final Distribution Date In the event that there exist on the Effective Date any Disputed Claims, a date selected by the Debtor, in its sole discretion, on which all such Disputed Claims have been resolved by or in accordance with a Final Order. Final Order An order or judgment of the Bankruptcy Court entered by the Clerk of the Bankruptcy Court on the docket in the Chapter 11 Case, whether prior to or after the Effective Date, as to which no appeal, petition for certiorari, or move for reargument or rehearing has expired and as to which no appeal, petition for certiorari or other proceeding for reargument or rehearing shall be pending; provided, however, if an appeal, writ of certiorari, reargument or rehearing thereof has been filed or sought, such order shall have been affirmed by the highest court to which such order was appealed, or certiorari shall have been denied or reargument or rehearing shall have been denied or resulted in no modification of such order, and the time to take any further appeal, petition for certiorari or move for reargument or rehearing shall have expired. General Unsecured Claim Any Claim against the Debtor that (i) is not an Administrative Expense Claim, a Priority Tax Claim, a Secured Claim, a Priority Non-Tax Claim, or a Subordinated Claim, or (ii) is otherwise determined by the Bankruptcy Court to be a General Unsecured Claim. Initial Distribution Date The first date on or after the Effective Date, as scheduled by the Debtor, in its sole discretion, that a distribution of Cash is made to holders of Allowed Claims under the Plan. Interim Distribution Date One or more dates as scheduled by the Debtor, in its sole discretion, that a distribution of Cash is made to the holders of Allowed Claims under the Plan after the Initial Distribution Date but before the Final Distribution Date. Liabilities Any and all costs, expenses, actions, causes of action, suits, controversies, damages, claims, demands, debts, liabilities or obligations of any nature, whether known or unknown, foreseen or unforeseen, existing or hereinafter arising, liquidated or unliquidated, matured or unmatured, contingent or direct, whether arising at common law, in equity, or under any statute, based in whole or in part on any act or omission or other occurrence arising or taking place on or prior to the Effective Date. Lien The phrase described in section 101(37) of the Bankruptcy Code (but a lien that has been or may be avoided pursuant to an Avoidance Action shall not constitute a Lien). Litigation Trust The trust created by the Debtor and the Committee in accordance with the provisions of Section 9 of the Plan and the Litigation Trust Agreement for the benefit of holders of Allowed Claims. Litigation Trustee The party appointed by the Committee to administer the Litigation Trust in accordance with the terms and provisions of Section 9 of the Plan and the Litigation Trust Agreement Litigation Trust Agreement The trust agreement, which agreement shall be in form and substance satisfactory to the Committee and substantially in the form contained in the Plan Supplement, pursuant to which the Litigation Trust shall pursue the Litigation Trust Claims, if applicable, and distribute the proceeds thereof, if any. Litigation Trust Claims All claims and causes of action asserted, or which may be asserted, by or on behalf of the Debtor or the Debtor's estate arising under or pursuant to sections 544, 545, 547, 548, 549, 550, 551 and 553 of the Bankruptcy Code; provided, however, that, under no circumstances, shall such claims and causes of action include any claims and causes of action of the estate of the Debtor waived and released; and, provided, further, that, in the event that the Debtor and the Committee jointly determine not to form the Litigation Trust, the claims and causes of action referred to herein shall be deemed to be assets of the estate, notwithstanding the inclusion of the Debtor or its estate as a plaintiff in such litigation and without the execution and delivery of any additional documents or the entry of any order of the Bankruptcy Court or such other court of competent jurisdiction. Litigation Trust Interests The beneficial interests in the Litigation Trust to be deemed distributed ratably to holders of Allowed Claims pursuant to the terms and conditions of Section 9 of the Plan. Person An individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority, governmental unit or other entity of whatever nature. Plan The Plan of Able Laboratories, Inc. Under Chapter 11 of the Bankruptcy Code, annexed as Exhibit B to this Disclosure Statement, as the same may be amended from time to time. Plan Supplement A supplemental appendix to the Plan to be filed with the Bankruptcy Court no fewer than seven (7) days prior to the deadline to file ballots for the Plan and objections to the Plan. Priority Non-Tax Claim Any Claim other than an Administrative Expense Claim or a Priority Tax Claim, entitled to priority in payment as specified in section 507(a)(3), (4), (5), (6), (7) or (9) of the Bankruptcy Code. Priority Tax Claim Any Claim of a governmental unit of the kind entitled to priority in payment as specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code. Proceeds The proceeds available for distribution to unsecured creditors under the Plan, subject to adjustment based upon actual costs and recoveries from additional assets. Professional Any person retained or to be compensated pursuant to section 327, 328, 330, 503(b), or 1103 of the Bankruptcy Code. Pro Rata Share The proportionate share of an Allowed Claim, so that the ratio of the consideration distributed on account of an Allowed Claim in a Class to the amount of such Allowed Claim is the same as the ratio of the amount of the consideration distributed on account of all Allowed Claims in such Class to the amount of all Allowed Claims in such Class. Reclamation Claim A reclamation claim as determined either (i) by agreement between the Debtor and the claimant; or (ii) by order of the Bankruptcy Court under section 546(c) of the Bankruptcy Code and applicable law. Releasees Collectively, (i) any director, officer, agent or employee of any Debtor who was employed or otherwise serving in such capacity on or after the Commencement Date, (ii) the outside directors of the Debtor serving in such capacity on the Commencement Date, namely David Tierney, Elliot Hahn, Harry Silverman, and Jerry Treppel, (iii) the Committee, and (iv) any member of the Committee, any member, director, officer, agent or employee of a member of the Committee, or any of the Debtor's or the Committee's attorneys or advisors, who were acting, employed or otherwise serving in such capacity on or after the Commencement Date. Representatives The officers, directors, employees, agents, attorneys, accountants, financial advisors, other representatives, subsidiaries, affiliates, or any person who controls any of these within the meaning of the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. Reserves One or more reserves of Cash established by the Debtor, in its sole discretion, in such amounts as determined by the Debtor from time to time in its sole discretion, to fund adequately the administration of the Plan and the Chapter 11 Case on and after the Effective Date. Schedule of Assumed Contracts The schedule listing the executory contracts and unexpired leases to be assumed by the Debtor, to be filed in the Plan Supplement. Schedules The schedules of assets and liabilities and the statement of financial affairs filed by the Debtor under section 521 of the Bankruptcy Code, Bankruptcy Rule 1007 and the Official Bankruptcy Forms of the Bankruptcy Rules, as such schedules and statements have been or may be supplemented or amended. Secured Claim A Claim to the extent (i) secured by Collateral, the amount of which Claim is equal to or less than the value of such collateral (A) as set forth in the Plan, (B) as agreed to by the holder of such Claim and the Debtor, or (C) as determined by a Final Order in accordance with section 506(a) of the Bankruptcy Code, or (ii) validly secured by the amount of any rights of setoff of the holder thereof under section 553 of the Bankruptcy Code, which right of setoff is not subject to avoidance under the Bankruptcy Code or other applicable law. Subordinated Claim Any Claim against a Debtor, whether secured or unsecured, for any fine, penalty, forfeiture, attorneys' fees (to the extent that such attorneys' fees are punitive in nature), or for multiple, exemplary or punitive damages, to the extent that such fine, penalty, forfeiture, attorneys' fees or damages are not compensation for actual pecuniary loss suffered by the holder of such Claim and not statutorily prescribed, and all claims against the Debtor of the type described in Section 510 of the Bankruptcy Code relating to equity interests (including all Equity Interests). Tort Claim Any Claim related to personal injury, property damage, products liability, wrongful death, employment litigation or other similar Claims against the Debtor arising out of events that occurred, in whole or in part, prior to the Commencement Date, which have not previously been compromised and settled or otherwise resolved. Unsecured Creditor A holder of a General Unsecured Claim against the Debtor. Voting Procedures Order An order of the Bankruptcy Court that sets which Classes of Claims may vote on the Plan and designates the form of ballot to be used. - ------------------------------------ ------------------------------------------- Exhibit B Plan of Able Laboratories, Inc. Exhibit C Liquidation Analysis
- --------------------------------------- ABLE LABORATORIES INC ----------------------------------- ------------------------------ Liquidation Analysis as of: 02-27-06 CHAPTER 7 ESTIMATE CHAPTER 11 ESTIMATE Chapter 11 - --------------------------------------------------------------------------- ------------------------------ Projected Effective Date: 19-May-06 N 19-May-06 N Fav/(Unfav) STATEMENT OF ASSETS: BOOK RECOVERY EST. O BOOK RECOVERY EST. O versus Assets avaiflable for distribution: VALUE % Chapter 7 T VALUE % Chapter 11 T Chapter 7 -------- -------- --------- E ------ -------- ---------- E ------------ Available Operating Cash: $ 14,820 100% $ 14,820 [1.] 14,820 100% 14,820 [11.] - Restricted Cash and Equivalents: 3,000 100% $ 3,000 [2.] 3,000 100% 3,000 " - Accounts Receivable - 0.0% - [3.] - 0.0% - " - Notes Receivable - 0.0% - [4.] - 0.0% - " - Inventories - 0.0% - " - 0.0% - " - Prepaid Expenses - 0.0% - " - 0.0% - - Other Current Assets - 0.0% - " - 0.0% - - TOTAL CURRENT ASSETS $ 17,820 $ 17,820 $ 17,820 $ 17,820 - ------------ ------------- Land and Buildings - - " - - " - Machinery & Equipment - - " - - " - Leasehold Improvements & Lab - - " - - " - ------------ ------------ ------------- TOTAL PROPERTY & EQUIPMENT $ - 0.0% $ - $ - 0.0% $ - " $ - ------------ ------------ ------------- OTHER MISC. ASSETS[furn.+comp+i.t.] - 0.0% - " - 0.0% - " - Other $ - $ - " - " -------- ------------ $ 17,820 100.0% $ 17,820 $ 17,820 100.0% $ 17,820 $ - -------- ------------ Payments to Construction Liens $ - $ - [5.] - [12.] - Payments to Priority Claims - (50) [6.] - (50) " - Payments to Secured Holders $ - $ (5,500) [7.] $ - $ (5,500) " $ - Payments to Professionals $ - $ - [8.] $ - - " $ - Cost to Complete Recall & Admin $ - $ - " $ - - " $ - PROCEEDS Prior to Liquidation Costs: $ 12,270 $ 12,270 $ - EST. COSTS OF LIQUIDATION Fee of Liquidating Professional $ (535) [9.] $ - $ 535 Associated Admin.Expenses (249) " - $ 249 Payments to Professionals $ (279) [10.] (210) [13.] $ 69 Cost to Complete Recall & Admin $ (75) " (60) [14.] $ 15 ESTIMATED PROCEEDS AVAILABLE TO ------------ ------------- ---------- CREDITORS: $ 11,132 $ 12,000 $ 868 ------------ ------------- ---------- file name: Liquidation_JDS_r1 file location: Able/Rshep
ABLE LABORATORIES INC. Liquidation Study as of: [projected Effective Date May 19th 2006]
NOTE CHAPTER 7 LIQUIDATION ESTIMATE - ---- ------------------------------ 1.] Available Operating Cash as of May 19, 2006 (internal cash projections 02-25-06) This includes all payments to staff operating the Company, closing the Recall, rents for the estate, insurances, audit fees, destruction of finished goods to comply with FDA/DEA regulations. Other operating expenses as required. Includes legal & professional fees and the satisfaction of Matrix lease obligations, payments to U.S. Trustee, payments for Construction liens; and, Payments for the return of Off-Site Equipment in accordance with the Sales Order. 2.] Restricted Cash: Escrow Account = $3.0million held in LaSalle Bank - Chicago 3.] Accounts Receivable balances have been in a negative position for several months as a result are Reclassified as liabilities in the Liquidation study & other projections 4.] Notes Receivable were deemed uncollectible, Inventories & Other Current Assets were transferred at the time of "363" Sale, (12-22-05), written down to zero eom Dec.05' Land and Buildings and Other Misc. Assets were transferred at time to Sale 5.] Payments for Construction Liens are assumed paid prior to Effective Date 6.] Priority Claims are the Company's best estimate as of 02-25-06 7.] Secured Holders [one] the Company's best estimate as of 02-25-06 8.] Payments to Professionals are or will be up to date prior to May 19th, 2006 [including "hold backs"] Cost to Complete Recall and Internal Admin. Costs are up to date on May 19th, 2006 9.] Fee of Liquidating Professionals estimated at standard rate 3% of Total Assets Associated Admin. Expenses are estimated at 1.4% of Total Asset Disposition 10.] Payments to Liquidating Professionals include start up costs for FDA/DEA & other governmental agencies In addition the estimate includes services for attorneys & professionals to complete the work of the estate consistent with the Company's projections. CHAPTER 11 ---------- 11.] Same as notes 1.] through 4.] 12.] Same as notes 5.] through 8.] 13.] Charges for balance of professionals per previous projections 14.] Estimated costs to complete administration [notes 13. and 14. assume this portion of the Estate is completed by June 30th 2006]
Exhibit D Litigation Schedule ABLE LABORATORIES STATUS OF PENDING LITIGATION/ADVERSARY PROCEEDINGS
- ------------------------- ----------------------- ------------------------------ CASE NAME AND NUMBER VENUE NATURE OF ACTION/STATUS - ------------------------- ----------------------- ------------------------------ American Floorworks LLC Bankruptcy Court for Nature of Suit: Contract v. Able Labs, et al. the District of New action removed from New Jersey Jersey Superior Court. Plaintiff Adv. Proc. 05-6282 possesses a construction lien for the materials and services provided. Pre-Trial Hearing scheduled for March 16, 2006 at 2:00 p.m. - ------------------------- ----------------------- ------------------------------ Rabito v. Able Bankruptcy Court for Nature of Suit: Derivative the District of New action against board of Adv. Proc. 05-6280 Jersey directors alleging breach of fiduciary duty; removed from New Jersey Superior Court. Pre-Trial Hearing scheduled for March 16, 2006 at 2:00 p.m. - ------------------------- ----------------------- ------------------------------ Lasker v. Able Bankruptcy Court for Nature of Suit: Derivative the District of New action removed from Delaware Adv. Proc. 05-6275 Jersey Chancery Court. Pre-Trial Hearing scheduled for March 16, 2006 at 2:00 p.m. - ------------------------- ----------------------- ------------------------------ Johnson v. Able Bankruptcy Court for Nature of Suit: Derivative the District of New action removed from New Jersey Adv. Proc. 05-6350 Jersey Superior Court. Pre-Trial Hearing scheduled for March 16, 2006 at 2:00 p.m. - ------------------------- ----------------------- ------------------------------ Able v. AmerisourceBergen Bankruptcy Court for Nature of Suit: Adversary Corporation the District of New proceeding brought by the Adv. Proc. 05-2480 Jersey Debtor challenging the nature, extent and validity of AmerisourceBergen's liens Hearing re: Order to Show Cause For Immediate Relief Against Defendant, AmerisourceBergen Corp. scheduled for March 20, 2006 at 2:00 p.m. Pre-Trial Hearing scheduled for April 5, 2006 at 2:00 p.m. - ------------------------- ----------------------- ------------------------------ Mehta et al. v. Able Bankruptcy Court for Nature of Suit: This class the District of New action alleges WARN Act Adv. Proc. 05-2756 Jersey violations on behalf of approximately 340 former employees. The complaint asserts that these "wage" claims should receive priority status and treatment. Hearing re: Motion to Dismiss WARN Act scheduled for March 20, 2006 at 2:00 p.m. Pre-Trial Hearing scheduled for March 20, 2006 at 2:00 p.m. Hearing re: Motion of Official Committee of Unsecured Creditors to Intervene scheduled for March 20, 2006 at 2:00 p.m. - ------------------------- ----------------------- ------------------------------ Kirtley et al. v. Able Bankruptcy Court for Nature of Suit: Class Action the District of New Complaint For: Consumer Fraud Adv. Proc. 05-6128 Jersey Act, Fraud, Negligent Misrepresentation, Breach of Contract and Unjust Enrichment. Hearing re: Motion of Hempel (USA) Inc. to intervene in the within adversary proceeding as a party plaintiff scheduled for March 6, 2006 at 2:00 p.m. Pre-Trial Hearing scheduled for March 1, 2006 at 2:00 p.m. - ------------------------- ----------------------- ------------------------------ Lodish v. Able District Court for Nature of Suit: Class action the District of New alleging violations of the 05-2681 Jersey Securities Exchange Act Hearing held on 1/23/2006. LEAD CASE (all other related cases Order entered on 1/26/06 consolidated into consolidating cases 05-2681 and closed) 05-2683,05-2684,05-2685, 05-2810,05-3013,05-3068, 05-3083,05-3378 with 05-2681 and shall have the caption IN RE ABLE LABORATORIES SECURITIES LITIGATION - ------------------------- ----------------------- ------------------------------ Cummings v. Able District Court for the District of New 05-3378 Jersey Civil case consolidated into 05-2681 and closed. - ------------------------------------------------ ------------------------------- Silverman v. Able District Court for the District of New 05-3068 Jersey Civil case consolidated into 05-2681 and closed. - ------------------------- ----------------------- ------------------------------ Skoros v. Able District Court for the District of New 05-2810 Jersey Civil case consolidated into 05-2681 and closed. - ------------------------- ----------------------- ------------------------------ Micro Investors, LLC v. Able District Court for the District of New 05-2684 Jersey Civil case consolidated into 05-2681 and closed. - ------------------------- ----------------------- ------------------------------ Kriegel v. Able District Court for the District of New 05-2683 Jersey Civil case consolidated into 05-2681 and closed. - ------------------------- ----------------------- ------------------------------ Communications Workers District Court for of America v. Able the District of New 05-2685 Jersey Civil case consolidated into 05-2681 and closed. - ------------------------- ----------------------- ------------------------------ Hand v. Able District Court for the District of New 05-3083 Jersey Civil case consolidated into 05-2681 and closed. - ------------------------- ----------------------- ------------------------------ McFarlane v. Able District Court for the District of New 05-03013 Jersey Civil case consolidated into 05-2681 and closed. - ------------------------- ----------------------- ------------------------------ Evans v. CVS et al. Commonwealth of Able dismissed as a defendant Kentucky by Order of the Court dated February 13, 2006. 05-01191 - ------------------------- ----------------------- ------------------------------
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