Attached files
file | filename |
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8-K - FORM 8-K - CAPITAL CORP OF THE WEST | f54334e8vk.htm |
EX-99.2 - EX-99.2 - CAPITAL CORP OF THE WEST | f54334exv99w2.htm |
EX-99.1 - EX-99.1 - CAPITAL CORP OF THE WEST | f54334exv99w1.htm |
EX-99.4 - EX-99.4 - CAPITAL CORP OF THE WEST | f54334exv99w4.htm |
Exhibit 99.3
STEVEN H. FELDERSTEIN, State Bar No. 056978
PAUL J. PASCUZZI, State Bar No. 148810
FELDERSTEIN FITZGERALD WILLOUGHBY &
PASCUZZI LLP
400 Capitol Mall, Suite 1450
Sacramento, CA 95814
Telephone: (916) 329-7400
Facsimile: (916) 329-7435
ppascuzzi@ffwplaw.com
PAUL J. PASCUZZI, State Bar No. 148810
FELDERSTEIN FITZGERALD WILLOUGHBY &
PASCUZZI LLP
400 Capitol Mall, Suite 1450
Sacramento, CA 95814
Telephone: (916) 329-7400
Facsimile: (916) 329-7435
ppascuzzi@ffwplaw.com
Attorneys for Capital Corp of the West
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF CALIFORNIA
FRESNO DIVISION
In re: |
Case No. 09-14298 | |
CAPITAL CORP OF THE WEST, |
Chapter 11 | |
Debtor. |
||
Tax ID # |
FIRST AMENDED DISCLOSURE STATEMENT TO DEBTORS
FIRST AMENDED PLAN OF LIQUIDATION (Dated October 23, 2009)
FIRST AMENDED PLAN OF LIQUIDATION (Dated October 23, 2009)
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
TABLE OF CONTENTS
I. INTRODUCTION |
1 | |||
A. Limited Representation |
2 | |||
B. Voting Procedures |
4 | |||
II. OVERVIEW OF THE PLAN |
5 | |||
A. General Structure of and Means for Implementation of the Plan |
5 | |||
B. Debtors Assets and Liabilities and Estimated Distribution To Creditors |
7 | |||
III. HISTORY OF CAPITAL CORP OF THE WEST |
13 | |||
A. Description of the Debtors Business |
13 | |||
B. Capital |
21 | |||
C. Bay View Funding |
22 | |||
D. F&M Stock |
24 | |||
E. Intercompany Transactions |
24 | |||
F. Purpose of the Chapter 11 Filing |
25 | |||
IV. SIGNIFICANT EVENTS DURING THE CHAPTER 11 CASE |
26 | |||
A. First Day Motions |
26 | |||
B. Formation of Creditors Committee |
26 | |||
C. Retention of Professionals |
27 | |||
D. Use of Cash Collateral and Debtor in Possession Financing |
27 | |||
E. Miscellaneous Motions |
27 | |||
V. PLAN DESCRIPTION |
28 | |||
A. Specification And Treatment Of Unclassified Claims |
28 | |||
B. Treatment Of Classified Claims |
28 | |||
1. Class 1 (Priority Claims): |
28 | |||
2. Class 2 (Secured Claims): |
29 | |||
3. Class 3 (General Unsecured Claims): |
29 | |||
4. Class 4 (Subordinated General Unsecured Claims): |
30 | |||
5. Class 5 (Shareholders): |
30 | |||
C. Means For Implementation And Execution Of The Plan |
30 | |||
1. Assets of the Estate Do Not Revest in the Debtor: |
30 |
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-i-
2. Post-Confirmation Debtor Acts through a Plan Administrator: |
30 | |||
3. Limitation on Liability of the Debtor, the Post-Confirmation
Debtor, Creditors Committee, the Plan Administrator, Indenture
Trustees and Statutory Trustees: |
31 | |||
4. Approval of Transactions Outside the Ordinary Course of Business: |
32 | |||
5. Post-Confirmation U.S. Trustee Quarterly Fees and Quarterly
Reports: |
32 | |||
6. Post-Confirmation Employment of Professionals: |
33 | |||
7. Preservation of Causes of Action: |
33 | |||
8. Closing of Case: |
33 | |||
9. Certain Jurisdictional Limitations: |
34 | |||
10. Permanent Injunction: |
34 | |||
D. Procedures Relating To Claims And Interests |
35 | |||
1. Pre-Petition, Unsecured Claims Bar Date: |
35 | |||
2. Bar Date for Administrative Claims Incurred Before the
Confirmation Date: |
35 | |||
3. Disputed Claims: |
35 | |||
4. Claims Cap: |
35 | |||
5. Claims under Bankruptcy Code Section 502(h): |
36 | |||
6. Deadline for Objections to Claims: |
36 | |||
7. Interim Distributions: |
36 | |||
8. Distributions to Holders of TRUPS Claims: |
36 | |||
E. Executory Contracts and Leases |
36 | |||
F. Effect Of Confirmation |
37 | |||
1. Discharge: |
37 | |||
2. Creditors Committee Continuation: |
37 | |||
VI. LIQUIDATION ANALYSIS |
38 | |||
VII. FEDERAL INCOME TAX CONSEQUENCES |
38 | |||
VIII. RECOMMENDATION FOR VOTE TO ACCEPT THE PLAN |
39 |
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-ii-
I. INTRODUCTION
On May 11, 2009, Capital Corp of the West (the Debtor) filed a voluntary petition under
Chapter 11 of the Bankruptcy Code. The Debtor has proposed a plan of liquidation (the
Plan) pursuant to Bankruptcy Code section 1121. The Plan is designed to complete the
orderly liquidation of the Debtors business and assets and to distribute the proceeds
consistent with the requirements of the Bankruptcy Code and any orders of the Bankruptcy
Court previously entered in the case.
Generally, the issues in this case are the Debtors entitlement to significant amounts of tax
refund proceeds and the validity and priority of various claims. Depending on the amount available
to distribute and the amount and priority of valid claims, the
recovery to non-governmental,
non-subordinated creditors could range from approximately 8% to 29%. In the event a claim is made
by certain governmental creditors and that claim is determined to be valid and has priority, there
is a chance that the recovery to non-governmental creditors could be zero. All shareholder
interests in the Debtor are canceled by the Plan, as there are insufficient funds under any
scenario to make a distribution to shareholders.
The Plan provides for the appointment of a Plan Administrator to administer the case to a
conclusion with the oversight of the Creditors Committee. In the event a compromise resolution of
the various categories of claims cannot be reached, the Plan Administrator, with the assistance of
the Creditors Committee as provided in the Plan, shall object to claims, obtain court orders
regarding the validity and priority of Claims, and distribute the funds in accordance with the
validity and priority of the Claims as determined by the Court. The Plan does not contain any
injunction other than to protect assets of the estate during the administration by the Plan
Administrator. In accordance with the Bankruptcy Code, the Debtor does not receive a discharge.
The Debtor and the Creditors Committee strongly encourage you to vote to accept the Plan. The
Plan provides for the orderly liquidation of the assets of the Estate and the distribution of the
net proceeds to holders of Allowed Claims, which is similar to what would occur in a chapter 7
case. If the Plan is not confirmed, it is likely the Case would be converted to a chapter 7 case at
likely substantial additional cost to the Estate. Under the Plan, the Debtors experience,
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-1-
knowledge and expertise will be utilized for the benefit of all parties to maximize the value of
the assets and efficiently resolve the Claims. For this reason, the Debtor believes that the
distribution to creditors will be far greater under the Plan than in a chapter 7 case. In addition,
conversion of the Case to chapter 7 would add an additional layer of administrative expenses from
the chapter 7 case that does not already exist, which would further diminish the funds available
for distribution to creditors. Moreover, liquidation under the Plan provides the maximum
flexibility for the efficient management of the Estate post-confirmation that would not be
available in a chapter 7 case.
Please timely submit your Ballot to vote to accept the Plan.
A. Limited Representation
This Disclosure Statement is submitted in accordance with Bankruptcy Code section 1125 to
solicit acceptances of the Plan from holders of certain Claims. The Court must approve the
Disclosure Statement as containing information of a kind, and in sufficient detail, which is
adequate to enable you to make an informed judgment whether to vote to accept or to reject the
Plan. This Disclosure Statement will be used to solicit acceptances of the Plan only after the
Court enters an order approving it.
In determining whether the Plan should be confirmed, the Court will consider whether the Plan
satisfies the requirements of the Bankruptcy Code, including whether it is feasible, and whether it
is in the best interests of the holders of Claims. The Court also will receive and consider a
Ballot report prepared by the Debtor concerning the votes for acceptance or rejection of the Plan
by parties entitled to vote. Only holders of Allowed Claims that are impaired under the Plan will
be allowed to vote to approve or reject the Plan.
THIS DISCLOSURE STATEMENT IS NOT THE PLAN. THIS DISCLOSURE STATEMENT, TOGETHER WITH THE
PLAN, SHOULD BE READ COMPLETELY FOR THE CONVENIENCE OF PARTIES, THE PLAN IS SUMMARIZED IN
THIS DISCLOSURE STATEMENT, BUT ALL SUMMARIES AND OTHER STATEMENTS REGARDING THE PLAN ARE
QUALIFIED IN THEIR ENTIRETY BY THE PLAN ITSELF, WHICH IS CONTROLLING IN THE EVENT OF ANY
INCONSISTENCY.
The Court will hold a hearing on confirmation of the Plan. The date and time of the hearing
will be fixed by order of the Court and will be noticed to Creditors and other parties
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-2-
entitled to notice under the Bankruptcy Code and Rules after the Disclosure Statement is approved.
The Confirmation hearing may be adjourned from time to time without further written notice.
Information contained in this Disclosure Statement was obtained from knowledgeable personnel
at the Debtor or from its records. Financial information developed for purposes of this Disclosure
Statement was developed by personnel at the Debtor. Certain materials contained in this Disclosure
Statement are taken directly from other, readily accessible documents and pleadings or are digests
of other documents. While every effort was made to retain the meaning of such documents, you are
urged to rely upon the contents of such documents only after a thorough review of the documents
themselves. For example, all pleadings filed by the Debtor in the Case have been posted on counsel
for the Debtors webpage at www.ffwplaw.com on the Cases page in the folder entitled
Capital Corp of the West.
NO REPRESENTATIONS OR ASSURANCES CONCERNING THE DEBTOR, INCLUDING, WITHOUT
LIMITATION, ITS OPERATIONS, THE VALUE OF ASSETS, OR THE FUTURE OF THE DEBTOR ARE
AUTHORIZED BY THE DEBTOR OTHER THAN AS SET FORTH IN THIS DISCLOSURE STATEMENT.
THIS IS A SOLICITATION BY THE DEBTOR ONLY AND IT IS NOT A SOLICITATION BY THE
DEBTORS ATTORNEYS OR ANY OTHER PROFESSIONALS EMPLOYED BY THE DEBTOR. THE
REPRESENTATIONS MADE HEREIN ARE THOSE OF THE DEBTOR AND NOT OF THE DEBTORS
ATTORNEYS OR ANY OTHER PROFESSIONAL.
REASONABLE EFFORTS HAVE BEEN MADE TO ACCURATELY PREPARE ALL UNAUDITED FINANCIAL
STATEMENTS WHICH MAY BE CONTAINED IN THIS DISCLOSURE STATEMENT FROM THE INFORMATION
AVAILABLE TO THE DEBTOR. HOWEVER, AS TO ALL SUCH FINANCIAL STATEMENTS, THE DEBTOR
IS UNABLE TO WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED THEREIN IS WITHOUT
ERROR.
APPROVAL BY THE BANKRUPTCY COURT OF THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE
CERTIFICATION BY THE COURT THAT THIS DISCLOSURE STATEMENT IS ERROR
FREE.
Unless this Disclosure Statement expressly stated otherwise, all terms defined in the Plan
will have the same meaning when used in this Disclosure Statement. In addition, unless otherwise
stated, terms defined in the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, or the
Local Rules of the Court will have the same meanings when used in this
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-3-
Disclosure Statement. Defined terms in this Disclosure Statement are solely for convenience; and
the Debtor does not intend to change the definitions of those terms from the Plan or from the
otherwise applicable sources. Furthermore, in the event of any inconsistency between the Plan
and this Disclosure Statement, the Plan will control. Any exhibits filed and served in support
of this Disclosure Statement are incorporated into and are a part of this Disclosure Statement.
All references to the Bankruptcy Code are to the United Bankruptcy Code, 11 U.S.C. Sections 101
et seq.
B. Voting Procedures
If you are the holder of a Claim that is impaired under the Plan, it is important that
you vote. In that regard, acceptances of the Plan are sought only from those holders of Claims
whose Claims are impaired by the Plan and who are not deemed to have accepted or rejected the
Plan. Specifically, acceptances are solicited only from those Creditors and parties in interest
whose legal, equitable, or contractual rights are altered by the Plan or who will not receive
under the Plan the full amounts of their Allowed Claims in cash on the Effective Date of the
Plan or as soon thereafter as practicable. Holders of Claims which are not impaired under the
Plan are deemed to have accepted the Plan. See Bankruptcy Code § 1126(f). Conversely,
acceptances need not be solicited from the holder of Claims or Interests who will receive
nothing under the Plan because they are deemed to have rejected the Plan. See Bankruptcy Code §
1126(g).
In order for a Class of Claims to vote to accept the Plan, votes representing at least
two-thirds in amount of all claims in that Class, and more than one-half in number in that Class
must be cast accepting their treatment under the Plan. As more fully described below, the Debtor
is seeking acceptances from holders of Allowed Claims in the following Classes (reserving the
right to supplement as to any other impaired Class(es) of Claims, if any):
Class | Description | Status | ||
Class 2
|
Secured Claims | Impaired Entitled to Vote | ||
Class 3
|
General Unsecured Claims | Impaired Entitled to Vote | ||
Class 4
|
Subordinated General Unsecured Claims | Impaired Entitled to Vote |
The following Classes of Claims or Interests are not impaired under the Plan or are
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-4-
otherwise prohibited by the Bankruptcy Code from voting on the Plan for the reason indicated:
Class | Description | Status | ||
Unclassified
|
Administrative Claims | Unimpaired Deemed to Accept | ||
Unclassified
|
Professional Claims | Unimpaired Deemed to Accept | ||
Unclassified
|
Pre-Petition Tax Claims | Unimpaired Deemed to Accept | ||
Class 1A
|
Priority Employee Unsecured Claims | Unimpaired Deemed to Accept | ||
Class 1B
|
Other Priority Unsecured Claims | Unimpaired Deemed to Accept | ||
Class 5
|
Shareholders of the Debtor | Take Nothing Deemed to Reject |
The specific treatment of each Class under the Plan is set forth in the Plan and merely is
summarized in Article VI of this Disclosure Statement. Bankruptcy Code section 1129(b) provides
that, if the Plan is rejected by one or more impaired Classes of Claims, the Plan nevertheless
may be confirmed by the Bankruptcy Court, if: (i) the Bankruptcy Court determines that the Plan
does not discriminate unfairly and is fair and equitable with respect to the rejecting Class(es)
of Claims that are impaired under the Plan; and (ii) at least one Class of impaired Claims voted
to accept the Plan. The Debtor seeks to confirm the Plan under the provisions of Bankruptcy Code
section 1129(b) in the event that becomes necessary.
A VOTE FOR ACCEPTANCE OF THE PLAN BY THOSE HOLDERS OF CLAIMS WHO ARE ENTITLED TO
VOTE IS MOST IMPORTANT. THE DEBTOR RECOMMENDS THAT THE HOLDERS OF ALLOWED CLAIMS
VOTE IN FAVOR OF THE PLAN.
Unless otherwise expressly stated, portions of this Disclosure Statement describing the
Debtor have not been subject to a certified audit, but have been prepared from the information
compiled by the Debtor from the records maintained in the ordinary course of its business. Every
effort has been made to be as accurate as possible in the preparation of this Disclosure
Statement.
II. OVERVIEW OF THE PLAN
A. General Structure of and Means for Implementation of the Plan
The Plan is designed
to complete the orderly liquidation of the Debtors business and assets, to the extent such
liquidation is not already complete, and to distribute the proceeds consistent with the
requirements of the Bankruptcy Code and orders of the Bankruptcy Court
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-5-
previously entered in the Case, if any. On the Effective Date of the Plan or as soon thereafter as
practicable, the Debtor through a Plan Administrator shall use cash on hand from the liquidation of
assets to pay in full all unclassified Claims and all Allowed Claims in Classes 1A and 1B (Priority
Claims), if any. The Debtor through a Plan Administrator, acting as a liquidating and distribution
agent, shall continue to liquidate the assets of the Estate in a prudent and businesslike manner
after the Effective Date. The Debtor through a Plan Administrator shall object to Claims as
necessary to determine the validity and priority of all Claims. As funds become available that are
not necessary to fund liquidation costs, the Debtor may make distributions to Claim holders with
Allowed Claims in the order of priority set forth in the Plan, which follows the priority scheme
set forth in and required by the Bankruptcy Code. The Debtor anticipates that the liquidation shall
occur over the period of at least nine months to one year, unless a compromise agreement is reached
among the creditors.
For the protection of holders of Claims, the Post-Confirmation Debtor must obtain approval
from the Creditors Committee in writing or Court approval for any sales or abandonment of assets
or compromise of Claims that have a net effect on the creditors of over $50,000 and less than
$250,000. Any transactions that have a net affect on the Estate of over $250,000 must be approved
by the Court upon noticed motion under the provisions of the Bankruptcy Code, Rules and Local
Rules. The Debtor is authorized under the Plan to retain Professional Persons to assist with the
liquidation with Court approval. The Committee shall remain in existence Post-Confirmation, unless
its current members decline to serve or as otherwise ordered by the Court. The projected
liquidation expenses for the period August 31, 2009, to December 31, 2009, are attached to this
Disclosure Statement as Exhibit 1. With these protections and notices to parties in interest, the
Debtor believes that all parties interests will be adequately protected during the liquidation of
the assets and allowance of Claims.
Unless such task is otherwise assigned to the Creditors Committee in the Plan or
Post-Confirmation by noticed motion, the Post-Confirmation Debtor also will review all filed
Claims, and if necessary, object to those Claims as required by the Bankruptcy Code, Rules or
Local Rules. Unless such task is otherwise assigned to the Creditors Committee in the Plan or
Post-
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-6-
Confirmation by noticed motion, the Post-Confirmation Debtor also will review all pre-Petition Date
transactions to determine whether any are avoidable under the Bankruptcy Code as preferential,
fraudulent or otherwise avoidable transfers that are appropriate to pursue. All parties who have
received transfers from the Debtor, including without limitation those listed in the Debtors
statement of financial affairs as recipients of transfers within two years of the Petition Date,
are hereby disclosed as potential targets for the recovery of such transfers to the extent such
transfers, or any other transfers, are avoidable under the Bankruptcy Code or other applicable law.
When the Case is fully administered and the Post-Confirmation Debtor has no other duties under the
Plan, the Plan will be completed. Nothing in the Plan affects the Post-Confirmation Debtors duties
to comply with applicable non-bankruptcy law, if any, to wind up its affairs.
B. Debtors Assets and Liabilities and Estimated Distribution To Creditors
The following is a summary of the assets, likely valid claims, and projected (not guaranteed)
recoveries for each Class of holders of Allowed Claims or Interests under the Plan:
Estimated Range of Value | ||||||||
Low | High | |||||||
Assets |
||||||||
1. Estimated cash at projected Effective Date of approximately December 31, 2009 |
$6.1 million | $6.1 million | ||||||
2. Estimated federal tax refunds available |
$ | 0 | $ | 10,056,000 | ||||
3. Estimated California state tax refund proceeds available |
$ | 0 | $2.3 million | |||||
4. Estimated insurance refunds available |
$ | 0 | $ | 100,000 | ||||
5. Rabbi Trust cash |
$ | 0 | $ | 336,000 | ||||
Total estimated range of values: |
$6.1 million | $18.9 million |
The difference between the low and high estimates is accounted for by estimated federal tax
refunds for 2008-09, potential tax credits from the Net Interest Deduction and Enterprise Zone
review, and potential claims by the FDIC as to ownership of or claims against tax and insurance
refunds. The 2008-09 federal tax refund claimed is approximately $10,056,000 and is expected to be
received by early November 2009. The potential tax credits and deductions from the Net Interest
Deduction and Enterprise Zone review are expected to generate a tax refund from the State of
California for the years 2003-2007 in the approximate amount of $2.3 million. These
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-7-
amounts are based on the best information available from the Debtors accountants and tax
consultants at this time. However, the Debtor has not yet received the funds, so the actual
recovery on the tax refunds is still uncertain. The potential tax credits and deductions are being
audited by the State of California, which could affect the amount and timing of the claimed refund.
Moreover, the FDIC asserts that some or all of the tax and insurance refunds are not property of
the Debtors estate, but instead are property of the receivership of County Bank. The Debtor
disputes this assertion and believes that all or a substantial part of all the tax and insurance
refunds are property of the estate and that any interest the County Bank may have in the refunds is
owned by the Debtor.
The Debtor also has claims to certain property that is in a so-called Rabbi Trust in the
form of cash and insurance policies, other miscellaneous prepaid expenses that may be refunded to
the estate, and potential claims to its interest in the trusts that issued the Trust Preferred
Securities to supplement the existing cash balance and tax refund claims. The cash and insurance
policies that are the subject of the Rabbi Trust were set up to fund any liability of County Bank
or the Debtor for non-qualified deferred compensation plans and executive salary continuation
plans. The trust document specifically says that the assets of the trust are owned by the
Company, defined as both County Bank and the Debtor, and are subject to the claims of the
Companys creditors in the event of insolvency. The trust document also specifically says that no
beneficiary of the trust shall have a preferred claim on, or any beneficial interest in, any assets
of the trust. Based on the language of the trust document, the Debtor contends that the funds in
the Rabbi Trust are property of the estate and are available to fund the payment of all Allowed
Claims. However, the FDIC may take the position that some or all of the assets of the Rabbi Trust
are property of County Bank and therefore property of the receivership and not available for
payment of the Debtors creditors. The Debtor has segregated all funds received from the assets of
the Rabbi Trust pending resolution of any Claims to the funds.
The Debtor does not believe that it has any Avoidance Actions against any party worth
pursuing, but nonetheless preserves the right to pursue any and all Avoidance Actions under the
Plan. Further, the Debtor does not believe that it has any Other Causes of Action against any
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-8-
party worth pursuing, but nonetheless preserves the right to pursue any and all Other Causes of
Action under the Plan.
The following chart shows the estimated amount of claims by category according to the
Debtors records. This chart only is the Debtors position and best estimate of claims and does
not contain all filed claims.
Estimated Amounts of Potentially Valid Claims According to the Debtor
1. Secured |
$ | 0 | ||
2. Priority unsecured |
$ | 642 | ||
3. Unsecured Trust Preferred Securities |
$ | 61,519,899 | ||
4. Unsecured General Creditor Claims |
$ | 18,526 | ||
5. Salary Continuation |
$ | 900,780 | ||
6. Severance |
$ | 250,000 | ||
7. Bay View Selling Shareholders |
$ | 1,504,020 | ||
8. Deferred Compensation |
$ | 729,073 | ||
Total |
$ | 64,922,940 | ||
In the Debtors opinion, based on legal analysis performed prior to and subsequent to the
Petition Date, the above chart lists the approximate amount of the valid Claims against the
estate. Claims in different amounts and claiming different priorities have been filed in the
case, including claims by certain former officers and directors for priority wage and benefit
claims under sections 507(a)(4) and (5) of the Bankruptcy Code.
In the Debtors opinion, the Trust Preferred Securities agreed to subordinate their Claims to
the Claims of the Bay View Selling Shareholders. If the Debtors view is correct, and based on an
available distribution amount of approximately $18.9 million (which assumes all projected tax and
insurance refunds are collected and are property of the estate), the estimated distribution
percentages would be approximately 27.48% for the Trust Preferred Securities, 100% for the Bay
View Selling Shareholders and approximately 29.21% for all other general unsecured creditors. See
Exhibit 2 to this Disclosure Statement (Base Case I-A) for a chart showing this
scenario.1 If
1 | The subordination of the Claims of the Trust Preferred Securities to the Bay View Selling Shareholders is accomplished by calculating the pro rata share of the available distribution amount to each category of general unsecured claims and reducing the funds to be distributed on the Claims of the Trust Preferred Securities by an amount necessary to increase the funds to be distributed on the Claims of the Bay View Selling Shareholders until such claims are paid in full. This calculation does not affect any other creditors. |
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-9-
the available distribution amount is $6.1 million (which assumes no further tax or insurance
refunds are collected by the estate), then the estimated distribution percentages would be
approximately 7.13% for the Trust Preferred Securities, 100% for the Bay View Selling Shareholders
and approximately 9.35% for all other general unsecured creditors. See Exhibit 3 to this
Disclosure Statement (Base Case I-B) for a chart showing this scenario.
Due to an inconsistency in the deferred compensation agreements, there is an argument that
could be made that the Deferred Compensation Claims are subordinated to all other general
unsecured creditors. The Debtor does not believe that a Court would find that the Deferred
Compensation Claims are subordinated, but in the event a Court does so conclude the distribution
analysis changes slightly. If the available distribution amount is approximately $18.9 million
(which assumes all projected tax and insurance refunds are collected and property of the estate)
and the Deferred Compensation Claims are subordinated to all other general unsecured claims, the
estimated distribution percentages would be approximately 27.82% for the Trust Preferred
Securities, 100% for the Bay View Selling Shareholders and approximately 29.55% for all other
general unsecured creditors. See Exhibit 4 to this Disclosure Statement (Base Case II-A) for a
chart showing this scenario. If the available distribution amount is $6.1 million (which assumes
no further tax refunds are collected by the estate) and the Deferred Compensation Claims are
subordinated to all other general unsecured claims, then the estimated distribution percentages
would be approximately 7.24% for the Trust Preferred Securities, 100% for the Bay View Selling
Shareholders and approximately 9.46% for all other general unsecured creditors. See Exhibit 5 to
this Disclosure Statement (Base Case II-B) for a chart showing this scenario.
In the Debtors view, a substantial amount of the Salary Continuation and Severance
obligations are not valid claims. The Debtors position is based on the fact that the agreements
governing such obligations state that the Debtors obligations terminate upon the receivership of
County Bank, that certain of the payments would be prohibited by the restrictions on golden
parachute payments under 12 CFR Part 359, that certain of the agreements require a change in
control to trigger the payments, and that certain agreements require FDIC and Federal Reserve Board
consent which has not been received despite pre-petition requests. Such claims could add
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-10-
an additional $8.9 million to the total amount of general unsecured claims and affect the analysis
set forth herein.
To the best of the Debtors ability to estimate, if all the Salary Continuation and Severance
obligations are in fact valid claims and the available distribution amount is $18.9 million, then
the estimated distribution percentages would be approximately 23.29% for the Trust Preferred
Securities, 100% for the Bay View Selling Shareholders and approximately 25.12% for all other
general unsecured creditors. See Exhibit 6 to this Disclosure Statement (Base Case III-A) for a
chart showing this scenario. To the best of the Debtors ability to estimate, if all such claims
are in fact valid claims and the available distribution amount is $6.1 million, then the estimated
distribution percentages would be approximately 5.79% for the Trust Preferred Securities, 100% for
the Bay View Selling Shareholders and approximately 8.04% for all other general unsecured
creditors. See Exhibit 7 to this Disclosure Statement (Base Case III-B) for a chart showing this
scenario.
In the Debtors view, the FDIC does not have a claim against the estate. However, the Debtor
does not know if the FDIC will file a claim against the estate and/or assert any priority claim
under section 507(a)(9) of the Bankruptcy Code. The deadline for the FDIC to file a claim is
November 9, 2009. The FDIC has stated that its losses from the receivership of County Bank total
approximately $135 million. Prior to the Petition Date, the FDIC also has stated that it is
entitled to some of the tax refunds. The FDIC may claim that all or a portion of the Rabbi Trust
assets are part of the receivership and not property of the estate. Section 507(a)(9) of the
Bankruptcy Code provides that an allowed unsecured claim based upon any commitment by the debtor to
a Federal depository institutions regulatory agency (or predecessor to such agency) to maintain the
capital of an insured depository institution is entitled to ninth priority. The Debtor did not sign
a guaranty to maintain the capital of County Bank, so the Debtor does not believe it has any such
liability. See In re Imperial Credit Industries, 527 F.3d 959 (9th Cir. 2008). In the
event the FDIC has a valid Claim in the amount of its losses from the receivership of County Bank,
the distribution to other creditors could be zero or otherwise substantially diminished. The Plan
provides that the Plan Administrator may object to any such claim
filed by the FDIC, which
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-11-
objection the Debtor believes is likely to be upheld.
The
FDIC has contacted the Debtors and County Banks insurance companies and made purported
claims against three policies for actions or failures to act on behalf of bank directors and
officers alleging losses of $135 million. The two primary policies have limits of $12.5 million
each and the umbrella coverage has a limit of $1 million. The policies have deductibles ranging
from $0 to $250,000. To the extent any directors or officers of the Debtor incur liability they
are likely to have claims against the Debtor for indemnification. While such claims have been
filed in unliquidated amounts, the Debtor is unable to predict whether such claims will need to be
paid and how that might affect the projected distributions.
The primary assumptions made in formulating the estimates in the above charts are as follows:
(a) the claim amounts are based on the Debtors estimation of the likely outcome of valid claims
and a legal analysis performed to determine the validity and priority of claims; (b) the amounts
are the best estimates available, however, the amounts due as of the Petition Date for the Trust
Preferred Securities interest and certain Salary Continuation obligations remain in the process of
refinement and confirmation; (c) the high cash balance includes amounts estimated from anticipated
tax and insurance refunds; (d) no trustee is appointed and the Case is not converted to chapter 7;
(e) the list of assets is a general description of the major asset categories and nothing herein
limits the potential assets of the estate in any way; and (f) the Debtor may have other assets,
including without limitation, net operating losses and causes of action the value of which is
uncertain at this time. The Plan does not guarantee any specific amount of recovery to creditors.
The Debtor has outstanding approximately 10,805,000 shares of common stock, no par value,
held by approximately 1,700 shareholders. Because there are insufficient funds to pay all Claims
in full, shareholders interests in the Debtor are cancelled by the Plan and they will not receive
a distribution. The most current financial information can be obtained by reviewing the Debtors
latest monthly operating reports filed with the Court and posted on Debtors counsels website.
///
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-12-
III. HISTORY OF CAPITAL CORP OF THE WEST
A. Description of the Debtors Business
The Debtor is a bank holding company incorporated under the laws of the State of California on
April 26, 1995. The Debtor has three subsidiaries. One is a wholly-owned inactive non-bank
subsidiary, Capital West Group (CWG). The Debtor also had one wholly-owned bank subsidiary,
County Bank (the Bank), which was seized by regulators as will be described below. Finally, the
Debtor also owned all the stock of Bay View Funding (BVF).
At the time County Bank was placed into receivership by its state and federal regulators, the
Bank had three wholly-owned subsidiaries, Merced Area Investment & Development, Inc. (MAID) a
real estate company, County Asset Advisors (CAA) and 1977 Services Corporation, which was formed
in 2007 to hold a foreclosed real estate construction project in Rocklin, California. County
Investment Trust (REIT), a former subsidiary of the Bank, was liquidated in 2006. CAA is
currently inactive, and MAID had limited operations serving as the owner of certain bank
properties.
The Debtor also has an interest in County Statutory Trust I, County Statutory Trust II, County
Statutory Trust III, and County Statutory Trust IV, which are all trust subsidiaries established to
facilitate the issuance of trust preferred securities. On November 1, 1995, the Company became
registered as a bank holding company and is the holder of all of the capital stock of the Bank. The
Debtors primary asset and source of income was the Bank. On October 5, 2007, the Debtor acquired
Bay View Funding (BVF), a factoring business headquartered in San Mateo, California. On November
2, 2007, the Bank acquired eleven California branches of National Bank of Arizona dba The
Stockmens Bank of California. As of December 31, 2008, the Company had outstanding approximately
10,805,000 shares of common stock, no par value, held by approximately 1,700 shareholders. There
were no preferred shares outstanding at December 31, 2008.
The Bank was organized on August 1, 1977, as County Bank of Merced, a California state
banking corporation. The Bank commenced operations in 1977. In November 1992, the Bank changed its
legal name to County Bank. The Banks deposits were insured by the Federal
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-13-
Deposit Insurance Corporation (FDIC) up to applicable limits. The Bank was a member of the
Federal Reserve System and a member of the Federal Home Loan Bank.
Through County Statutory Trust I, County Statutory Trust II, County Statutory Trust III, and
County Statutory Trust IV, the Company issued four series of trust preferred securities. The
transactions closed on the following dates and in the following amounts.
Date | Amount | |||
February 22, 2001 |
6,186,000 | |||
December 17, 2003 |
10,310,000 | |||
June 23, 2006 |
15,464,000 | |||
October 31, 2007 |
25,774,000 | |||
Total |
57,734,000 | |||
The Company also invested 3% of the above amounts, or approximately $1,700,000, in equity
interests in the four trusts. Trust preferred securities are a capital-raising vehicle. In a trust
preferred transaction, a bank holding company forms a business trust, invests capital as common
equity of the trust equal to 3% of the expected capital raised and issues a debenture to the trust
in return for the proceeds of the issuance of trust preferred securities by the trust. The trust,
or more often a pool of trusts in which other community institutions also participate, issues the
securities to investors, generally other banks and institutional investors. Federal bank regulators
have authorized banks and holding companies to treat these securities as tier 1 capital for bank
regulatory purposes, on which the Internal Revenue Code permits the interest component of payment
to be deducted as interest expense for federal income tax purposes. Interest payments are due
quarterly (semi-annually in the case of County Trust I) and the principal amount must be repaid or
redeemed within 30 years. Companies are permitted to defer interest payments for up to 20 quarters,
and accordingly the Company elected to begin to defer interest in March of 2008. Holders can
accelerate the maturity in case of an event of default. A voluntary bankruptcy filing is an event
of default permitting the trustee to accelerate the obligation to repay the amount of the
investment. The trustees of the trusts on behalf of holders of the trust preferred securities are
the Debtors largest creditors.
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-14-
The Debtors net income for 2004-2006 was as follows:
2004
|
$12,243,000 | |
2005 | $18,004,000 | |
2006 | $22,600,000 |
The Debtors net income for the first three quarters of 2007 was $10,614,000. Its
shareholders equity at September 30, 2007, was $156,104,000. In the fourth quarter of 2007, the
effects of what became the subprime mortgage crisis and broader recession started to be felt, as
real properties started to decline in value and businesses dependent on real estate values started
to suffer.
In February 2008, in the course of the year-end review and audit of its financial statements
for the year ended December 31, 2007, and discussions with the California Department of Financial
Institutions, its state regulator, and the Federal Reserve Bank of San Francisco, its primary
federal bank regulator, the Company determined that its Banks loan portfolio had suffered
substantial deterioration and a large increase in its allowance for loan losses was required.
Although the Bank made no subprime mortgages, it had made substantial loans to developers for
acquisition, development and construction of residential homes and condominiums throughout
Californias Central Valley. Overbuilding and an increase in foreclosures in the market resulted in
rapidly declining real property values. The increases in the Banks allowance for those losses were
the result of the increase in nonperforming loans and other nonperforming assets. The increase in
nonperforming loans was primarily attributable to delinquencies in real estate construction and
commercial real estate loans resulting from sharply declining real estate values, inadequate demand
for new residential units and the unavailability of mortgage financing.
The decline in the Bank loan collateral values resulted from construction of residential real
estate in excess of sustainable demand and sharply lower appraised values for real estate
collateral. The excess supply of homes depressed market values for homes and land under
development. For the first time in recent years, home builders were unable to sell completed homes
at prices sufficient to recover their costs (or in some cases at any price). Appraised values
plummeted sharply when a major local developer executed certain year-end 2007 sales
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-15-
transactions for newly constructed residential units and land under development in the Banks
market area at discounts of approximately 50% from previous sales prices. Because so few sales were
taking place, sales at these deeply discounted prices became the comparable sales on which nearly
all appraisers of residential real estate in the market area had to rely. Because sales were so
limited, borrowers received no sales proceeds from which to repay their loans as they came due and
they were unable to obtain refinancing from other sources. Some borrowers were able to make partial
principal payments from other sources or to provide additional collateral, but many were unable to
do either. As a result builders and developers became delinquent on their loans made by the Bank to
finance this construction. Increasing foreclosures against homes in the Banks market area further
increased the supply of homes and further depressed real estate market values.
In connection with these events, the Debtor disclosed in its Annual Report on Form 10 K filed
on April 2, 2008, the following:
The Company and County Bank expect to enter into a formal agreement with the
Federal Reserve Bank of San Francisco and the California Department of Financial
Institutions, as County Banks primary federal and state bank regulators. Although
the specific terms of the anticipated agreement have not yet been determined, the
Company believes that the agreement will include restrictions and requirements with
respect to the Banks capital levels, asset quality, management, earnings,
liquidity and sensitivity to market risks. The Company has announced the suspension
of common stock dividends through the end of 2008 as a measure to conserve capital.
The Company has also announced the formation of a Regulatory Oversight Committee
(ROC) composed of three outside directors. The committee includes independent
directors Michael Graves, Audit Committee Chair, and Jerry Callister, Chairman of
the Board. The ROC will be chaired by Director Donald T. Briggs, Jr. The Oversight
Committee has been given authority by the Companys board to oversee all of the
Companys operations.
At the same time it filed its Form 10-K on April 2, 2008, the Debtor issued a press release
summarizing results of operations for the fourth quarter of 2007 and the year ended December 31,
2007. The press release included the following:
The Company reported a net after-tax loss of $3.6 million for the year ended
December 31, 2007, compared to a net income of $22.6 million for the year ended
December 31, 2006. It also reported a net after-tax loss of $14.2 million for the
fourth quarter of 2007, compared to a net income of $5.2 million for the fourth
quarter of 2006. In the Form 12b-25 filing, the Company had estimated its loss at
$4 million for the year and $15 million for the fourth quarter.
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-16-
The quarterly loss is attributed primarily to a preliminary provision for loan
losses of approximately $25.2 million. The provision for loan losses for all of
2007 was $29.8 million, compared with $400,000 for 2006. The largest factor
contributing to the increased provision was the rapid decline in real estate values
in Californias Central Valley in fourth quarter 2007, which includes the Companys
primary service area in Merced County. Non-accrual loans as of December 31, 2007
were $53.6 million.
The Companys pre-tax loss for 2007 was $11.4 million. This figure includes in
addition to the $29.8 million pre-tax loan loss provision discussed above a $1.4
million impairment related to a 1995 acquisition as a result of the Companys
annual fourth quarter assessment of goodwill and a $1 million fourth quarter
impairment of an agency preferred security; due to then-current market conditions
and an assessment of the issuer.
Also in connection with preparation of its Form 10-K, the Debtor determined that it had
material weaknesses in its credit and accounting functions that contributed to its need to make
such a large provision to its allowance for loan losses. In response to this determination, the
Debtor took the following steps as announced in its SEC filings to address those weaknesses:
| Engaging independent credit specialists to evaluate a substantial portion of the commercial, real estate and construction loan portfolios; | ||
| Ensuring via review by qualified senior management that managements assessment of loans requiring impairment analysis in accordance with SFAS 114 is supported by comprehensive documentation; | ||
| Training of lending and credit personnel to ensure that loans are appropriately classified and that problem loans are identified and communicated to Credit Administration on a timely basis; | ||
| Putting a process in place to involve the Accounting department in the preparation and review of comprehensive documentation developed by Credit Administration to support the loan loss provisioning and the adequacy of the Allowance for Loan Losses; | ||
| Hiring of additional accounting and credit personnel to ensure that personnel with adequate experience, skills and knowledge particularly in relation to complex or non-routine transactions are directly involved in the review and accounting evaluation of such transactions; | ||
| Documenting of processes and procedures, along with appropriate training, to ensure that the accounting policies conform to GAAP and are consistently applied prospectively; and | ||
| Ensuring through appropriate review by senior level personnel that managements analysis of the appropriate accounting treatment for Affordable Housing Partnership investments is supported by comprehensive documentation. |
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-17-
On May 19, 2008, the Debtor announced first quarter 2008 net income of $2.3 million.
Continuing the effort to review the Banks portfolio more closely, the Debtor expanded its
internal credit review process during the first quarter of 2008 to include a credit review of all
construction loans and all land loans in excess of $250,000, resulting in additional loans being
placed on non-accrual status while other loans were removed from non-accrual status.
On July 17, 2008, the Debtor entered into a written agreement with the Federal Reserve Bank of
San Francisco related to its regulatory problems. The Debtor disclosed this agreement and its
effect in a current report on Form 8-K filed on July 23, 2008. That report disclosed the following:
Consistent with the Companys prior disclosures in its Form 10-K for the year ended
December 31, 2007, the related press release and Form 10-Q for the first quarter of
2008, the Company and its subsidiary County Bank entered into a formal agreement
with the Federal Reserve Bank of San Francisco to address regulatory concerns.
Under the agreement, the Company and the Bank agree to take appropriate steps to
improve board oversight and management; strengthen risk management practices;
improve credit and loan administration policies and procedures; improve asset
quality; maintain an adequate allowance for loan losses; submit a capital plan for
achieving and maintaining acceptable capital levels; suspend cash dividends and
payments on trust preferred securities without regulatory approval; not incur any
new material debt or repurchase or redeem capital stock; submit an earnings plan
and budget; submit an acceptable plan for liquidity and cash management; constitute
a Compliance Committee to monitor and coordinate compliance with the agreement; and
submit progress reports on a regular basis. A copy of the agreement is attached as
an exhibit to this report.
The Company and Bank established a Regulatory Oversight Committee (ROC) on March
19, 2008. The ROC together with the full board and management have been taking and
continue to take steps to address all of these concerns since that date. The ROC
will continue to function as the Compliance Committee required by the agreement.
The Company and Bank believe they have made substantial progress on all of the
matters covered by the agreement and are devoting substantial efforts to continue
that progress. As previously disclosed, the Company has engaged an investment
banking firm to advise and assist it in raising capital as required.
The Company and Bank expect that the California Department of Financial
Institutions may require them to enter into a separate agreement addressing similar
concerns. The Company and Bank believe that the corrective measures undertaken to
date and referred to above will be equally responsive to concerns of the
Department.
The Bank subsequently entered into an agreement of similar effect with the California
Department of Financial Institutions, but the California Department of Financial Institutions
ordered that its terms must remain confidential.
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-18-
The Debtors then chief executive officer, Thomas T. Hawker, had been scheduled to retire in
January 2009, but announced his intent to retire early, as soon as the Debtor could engage a new
chief executive in order to afford the Debtor the benefit of new leadership. On July 29, 2008, the
Debtor announced the appointment of Richard Cupp as its president and chief executive officer,
subject to his required approval or non-objection by the Federal Reserve Bank of San Francisco.
Mr. Cupp joined the Debtor immediately as a consultant pending consideration of his appointment by
the FRB. The FRB granted its approval on August 15, 2008. Mr. Cupp has over 40 years of experience
in the financial services industry, having held leadership roles within financial institutions of
all sizes and regulatory charters. For the prior 13 years, he had served as Chief Executive
Officer of several independent commercial and savings banks and was responsible for significant
improvements in operations, asset quality, regulatory and investor relations, earnings and
shareholder valuation.
On November 17, 2008, the Debtor announced a third quarter net loss of $54.6 million. Third
quarter results were negatively impacted by significant non-cash charges corresponding to a
goodwill impairment of $23.5 million and an increase in the deferred tax valuation allowance of
$25.3 million. In addition to the non-cash charges, the Debtor also recorded a loan loss provision
of $11.5 million in the third quarter of 2008. Excluding the goodwill impairment and deferred tax
valuation allowance non-cash charges, the Debtor would have reported a third quarter net loss of
$5.8 million.
On January 30, 2009, the Debtor announced the following:
Capital Corp of the West (the Company) determined, on a preliminary basis, that
it would be required to make a provision for loan losses of approximately $28.5
million in the fourth quarter of 2008, compared with a provision of $11.5 million
for the third quarter of 2008. The fourth quarter provision is attributable to
continued declines in the appraised values of real property collateral securing
loans in the Companys portfolio, a deteriorating economic environment, downgrades
in internal risk ratings, an increase in nonperforming loans and portfolio reviews
by third parties including state and federal regulators. Absent further adjustment,
the estimated cumulative provision for loan losses for the year ended December 31,
2008, will be approximately $55.4 million.
Additionally, County Bank (the Bank) filed its fourth quarter Call Report today
with banking authorities. According to the Call Report, preliminary results of
operations for 2008 reflect a loss for the year of approximately $96 million,
compared to a loss of $2.7 million for 2007. For the fourth quarter of 2008, the
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-19-
Bank incurred a loss of approximately $35.1 million, compared to a loss of $14.3
million for the fourth quarter of 2007. The provision for loan losses in 2008 was
$55.4 million, compared to $29.8 million in 2007. Total nonperforming loans at
December 31, 2008 were approximately $109 million, or 9% of total loans, compared
to $54 million, or 3.6% of total loans at December 31, 2007. The allowance for loan
losses at December 31, 2008, was approximately $38.2 million or 3.1% of total
loans, compared to $35.8 million, or 2.4% of total loans at
December 31, 2007.
As a result of the provision and subject to completion of its year-end review, the
Company expects that the Banks capital ratios at year end will fall into the
undercapitalized category under federal capital guidelines. The Bank believes
that it needs to raise approximately $75,000,000 in new capital in the near future
in order to be capitalized at acceptable levels. The Bank will convert $20,000,000
of tier 2 capital (in the form of a subordinated note) to tier 1 capital upon the
Companys contribution of the note to the Bank. If this adjustment had been
effective at December 31, 2008, the Banks tier 1 risk-based capital ratio and its
leverage ratio would have been in the adequately capitalized category, but its
total risk-based capital ratio would have been approximately 6.53%, which is in the
undercapitalized range, and the Bank would still be classified as undercapitalized.
Except for this adjustment, neither the Company nor the Bank has any investment or
sale proposal under active consideration that is likely to result in a successful
recapitalization.
As a result of its failure to improve its capital position, the Bank is not in
compliance with regulatory agreements requiring additional capital. As previously
reported, uncertainty regarding the Companys ability to obtain additional capital
raises substantial doubt about the Companys ability to continue as a going
concern. As a result of the Banks cumulative losses, capital position and
noncompliance with its regulatory agreements, the Banks state and federal banking
regulators may take further significant regulatory action.
The FDICs general deposit insurance rules raised deposit insurance coverage to
$250,000 per depositor (with separate coverage for joint accounts) per insured
institution through December 31, 2009. In addition, under the Transaction Account
Guarantee Program, the FDIC provides full coverage for (i) non-interest bearing
transaction deposit accounts, including all personal and business checking deposit
accounts, (ii) NOW accounts earning interest rates of 50 basis points or less and
(iii) all attorney client trust accounts through December 31, 2009.
On February 6, 2009, the DFI took possession of and closed the Bank under provisions of the
California Financial Code. In the Debtors opinion, the seizure was the result primarily of the
Banks decline in capital to levels considered unsafe and unsound under state and federal banking
laws and the decline in the Banks liquidity, or cash available to meet deposit withdrawals, make
loans and otherwise satisfy the cash needs of bank operations. The DFI appointed the FDIC as
receiver of the Bank. The FDIC transferred certain of the Banks deposits and assets to Westamerica
Bank and guaranteed the transferee against certain losses it might incur on transferred assets. The
Debtor is unlikely to receive any proceeds as a result of this disposition of
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-20-
the Bank and the stock of the Bank appears to be worthless. The FDIC has indicated in writing that
it is unlikely that any funds will be available for distribution to the Debtor as the
shareholder of the Bank.
B. Capital
Federal banking law includes guidelines for capital adequacy for a bank holding company, with
ranges identified as well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized. At each level below well
capitalized, an institution becomes subject to additional regulatory sanctions and restrictions
on activities, payment of dividends, pricing or acceptance of certain deposits, additional
reporting requirements and the like. Bank regulators have broad discretion in imposing sanctions
and restrictions. The most severe sanctions include termination of FDIC deposit insurance,
receivership and imposition of civil money penalties.
The Debtor remained well capitalized at least until June 30, 2008. The Bank remained well
capitalized until December 31, 2007, when its capital ratios fell to within the adequately
capitalized range. At December 31, 2008, the Banks capital ratios fell further into the
undercapitalized range.
The most important requirement of the supervisory agreements in the Debtors opinion was the
requirement that the Debtor adopt a capital plan and raise additional capital.
In April 2008, the Debtor engaged Keefe Bruyette & Woods, Inc. (KBW), a prominent investment
firm in the banking industry, to assist it in raising capital or finding a possible merger partner.
The Debtor retained KBW in this capacity until January 2009. The Debtor prepared extensive due
diligence materials to be made available to interested parties through KBW. During this period,
several potential investors entered into confidentiality agreements in order to have access to the
Debtors due diligence materials, but the Debtor never reached an agreement for an investment with
any of them. The Debtors stock price was falling during this period from $19.87 in January 2008 to
approximately $0.01 to $0.02. The Debtors stock was suspended and then
delisted from trading on NASDAQ in February and March of 2009 and it now trades in the
over-the-counter market with prices quoted in the pink sheets.
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-21-
Commencing in May 2008, members of the board of directors and management also sought
potential investors independent of KBWs efforts. Unfortunately none was successful in identifying
an investor willing to commit to a capital investment.
It was the view of management, the Board and the Debtors advisors that the difficulty in
raising new capital was in part a result of the financial markets instability and the governments
ongoing actions to resolve this crisis, including new regulatory guidelines and programs regarding
capital, including TARP (briefly described below). Many other industries beyond the banking and
financial services sectors were showing signs of significant financial strain as well, further
complicating the financial markets recovery.
In November 2008, the Debtor also made an application to participate in the U.S. Department of
Treasurys Troubled Asset Relief Program (TARP) Capital Purchase Program, under which Treasury
invests capital in banking companies in exchange for preferred stock and warrants. The Treasury
Department did not act on the Debtors application, so the Debtor has not received any of the $700
billion in funds appropriated for the bailout. After the seizure of the Bank, the Debtor is no
longer eligible for TARP funds.
C. Bay View Funding
The Debtor purchased BVF in October 2007. The total purchase price was approximately
$13,800,000. Of this amount, approximately 85% was paid at the time of acquisition. Of the balance
of approximately $2,100,000, approximately one-third ($735,000) was paid in October 2008 and the
remaining two-thirds ($1,394,000) becomes payable in October 2009.
BVF was a factoring company. It purchased receivables from businesses at a discount and
collected the receivables. Historically, the receivables were outstanding an average of 22 days.
At historical collection levels, this activity produced a return of 36% to 38% per annum on
average outstanding balances.
BVF required approximately $20,000,000 in funding to operate efficiently. Its own
resources always were substantially less than that. Instead, BVF utilized a credit facility.
At the time that it was acquired by the Debtor, Wells Fargo Foothill, an affiliate of Wells Fargo
Bank, provided BVF with its credit facility. From the time of the Debtors acquisition until the
seizure
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-22-
of County Bank, County Bank provided this facility. Under the facility, the Bank acquired the
receivables for its account and BVF earned fees for originating and collecting the receivables and
providing services to the customers. Because of the current recession, confidence in small
businesses that are the typical customers of a factoring business is low, so the market for the
factoring business is depressed. The value of BVF was dependent in large part on the relationships
that its principals had with businesses that require factoring services.
Following the closure of the Bank, the Debtor solicited bids for BVF over a six-week period
from persons and entities known to be active in the factoring business and made due diligence
information available during that time. The Debtor ultimately requested proposals, in the form of
letters of intent, from three interested parties. The Debtor selected the purchasers proposal
because it represented the highest firm price and was considered the most likely to be consummated.
On April 3, 2009, the Debtor, BVF and BVFs subsidiary CSNK Working Capital Finance Corp
entered into an Asset Purchase Agreement for the sale of the factoring business conducted by BVF to
BVF/CSNK Acquisition Corp Under the Asset Purchase Agreement, BVF and CSNK Working Capital Finance
Corp sold to the buyer all their interest in factored receivables then held by the seller
(approximately $16,000,000), equipment, contract rights, customer deposits, ownership of CSNK
Working Capital Finance Corp, rights to the Bay View Funding name and related trade name rights,
goodwill and related assets, subject to certain exceptions. The Debtor received approximately $5.6
million in net proceeds representing the purchase premium, equipment, prepaid expenses and other
assets including cash previously deployed as working capital in the factoring business. The balance
of the purchase price was applied to repay the outstanding financing against the factored
receivables.
Principals of the purchaser include Ed Sondker and Vince Narez. Mr. Sondker is a managing
director of Genesis Financial Consultants of Leawood, Kansas. Mr. Sondker was a minority
shareholder of BVF when it sold the factoring business to the Debtor in 2007. Mr. Narez has entered
into an employment relationship with the purchaser and will be an executive in the factoring
business under the new ownership. Mr. Narez was the president and controlling
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-23-
shareholder of BVF when it sold the factoring business to the Debtor in 2007. He continued as
president of BVF during its ownership by the Debtor. Given the sale of the assets of BVF, the
Debtor does not believe that its stock in BVF has any value.
D. F&M Stock
The Debtors other principal non-cash asset was 4,731 shares of common stock of Farmers and
Merchants Bancorp (F&M) of Lodi. The F&M stock symbol is FMCB.OB and the stock trades
over-the-counter on the pink sheets. Taking into account the depressed market for stock of
financial institutions, the Debtor believed it had a value of approximately $ 1,600,000. F&M stock
is not actively traded.
Since February 6, 2009, the Debtor negotiated the sale of these shares for the following
prices net of commissions:
Number sold | Price | Net proceeds | ||||||
2,500 |
363.50 | 907,495 | ||||||
670 |
362.50 | 218,755 | ||||||
850 |
340.00 | (est.) 289,000 | ||||||
711 |
340.00 | (est.) 241,740 | ||||||
4,731 |
$1,656,990 |
E. Intercompany Transactions
The operations of the Debtor and the Bank were closely connected. During normal operations,
the Debtor and the Bank allocated operating expenses between them in a manner management
considered equitable. To managements knowledge, the method of allocation was not a regulatory
concern. Management of the Debtor made a good faith effort to fairly allocate assets, liabilities
and expenses owned or incurred by the Debtor and the Bank.
The Debtor held a subordinated note for $20,000,000 issued by the Bank for cash invested by
the Debtor in the Bank in December 2007. Immediately prior to the seizure of the Bank, in an effort
to enhance the capital structure of the Bank, the Debtor contributed this note to the Bank. As a
result, $20,000,000 of the Banks tier 2 capital became tier 1 capital, which is the form of
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-24-
capital preferred by bank regulators. At the same time, to further bolster the Banks capital, the
Debtor repaid to the Bank $871,570 in cash that the Bank had paid to the Company in interest on
the subordinated note during 2008.
To properly align the functions of the Bank and the Debtor, the Debtor also contributed to
the Bank certain fixed assets, such as computers, other equipment, furniture, fixtures and
leasehold improvements that were owned by the Debtor but used by the Bank in normal operations.
The book value of these contributed assets was $1,027,823 net of certain capitalized lease
obligations.
The Debtor contributed to the Bank $1,513,805 in unpaid liabilities at December 31, 2008,
that the Debtor had charged to the Bank in 2008 but had not yet paid at year-end. The Debtor
contributed another $55,125 to the Bank for Debtor expenses paid by the Bank in January 2009.
The Debtor had on its books prepaid costs of $1,922,606 at December 31, 2008. These costs
have not been charged to the Bank. The Debtor reviewed these costs in detail and excluded all
costs associated with insurance (such as D & O, Liability, etc.) even though a meaningful portion
of these costs has historically been allocated to the Bank. The Debtor has similarly treated all
Bank legal costs during 2008 as Debtor costs despite the fact that a meaningful portion of these
would normally be charged to the Bank. Accordingly, management reduced the prepaid cost to
$1,150,231 which represents the Debtors best estimate of costs singularly related to the Bank.
Funds contributed by the Debtor to the Bank were reduced by this amount, as the Bank had the
benefit of these prepaid costs.
F. Purpose of the Chapter 11 Filing
The bankruptcy filing was necessary for an orderly allocation of the Debtors assets among its
creditors, including the resolution of disputed claims and determination of priority of trust
preferred securities and other claims.
The Debtor remains a public company registered with the SEC under the Securities
Exchange Act of 1934 and retains its obligation to file reports in accordance with that law
and regulations promulgated under it. Because of the Debtors limited resources and lack of access
to historic information, all of which are maintained on information systems belonging to the Bank,
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
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the Debtors filings will most likely be limited to current reports on Form 8-K to report filings
and developments in this proceeding. The Debtor has filed reports with the SEC indicating its
intention to continue with limited reporting.
As of the Petition Date, the Debtors board of directors remained substantially intact. The
current directors are Jerry E. Callister, Richard A. Cupp, Dorothy L. Bizzini, David X. Bonnar,
John D. Fawcett, Curtis R. Grant, and Curtis A. Riggs. Background information on the Debtors
directors can be obtained from the Debtors most recent proxy statement filed with the Securities
and Exchange Commission.
Richard A. Cupp, CEO, and David A. Heaberlin, CFO, continued as officers of the Debtor during
the bankruptcy proceedings. The Debtor has no other employees.
IV. SIGNIFICANT EVENTS DURING THE CHAPTER 11 CASE
The following constitutes a brief, general discussion of certain significant events during
the chapter 11 cases prior to the filing of this disclosure statement. All of the pleadings filed
by the Debtor in the Case are posted in pdf format on counsel for the Debtors webpage at
www.ffwplaw.com under Cases and in the Capital Corp of the West folder.
A. First Day Motions
As soon as practicable after the filing of the petition, the Debtor filed several first day
motions. These motions included a motion to limit notice to those parties who requested notice and
a motion to approve the assumption of employment contracts with the Debtors only two officers and
employees. Both of these motions were granted.
B. Formation of Creditors Committee
The Office of the United States Trustee (U.S. Trustee) solicited the 20 largest creditors
for participation on the Official Committee of Unsecured Creditors (Committee). As of the
date of this Disclosure Statement, the following parties are members of the Committee: Thomas
T. Hawker, 2954 Greenfield Drive, Merced, California 95340; U.S. Bank National Association,
Trustee, One Federal Street, 3rd Floor, Boston, MA 02110, Attn. Robert Butzier;
Wilmington Trust Company as Trustee, Rodney Square North, 1100 North Market Street, Wilmington, DE
19890-1615, Attn. David Vanaskey.
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
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C. Retention of Professionals
The Debtor retained Felderstein Fitzgerald Willoughby & Pascuzzi LLP (FFWP) as its
bankruptcy counsel and Bingham McCutchen LLP for certain bank and bank holding company regulatory
matters, certain corporate and securities matters, and certain labor issues. The Committee
retained Klein, DeNatale, Goldner, Cooper, Rosenlieb & Kimball LLP, 5260 N. Palm Avenue, Suite
217, Fresno, California as its counsel.
The Debtor retained Perry-Smith as its accountants to prepare and complete the 2008 federal
and state tax returns and for any tax returns required post-petition. The Debtor retained Boos &
Associates as its tax consultants to pursue California Enterprise Zone Net Interest Deductions
(NIDs), as defined in the California Revenue & Taxation Code and California Enterprise Zone
Hiring and Sales and Use Tax Credits (EZ Credits), as defined in the California Revenue &
Taxation Code.
D. Use of Cash Collateral and Debtor in Possession Financing
The Debtor had no creditors that held a security interest in cash collateral as that term is
defined by the Bankruptcy Code. Thus, no motion for use of cash collateral was filed.
E. Miscellaneous Motions
The Debtor filed a motion to assume and assign a lease of non-residential real property
lease, the Tower Plaza Office Lease dated as of August 1, 2008 which the Debtor leased from
Diamond SRGNC Bayview Plaza LLC for certain office space located at 2121 South El Camino Real,
Suite B-100, in San Mateo, California. Pursuant to an Asset Purchase Agreement dated as of April
3, 2009, among the Debtor, Bay View Funding (Bay View), a subsidiary of the Debtor, CSNK,
Westamerica Bank (Westamerica), and BVF/CSNK Acquisition Corp (BVF/CSNK), in which Bay View
sold and BVF/CSNK purchased substantially all of Bay Views assets, the parties to the Purchase
Agreement contemplated the renegotiation and/or assumption of the Lease within 90 days of the date
of that Purchase Agreement. The Debtor assigned the Lease to CSNK with the
landlord Diamonds consent, which benefited the Estate by enabling the Debtor to reduce the
administrative burdens and potential liabilities that otherwise would be present from the lease.
///
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
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V. PLAN DESCRIPTION
The Plan treatment of claims is summarized below.
A. Specification And Treatment Of Unclassified Claims
Other than the Professional Claims, each Administrative Claim against the Debtor or its Estate
shall be paid in full as soon as practicable after the entry of an order of the Court approving
such Administrative Claim or on the Effective Date, whichever is later, unless different treatment
is agreed to between the claimant and the Debtor; provided however, that the Debtor is hereby
authorized to pay any and all Administrative Claims in the ordinary course of business without
Court approval. Except as may be expressly set forth in the Plan or by an order of the Court, no
holder of an Administrative Claim shall be entitled to payment on account of any post-petition
interest or penalties arising with respect to such Administrative Claim.
To the extent any Professional Person holds a Professional Claim against the Debtor for
services rendered prior to the Effective Date of the Plan, such Professional Person shall be paid
in full upon Court approval pursuant to the terms of the applicable employment order.
Allowed Pre-Petition Tax Claims shall be paid in full on the Effective Date of the Plan or in
accordance with sections 1129(a)(9)(C) and (D). All fees payable by the Debtor through the
Confirmation Date under 28 U.S.C. §1930 shall be paid in full on the Effective Date or as soon
thereafter as they may come due in the ordinary course.
B. Treatment Of Classified Claims
1. Class 1 (Priority Claims):
(a) Class 1A (Wages): The holder of each Allowed Class 1A Claim shall be paid the
Allowed amount of their Priority Claim in the amount required under section 507(a)(4) and section
507(a)(5) in cash on the Effective Date or as soon thereafter as is practicable, except to the
extent that the holder of a particular Claim has agreed otherwise. The
Debtor does not believe there are any claims in this Class 1A.
(b) Class 1B (Other Priority Claims): Any Allowed Priority Claims not otherwise
included in Class 1A shall be paid the Allowed amount thereof in cash on the Effective Date or as
soon thereafter as is practicable, except to the extent that the holder of a particular
First Amended Disclosure Statement to
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Debtors First Amended Plan of Liquidation
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Claim has agreed otherwise. The Debtor is aware of a few small claims in this Class 1B in the
amount of approximately $642.
2. Class 2 (Secured Claims):
Any holder of an Allowed Secured Claim shall retain its liens securing the Claims and shall
receive deferred cash payments totaling at least the allowed amount of their Claims, of a value, as
of the Effective Date of the Plan, of at least the value of each claimants interest in the
collateral as required under section 1129(b)(2) of the Bankruptcy Code; provided however, that the
Debtor reserves the right to require each claimant to remove, at its own cost and peril and without
damage to any property of the Estate, and at a time mutually convenient to such holder and the
Debtor, such property as to which such holder holds a perfected security interest. Such holder may
file and assert a Claim within Class 3 for any deficiency resulting from such abandonment and
return of collateral, provided that a proof of claim therefor is filed with the Court and served
upon the Debtor within thirty (30) days following the Effective Date. The Debtor does not believe
there are any holders of Class 2 Secured Claims.
3. Class 3 (General Unsecured Claims):
All Allowed Unsecured Claims within Class 3 shall be paid or otherwise satisfied in full from
any Unencumbered Funds from the liquidation of the Debtors assets after all payment in full, or
reservation for payment in full, of all Administrative Claims, Priority Claims, Pre-Petition Tax
Claims, Professional Claims, and Class 1 Claims, and after payment or reservation of sufficient
funds to pay for all post-confirmation liquidation expenses. In the event there are insufficient
Unencumbered Funds to pay all Allowed Unsecured Claims in full, the holders of Allowed Unsecured
Claims in Class 3 shall be paid on a Pro Rata basis. In no event shall any holder of an Allowed
Unsecured Class 3 Claim receive more than the full amount of its Allowed Unsecured Claim.
In the event any Allowed TRUPS Claim is found by the Court to be, or pursuant to the Plan is
denoted as, a Subordinated TRUPS Claim, then such Subordinated TRUPS Claims pro
rata share of any distribution shall be paid to the creditor to which the Subordinated TRUPS
Claim is subordinated until such claim is paid in full, then any further distribution shall be
made
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Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
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to the Subordinated TRUPS Claim. In no event shall such subordination affect any other creditor.
4. Class 4 (Subordinated General Unsecured Claims):
In the event any Allowed Claims, other than Subordinated TRUPS Claims, are found to be
subordinated to Class 3 claims, then such claims shall be Class 4 claims and shall not receive any
distribution unless and until all Class 3 claims are paid in full including interest at the legal
rate as of the Effective Date.
5. Class 5 (Shareholders):
All holders of shares of common or preferred stock of the Debtor shall receive nothing under
the Plan. All such shares, warrants or stock options shall be canceled as of the Effective Date of
the Plan.
C. Means For Implementation And Execution Of The Plan
1. Assets of the Estate Do Not Revest in the Debtor:
The Debtor shall not be revested with its assets on confirmation of the Plan, but shall
manage its affairs and its property as Post-Confirmation Debtor under the terms of the Plan.
Accordingly, the automatic stay pursuant to 11 U.S.C. § 362 shall remain in effect with respect to
the Debtors assets following the Effective Date of the Plan until such time as (a) such property
is no longer property of the estate, (b) relief from stay is granted by Final Order of the Court,
or (c) the Court enters a Final Decree and the Case is closed.
2. Post-Confirmation Debtor Acts through a Plan Administrator:
The Post-Confirmation Debtor through a Plan Administrator, acting as a liquidating and
distribution agent, shall continue to liquidate assets of the Estate, if any, in a prudent and
businesslike manner after the Effective Date. Such liquidation may include, without limitation,
(a) merger or consolidation of the Debtor with one or more persons, (b) sale of all or any
part of the property of the Estate, (c) distribution of property to those having an interest in the
property, or (d) the transfer of all or any part of the property of the Estate to one or more
entities, whether organized before or after the confirmation of the Plan. On the Effective Date or
as soon thereafter as practicable, the Post-Confirmation Debtor shall make the payments or reserve
sufficient funds to make such payments in the future that are required under the Plan by Article 3
(unclassified
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Debtors First Amended Plan of Liquidation
-30-
Claims) and to Classes 1A and 1B. Except as otherwise provided in paragraph 6.10 of the Plan, the
Post-Confirmation Debtor is authorized to pay any and all post-confirmation liquidation expenses
without further order of the Court.
The Plan provides for the appointment of a Plan Administrator to administer the case to a
conclusion with the oversight of the Creditors Committee. In the event a compromise resolution of
the various categories of claims cannot be reached, the Plan Administrator, with the assistance of
the Creditors Committee as provided in the Plan, shall object to Claims, obtain court orders
regarding the validity and priority of Claims, and distribute the funds in accordance with the
validity and priority of the Claims.
The Post-Confirmation Debtor shall have such powers as are set forth in the Plan and the
Confirmation Order and which are necessary to the proper performance of its duties as set forth in
the Plan. In addition, the Post-Confirmation Debtor shall retain post-confirmation all rights of a
trustee serving as a Chapter 11 trustee pursuant to the Bankruptcy Code. Without limiting the
foregoing, the Post-Confirmation Debtor may continue any operations of the business that in its
discretion enhance the value of the assets and/or maximize the opportunities to liquidate the
assets.
The Board of Directors of the Post-Confirmation Debtor shall consist of the Plan
Administrator, who shall be appointed on noticed motion with approval from the Court. The Board of
the Post-Confirmation Debtor shall be operated under the Debtors by-laws post-confirmation, and
it shall govern the Post-Confirmation Debtor in accordance with non-bankruptcy law. The Board of
the Post-Confirmation Debtor shall serve without compensation, except as otherwise approved by the
Court.
3. Limitation on Liability of the Debtor, the Post-Confirmation Debtor,
Creditors Committee, the Plan Administrator, Indenture Trustees and Statutory Trustees:
Except as otherwise prohibited by the Bankruptcy Code or applicable
non-bankruptcy law, Capital Corp of the West, the
Post-Confirmation Debtor, the Creditors
Committee, the Plan Administrator, and each Indenture Trustee and Statutory Trustee, and each of
their officers, directors, attorneys, consultants, employees, agents and assignees, shall have no
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-31-
liability for any error of judgment acting in his/her official capacity made in good faith other
than as a result of gross negligence or willful misconduct from the Petition Date forward. Except
as otherwise prohibited by the Bankruptcy Code or applicable non-bankruptcy law, the
Post-Confirmation Debtor, the Creditors Committee, the Plan Administrator, and each Indenture
Trustee and Statutory Trustee and each of their officers, directors, consultants, attorneys,
employees, and agents shall not be liable for any action taken or omitted in good faith and
believed by them to be authorized within the discretion or rights or powers conferred upon them by
the Plan. No provision of the Plan shall require any agent, employee, officer or director of the
Post-Confirmation Debtor, the Creditors Committee, the Plan Administrator, any Indenture Trustee
or Statutory Trustee to expend or risk his or her own funds or otherwise incur personal financial
liability in the performance of any of his or her duties under the Plan or in the exercise of any
of his or her rights and powers.
4. Approval of Transactions Outside the Ordinary Course of Business:
The Post-Confirmation Debtor may enter into transactions outside the ordinary course of
business, including the transfer, sale or abandonment of assets or the settlement of any Claims or
causes of action, only after order of the Court in accordance with the Bankruptcy Code, Rules and
Local Rules as if the Post-Confirmation Debtor was a debtor in possession; provided however, that
the Post-Confirmation Debtor may transfer, sell or abandon any assets or settle any Claims or
causes of action (a) that have a net effect on the Estate of $50,000 or less without Court approval
or further notice except notice as provided in the Plan to any Creditors Committee and (b) that
have a net effect on the Estate of more than $50,000 and less than $250,000 without Court approval
where the Creditors Committee affirmatively consents.
5. Post-Confirmation U.S. Trustee Quarterly Fees and Quarterly
Reports:
The quarterly fees shall be paid by the Post-Confirmation Debtor to the U.S.
Trustee for each quarter (including any fraction thereof) and quarterly
reports in the form required by the U.S. Trustee shall be filed by the
Post-Confirmation Debtor until the case is closed, converted, or dismissed.
///
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-32-
6. Post-Confirmation Employment of Professionals:
To assist in the performance of the functions under the Plan, the Post-Confirmation Debtor
may employ professionals, including a plan administrator and professionals to liquidate assets, to
the same extent as they could have been employed under the Bankruptcy Code before confirmation of
the Plan, except that further Court approval for employment shall not be required if the Court
approved the professionals employment before the Effective Date. The compensation procedures for
such Professionals are set forth in the Plan.
7. Preservation of Causes of Action:
As of the Effective Date, each and every claim, right, cause of action, claim for relief,
right to set-off and other entitlement held by the Debtor, Capital Corp of the West or the Estate,
whether arising under §§ 502, 506, 510, 541, 542, 543, 544, 545, 546, 547, 548, 549, 550, 551, 552
or 553 of the Bankruptcy Code, or otherwise, other than those waived or released by express terms
of the Plan or the Confirmation Order, shall be deemed fully preserved and vested in the
Post-Confirmation Debtor. This preservation shall specifically include the corporate entities and
all net operating losses to the extent allowed under non-bankruptcy law. Without limiting the
generality of the foregoing, any and all claims and causes of action held by the Debtor and/or the
Debtor in Possession prior to the Effective Date shall be retained by the Post-Confirmation Debtor,
including but not limited to all avoidance actions for transfers made by the Debtor, including all
transfers disclosed in the statement of financial affairs filed with the Court by the Debtor.
8. Closing of Case:
At such point as the Court determines, upon noticed motion of the Post-Confirmation Debtor or
other party in interest, that all pending Claims objections, contested matters and adversary
proceedings have been resolved, or that the Case need not remain open despite pending objections,
matters or proceedings, the Case may be closed by the terms of a final decree of the Court;
provided that the Case will be reopened thereafter if necessary to
facilitate any actions contemplated by the terms of the Plan. The fact that some or all of
the distributions to Creditors remain to be made shall not, in and of itself, constitute grounds
for keeping the Case
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-33-
open when the Post-Confirmation Debtor requests that the Case
be closed.
9. Certain Jurisdictional Limitations:
Any party in interest who believes that the conduct of the Post-Confirmation Debtor, the Plan
Administrator, the Creditors Committee or professionals engaged by the Post-Confirmation Debtor,
the Creditors Committee or the Plan Administrator, is not consistent with the provisions of the
Plan, or believes that any Claims exist against the Post-Confirmation Debtor, the Creditors
Committee, the Plan Administrator or professionals working for the Post-Confirmation Debtor or the
Creditors Committee for any conduct taken within the scope of its/his/her duties as
Post-Confirmation Debtor, Creditors Committee or as such professional, all such Claims, rights,
requests for relief, or enforcement of the Plan must be filed in and determined by the Bankruptcy
Court having jurisdiction over the Case. No concurrent jurisdiction shall exist for the
determination or enforcement of any such rights under or arising from the Plan, or Claims against
the Post-Confirmation Debtor, Creditors Committee or professionals retained by the
Post-Confirmation Debtor or Creditors Committee, in any other state, federal or foreign court.
10. Permanent Injunction:
The Plan does not grant the Debtor a discharge under the provisions of section 1141 of the
Bankruptcy Code. However, the Plan does protect the assets of the Estate for administration by the
Plan Administrator. The rights afforded herein, and the treatment of all Claims and Interests set
forth in the Plan, shall be in full exchange for, and in complete satisfaction, discharge and
release of, all Claims and Interests of any kind or nature whatsoever, whether known or unknown,
matured or contingent, liquidated or unliquidated, existing, arising or accruing, whether or not
yet due, prior to the Effective Date, including without limitation any Claims, or interests on
Claims, accruing on or after the Petition Date, against the Estate, or any assets or property
thereof; provided that such release and discharge does not affect any partys rights as
against the Debtor or any assets outside of the Estate, which rights shall be governed by section
1141 of the Bankruptcy Code and other applicable law.
///
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-34-
D. Procedures Relating To Claims And Interests
1. Pre-Petition, Unsecured Claims Bar Date:
The deadline for filing pre-petition, unsecured Claims was established by the Court as
September 17, 2009, for Creditors other than Governmental Units. For Governmental Units, the
deadline is November 9, 2009.
2. Bar Date for Administrative Claims Incurred Before the Confirmation Date:
Holders of Administrative Claims arising before the Confirmation Date, including those
allowable under Bankruptcy Code section 503 but excluding post-confirmation Claims of
Professionals, shall be forever barred from recovering from Debtor or the Estate on account of such
Claim unless within forty-five (45) days of service of notice of entry of the Confirmation Order
the holder of such Claim files with the Court a motion for allowance of such Claim, including
notice of the date and time for the hearing on the allowance of such Claim.
3. Disputed Claims:
In the case of disputed Claims and unless the Court orders otherwise for cause shown,
reserves from each distribution shall be set aside for the holder of each disputed Claim in an
amount equal to what each disputed Claim holder would have received had its Claim been allowed at
the time of the distribution, unless otherwise ordered by the Court under section 502(c). When the
dispute over the Claim is resolved, the funds reserved for the disputed Claim shall be paid if it
is allowed and any funds reserved for the disputed Claim, if
disallowed, shall be
re-distributed
to the holders of Allowed Claims or Interests of that class until paid in full, subject to the
terms of the Plan. There shall be no distribution to any Disallowed Claim.
4. Claims Cap:
The Claims of all Creditors who have been properly scheduled and/or who have filed Claims
shall be capped at the amount set in the schedules or proof of Claim as of the Confirmation Date.
Unless specifically provided for under the Plan, no Creditor may amend a Claim after the
Confirmation Date to increase the amount asserted against the Debtor or the Estate, unless such
Creditor seeks approval of the Court and the Court allows such amendment by
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-35-
Final Order.
5. Claims under Bankruptcy Code Section 502(h):
All Claims arising from judgments or settlements in an action by the Estate for recovery of
money or property must be filed within thirty (30) days of the entry of such judgment or date of
such settlement as required by Rule 3002(c)(3) or will forever be barred and disallowed.
6. Deadline for Objections to Claims:
Unless the Court orders otherwise, any objection to Claims filed by the Post-Confirmation
Debtor must be filed within 60 days of the later of (i) the Effective Date of the Plan, or (ii)
the order appointing a Plan Administrator becoming a Final Order. Unless the Court orders
otherwise, any objections to Claims by the Creditors Committee or any other party in interest
shall be filed within 90 days of the Effective Date of the Plan.
7. Interim Distributions:
The Post-Confirmation Debtor, in consultation with the Creditors Committee, shall make
interim distributions to holders of Allowed Claims no less frequently than every 120 days
following the Effective Date, provided that sufficient funds exist to continue the implementation
of the Plan and to reserve for disputed Claims and all costs to be incurred in completing the
liquidation of assets and other duties under the Plan. If the Creditors Committee has approved a
proposed distribution, Court approval is not required for interim distributions, but the
Post-Confirmation Debtor may seek such approval nonetheless.
8. Distributions to Holders of TRUPS Claims:
A distribution of a TRUPS Claim shall be made to the applicable Indenture Trustee, who will
make further distributions in accordance with the terms of the Indenture
governing such Indenture Trustee.
E. Executory Contracts and Leases
A list of the executory contracts and unexpired leases to be assumed, and to the extent
necessary assigned, to the Post-Confirmation Debtor, or to be rejected, on the Effective Date of
the Plan will be filed and served by the Debtor at least 30 days prior to the hearing on
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-36-
confirmation of the Plan.
Except as otherwise provided in the Plan or other order of the Court prior to Confirmation,
all executory contracts and unexpired leases of the Debtor entered into prior to the Petition Date
which are not assumed or rejected pursuant to Bankruptcy Code section 365 prior to the
Confirmation Date shall be deemed rejected upon the Effective Date. Specifically, the Debtor
hereby rejects all of the executory contracts and unexpired leases listed on the Debtors Schedule
G, as amended, except those that have been specifically assumed during the Bankruptcy Case. Each
non-debtor party to an executory contract or unexpired lease rejected hereunder shall have thirty
(30) days subsequent to the Effective Date to file a proof of Claim with the Court asserting
damages arising from such rejection.
F. Effect Of Confirmation
1. Discharge:
Pursuant to section 1141(d)(3) of the Bankruptcy Code, the confirmation of the Plan shall not
discharge Claims against the Debtor. However, any actions against the Debtor, Post-Confirmation
Debtor, the Estate, the Plan Administrator, the Debtor in Possession, or properties or interests
in properties of any of the foregoing are enjoined pursuant to and to the extent provided by
paragraph 6.15 of the Plan.
2. Creditors Committee Continuation:
On and after the Effective Date, the Creditors Committee shall continue in existence with all
powers and duties as set forth in the Bankruptcy Code, unless its members decline to serve or as
otherwise ordered by the Court upon noticed motion by any party in interest. Post-confirmation
compensation for Counsel for the Creditors Committee shall be governed by section 6.10 et seq. of
the Plan. The Post-Confirmation Creditors Committee shall supervise the liquidation of assets
proposed under the Plan. Counsel for the Creditors Committee may contact the counsel, special
counsel, or other professionals employed by
Post-Confirmation Debtor on a periodic basis to determine their progress in liquidating the
assets of the estate, including the status of any pending litigation, collection of assets, costs
associated in connection with such liquidation, and estimates as to further distributions. Except
with respect to
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-37-
transactions or settlements within the scope of Section 6.7 of the Plan that do not require Court
approval, the Post-Confirmation Debtor and its counsel shall notify counsel for the Creditors
Committee of any proposed settlements. With respect to any settlement or other action that
requires Court approval, the Creditors Committee shall be notified of any such proposed action
pursuant to Section 6.7 of the Plan and the Creditors Committee shall determine whether the
Post-Confirmation Debtors proposed course of action or inaction is in the best interest of the
estate. If, in the discretion of the Creditors Committee, the Post-Confirmation Debtor is not
acting in the best interests of the estate, the Creditors Committee shall have the ability to
move for removal of the Plan Administrator or for conversion of the case to Chapter 7 pursuant to
the standards of 11 U.S.C. § 1112; provided, however, that no such motion shall be brought before
the lapse of 30 days after written notice of the Creditors Committees concerns and the failure
of Post-Confirmation Debtor to make adequate progress toward resolving the stated concerns. In the
absence of a Creditors Committee, any creditor shall have standing to take any action specified
in the preceding sentence.
VI. LIQUIDATION ANALYSIS
The Plan provides for the orderly liquidation of the assets of the Estate and the distribution
of the net proceeds to holders of Allowed Claims, which is similar to what would occur in a chapter
7 case. However, under the Plan, the Debtors experience, knowledge and expertise will be utilized
for the benefit of all parties to maximize the value of the assets. For this reason, the Debtor
contends that the net proceeds of the liquidation will be far greater under the Plan than in a
chapter 7 case. In addition, conversion of the Case to chapter 7 would add an additional layer of
administrative expenses from the chapter 7 case that does not already exist. Moreover, liquidation
under the Plan provides the maximum flexibility for the efficient management of the Estate
post-confirmation that would not be available in a chapter 7 case.
VII. FEDERAL INCOME TAX CONSEQUENCES
Attached hereto as Exhibit 8 is a summary of certain material federal income tax
///
///
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-38-
consequences of the Plan to the Debtor and the holders of Claims or Interests.
VIII. RECOMMENDATION FOR VOTE TO ACCEPT THE PLAN
The Debtor recommends that all creditors entitled to vote cast a ballot accepting the Plan.
PROPONENT:
Dated: October 23, 2009
CAPITAL CORP OF THE WEST | ||||||
By | /s/ David A. Heaberlin | |||||
APPROVED AS TO FORM.
FELDERSTEIN FITZGERALD | ||||
WILLOUGHBY & PASCUZZI, LLP | ||||
By
|
/s/ Paul J. Pascuzzi | |||
Attorneys for Capital Corp of the West |
First Amended Disclosure Statement to
Debtors First Amended Plan of Liquidation
Debtors First Amended Plan of Liquidation
-39-
EXHIBIT 1
Capital Corp of the West
Liquidation Plan
Estimated Operating Costs Through December 31, 2009
Liquidation Plan
Estimated Operating Costs Through December 31, 2009
Citibank DIP Operating Account | July | August | September | October | November | December | ||||||||||||||||||
Opening Balance |
$ | 6,628,683 | $ | 6,629,866 | $ | 6,908,037 | $ | 6,844,037 | $ | 6,778,037 | $ | 6,723,537 | ||||||||||||
Refunds Received |
||||||||||||||||||||||||
Audit |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
Insurance |
$ | 0 | $ | 375,240 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
Federal Income Tax |
$ | 50,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
California State Tax |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
Total Funds Available |
$ | 6,678,683 | $ | 7,005,106 | $ | 6,908,037 | $ | 6,844,037 | $ | 6,778,037 | $ | 6,723,537 | ||||||||||||
Operating Costs |
||||||||||||||||||||||||
Compensation |
- | $ | 40,750 | - | $ | 42,265 | - | $ | 40,000 | - | $ | 50,000 | - | $ | 40,000 | - | $ | 150,000 | ||||||
CFO Bonus |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | - | $ | 64,000 | |||||||||||
Computer & Internet |
- | $ | 800 | - | $ | 307 | - | $ | 500 | - | $ | 500 | - | $ | 500 | - | $ | 500 | ||||||
General Liability Insurance |
- | $ | 500 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||
Office Supplies |
$ | 0 | - | $ | 337 | - | $ | 500 | - | $ | 500 | - | $ | 500 | - | $ | 500 | |||||||
Legal Fees |
$ | 0 | - | $ | 7,356 | - | $ | 5,000 | - | $ | 10,000 | - | $ | 10,000 | - | $ | 10,000 | |||||||
Public Disclosure Filings |
- | $ | 4,050 | - | $ | 1,625 | - | $ | 1,200 | - | $ | 1,200 | - | $ | 1,200 | - | $ | 1,200 | ||||||
Rent Expense |
- | $ | 1,345 | - | $ | 1,280 | - | $ | 1,300 | - | $ | 1,300 | - | $ | 1,300 | - | $ | 1,300 | ||||||
Shareholder Records Expense |
$ | 0 | - | $ | 814 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||
Tax Return Fees |
$ | 0 | - | $ | 42,500 | - | $ | 14,500 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
Telephone |
$ | 0 | - | $ | 144 | - | $ | 500 | - | $ | 500 | - | $ | 500 | - | $ | 500 | |||||||
Travel |
- | $ | 397 | - | $ | 441 | - | $ | 500 | - | $ | 500 | - | $ | 500 | - | $ | 500 | ||||||
U. S. Trustee Fees |
- | $ | 975 | $ | 0 | $ | 0 | - | $ | 1,500 | $ | 0 | $ | 0 | ||||||||||
Total Operating Costs |
- | $ | 48,817 | - | $ | 97,069 | - | $ | 64,000 | - | $ | 66,000 | - | $ | 54,500 | - | $ | 228,500 | ||||||
Net Operating Results |
$ | 1,183 | $ | 278,171 | - | $ | 64,000 | - | $ | 66,000 | - | $ | 54,500 | - | $ | 228,500 | ||||||||
Ending Balance |
$ | 6,629,866 | $ | 6,908,037 | $ | 6,844,037 | $ | 6,778,037 | $ | 6,723,537 | $ | 6,495,037 | ||||||||||||
Page 1 of 1
EXHIBIT 2
Capital Corp of the West
Liquidation Plan
Base Case I A
As of August 31, 2009
(Includes Estimated Refunds &
TRUPs Subordination to
Bay View Selling Shareholders)
TRUPs Subordination to
Bay View Selling Shareholders)
Subject to Fed. Rules of Evidence 408
Page 1 of 1
Capital Corp of the West
Liquidation Plan
Base Case I A
Critical Assumptions
August 31, 2009
Liquidation Plan
Base Case I A
Critical Assumptions
August 31, 2009
* | This Liquidation Plan has been based on legal analysis performed to determine the validity and priority of claims. Nothing contained herein or in the Disclosure Statement shall be deemed an admission by the Debtor or any other party in interest as to any matter stated including but not limited to the validity, priority or amount of any claim. | |
* | This Liquidation Plan includes the best estimates available; however interest on the Trust Preferred Securities (TRUPs) and certain Salary Continuation obligations remain in the process of refinement and confirmation. | |
* | This Liquidation Plan includes estimates for tax and insurance refunds anticipated. | |
* | This Liquidation Plan assumes that the TRUPs are subordinated to the Bay View Shareholders Obligation. | |
* | This Liquidation Plan includes estimates for Operating Costs assuming that the Bankruptcy can be concluded by December 31, 2009. | |
* | This Liquidation Plan does not include any potential claim(s) by the FDIC. The Bar Date for governmental claims is November 9, 2009. | |
* | This Liquidation Plan includes all currently known potential Creditor Claims. However, it is expected that additional claims will be forth coming as the September 17, 2009 Bar Date approaches. |
Page 1 of 1
Capital Corp of the West
Base Case I A
Liquidation Plan Distribution Summary
As Of August 31, 2009
Base Case I A
Liquidation Plan Distribution Summary
As Of August 31, 2009
Claim | Distribution | Distribution | ||||||||||
Amount | $ Amount | Percentage | ||||||||||
Projected Funds Available for Liquidation |
$ | 18,966,485 | ||||||||||
Potential Liquidation Priority Allocation: |
||||||||||||
Compensation Related Claims |
||||||||||||
Director Elective Income Deferral |
- | $ | 729,073 | - | $ | 212,990 | 29.21 | % | ||||
Salary Continuation (See Salary Continuation Worksheet) |
||||||||||||
Carol Wix & Robert Perry |
- | $ | 900,780 | - | $ | 263,152 | 29.21 | % | ||||
All Others |
$ | 0 | ||||||||||
Total Salary Continuation |
- | $ | 900,780 | |||||||||
Severance and Related Compensation |
- | $ | 250,000 | - | $ | 73,035 | 29.21 | % | ||||
Total Compensation Related Approved Claims |
- | $ | 1,879,853 | |||||||||
Creditor Claims (See Creditor Claims
Worksheet) |
- | $ | 19,167 | - | $ | 5,600 | 29.21 | % | ||||
Former
Bay View Selling Shareholders Obligation (See Bay View Shareholders
Worksheet) |
- | $ | 1,504,020 | - | $ | 439,382 | 29.21 | % | ||||
Trust Preferred Subordination (See Subordination
Analysis Worksheet) |
- | $ | 1,064,638 | 70.79 | % | |||||||
Total Bay View Selling Shareholders Distribution |
- | $ | 1,504,020 | |||||||||
Trust Preferred Obligations (See
Trust Preferred Worksheet) |
- | $ | 61,519,899 | - | $ | 16,907,687 | 27.48 | % | ||||
Total Potential Valid Claims |
- | $ | 64,922,940 | $ | 0 | |||||||
Page 1 of 1
EXHIBIT 3
Capital Corp of the West
Liquidation Plan
Base Case I B
As of August 31, 2009
(Excludes Estimated Refunds But
Includes TRUPs Subordination to
Bay View Selling Shareholders)
Includes TRUPs Subordination to
Bay View Selling Shareholders)
Subject to Fed. Rules of Evidence 408
Page 1 of 1
Capital Corp of the West
Liquidation Plan
Base Case I B
Critical Assumptions
Liquidation Plan
Base Case I B
Critical Assumptions
* | This Liquidation Plan has been based on legal analysis performed to determine the validity and priority of claims. Nothing contained herein or in the Disclosure Statement shall be deemed an admission by the Debtor or any other party in interest as to any matter stated Including but not limited to the validity, priority or amount of any claim. | |
* | This Liquidation Plan includes the best estimates available; however interest on the Trust Preferred Securities (TRUPs) and certain Salary Continuation obligations remain in the process of refinement and confirmation. | |
* | This Liquidation Plan includes estimates for tax and insurance refunds anticipated. | |
* | This Liquidation Plan assumes that the TRUPs are subordinated to the Bay View Shareholders Obligation. | |
* | This Liquidation Plan includes estimates for Operating Costs assuming that the Bankruptcy can be concluded by December 31, 2009. | |
* | This Liquidation Plan does not include any potential claim(s) by the FDIC. The Bar Date for governmental claims is November 9, 2009. | |
* | This Liquidation Plan includes all currently known potential Creditor Claims. However, it is expected that additional claims will be forth coming as the September 17, 2009 Bar Date approaches. |
Page 1 of 1
Capital Corp of the West
Base Case I B
Liquidation Plan Distribution Summary
As Of August 31, 2009
Base Case I B
Liquidation Plan Distribution Summary
As Of August 31, 2009
Claim | Distribution | Distribution | ||||||||||
Amount | Amount | Percentage | ||||||||||
Projected Funds Available for Liquidation |
$ | 6,069,797 | ||||||||||
Potential Liquidation Priority Allocation: |
||||||||||||
Compensation Related Claims |
||||||||||||
Director Elective Income Deferral |
- | $ | 729,073 | - | $ | 68,163 | 9.35 | % | ||||
Salary Continuation (See Salary Continuation
Worksheet) |
||||||||||||
Carol Wix & Robert Perry |
- | $ | 900,780 | - | $ | 84,216 | 9.35 | % | ||||
All Others |
$ | 0 | ||||||||||
Total Salary Continuation |
- | $ | 900,780 | |||||||||
Severance and Related Compensation |
- | $ | 250,000 | - | $ | 23,373 | 9.35 | % | ||||
Total Compensation Related Approved Claims |
- | $ | 1,879,853 | |||||||||
Creditor Claims (See Creditor Claims Worksheet) |
- | $ | 19,167 | - | $ | 1,792 | 9.35 | % | ||||
Former
Bay View Selling Shareholders Obligation (See Bay View Shareholders
Worksheet) |
- | $ | 1,504,020 | - | $ | 140,614 | 9.35 | % | ||||
Trust Preferred Subordination
(See Subordination Analysis Worksheet) |
- | $ | 1,363,406 | 90.65 | % | |||||||
Total Bay View Selling Shareholders Distribution |
- | $ | 1,504,020 | |||||||||
Trust Preferred Obligations (See
Trust Preferred Worksheet) |
- | $ | 61,519,899 | - | $ | 4,388,232 | 7.13 | % | ||||
Total Potential Valid Claims |
- | $ | 64,922,940 | $ | 0 | |||||||
Page 1 of 1
EXHIBIT 4
Capital Corp of the West
Liquidation Plan
Base Case II A
As of August 31, 2009
(Includes Estimated Refunds &
TRUPs Subordination to Bay View
Selling Shareholders
/ Deferred Compensation Subordination to All)
TRUPs Subordination to Bay View
Selling Shareholders
/ Deferred Compensation Subordination to All)
Subject to Fed. Rules of Evidence 408
Page 1 of 1
Capital Corp of the West
Liquidation Plan
Base Case II A
Critical Assumptions
August 31, 2009
Liquidation Plan
Base Case II A
Critical Assumptions
August 31, 2009
* | This Liquidation Plan has been based on legal analysis performed to determine the validity and priority of claims. Nothing contained herein or in the Disclosure Statement shall be deemed an admission by the Debtor or any other party in interest as to any matter stated including but not limited to the validity, priority or amount of any claim. | |
* | This Liquidation Plan includes the best estimates available; however interest on the Trust Preferred Securities (TRUPs) and certain Salary Continuation obligations remain in the process of refinement and confirmation. | |
* | This Liquidation Plan includes estimates for tax and insurance refunds anticipated. | |
* | This Liquidation Plan assumes that the TRUPs are subordinated to the Bay View Shareholders Obligation and the Directors Deferred Compensation Obligations are subordinated to all claims. | |
* | This Liquidation Plan includes estimates for Operating Costs assuming that the Bankruptcy can be concluded by December 31, 2009. | |
* | This Liquidation Plan does not include any potential claim(s) by the FDIC. The Bar Date for governmental claims is November 9, 2009. | |
* | This Liquidation Plan includes all currently known potential Creditor Claims. However, it is expected that additional claims will be forth coming as the September 17, 2009 Bar Date approaches. |
Page 1 of 1
Capital Corp of the West
Base Case II A
Liquidation Plan Distribution Summary
As Of August 31, 2009
Base Case II A
Liquidation Plan Distribution Summary
As Of August 31, 2009
Claim | Distribution | Distribution | ||||||||||
Amount | Amount | Percentage | ||||||||||
Projected Funds Available for Liquidation |
$ | 18,966,485 | ||||||||||
Potential Liquidation Priority Allocation: |
||||||||||||
Compensation Related Claims |
||||||||||||
Director Elective Income Deferral |
- | $ | 729,073 | $ | 0 | 0.00 | % | |||||
Salary Continuation (See Salary
Continuation Worksheet) |
||||||||||||
Carol Wix & Robert Perry |
- | $ | 900,780 | - | $ | 266,141 | 29.55 | % | ||||
All Others |
$ | 0 | ||||||||||
Total Salary Continuation |
- | $ | 900,780 | |||||||||
Severance and Related Compensation |
- | $ | 250,000 | - | $ | 73,864 | 29.55 | % | ||||
Total Compensation Related Approved Claims |
- | $ | 1,879,853 | |||||||||
Creditor Claims (See Creditor Claims Worksheet) |
- | $ | 19,167 | - | $ | 5,663 | 29.55 | % | ||||
Former Bay View Selling Shareholders Obligation
(See Bay View Shareholders Worksheet) |
- | $ | 1,504,020 | - | $ | 444,372 | 29.55 | % | ||||
Trust Preferred Subordination (See
Subordination Analysis Worksheet) |
- | $ | 1,059,648 | 70.45 | % | |||||||
Total Bay View Selling Shareholders Distribution |
- | $ | 1,504,020 | |||||||||
Trust Preferred Obligations (See Trust
Preferred Worksheet) |
- | $ | 61,519,899 | - | $ | 17,116,796 | 27.82 | % | ||||
Total Potential Valid Claims |
- | $ | 64,922,940 | $ | 0 | |||||||
Page 1 of 1
EXHIBIT 5
Capital Corp of the West
Liquidation Plan
Base Case II B
As of August 31, 2009
(Includes Estimated Refunds &
TRUPs Subordination to Bay View
Selling Shareholders
/ Deferred Compensation Subordination to All)
TRUPs Subordination to Bay View
Selling Shareholders
/ Deferred Compensation Subordination to All)
Subject to Fed. Rules of Evidence 408
Page 1 of 1
Capital Corp of the West
Liquidation Plan
Base Case II B
Critical Assumptions
August 31, 2009
Liquidation Plan
Base Case II B
Critical Assumptions
August 31, 2009
* | This Liquidation Plan has been based on legal analysis performed to determine the validity and priority of claims. Nothing contained herein or in the Disclosure Statement shall be deemed an admission by the Debtor or any other party in interest as to any matter stated including but not limited to the validity, priority or amount of any claim. | |
* | This Liquidation Plan includes the best estimates available; however interest on the Trust Preferred Securities (TRUPs) and certain Salary Continuation obligations remain in the process of refinement and confirmation. | |
* | This Liquidation Plan includes estimates for tax and insurance refunds anticipated. | |
* | This Liquidation Plan assumes that the TRUPs are subordinated to the Bay View Shareholders Obligation and the Directors Deferred Compensation Obligations are subordinated to all claims. | |
* | This Liquidation Plan includes estimates for Operating Costs assuming that the Bankruptcy can be concluded by December 31, 2009. | |
* | This Liquidation Plan does not include any potential claim(s) by the FDIC. The Bar Date for governmental claims is November 9, 2009. | |
* | This Liquidation Plan includes all currently known potential Creditor Claims. However, it is expected that additional claims will be forth coming as the September 17, 2009 Bar Date approaches. |
Page 1 of 1
Capital Corp of the West
Base Case II B
Liquidation Plan Distribution Summary
As Of August 31, 2009
Base Case II B
Liquidation Plan Distribution Summary
As Of August 31, 2009
Claim | Distribution | Distribution | ||||||||||
Amount | Amount | Percentage | ||||||||||
Projected Funds Available for Liquidation |
$ | 6,069,797 | ||||||||||
Potential Liquidation Priority Allocation: |
||||||||||||
Compensation Related Claims |
||||||||||||
Director Elective Income Deferral |
- | $ | 729,073 | $ | 0 | 0.00 | % | |||||
Salary Continuation (See Salary Continuation Worksheet) |
||||||||||||
Carol Wix & Robert Perry |
- | $ | 900,780 | - | $ | 85,172 | 9.46 | % | ||||
All Others |
$ | 0 | ||||||||||
Total Salary Continuation |
- | $ | 900,780 | |||||||||
Severance and Related Compensation |
- | $ | 250,000 | - | $ | 23,639 | 9.46 | % | ||||
Total Compensation Related Approved Claims |
- | $ | 1,879,853 | |||||||||
Creditor Claims (See Creditor Claims Worksheet) |
- | $ | 19,167 | - | $ | 1,812 | 9.46 | % | ||||
Former Bay View Selling Shareholders Obligation (See Bay View
Shareholders Worksheet) |
- | $ | 1,504,020 | - | $ | 142,211 | 9.46 | % | ||||
Trust Preferred Subordination (See Subordination Analysis
Worksheet) |
- | $ | 1,361,809 | 90.54 | % | |||||||
Total Bay View Selling Shareholders Distribution |
- | $ | 1,504,020 | |||||||||
Trust Preferred Obligations (See Trust Preferred Worksheet) |
- | $ | 61,519,899 | - | $ | 4,455,153 | 7.24 | % | ||||
Total Potential Valid Claims |
- | $ | 64,922,940 | $ | 0 | |||||||
Page 1 of 1
EXHIBIT 6
Capital Corp of the West
Liquidation Plan
Base Case III A
As of August 31, 2009
(Includes Estimated Refunds &
TRUPs Subordination to
Bay View Selling Shareholders Plus
SERPs and Severance at Max Amounts)
TRUPs Subordination to
Bay View Selling Shareholders Plus
SERPs and Severance at Max Amounts)
Subject to Fed. Rules of Evidence 408
Page 1 of 1
Capital Corp of the West
Liquidation Plan
Base Case III A
Critical Assumptions
August 31, 2009
Liquidation Plan
Base Case III A
Critical Assumptions
August 31, 2009
* | This Liquidation Plan has been based on legal analysis performed to determine the validity and priority of claims. Nothing contained herein or in the Disclosure Statement shall be deemed an admission by the Debtor or any other party in interest as to any matter stated including but not limited to the validity, priority or amount of any claim. | |
* | This Liquidation Plan includes the best estimates available; however interest on the Trust Preferred Securities (TRUPs) and certain Salary Continuation obligations remain in the process of refinement and confirmation. | |
* | This Liquidation Plan includes estimates for tax and insurance refunds anticipated. | |
* | This Liquidation Plan assumes that the TRUPs are subordinated to the Bay View Shareholders Obligation. | |
* | This Liquidation Plan includes estimates for Operating Costs assuming that the Bankruptcy can be concluded by December 31, 2009. | |
* | This Liquidation Plan does not include any potential claim(s) by the FDIC. The Bar Date for governmental claims is November 9, 2009. | |
* | This Liquidation Plan includes all currently known potential Creditor Claims. However, it is expected that additional claims will be forth coming as the September 17, 2009 Bar Date approaches. | |
* | This Liquidation Plan assumes SERP and Severance claims at maximum exposure amounts are valid claims. |
Page 1 of 1
Capital Corp of the West
Base Case III A
Liquidation Plan Distribution Summary
As Of August 31, 2009
Base Case III A
Liquidation Plan Distribution Summary
As Of August 31, 2009
Claim | Distribution | Distribution | ||||||||||||||
Amount | $ Amount | Percentage | ||||||||||||||
Projected Funds Available for
Liquidation |
$ | 18,966,485 | ||||||||||||||
Potential Liquidation Priority Allocation: | ||||||||||||||||
Compensation Related Claims |
||||||||||||||||
Director Elective Income Deferral |
-$ | 729,073 | -$ | 183,173 | 25.12 | % | ||||||||||
Salary Continuation (See Salary
Continuation Worksheet) |
||||||||||||||||
Carol Wix & Robert Perry |
-$ | 900,780 | -$ | 226,313 | 25.12 | % | ||||||||||
All Others |
-$ | 8,913,381 | -$ | 2,239,403 | 25.12 | % | ||||||||||
Total Salary Continuation |
-$ | 9,814,161 | ||||||||||||||
Severance and Related
Compensation |
-$ | 1,905,000 | -$ | 478,613 | 25.12 | % | ||||||||||
Total Compensation Related
Approved Claims |
-$ | 12,448,234 | ||||||||||||||
Creditor Claims (See Creditor
Claims Worksheet) |
-$ | 19,167 | -$ | 4,816 | 25.12 | % | ||||||||||
Former Bay View Selling
Shareholders Obligation
(See Bay View
Shareholders Worksheet) |
-$ | 1,504,020 | -$ | 377,871 | 25.12 | % | ||||||||||
Trust Preferred Subordination
(See Subordination Analysis
Worksheet) |
-$ | 1,126,149 | 74.88 | % | ||||||||||||
Total Bay View Selling
Shareholders Distribution |
$ | 1,504,020 | ||||||||||||||
Trust Preferred Obligations (See
Trust Preferred Worksheet) |
-$ | 61,519,899 | -$ | 14,330,147 | 23.29 | % | ||||||||||
Total Potential Valid Claims |
-$ | 75,491,322 | $ | 0 | ||||||||||||
Page 1 of 1
EXHIBIT 7
Capital Corp of the West
Liquidation Plan
Base Case III B
As of August 31, 2009
(Excludes Estimated Refunds But
Includes TRUPs Subordination to
Bay View Selling Shareholders Plus
SERPs and Severance at Max Amounts)
Includes TRUPs Subordination to
Bay View Selling Shareholders Plus
SERPs and Severance at Max Amounts)
Subject to Fed. Rules of Evidence 408
Page 1 of 1
Capital Corp of the West
Liquidation Plan
Base Case III B
Critical Assumptions
August 31, 2009
Liquidation Plan
Base Case III B
Critical Assumptions
August 31, 2009
* | This Liquidation Plan has been based on legal analysis performed to determine the validity and priority of claims. Nothing contained herein or in the Disclosure Statement shall be deemed an admission by the Debtor or any other party in interest as to any matter stated including but not limited to the validity, priority or amount of any claim. | |
* | This Liquidation Plan includes the best estimates available; however interest on the Trust Preferred Securities (TRUPs) and certain Salary Continuation obligations remain in the process of refinement and confirmation. | |
* | This Liquidation Plan includes estimates for tax and insurance refunds anticipated. | |
* | This Liquidation Plan assumes that the TRUPs are subordinated to the Bay View Shareholders Obligation. | |
* | This Liquidation Plan includes estimates for Operating Costs assuming that the Bankruptcy can be concluded by December 31, 2009. | |
* | This Liquidation Plan does not include any potential claim(s) by the FDIC. The Bar Date for governmental claims is November 9, 2009. | |
* | This Liquidation Plan includes all currently known potential Creditor Claims. However, it is expected that additional claims will be forth coming as the September 17, 2009 Bar Date approaches. | |
* | This Liquidation Plan assumes SERP and Severance claims at maximum exposure amounts are valid claims. |
Page 1 of 1
Capital Corp of the West
Base Case III B
Liquidation Plan Distribution Summary
As Of August 31, 2009
Base Case III B
Liquidation Plan Distribution Summary
As Of August 31, 2009
Claim | Distribution | Distribution | ||||||||||||||
Amount | Amount | Percentage | ||||||||||||||
Projected Funds Available for
Liquidation |
$ | 6,069,797 | ||||||||||||||
Potential Liquidation Priority Allocation: | ||||||||||||||||
Compensation Related Claims |
||||||||||||||||
Director Elective Income Deferral |
-$ | 729,073 | -$ | 58,620 | 8.04 | % | ||||||||||
Salary Continuation (See Salary
Continuation Worksheet) |
||||||||||||||||
Carol Wix & Robert Perry |
-$ | 900,780 | -$ | 72,426 | 8.04 | % | ||||||||||
All Others |
-$ | 8,913,381 | -$ | 716,671 | ||||||||||||
Total Salary Continuation |
-$ | 9,814,161 | ||||||||||||||
Severance and Related
Compensation |
-$ | 1,905,000 | -$ | 153,169 | 8.04 | % | ||||||||||
Total Compensation Related
Approved Claims |
-$ | 12,448,234 | ||||||||||||||
Creditor Claims (See Creditor
Claims Worksheet) |
-$ | 19,167 | -$ | 1,541 | 8.04 | % | ||||||||||
Former Bay View Selling
Shareholders Obligation
(See Bay View
Shareholders Worksheet) |
-$ | 1,504,020 | -$ | 120,929 | 8.04 | % | ||||||||||
Trust Preferred Subordination
(See Subordination Analysis
Worksheet) |
-$ | 1,383,091 | 91.96 | % | ||||||||||||
Total Bay View Selling
Shareholders Distribution |
$ | 1,504,020 | ||||||||||||||
Trust Preferred Obligations (See
Trust Preferred Worksheet) |
-$ | 61,519,899 | -$ | 3,563,349 | 5.79 | % | ||||||||||
Total Potential Valid Claims |
-$ | 75,491,322 | $ | 0 | ||||||||||||
Page 1 of 1
EXHIBIT 8
In re Capital Corp of the West 09-14298
Exhibit 8 to Disclosure Statement
Exhibit 8 to Disclosure Statement
FEDERAL INCOME TAX CONSEQUENCES
1. | Federal Income Tax Consequences in General. |
The following summary addresses certain material federal income tax consequences of the Plan
to the Debtor and the holders of Allowed Claims and Interests. The summary is based upon the
Debtors interpretation of the Internal Revenue Code of 1986, as amended (the Tax Code),
applicable Treasury Regulations, judicial authority and current administrative rulings and
pronouncements of the Internal Revenue Service (IRS), all of which are subject to change
possibly with retroactive effect. Due to the differences in the nature of the Claims of the
various holders of Allowed Claims, their taxpayer status, residence and methods of accounting and
prior actions taken by such holders with respect to their Claims, the tax consequences described
below are general in nature and are subject to significant considerations applicable to each
holder of an Allowed Claim.
The Plan Proponents interpretation of the federal income tax consequences is not binding on
the IRS, and the Plan Proponent has not and does not intend to request an administrative ruling
from the IRS with respect to any of the federal income tax aspects of the Plan. Consequently,
there can be no assurance that the treatment described in this Disclosure Statement will be
accepted by the IRS. No opinion of counsel has either been sought or obtained with respect to the
federal, state, local or foreign tax aspects of the Plan. Legislative, judicial or administrative
changes or interpretations may be forthcoming that could alter or modify the statements and
conclusions set forth herein. Additionally, changes in the facts or circumstances relating to the
consummation or operation of the Plan or the formation or operation of the Consolidated Debtor
could likewise affect the tax consequences to such parties. The federal income tax consequences of
the Plan and distributions are complex and subject to significant uncertainties. This summary does
not address foreign, state or local tax consequences of the Plan, nor does it purport to address
all of the federal income tax consequences of the Plan. This summary also does not purport to
address the federal income tax consequences of the Plan to taxpayers subject to special treatment
under the federal income tax laws, such as broker-dealers, tax-exempt entities, financial
institutions, insurance companies, S corporations, small business investment companies, mutual
funds, regulated investment companies, foreign corporations, and foreign persons.
Holders of Allowed Claims and Interests are urged to consult with their tax advisors about
the state, local and foreign tax consequences of the transactions contemplated under or in
connection with the Plan.
2. | Federal Income Tax Consequences to Debtor. |
(a) Gain or Loss on Transfer. The Debtor generally will realize gain or loss
on the sale of the assets and any other property it sells equal to the difference between the
amount realized on the sale and the adjusted tax basis of such property. The Debtor will
generally be able to offset any gain by Net Operating Losses (NOLs); and therefore,
the Plan Proponent does not believe that the Plan will result in any material tax liability.
(b) Discharge of Indebtedness Income. As a general rule, the discharge of
all or a portion of a debt by its holder results in the debtors recognition of taxable
income. Section 108 of the Tax Code sets forth certain exceptions to this general rule.
Exhibit 8 to
Disclosure Statement
Disclosure Statement
1
Section 108(e)(2) of the Tax Code provides that a taxpayer does not recognize income from the
discharge of indebtedness to the extent that satisfaction of the liability would have given rise to
a deduction. Section 108(a)(l)(A) of the Tax Code provides an exception to the required recognition
of income from the discharge of indebtedness when the discharge occurs in a chapter 11 case under
the Bankruptcy Code if the taxpayer is under the jurisdiction of the court and the debt discharge
is granted by the court or is pursuant to a plan approved by the court. If Section 108(a)(l)(A) of
the Tax Code applies to exclude from gross income the discharged indebtedness, the tax attributes
of the taxpayer are reduced, unless the taxpayer affirmatively elects to first reduce the tax bases
of its depreciable assets. Section 108(b) of the Tax Code reduces tax attributes in the following
order: NOLs, general business credit carryovers, minimum tax credits, capital loss carryovers,
basis of depreciable property and foreign tax credit carryovers.
If the exceptions provided for in Section 108 of the Tax Code were inapplicable, the Debtor
would recognize discharge of indebtedness income with respect to any Allowed Claims that are
satisfied to the extent that the aggregate amount of such satisfied Allowed Claims exceeds the
amounts transferred in satisfaction thereof. However, the Plan Proponent believes that the
exceptions provided for in Section 108 of the Tax Code should apply to exclude any discharge of
indebtedness income from the gross income of the Debtor, and at the same time the Debtor should be
required to reduce its tax attributes, as described above, by such amount. Moreover, if the amount
of the discharge of indebtedness exceeds the tax attributes of the Debtor, such excess is
nevertheless excluded from gross income and no additional tax liability arises. Moreover, the Plan
does not give the Debtor a discharge.
(c) Deductions of Accrued Interest by Debtor. To the extent a portion of the consideration
paid to Holders of Allowed Claims pursuant to the Plan is attributable to accrued and unpaid
interest on their Claims, the Debtor would be entitled to interest deductions in the amount of such
accrued interest, to the extent the Debtor has not already deducted such amounts. Although the
amount of consideration allocable to accrued interest where Holders of Allowed Claims are receiving
less than the full principal amount of their claims is unclear under present law, the Debtor
intends to allocate the consideration transferred to Holders of Allowed Claims pursuant to the Plan
first to the principal amount of such Holders Allowed Claims and accrued interest on such Holders
Allowed Claims.
3. | Federal Income Tax Consequences to Holders of Allowed Claims. |
The tax consequences of the implementation of the Plan to a holder of an Allowed Claim will
depend in part on whether the holder reports income on the accrual or cash basis, whether the
holder receives consideration in more than one tax year of the holder, and whether the holder is a
resident of the United States. The tax consequences of the receipt of cash or property that is
allocable to interest are discussed below in the section entitled Receipt of Interest.
(a) Receipt of Interest. Consideration received by a holder of an Allowed Claim that is
attributable to accrued but unpaid interest will be treated as ordinary income, regardless of
whether the holders existing Claims are capital assets in its hands.
As discussed above, the manner in which consideration is to be allocated between accrued and
unpaid interest and principal of the Claims of the Creditors for federal income tax purposes is
unclear under present law. See Section 2(c) Federal Income Tax Consequences to the Debtor
Deductions of Accrued Interest by Debtor, above.
Exhibit 8 to
Disclosure Statement
Disclosure Statement
2
(b) Backup Withholding. Under the Tax Code, interest, dividends and other reportable
payments may, under certain circumstances, be subject to backup withholding at a 28% rate.
Withholding generally applies if the recipient (i) fails to furnish his social security number or
other taxpayer identification number (TIN); (ii) furnishes an incorrect TIN; (iii) fails properly
to report interest or dividends; or (iv) under certain circumstances, fails to provide a certified
statement, signed under penalty of perjury, that the TIN provided is its correct number and that it
is not subject to backup withholding.
4. | Tax Consequences to Holders of Interests. |
If holders of Interests do not receive or retain any property in exchange for their
Interests, a holder of an Interest that holds such Interest as a capital asset should be entitled
to a worthless stock deduction. Section 165(g) of the Tax Code provides that if a security that is
held as a capital asset becomes wholly worthless during the taxable year, the holder is entitled
to a capital loss, which is treated as recognized from the sale or exchange of such security on
the last day of such taxable year. The definition of security includes (i) shares of stock in a
corporation and (ii) the right to subscribe for shares of stock in a corporation. The amount of
loss deductible is limited to the holders basis in the Interest.
5. | Importance of Obtaining Professional Tax Assistance. |
The foregoing is intended as a summary only, and is not a substitute for careful tax planning
with a tax professional. The federal, foreign, state and local income and other tax consequences
of the Plan are complex and, in some cases, uncertain. Such consequences may also vary based on
the particular circumstances of each holder of an Allowed Claim or Allowed Interest. Accordingly,
each holder of an Allowed Claim or Allowed Interest is strongly urged to consult with his, her or
its own tax advisor regarding the federal, foreign, state and local income and other tax
consequences under the Plan.
To ensure compliance with United States Internal Revenue Service Circular 230, (a) any
discussion of U.S. federal tax issues in the Disclosure Statement is not intended or written to be
relied upon, and cannot be relied upon by Creditor or Interest holders, for purposes of avoiding
penalties that may be imposed on such parties under the Internal Revenue Code; (b) such discussion
is written to support promotion of the Plan; and (c) each holder of a Claim or Interest should
seek advice based on such partys particular circumstances from an independent tax advisor.
Exhibit 8 to
Disclosure Statement
Disclosure Statement
3