Atrinsic BK Doc 75

THIS IS NOT A SOLICITATION OF ACCEPTANCE OR REJECTION OF THE PLAN. ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED UNTIL

A DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT. THIS DISCLOSURE STATEMENT WILL BE SUBMITTED FOR

APPROVAL BUT HAS NOT BEEN APPROVED BY THE BANKRUPTCY COURT. THE DEBTOR RESERVES THE RIGHT TO AMEND THIS DISCLOSURE

STATEMENT AT ANY TIME PRIOR TO THE DISCLOSURE STATEMENT HEARING

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK x In re: Chapter 11 ATRINSIC, INC. Case No. 12-12553 -JMP

Debtor.

x

FIRST AMENDED DISCLOSURE STATEMENT ACCOMPANYING FIRST AMENDED PLAN OF REORGANIZATION DATED JANUARY 22, 2013 PROPOSED

BY THE DEBTOR

DELBELLO DONNELLAN WEINGARTEN WISE & WIEDERKEHR, LLP Attorneys for the Debtor One North Lexington Avenue White Plains, New York 10601 Telephone: 914 681 0200 Facsimile: 914 684-0288 Jonathan S. Pasternak Erica R. Feynman

12-12553-jmp Doc 75 Filed 01/22/13 Entered 01/22/13 15:29:23 Main Document Pg 1 of 69

ARTICLE I SUMMARY OF THE PLAN

1.1. Introduction. The Debtor is soliciting votes from creditors and equity interest

holders of the Debtor for the acceptance of the First Amended Plan of Reorganization for the

Debtor (the “Plan”).1 The Debtor submits that a liquidation pursuant to Chapter 7 of the

Bankruptcy Code is unlikely to yield material proceeds as the Debtor’s only assets are a

corporate shell, de minimis intellectual property, certain discounted accounts receivable and an

illiquid interest in a privately held concern. Accordingly, the Debtor’s creditors will receive a

greater distribution under the Plan than in a liquidation pursuant to Chapter 7 of the Bankruptcy

Code.

The Plan is predicated on the financial support of the Class 2 Senior Noteholders who

have provided substantial contributions and assistance to the Debtor, including permitting the

Debtor to use its cash collateral to help effectuate the Plan and to preserve the Debtor’s public

corporate shell and its remaining assets. To the extent the Plan is confirmed by the Bankruptcy

Court, the Class 2 Senior Noteholders have agreed to forgo a cash distribution on their Class 2

Claims (and potential Class 3 deficiency Unsecured Claims) for monies loaned to the Debtor.

These claims aggregate more than $20,000,000. In lieu of a cash distribution, the Class 2

Creditors have agreed to accept in full satisfaction of all Claims 100% of a newly authorized and

issued series of Reorganized Debtor Convertible Preferred Stock, which will be convertible into

92% of the Reorganized Debtor Common Stock, as more fully set forth herein and in the Plan.

1 Unless otherwise defined herein, capitalized terms used in this Disclosure Statement shall be defined as set forth in the Plan.


2

The Plan is also predicated on the acquisition by the Reorganized Debtor of a fifty-one percent

(51%) equity interest in [Momspot], a [Delaware corporation] (“Momspot”), as more fully set

forth herein and in the Plan.

This First Amended Disclosure Statement sets forth information regarding the Debtor’s

pre-petition history, significant events that have occurred during the Case, the Debtor’s assets

and liabilities, and the reorganization and anticipated post-reorganization operations and

financing of the Reorganized Debtor. This Disclosure Statement also describes the terms and

provisions of the Plan, including certain alternatives to the Plan, certain effects of confirmation

of the Plan, certain risk factors associated with the securities to be issued under the Plan and the

manner in which distributions will be made under the Plan. In addition, this Disclosure

Statement discusses the confirmation process and the voting procedures that holders of Claims

eligible to vote must follow for their votes to be counted. Factual information concerning the

Debtor contained in this Disclosure Statement has been provided by the Debtor’s management

and public sources.

Holders of the Class 2 Secured Claims and Class 3 Unsecured Claims are impaired under

the Plan and are entitled to vote. The Plan provides for a distribution of the Equity Interests in

the Reorganized Debtor to Class 2 and 3 claims holders as well as Class 4 Equity interest

holders, subject to acceptance of the Plan by the Class 2 and 3 Claimholders.

The Debtor asks that all holders of Class 2 and Class 3 Claims and Class 4 interest

holders vote to accept the Plan.

For a summary of the Plan, please see Article VI hereof. For a discussion of certain

factors to be considered prior to voting, please see Articles VII, VIII, IX, X and XI hereof.

The following table summarizes the projected treatment accorded creditors and

shareholders of the Debtor under the Plan:


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Class Description Treatment

Entitled to Vote

Estimated % Recovery

NA

Administrative Expense Claims --Debtor’s professionals

Payment in full (or as otherwise agreed) No 100%

NA Priority Tax Claims

Payment in full (or as otherwise agreed) No 100%

1 Non-Tax Priority Claims

Payment in full (or as otherwise agreed) N/A 100%

2 Secured Claims – Senior Noteholders

100% of a newly authorized and issued series of Reorganized Debtor Convertible Preferred Stock, which will be convertible into 92% of the Reorganized Debtor Common Stock (provided that there shall be a 9.99% beneficial ownership blocker for each of the holders of Class 2 Senior Noteholder Claims) Yes Unk.

3 General Unsecured Claims

6% Reorganized Debtor Common Stock issued in the Reorganized Debtor Creditor Distribution (treating the Reorganized Debtor Convertible Preferred Stock on an as-converted basis without regard to the 9.99% beneficial ownership blocker) plus the Liquidating Trust Interests Yes Unk.


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4 Interests in Debtor

2% Reorganized Debtor Common Stock Creditor Distribution Yes Unk.

1.2.Voting Procedure And Instructions. In accordance with section 1126(f) of the

Bankruptcy Code, only Classes of Claims and Interests that are impaired under a plan may vote

to accept or reject a plan. Unimpaired Classes are conclusively presumed to have accepted the

Plan. A Class is Impaired if the legal, equitable or contractual rights attaching to Claims of

Interests in that Class are modified other than by curing defaults and reinstating maturity of

obligations or payment in full in Cash.

Ballots for acceptance or rejection of the Plan are being provided to Creditors in the Class

of Claims entitled to vote to accept or reject the Plan. Each Holder of a Claim should read this

Disclosure Statement and the Plan. If you are entitled to vote, after carefully considering this

Disclosure Statement and the Plan, please indicate your vote with respect to the Plan on the

enclosed ballot and return such ballot before the voting deadline to DelBello Donnellan

Weingarten Wise & Wiederkehr, LLP, One North Lexington Avenue, White Plains, New

York 10601 attn: Jonathan S. Pasternak, Esq. If you are asserting more than one Claim,

please copy your ballot and return one completed ballot for each Claim.

You should complete and sign the enclosed ballot and return such ballot in the envelope

provided. In order to be counted, your ballot must be actually received by DelBello Donnellan

Weingarten Wise & Wiederkehr, LLP, One North Lexington Avenue, White Plains, New

York 10601 attn: Jonathan S. Pasternak, Esq. on or before 5:00 p.m. (prevailing Eastern

Time) on [_______][__], 2013 (the “Voting Deadline”). All forms of personal delivery of

ballots including overnight delivery service, courier service, and delivery by hand are acceptable.

Facsimile and electronic transmissions are acceptable as well. There is no need to file your

Ballot with the Clerk of the Bankruptcy Court. If your ballot is damaged or lost, or if you do not


5

receive a ballot to which you are entitled, you may request in writing a replacement by

contacting DelBello Donnellan Weingarten Wise & Wiederkehr, LLP, One North Lexington

Avenue, White Plains, New York 10601 attn: Jonathan S. Pasternak, Esq. at the stated

address.

Only actual votes will be counted. A failure to return a ballot will not be counted either

as a vote for or against the Plan. Any improperly completed or late ballot will not be counted.

Any ballot that indicates both an acceptance and rejection of the Plan will be deemed a vote to

accept the Plan. If no votes to accept or reject the Plan are received with respect to a particular

class, the class will be deemed to have voted to accept the Plan. If a creditor casts more than one

ballot voting the same Claim before the Voting Deadline, the latest dated Ballot received before

the Voting Deadline will be deemed to reflect the voter’s intent and thus to supersede any prior

ballots. Creditors must vote all of their Claims within a particular Class under the Plan either to

accept or reject the Plan and may not split their votes within a particular Class; thus, a ballot (or a

group of ballots) within a particular Class received from a single Creditor that partially rejects

and partially accepts the Plan will be deemed to have voted to accept the Plan.

1.3. Disclosure Statement Enclosures. Accompanying this Disclosure Statement are

copies of: the Plan (Exhibit A); current financial statements of the Debtor (Exhibit B); the

liquidation analysis prepared by the Debtor (Exhibit C); Executive Summary of Momspot

(Exhibit D) and Three Year Consolidated Financial Projections (Exhibit E). In addition, those

parties eligible to vote will receive a ballot for voting on the Plan.

1.4. Confirmation Of The Plan. Your vote on the Plan is important. In order for the

Plan to be accepted, of those Holders of Claims who cast ballots, the affirmative vote of at least

two-thirds (2/3) in dollar amount and more than one-half (1/2) in number of Claims in each class

is required.


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If certain Classes vote against the Plan, the Bankruptcy Court may still confirm the Plan

if the Court finds that the Plan does not unfairly discriminate against the impaired Class or

Classes voting against the Plan and accords fair and equitable treatment to those impaired

Classes. The Debtor intends to request such a “cramdown” confirmation if any Class does not

vote in favor of the Plan.

The Bankruptcy Court has scheduled a hearing on confirmation of the Plan for ____ a.m.

(prevailing Eastern Time) on [_______] [__], 2013 at the United States Bankruptcy Court

for the Southern District of New York, Old Custom House, One Bowling Green,

Courtroom 601, New York, New York 10004-1408. Any party in interest may object to

confirmation of the Plan. The Bankruptcy Court has directed that objections, if any, to

confirmation of the Plan, be served upon: (i) counsel to the Debtor, DelBello Donnellan

Weingarten Wise & Wiederkehr, LLP, One North Lexington Avenue, White Plains, New York

10601 attn: Jonathan S. Pasternak, Esq.. and (ii) Richard Morrissey, Esq., the Office of the

United States Trustee, 33 Whitehall Street, New York, New York 10004 at or before 5:00 p.m.

(prevailing Eastern Time) on [_______] [__], 2013, in the manner described in the order

scheduling hearing on confirmation accompanying the Disclosure Statement. The

Confirmation Hearing may be adjourned from time to time without further notice other

than by announcement in open court.

1.5. Recommendations With Respect To The Plan. The Debtor and the Creditors’

Committee recommend that you accept the Plan by voting your ballot accordingly and timely

returning your completed ballot in the pre-printed envelope provided.

1.6. Disclaimer. The Bankruptcy Court’s approval of this Disclosure Statement does

not constitute either a guaranty of the accuracy of the information contained herein or an

endorsement of the Plan by the Bankruptcy Court. This Disclosure Statement is the only

document authorized by the Bankruptcy Court to be used in connection with the solicitation of


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votes accepting the Plan. No representations other than those explicitly set forth in this

Disclosure Statement are authorized concerning the Debtor, including the value of its assets or

the Claims of its creditors. The information contained in this Disclosure Statement is for

purposes of soliciting acceptances of the Plan and may not be relied upon for any other purposes.

This Disclosure Statement contains summaries of certain provisions of the Plan, certain

statutory provisions, certain documents related to the Plan, certain events in the case and certain

financial information. Although the Debtor believes that the Disclosure Statement and related

document summaries are fair and accurate, these documents are qualified to the extent that they

do not set forth the entire text of the Plan, the document referred to or the statutory provision

referred to. The terms of the Plan govern in the event of any inconsistency between it and this

Disclosure Statement. All exhibits to the Disclosure Statement are incorporated into and are a

part of this Disclosure Statement as if set forth in full herein. The statements contained in this

Disclosure Statement are made as of the date hereof, unless otherwise specified, and the Debtor

disclaims any obligation to update any such statements after the hearing on the approval of the

Disclosure Statement.

Safe harbor statement under the Private Securities Litigation Reform Act of 1995:

All forward-looking statements contained herein or otherwise made by the Debtor involve

material risks and uncertainties and are subject to change based on numerous factors, including

factors that are beyond the Debtor’s control. Accordingly, the Debtor’s or Reorganized Debtor’s

future performance and financial results may differ materially from those expressed or implied in

any such forward-looking statements. Such factors include, but are not limited to, those

described in this Disclosure Statement. The Debtor does not undertake to publicly update or

revise its forward-looking statements even if experience or future changes make it clear that any

projected results expressed or implied therein will not be realized.


8

This Disclosure Statement has been prepared pursuant to Section 1125 of the Bankruptcy

Code and Rule 3016(b) of the Federal Rules of Bankruptcy Procedure and not prepared

necessarily in accordance with federal or state securities laws or other similar laws. The offer of

Reorganized Debtor Common Stock (as defined in the Plan) made hereunder has not been

registered under the Securities Act or similar state securities or “blue sky” laws. The issuance

and distribution of Reorganized Debtor Convertible Preferred Stock and Reorganized Debtor

Common Stock to creditors of the Debtor pursuant to the Plan are being made in reliance on the

exemption from registration specified in Section 1145 of the Bankruptcy Code. None of the

stock to be issued on the Effective Date has been approved or disapproved by the Securities and

Exchange Commission or by any state securities commission or similar public, governmental, or

regulatory authority, and neither the Securities and Exchange Commission nor any such state

authority has passed upon the accuracy or adequacy of the information contained in this

Disclosure Statement or upon the merits of the Plan. Persons or entities trading in or otherwise

purchasing, selling or transferring securities of the Debtor should evaluate this Disclosure

Statement and the Plan in light of the purposes for which they were prepared.

The financial information contained herein has been prepared by the Debtor and has not

been audited by a certified public accountant and has not necessarily been prepared in

accordance with generally accepted accounting principles. The Class 2 Senior Noteholders have

not independently verified this financial information and are relying on the Debtor’s disclosures.

All parties in interest are encouraged to read the entire Disclosure Statement carefully,

including the Plan and other exhibits, before deciding to vote either to accept or reject the Plan.

Holders of Claims should not, however, construe the contents of this Disclosure Statement as

providing any legal, business, financial, or tax advice and should consult with their own advisors.


9

ARTICLE II DEBTOR’S HISTORY AND BUSINESS BACKGROUND

2.1. Business Description

Atrinsic, Inc. is a corporation, organized under the laws of the State of Delaware,

with its principal place of business, at the time of the Chapter 11 filing date, located at 469

Seventh Avenue, 10th Floor, New York, New York 10018. Atrinsic is a publicly-traded

corporation, the common stock of which is currently traded on the pink sheets (“Pink Sheets”)

under ticker symbol “ATRNQ” (the “Stock”). As of the Petition Date, there were 100 million

shares of the Stock issued, all of which shares are outstanding, and the closing price of the

Debtor’s stock on such date was $0.04.

Atrinsic is governed by a five-member Board of Directors (the “Board”), Stuart Goldfarb,

Jerome Chazen, the Chairman of the Board, Raymond Musci, Lawrence Burstein and Mark

Dyne.

Atrinsic is the parent of [thirty-one (31)]wholly-owned subsidiaries, which are not

debtors herein (the “Non-Debtor Affiliates”). The Non-Debtor Affiliates are set forth in the

Schedules (defined below). Substantially all of the Non-Debtor Affiliates are inactive and, except

as otherwise described, have minimal or no assets or liabilities as of the Petition Date.

i. Corporate History2

The entity that is now known as Atrinsic, Inc. was originally incorporated under the name

Millbrook Acquisition Corp. on or about February 3, 1994. On or about May 2, 2007, Millbrook

Acquisition Corp. changed its name to New Motion, Inc. On or about February 4, 2008, New

Motion, Inc. merged (the “Merger”) with Traffix, Inc., pursuant to which Traffix, Inc. became a

2 This Disclosure Statement’s description of the Debtor’s history and its businesses represent the most accurate, up-to-date information concerning the Debtor. In the event of any conflict between the Disclosure Statement and other disclosures concerning such topics, the Disclosure Statement is deemed to control.


10

wholly-owned subsidiary of New Motion, Inc. On or about June 25, 2009, New Motion, Inc.

changed its name to Atrinsic, Inc.

ii. Description of the Business

Overview

Prior to the Petition Date, the Debtor was a marketer of direct-to-consumer subscription

products and an Internet search-marketing agency. The Debtor sold entertainment and lifestyle

subscription products directly to consumers, which the Debtor marketed through the Internet.

The Debtor also sold Internet marketing services to its corporate and advertising clients. The

Debtor developed its marketing media network, consisting of web sites, proprietary content and

licensed media, to attract consumers, corporate partners and advertisers.

The Debtor’s business focused on two key areas:

· Direct-to-consumer subscriptions, built around the Debtor’s Kazaa brand (as further

described below), and

· Search and affiliate marketing, built around the Debtor’s Atrinsic Interactive brand.

The Debtor’s Subscription Business

The Debtor’s direct-to-consumer subscription business was built around a recurring-

revenue business model. The Debtor was focused on digital music in the rapidly growing mobile

space, and its lead offering, Kazaa, was a recognizable brand in this market. The Debtor also

provided alternative billing capabilities, allowing its subscribers to utilize payment methods

other than just credit cards, to purchase its services. The Debtor’s core strategic focus for Kazaa

and its direct-to-consumer subscription business was to build and sustain a large and profitable

subscriber base and a growing and engaged audience and to deliver entertainment content to its

customers anywhere, anytime and on any device, in a manner its customers chose.


11

Entry into Master and Marketing Services Agreements with Digital

In connection with the Debtor’s direct-to-consumer business, on March 26, 2010, the

Debtor entered into a Marketing Services Agreement (the “Marketing Agreement”) and a Master

Services Agreement (the “Services Agreement”) with Brilliant Digital Entertainment, Inc.

(“Digital” or “BDE”) effective as of July 1, 2009 (collectively, the “Agreements”), relating to the

operation and marketing of the Kazaa digital music service (“KDMS”). The Agreements

governed the operation of the KDMS business, which was jointly operated by the Debtor and

Digital. Under the Marketing Services Agreement, the Debtor was responsible for marketing,

promotional, and advertising services for the KDMS business. Pursuant to the Master Services

Agreement, the Debtor provided services related to the operation of the KDMS business,

including billing and collection services and the operation of the Kazaa online storefront. The

Agreements obligated Digital to provide certain other services with respect to the KDMS

business, including licensing the intellectual property underlying the KDMS business to the

Debtor, obtaining all licenses to the content offered as part of the KDMS business and delivering

that content to subscribers. As part of the Agreements, the Debtor was required to make various

payments and expenditures of certain expenses incurred in order to operate the KDMS business.

Pursuant to the Agreement, these advances and expenditures were recoverable on a dollar for

dollar basis against revenues generated by the business.

Atrinsic Interactive

Atrinsic Interactive, the Debtor’s affiliate network and search marketing agency, was a

top ten search agency according to Advertising Age (2010) and a top-tier affiliate network.

Atrinsic Interactive operated in three business lines: Search Engine Marketing (“SEM”), Search

Engine Optimization (“SEO”) and an Affiliate Network. The Debtor worked with all types and

sizes of advertisers on a performance basis to assist them in acquiring customers at an attractive


12

return on investment. The Debtor’s core strategic focus for Atrinsic Interactive was to build a

leading independent search marketing agency and a top-five affiliate network.

In the SEM component of Atrinsic Interactive’s business, the Debtor helped advertisers

manage their pay-per-click advertising initiatives on various search engines. Atrinsic charged

the advertiser a fee for optimizing and operating the advertiser’s campaign. In the SEO

component of the Debtor’s business, Atrinsic helped advertisers optimize their websites to gain

higher rankings within the search engines. Atrinsic typically charged a flat monthly fee for such

services. In the Affiliate network component of the Debtor’s business, Atrinsic operated a

performance-based marketing platform known as an Affiliate Network. This network allowed

advertisers to connect with relevant websites that contract with them to drive sales or leads to

them on a performance basis. Atrinsic earned fees from helping advertisers connect with the

most relevant/profitable websites for their goals. Atrinsic earned a transaction fee for sales or

leads that were generated on a performance basis.

Elimination of Marginally Profitable Lead Generation Activities

As disclosed in the Debtor’s Annual Report on Form 10-K filed with the SEC on April 7,

2011, beginning in April 2010, at the direction of its Board, the Debtor began to take steps to

eliminate unprofitable or marginally profitable lead generation activities and marketing programs

from its product offerings, to focus the Debtor on businesses the Board believed would be more

likely to generate long term value for its stockholders.

Amendments to Master and Marketing Services Agreements with Digital, Entry into Asset Purchase Agreement

As part of the Debtor’s initiatives to focus on the businesses that would likely generate

more long term value, on October 13, 2010, the Debtor entered into amendments to the

Agreements with Digital and entered into an agreement with Digital and Altnet, Inc., a wholly-

owned subsidiary of Digital, to acquire all of the assets of Digital that relate to the KDMS


13

business. Among other things, the amendments extended the term of the Agreements from three

(3) years to thirty (30) years, provided the Debtor with an exclusive license to the Kazaa

trademark in connection with its services under the Agreements, and modified the KDMS profit

share payable to the Debtor under the Agreements from 50% to 80%. In addition, the

amendments removed Digital’s obligation to repay up to $2.5 million of advances and

expenditures which were not otherwise recovered from Kazaa generated revenues and removed a

$5 million cap on expenditures that the Debtor was required to advance to the operation of the

KDMS business. As consideration for entering into the amendments, the Debtor issued

1,040,358 shares of its Stock to Digital.

On October 13, 2010, in addition to the amendments to the Agreements, the Debtor

entered into an asset purchase agreement with Digital to acquire all of the assets of Digital that

relate to the KDMS business. The purchase price for the acquired assets was to include the

issuance of an additional 1,781,416 shares of the Debtor’s common stock at the closing of the

transaction, as well as the assumption of certain liabilities related to the KDMS business. As

discussed below, the transactions contemplated by the asset purchase agreement were never

consummated.

Restructuring of Operations

In November 2010 and as reported in the Debtor’s Annual Report on Form 10-K filed

with the SEC on April 7, 2011, in connection with the Debtor’s announcement to purchase the

KDMS assets, the Debtor also undertook a restructuring of its existing operations and of the

operations of the KDMS business. The restructuring was designed to rapidly reduce certain

expenditures, improve product development and sales and to improve customer acquisition

outcomes for the company in general as well as for the KDMS business. The restructuring

involved the consolidation of activities in New York, the reduction in the Debtor’s Canadian

workforce, and migration of the Debtor’s Canadian technology assets to pre-existing


14

infrastructure in the U.S. In addition, certain functions and activities involving the development

of the KDMS and application development, as well as marketing were consolidated.

The Debtor’s Capital Needs

As reported in the Debtor’s Annual Report on Form 10-K filed with the SEC on April 7,

2011, in order to fund its operations, the Debtor needed to raise capital and the report of the

Debtor’s independent registered public accountants, KPMG, LLP contained in the Debtor’s

Annual Report on Form 10-K included an explanatory paragraph related to the ability of the

Debtor to continue as a going concern in the event that such capital raising efforts proved

ineffective. As described in the Annual Report on Form 10-K, the Debtor at the time was

working with an independent financial advisory firm to assist it in structuring a financing

arrangement and to engage an investment bank to assist the Debtor in raising debt or equity

capital to fund the Debtor’s immediate cash needs and to finance its longer term growth to

further develop the Kazaa business and grow its subscriber base. At the time of the filing of its

Annual Report, the Debtor continued to evaluate all available options for additional financing as

well as other alternative capital-raising measures, such as the sale of certain of its assets and

businesses.

The Debtor’s Sale of Secured Convertible Promissory Notes

As the Debtor’s Board continued to work with its restructuring advisors to obtain a

permanent source of capital, the Board determined that interim bridge financing was necessary to

continue core operations. In order to meet that immediate need for liquidity, on May 31, 2011,

the Debtor, upon the advice of its restructuring advisors, and certain purchasers and lenders3

(the “Secured Lenders”)4 entered into a Securities Purchase Agreement (the “SPA”). Pursuant to

3 The Secured Lenders, not taking into account transfers of claims and interests under the Convertible Note, are: Iroquois Master Fund Ltd.; Hudson Bay Master Fund Ltd.; Brilliant Digital Entertainment, Inc.; Liballo Investment Limited; AYM Aggressive Value Fund; Kamran Hakim; Phillip Dollman; and Joseph Tuchman. 4 Pursuant to the Cash Collateral Order, Hudson Bay Master Fund Ltd. and Iroquois Master Fund Ltd. are deemed to have allowed secured claims for the amounts reflected herein.


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the SPA, the Debtor sold to the Secured Lenders senior secured convertible notes in the original

aggregate principal amount of $5,813,500 (the “Convertible Notes”) which notes are convertible

to shares of the Debtor’s common stock. In addition, pursuant to the SPA, the Debtor issued

three series of warrants (the “Warrants”) to purchase additional shares of the Debtor’s common

stock (the “Warrant Stock”): Series A Warrants exercisable at a price of $2.90 per share on or

before May 30, 2016; Series B Warrants exercisable at a price of $2.93 per share on or before

May 30, 2016 and Series C Warrants exercisable at a price of $2.97 per share on or before May

30, 2016. The Convertible Notes and Warrants were sold in a transaction exempt from

registration under the Securities Act of 1933, in reliance on Section 4(2) thereof and Rule 506 of

Regulation D thereunder.

The Convertible Notes do not accrue interest, except after the occurrence of an event of

default, in which case the Convertible Notes accrue default interest at the rate of 18% per annum.

The Convertible Notes were scheduled to be repaid by Atrinsic in six (6) equal monthly

installments beginning on December 31, 2011 and concluding on May 31, 2012. Provided that

there has not been an event of default under the Convertible Notes, the Convertible Notes are

payable in installments of cash or in Stock of Atrinsic, at Atrinsic’s option. If there has been an

event of default under the Convertible Notes, the Secured Lenders may demand that the

Convertible Notes be repaid in cash. Upon an Event of Default, Section 4(b) of the Convertible

Notes provides a formula for determining the amount due following such an Event of Default.

The proofs of claim filed by Iroquois Master Fund Ltd. (“Iroquois”) and Hudson Bay Master

Fund Ltd. (“Hudson”) include this calculation of amounts owing. See Proofs of Claim Nos. 35

and 36 . Under the Plan, all amounts owing to Hudson and Iroquois are satisfied by virtue of the

stock distribution under the Plan.

The obligations under the Convertible Notes are secured pursuant to the terms of a

Security Agreement (the “Security Agreement”) by certain property of Atrinsic, including (a)


16

accounts; (b) books; (c) chattel paper; (d) deposit accounts; (e) equipment and fixtures; (f)

general intangibles; (g) inventory; (h) investment related property; (i) negotiable collateral; (j)

supporting obligations; (k) commercial tort claims; (l) money, cash, cash equivalents or other

assets of Atrinsic that come into the possession, custody or control of any Secured Lender; and

(m) all proceeds and products of the foregoing (the “Pre-Petition Collateral”).

Of the Secured Lenders, only Iroquois Hudson. and Digital perfected their security

interests in the Pre-Petition Collateral prior to the Petition Date by the filing of Uniform

Commercial Code financing statements. All other security interests are unperfected as of the

Petition Date and are void or voidable as a matter of law.

The obligations under the Convertible Notes are guaranteed by New Motion Mobile, Inc.

and Traffix, Inc., which are wholly-owned subsidiaries of Atrinsic.

Engagement of Roth Capital Partners

Based on advice from the Debtor’s restructuring advisors, the Debtor believed that

profitability and long-term growth of the KDMS business required a substantial amount of

capital. In July 2011, the Debtor engaged Roth Capital Partners to assist the company in raising

addition financing to fund the capital needs of its KDMS business as well as to enable it to sell

its less profitable businesses as going-concerns. Due to the condition and volatility of the capital

markets in the second half of 2011, Roth Capital Partners was ultimately unable to secure

additional funding to meet these needs. As reported in its Current Report on Form 8-K filed with

the SEC on October 28, 2011, among other alternatives, the Debtor pursued a potential financing

transaction comparable to the financing transaction the Debtor executed in May, 2011, but the

anticipated proceeds from such transaction were not sufficient for the Debtor’s needs.

Winding-Down of KDMS Business

After considering various alternatives and after being unable to raise sufficient capital to

support the sustained growth of the KDMS business, the Board made a determination that it was


17

in the best interests of the Debtor to wind down that business segment. On December 1, 2011,

the Debtor announced that it was winding down its support of the KDMS operations. At the

same time, the Debtor confirmed that it was continuing to operate its agency business as well as

its other subscription businesses. As a consequence, the Asset Purchase Agreement, the

Marketing Services Agreement and the Master Services Agreement between the Debtor and

Digital were terminated. Notwithstanding the termination of the agreements, Digital was still

owed approximately $2,000,000 for unsecured advances it made on Atrinsic’s behalf.

Sale of Assets

In the fourth quarter of 2011, in conjunction with the other alternative capital-raising

transactions explained above, the Debtor continued its efforts to sell assets to fund its operations

and repay the holders of its Convertible Notes. On December 15, 2011, the Debtor completed

the sale of its building in Moncton, New Brunswick, Canada to P. Albert Investments, Inc. and

Denis Albert, who are unrelated to the Debtor. The transaction resulted in net cash proceeds to

the Debtor of approximately $645,000, which proceeds were used for working capital purposes.

On December 28, 2011, the Debtor entered into an asset purchase agreement with Mkono

Media Corp., a British Columbia corporation (“Mkono”). Pursuant to the agreement, Mkono

agreed to purchase from the Debtor certain short codes, domain names, trademarks and databases

used in the company’s subscription businesses. The purchase price for the assets was $615,000,

and was paid to the Debtor upon the closing of the transactions on January 23, 2012. The

proceeds received from the sale were distributed in accordance with the terms of the Convertible

Notes to the Secured Lenders on a pro-rata basis based upon the original principal amount of

their respective notes.

Exchange Act Reports

On March 30, 2012, in order to preserve the company’s limited cash resources and not

incur the costs required to prepare and file its Annual Report on Form 10-K and other reports


18

otherwise required under the Securities Exchange Act of 1934, as amended (the “Exchange

Act”), the Debtor filed notice with the SEC that it would no longer be filing certain reports

required by the Exchange Act. In taking this action, the Board also considered the fact that the

volatility of the capital markets in the latter half of 2011 and early 2012 rendered the

continuation of the required filings of little use to the Debtor. Upon information and belief, as of

the date of this Disclosure Statement, the Stock is deregistered under Section 12(g) of the

Exchange Act and the Debtor’s reporting obligations are suspended under Section 15(g) of the

Exchange Act.

Agency Business

Following the winding-down of its KDMS operations, the Debtor continued to operate its

Agency Business while it continued its search for a potential buyer of the business. The

Debtor’s management believed that the Agency Business was potentially a viable enterprise, but

the Debtor was unable to realize maximum value because, in the current economic environment,

the Debtor was unable to capitalize the Agency Business sufficiently, the Agency Business

remained dependent on a few key customers and it was also dependent on the services of certain

key personnel whom the Debtor was unable to incentivize to remain with the Debtor given the

Debtor’s economic condition. In September 2011, the Debtor engaged Gruppo Levy & Co.

(“Gruppo”), an investment banking firm, to identify prospective purchasers for the Agency

Business. Gruppo identified and contacted approximately 95 potential purchasers through the

fall of 2011 and provided such potential purchasers preliminary information regarding a potential

transaction for the purchase of the Agency Business. Of the parties receiving such information,

four (4) requested further information and/or a meeting with Atrinsic’s management to discuss a

transaction. Despite all efforts, ultimately, this process did not result in an offer for the Agency

Business.


19

Independently from Gruppo’s efforts to identify an acquirer of the Agency Business,

Atrinsic’s management actively sought an acquirer for the Agency Business. From February

2012 through the Petition Date, the Debtor’s management contacted and solicited offers from

five (5) additional parties regarding a possible acquisition of the Agency Business. The

company formed a committee consisting of independent directors to evaluate offers for its

Agency Business. The highest offer received was $450,000, however, the company was unable

to successfully consummate a transaction with the bidder.

After an exhaustive marketing process that has lasted over seven (7) months, the

Company was unable to consummate a sale of its Agency Business and the employees who

operated the business have left the company and started another agency. [The Debtor will

continue to attempt to market and sell any remaining assets relating to the Agency Business,

which the company believes have nominal value.]

The Billing Resource

On October 30, 2008, the Debtor acquired a 36% non-controlling interest in The Billing

Resource, LLC (“ New TBR”). Upon information and belief, New TBR is controlled and

majority owned by a Florida trust, the 2008 BF Trust (the “Trust”) and managed by a Mr. Nelson

Gerard. Their respective rights as members and otherwise are governed by a certain Limited

Liability Company Agreement of The Billing Resource, LLC (the “LLC Agreement”) entered

into as of October 30, 2008.

New TBR is an aggregator of fixed telephone line billing. It performs validation, billing,

collection and related services to companies like the Debtor who sell products and services to

consumers and collect payments through telephone bills issued to the consumers by local

telephone companies [also known as “local exchange carriers” (“LECs”)] such as AT&T,

Verizon and Frontier.


20

New TBR provided these services to the Debtor and its subsidiaries under a Master

Services Agreement dated October 8, 2008 (the “MSA”). The general practice under the MSA

had been for (i) Clients [the Debtor and one of its subsidiaries] to provide New TBR with billing

transactions related to services provided by Clients to their end-user customers, which New TBR

would transmit to the LECs in the format required by the LECs for their processing of the billing

transaction to appear on the end-users local telephone bills and in collection of payments from

Clients’ end-user customers, (ii) after collecting payments from the end-users, processing by the

LECs of activity with such customers and performing risk analyses, the LECs would transmit the

aggregate revenues, less fees, deductions, offsets and reserves, (iii) New TBR would conduct its

own risk analyses and then remit the net proceeds to Clients, net of the various deductions

allowed by the MSA, including, but not limited to, New TBR’s fees, deductions, service

invoices, offsets, and reserves, as provided in the MSA.

The Debtor’s initial 36% non-controlling membership interest in New TBR was obtained

in October 2008, at the time when the assets of New TBR were purchased from the bankruptcy

estate of the predecessor entity to New TBR known as Old T.B.R., Incorporated, f/k/a The

Billing Resource, Inc. d.b.a Integretel, Inc. (“Old TBR"). The Debtor’s initial investment was

roughly $2.2 million plus an additional $1 million in working capital. The working capital was

contemplated to be repaid through preferred distributions from New TBR, and the $2.2 million

initial investment was to be reduced by further pro-rata membership distributions over the next

three years. Thus the Debtor’s net investment was reduced over time and was accounted for

accordingly. Most of the distributions were paid as the LECs processed billing transactions and

relinquished proceeds or liquidated reserves they held from prior and current submissions by

New TBR.

The Debtor had been the exclusive United States licensee of Kazaa, an online music

streaming platform (“Kazaa”).


21

As the provider of Kazaa, the Debtor provided access to Kazaa to its customers, some of

which elected to pay for such access through their monthly telephone bills with their LECs.

In December 2011, the Debtor discontinued operation of Kazaa.

Pursuant to the MSA, New TBR held back a portion of the customer collections

otherwise payable to the Debtor and its subsidiary World Wide Access, Inc. (“WWA”;

collectively hereafter with the Debtor, the “Debtor”) (“TBR Reserves”) to account for

non-collectible accounts, adjustments, cancellations, other deductions, liability risks (including

potential indemnity obligations), and other risks before remitting net proceeds to the Debtor,

which funds are retained by New TBR under the MSA until New TBR’s exposure to third party

liability and LEC deductions can be adequately determined.

The Debtor contended that New TBR was holding $1,427,315 in TBR Reserves that are

payable to its estate. New TBR contended that, as of December 3, 2012, the TBR Reserves were

only approximately $806,319.

As of December 22, 2011, New TBR terminated the MSA on account of certain alleged

breaches thereof by the Debtor and exercised the option contained in the MSA to suspend

performance thereunder due to such breaches by the Debtor.

AT&T, Inc., and Verizon Communications, Inc., the two largest LECs collecting

payments for the parties, are in the process of settling nationwide class action lawsuits and have

demanded indemnification from New TBR for their expenses and settlement payments in

connection with such lawsuits.

Because of the Debtor’s termination of the Kazaa operation, other alleged breaches of the

MSA, and pending litigation and potential threats of litigation to which New TBR is exposed

arising, at least in part, from the management of the Kazaa service by the Debtor, including but

not limited to exposure arising from the AT&T and Verizon nationwide class action lawsuits,

New TBR asserts that (i) it is entitled to hold the TBR Reserves for an indefinite time, and (ii) it


22

has incurred or will incur losses for which the Debtor is obligated to indemnify New TBR

(“Indemnity Claims”) in amounts that are currently impossible to determine on account of LEC

deductions, offsets, and litigation costs, particularly those arising from the AT&T and Verizon

class actions. The Debtor has denied responsibility for such losses and asserts that a major

portion of the TBR Reserves would be distributable to the Debtor in due course.

Notwithstanding, New TBR has wholly disputed any liability to the Debtor arising out of

the MSA and is likely to assert substantial, although currently unliquidated, claims for setoff,

counterclaims or indemnification in amounts in excess of the amounts claimed owed to the

Debtor from New TBR.

The Debtor, throughout the course of the Chapter 11 case, has done a thorough

investigation into the assets of New TBR and the claims and defenses set forth above. The

Debtor has been provided with substantial discovery concerning the current financial affairs of

New TBR, its assets and value.

According to TBR’s unaudited financial statements as of November 30, 2012, as

provided to the Debtor, New TBR suffered a net loss for the eleven months ending on

November 30, 20912 in the amount of $367,334.55.

Moreover, New TBR’s unaudited balance sheet as of November 30, 2012, shows a

negative equity balance of ($465,013.88). Further, the Debtor’s interest is a minority interest and

its investigation reveals that there is little to no likelihood that the Debtor could sell its interest to

any third party. Accordingly, the Debtor believes that its membership interests in New TBR may

currently have no value.

As a result of all of the foregoing, the Debtor and New TBR determined, in their

respective business judgment, that it would be in the best interests of all parties to try and settle

all competing claims and interests between the parties.


23

On January 3, 2013, the Debtor filed a motion to approve a settlement with TBR [Dkt. #

65] (the “TBR Settlement”). A hearing to consider the TBR Settlement is scheduled for January

23, 2013. If approved, pursuant to the TBR Settlement, the Debtor will assign its 36%

membership interest in TBR to its majority holder in exchange for $308,000 in cash, to be

distributed in accordance with the Plan, in full and final settlement of the Debtor’s claims

against TBR and the exchange of mutual releases.

Events Necessitating Chapter 11 Filing

As a result of the foregoing events as well as continuing business losses, the Debtor’s

liquidity has been steadily deteriorating. Prior to the Petition Date, collection attempts by

creditors of the Debtor became more aggressive and, as a result of a significant judgment entered

against the Debtor by Internap, a provider of server hosting services to the company, the

Debtor’s bank accounts were frozen. This judgment severally restricted the Debtor’s operations.

In order to preserve the value of the Debtor and its assets, the Board of Directors

determined that a Chapter 11 filing supported by its key constituents was in the best interests of

the Debtor and its creditors. In contemplation thereof, the Company hired the deponent as acting

Chief Restructuring Officer as well as an experienced controller to guide the Debtor through the

Chapter 11 process.

Prior to the Petition Date, the Debtor successfully negotiated with its key constituents,

namely, its two primary secured creditors, Iroquois and Hudson, regarding the terms of an Order

authorizing the use of cash collateral and a Plan of Reorganization Support Agreement (“PSA”).

The PSA provides, among other things, for the filing of a plan of reorganization no later than

June 30, 2012 (since extended to July 15. 2012) which was to provide for a re-distribution of

equity interests in the Reorganized Debtor to all classes of claims and interests while the Debtor

continues to maximize the value of its assets and seek a business combination for future

exploitation and development.


24

Accordingly, on January [__], 2013, the Debtor filed the First Amendment to Plan of

Reorganization (the “Plan”), which provides for a re-distribution of equity interests in the

Reorganized Debtor to all classes of claims and interests while the Debtor will “re-start” its

business operations by, inter alia, acquiring fifty-one percent (51%) of the outstanding capital

stock of Momspot in a private placement, which will be subject to the terms and conditions of a

definitive stock purchase agreement, and securing additional investments from Class 2 Senior

Noteholders to finance the working capital needs of Debtor and Momspot during the first two

years after the consummation of the Plan. The Plan, a copy of which is annexed hereto as

Exhibit “A”, is described in further detail below.

iii. Description of Interests of Certain Creditors in Debtor on the Petition Date

Iroquois Liens and Obligations. Pursuant to that certain Securities Purchase Agreement,

dated as of May 31, 2011 (the “Purchase Agreement”), by and among the Company and certain

Buyers (as defined in the Purchase Agreement), the Company issued to Iroquois certain secured

convertible notes dated as of May 31, 2011, as amended in October 2011 (as issued to the Buyers

in their entirety pursuant to the Purchase Agreement, the “Senior Notes”), aggregating to the

original principal amount of $1,375,000 (the “Iroquois Note”). As of the Petition Date, the

Company was indebted to Iroquois in the principal amount of $10,153,359 including the

obligations due and owing upon the deliveries of Event of Default Redemption Notices as

defined below (the “Iroquois Note Indebtedness”). Pursuant to the Purchase Agreement, the

Iroquois Note Indebtedness is secured by substantially all of the Debtor’s personal property (the

“Prepetition Collateral”) on a first priority basis (the “Iroquois Prepetition Liens”).

Hudson Liens and Obligations. Pursuant to the Purchase Agreement, the Debtor issued

to Hudson Senior Notes aggregating to the original principal amount of $1,375,000 (the “Hudson

Note”). As of the Petition Date, the Debtor was indebted to Hudson in the amount of

$10,267,309, including the obligations due and owing upon the deliveries of Event of Default


25

Redemption Notices as defined below (the “Hudson Note Indebtedness” and collectively with

the Iroquois Note Indebtedness, the “Prepetition Obligations”). Pursuant to the Security

Agreement, the Hudson Note Indebtedness is secured by the Prepetition Collateral on a first

priority basis with the Iroquois Note Indebtedness (the “Hudson Prepetition Liens”).

BDE Liens and Obligations. Pursuant to the Purchase Agreement the Company issued to

BrillBDE (BDE, collectively with Iroquois and Hudson, the “Prepetition Lenders”) Senior Notes

aggregating to the original principal amount of $2,200,000.00 (the “BDE Note”). As of the

Petition Date, the Debtor was indebted to BDE in the principal amount of $1,868,689, together

with interest, fees, expenses, and all other obligations of the Company, plus the obligations due

and owing upon the deliveries of Event of Default Redemption Notices Prior to the Petition Date,

BDE sold and assigned one half of the BDE Note to Hudson and the other half of the BDE Note

to Iroquois.

As of the Petition Date, the Company’s principal indebtedness to Hudson includes the

assigned BDE Note obligation of $1,868,689.00 (which is incorporated into the principal claim

amounts set forth above for each of Iroquois and Hudson), including the obligations due and

owing upon the delivery of an Event of Default Redemption Notice as defined below (the “BDE

Note Indebtedness” and collectively with the Iroquois Note Indebtedness and the Hudson Note

Indebtedness, the “Prepetition Obligations”). Pursuant to the Security Agreement, the BDE Note

Indebtedness is secured by the Prepetition Collateral on a first priority basis with the Iroquois

Note Indebtedness and the Hudson Note Indebtedness (the “BDE Prepetition Liens” and

collectively with the Iroquois Prepetition Liens and the Hudson Prepetition Liens, the

“Prepetition Liens”).

As of the Petition Date, Digital owns approximately 1,000,000 shares of the Debtor’s

common stock and members of the Debtor’s Board of Directors beneficially own approximately


26

1,200,000 shares of the company’s common stock5. Between October 2011 and January 2012,

the Debtor issued an aggregate of approximately 92,600,000 shares of its common stock to

Hudson, Iroquois and AYM Aggressive Value Fund, L.P. upon their request and pursuant to the

terms of the Convertible Notes.

The Debtor concedes that Events of Default occurred under the Senior Notes and under

each of the Transaction Documents (as defined in the Purchase Agreement) before the Petition

Date, and event of Default Redemption Notices (as defined in the Senior Notes) were delivered

by Hudson and Iroquois to the Company before the Petition Date.

ARTICLE III SIGNIFICANT EVENTS DURING THE BANKRUPTCY

3.1. Voluntary Petition. On June 15, 2012, the Debtor filed a voluntary petition for

relief under Chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101, et seq. in the

United States Bankruptcy Court for the Southern District of New York. The Debtor continues

operating its business and managing its properties as debtor in possession pursuant to

Bankruptcy Code Sections 1107 and 1108. [No trustee or examiner has been appointed in the

Debtor’s Chapter 11 case.]

3.2. Creditors Committee. On July 6, 2012, the United States Trustee appointed an

Official Committee of Unsecured Creditors (the “Committee”). The Committee consists of the

following members:

5 During 2011 and 2012, members of the Board of Directors of the Debtor have not received any cash compensation for their board services to the company.


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Google Inc. 1600 Amphitheatre Parkway Mountain View, California 94043 Attention: Blake Reese, Esq. Associate Product Counsel Google Inc. 76 Ninth Avenue New York, New York 10011 Tel.: (212) 565-7297 E-mail: [email protected] MusicNet, Inc. d/b/a MediaNet Digital 2401 Elliott Avenue Seattle, Washington 98121 Attention: Seth Goldstein, Esq. Director, Legal & Business Affairs Tel.: (206) 269-6000 Kamran Hakim c/o Buckingham Trading Partners, Inc. 3 West 57 Street, 7th Floor New York, New York 10019 Tel.: (212) 750-1165

The Committee retained the law firm of ASK, LLP as substitute counsel for Neiger, LLP as its

counsel.

3.3. Schedules. The Debtor has filed the requisite schedules of assets and liabilities

and statement of financial affairs as required pursuant to section 521 of the Bankruptcy Code and

Bankruptcy Rule 1007.

3.4. Employment of Professionals. The Debtor obtained an order from the

Bankruptcy Court authorizing the Debtor to employ Rattet Pasternak, LLP as its bankruptcy

counsel and Stubbs Alderton & Markiles, LLP as special SEC counsel to the Debtor. As a result

of a merger involving the Rattet law firm, on January 9, 2013, the Court entered an order

authorizing the law firm of DelBello Donnellan Weingarten Wise & Wiederkehr, LLP to act as

substitute counsel to the debtor, nunc pro tunc as of January 1, 2013.


mailto:[email protected]

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3.5. Claims Bar Date. Pursuant to Bankruptcy Rule 3003 and Local Bankruptcy Rule

3003-1, the Court established October 1, 2012 (the “Bar Date”) as the deadline by which all

Creditors holding a Claim against the Debtor which arose prior to the filing of the Case, and

which was not listed by the Debtor on its schedules, or listed on the schedules as disputed,

contingent, or in an unliquidated amount, were required to file a proof of claim with the

Bankruptcy Court. Notice of the Bar Date was timely mailed to all parties on the Court’s Master

Mailing Matrix. Persons required to file a proof of claim by the Bar Date, but who did not do so,

will not receive any distribution under the Plan.

3.6. Authority to Use Cash Collateral. The Debtor has obtained an final order

(“Cash Collateral Order”) of the Bankruptcy Court entered on August 1, 2012 to authorizing the

use of cash collateral in which the Class 2 Senior Noteholders have asserted a perfected first

priority security interest and liens which will permit the Debtor to pay the administrative costs of

the bankruptcy case. [Dkt. No. 30]. Under the terms of the Cash Collateral Order the Class 2

Senior Noteholders’ Claims are secured by a first priority lien on all of the Debtor’s assets and

have super priority administrative Claim status, junior only to United States Trustee Fees and

certain other carve outs.

3.7. Exclusivity. On November 15, 2012, the Court entered an order extending

exclusive periods to file a plan pursuant to section 1121(d) of the Bankruptcy Code. That order

granted each of the Debtor, Hudson and Iroquois the exclusive right to file a plan reorganization

through and including February 9, 2013.

3.8. Debtor’s Business Activities During Chapter 11 Case. During the early stages

of the Chapter 11 Case, the Debtor vacated its pre-petition month to month premises, re-located

to a cheaper and small office space and began to focus on analyzing the Debtor’s assets including

its domain names category, accounts receivable and other business related assets and formulating

a business plan to re-commence operations.


29

The Debtor also commenced exploring possible business combinations in anticipation of

becoming re-listed subject to the reporting obligations under the Securities Exchange Act of

1934, as amended.

Momspot. The Debtor entered into negotiations with Momspot regarding the acquisition

by the Reorganized Debtor of a controlling interest in Momspot on or prior to the Effective Date.

See detailed discussion in Article V below.

The Debtor continues to attempt to maximize the value of its remaining assets. As

discussed above, the Debtor has entered into a stipulation with TBR for which it seeks court

approval.

On or about January 17, 2013, the Debtor, Committee and the Board entered into a

stipulation (the “Board Stipulation”), attached to the Plan as Exhibit A. The Board Stipulation

provides for third-party funding for an independent investigation of pre-Petition Date claims

(“Potential Claims”) of the Debtor or its Estate against officers and directors of the Debtor.

Under the Plan, the Potential Claims will be transferred to the Liquidating Trust, which will have

until March 31, 2015 to bring suit on account of any Potential Claim.

ARTICLE IV FINANCIAL STATUS

4.1. Debtor’s Liabilities. The Debtor estimates that, as of the Effective Date, their

pre-petition and post-petition liabilities will consist of the following: Pre-petition debts consist

of known priority wage claims of approximately $5,000, Pre-Petition tax Claims of

approximately $10,000, Pre-petition Lender Claims of approximately $20 million (including

interest and other charges) and Unsecured Claims of approximately $11,500,000. The Debtor

estimates that their post-petition liabilities will consist of net administrative claims for Chapter

11 professional fees and expenses of approximately $200,000. It is possible that prior to the


30

Effective Date, the Debtor will have paid part of the administrative professional fees and

expenses, which payments will reduce the amount of the Debtor’s liabilities.

4.2. Debtor’s Assets. The Debtor has few, if any, liquid assets. The Debtor estimates

that on the Confirmation Date, their assets will consist of (i) cash on hand, approximately

$750,000, (ii) its public corporate shell, the value of which is estimated to be approximately

$200,000, if it were to be sold on the open market; (ii) accounts receivable (including the

disputed TBR receivable), net of doubtful collections, book valued at approximately

$462,446.05; and (iii) property and equipment, net of depreciation, book valued at approximately

$0. Under the Plan, the Debtor will continue to preserve and maximize the value of its

remaining assets and re-commence business operations as an ongoing business enterprise

through the operation of Momspot. The Debtor will therefore continue in existence as a

Reorganized Debtor.

ARTICLE V PROPOSED ACQUISITION

5.1. Introduction.

The Plan provides for the acquisition of fifty-one percent (51%) of the outstanding capital

stock of Momspot (the “Acquisition”) by the Reorganized Debtor on or prior to the Effective

Date. The Debtor is hopeful that the Acquisition will result in an active and viable public trading

market for the shares of the Reorganized Debtor, but makes no representation or warranties that

such market will develop at any time or at any price. The Acquisition will be subject to the

terms and conditions of a definitive stock purchase agreement, which will contain customary

representations, warranties and covenants. In consideration for the Acquisition, the Reorganized

Debtor will agree to contribute from time to time, in such increments and at such times as may

be requested by the management of Momspot, up to $165,000 in the aggregate, to finance the

anticipated working capital needs of Momspot during its first two years of operation.


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5.2. Momspot.

Momspot aims to be an innovative ‘click ‘n mortar’ retail and social networking

company operating in both the virtual and physical realms that markets its products and services

specifically to the “Mom” market. Specifically, it intends to develop an online and mobile

personal management system consisting of social utilities and calendaring tools that help Moms

manage their daily routine and that of their family. Momspot’s business plan calls for two

phases: (i) Phase I - Momspot will develop an online retail capability that markets and resells

products to the “Mom Market”, a social networking capability and personal organization and

management tools geared specifically to Moms and (ii) Phase II - Momspot will leverage its

brand success to establish a physical presence and create stores that provide a “third-space” for

Moms, which caters specifically to their needs. Although many of the tools Momspot proposes

already exist in some form on the Internet today, Momspot believes it is the first company to

bundle these various products and services into a unique brand marketed specifically to mothers.

Momspot’s Executive Summary, which contains a description of the business plan described

above, is annexed to this Disclosure Statement as Exhibit D. Parties are encouraged to review

the Executive Summary in its entirety for a full understanding of the business plan and its impact

on the viability of the Reorganized Debtor’s business.

(a) Phase I.

In the first phase, resources will be dedicated to developing an online presence that

includes a web-based retail market place. Momspot intends to be the reseller and marketer of

choice for merchandise, apparel, and food brands that service the “Mom” market. Momspot’s

online market will have three main categories of products: merchandise, apparel, and food, and

within each category there will be numerous subcategories organized according to age and target

consumer. Moreover, the online Momspot market will have a baby registry in which expecting

mothers can register and select all the products they desire for their baby showers. Resources


32

will also be dedicated to developing social networking capabilities and personal organization and

management tools bundled together in what Momspot refers to as the Momspot Mommy

Management System (“MMMS”), which will be one of the key differentiators of Momspot. At

the core of MMMS will be an integrated dynamic calendar and scheduling tool and social utility

that allow Moms to manage their schedules and those of their children, as well as view the

calendars of individuals in their network and the public calendars of any number of commercial

and noncommercial organizations in their local community. Phase I will be further broken down

into six (6) different stages of business development that coincide with any Internet company’s

lifecycle. These stages are: (1) website development; (2) beta testing & marketing; (3)

operational start-up; (4) commercialization; (5) growth; and (6) steady operations.

During Phase I, Momspot intends to generate revenue through various channels,

including online retail sales and affiliate marketing commissions. Momspot does not intend to

carry any inventory; rather, it will be increasing customer purchases of retailers’ products by

providing them an additional sales channel, and helping to push focused traffic to their products.

Although Momspot intends to showcase all products within the Momspot Market area of its

website, Momspot will simply be acting as an intermediary, or broker, between the buyer and

seller and will establish commercial terms with each of its suppliers that define the percentage of

sales received by Momspot.

Momspot will also generate revenue via web and mobile advertising by selling space to

third parties to place various types of advertisements on its website and mobile apps, which will

permit Momspot to charge a premium price for its advertising space. Momspot will focus on

two advertising revenue channels: display advertising and pay-per-click advertising (“PPC”).

Momspot believes it brings additional value to companies looking to target Moms as Momspot

offers numerous other tools and services to entice Moms to use our website and mobile apps,


33

thus increasing the number of ad views and the level of engagement with users. Momspot

believe this should allow Momspot to charge a premium price for its modes of advertising:

• Display Advertisements: Like most Websites, Momspot will sell advertising-space to

place various types of advertisements on its website and mobile apps.

• PPC Advertisements: Momspot will dedicate various space on its web pages for

advertisers to publish advertisements and offers which result in revenue for Momspot

only in the event the user clicks the advertisement. This type of advertising will include

product placements in the Momspot market place as well. In effect, this allows Momspot

to monetize marketplace web real estate multiple times: once when a user clicks on a

product, and another if/when that user makes a purchase of that product.

(b) Phase II.

In the second phase of the business, the intent is to leverage the Momspot brand success

and move into the physical retailing space by creating a “third space” that caters specifically to

Moms. “The Momspot” will provide mothers with all of the goods and services they may want in

a single location, such as a place to purchase merchandise, apparel, and groceries (the “Momspot

Market”), a place to eat and socialize with friends (the “Café”), and a place to play with their

children or meet for their children’s play dates (the “Supervised Play Space”). Each store will

contain these sections.

During Phase II, Momspot intends to generate revenue by owning and operating various

retail locations. Retail sales will include purchases of products (merchandise, apparel and

groceries) as well as purchases from the Café. Momspot will also generate revenue via

franchising and licensing opportunities. Because Momspot is intended to become a recognized

brand worldwide, there is tremendous opportunity to license the brand and franchise the retail

format both domestically and internationally.


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(c) Market Opportunity & Financial Projections.

There is expected to be ample market opportunities available for Momspot, particularly

in light of the emerging trend in social media and growth of niche sites as well as the sheer

magnitude of the “Mom Market.” Further, Momspot believes that no brand has yet been

marketed specifically to Moms, reinforcing the potential of Momspot as a viable business.

Momspot believes that digital media is an essential and important part of a Mom’s life

today, and the Internet is a rapidly growing media outlet that Moms turn to for information and

entertainment. Momspot advises that according to America Online DMS, mothers who use the

Internet spent up to sixteen (16) hours and fifty-two (52) minutes per week online, which is more

than teens (who are online approximately 12 hours and 17 minutes). Momspot believes its

potentially served market (“PSM”) numbers approximately one-hundred and thirteen (113)

million given that there are approximately one-hundred and forty-one (141) million women with

children in the U.S., and eighty percent (80%) of Moms have online service available to them.

Moreover, the growth of the Mom Market by estimated one percent (1%) a year coupled with the

fact that Moms account for an estimated eighty-five percent (85%) of the purchasing decisions of

U.S. households, confirms that the Mom Market comprises a very powerful consumer market.

Momspot has identified the key drivers of revenues and costs for its business and has

compiled a five-year financial projection, which is detailed in the Executive Summary attached

hereto as Exhibit D. According to these projections, Momspot is forecasted to begin generating

modest revenues through online advertising sales by the time it begins beta testing (stage 2) in

May/June 2013. Momspot anticipates these revenues to increase significantly as the number of

incremental unique users to the website increases and as additional revenue-generating services,

such as sponsored promotions and premium app sales, come online.

Momspot’s projections reflect positive cash flow after the first two years of operations,

with profits of $797,538 expected in 2014, $2,150,574 in 2015 and $3,714,674 in 2016. Those


35

projections are subject to a number of assumptions and certain risk factors, which are discussed

more fully herein. The Plan provides for capital contributions by the Reorganized Debtor of up

to $165,000 in the aggregate to finance the anticipated working capital needs of Momspot during

its first two years of operation. Accordingly, with the assistance of the Reorganized Debtor

pursuant to the Plan, Momspot is expected to have the necessary cash flow to finance its business

operations and in turn, to fund post-reorganization operations of the Debtor. See Projections

annexed hereto as Exhibit E.

(d) Management.

Momspot was founded by Barry Eisenberg, who is also the Chief Executive Officer of

the company. Mr. Eisenberg has a proven track record for managing the design, development,

and implementation of complex technological and analytical tools, which spans more than

thirteen (13) years at well known consulting and financial services firms such as

PricewaterhouseCoopers and Morgan Stanley. Prior to founding Momspot, Mr. Eisenberg was a

Vice President and Portfolio Manager in the Acquisitions and Investment Management unit of

Mubadala Development Company, a prestigious sovereign wealth fund and strategic investment

firm of the Government of Abu Dhabi, with more than $50bn AUM. Mr. Eisenberg also has

extensive experience as a Product Manager with Morgan Stanley, working as part of team

responsible for developing an analytic platform to institutionalize a proprietary accounting and

valuation framework across the firm’s Investment Banking, Institutional Sales & Trading, and

Equity Research businesses. Mr. Eisenberg has a M.B.A. in Finance and International Business

and a B.A. in Managerial Economics and Computer Science.


36

ARTICLE VI DESCRIPTION OF THE PLAN

6.1. Introduction. This section summarizes the important provisions of the Plan. The

Plan is annexed to this Disclosure Statement as Exhibit A. Parties are encouraged to review the

Plan in its entirety for a full understanding of its provisions and impact on creditors.

The Plan provides that all Claims are placed into the Classes set forth below, except that

pursuant to Bankruptcy Code §1123(a)(1), Administrative Claims and Priority Tax Claims are

not classified.

Under the Plan, unclassified Claims are not impaired. Holders of an Administrative

Claim and Priority Tax Claim are conclusively presumed to have accepted the Plan and,

therefore, are not entitled to vote to accept or reject the Plan.

Holders of Claims in the following Classes are entitled to vote to accept or reject the

Plan: Class 2 (Prepetition Lender Claims), Class 3 Unsecured Claims and Class 4 Interests in

the Debtor. Since none of these Classes will receive 100% distribution on account of their

respective claims and interests, such Classes are impaired and entitled to vote to accept or reject

the Plan.

In addition, the distribution to Class 4 Equity Interests under the Plan is subject to and

conditioned upon acceptance of the Plan by Class 3 Unsecured Creditors. See discussion below.

6.2. Treatment of Unclassified Claims. The Plan provides for the following

treatment of Unclassified Claims:

Administrative Expense Claims. All Administrative Expense Claims, if any, shall be

paid in full in Cash as soon as practicable after the Effective Date.

Bar Dates for Administrative Claims. Holders of Administrative Expense Claims other

than retained professionals are subject to the above-described Bar Date.


37

Applications for Professional Fees. All applications for professional fees for services

rendered and reimbursement of expenses in connection with the Bankruptcy Case through the

Confirmation Date are Administrative Expense Claims and shall be filed with the Bankruptcy

Court within sixty (60) days after the Effective Date. Any such application not filed within sixty

(0) days after the Effective Date shall be deemed waived and the Holder of such Claim shall be

forever barred from receiving payment on account thereof. The Debtor’s counsel, the Debtor’s

substituted counsel and counsel to the Creditors Committee have agreed to aggregate payment of

not more than $175,000 from the Debtor’s Cash, inclusive of the pre-petition retainer already

received. All such professional fees incurred by the Debtor in its Case will be paid by the

Reorganized Debtor from its available cash on hand as of the Effective Date.

U.S. Trustee Fees. All unpaid U.S. Trustee Fees incurred before the Effective Date shall

be timely paid by the Debtor in the ordinary course as such U.S. Trustee Fees become due and

payable. All unpaid U.S. Trustee Fees incurred after the Effective Date shall be timely paid by

the Reorganized Debtor in the ordinary course as such U.S. Trustee Fees become due and

payable until the Chapter 11 Case is closed.

Allowed Priority Tax Claims. Allowed Priority Tax Claims shall be paid in full from

Post-Confirmation Assets as soon as practicable after the Effective Date. The Debtor believes

that such Claims total approximately $10,000.

6.3. Treatment of Classified Claims. The Plan provides for the following treatment

of Claims in the following Classes:

Class 1 (Non-Tax Priority Claims). Class 1 Claims shall be paid in full in Cash on or

shortly after the Effective Date. Class 1 Claims total approximately $5,000. Class 1 Claims shall

not be Impaired under the Plan, are deemed to accept the Plan and are therefore not entitled to

vote to accept or reject the Plan.


38

Class 2 (Senior Noteholder Claims). Provided the Plan is confirmed, the Class 2

Senior Noteholders have agreed to forgo a Cash distribution on their Secured Claims, waive their

right to be repaid for the use and diminution of their cash collateral and, in lieu of cash, the Class

2 Senior Noteholders have agreed to accept in full satisfaction thereof 100% of a newly

authorized and issued series of Reorganized Debtor Convertible Preferred Stock, which will be

convertible into 92% of the Reorganized Debtor Common Stock (provided that there shall be a

9.99% beneficial ownership blocker for each of the holders of Class 2 Senior Noteholders

Claims). The Reorganized Debtor Stock Creditor Distribution shall be exempt from all

registration requirements pursuant to Bankruptcy Code § 1145.

Class 3 (General Unsecured Claims). Provided the Plan is confirmed, the Class 3

Unsecured Creditors accept in full satisfaction thereof (i) their pro rata share of the Reorganized

Debtor Common Stock issued in the Reorganized Debtor Stock Distribution, which shares shall

represent 6% of the Reorganized Debtor Common Stock on the Effective Date, treating the

Reorganized Debtor Convertible Preferred Stock on an as-converted basis without regard to the

9.99% beneficial ownership blocker; and (ii) the Liquidating Trust Interests.

Class 4 (Interests). On the Effective Date, equity interests in the Debtor shall be

extinguished and canceled, and, subject to acceptance of the Plan by the Class 3 Unsecured

Creditors, the holders of Class 4 Interests shall accept in full satisfaction thereof 2% of the

Reorganized Debtor Common Stock Creditor Distribution. The Reorganized Debtor Stock

Creditor Distribution shall be 2% of the Reorganized Debtor Common Stock pro rata among all

Class 4 Interest holders. The Reorganized Debtor Stock Creditor Distribution shall be exempt

from all registration requirements pursuant to Bankruptcy Code § 1145.

Reservation of Rights. Except as otherwise provided in the Plan or the Confirmation

Order, the Debtor’s or Reorganized Debtor’s rights and defenses, both legal and equitable, with

respect to any Claims or Administrative Expense Claims, including, but not limited to, all rights


39

with respect to legal and equitable defenses to setoffs or recoupments, shall be unaffected and

unaltered. From and after the Effective Date, the Reorganized Debtor shall be deemed to be the

successor in interest to the Debtor with respect to all such rights and defenses.

Classes Entitled to Vote. Holders of Claims in Classes 2 and 3 and Interests in Class 4

shall be entitled to vote to accept or reject the Plan.

Acceptance by Impaired Classes of Claims. An Impaired Class of Claims shall have

accepted the Plan if (a) the Holders (other than any Holder designated under Bankruptcy Code §

1126(e)) of at least two-thirds in amount of the Allowed Claims actually voting in such Class

have voted to accept the Plan and (ii) the Holders (other than any Holder designated under

Bankruptcy Code § 1126(e)) of more than one-half in number of the Allowed Claims actually

voting in such Class have voted to accept the Plan.

Cramdown. If an Impaired Class of Claims does not accept the Plan, the Debtor

requests Confirmation of the Plan under Bankruptcy Code § 1129(b). The Debtor reserves the

right to modify the Plan to the extent, if any, that Confirmation pursuant to Bankruptcy Code §

1129(b) requires modification or for any other reason in their discretion.

6.4.Conditions Precedent to the Effective Date. Each of the following events shall

occur on or before the Effective Date:

(a) The Final Confirmation Order shall have been entered, in a form and substance

reasonably acceptable to each of the Debtor, the Class 2 Senior Noteholders the

Creditors Committee and which shall include one or more findings that (i) the Plan

was proposed in good faith, (ii) the Plan satisfied the applicable provisions of the

Bankruptcy Code as set forth in Bankruptcy Code § 1125(e), and (iii) the

Reorganized Debtor is a successor to the Debtor only to the limited extent necessary

to comply with Bankruptcy Code § 1145 and for no other reason under any state or

federal law;


40

(b) The Bankruptcy Court shall have determined that the Reorganized Debtor is duly

authorized to take the actions contemplated in the Plan which approval and

authorization may be set forth in the Confirmation Order; and

(c) All documents, instruments, and agreements provided under, or necessary to

implement the Plan shall have been executed and delivered by the applicable parties.

Waiver of Conditions Precedent to the Effective Date. The Debtor with the Consent of

the Class 2 Senior Noteholders and the Creditors Committee may waive in writing any or all of

the conditions precedent to the Effective Date set forth in this Article, whereupon the Effective

Date shall occur without further action by any Person; provided, however, that the conditions

specified in Article 6.4 (a) may not be waived.

6.5. Acquisition. On or prior to the Effective Date, the Reorganized Debtor shall

acquire from Momspot equity securities representing fifty-one percent (51%) of the outstanding

capital stock of Momspot pursuant to a definitive stock purchase agreement, which will contain

customary representations, warranties and covenants. In consideration for the Acquisition, the

Reorganized Debtor shall contribute from time to time as requested by Momspot, up to an

aggregate of $165,000, to finance the anticipated working capital needs of Momspot during its

first two years of operation. The Reorganized Debtor shall be a company reporting under the

Securities Exchange Act of 1934.

6.6. Vesting of Assets in Reorganized Debtor for Distribution. On the Effective

Date, all of the Debtor’s Assets not expressly vested in the Liquidating Trust shall be vested in

the Reorganized Debtor for Distribution pursuant to the terms of the Plan. Such vesting shall be

exempt from any stamp real estate transfer, mortgage reporting, sales, use or other similar tax.

6.7. Establishment of the Liquidating Trust. On the Effective Date, the Debtor and

the Liquidating Trustee will execute the Liquidating Trust Agreement and will take all other

steps necessary to establish the Liquidating Trust for the benefit of the Liquidating Trust


41

Beneficiaries. The Liquidating Trust will be irrevocably funded with the Liquidating Trust

Assets and no other Assets on the Effective Date of the Plan for the benefit of the Liquidating

Trust Beneficiaries. Such funding shall be exempt from any stamp real estate transfer, mortgage

reporting, sales, use or other similar tax.

The identity of the Liquidating Trustee, and the structure and governance of the

Liquidating Trust will be determined as set forth in the Liquidating Trust Agreement attached to

the Plan as Exhibit A. In the event the Liquidating Trustee is no longer willing or able to serve

as trustee, then the successor will be appointed in accordance with the Liquidating Trust

Agreement, or as otherwise determined by the Bankruptcy Court, and notice of the appointment

of such Liquidating Trustee will be filed with the Bankruptcy Court. The Liquidating Trust

Assets shall include: (i) 50% of net proceeds recovered from Atrinsic’s investment in TBR; (ii)

the Committee Causes of Action; and (iii) $50,000.

6.8. Certificate of Incorporation and By-Laws of Reorganized Debtor, Directors

and Corporate Action.

(a) Certificate of Incorporation and By-Laws. On the Effective Date, the by-laws and

certificate of incorporation of the Debtor shall be amended to provide for the issuance of stock as

required under the Plan. Such amendments shall be filed in the Plan Supplement, not less than

five days prior to the voting deadline.

After the Effective Date, the Reorganized Debtor may amend and restate the certificate of

incorporation and by-laws as permitted by applicable law.

(b) Directors and Officers of the Reorganized Debtor. On the Effective Date, the

Debtor’s board of directors and officers will resign, and the board of directors and officers of the

Reorganized Debtor shall consist of one individual that will be identified in the Plan Supplement.

The classification and composition of the board of directors of the Reorganized Debtor

shall be consistent with the Amended Certificate of Incorporation and By-Laws. Each such


42

director shall serve from and after the Effective Date pursuant to the terms of the Amended

Certificate of Incorporation and By-Laws, the other constituent documents of the Reorganized

Debtor, and applicable law. The Debtor’s current interim chief restructuring officer, Sebastian

Giordano, shall work for the Reorganized Debtor as the chief restructuring officer and shall

continue to be compensated at the rate of approximately $10,000 per month, subject to further

arrangement between Mr. Giordano and the Senior Noteholders.

6.9. Cancellation of Instruments and Stock. On the Effective Date, all Interests in

the Debtor, any and all stock options (including, but not limited to, all stock options granted to

the Debtor’s employees), any and all warrants and any instrument evidencing or creating any

indebtedness or obligation of the Debtor, except such instruments that are issued under the Plan,

shall be canceled and extinguished. Additionally, as of the Effective Date, all Interests in the

Debtor, and any and all warrants, options, rights or interests with respect to equity interest in the

Debtor that have been authorized to be issued but that have not been issued shall be deemed

canceled and extinguished without any further action of any party.

6.10. Continuation of the Debtor and Reorganized Debtor: The Reorganized

Debtor shall operate the Debtor’s business after the Effective Date and shall act as Disbursing

Agent. The Reorganized Debtor shall be responsible for: (a) paying, objecting to, settling and

administering Administrative Expense Claims and Priority Claims; (b) paying, objecting to,

settling and administering Class 2 Claims; (c) distributing stock to holders of Allowed Class 3

Claims in accordance with the terms of the Plan and schedule of Allowed Class 3 Claims

provided by the Liquidating Trustee; (d) paying U.S. Trustee Fees after the Effective Date; and

(e) performing normal administrative activities and functions for the Post-Confirmation Assets.

The Reorganized Debtor shall also continue as an operating entity to manage and

maximize its assets for the Reorganized Debtor’s Common Stockholders and as a result of the


43

Acquisition, shall provide Momspot with capital contributions to help finance the anticipated

working capital needs of the business during its first two years of operation.

(a) Creation of Reserve for Expenses and Professional Fees. To the extent necessary to

pay the anticipated awards of fees of the professionals retained by the Debtor and the Creditors

Committee in the Case and to pay the post-Effective Date expenses of the Debtor, before making

the Distributions, the Reorganized Debtor shall create a reserve sufficient to fund all such

payments, subject to the caps set forth in the Plan or the Board Stipulation.

(b) Post-Confirmation Fees and Expenses of Professionals. The Reorganized Debtor

estate shall pay the reasonable compensation and out-of-pocket expenses incurred by the

Debtor’s 11 Professionals upon submission of written invoice to the Reorganized Debtor. In the

event of a dispute with respect thereto, it shall be subject to determination by the Bankruptcy

Court. Any Post-Confirmation professional fees and expenses incurred by the Committee or the

Liquidating Trustee shall be paid solely from the Liquidating Trust.

6.11. Settlement of Disputed Claims Prior to the Effective Date. At any time prior

to the Effective Date, notwithstanding anything in the Plan to the contrary, the Debtor may settle

some or all Disputed Claims subject to obtaining any necessary Bankruptcy Court approval.

6.12. Operating Reports. Prior to the Effective Date, the Debtor shall timely file all

reports, including without limitation, monthly operating reports, required by the Bankruptcy

Court, Bankruptcy Code, Bankruptcy Rules or Office of the United States Trustee. After the

Effective Date, the Reorganized Debtor shall timely file all reports, including without limitation,

quarterly operating reports, as required by the Bankruptcy Court, Bankruptcy Code, Bankruptcy

Rules or Office of the United States Trustee.

6.13. Distributions. The Plan includes the following provisions to govern

Distributions of Assets under the Plan by the Reorganized Debtor:


44

(a) Distributions for Claims Allowed as of the Effective Date. Except as otherwise

provided herein or as ordered by the Bankruptcy Court, Distributions to Creditors for Allowed

Claims shall be made as soon as practicable after the Effective Date. Distributions on account of

Claims that first become Allowed Claims after the Effective Date shall be made as soon as

reasonably practicable after such Claim becomes an Allowed Claim.

(b) Means of Cash Payment. Cash payments made pursuant to the Plan shall be in U.S.

funds, by the means, including by check or wire transfer, determined by the Reorganized Debtor.

(c) Delivery of Distribution. Distributions to holders of Allowed Claims shall be made

(a) at the addresses set forth on the Proofs of Claim Filed by such holders (or at the last known

addresses of such holders if no Proof of Claim is Filed or if the Debtor has been notified of a

change of address); (b) at the addresses set forth in any written notices of address changes

delivered to the Reorganized Debtor; or (c) if no Proof of Claim has been Filed and the

Reorganized Debtor has not received a written notice of a change of address, at the addresses

reflected in the Bankruptcy Schedules, if any.

(d) Objection Deadline; Prosecution of Objections; Late Filed Claims Expunged. As

soon as reasonably practicable, but in no event later than the Claims Objection Deadline, the

Reorganized Debtor or the Liquidating Trustee solely with respect to objections to Class 3

Claims, shall File objections to Claims and serve such objections upon the holders of each of the

Claims to which objections are made. All late filed Claims (those filed after the Bar Date) are

deemed expunged absent further order of this Court allowing same. The Reorganized Debtor or

the Liquidating Trustee, as applicable, shall be authorized to resolve all Disputed Claims by

withdrawing or settling such objections thereto, or by litigating to judgment in the Bankruptcy

Court or such other court having competent jurisdiction the validity, nature, and/or amount

thereof. If the Reorganized Debtor or the Liquidating Trustee, as applicable, and the holder of a

Disputed Claim agree to compromise, settle, and/or resolve a Disputed Claim by granting such


45

holder an Allowed Claim in the amount of $10,000 or less, then the Reorganized Debtor or the

Liquidating Trustee, as applicable, may compromise, settle, and/or resolve such Disputed Claim

without further Bankruptcy Court approval. Otherwise, the Reorganized Debtor or the

Liquidating Trustee, as applicable, may only compromise, settle, and/or resolve such Disputed

Claim with Bankruptcy Court approval.

(e) No Distributions Pending Allowance. Notwithstanding any other provision of the

Plan, no payments or Distribution by the Reorganized Debtor or the Liquidating Trustee, as

applicable, shall be made with respect to all or any portion of a Disputed Claim unless and until

all objections to such Disputed Claim have been settled or withdrawn or have been determined

by Final Order, and the Disputed Claim, or some portion thereof, has become an Allowed Claim.

(f) Withholding and Reporting Requirements. In connection with the Plan and all

Distributions hereunder, the Reorganized Debtor or the Liquidating Trustee, as applicable, shall,

to the extent applicable, comply with all tax withholding and reporting requirements imposed by

any federal, state, local, or foreign taxing authority, and all Distributions hereunder shall be

subject to any such withholding and reporting requirements. The Reorganized Debtor or the

Liquidating Trustee, as applicable, shall be authorized to take any and all actions that may be

reasonably necessary or appropriate to comply with such withholding and reporting

requirements.

(g) Setoffs. The Reorganized Debtor may, but shall not be required to, setoff against any

Claim, and the payments or other Distributions to be made pursuant to the Plan in respect of such

Claim, claims of any nature whatsoever that the Debtor or the Reorganized Debtor, respectively,

may have against the holder of such Claim; provided, however, neither the failure to do so nor

the allowance of any Claim hereunder shall constitute a waiver or release by the Reorganized

Debtor of any such Claim that the Reorganized Debtor may have against such holder, unless

otherwise agreed to in writing by such holder and the Reorganized Debtor, as applicable.


46

6.14. Effects of Confirmation. The Plan provides that Confirmation will have the

following effects:

(a) Discharge. Except as otherwise set forth in the Plan or the Confirmation Order, the

rights afforded under the Plan and the treatment of Claims and Interests under the Plan are in

exchange for and in complete satisfaction, discharge, and release of, all Claims including any

interest accrued on any Claims from the Petition Date, and the termination of all Interests.

Confirmation shall (a) discharge the Debtor and the Reorganized Debtor from all Claims or other

debts that arose before the Confirmation Date, and all debts of a kind specified in Bankruptcy

Code §§ 502(g), (h), or (i), whether or not (i) a Proof of Claim based on such debt is Filed or

deemed Filed under Bankruptcy Code § 501; (ii) a Claim based on such debt is Allowed; or (iii)

the holder of a Claim based on such debt has accepted the Plan; and (b) terminate all Interests

and other rights of Interests in the Debtor.

(b) Injunction. Except as otherwise expressly provided herein or in the Confirmation

Order, all Persons or entities who have held, hold or may hold Claims against or Interests in the

Debtor, and all other parties in interest, along with their respective present and former

employees, agents, officers, directors, principals and affiliates, are permanently enjoined, from

and after the Effective Date, from (a) commencing or continuing in any manner any action or

other proceeding of any kin on any such Claim or Interest against the Debtor, the Reorganized

Debtor or the Class 2 Senior Noteholders, (b) the enforcement, attachment, collection or

recovery by any manner or means of any judgment, award, decree or other against the Debtor,

the Reorganized Debtor or the Class 2 Senior Noteholders, (c) creating, perfecting or enforcing

any encumbrance of any kind against the Debtor, the Reorganized Debtor or against the property

or interests in property of the Debtor, the Reorganized Debtor or the Class 2 Senior Noteholders,

(d) asserting any right of setoff, subrogation or recoupment of any kind against any obligation

due to the Debtor or against the property or interests in property of the Debtor, Reorganized


47

Debtor or the Class 2 Senior Noteholders with respect to such Claim or Interest or (e) pursuing

any claim released pursuant to this Article VI of the Plan. Such injunction shall extend to any

successors of the Debtor and the Reorganized Debtor, and their respective properties and

interests in properties.

(c) Exculpation and Limitation of Liability. Pursuant to and to the extent permitted

by section 1125(e) of the Code, and notwithstanding any other provision of the Plan, no

holder of a Claim or Interest shall have any right of action against the Debtor, the

Reorganized Debtor, the Committee, the Post-Confirmation Assets, the Class 2 Senior

Noteholders or any of their respective managers, officers, directors, agents, attorneys,

investment bankers, financial advisors, other professionals, or any of their respective

property and assets for any act or omission in connection with, relating to or arising out of

the pursuit of confirmation of the Plan, the consummation of the Plan, or the

administration of the Plan or the property to be distributed under the Plan, except for acts

or omissions which constitute willful misconduct or gross negligence.

(d) RELEASES.

(i) CLASS 2 SENIOR NOTEHOLDER RELEASES. ON THE EFFECTIVE

DATE, THE DEBTOR, THE REORGANIZED DEBTOR, THE DEBTOR’S

ESTATE, THE CREDITORS COMMITTEE, ALL CREDITORS, HOLDERS OF

INTERESTS AND THE SUCCESSORS OF EACH OF THE FOREGOING,

INCLUDING, WITHOUT LIMITATION, THE LIQUIDATING TRUST

(COLLECTIVELY, THE “RELEASOR PARTIES”) SHALL BE DEEMED TO

HAVE RELEASED AND DISCHARGED TO THE FULLEST EXTENT

POSSIBLE THE CLASS 2 SENIOR NOTEHOLDERS AND ALL OF THE CLASS

2 SENIOR NOTEHOLDERS’ PRESENT AND FORMER OFFICERS,

DIRECTORS, AGENTS, ATTORNEYS, INVESTMENT BANKERS, FINANCIAL


48

ADVISORS, AND PROFESSIONALS EMPLOYED BY OR ASSOCIATED WITH

THE CLASS 2 SENIOR NOTEHOLDERS (THE “RELEASED PARTIES”), OF

AND FROM ANY AND ALL CLAIMS OR CAUSE OF ACTIONS, WHETHER

KNOWN OR UNKNOWN, ASSERTED OR NOT ASSERTED, SCHEDULED OR

NOT SCHEDULED AND WHETHER ARISING UNDER THE BANKRUPTCY

CODE OR OTHER APPLICABLE STATE OR FEDERAL LAW, ARISING

FROM OR RELATED TO ACTS OR OMISSIONS (EXCEPT FOR WILLFUL

MISCONDUCT OR INTENTIONAL FRAUD) OCCURRING ON OR BEFORE

THE EFFECTIVE DATE OF THE PLAN AND THE RELEASOR PARTIES

COVENANT NOT TO SUE ANY OF THE RELEASED PARTIES WITH

RESPECT TO THE CLAIMS RELEASED PURSUANT TO THE PLAN.

(ii) QUALIFYING OFFICER AND DIRECTOR CONDITIONAL RELEASES.

AS OF THE EARLIER OF (I) MARCH 31, 2015, SOLELY WITH RESPECT TO

THOSE FORMER OR CURRENT OFFICERS OR DIRECTORS OF THE

DEBTOR AGAINST WHOM NO CIVIL SUIT HAS BEEN BROUGHT AS OF

SUCH TIME IN ACCORDANCE WITH THE BOARD STIPULATION OR (II)

THE CONCLUSION OF THE INVESTIGATION CONTEMPLATED BY THE

BOARD STIPULATION (THE “INVESTIGATION CONCLUSION DATE”) IF

AND ONLY IF A DETERMINATION HAS BEEN MADE THAT NO

POTENTIAL CLAIMS EXIST AGAINST THE OFFICERS AND DIRECTORS,

THE RELEASOR PARTIES, THE DEBTOR’S ESTATE, THE CREDITORS

COMMITTEE, ALL CREDITORS, AND THE SUCCESSORS OF EACH OF

THE FOREGOING, INCLUDING, WITHOUT LIMITATION, THE

LIQUIDATING TRUST, THE LIQUIDATING TRUSTEE, AND THE

REORGANIZED DEBTOR, SHALL BE DEEMED TO HAVE RELEASED AND


49

DISCHARGED TO THE FULLEST EXTENT POSSIBLE SUCH OFFICERS

AND DIRECTORS (THE “QUALIFYING OFFICERS AND DIRECTORS”)

AND ALL OF THE QUALIFYING OFFICERS AND DIRECTORS’

RESPECTIVE AGENTS, ATTORNEYS, INVESTMENT BANKERS,

FINANCIAL ADVISORS, AND PROFESSIONALS EMPLOYED BY OR

ASSOCIATED WITH THE QUALIFYING OFFICERS AND DIRECTORS

(THE “D & O RELEASED PARTIES”) OF AND FROM ANY AND ALL

CLAIMS OR CAUSE OF ACTIONS ARISING AGAINST OR ON ACCOUNT

OF SUCH QUALIFYING OFFICER AND DIRECTOR, WHETHER KNOWN

OR UNKNOWN, ASSERTED OR NOT ASSERTED, SCHEDULED OR NOT

SCHEDULED AND WHETHER ARISING UNDER THE BANKRUPTCY

CODE OR OTHER APPLICABLE STATE OR FEDERAL LAW, ARISING

FROM OR RELATED TO ACTS OR OMISSIONS (EXCEPT FOR WILLFUL

MISCONDUCT OR INTENTIONAL FRAUD) OCCURRING ON OR BEFORE

THE EFFECTIVE DATE OF THE PLAN. AS OF THE EARLIER OF (I)

MARCH 31, 2015, SOLELY WITH RESPECT TO THOSE FORMER OR

CURRENT OFFICERS OR DIRECTORS OF THE DEBTOR AGAINST

WHOM NO CIVIL SUIT HAS BEEN BROUGHT AS OF SUCH TIME IN

ACCORDANCE WITH THE BOARD STIPULATION OR (II) THE

INVESTIGATION CONCLUSION DATE IF AND ONLY IF A

DETERMINATION HAS BEEN MADE THAT NO POTENTIAL CLAIMS

EXIST AGAINST THE OFFICERS AND DIRECTORS, THE RELEASOR

PARTIES, THE DEBTOR’S ESTATE, THE CREDITORS COMMITTEE, ALL

CREDITORS, AND THE SUCCESSORS OF EACH OF THE FOREGOING,

INCLUDING, WITHOUT LIMITATION, THE LIQUIDATING TRUST, THE


50

LIQUIDATING TRUSTEE, AND THE REORGANIZED DEBTOR,

COVENANT NOT TO SUE ANY OF THE D&O RELEASED PARTIES WITH

RESPECT TO THE CLAIMS RELEASED HEREIN.

6.15. Notwithstanding any language to the contrary contained in the Disclosure

Statement, Plan, and/or Confirmation Order, no provision shall release any non-debtor, including

any current and/or former officer and/or director of the Debtor and/or Plan Proponent, and any

non-debtor, from liability in connection with any legal action or claim brought by the United

States SEC.

Legal Binding Effect. The provisions of the Plan shall bind all holders of Claims and

Interests and their respective successors and assigns, whether or not they accept the Plan.

6.16. Insurance. Confirmation and consummation of the Plan shall have no effect on

insurance policies of the Debtor in which the Debtor is or was an insured party. Each insurance

company is prohibited from, and the Confirmation Order shall include an injunction against,

denying, refusing, altering or delaying coverage on any basis regarding or related to the Debtor’s

Bankruptcy Cases, the Plan or any provision within the Plan, including the treatment or means of

liquidation set out within the Plan for insured Claims.

6.17. Retention of Jurisdiction. The Plan provides that, pursuant to Bankruptcy Code

§§ 105(a) and 1142, and notwithstanding entry of the Confirmation Order and occurrence of the

Effective Date, the Bankruptcy Court shall retain exclusive jurisdiction over all matters arising

out of, and related to, the Case and the Plan to the fullest extent permitted by law, including,

among other things, jurisdiction to:

(a) allow, disallow, determine, liquidate, classify, estimate or establish the priority or

secured or unsecured status of any Claim, including the resolution of any application or request

for payment of any Administrative Claim, and the resolution of any objections to the allowance

or priority of Claims;


51

(b) hear and determine any and all adversary proceedings, motions, applications, and

contested or litigated matters, including, but not limited to, all Causes of Action, and consider

and act upon the compromise and settlement of any Claim, or Cause of Action;

(c) enter such orders as may be necessary or appropriate to execute, implement, or

consummate the provisions of the Plan and all contracts, instruments, releases, and other

agreements or documents created in connection therewith;

(d) hear and determine disputes arising in connection with the interpretation,

implementation, consummation, or enforcement of the Plan;

(e) consider any modifications of the Plan, cure any defect or omission, or reconcile any

inconsistency in any order of the Bankruptcy Court, including, without limitation, the

Confirmation Order;

(f) issue injunctions, enter and implement other orders, or take such other actions as may

be necessary or appropriate to restrain interference by any Person with the implementation,

consummation, or enforcement of the Plan or the Confirmation Order;

(g) hear and determine any matters arising in connection with or relating to the Plan, the

Disclosure Statement, and the Confirmation Order;

(h) enforce all orders, judgments, injunctions, releases, exculpations, indemnifications

and rulings entered in connection with the Case;

(i) hear and determine matters concerning state, local, and federal taxes in accordance

with Bankruptcy Code §§ 346, 505 and 1146;

(j) hear and determine all matters related to the Post-Confirmation Assets, the Debtor,

and the Reorganized Debtor from and after the Effective Date;

(k) hear and determine such other matters as may be provided in the Confirmation Order

and as may be authorized under the provisions of the Bankruptcy Code; and

(l) enter a final decree closing the Case.


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6.18. Miscellaneous Provisions of the Plan.

(a) Revocation, Withdrawal or Non-Consummation. The Debtor, upon five (5) Business

Days notice to the other, reserves the right to withdraw as a Plan Proponent prior to the

Confirmation Hearing Date. If the Plan is withdrawn or if Confirmation or Effective Date does

not occur, then (a) the Plan shall be null and void in all respects, (b) settlements or compromises

embodied in the Plan, assumptions or rejections of executory contracts or unexpired leases

affected by the Plan, and any documents or agreements executed pursuant to the Plan, shall be

deemed null and void, and (c) nothing contained in the Plan or the Disclosure Statement shall (i)

constitute a waiver or release of any Claims by or against, or any Interests in, the Debtor or any

other Person, (ii) prejudice in any manner the rights of the Debtor or any other Person, or (iii)

constitute an admission of any sort by the Debtor or any other Person.

(b) Severability of Plan Provisions. If, prior to Confirmation, any term or provision of

the Plan is held by the Bankruptcy Court to be invalid, void or unenforceable, the Bankruptcy

Court, at the request of the Plan Proponent, shall have the power to alter and interpret such term

or provision to make it valid or enforceable to the maximum extent practicable, consistent with

the original purpose of the term or provision held to be invalid, void or unenforceable, and such

term or provision shall then be applicable as altered or interpreted. Notwithstanding any such

holding, alteration or interpretation, the remainder of the terms and provisions of the Plan shall

remain in full force and effect and shall in no way be affected, impaired or invalidated by such

holding, alteration or interpretation. The Confirmation Order shall constitute a judicial

determination and shall provide that each term and provision of the Plan, as it may be altered or

interpreted in accordance with the foregoing, is valid and enforceable pursuant to its terms.

(c) Exemption from Transfer Taxes. In accordance with Bankruptcy Code § 1146(a), the

Bankruptcy Court will be requested to make findings, in the Confirmation Order, that the

issuance, transfer or exchange of security under the Plan or the making or delivery of an


53

instrument of transfer, shall not be taxed under any law imposing stamp or similar tax, provided

such transfer occurs after the Effective Date. Consistent with the foregoing, each recorder of

deeds or similar official for any county, city or governmental unit in which any instrument

hereunder is to be recorded shall, pursuant to the Confirmation Order, be ordered and directed to

accept such instrument, without requiring the payment of any stamp or similar tax.

(d) Interest Accrual. No postpetition interest shall accrue on any Claim or scheduled

liability (including, but not limited to, Allowed Administrative Claims).

(e) Allocation of Plan Distributions between Principal and Interest. To the extent that

any Allowed Claim entitled to a distribution under the Plan is comprised of indebtedness and

accrued but unpaid interest thereon, such distribution shall, for federal income tax purposes, be

allocated to the principal amount of the Claim first, and then, to the extent the consideration

exceeds the principal amount of the Claim, to accrued but unpaid interest.

(f) Rules of Interpretation; Computation of Time. For purposes of the Plan, (a) any

reference in the Plan to a contract, instrument, release, indenture, or other agreement or

document as being in a particular form or containing particular terms and conditions means that

such document shall be substantially in such form or substantially on such terms and conditions,

(b) any reference in the Plan to an existing document or exhibit filed or to be filed means such

document or exhibit as it may have been or may be amended, modified, or supplemented, (c)

unless otherwise specified, all references in the Plan to Sections, Articles, and Exhibits, if any,

are references to Sections, Articles, and Exhibits of or to the Plan, (d) the words “herein” and

“hereto” refer to the Plan in its entirety rather than to a particular portion of the Plan, (e) captions

and headings to Articles and Sections are inserted for convenience of reference only and are not

intended to be a part of or to affect the interpretation of the Plan, and (f) the rules of construction

set forth in Bankruptcy Code § 102 and in the Bankruptcy Rules shall apply. In computing any


54

period of time prescribed or allowed by the Plan, unless otherwise specifically designated herein,

the provisions of Bankruptcy Rule 9006(a) shall apply.

(g) Successors and Assigns. The rights, benefits and obligations of any Person named or

referred to in the Plan shall be binding on, and shall inure to the benefit of, any heir, executor,

administrator, successor or assign of such Person.

(h) Governing Law. Unless a rule of law or procedure is supplied by federal law,

including the Bankruptcy Code and Bankruptcy Rules, (a) the construction and implementation

of the Plan and any agreements, documents, and instruments executed in connection with the

Plan, and (b) governance matters shall be governed by the laws of the State of Delaware, without

giving effect to the principles of conflict of law thereof.

(i) Entire Agreement. The Plan and the Plan Documents set forth the entire agreement

and understanding among the parties in interest relating to the subject matter hereof and

supersede all prior discussions and documents.

(j) Modification of the Plan. The Debtor, upon the consent of the Senior Noteholders and

the Board, may alter, amend, or modify the Plan or any Plan Documents under Bankruptcy Code

§ 1127(a) at any time prior to the Confirmation Date. After the Confirmation Date and prior to

Effective Date of the Plan, the Debtor may, under Bankruptcy Code § 1127(b), institute

proceedings in the Bankruptcy Court to remedy any defect or omission or reconcile any

inconsistencies in the Plan, the Disclosure Statement, or the Confirmation Order, and such

matters as may be necessary to carry out the purposes and effects of the Plan so long as such

proceedings do not materially or adversely affect the treatment of holders of Claims or Interests

under the Plan; provided, however, prior notice of such proceedings shall be served in

accordance with the Bankruptcy Rules or Order of the Bankruptcy Court.

(k) Turnover of Property of the Debtor. On the Effective Date, the Post-Confirmation

Assets shall be turned over to the Reorganized Debtor for disposition pursuant to the Plan.


55

ARTICLE VII

CAUSES OF ACTION, AVOIDANCE ACTIONS AND COMMITTEE CAUSES OF ACTION

The Debtor has not heretofore performed an analysis or review of the potential

Avoidance Actions belonging to the Debtor’s estate. The Debtor can therefore make no

representation as to the likelihood or amounts of any recoveries form Avoidance Actions at this

time. Avoidance Actions may include, but are not limited to, any cause of action arising from

transactions identified in the Debtor’s Statement of Financial Affairs (ECF Document No. 11).

Pursuant to the Plan, as of and subject to the occurrence of the Effective Date, the

Reorganized Debtor, for and on its behalf and on behalf of its estate, will prosecute the Causes of

Action, including the Avoidance Actions. Any proceeds from recovery of Causes of Action, after

the payment of all reasonable attorneys fees and costs incurred in connection with such

recovery(s), shall be vested in the Reorganized Debtor.

As of and subject to the occurrence of the Effective Date, the Liquidating Trustee will

prosecute the Committee Causes of Action. Any proceeds from recovery of Committee Causes

of Action, after the payment of all reasonable attorneys’ fees and costs incurred in connection

with such recovery(s), shall be vested in the Liquidating Trust.

Any professional fees and expenses in connection with the prosecution of any of the

Avoidance Actions shall be paid solely from the Liquidating Trust, and neither the Debtor nor

the Reorganized Debtor nor their respective estates shall not be responsible for any such fees and

expenses.


56

ARTICLE VIII RISK FACTORS

Holders of Claims against the Debtor who are entitled to vote to accept or reject the Plan

should carefully consider the risk factors set forth below prior to voting to accept or reject the

Plan.

8.1. Bankruptcy Considerations.

(a) Failure to Receive Requisite Accepting Votes.

In order for the Plan to be accepted, of those Holders of Claims who cast ballots, the

affirmative vote of at least two-thirds (2/3) in dollar amount and more than one-half (1/2) in

number of Allowed Claims in each voting class is required. If the requisite votes are not

received to accept the Plan, and if the Plan is not confirmed by the Bankruptcy Court pursuant to

the so-called “cram down” provision of section 1129(b) of the Bankruptcy Code, the Debtor may

seek to liquidate the Debtor in accordance with chapter 7 of the Bankruptcy Code. There can be

no assurance that the terms of a liquidation under chapter 7 of the Bankruptcy Code would be

similar to or as favorable to Holders of Claims and Interests as those proposed in the Plan. The

Debtor believes that the financial results would not be as favorable to such Holders in a

proceeding under chapter 7 of the Bankruptcy Code. Specifically, the Debtor submits that the

Distribution to Holders of Claims in Classes 1, 2, and 3 would be de minimis in a chapter 7

proceeding than under the Plan.

(b) Acceptance of the Plan Required by Class 3 Unsecured Creditors In Order for Class

4 Interests to Receive Any Distribution Under the Plan.

The creditors in Class 3 consist of holders of General Unsecured Claims, whose Claims

total approximately $11,500,000] These Creditors shall receive a 6% Pro Rata distribution of

Reorganized Debtor Common Stock plus the allocable interests in the Liquidation Trust in full

and complete satisfaction of their Class 3 Claims. This Class is impaired under the Plan within


57

the meaning of 11 U.S.C. §1124, because members of this Class are receiving in settlement of

their Allowed Claims, a sum less than they, and each of them, would have been entitled to

receive pursuant to their legal, equitable contractual rights as a holder of such Claim, absent the

filing of the Chapter 11 Case and Plan.

With certain exceptions, one of the requirements for confirmation is that a plan not

provide any payments to a junior class unless all superior classes are paid in full. Since Class 3

Unsecured Creditors are superior to Class 4 Equity Interest Holders, Equity Interest Holders may

not retain their Interests unless one of three situations occur:

1. The Plan provides for full payment to general Unsecured Creditors; 2. The Unsecured Creditors waive their rights by consenting to the Plan as proposed;

or 3. If the Unsecured Creditors vote as a class to accept a plan which provides for less

than full payment to them while permitting stockholders to retain their interest, their acceptance constitutes the waiver referred to in item 2 above.

The Plan proposes to pay the Class 3 Unsecured Creditors less than full payment.

Therefore, in order for the Plan to be confirmed, more than one-half in number and two thirds in

dollar amount of Class 3 Unsecured Creditors actually voting must vote in favor of the Plan. If

the requisite number of votes is not received, the Plan is deemed rejected.

Class 3 Unsecured Creditors may elect not to waive these rights by rejecting the Plan.

This may result in the filing of an amended plan by the proponent which may treat Unsecured

Creditors differently or may result in a liquidation of the Debtor. Unsecured Creditors may also

be able to offer their own plan. New plans are subject to a new vote. Since these options may

result in liquidation of the Debtor, creditors should carefully review this Disclosure Statement in

order to determine what action may be in their interest.

The Debtor submits that the Plan provides for the best possible recovery the Class 3

Unsecured Creditors, and if the Plan as proposed is rejected, the recovery to Class 3

Unsecured Creditors under an alternative plan or liquidation will likely result in little or no


58

distribution to the Class 3 Unsecured Creditors. THE DEBTOR THEREFORE

STRONGLY RECOMMEND THAT THE CLASS 3 UNSECURED CREDITORS

ACCEPT THE PLAN.

(c) Risk of Non-Confirmation of the Plan.

Although the Debtor believes that the Plan satisfies all legal requirements necessary for

confirmation by the Bankruptcy Court, there can be no assurance that the Bankruptcy Court will

confirm the Plan. There can also be no assurance that modifications of the Plan will not be

required for confirmation or that such modifications would not necessitate re-solicitation of votes

to accept or reject the Plan.

(d) Risk of Additional or Larger Claims.

The Disclosure Statement and its attached exhibits necessarily include estimates,

including estimates of future events. These estimates, made by the Debtor, include, but are not

limited to estimates as to the total amount of Claims that will be asserted against the Debtor, and

the outcome of Disputed Claims. The Debtor believes that the estimates presented are

reasonable and appropriate under the circumstances. Nevertheless, there is a risk that unforeseen

future events may cause one or more of these estimates to be materially inaccurate. Among the

potential risks is the risk that additional prepetition or Administrative Expense Claims may be

asserted, that Disputed Claims may be resolved at higher amounts than expected or that the

resolution of such Claims may require the expenditure of unanticipated professional fees. If one

or more of these estimates proves to be inaccurate, the amount of funds available for Distribution

pursuant to the Plan may be reduced.

8.2.Risk Factors Associated with the Acquisition of Momspot.

The Plan is predicated on the acquisition by the Reorganized Debtor of a fifty-one

percent (51%) equity interest in Momspot Because Momspot is a recently formed start-up

company and therefore has no operating history, there is no assurance that it can generate


59

revenues or sell any of its products in the marketplace. Further, even if revenues are generated,

there is no guarantee that the company can earn a profit.

Momspot’s business is expected to have two principal components: (1) an online retail

capability that resells products marketed to the “Mom Market” as well as a social networking

capability with personal organization and management tools geared specifically to Moms; and

(2) the establishment of retail stores that provide a “third-space” for Moms. The success of the

Reorganized Debtor will depend on the success of Momspot’s entrance into this market and

continued viability thereafter. However, there can be no assurance that Momspot will be able to

attain the projected revenues and profit margins from this new endeavor.

ARTICLE IX FEASIBILITY OF THE PLAN

As a condition to confirmation, Bankruptcy Code § 1129(a)(11) requires that the

proponents of a plan show that confirmation is not likely to be followed by the liquidation of the

debtor or the need for further financial reorganization, unless such liquidation or reorganization

is a component of the Plan. In that the Plan contemplates a retention of all assets and a mere

redistribution of equity interests in the Reorganized Debtor to the Debtor’s pre-petition Creditors

and Interest holders, the Plan is clearly feasible and the requirements of Bankruptcy Code §

1129(a)(11) are largely inapplicable in the Debtor’s Bankruptcy Case. The Secured Claims of the

Class 2 Senior Noteholders are impaired and they understand that the possibility of and value of

the distribution of Reorganized Debtor Common Stock is speculative.

The Reorganized Debtor is expected to have approximately $1 million in Cash at

confirmation to cover post-reorganization expenses. Moreover, based on the five-year financial

projection for Momspot, which is detailed in the Executive Summary attached hereto as Exhibit

D, Momspot is forecasted to begin generating modest revenues through online advertising sales


60

by April 2013. Debtor anticipates these revenues to increase significantly as the number of

incremental unique users to the website increases and as additional revenue-generating services,

such as sponsored promotions and premium app sales, come online. If needed, in the ordinary

course of business, the Reorganized Debtor may seek lines of credit or similar funding from third

parties to finance the working capital needs of Momspot and the corporate overhead expenses of

the Reorganized Debtor in such increments and at such times as may be requested by the

Reorganized Debtor’s management. Accordingly, Debtor is expected to have the necessary cash

flow to finance its business operations and in turn, to fund post-reorganization operations of the

Debtor.

Accordingly, the Debtor believes that the Plan satisfies the feasibility requirement of

Section 1129(a)(11) of the Bankruptcy Code.

ARTICLE IX BEST INTERESTS TEST

Notwithstanding acceptance of a Chapter 11 plan by the required impaired Class, to

confirm the Plan, the Bankruptcy Court must determine that the Plan is in the best interests of

each Holder of an impaired Claim that has not voted to accept the Plan. Accordingly, if an

impaired Class does not unanimously accept the Plan, the best interests test of Bankruptcy Code

§ 1129(a)(7) requires that the Bankruptcy Court find that the Plan provides to each Holder of

such Claim or Interest a recovery on account thereof that has a value at least equal to the amount

that such holder would receive if the debtor were liquidated under Chapter 7 of the Bankruptcy

Code.

To estimate the recovery of an impaired holder of a claim or interest under a Chapter 7

liquidation, the Bankruptcy Court first determines the aggregate dollar amount that would be

available if the Chapter 11 case were converted to a Chapter 7 case and the assets of the debtor


61

liquidated by a Chapter 7 trustee. The liquidation value would consist of the net proceeds of the

disposition of the debtor’s assets and cash held by the debtor, reduced by the additional increased

costs of liquidation and the administrative claims that would arise in a Chapter 7 liquidation case

but that do not arise in a Chapter 11 case.

The additional costs and expenses of liquidation under Chapter 7 of the Bankruptcy Code

would include the compensation of a Chapter 7 trustee and compensation for services rendered

and reimbursement of disbursements incurred on behalf of such trustee’s counsel and other

professionals, disposition expenses, litigation costs, and claims arising during the pendency of

the Chapter 7 liquidation case. The liquidation itself may trigger certain priority claims, which

must be paid out of liquidation proceeds before the balance is made available to pay other

claims.

The Liquidation Analysis attached as Exhibit C, which values the forced liquidation of

the Debtor’s assets, estimates that each Holder of a Class 3 Unsecured Claim would receive

approximately 0% recovery on its Allowed Claim and each Holder of an Interest in Class 4

would also receive 0% on account of its Allowed Claim. As evidenced by this analysis, in the

Plan is not confirmed and the Debtor would need to liquidate pursuant to Chapter 7, there would

not be available funds to administer an orderly liquidation and compensate a Chapter 7 trustee.

In contrast, pursuant to the Plan, Class 3 and Class 4 will each receive a distribution of equity

Interests in the Reorganized Debtor, albeit in a currently unknown value. To the extent the Plan

is confirmed by the Bankruptcy Court, the Class 2 Senior Noteholders have agreed to forego a

cash distribution on its Secured Claims and will receive instead 100% of a newly authorized and

issued series of Reorganized Debtor Convertible Preferred Stock, which will be convertible into

92% of the Reorganized Debtor Common Stock Creditor Distribution. Under a Chapter 7

liquidation, the Class 2 Claims are entitled to a Cash distribution, however, under a liquidation


62

there would be no funds for other estate constituencies. Accordingly, the Debtor believes that

the Plan satisfies the best interest requirement of Section 1129(a)(7) of the Bankruptcy Code.

ARTICLE X TAX CONSEQUENCES

10.1 Tax Consequences of Confirmation.

Circular 230 Disclaimer: To ensure compliance with requirements imposed by the

Internal Revenue Service (the “IRS”), we inform you that any U.S. federal tax advice contained

in this communication (including any attachments) is not intended or written to be used, and

cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue

Code or (ii) promoting, marketing or recommending to another party any transaction or tax-

related matter(s) addressed herein.

Confirmation may have federal income tax consequences for the Debtor and Holders of

Claims or Interests. The Debtor has not obtained and do not intend to request a ruling from the

IRS, nor has the Debtor obtained an opinion of counsel with respect to any tax matters. Any

federal income tax matters raised by Confirmation of the Plan are governed by the Internal

Revenue Code and the regulations promulgated thereunder. Creditors are urged to consult their

own counsel and tax advisors as to the consequences to them, under federal and applicable state,

local and foreign tax laws, of the Plan. The following is intended to be a summary only and not

a substitute for careful tax planning with a tax professional. The federal, state and local tax

consequences of the Plan may be complex in some circumstances and, in some cases, uncertain.

Accordingly, each Holder of a Claim is strongly urged to consult with his or her own tax advisor

regarding the federal, state and local tax consequences of the Plan.

10.2 Tax Consequences to the Debtor. The Debtor may not recognize income as a

result of the discharge of debt pursuant to the Plan because § 108 of the Internal Revenue Code

provides that taxpayers in bankruptcy proceedings do not recognize income from the discharge


63

of debt. However, a taxpayer is required to reduce its “tax attributes” by the amount of the debt

discharged. Tax attributes are reduced in the following order: (i) net operating losses; (ii)

general business credits; (iii) capital loss carryovers; (iv) basis in assets; and (v) foreign tax

credits.

10.3 U.S. Federal Income Tax Treatment of the Liquidating Trust and U.S.

Holders Of Interests in the Liquidating Trust

Classification of the Liquidating Trust

Holders of allowed Claims of Class 3 will become Liquidating Trust Beneficiaries in

connection with the implementation of the Plan. The Liquidating Trust is intended to qualify as

a “grantor trust” for U.S. federal income tax purposes. In general, a “grantor trust” is not a

separate taxable entity. Assuming each Liquidating Trust is classified as a grantor trust, for U.S.

federal income tax purposes, the assets transferred by the Debtor to the Liquidating Trust

pursuant to the Plan will be treated as being owned at all times thereafter by the Liquidating

Trust Beneficiaries. The IRS, in Revenue Procedure 94-45, set forth the general criteria for

obtaining an IRS ruling as to the grantor trust status of a liquidating trust under a chapter 11 plan.

The Liquidating Trust will be structured with the intention of complying with such general

criteria. Pursuant to the Plan, and in conformity with Revenue Procedure 94-45, all parties

(including the Debtor, the Liquidating Trustee and the Liquidating Trust Beneficiaries) are

required to treat the Liquidating Trust, for U.S. federal income tax purposes, as a grantor trust of

which the Liquidating Trust Beneficiaries are the owners and grantors. The following discussion

assumes that each Liquidating Trust will be respected as a grantor trust for U.S. federal income

tax purposes. No ruling from the IRS nor opinion of counsel has been requested concerning the

tax status of either Liquidating Trust as a grantor trust. As a result, there can be no assurance

that the IRS will treat the Liquidating Trust as grantor trusts. If the IRS were to challenge

successfully the U.S. federal income tax classification of a Liquidating Trust, the U.S. federal


64

income tax consequences to that Liquidating Trust, the Liquidating Trust Beneficiaries and the

Debtor could vary from those discussed herein (including the potential for an entity level tax on

any income of the Liquidating Trust).

General Tax Reporting by the Liquidating Trust and Holders of Interests in the

Liquidating Trust

For all U.S. federal income tax purposes, the Plan requires all parties (including the

Debtor, the Liquidating Trustee and the Liquidating Trust Beneficiaries) to treat the transfer of

assets by the Debtor to the Liquidating Trust, for U.S. federal income tax purposes, as a transfer

of assets directly to the Liquidating Trust Beneficiaries followed by the transfer of such assets by

such Liquidating Trust Beneficiaries to the appropriate Liquidating Trust. Consistent therewith,

the Plan requires all parties to treat the Liquidating Trust as grantor trusts and the creditors as

owners and grantors of the trusts. Thus, following receipt of interests in a Liquidating Trust,

Liquidating Trust Beneficiaries will be treated as the direct owners of a specified undivided

interest in the assets of such Liquidating Trust for all U.S. federal income tax purposes (which

assets will have a tax basis equal to their fair market value on the date transferred to the

applicable Liquidating Trust). The Plan requires the Liquidating Trustee to determine the fair

market value of the assets transferred to the Liquidating Trust as of the date the assets are

transferred to the Liquidating Trust and, further, requires all parties, including the Liquidating

Trust Beneficiaries, to consistently use such valuations in filing any required returns and reports

with the IRS. Accordingly, the Plan requires each Liquidating Trust Beneficiary to report on its

U.S. federal income tax return its allocable share of any income, gain, loss, deduction or credit

recognized or incurred by the Liquidating Trust, in accordance with its beneficial interest in the

trust. The character of items of income, gain, loss, deduction, and credit to any beneficiary and


65

the ability of such beneficiary to benefit from any deduction or losses will depend on the

particular situation of such beneficiary.

The U.S. federal income tax reporting obligation of a trust beneficiary is not dependent

upon the Liquidating Trust distributing any cash or other proceeds. Therefore, a beneficiary may

incur a U.S. federal income tax liability with respect to its allocable share of the income of the

Liquidating Trust whether or not such Liquidating Trust makes any concurrent distribution to the

beneficiary. In general, a distribution by a Liquidating Trust to a beneficiary of an interest in

such trust will not be taxable to such beneficiary because the beneficiary is already regarded for

U.S. federal income tax purposes as owning the underlying assets. Beneficiaries are urged to

consult their tax advisors regarding the appropriate U.S. federal income tax treatment of

distributions from the Liquidating Trust.

The Liquidating Trustee will file with the IRS returns for the Liquidating Trust as grantor

trusts pursuant to Treasury Regulation section 1.671-4(a) and will also send to each Liquidating

Trust Beneficiary, a separate statement setting forth such beneficiary’s share of items of income,

gain, loss, deduction, or credit of the trust and will instruct the beneficiary to report such items

on its U.S. federal income tax return.

10.3 Disclaimer. Holders of Claims should not rely on this Disclosure Statement with

respect to the tax consequences of the Plan. They should consult with their own tax counsel or

advisor. The discussion of tax consequences in this Disclosure Statement is not intended to be a

complete discussion or analysis.


66

ARTICLE XI SECURITIES LAW MATTERS

(Bankruptcy Code § 1145 Exemption)

RECIPIENTS OF SECURITIES ISSUED UNDER THE PLAN ARE ADVISED TO

CONSULT WITH THEIR OWN COUNSEL AS TO THE AVAILABILITY OF ANY OF THE

FOLLOWING EXEMPTIONS FROM REGISTRATION UNDER STATE SECURITIES

LAWS IN ANY GIVEN INSTANCE AND AS TO ANY APPLICABLE REQUIREMENTS OR

CONDITIONS TO THE AVAILABILITY THEREOF.

Upon the Effective Date, as applicable, the Reorganized Debtor Preferred Stock and the

Reorganized Debtor Common Stock will be distributed to the Class 2 and 3 Creditors and Class

4 Interest holders entitled to same under the Plan pursuant to the exemption provided by

Bankruptcy Code § 1145. Section 1145 of the Bankruptcy Code generally exempts from

registration the offer or sale of a debtor’s securities of those or an affiliate of, or a successor to,

the debtor under a chapter 11 plan if such securities are offered or sold in exchange for a claim

against, or interest in, or a claim for an administrative expense concerning such debtor. The

Debtor believes that the issuance of the Reorganized Debtor Preferred Stock and the

Reorganized Debtor Common Stock to the Creditors who are entitled to same under the Plan in

exchange for Claims against the Debtor will satisfy the requirements of Section 1145(a) of the

Bankruptcy Code. Therefore, under Section 1145 of the Bankruptcy Code, the issuance of the

Reorganized Debtor Preferred Stock and the Reorganized Debtor Common Stock and the

subsequent resale of such securities by entities that are not “underwriters” (as defined in Section

1145(b) of the Bankruptcy Code, a “Section 1145 Underwriter”) are not subject to the

registration requirements of Section 5 of the Securities Act of 1933, as amended (the “Securities

Act”) or equivalent state securities laws. Thus, such shares will be deemed to have been issued

in a registered public offering under the Securities Act and, therefore, the Debtor believes may


67

be resold by any holder thereof without registration under the Securities Act pursuant to the

exemption provided by section 4(1) thereof unless the holder is a Section 1145 Underwriter. In

addition, such securities generally may be resold by the recipients thereof without registration

under state securities or “blue sky” laws pursuant to various exemptions provided by the

respective laws of the several states.

Section 1145(b) of the Bankruptcy Code generally defines “underwriter” for purposes of

the Securities Act as one who (a) purchases a claim with a view to distribution of any security to

be received in exchange for the claim, (b) offers to sell securities issued under a plan for the

holders of such securities, (c) offers to buy securities issued under a plan from persons receiving

such securities, if the offer to buy is made with a view to distribution of such securities, (d) is an

issuer (in this case, the Reorganized Debtor) of the securities within the meaning of section 2(11)

of the Securities Act. The reference contained in Bankruptcy Code § 1145(b)(1)(D) to Section

2(11) of the Securities Act includes as Section 1145 Underwriters all persons who, directly or

indirectly, through one or more intermediaries, control, are controlled by or are under common

control with, an issuer or securities. “Control” (as defined in Rule 405 under the Securities Act)

means the possession, direct or indirect, of the power to direct or cause the direction of the

policies of a person, whether through ownership of voting securities, by contract, or otherwise.

Accordingly, an officer or director of the Reorganized Debtor or its successor, under a plan of

reorganization may be deemed to be a “control person,” particularly if the management position

or directorship is coupled with ownership of a significant percentage of Reorganized Debtor’s or

its successor’s voting securities. Moreover, the legislative history of Section 1145 of the

Bankruptcy Code suggests that a creditor that owns at least ten percent (10%) of the securities of

the Reorganized Debtor is a presumptive “control person” of Reorganized Debtor. To the extent

that persons deemed to be “underwriters” receive Reorganized Debtor Common Stock, resales


68

by such persons would not be exempted by Section 1145 of the Bankruptcy Code from

registration under the Securities Act or other applicable law.

CONCLUSION

Based on the information in this Disclosure Statement, the Debtor believes that

confirmation of the Plan is in the best interests of the Debtor, its bankruptcy estates and holders

of Claims against and Interests in the Debtor. Accordingly, the Debtor asks that Creditors vote

in favor of the Plan on the enclosed ballot and return the ballot as described above and on the

ballot.

RECOMMENDATION

THE DEBTOR BELIEVES THAT CONFIRMATION OF THE PLAN IS

PREFERABLE TO ANY OF THE ALTERNATIVES DESCRIBED ABOVE AND THAT

THE PLAN IS DESIGNED TO PROVIDE GREATER RECOVERIES THAN THOSE

AVAILABLE IN ANY OTHER FORM OF LIQUIDATION. ANY OTHER

ALTERNATIVE WOULD CAUSE SIGNIFICANT DELAY AND UNCERTAINTY, AS

WELL AS ADDITIONAL ADMINISTRATIVE COSTS.

THUS, THE DEBTOR RECOMMENDS THAT YOU VOTE TO “ACCEPT” THE

PLAN.

Dated: January 22, 2013

ATRINSIC, INC. Debtor and Debtor-in-Possession By: /s/ Sebastian Giordano Name: Sebastian Giordano Title: Chief Restructuring Officer


UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK x In re: Chapter 11 ATRINSIC, INC. Case No. 12-12553 (JMP)

Debtor.

x

FIRST AMENDED PLAN OF REORGANIZATION PROPOSED BY ATRINSIC, INC.

DELBELLO DONNELLAN WEINGARTEN WISE & WIEDERKEHR, LLP Jonathan S. Pasternak, Esq. Erica R. Feynman, Esq. One North Lexington Avenue White Plains, NY 10601 Tel.: (914) 681-0200 Attorneys for the Debtor


12-12553-jmp Doc 75-1 Filed 01/22/13 Entered 01/22/13 15:29:23 Exhibit First Amended Plan of Reorganization Pg 1 of 23

Atrinsic, Inc., the Debtor herein (“Atrinsic”, or the “Debtor”), hereby proposes this First Amended Chapter 11 Plan of Reorganization (“Plan”).

ARTICLE I CERTAIN DEFINITIONS

Unless otherwise provided in the Plan, all capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Bankruptcy Code. For the purposes of the Plan, the following terms (which are capitalized in the Plan) shall have the meanings set forth below.

“Acquisition” means the acquisition by Atrinsic of fifty-one percent (51%) of the outstanding capital stock of Momspot pursuant to the terms and conditions of a definitive stock purchase agreement.

“Administrative Expense Claim” means a Claim for costs and expenses of administration of the Chapter 11 case allowed under §§ 503(b), 507(b) or, if applicable, 1114(e)(2) of the Bankruptcy Code, including: (a) any actual and necessary costs and expenses incurred after the Petition Date of preserving the Debtor’s Estate and operating the businesses of the Debtor (such as wages, salaries, commissions for services and payments for inventories, leased equipment and premises) and Claims of governmental units for taxes (including Claims related to taxes which accrued after the Petition Date, but excluding Claims related to taxes which accrued on or before the Petition Date); (b) compensation for legal, financial, advisory, accounting and other services and reimbursement of expenses allowed by the Bankruptcy Court under §§ 330, 331 or 503(b) of the Bankruptcy Code to the extent incurred prior to the Effective Date; and (c) all fees and charges assessed against the Debtor’s Estate under § 1930, chapter 123 of title 287 of the United States Code.

“Allowed Claim” means a Claim (a) as to which no objection or request for estimation has been filed on or before the Claims Objection Deadline or the expiration of such other applicable period fixed by the Bankruptcy Court; or (b) as to which any objection has been settled, waived, withdrawn or denied by a Final Order; or (c) that is Allowed (i) by a Final Order; (ii) by an agreement between the Holder of such Claim and the Debtor, Reorganized Debtor or Liquidating Trustee, as applicable; or (iii) pursuant to the terms of the Plan. For purposes of computing distributions under the Plan, the term “Allowed Claim” shall not include interest on such Claim from and after the Petition Date, except as provided in Bankruptcy Code § 506(b) or as otherwise expressly set forth in the Plan.

“Assets” means all assets of the Debtor constituting property of the estate pursuant to Bankruptcy Code Section 541.

“Atrinsic” means Atrinsic, Inc.

“Avoidance Actions” shall mean any cause of action assertable under Sections 510, 542, 543, 544, 545, 547, 548, 549, 550 or 553 of the Bankruptcy Code or state law if made applicable under such Bankruptcy Code sections, including, but not limited to, any cause of action arising from transactions identified in the Debtor’s Statement of Financial Affairs (ECF Document No. 11).


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“Bankruptcy Code” or the “Code” means title 11 of the United States Code, 11 U.S.C. §§101 et seq., as now in effect or hereafter amended.

“Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of New York or any court having competent jurisdiction to enter the Confirmation Order.

“Bankruptcy Rules” means the Federal Rules of Bankruptcy Procedure, the Official Bankruptcy Forms, the Federal Rules of Civil Procedure, the Local Rules of the United States District Court for the Southern District of New York, and the Local Rules of the Bankruptcy Court, as applicable to the Cases or proceedings therein, as the case may be.

“Bankruptcy Schedules” means the schedules of assets and liabilities, lists of executory contracts and unexpired leases, statements of financial affairs, and related information filed by the applicable Debtor pursuant to Bankruptcy Rule 1007, as same may be amended or supplemented from time to time.

“Board Stipulation” means that certain Stipulation Among Debtor, Official Committee of Unsecured Creditors and Board of Directors dated January 18, 2013 that is attached to this Plan as Exhibit B.

“Business Day” means any day, excluding Saturdays, Sundays or “legal holidays” (as referenced in Bankruptcy Rule 9006(a)), on which commercial banks are open for business in New York, New York.

“Capital Consideration” has the meaning set forth in Section 6.3.

“Case” means the Chapter 11 case herein, assigned Case No 12- 12553 (JMP) in the Bankruptcy Court.

“Cash” means legal tender of the United States of America and equivalents thereof.

“Cash Collateral Claim” means the senior secured, superpriority claim of the Class 2 Senior Noteholders for post-petition cash collateral financing approved by Court order.

“Cash Collateral Order” means the Final Order of the Bankruptcy Court dated August 1, 2012 (I) Authorizing the Debtor to Utilize Cash Collateral of Prepetition Secured Lenders, (II) Granting Adequate Protection to the Prepetition Secured Lenders, and (III) Granting Related Relief. (ECF Doc. No. 30).

“Causes of Action” means all claims (including, but not limited to, as defined in § 101(5) of the Bankruptcy Code), causes of action, third-party claims, counterclaims and cross claims of any kind or nature which belong to the Debtor or the Estate against any Person based in law or equity, including, without limitation, under the Bankruptcy Code, state law or federal law, whether direct, indirect, derivative or otherwise, and whether asserted or unasserted, inclusive of Avoidance Actions; provided, however, that the term “Causes of Action” shall not include Committee Causes of Action.


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“Claim” means a claim against the Debtor as defined in Bankruptcy Code § 101(5).

“Claims Objection Deadline” shall mean that date which is 120 days after the Effective Date or as otherwise extended by the Bankruptcy Court.

“Class” means all of the Holders of Claims or Interests having characteristics substantially similar to the other Claims or Interests and which have been designated as a class in the Plan.

“Committee Causes of Action” means the potential claims and causes of action of the Debtor or its Estate against any of the Debtor’s officers and directors contemplated as “Potential Claims” by the Board Stipulation, which claims and causes of action are subject to the terms of the Board Stipulation.

“Confirmation” means the entry of the Confirmation Order on the Bankruptcy Court’s docket.

“Confirmation Date” means the date on which the clerk of the Bankruptcy Court enters the Confirmation Order on the docket of the Bankruptcy Court.

“Confirmation Hearing” means the hearing or hearings before the Bankruptcy Court at which the Bankruptcy Court will consider the Confirmation of the Plan pursuant to Bankruptcy Code § 1128.

“Confirmation Order” means the order of the Bankruptcy Court, in form and substance satisfactory to the Class 2 Senior Noteholders and the Creditors Committee, confirming the Plan pursuant to Bankruptcy Code § 1129.

“Creditor” means a Holder of a Claim.

“Creditors Committee” means the Official Committee of Unsecured Creditors appointed by the United States Trustee in the Chapter 11 Case.

“Debtor” means Atrinsic, Inc.

“Disclosure Statement” means the First Amended Disclosure Statement for the Debtor’s First Amended Plan of Reorganization dated January 22, 2013, as amended from time to time, together with any supplements, amendments, or modifications thereto.

“Disputed Claim” means any Claim as to which the Debtor, the Reorganized Debtor or the Liquidating Trustee, as applicable, has interposed a timely objection or request for estimation in accordance with the Bankruptcy Code and the Bankruptcy Rules, or any Claim otherwise disputed by the Debtor, Reorganized Debtor or Liquidating Trustee, as applicable, in accordance with applicable law, which objection has not been withdrawn or determined by a Final Order.


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“Distribution” means the distribution of cash and Reorganized Debtor Common Stock and Reorganized Debtor Convertible Preferred Stock by the Reorganized Debtor to the Holders of Allowed Claims pursuant to the Plan.

“Distribution Date” means the date on which a Distribution is made under the Plan.

“Effective Date” means the first Business Day on which all conditions precedent to the effectiveness of the Plan have been satisfied or waived as provided in Article V of the Plan; provided, however, the Effective Date may occur on such other later date agreed to by the Class 2 Prepetition Lenders.

“Estate” means the Debtor’s estate created by Bankruptcy Code § 541 upon the commencement of the Case.

“Existing Common Stock” mean shares of the Debtor’s Common Stock issued as of the Petition Date.

“Filed” means filed with the Bankruptcy Court in the Debtor’s Case.

“Final Order” means an order entered by the Bankruptcy Court or other court of competent jurisdiction on its docket as to which (a) the time to appeal, petition for certiorari, or move for reargument or rehearing has expired and as to which no appeal, petition for certiorari, or other proceedings for reargument or rehearing shall then be pending; or (b) in the event that an appeal, writ of certiorari, reargument, or rehearing thereof has been sought, such order of the Bankruptcy Court or any other court or adjudicative body shall have been affirmed by the highest court to which such order was appealed, or certiorari has been denied, or from which reargument or rehearing was sought, and the time to take any further appeal, petition for certiorari or move for reargument or rehearing shall have expired; provided, however, that no order shall fail to be a Final Order solely because of the possibility that a motion pursuant to Rule 60 of the Federal Rules of Civil Procedure or a similar rule under the Federal Rules of Bankruptcy Procedure may be filed with respect to such order.

“General Unsecured Claim” shall mean any unsecured Claim which is not an Administrative Claim, Priority Claim, Class 1 Claim, Class 2 Claim or Interest and that arose prior to the filing of the Debtor’s Chapter 11 Case and includes, without limitation, Claims based upon pre-petition trade accounts payable, the rejection of an executory contract during pendency of the Chapter 11 Cases and Unsecured Prepetition Lender Claims that are not Class 2 Secured Claims.

“Holder” means any Person holding a Claim or Interest against the Debtor’s Estate.

“Impaired” means any Claim or Interest that is “impaired” within the meaning of section 1124 of the Bankruptcy Code.

“Interest” means the legal, equitable, contractual and other rights of the Holders of any equity interest in the Debtor, including the rights of any Person to purchase or demand the issuance of any Interest, including (a) conversion, exchange, voting, participation and dividend


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rights; (b) liquidations preferences; (c) stock options, warrants and put rights; and (d) share-appreciation rights; or (e) any other stock right pertaining or in any way relating to the Debtor.

“Lien” means any charge against, or interest in, property to secure payment of a debt or performance of a Claim.

“Liquidating Trust” means the liquidating trust created on the Effective Date in accordance with the Liquidating Trust Agreement; the Liquidating Trust shall conduct no business and shall qualify as a liquidating trust pursuant to Treasury Regulation §301.7701-4(d).

“Liquidating Trustee” means the trustee of the Liquidating Trust.

“Liquidating Trust Agreement” means the trust agreement between the Debtor and the Liquidating Trustee annexed hereto as Exhibit A, which shall expressly acknowledge and incorporate by reference the Board Stipulation.

“Liquidating Trust Assets” means the assets transferred into the Liquidating Trust, being (i) the right to share in 50% of the net proceeds recovered by the Estate from Atrinsic’s investment in or claims against The Billing Resource, LLC, a Nevada limited liability company; (ii) the Committee Causes of Action and all proceeds thereof; and (iii) $50,000 in Cash.

“Liquidating Trust Beneficiaries” means the holders of allowed Class 3 Unsecured Claims.

“Liquidating Trust Interests” means the proceeds in the Liquidating Trust distributed to the Liquidating Trust Beneficiaries.

“Momspot” means Momspot, Inc., a Delaware corporation.

“Person” means any person or entity of any nature whatsoever, specifically including, but not limited to, an individual, firm, company, corporation, partnership, trust, governmental unit, joint venture, association, joint stock company, limited liability company, estate, unincorporated organization or other entity.

“Petition Date” means June 15, 2012, the date on which the Debtor filed a voluntary petition for relief under Chapter 11 of title 11 of the United States Code.

“Plan” means this Plan of Reorganization, as it may be amended, modified, or supplemented from time to time as permitted herein.

“Plan Documents” means all documents, forms, lists, and agreements contemplated under the Plan to effectuate the terms and conditions hereof.

“Plan Proponent” means the Debtor.

“Plan Supplement” means the compilation of Plan Documents and other documents, forms, lists, and schedules as specified in the Plan and Disclosure Statement which will be filed


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with the Bankruptcy Court not later than five (5) days prior to the Voting Deadline, as such documents may be altered, restated, modified, or supplemented from time to time.

“Post-Confirmation Assets” means all of the assets of the Debtor, all of which assets shall be turned over to the Reorganized Debtor on the Effective Date.

“Priority Claim” means all Claims that are entitled to priority pursuant to Bankruptcy Code § 507(a) and that are not Administrative Expense Claims or Priority Tax Claims.

“Priority Tax Claim” means a Claim of a governmental unit of the kind specified in Bankruptcy Code §§ 502(i) and 507(a)(8).

“Proof of Claim” means a written statement setting forth a Creditor’s Claim and conforming substantially to the appropriate official form.

“Pro Rata” means the proportion that the amount of an Allowed Claim bears, respectively, to the aggregate amount of all Claims in its Class, including Disputed Claims but excluding Disallowed Claims. For purposes of this calculation, the amount of a Disputed Claim will equal the lesser of (a) its Face Amount, and (b) the amount estimated as allowable by the Bankruptcy Court.

“Reorganized Debtor” means Atrinsic as it continues after the Effective Date.

“Reorganized Debtor Common Stock” means the Existing Common Stock and shares of common stock of the Reorganized Debtor authorized under the certificate of incorporation and the by-laws of the Reorganized Debtor and issued on or after the Effective Date.

“Reorganized Debtor Convertible Preferred Stock” means shares of convertible preferred stock of the Reorganized Debtor authorized under the certificate of incorporation and the by-laws of the Reorganized Debtor and issued on or after the Effective Date.

“Reorganized Debtor Stock Distribution” means the distribution of Reorganized Debtor Common Stock and Reorganized Debtor Convertible Preferred Stock, as applicable, to specified Creditors and Interest holders of the Debtor under the Plan. The Reorganized Debtor Stock Distribution, including the shares of Reorganized Debtor Common Stock issuable upon conversion of Reorganized Debtor Convertible Preferred Stock, shall be exempt from all registration requirements pursuant to Bankruptcy Code § 1145.

“Reorganized Debtor Stock” shall mean, collectively, the Reorganized Debtor Common Stock and Reorganized Debtor Convertible Preferred Stock.

“Scheduled” means included in or listed in the Debtor’s Bankruptcy Schedules, as initially filed or as amended.

“Securities Act” means the Securities Act of 1933, 15 U.S.C. § 77c-77aa, in effect from time to time.

“SEC” means the United States Securities and Exchange Commission.


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“Senior Notes” means the senior secured notes of the Debtor issued pursuant to that certain Securities Purchase Agreement dated as of May 31, 2011 between the Debtor and certain Buyers as defined therein.

“Senior Noteholders” means holders of Senior Noteholder Claims.

“Senior Noteholder Claims” means the Claims of Hudson Bay Master Fund Ltd. (“Hudson Bay”) and Iroquois Master Fund Ltd. (“Iroquois”) arising under the Senior Notes as of the Petition Date as follows: (1) Hudson Bay: $10,267,309 and (2) Iroquois: $10,153,359 inclusive of applicable Event of Default Redemption Price amount owing pursuant to Section 4(b) of the Senior Notes.

“Unsecured Senior Notes Claims” means general unsecured claims of holders of Senior Notes who did not file a UCC-1 financing statement or otherwise did not perfect their interests in accordance with applicable law.

“U.S. Trustee Fees” means fees payable pursuant to 28 U.S.C. § 1930 and 31 U.S.C. 3717.

ARTICLE II CLASSIFICATION OF CLAIMS AND INTERESTS

2.1. Class 1 consists of Priority Non-Tax Claims (Unimpaired).

2.2. Class 2 consists of all Senior Noteholder Claims (Impaired).

2.3. Class 3 consists of all General Unsecured Claims (Impaired).

2.4. Class 4 consists of Holders of Interests (Impaired).

ARTICLE III TREATMENT OF UNCLASSIFIED CLAIMS

3.1. Administrative Expense Claims. All Allowed Administrative Expense Claims shall be paid in full in Cash, or as otherwise agreed by the holder of such Allowed Administrative Expense Claim, on the Effective Date.

3.2. Bar Dates for Non-Professional Administrative Expense Claims. The Bar Date for Holders of Administrative Expense Claims other than those of professionals retained by the Debtor shall be thirty (30) days after the Plan Order becomes a Final Order.

3.3. Professional Fees. All applications for professional fees for services rendered and reimbursement of expenses in connection with the Case through the Confirmation Date that are in accordance with the Board Stipulation are Administrative Expense Claims and shall be filed with the Bankruptcy Court within sixty (60) days after the Effective Date. Any such application not filed within sixty (60) days after the Effective Date shall be deemed waived and the Holder of such Claim shall be forever barred from receiving payment on account thereof. Subject to a cap of $175,000 for the aggregate


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fees and expenses (inclusive of any retainers paid) as may be awarded to Debtor’s current counsel, DelBello Donnellan Weingarten Wise & Wiederkehr, Debtor’s prior counsel, Rattet Pasternak, LLP, and counsel of the Creditors Committee to be paid from the Debtor’s Cash and any caps provided for in the Board Stipulation, all retained professionals shall be paid the full amounts awarded by the Court, in Cash, on the later of (a) the Effective Date or (b) an Order granting final allowance and award. All such awarded fees shall be paid upon Court award by the Reorganized Debtor from the Post-Confirmation Assets. Any Post-Confirmation professional fees and expenses incurred by the Committee or the Liquidating Trustee shall be paid solely from the Liquidating Trust.

3.4. U.S. Trustee Fees. All unpaid U.S. Trustee Fees incurred before the Effective Date shall be timely paid by the Debtor in the ordinary course as such U.S. Trustee Fees become due and payable. All unpaid U.S. Trustee Fees incurred after the Effective Date shall be timely paid from Post-Confirmation Assets by the Reorganized Debtor in the ordinary course as such U.S. Trustee Fees become due and payable.

3.5. Priority Tax Claims. As soon as practicable after the Effective Date, the Reorganized Debtor shall pay to each Holder of an Allowed Priority Tax Claim from the Post-Confirmation Assets the full amount of such Claims, if any, unless such holder agrees to other treatment.

ARTICLE IV TREATMENT OF CLASSIFIED CLAIMS AND INTERESTS

4.1. Class 1 (Priority Non Tax Claims).

(i) Classification: Class 1 Priority Non Tax Claims consists of claims entitled to priority under Section 507(a)(4) of the Bankruptcy Code.

(ii) Treatment. On the Effective Date, all Allowed Class 1 Claims shall be paid in full in Cash.

(iii) Voting. Class 1 is an Unimpaired Class. Therefore, Class 1 claimholders are not entitled to vote to accept or reject the Plan

4.2. Class 2 (Senior Noteholder Claims).

(i) Classification: Class 2 Senior Noteholder Claims consists of all claims of Hudson Bay and Iroquois.

(ii) Treatment. On the Effective Date, in full and final satisfaction of their Class 2 Senior Noteholder Claims, Iroquois and Hudson Bay will each receive their Pro Rata share of 100% of a newly authorized and issued series of Reorganized Debtor Convertible Preferred Stock, which will be convertible into 92% of the Reorganized Debtor Common Stock (provided that there shall be a 9.99% beneficial ownership blocker for each of the holders of Class 2 Senior Noteholder Claims).


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On the Effective Date, Hudson Bay and Iroquois shall be deemed to have waived and released the Reorganized Debtor from paying the Cash Collateral Claim and shall be further deemed to waive rights to distribution, but not voting rights, any Class 3 Unsecured Claim based upon any potential deficiency.

(iii) Voting. Class 2 is an Impaired Class. Therefore, the Holders of the Senior Noteholder Claims are entitled to vote to accept or reject the Plan.

4.3. Class 3 (General Unsecured Claims)

(i) Classification: Class 3 consists of all General Unsecured Claims.

(ii) Treatment: The Holders of Class 3 General Unsecured Claim shall receive (i) their pro rata share of the Reorganized Debtor Common Stock issued in the Reorganized Debtor Stock Distribution, which shares shall represent 6% of the Reorganized Debtor Common Stock on the Effective Date, treating the Reorganized Debtor Convertible Preferred Stock on an as-converted basis without regard to the 9.99% beneficial ownership blocker; and (ii) the Liquidating Trust Interests in full and final satisfaction of all Class 3 Claims against the Debtor and the Debtor’s estate.

(iii) Voting: Class 3 is an Impaired Class. Therefore, the Holders of General Unsecured Claims in Class 3 are entitled to vote to accept or reject the Plan.

4.4. Class 4 (Interests).

(i) Classification: Class 4 consists of Holders of the Debtor’s Interests.

(ii) Treatment: On the Effective Date, the Holders of Class 4 Interests shall receive, subject to acceptance of the Plan by the Class 3 General Unsecured Claims, on account of their Existing Common Stock Interests in the Debtor, 2% of the Reorganized Debtor Common Stock on the Effective Date, treating the Reorganized Debtor Convertible Preferred Stock on an as-converted basis without regard to the 9.99% beneficial ownership blocker and shall be subject to dilution as a result of the Reorganized Debtor Stock Distribution to Class 2 and Class 3 Creditors under the Plan.

(iii) Voting: Class 4 is an Impaired Class. Therefore, the Holders of Interests in Class 4 are entitled to vote to accept or reject the Plan.

4.5. Reservation of Rights. Except as otherwise provided in the Plan or the Confirmation Order, the Debtor’s or Reorganized Debtor’s rights and defenses, both legal and equitable, with respect to any Claims, Interests or Administrative Expense Claims, including, but not limited to, all rights with respect to legal and equitable defenses to setoffs or recoupments, shall be unaffected and unaltered. From and after the Effective Date, the Reorganized Debtor shall be deemed to be the successor in interest to the Debtor with respect to all such rights and defenses.


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ARTICLE V CONDITIONS PRECEDENT TO THE EFFECTIVE DATE

5.1. Conditions Precedent.

Each of the following events shall occur on or before the Effective Date:

(i) The Final Confirmation Order that is in form and substance reasonably acceptable to each of holders of the Class 2 Senior Noteholder Claims and the Creditors Committee, consistent with the Board Stipulation, and includes the following findings, shall have been entered: (i) the Plan was proposed in good faith by the Debtor, (ii) the Plan satisfied the applicable provisions of the Bankruptcy Code as set forth in Bankruptcy Code § 1125(e), and (iii) the Reorganized Debtor is a successor to the Debtor only to the limited extent needed to comply with Bankruptcy Code § 1145 and for no other reason under any state or federal law.

(ii) The Bankruptcy Court shall have determined that the Reorganized Debtor is duly authorized to take the actions contemplated in the Plan which approval and authorization may be set forth in the Confirmation Order.

(iii) All documents, instruments, and agreements provided under, or necessary to implement the Plan shall have been executed and delivered by the applicable parties.

ARTICLE VI MEANS FOR IMPLEMENTATION OF THE PLAN

6.1. Waiver of Conditions Precedent to the Effective Date. The Debtor, with the written consent of the holders of the Class 2 Senior Noteholder Claims, may waive in writing any or all of the conditions precedent to the Effective Date set forth above, whereupon the Effective Date shall occur without further action by any Person.

6.2. Acquisition. Following the Effective Date, the Reorganized Debtor will continue to operate the Debtor’s business in the ordinary course. In addition, as of the Effective Date, the Reorganized Debtor shall acquire from Momspot equity securities representing 51% of the outstanding capital stock of Momspot pursuant to a definitive stock purchase agreement, which will contain customary representations, warranties and covenants. In consideration for the Acquisition, the Reorganized Debtor shall contribute from time to time as requested by Momspot, up to an aggregate of $165,000, to finance the anticipated working capital needs of Momspot during its first two years of operation.

6.3. Vesting of Assets in Reorganized Debtor for Distribution. On the Effective Date, all of the Debtor’s Assets not expressly vested in the Liquidating Trust shall be vested in the Reorganized Debtor for Distribution pursuant to the terms of the Plan. Such vesting shall be exempt from any stamp real estate transfer, mortgage reporting, sales, use or other similar tax.


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6.4. Establishment of the Liquidating Trust. On the Effective Date, the Debtor and the Liquidating Trustee will execute the Liquidating Trust Agreement, which incorporates by reference the Board Stipulation, and will take all other steps necessary to establish the Liquidating Trust for the benefit of the Liquidating Trust Beneficiaries. The Liquidating Trust will be irrevocably funded with the Liquidating Trust Assets and no other Assets on the Effective Date of the Plan for the benefit of the Liquidating Trust Beneficiaries. Such funding shall be exempt from any stamp real estate transfer, mortgage reporting, sales, use or other similar tax.

The identity of the Liquidating Trustee, and the structure and governance of the Liquidating Trust will be determined as set forth in the Liquidating Trust Agreement attached hereto as Exhibit A. In the event the Liquidating Trustee is no longer willing or able to serve as trustee, then the successor will be appointed in accordance with the Liquidating Trust Agreement, or as otherwise determined by the Bankruptcy Court, and notice of the appointment of such Liquidating Trustee will be filed with the Bankruptcy Court. The terms of the Liquidating Trust Agreement are incorporated herein by reference.

6.5. Certificate of Incorporation and By-Laws of Reorganized Debtor, Directors, Officers and Corporate Action.

(i) Certificate of Incorporation and By-Laws. On the Effective Date (or as soon as reasonably practicable thereafter), the Reorganized Debtor shall file its amended certificate of incorporation and by-laws (which shall be filed with the Bankruptcy Court as part of the Plan Supplement). The amended certificate of incorporation shall satisfy the provisions of the Plan and the Bankruptcy Code. After the Effective Date, the Reorganized Debtor may amend and restate the amended certificate of incorporation and by-laws as permitted by applicable law.

(ii) Directors of the Reorganized Debtor. On the Effective Date, the members of the Debtor’s board of directors, which shall consist of one (1) director, shall be designated in accordance with the amended certificate of incorporation and by-laws of the Reorganized Debtor.

6.6. Cancellation of Instruments and Stock. On the Effective Date, except for the Existing Common Stock, all Interests in the Debtor, any and all stock options (including, but not limited to, all stock options granted to the Debtor’s employees), any and all warrants and any instrument evidencing or creating any indebtedness or obligation of the Debtor, except such instruments that are issued under the Plan, shall be canceled and extinguished. Additionally, as of the Effective Date, all Interests in the Debtor that are not Existing Common Stock Interests, and any and all warrants, options, rights or interests with respect to equity interest in the Debtor that have been authorized to be issued but that have not been issued shall be deemed canceled and extinguished without any further action of any party.

6.7. Issuance of Reorganized Debtor Common Stock. Shares of Reorganized Debtor Common Stock and shares of Reorganized Debtor Convertible Preferred Stock


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authorized under the Reorganized Debtor’s certificate of incorporation and by-laws shall be issued in connection with the Reorganized Debtor Stock Distribution. The Reorganized Debtor Stock Distribution, including the shares of Reorganized Debtor Common Stock issuable upon conversion of Reorganized Debtor Convertible Preferred Stock, shall be exempt from registration under the Securities Act and any state or local law pursuant to Bankruptcy Code § 1145.

(i) Continuation of the Debtor and Reorganized Debtor. The Reorganized Debtor shall continue in business operations after the Effective Date. The Reorganized Debtor shall act as disbursing agent under the Plan. The Reorganized Debtor shall be responsible for: (a) paying, objecting to, settling and administering Administrative Expense Claims and Priority Claims; (b) paying, objecting to, settling and administering Class 1 and Class 2 Claims; (c) distributing stock to the holders of Allowed Class 3 Claims in accordance with the terms of the Plan and schedule of Allowed Class 3 Claims provided by the Liquidating Trustee; (d) paying U.S. Trustee Fees until the Case is closed; and (e) performing normal administrative activities and functions for the Post-Confirmation Assets.

(ii) Creation of Reserve for Expenses and Professional Fees of Debtor’s Professionals. To the extent necessary to pay the anticipated awards of fees of the professionals retained by the Debtor in its Case and to pay the post-Effective Date expenses of the Debtor, before making the Distributions, the Reorganized Debtor shall create a reserve sufficient to fund all such payments.

6.8. Settlement of Disputed Claims Prior to the Effective Date. At any time prior to the Effective Date, notwithstanding anything in the Plan to the contrary, the Debtor may settle some or all Disputed Claims subject to obtaining any necessary Bankruptcy Court approval.

6.9. Operating Reports. Prior to the Effective Date, the Debtor shall timely file all reports, including without limitation, monthly operating reports, required by the Bankruptcy Court, Bankruptcy Code, Bankruptcy Rules or Office of the United States Trustee. After the Effective Date, the Reorganized Debtor shall timely file all reports, including without limitation, quarterly operating reports, as required by the Bankruptcy Court, Bankruptcy Code, Bankruptcy Rules or Office of the United States Trustee until the Case is closed.

ARTICLE VII BAR DATES, CLAIMS OBJECTIONS AND DISTRIBUTIONS

7.1. Distributions for Claims Allowed as of the Effective Date. Except as otherwise provided herein or as ordered by the Bankruptcy Court, Distributions to Creditors shall be made as soon as practicable after the Effective Date. Distributions on account of Claims that first become Allowed Claims after the Effective Date shall be made as soon as reasonably practicable after such Claim becomes an Allowed Claim.


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7.2. Means of Cash Payment. Cash payments made pursuant to the Plan shall be in U.S. funds, by the means, including by check or wire transfer, determined by the Reorganized Debtor.

7.3. Delivery of Distribution. Distributions to holders of Allowed Claims shall be made (a) at the addresses set forth on the Proofs of Claim Filed by such holders (or at the last known addresses of such holders if no Proof of Claim is Filed or if the Debtor has been notified of a change of address); (b) at the addresses set forth in any written notices of address changes delivered to the Reorganized Debtor; or (c) if no Proof of Claim has been Filed and the Reorganized Debtor has not received a written notice of a change of address, at the addresses reflected in the Bankruptcy Schedules, if any.

7.4. Objection Deadline; Prosecution of Objections; Late Filed Claims Expunged. As soon as reasonably practicable, the Reorganized Debtor or the Liquidating Trustee, solely with respect to Class 3 Claims, shall file objections to Claims and serve such objections upon the holders of each of the Claims to which objections are made. All late filed Claims (those filed after the Bar Date) are deemed expunged absent further order of this Court allowing same. The Reorganized Debtor or the Liquidating Trustee, as applicable, shall be authorized to resolve all Disputed Claims by withdrawing or settling such objections thereto, or by litigating to judgment in the Bankruptcy Court or such other court having competent jurisdiction the validity, nature, and/or amount thereof. If the Reorganized Debtor or the Liquidating Trustee, as applicable, and the holder of a Disputed Claim agree to compromise, settle, and/or resolve a Disputed Claim by granting such holder an Allowed Claim in the amount of $10,000 or less, then the Reorganized Debtor or Liquidating Trustee, as applicable, may compromise, settle, and/or resolve such Disputed Claim without further Bankruptcy Court approval. Otherwise, the Reorganized Debtor or the Liquidating Trustee, as applicable, may only compromise, settle, and/or resolve such Disputed Claim with Bankruptcy Court approval.

7.5. No Distributions Pending Allowance. Notwithstanding any other provision of the Plan, no payments or Distribution by the Reorganized Debtor or Liquidating Trustee shall be made with respect to all or any portion of a Disputed Claim unless and until all objections to such Disputed Claim have been settled or withdrawn or have been determined by Final Order, and the Disputed Claim, or some portion thereof, has become an Allowed Claim.

7.6. Withholding and Reporting Requirements. In connection with the Plan and all Distributions hereunder, the Reorganized Debtor and the Liquidating Trustee shall, to the extent applicable, comply with all tax withholding and reporting requirements imposed by any federal, state, local, or foreign taxing authority, and all Distributions hereunder shall be subject to any such withholding and reporting requirements. The Reorganized Debtor and the Liquidating Trustee shall be authorized to take any and all actions that may be reasonably necessary or appropriate to comply with such withholding and reporting requirements.


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7.7. Setoffs. The Reorganized Debtor may, but shall not be required to, setoff against any Claim, and the payments or other Distributions to be made pursuant to the Plan in respect of such Claim, claims of any nature whatsoever that the Debtor or the Reorganized Debtor, respectively, may have against the holder of such Claim; provided, however, neither the failure to do so nor the allowance of any Claim hereunder shall constitute a waiver or release by the Reorganized Debtor of any such Claim that the Reorganized Debtor may have against such holder, unless otherwise agreed to in writing by such holder and the Reorganized Debtor, as applicable.

ARTICLE VIII EXECUTORY CONTRACTS AND UNEXPIRED LEASES DEEMED REJECTED

All of the Debtor’s executory contracts and unexpired leases shall be deemed rejected on the Effective Date except to the extent (a) the Debtor previously has assumed or rejected an executory contract or unexpired lease, or (b) prior to the Effective Date, the Debtor has Filed or does File a motion to assume an executory contract or unexpired lease on which the Bankruptcy Court has not ruled.

ARTICLE IX EFFECTS OF CONFIRMATION

The Plan provides that Confirmation shall have the following effects:

9.1. Discharge. Except as otherwise set forth in the Plan or the Confirmation Order, the rights afforded under the Plan and the treatment of Claims and Interests under the Plan are in exchange for and in complete satisfaction, discharge, and release of, all Claims and Liens including any interest accrued on any Claims from the Petition Date, and the termination of all Interests. Confirmation shall (a) discharge the Debtor and the Reorganized Debtor from all Claims or other debts that arose before the Confirmation Date, and all debts of a kind specified in Bankruptcy Code §§ 502(g), (h), or (i), whether or not (i) a Proof of Claim based on such debt is Filed or deemed Filed under Bankruptcy Code § 501; (ii) a Claim based on such debt is Allowed; or (iii) the holder of a Claim based on such debt has accepted the Plan; and (b) terminate all Interests and other rights of Interests in the Debtor. The Debtor’s discharge shall be governed by Section 1141 of the Bankruptcy Code.

9.2. Injunction. Except as otherwise expressly provided herein or in the Confirmation Order, all Persons or entities who have held, hold or may hold Claims against or Interests in the Debtor, and all other parties in interest, along with their respective present and former employees, agents, officers, directors, principals and affiliates, are permanently enjoined, from and after the Effective Date, from (a) commencing or continuing in any manner any action or other proceeding of any kin on any such Claim or Interest against the Debtor. The Reorganized Debtor or the Class 2 Prepetition Lenders, (b) the enforcement, attachment, collection or recovery by any manner or means of any judgment, award, decree or other against the Debtor, the Reorganized Debtor or the Class 2 Senior Noteholders, (c) creating, perfecting or enforcing any encumbrance of any kind against the Debtor, the Reorganized Debtor or the Class 2


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Senior Noteholders or against the property or interests in property of the Debtor, the Reorganized Debtor or the Class 2 Senior Noteholders, (d) asserting any right of setoff, subrogation or recoupment of any kind against any obligation due to the Debtor or against the property or interests in property of the Debtor Reorganized Debtor or the Class 2 Senior Noteholders with respect to such Claim or Interest or (e) pursuing any claim released pursuant to this Article IX of the Plan. Such injunction shall extend to any successors of the Debtor, the Reorganized Debtor and the Class 2 Senior Noteholders, and their respective properties and interests in properties.

9.3. Exculpation and Limitation of Liability. Pursuant to and to the extent permitted by section 1125(e) of the Code, and notwithstanding any other provision of the Plan, no holder of a Claim Interest or Lien shall have any right of action against the Debtor, the Reorganized Debtor, the Creditors Committee, the Debtor’s Assets, the Class 2 Senior Noteholders or any of their respective managers, officers, directors, agents, attorneys, investment bankers, financial advisors, other professionals (the “1125 Released Parties”), or any of their respective property and assets for any act or omission in connection with, relating to or arising out of the pursuit of confirmation of the Plan, the consummation of the Plan, or the administration of the Plan or the property to be distributed under the Plan, except for acts or omissions which constitute willful misconduct.

The 1125 Released Parties shall not have nor incur any liability to any entity for any action taken or omitted to be taken in connection with or related to the formulation, preparation, dissemination, confirmation or consummation of the Plan, the Disclosure Statement or any contract, instrument, release or other agreement or document created or entered into, or any other action taken or omitted to be taken in connection with this chapter 11 case or the Plan except with respect to (a) their obligations under the Plan and any related agreement or for (b) bad faith, willful misconduct, breach of fiduciary duty, malpractice, fraud, criminal conduct, unauthorized use of confidential information that causes damages, and/or ultra vires acts. Notwithstanding any other provision hereof, nothing in Sections 9.3 or 9.4 hereof shall effect a release of any claim by the United States Government or any of its agencies or any state and local authority whatsoever, including, without limitation, any claim arising under the Internal Revenue Code, NYS Tax Law, the environmental laws or any criminal laws of the United States or any state and local authority against the 1125 Released Parties, nor shall anything in Sections 9.3 or 9.4 hereof enjoin the United States or any state or local authority from bringing any claim, suit, action or other proceedings against the 1125 Released Parties referred to herein for any liability whatever, including, without limitation, any claim, suit or action arising under the Internal Revenue Code, the environmental laws or any criminal laws of the United States or any state and local authority, nor shall anything in this Plan exculpate any party from any liability to the United States Government or any of its agencies or any state and local authority whatsoever, including liabilities arising under the Internal Revenue Code, NYS Tax Law, the environmental laws or any criminal laws of the United States or any state and local authority against the 1125 Released Parties, or limit the liability of the Debtor’s Professionals retained


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pursuant to Rule 1.8(h)(1) of the New York Rules of Professional Conduct.

9.4. RELEASES.

(i) CLASS 2 SENIOR NOTEHOLDER RELEASES. ON THE EFFECTIVE DATE, THE DEBTOR, THE REORGANIZED DEBTOR, THE DEBTOR’S ESTATE, THE CREDITORS COMMITTEE, ALL CREDITORS, HOLDERS OF INTERESTS AND THE SUCCESSORS OF EACH OF THE FOREGOING, INCLUDING WITHOUT LIMITATION, THE LIQUIDATING TRUST (COLLECTIVELY, THE “RELEASOR PARTIES”) SHALL BE DEEMED TO HAVE RELEASED AND DISCHARGED TO THE FULLEST EXTENT POSSIBLE THE CLASS 2 SENIOR NOTEHOLDERS AND ALL OF THE CLASS 2 SENIOR NOTEHOLDERS’ PRESENT AND FORMER OFFICERS, DIRECTORS, AGENTS, ATTORNEYS, INVESTMENT BANKERS, FINANCIAL ADVISORS, AND PROFESSIONALS EMPLOYED BY OR ASSOCIATED WITH THE CLASS 2 SENIOR NOTEHOLDERS (THE “RELEASED PARTIES”), OF AND FROM ANY AND ALL CLAIMS OR CAUSE OF ACTIONS, WHETHER KNOWN OR UNKNOWN, ASSERTED OR NOT ASSERTED, SCHEDULED OR NOT SCHEDULED AND WHETHER ARISING UNDER THE BANKRUPTCY CODE OR OTHER APPLICABLE STATE OR FEDERAL LAW, ARISING FROM OR RELATED TO ACTS OR OMISSIONS (EXCEPT FOR WILLFUL MISCONDUCT OR INTENTIONAL FRAUD) OCCURRING ON OR BEFORE THE EFFECTIVE DATE OF THE PLAN AND THE RELEASOR PARTIES COVENANT NOT TO SUE ANY OF THE RELEASED PARTIES WITH RESPECT TO THE CLAIMS RELEASED HEREIN.

(ii) QUALIFYING OFFICER AND DIRECTOR CONDITIONAL RELEASES. AS OF THE EARLIER OF (I) MARCH 31, 2015, SOLELY WITH RESPECT TO THOSE FORMER OR CURRENT OFFICERS OR DIRECTORS OF THE DEBTOR AGAINST WHOM NO CIVIL SUIT HAS BEEN BROUGHT AS OF SUCH TIME IN ACCORDANCE WITH THE BOARD STIPULATION OR (II) THE CONCLUSION OF THE INVESTIGATION CONTEMPLATED BY THE BOARD STIPULATION (THE “INVESTIGATION CONCLUSION DATE”) IF AND ONLY IF A DETERMINATION HAS BEEN MADE THAT NO POTENTIAL CLAIMS EXIST AGAINST THE OFFICERS AND DIRECTORS, THE RELEASOR PARTIES, THE DEBTOR’S ESTATE, THE CREDITORS COMMITTEE, ALL CREDITORS, AND THE SUCCESSORS OF EACH OF THE FOREGOING, INCLUDING, WITHOUT LIMITATION, THE LIQUIDATING TRUST, THE LIQUIDATING TRUSTEE, AND THE REORGANIZED DEBTOR, SHALL BE DEEMED TO HAVE RELEASED AND DISCHARGED TO THE FULLEST EXTENT POSSIBLE SUCH OFFICERS AND DIRECTORS (THE “QUALIFYING OFFICERS AND DIRECTORS”) AND ALL OF THE QUALIFYING OFFICERS AND DIRECTORS’ RESPECTIVE AGENTS, ATTORNEYS, INVESTMENT BANKERS, FINANCIAL ADVISORS, AND PROFESSIONALS EMPLOYED BY OR


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ASSOCIATED WITH THE QUALIFYING OFFICERS AND DIRECTORS (THE “D & O RELEASED PARTIES”) OF AND FROM ANY AND ALL CLAIMS OR CAUSE OF ACTIONS ARISING AGAINST OR ON ACCOUNT OF SUCH QUALIFYING OFFICER AND DIRECTOR, WHETHER KNOWN OR UNKNOWN, ASSERTED OR NOT ASSERTED, SCHEDULED OR NOT SCHEDULED AND WHETHER ARISING UNDER THE BANKRUPTCY CODE OR OTHER APPLICABLE STATE OR FEDERAL LAW, ARISING FROM OR RELATED TO ACTS OR OMISSIONS (EXCEPT FOR WILLFUL MISCONDUCT OR INTENTIONAL FRAUD) OCCURRING ON OR BEFORE THE EFFECTIVE DATE OF THE PLAN. AS OF THE EARLIER OF (I) MARCH 31, 2015, SOLELY WITH RESPECT TO THOSE FORMER OR CURRENT OFFICERS OR DIRECTORS OF THE DEBTOR AGAINST WHOM NO CIVIL SUIT HAS BEEN BROUGHT AS OF SUCH TIME IN ACCORDANCE WITH THE BOARD STIPULATION OR (II) THE INVESTIGATION CONCLUSION DATE IF AND ONLY IF A DETERMINATION HAS BEEN MADE THAT NO POTENTIAL CLAIMS EXIST AGAINST THE OFFICERS AND DIRECTORS, THE RELEASOR PARTIES, THE DEBTOR’S ESTATE, THE CREDITORS COMMITTEE, ALL CREDITORS, AND THE SUCCESSORS OF EACH OF THE FOREGOING, INCLUDING, WITHOUT LIMITATION, THE LIQUIDATING TRUST, THE LIQUIDATING TRUSTEE, AND THE REORGANIZED DEBTOR, COVENANT NOT TO SUE ANY OF THE D&O RELEASED PARTIES WITH RESPECT TO THE CLAIMS RELEASED HEREIN.

Notwithstanding any language to the contrary contained in the Disclosure Statement, Plan, and/or Confirmation Order, no provision shall release any non-debtor, including any current and/or former officer and/or director of the Debtor, and any non-debtor, from liability in connection with any legal action or claim brought by the SEC.

9.5. Legal Binding Effect. The provisions of the Plan shall bind all holders of Claims and Interests and their respective successors and assigns, whether or not they accept the Plan.

9.6. Insurance. Confirmation and consummation of the Plan shall have no effect on insurance policies of the Debtor in which the Debtor is or was an insured party. Each insurance company is prohibited from, and the Confirmation Order shall include an injunction against, denying, refusing, altering or delaying coverage on any basis regarding or related to the Case, the Plan or any provision within the Plan, including any treatment or means of liquidation set out within the Plan for insured Claims.

ARTICLE X CREDITORS COMMITTEE

10.1 Upon the later of (a) the Effective Date and (b) the date on which the Committee has

made a determination under the Board Stipulation that there either are or are not Potential Claims (as defined in the Board Stipulation), the Creditors Committee shall be disbanded


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and dissolved. As set forth in the Board Stipulation, only the Committee itself, and not any successor in interest or other party, may make such determination.

10. 2 Neither the Creditors Committee, nor any of its members, designees, or professionals, or

any duly designated agent or representative of the Creditors Committee, or their respective employees, shall be liable for the act or omission of any other member, designee, agent, or representative of the Creditors Committee, nor shall any member be liable for any act or omission taken or omitted to be taken in its capacity as a member of the Creditors Committee, other than acts or omissions resulting from such member’s willful misconduct, fraud or breach of fiduciary duty. The Creditors Committee may, in connection with the performance of its functions, and in its sole and absolute discretion, consult with counsel, accountants and its agents, and shall not be liable for any act taken, omitted to be taken, or suffered to be done in accordance with advice or opinions rendered by such professionals. Notwithstanding such authority, the Creditors Committee shall be under no obligation to consult with counsel, accountants or its agents, and its determination to not do so shall not result in the imposition of liability on the Creditors Committee, or its members and/or designees, unless such determination is based on willful misconduct, fraud or breach of fiduciary duty.

ARTICLE XI CAUSES OF ACTION, AVOIDANCE ACTIONS AND

COMMITTEE CAUSES OF ACTION

As of and subject to the occurrence of the Effective Date, the Reorganized Debtor, for and on its behalf and on behalf of its estate, will prosecute the Causes of Action, including the Avoidance Actions. Avoidance Actions may include, but are not limited to, any cause of action arising from transactions identified in the Debtor’s Statement of Financial Affairs (ECF Document No. 11). Any proceeds from recovery of Causes of Action, after the payment of all reasonable attorneys’ fees and costs incurred in connection with such recovery(s), shall be vested in the Reorganized Debtor.

Subject to the terms of the Board Stipulation, as of and subject to the occurrence of the

Effective Date, the Liquidating Trustee will prosecute the Committee Causes of Action. Any proceeds from recovery of Committee Causes of Action, after the payment of all reasonable attorneys’ fees and costs incurred in connection with such recovery(s), shall be vested in the Liquidating Trust.

The Board Stipulation, including but not limited to the March 31, 2015 deadline for

commencement of any civil action(s) to pursue the Potential Claims, is incorporated in its entirety in this Plan by reference and the provisions of such Board Stipulation shall govern all relevant matters notwithstanding anything in this Plan to the contrary.

Any professional fees and expenses in connection with the prosecution of any of the

Causes of Action, including the Avoidance Actions and the Committee Causes of Action shall be paid solely from the proceeds of such recoveries, and the Reorganized Debtor and its estate shall not be responsible for any such fees and expenses.


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ARTICLE XII RETENTION OF JURISDICTION

Pursuant to Bankruptcy Code §§ 105(a) and 1142, and notwithstanding entry of the Confirmation Order and occurrence of the Effective Date, the Bankruptcy Court shall retain exclusive jurisdiction over all matters arising out of, and related to, the Cases and the Plan to the fullest extent permitted by law, including, among other things, jurisdiction to:

(i) allow, disallow, determine, liquidate, classify, estimate or establish the priority or secured or unsecured status of any Claim, including the resolution of any application or request for payment of any Administrative Claim, and the resolution of any objections to the allowance or priority of Claims;

(ii) hear and determine any and all adversary proceedings, motions, applications, and contested or litigated matters, including, but not limited to, all causes of action, and consider and act upon the compromise and settlement of any Claim, or cause of action;

(iii) enter such orders as may be necessary or appropriate to execute, implement, or consummate the provisions of the Plan and all contracts, instruments, releases, and other agreements or documents created in connection therewith;

(iv) hear and determine disputes arising in connection with the interpretation, implementation, consummation, or enforcement of the Plan;

(v) consider any modifications of the Plan, cure any defect or omission, or reconcile any inconsistency in any order of the Bankruptcy Court, including, without limitation, the Confirmation Order;

(vi) issue injunctions, enter and implement other orders, or take such other actions as may be necessary or appropriate to restrain interference by any Person with the implementation, consummation, or enforcement of the Plan or the Confirmation Order;

(vii) hear and determine any matters arising in connection with or relating to the Plan, the Disclosure Statement, and the Confirmation Order;

(viii) enforce all orders, judgments, injunctions, releases, exculpations, indemnifications and rulings entered in connection with the Case;

(ix) hear and determine matters concerning state, local, and federal taxes in accordance with Bankruptcy Code §§ 346, 505 and 1146;

(x) hear and determine all matters related to the Post-Confirmation Assets, the Debtor, and the Reorganized Debtor from and after the Effective Date;


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(xi) hear and determine such other matters as may be provided in the Confirmation Order and as may be authorized under the provisions of the Bankruptcy Code; and

(xii) enter a final decree closing the Cases.

ARTICLE XIII MISCELLANEOUS PROVISIONS.

13.1 Non-Consummation. If Confirmation or Effective Date does not occur, then (a) the Plan shall be null and void in all respects, (b) settlements or compromises embodied in the Plan, assumptions or rejections of executory contracts or unexpired leases affected by the Plan, and any documents or agreements executed pursuant to the Plan, shall be deemed null and void, and (c) nothing contained in the Plan or the Disclosure Statement shall (i) constitute a waiver or release of any Claims by or against, or any Interests in, the Debtor or any other Person, (ii) prejudice in any manner the rights of the Debtor or any other Person, or (iii) constitute an admission of any sort by the Debtor or any other Person.

13.2 Severability of Plan Provisions. If, prior to Confirmation, any term or provision of the Plan is held by the Bankruptcy Court to be invalid, void or unenforceable, the Bankruptcy Court, at the request of the Plan Proponent, shall have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision shall then be applicable as altered or interpreted. Notwithstanding any such holding, alteration or interpretation, the remainder of the terms and provisions of the Plan shall remain in full force and effect and shall in no way be affected, impaired or invalidated by such holding, alteration or interpretation. The Confirmation Order shall constitute a judicial determination and shall provide that each term and provision of the Plan, as it may be altered or interpreted in accordance with the foregoing, is valid and enforceable pursuant to its terms.

13.3 Exemption from Transfer Taxes. In accordance with Bankruptcy Code § 1146(a), the Bankruptcy Court will be requested to make findings, in the Confirmation Order, that neither (i) the issuance, transfer or exchange of security under the Plan or the making or delivery of an instrument of transfer nor (ii) the transfers of the Debtor’s assets shall be taxed under any law imposing stamp or similar tax, provided such transfer occurs after the Confirmation Date. Consistent with the foregoing, each recorder of deeds or similar official for any county, city or governmental unit in which any instrument hereunder is to be recorded shall, pursuant to the Confirmation Order, be ordered and directed to accept such instrument, without requiring the payment of any stamp or similar tax.

13.4 Interest Accrual. No postpetition interest shall accrue on any Claim or scheduled liability (including, but not limited to, Allowed Administrative Expense Claims).


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13.5 Allocation of Plan Distributions between Principal and Interest. To the extent that any Allowed Claim entitled to a distribution under the Plan is comprised of indebtedness and accrued but unpaid interest thereon, such distribution shall, for federal income tax purposes, be allocated to the principal amount of the Claim first, and then, to the extent the consideration exceeds the principal amount of the Claim, to accrued but unpaid interest.

13.6 Rules of Interpretation; Computation of Time. For purposes of the Plan, (a) any reference in the Plan to a contract, instrument, release, indenture, or other agreement or document as being in a particular form or containing particular terms and conditions means that such document shall be substantially in such form or substantially on such terms and conditions, (b) any reference in the Plan to an existing document or exhibit filed or to be filed means such document or exhibit as it may have been or may be amended, modified, or supplemented, (c) unless otherwise specified, all references in the Plan to Sections, Articles, and Exhibits, if any, are references to Sections, Articles, and Exhibits of or to the Plan, (d) the words “herein” and “hereto” refer to the Plan in its entirety rather than to a particular portion of the Plan, (e) captions and headings to Articles and Sections are inserted for convenience of reference only and are not intended to be a part of or to affect the interpretation of the Plan, and (f) the rules of construction set forth in Bankruptcy Code § 102 and in the Bankruptcy Rules shall apply. In computing any period of time prescribed or allowed by the Plan, unless otherwise specifically designated herein, the provisions of Bankruptcy Rule 9006(a) shall apply.

13.7 Successors and Assigns. The rights, benefits and obligations of any Person named or referred to in the Plan shall be binding on, and shall inure to the benefit of, any heir, executor, administrator, successor or assign of such Person.

13.8 Governing Law. Unless a rule of law or procedure is supplied by federal law, including the Bankruptcy Code and Bankruptcy Rules, (a) the construction and implementation of the Plan and any agreements, documents, and instruments executed in connection with the Plan, and (b) governance matters shall be governed by the laws of the State of Delaware, without giving effect to the principles of conflict of law thereof.

13.9 Entire Agreement. The Plan sets forth the entire agreement and understanding among the parties in interest relating to the subject matter hereof and supersedes all prior discussions and documents.

13. 10 Modification of the Plan. The Debtor may alter, amend, or modify the Plan any Plan Documents under Bankruptcy Code § 1127(a) at any time prior to the Confirmation Date, but only with the consent of the board of directors, the Creditors Committee, and the Senior Noteholders. After the Confirmation Date and prior to Effective Date of the Plan, the Plan Proponent may, under Bankruptcy Code § 1127(b), institute proceedings in the Bankruptcy Court to remedy any defect or omission or reconcile any inconsistencies in the Plan, the Disclosure Statement, or the Confirmation Order, and such matters as may be necessary to carry out the purposes and effects of the Plan so


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long as such proceedings do not materially or adversely affect the treatment of holders of Claims or Interests under the Plan; provided, however, prior notice of such proceedings shall be served in accordance with the Bankruptcy Rules or Order of the Bankruptcy Court.


ATRINSIC, INC. Debtor and Debtor-in-Possession

By: /s/ Sebastian Giordano Name: Sebastian Giordano Title: Chief Restructuring Officer


LITIGATION TRUST AGREEMENT AND DECLARATION OF TRUST

This litigation trust agreement and declaration of trust (the “Agreement”), dated as of

January __, 2013, is made by and among Atrinsic, Inc. (the “Debtor”), debtor and debtor in

possession, and Jacen Dinoff (“Trustee,” and together with the Debtor, “Parties”).

RECITALS

A. On June 15, 2012, the Debtor filed a voluntary petition for relief under chapter 11

of Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy

Court for the Southern District of New York (the “Bankruptcy Court”).

B. On July 6, 2012, the Office of the United States Trustee appointed (Docket No.

19) the Official Committee of Unsecured Creditors of the Debtor (“Committee”).

C. On January __, 2013, the Debtor filed the First Amended Plan of Reorganization

Proposed by Atrinsic, Inc. (“Plan”) (Docket No. __).

D. On ______________, 2013, the Bankruptcy Court entered an order

(“Confirmation Order”) (Docket No. __) confirming the Plan which became effective on

_____________, 2013 (“Effective Date”) (Docket No. __).

E. The Plan provides for the establishment of a trust (the “Trust”) effective on the

Effective Date of the Plan.

F. The Confirmation Order provides for the appointment of the Trustee as trustee of

the Trust, and the Plan and this Agreement provide for the appointment as necessary of any

successor Trustee of the Trust.

G. The Trust is established for the benefit of the holders of Class 3 General

Unsecured Claims (collectively, “Beneficiaries”).

12-12553-jmp Doc 75-2 Filed 01/22/13 Entered 01/22/13 15:29:23 Exhibit Plan Ex. A - Liquidating Trust Agreement Pg 1 of 38

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H. The Trust is established for the purpose of collecting, holding, administering,

distributing, and liquidating the Trust Assets (defined below) for the benefit of the Beneficiaries

in accordance with the terms and conditions of this Agreement and the Plan and with no

objective to continue or engage in the conduct of a trade or business, except to the extent

necessary to, and consistent with, the Plan and liquidating purpose of the Trust.

I. Pursuant to the Plan, the Debtor, Trust, Trustee, and Beneficiaries are required to

treat, for all federal income tax purposes, the transfer of the sum of $50,000 (the “Lender

Contribution”), 50% of any proceeds recovered from the Debtor’s investment in or claims

against The Billing Resource, LLC, a Nevada limited liability company (the “TBR Receivable

Payment”), and the potential claims and causes of action of the Debtor or its Estate against any

of the Debtor’s officers and directors contemplated as “Potential Claims” by the Board

Stipulation, which claims and causes of action are subject to the terms of the Board Stipulation

(the “Causes of Action”) (together, the “Trust Fund”) to the Trust as a transfer of the Trust Fund

by the Debtor to the Beneficiaries in satisfaction of their Allowed Claims, followed by a transfer

of the Trust Fund by the Beneficiaries to the Trust in exchange for the beneficial interest herein,

and to treat the Beneficiaries as the grantors and owners of the Trust for federal income tax

purposes.

J. Pursuant to the Plan, the Trust is intended for federal income tax purposes (i) to

be treated as a grantor trust within the meaning of sections 671-677 of the Internal Revenue Code

of 1986, as amended (“IRC”), and (ii) to qualify as a liquidating trust within the meaning of

Treasury Regulation section 301.7701-4(d).

K. In accordance with the Plan, the Trust is further intended to be exempt from the

requirements of (i) pursuant to section 1145 of the Bankruptcy Code, the Securities Exchange


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Act of 1933, as amended, and any applicable state and local laws requiring registration of

securities, and (ii) the Investment Company Act of 1940, as amended, pursuant to sections 7(a)

and 7(b) of that Act and section 1145 of the Bankruptcy Code.

NOW, THEREFOR, in accordance with the Plan and the Confirmation Order, and in

consideration of the promises, and the mutual covenants and agreements of the Parties contained

in the Plan and herein, and other good and valuable consideration, the receipt and sufficiency of

which are hereby acknowledged and affirmed, the Parties agree and declare as follows:

DECLARATION OF TRUST

The Debtor and the Trustee enter into this Agreement to effectuate the distribution (the

“Distribution”) of the Trust Assets (as defined below) to the Beneficiaries pursuant to the Plan

and the Confirmation Order;

Pursuant to Article [__] of the Plan, the Confirmation Order, and this Agreement, all

right, title, and interest in, under, and to the Trust Fund shall be absolutely and irrevocably

assigned to the Trust and to its successors in trust and its successors and assigns;

TO HAVE AND TO HOLD unto the Trustee and his successors in Trust; and

IT IS HEREBY FURTHER COVENANTED AND DECLARED, that the Trust Fund

and all other property held from time to time by the Trust under this Agreement and any

proceeds thereof and earnings thereon and (collectively, “Trust Assets”) are to be held by the

Trust and applied on behalf of the Trust by the Trustee on the terms and conditions set forth

herein, solely for the benefit of the Beneficiaries and for no other party.

ARTICLE I

RECITALS, PLAN DEFINITIONS, AND INTERPRETATION


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1.1 Recitals. The Recitals are incorporated into and made terms of this Agreement.

1.2 Use of Plan Definitions. All terms which are used in this Agreement and not

defined herein shall have the same meaning set forth in the Plan.

1.3 Interpretation; Headings. All references herein to specific provisions of the Plan

or Confirmation Order are without exclusion or limitation of other applicable provisions of the

Plan or Confirmation Order. Words denoting the singular number shall include the plural

number and vice versa, and words denoting one gender shall include the other gender. The

headings in this Agreement are for convenience of reference only and shall not limit or otherwise

affect the provisions of this Agreement.

1.4 Conflict Among Plan Documents. With respect to the powers, duties and

obligations of the Trust and the Trustee, Article [__] of the Plan governs any conflict or

inconsistency between or among the Plan, Confirmation Order, and this Agreement.

ARTICLE II

ESTABLISHMENT OF TRUST

2.1 Effectiveness of Agreement; Name of Trust. This Agreement shall become

effective on the Effective Date. The Trust shall be officially known as the “Atrinsic Creditor

Trust.”

2.2 Purpose of Trust. The Debtor and the Trustee, pursuant to the Plan and in

accordance with title 11 of the United States Code (the “Bankruptcy Code”), hereby create the

Trust for the primary purpose of collecting, holding, administering, distributing and liquidating

the Trust Assets for the benefit of the Beneficiaries in accordance with the terms and conditions

of this Agreement and the Plan, and with no objective to continue or engage in the conduct of a


5

trade or business, except to the extent reasonably necessary to, and consistent with, the

liquidating purpose of the Trust.

2.3 Transfer of Trust Assets.

2.3.1 Conveyance of Trust Fund. The Debtor hereby grants, releases, assigns,

transfers, conveys and delivers, on behalf of the Beneficiaries, the Trust Assets, including the

Trust Fund, to the Trust as of the Effective Date in trust for the benefit of the Beneficiaries to be

administered and applied as specified in this Agreement and the Plan. The Debtor shall, from

time to time, as and when reasonably requested by the Trustee, execute and deliver or cause to be

executed and delivered all such documents (in recordable form where necessary or appropriate)

and the Debtor shall take or cause to be taken such further action as the Trustee may reasonably

deem necessary or appropriate, to vest or perfect in the Trust or confirm to the Trustee title to

and possession of the Trust Assets. The Trustee shall have no duty to arrange for any of the

transfers contemplated under this Agreement or by the Plan or to ensure their compliance with

the terms of the Plan and the Confirmation Order, and shall be conclusively entitled to rely on

the legality and validity of such transfers.

2.3.2 Title to Trust Assets. Except as otherwise provided in this Agreement, the

Plan, the Board Stipulation or the Confirmation Order, all of the Debtor’s right, title and interest

in and to the Trust Assets, including all such assets held or controlled by third parties, are

automatically vested in the Trust on the Effective Date, free and clear of all liens, claims,

encumbrances and other interests, and such transfer is on behalf of the Beneficiaries to establish

the Trust. The Trust shall be authorized to obtain possession or control of, liquidate, and collect

all of the Trust Assets in the possession or control of third parties and pursue all of the Causes of

Action. On the Effective Date, the Trust shall have the power to object to and otherwise


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administer the Class 3 General Unsecured Claims. To the extent any law or regulation prohibits

the transfer of ownership of any of the Trust Assets from the Debtor to the Trust and such law is

not superseded by the Bankruptcy Code, the Trust’s interest shall be a lien upon and security

interest in such Trust Assets, in trust, nevertheless, for the sole use and purposes set forth in

section 2.2, and this Agreement shall be deemed a security agreement granting such interest

thereon without need to file financing statements or mortgages. By executing this Agreement, the

Trustee on behalf of the Trust hereby accepts all of such property as Trust Assets, to be held in

trust for the Beneficiaries, subject to the terms of this Agreement and the Plan.

2.4 Cooperation of Debtor. The Debtor shall cooperate with the Trust and Trustee as

set forth in paragraph __ of the Confirmation Order, including undertaking such cooperation with

respect to all of the assets comprising the Trust Assets and to the Trust and Trustee’s evaluation

and pursuit of objections to Class 3 General Unsecured Claims. Such cooperation shall include,

but not be limited to providing the Trust with (i) reasonably prompt access to any information the

Trust reasonably requests in connection with its pursuit of objections to General Unsecured

Claims or its prosecution of Causes of Action; and (ii) reasonable access to employees of the

Debtor with knowledge regarding the General Unsecured Claims or Causes of Action. Promptly

after the Effective Date, the Debtor shall provide the Trustee with an updated claim register and

a reasonably detailed written report of the status of any previously filed and still pending claim

objection and the status of any reconciliations of claims.

2.5 No Retention of Excess Cash. Notwithstanding anything in this Agreement to the

contrary, under no circumstances shall the Trust or Trustee retain cash or cash equivalents in

excess of a reasonable amount to meet claims, expenses, and contingent liabilities or to maintain

the value of the Trust Assets during liquidation and shall distribute all amounts not required to be


7

retained for such purposes to the Beneficiaries as promptly as reasonably practicable in

accordance with the Plan and this Agreement.

2.6 Acceptance by Trustee. The Trustee accepts his appointment as Trustee of the

Trust.

ARTICLE III

ADMINISTRATION OF TRUST

3.1 Rights, Powers and Privileges of Trustee Generally. Except as otherwise

provided in this Agreement, the Plan, the Board Stipulation or the Confirmation Order, as of the

date that the Trust Assets are transferred to the Trust, the Trustee on behalf of the Trust may

control and exercise authority over the Trust Assets, over the acquisition, management and

disposition thereof, and over the management and conduct of the affairs of the Trust. In

administering the Trust Assets, the Trustee shall endeavor not to unduly prolong the Trust’s

duration, with due regard that undue haste in the administration of the Trust Assets may fail to

maximize value for the benefit of the Beneficiaries and otherwise be imprudent and not in the

best interests of the Beneficiaries.

3.1.1 Power to Contract. In furtherance of the purpose of the Trust, and except

as otherwise specifically restricted in the Plan, Confirmation Order, or this Agreement, the

Trustee shall have the right and power on behalf of the Trust to enter into any covenants or

agreements binding the Trust, and to execute, acknowledge and deliver any and all instruments

that are necessary or deemed by the Trustee to be consistent with and advisable in furthering the

purpose of the Trust.

3.1.2 Ultimate Right to Act Based on Advice of Counsel or Other Professionals.

The Trustee shall consult with the Advisory Committee as required by Article VIII of this


8

Agreement (if applicable), provided however, that nothing in this Agreement shall be deemed to

prevent the Trustee from taking or refraining to take any action on behalf of the Trust that, based

upon the advice of counsel or other professionals, the Trustee determines it is obligated to take or

to refrain from taking in the performance of any fiduciary or similar duty that the Trustee may

owe the Beneficiaries or any other Person.

3.2 Powers of Trustee. Without limiting the generality of the above section 3.1, in

addition to the powers granted in the Plan, the Trustee shall have the power to take the following

actions on behalf of the Trust and any powers reasonably incidental thereto that the Trustee, in

his reasonable discretion, deems necessary or appropriate to fulfill the purpose of the Trust,

unless otherwise specifically limited or restricted by the Plan or this Agreement:

3.2.1 hold legal title to the Trust Assets and to any and all rights of the Debtor

and the Beneficiaries in or arising from the Trust Assets;

3.2.2 receive, manage, invest, supervise, protect, sell, assign, and where

appropriate, cause the Trust to abandon the Trust Assets;

3.2.3 open and maintain bank accounts on behalf of or in the name of the Trust;

3.2.4 cause the Trust to enter into any agreement or execute any document or

instrument required by or consistent with the Plan, the Confirmation Order or this Agreement,

and to perform all obligations thereunder;

3.2.5 subject to Article VIII of this Agreement (if applicable), collect and

liquidate all Trust Assets;


9

3.2.6 protect and enforce the rights to the Trust Assets (including any Causes of

Action) vested in the Trust and Trustee by this Agreement by any method deemed appropriate,

including, without limitation, by judicial proceedings or otherwise;

3.2.7 investigate any Trust Assets including Causes of Action and any

objections to Class 3 General Unsecured Claims, and cause the Trust to seek the examination of

any Person pursuant to Federal Rule of Bankruptcy Procedure 2004;

3.2.8 cause the Trust to employ and pay professionals and other agents and third

parties pursuant to this Agreement;

3.2.9 cause the Trust to pay all of the Trust’s lawful expenses, debts, charges,

taxes and other liabilities, and make all other payments relating to the Trust Assets;

3.2.10 subject to Article VIII of this Agreement (if applicable), cause the Trust to

pursue, commence, prosecute, compromise, settle, assign, dismiss, release, waive, withdraw,

abandon, or resolve any and all Causes of Action;

3.2.11 subject to Article VIII of this Agreement (if applicable), calculate and

make all Distributions on behalf of the Trust to the Beneficiaries provided for in, or

contemplated by, the Plan and this Agreement;

3.2.12 subject to Article VIII of this Agreement (if applicable), establish, adjust,

and maintain reserves for Disputed Claims required to be administered by the Trust;

3.2.13 cause the Trust to withhold from the amount distributable to any Person

the maximum amount needed to pay any tax or other charge that the Trustee has determined,

based upon the advice of its agents and/or professionals, may be required to be withheld from


10

such Distribution under the income tax or other laws of the United States or of any state or

political subdivision thereof;

3.2.14 in reliance solely upon the Debtor’s schedules and the official claims

register maintained in the chapter 11 Case, review, and where appropriate, cause the Trust to

allow or object to Claims and, subject to Article VIII of this Agreement (if applicable), supervise

and administer the Trust’s commencement, prosecution, settlement, compromise, withdrawal, or

resolution of all objections to the Disputed Claims required to be administered by the Trust;

3.2.15 in reliance initially upon the Debtor’s schedules and the official claims

register maintained in the Chapter 11 Case, maintain on the Trust’s books and records a register

evidencing the beneficial interest herein held by each Beneficiary;

3.2.16 cause the Trust to make all tax withholdings, file tax information returns,

file and prosecute tax refund claims, make tax elections by and on behalf of the Trust, and file

tax returns for the Trust as a grantor trust under IRC section 671 and Treasury Income Tax

Regulation section 1.671-4 pursuant to and in accordance with the Plan and Article VII hereof,

and pay taxes, if any, payable for and on behalf of the Trust; provided, however, that

notwithstanding any other provision of this Agreement, the Trustee shall have no personal

responsibility for the signing or accuracy of the Debtor’s income tax returns that are due to be

filed after the Effective Date or for any tax liability related thereto;

3.2.17 cause the Trust to sell, assign, abandon or donate to a charitable

organization any Trust Assets that the Trustee determines, after consulting with the Advisory

Committee (if applicable), to be too impractical to distribute to Beneficiaries or of

inconsequential value to the Trust and Beneficiaries;


11

3.2.18 at the Trustee’s discretion, cause the Trust to send annually to

Beneficiaries, in accordance with the tax laws, a separate statement stating a Beneficiary’s

interest in the Trust and its share of the Trust’s income, gain, loss, deduction or credit, and to

instruct all such Beneficiaries to report such items on their federal tax returns;

3.2.19 at the Trustee’s discretion, cause the Trust to seek a determination of tax

liability or refund under section 505 of the Bankruptcy Code;

3.2.20 cause the Trust to establish such reserves for taxes, assessments and other

expenses of administration of the Trust as may be necessary and appropriate for the proper

operation of matters incident to the Trust;

3.2.21 cause the Trust to purchase and carry all insurance policies that the

Trustee deems reasonably necessary or advisable and to pay all associated insurance premiums

and costs;

3.2.22 cause the Trust to invest any moneys held as Trust Assets in accordance

with the terms of section 3.7 hereof;

3.2.23 if any of the Trust Assets are situated in any state or other jurisdiction in

which the Trustee is not qualified to act as trustee, after consulting with the Advisory Committee

(if applicable), nominate and appoint a Person duly qualified to act as trustee in such state or

jurisdiction in accordance with the terms of this Agreement;

3.2.24 undertake all administrative functions of the Trust, including winding

down and termination of the Trust;


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3.2.25 exercise, implement, enforce, and discharge all of the terms, conditions,

powers, duties, and other provisions of the Plan, the Confirmation Order, and this Agreement;

and

3.2.26 take all other actions consistent with the provisions of the Plan that the

Trustee deems reasonably necessary or desirable to administer the Trust.

3.3 Exclusive Authority to Pursue Causes of Action. The Trust shall have the

exclusive right, power, and interest to pursue, settle, assign, waive, release, abandon, or dismiss

the Causes of Action. The Trust shall be the sole representative of the Estate under section

1123(b)(3) of the Bankruptcy Code with respect to the Causes of Action. Notwithstanding

anything to the contrary in this Agreement, this Agreement and the Causes of Action are subject

to the terms of the Board Stipulation, which incorporated herein by reference, and the Trust and

the Trustee, as successors in interest to the Debtor’s estate and the Committee, are bound by the

terms of the Board Stipulation.

3.4 Abandonment. If, in the Trustee’s reasonable judgment, but only after consulting

with the Advisory Committee (if applicable), any non-cash Trust Assets cannot be sold in a

commercially reasonable manner or the Trustee believes in good faith that such property has

inconsequential value to the Trust or its Beneficiaries, the Trustee shall have the right to cause

the Trust to abandon or otherwise dispose of such property, including by donation of such

property to a charity.

3.5 Responsibility for Class 3 General Unsecured Claims; Objections to Disputed

Class 3 General Unsecured Claims. As of the Effective Date, the Trust shall become responsible

for administering and paying Distributions to the holders of the Class 3 General Unsecured

Claims as the Beneficiaries of the Trust. As more fully set forth in Article [__] of the Plan and


13

subject to the terms of the Confirmation Order, the Trust shall have the exclusive right to object

to the allowance of any Class 3 General Unsecured Claim on any ground and shall be entitled to

assert all defenses of the Debtor and their Estates. The Trust shall also be entitled to assert all of

the Estate’s rights under section 558 of the Bankruptcy Code with respect to Class 3 General

Unsecured Claims. The Trust may also seek estimation of any General Unsecured Claim under

and subject to section 502(c) of the Bankruptcy Code.

3.6 Agents and Professionals. The Trustee may, but shall not be required to, consult

with and retain attorneys, financial advisors, accountants, appraisers, and other professionals the

Trustee believes have qualifications necessary to assist in the administration of the Trust,

including professionals previously retained by the Debtor and the Creditors’ Committee. For the

avoidance of doubt, and without limitation of applicable law, nothing in this Agreement shall

limit the Trustee from engaging counsel or other professionals, including the Trustee himself or

the Trustee’s firm, to do work for the Trust. Subject to the requirements of Article VIII of this

Agreement (if applicable), the Trustee may pay the reasonable salaries, fees and expenses of

such Persons out of the Trust Assets in the ordinary course of business.

3.7 Safekeeping and Investment of Trust Assets. All moneys and other assets

received by the Trustee shall, until distributed or paid over as provided herein and in the Plan, be

held in trust for the benefit of the Beneficiaries, but need not be segregated in separate accounts

from other Trust Assets, unless and to the extent required by law or the Plan. The Trustee shall

not be under any obligation to invest Trust Assets. Neither the Trust nor the Trustee shall have

any liability for interest or producing income on any moneys received by them and held for

Distribution or payment to the Beneficiaries, except as such interest shall actually be received by

the Trust or Trustee, which shall be distributed as provided in the Plan. Except as otherwise


14

provided by the Plan, the powers of the Trustee to invest any moneys held by the Trust, other

than those powers reasonably necessary to maintain the value of the assets and to further the

Trust’s liquidating purpose, shall be limited to powers to invest in demand and time deposits,

such as short-term certificates of deposit, in banks or other savings institutions, or other

temporary liquid investments, such as treasury bills; provided, however, that the scope of

permissible investments shall be limited to include only those investments that a liquidating trust,

within the meaning of Treas. Reg. § 3.01.7701-4(d), may be permitted to hold pursuant to the

Treasury Regulations, or any modification of the IRS guidelines, whether set forth in IRS

rulings, IRS pronouncements, or otherwise. For the avoidance of doubt, the provisions of section

11-2.3 of the Estates, Power, and Trusts Law of New York shall not apply to this Agreement.

Notwithstanding the foregoing, the Trustee shall not be prohibited from engaging in any trade or

business on its own account, provided that such activity does not interfere or conflict with the

Trustee’s administration of the Trust.

3.8 Maintenance and Disposition of Trust Records. The Trustee shall maintain

accurate records of the administration of Trust Assets, including receipts and disbursements and

other activity of the Trust. The books and records maintained by the Trustee may be disposed of

by the Trustee at the later of (i) such time as the Trustee determines that the continued possession

or maintenance of such books and records is no longer necessary for the benefit of the Trust or

its Beneficiaries or (ii) upon the termination of the Trust.

3.9 Reporting Requirements. Within seventy-five (75) days after the end of each

calendar year, the Trustee shall prepare and distribute to any Advisory Committee member (if

any), an unaudited written annual report showing, without limitation, (i) the assets and liabilities

of the Trust at the beginning and end of the year, (ii) the cash position of the Trust at the


15

beginning and end of the year, (iii) the reserves held by the Trust at the beginning and end of the

year, (iv) the recoveries of the Trust for that year and cumulatively, (v) the operating and

professional expenses of the Trust for that year and cumulatively, (vi) the Distributions made by

the Trust that year and cumulatively, (vii) the number of Disputed Claims still outstanding and

their total asserted face amount, and (viii) the number of still pending Causes of Action and the

total amount of their demands. In addition, the Trustee shall provide any Advisory Committee

member (if any) the information and reports they may reasonably request concerning Trust

administration.

3.10 Conflicts of Interest. Conflicts of interest of the Trustee will be addressed by the

Advisory Committee as set forth below in Article VIII (if applicable). If no Advisory Committee

is established or serving, the Trustee will appoint a disinterested Person to handle any matter

where the Trustee has identified a conflict of interest or the Bankruptcy Court, on motion of a

party in interest, determines one exists. In the event the Trustee is unwilling or unable to appoint

a disinterested Person to handle any such matter, the Bankruptcy Court, on notice and hearing,

may do so.

ARTICLE IV

DISTRIBUTIONS

4.1 Distribution and Reserve of Trust Assets. Following the transfer of Trust Assets

to the Trust, the Trustee shall make continuing efforts on behalf of the Trust to collect, liquidate,

and distribute all Trust Assets, subject to the reserves required under the Plan.

4.1.1 Annual Distributions. The Trustee shall cause the Trust to distribute the

Trust’s net Cash income and net Cash proceeds from the liquidation of the Trust Fund at least

annually to the Beneficiaries, except the Trust may retain an amount of net income and other


16

Trust Assets reasonably necessary to maintain the value of the Trust Assets and investigate

and/or prosecute Causes of Action, object to Disputed Claims or to meet expenses, claims and

contingent liabilities of the Trust and Trustee, and retention of such amount may preclude

Distributions to Beneficiaries.

4.1.2 Reserves; Pooling of Reserved Funds. Before any Distribution can be

made, the Trustee shall, in its reasonable discretion, establish, supplement, and maintain reserves

in an amount sufficient to meet any and all expenses and liabilities of the Trust, including

professionals’ fees and expenses and the fees and expenses of other professionals. In accordance

with section [__] of the Plan, the Trust shall also maintain as necessary a reserve for Disputed

Claims required to be administered by the Trust. The Trustee need not maintain the Trust’s

reserves in segregated bank accounts and may pool funds in the reserves with each other and

other funds of the Trust; provided, however, that the Trust shall treat all such reserved funds as

being held in segregated accounts in its books and records.

4.1.3 Distributions Net of Reserves and Costs. Distributions shall be made net

of reserves in accordance with the Plan and also net of the actual and reasonable costs of making

the Distributions.

4.1.4 Right to Rely on Professionals. Without limitation of the generality of

section 6.6 of this Agreement, in determining the amount of any Distribution or reserves, the

Trustee may rely and shall be fully protected in relying on the advice and opinion of the Trust’s

financial advisors, accountants, or other professionals.

4.2 Method and Timing of Distributions. Distributions to Beneficiaries will be made

from the Trust in accordance with the terms of the Plan and this Agreement. The Trust may

engage disbursing agents and other Persons to help make Distributions.


17

4.3 Withholding from Distributions. The Trustee, in its discretion, may cause the

Trust to withhold from amounts distributable from the Trust to any Beneficiary any and all

amounts as may be sufficient to pay the maximum amount of any tax or other charge that has

been or might be assessed or imposed by any law, regulation, rule, ruling, directive, or other

governmental requirement on such Beneficiary or the Trust with respect to the amount to be

distributed to such Beneficiary. The Trustee shall determine such maximum amount to be

withheld by the Trust in its reasonable discretion and shall cause the Trust to distribute to the

Beneficiary any excess amount withheld.

4.4 Tax Identification Numbers. The Trustee may require any Beneficiary to furnish

its taxpayer identification number as assigned by the Internal Revenue Service and may

condition any Distribution to any Beneficiary upon receipt of such identification number. If a

Beneficiary does not timely provide the Trustee with its taxpayer identification number in the

manner and by the deadline established by the Trustee, then the Distribution to such Beneficiary

shall become an unclaimed Distribution and shall be administered as such under sections 4.5 and

4.6 of this Agreement and section [__] of the Plan.

4.5 Unclaimed and Undeliverable Distributions. If any Distribution to a Beneficiary

is returned to the Trustee as undeliverable or is otherwise unclaimed, no further Distributions to

such Beneficiary shall be made unless and until the Beneficiary claims the Distributions by

notifying the Trustee in writing of any information necessary to make the Distribution to the

Beneficiary in accordance with this Agreement, the Plan, and applicable law, including such

Beneficiary’s then-current address or taxpayer identification number. If the Beneficiary provides

the Trustee such missing information within 120 days of the Distribution, the Distribution shall

be made to the Beneficiary as soon as is practicable, without interest. Undeliverable or


18

unclaimed Distributions shall become Unclaimed Property as of the date that the Distributions

would have been made to the Beneficiaries entitled to the Distribution.

4.5.1 No Responsibility to Attempt to Locate Beneficiaries. The Trustee may,

in his sole discretion, attempt to determine a Beneficiary’s current address or otherwise locate a

Beneficiary, but nothing in this Agreement or the Plan shall require the Trustee to do so.

4.6 Unclaimed Property. The Trustee shall maintain all Unclaimed Property in a

reserve on its books for Unclaimed Property. A Beneficiary may claim Unclaimed Property by

timely and properly providing, as may be required, its then-current address, requesting

reissuance of a check and timely cashing it, supplying its taxpayer identification number, or other

means acceptable to the Trustee, in its sole discretion. If one hundred and twenty (120) days

passes from the date a Distribution becomes Unclaimed Property without the Beneficiary entitled

to the Property claiming the Unclaimed Property in accordance with this Agreement, the

Unclaimed Property shall be deemed released from the reserve for Unclaimed Property and

thereby automatically become unrestricted Property of the Trust. Such unrestricted Property

shall be part of the Trust Assets to be administered in accordance with this Agreement and the

Plan.

4.6.1 Disallowance of Claims; Cancellation of Corresponding Beneficial

Interests. All Claims in respect of undeliverable or unclaimed Distributions that have become

unrestricted Property of the Trust, shall be deemed Disallowed and expunged, and the

corresponding beneficial interests in the Trust of the Beneficiary holding such Disallowed

Claims shall be deemed canceled. The Holder of any such Disallowed Claim shall no longer

have any right, claim, or interest in or to any Distributions in respect of such Disallowed Claims.

The Holder of any such Disallowed Claim is forever barred, estopped, and enjoined from


19

receiving any Distributions under the Trust Agreement and from asserting such Disallowed

Claim against the Trust or Trustee.

4.6.2 Inapplicability of Unclaimed Property or Escheat Laws. Unclaimed

Property that becomes unrestricted Property of the Trust shall not be subject to the unclaimed

property or escheat laws of the United States, any state, or any local governmental unit.

4.7 Voided Checks; Request for Reissuance. Distribution checks issued to

Beneficiaries shall be null and void if not negotiated within ninety (90) days after the date of

issuance thereof. Requests for reissuance of any check shall be made in writing directly to the

Trustee by the Beneficiary that was originally issued such check. All such requests shall be

made promptly and in time for the check to be reissued and cashed within one hundred and

twenty (120) days after the date of issuance of the original check. The Beneficiary shall bear all

the risk that, and shall indemnify and hold the Trust and Trustee harmless against any loss that

may arise if, the Trustee does not reissue a check promptly after receiving a request for its

reissuance and the above deadline for cashing a reissued check passes without the check being

reissued or cashed. Distributions in respect of voided checks shall become unclaimed

Distributions as of the date of issuance of the checks and shall be administered in accordance

with sections 4.5 and 4.6 of this Agreement and section [__] of the Plan.

4.8 Conflicting Claims. If any conflicting claims or demands are made or asserted

with respect to the beneficial interest of a Beneficiary under this Agreement, or if there is any

disagreement between the assignees, transferees, heirs, representatives or legatees succeeding to

all or a part of such an interest resulting in adverse claims or demands being made in connection

with such interest, then, in any of such events, the Trustee shall be entitled, in its sole discretion,

to refuse to comply with any such conflicting claims or demands.


20

4.8.1 In so refusing, the Trustee may elect to cause the Trust to make no

payment or Distribution with respect to the beneficial interest subject to the conflicting claims or

demand, or any part thereof, and to refer such conflicting claims or demands to the Bankruptcy

Court, which shall have exclusive jurisdiction over resolution of such conflicting claims or

demands. In so doing, neither the Trust nor the Trustee shall be or become liable to any of such

parties for their refusal to comply with any such conflicting claims or demands, nor shall the

Trust or Trustee be liable for interest on any funds which may be so withheld.

4.8.2 The Trustee shall be entitled to refuse to act until either (i) the rights of the

adverse claimants have been adjudicated by a final order of the Bankruptcy Court or (ii) all

differences have been resolved by a valid written agreement among all such parties to the

satisfaction of the Trustee, which agreement shall include a complete release of the Trust and

Trustee. Until the Trustee receives written notice that one of the conditions of the preceding

sentence is met, the Trustee may deem and treat as the absolute owner under this Agreement of

the beneficial interest in the Trust the Beneficiary identified as the owner of that interest in the

books and records maintained by the Trustee. The Trustee may deem and treat such Beneficiary

as the absolute owner for purposes of receiving Distributions and any payments on account

thereof for federal and state income tax purposes, and for all other purposes whatsoever.

4.8.3 In acting or refraining from acting under and in accordance with this

section 4.8 of the Agreement, the Trustee shall be fully protected and incur no liability to any

purported claimant or any other Person pursuant to Article VI of this Agreement.

4.9 Priority of Expenses of Trust. The Trust must pay all of its expenses before

making Distributions.


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ARTICLE V

BENEFICIARIES

5.1 Interest Beneficial Only. The ownership of a beneficial interest in the Trust shall

not entitle any Beneficiary or the Debtor to any title in or to the Trust Assets or to any right to

call for a partition or division of such assets or to require an accounting.

5.2 Ownership of Beneficial Interests Hereunder. Each Beneficiary shall own a

beneficial interest herein which shall, subject to Section 4.1 herein and the Plan, be entitled to a

Distribution in the amounts, and at the times, set forth in the Plan.

5.3 Evidence of Beneficial Interest. Ownership of a beneficial interest in the Trust

Assets shall not be evidenced by any certificate, security, or receipt or in any other form or

manner whatsoever, except as maintained on the books and records of the Trust by the Trustee.

5.4 No Right to Accounting. Neither the Beneficiaries nor their successors, assigns,

creditors, or any other Person shall have any right to an accounting by the Trustee, and the

Trustee shall not be obligated to provide any accounting to any Beneficiary.

5.5 No Standing. Except as expressly provided in this Agreement, a Beneficiary shall

not have standing to direct or to seek to direct the Trust or Trustee to do or not to do any act or to

institute any action or proceeding at law or in equity against any Person upon or with respect to

the Trust Assets.

5.6 Requirement of Undertaking. The Trustee may request the Bankruptcy Court to

require, in any suit for the enforcement of any right or remedy under this Agreement, or in any

suit against the Trustee for any action taken or omitted by him as Trustee, the filing by any party

litigant in such suit of an undertaking to pay the costs of such suit, including reasonable


22

attorneys’ fees, against any party litigant in such suit; provided, however, that the provisions of

this Section 5.6 shall not apply to any suit by the Trustee.

5.7 Limitation on Transferability. It is understood and agreed that the beneficial

interests herein shall be non-transferable and non-assignable during the term of this Agreement

except by operation of law or upon the consent of the Advisory Committee. An assignment by

operation of law shall not be effective until appropriate notification and proof thereof is

submitted to the Trustee, and the Trustee may continue to cause the Trust to pay all amounts to

or for the benefit of the assigning Beneficiaries until receipt of proper notification and proof of

assignment by operation of law. The Trustee may rely upon such proof without the requirement

of any further investigation.

5.8 Exemption from Registration. The rights of the Beneficiaries arising under this

Trust Agreement may be deemed “securities” under applicable law. However, such rights have

not been defined as “securities” under the Plan because (i) the parties hereto intend that such

rights shall not be securities and (ii) if the rights arising under the Trust Agreement in favor of

the Beneficiaries are deemed to be “securities,” the exemption from registration under Section

1145 of the Bankruptcy Code is intended to be applicable to such securities. No party to this

Trust Agreement shall make a contrary or different contention.

5.9 Delivery of Distributions. Subject to the terms of this Agreement, the Trustee

shall cause the Trust to make Distributions to Beneficiaries in the manner provided in the Plan.

ARTICLE VI

THIRD PARTY RIGHTS AND LIMITATION OF LIABILITY

6.1 Parties Dealing With the Trustee. In the absence of actual knowledge to the

contrary, any Person dealing with the Trust or the Trustee shall be entitled to rely on the


23

authority of the Trustee or any of the Trustee’s agents to act in connection with the Trust Assets.

There is no obligation on any Person dealing with the Trustee to inquire into the validity or

expediency or propriety of any transaction by the Trustee or any agent of the Trustee.

6.2 Limitation of Trustee’s Liability. In exercising the rights granted herein, the

Trustee shall exercise the Trustee’s best judgment, to the end that the affairs of the Trust shall be

properly managed and the interests of all of the Beneficiaries safeguarded. But, notwithstanding

anything herein to the contrary, neither the Trustee, any member of the Advisory Committee (if

applicable), nor their respective firms, companies, affiliates, partners, officers, directors,

members, employees, professionals, advisors, attorneys, financial advisors, investment bankers,

disbursing agents, or agents, and any of such person’s successors and assigns shall incur any

responsibility or liability by reason of any error of law or fact or of any matter or thing done or

suffered or omitted to be done under or in connection with this Agreement, whether sounding in

tort, contract, or otherwise, except for fraud, gross negligence, or willful misconduct of the

Person asserting this provision that is found by a final judgment (not subject to further appeal or

review) of a court of competent jurisdiction to be the direct and primary cause of loss, liability,

damage, or expense suffered by the Trust. In no event shall the Trustee be liable for indirect,

punitive, special, incidental or consequential damage or loss (including but not limited to lost

profits) whatsoever, even if the Trustee has been informed of the likelihood of such loss or

damages and regardless of the form of action. Without limiting the foregoing, the Trustee shall

be entitled to the benefits of the exculpation and limitation of liability provisions set forth in the

Plan and Confirmation Order.


24

6.3 No Liability for Acts of Predecessors. No successor Trustee shall be in any way

responsible for the acts or omissions of any Trustee in office prior to the date on which such

successor becomes the Trustee, unless a successor Trustee expressly assumes such responsibility.

6.4 No Implied Obligations. The Trustee shall not be liable except for the

performance of such duties and obligations as are specifically set forth herein, and no implied

covenants or obligations shall be read into this Agreement against the Trustee.

6.5 No Liability for Good Faith Error of Judgment. The Trustee shall not be liable for

any error of judgment made in good faith, unless it shall be finally determined by a final

judgment of a court of competent jurisdiction (not subject to further appeal or review) that the

Trustee acted in bad faith.

6.6 Reliance by Trustee on Documents or Advice of Counsel or Other Persons.

Except as otherwise provided herein, the Trustee may rely and shall be protected in acting upon

any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order

or other paper or document believed by the Trustee to be genuine and to have been signed or

presented by the proper party or parties. The Trustee also may engage and consult with legal

counsel for the Trust and other agents and advisors and shall not be liable for any action taken,

omitted, or suffered by the Trust or Trustee in reliance upon the advice of such counsel, agents,

or advisors. The Trustee shall have the right at any time to seek instructions from the

Bankruptcy Court concerning the administration or disposition of the Trust Assets.

6.7 No Personal Obligation for Trust Liabilities. Persons dealing with the Trustee

shall have recourse only to the Trust Assets to satisfy any liability incurred by the Trustee to any

such Person in carrying out the terms of this Agreement, and the Trustee shall have no personal,

individual obligation to satisfy any such liability.


25

6.8 Indemnification. The Trustee and the members of the Advisory Committee (if

applicable), and their respective firms, companies, affiliates, partners, officers, directors,

members, employees, professionals, advisors, attorneys, financial advisors, investment bankers,

disbursing agents, or agents and any of such parties’ successors and assigns (collectively, the

“Indemnified Parties” and each, an “Indemnified Party”) shall be defended, held harmless, and

indemnified by the Trust and receive reimbursement from and against any and all loss, liability,

expense (including counsel fees), or damage of any kind, type or nature, whether sounding in

tort, contract, or otherwise, that the Indemnified Parties may incur or sustain in the exercise or

performance of any of the Trustee’s or Advisory Committee’s powers and duties under this

Agreement, or in the rendering of services by the Indemnified Party to the Trust, Trustee, or

Advisory Committee to the fullest extent permitted by applicable law (the “Indemnified

Conduct”), except if such loss, liability, expense or damage is finally determined by a final

judgment (not subject to further appeal or review) of a court of competent jurisdiction to result

directly and primarily from the fraud or bad faith of the Indemnified Party asserting this

provision. The amounts necessary for such indemnification and reimbursement shall be paid by

the Trust out of the Trust Assets. The Trustee shall not be personally liable for the payment of

any Trust expense or claim or other liability of the Trust, and no Person shall look to the Trustee

or other Indemnified Parties Personally for the payment of any such expense or liability.

6.9 Confirmation of Survival of Provisions. Without limitation in any way of any

provision of this Agreement, the provisions of this Article VI shall survive the death, dissolution,

liquidation, resignation, replacement, or removal, as may be applicable, of the Trustee, or the

termination of the Trust or this Agreement, and shall inure to the benefit of the Trustee’s and the

Indemnified Parties’ heirs and assigns.


26

ARTICLE VII

TAX MATTERS

7.1 Tax Treatment of Trust. Pursuant to and in accordance with the Plan, for all

federal income tax purposes, the Debtor, the Beneficiaries, the Trustee and the Trust shall treat

the Trust as a liquidating trust within the meaning of Treasury Income Tax Regulation Section

301.7701-4(d) and IRS Revenue Procedure 94-45, 1994-2 C.B. 124 and transfer of the Trust

Assets to the Trust shall be treated as a transfer of the Trust Assets by the Debtor to the

Beneficiaries in satisfaction of their Allowed Claims, followed by a transfer of the Trust Assets

by the Beneficiaries to the Trust in exchange for their pro rata beneficial interests in the Trust.

The Beneficiaries shall be treated as the grantors and owners of the Trust for federal income tax

purposes.

7.2 Annual Reporting and Filing Requirements. Pursuant to and in accordance with

the terms of the Plan and this Agreement, the Trustee shall file tax returns for the Trust as a

grantor trust pursuant to Treasury Income Tax Regulation Section 1.671-4(a).

7.3 Treatment of Reserves for Disputed Claims as Disputed Ownership Fund. The

Trustee may, at the Trust’s sole discretion, file a tax election to treat any and all reserves for

disputed claims as a Disputed Ownership Fund (“DOF”) within the meaning of Treasury Income

Tax Regulation Section 1.468B-9 for federal income tax purposes rather than to tax such reserve

as a part of the Trust. If such an election were made, the Trust would comply with all federal

and state tax reporting and tax compliance requirements of the DOF, including but not limited to

the filing of a separate federal tax return for the DOF and the payment of federal and/or state

income tax due.


27

7.4 Valuation of Trust Assets. After the Effective Date, but in no event later than the

due date for timely filing of the Trust's first federal income tax return (taking into account

applicable tax filing extensions), the Trustee may (a) determine the fair market value of the Trust

Assets as of the Effective Date, based on the Trustee’s good faith determination, (b) advise the

Advisory Committee (if applicable) of such valuation, and (c) establish appropriate means to

apprise the Beneficiaries of such valuation. The valuation shall be used consistently by all

parties (including, without limitation, the Debtor, the Trust, the Trustee, and the Beneficiaries)

for all federal income tax purposes.

ARTICLE VIII

ADVISORY COMMITTEE (IF APPOINTED)

8.1 Option to Appoint Advisory Committee. The members of the Committee may

appoint an advisory committee (“Advisory Committee”) to consult with the Trustee and oversee

the administration of the Trust. Except as the Trustee may otherwise agree, such appointment

must be made within thirty days after the Effective Date.

8.2 Composition of Advisory Committee. The Advisory Committee must, at all

times, have an odd number of members and no fewer than three (3) members, and its affairs shall

be governed by majority vote.

8.3 Limitations on Trustee’s Actions; Mode of Consulting. Notwithstanding anything

to the contrary contained in this Agreement or the Plan, the Trustee’s discretion to cause the

Trust to settle Claims and Causes of Action, dispose of Trust Assets, and retain and compensate

professionals shall be subject to the limitations contained in this Article VIII. The Trustee may,

but need not consult with the Advisory Committee when such limitations do not apply or the

matters are unrelated to those limitations. The Trustee may satisfy its obligation to consult with


28

members of the Advisory Committee by providing them written notice of proposed actions by e-

mail, including upon negative notice, or other means and, if necessary, discussing any concerns

of an Advisory Committee member with the member. If a majority of the Advisory Committee

disagrees with the Trustee’s proposed action, the Trustee may, but is not required to, seek

direction, on notice and hearing, from the Bankruptcy Court on how to proceed.

8.4 Distributions. Before causing the Trust to make a Distribution, the Trustee shall

consult with the Advisory Committee about the amount of the Distribution and the reserves but

the amount of distribution and discretion as to when to make a distribution is in the sole

reasonable discretion of the Trustee.

8.5 Sale, Abandonment, or Other Disposition of Notes. The Trustee shall have sole

discretion with respect to any marketing, sale, abandonment, or other disposition of Trust Assets.

8.6 Resolution of Disputed Claims. The Trustees shall have sole discretion to settle

Disputed Claims.

8.7 Settlement of Causes of Action. The Trustee in consultation with the Advisory

Committee shall have the authority to settle Causes of Action.

8.8 Trustee’s Conflict of Interest. The Trustee shall disclose to the Advisory

Committee any conflicts of interest that the Trustee has with respect to any matter arising during

administration of the Trust. In the event that the Trustee cannot take any action, including

without limitation the prosecution of any Cause of Action or the objection to any Claim, by

reason of an actual or potential conflict of interest, the Advisory Committee acting by majority

shall be authorized to take any such action(s) in the Trustee’s place and stead, including without


29

limitation the retention of professionals (which may include professionals retained by the

Trustee) for the purpose of taking such actions.

8.9 Appointment of Supplemental Trustee. The Trustee shall consult with the

Advisory Committee before appointing any Supplemental Trustee (defined below) under section

9.9 of this Agreement and removing and replacing any Supplemental Trustee under that

provision.

8.10 Resignation of Advisory Committee Member. A member of the Advisory

Committee may resign at any time on notice (including e-mailed notice) to the other Advisory

Committee members and the Trustee. The resignation shall be effective on the later of (i) the

date specified in the notice delivered to the other Advisory Committee members and the Trustee

or (ii) the date that is thirty days (30) after the date such notice is delivered.

8.11 Appointment of Replacement Advisory Committee Members. In the event that

the resignation, death, incapacity, or removal of a member of the Advisory Committee causes the

Advisory Committee to fail to satisfy the requirements of section 8.2 of this Agreement, the

Trustee shall nominate and the remaining members of Advisory Committee shall approve, by a

majority vote, an additional member of the Advisory Committee.

8.12 Absence of Advisory Committee. In the event that the members of the

Committee do not appoint an Advisory Committee, an Advisory Committee is not yet formed, no

one is willing to serve on the Advisory Committee, or there shall have been less than three

Advisory Committee members for a period of thirty (30) consecutive days, then the Trustee may,

during such vacancy and thereafter, ignore any reference in this Agreement to an Advisory

Committee, and all references to the Advisory Committee’s rights and responsibilities in this

Agreement will be null and void.


30

ARTICLE IX

SELECTION, REMOVAL, REPLACEMENT, AND COMPENSATION OF TRUSTEE

9.1 Initial Trustee. The Trustee has been selected by the Committee and is appointed

effective as of the Effective Date. The initial trustee shall be the Trustee.

9.2 Term of Service. The Trustee shall serve until (a) the completion of the

administration of the Trust Assets and the Trust, including the winding up of the Trust, in

accordance with this Agreement and the Plan; (b) termination of the Trust in accordance with the

terms of this Agreement and the Plan; or (c) the Trustee’s resignation, death, incapacity or

removal. In the event the Trustee’s appointment terminates by reason of death, dissolution,

liquidation, resignation or removal, the Trustee shall be immediately compensated for all

reasonable fees and expenses accrued through the effective date of termination, whether or not

previously invoiced. The provisions of Article VI of this Agreement shall survive the

resignation or removal of any Trustee.

9.3 Removal of Trustee. Any Person serving as Trustee may be removed at any time

for cause.

9.4 Resignation of Trustee. The Trustee may resign at any time. In the event of a

resignation, the resigning Trustee shall render to the Advisory Committee (if applicable) and the

U.S. Trustee a full and complete accounting of monies and assets received, disbursed, and held

during the term of office of that Trustee. The resignation shall be effective on the later of (i) the

date specified in the notice delivered to the Advisory Committee (if applicable) and the U.S.

Trustee; (ii) the date that is thirty days (30) after the date such notice is delivered; or (iii) the date

the accounting described in the preceding sentence is transmitted to the Advisory Committee (if


31

applicable) and U.S. Trustee by first class mail, postage pre-paid, hand delivery, or overnight

delivery.

9.5 Appointment of Successor Trustee. Upon the resignation, death, incapacity, or

removal of a Trustee, the Advisory Committee (if applicable) shall appoint a successor Trustee,

whose appointment shall be subject to approval by the Bankruptcy Court. If no Advisory

Committee is formed or serving, the Trustee shall appoint its successor, whose appointment shall

be subject to approval by the Bankruptcy Court. If the Advisory Committee (if applicable) or

Trustee is unable or unwilling to appoint a successor Trustee, the Bankruptcy Court shall do so.

Any successor Trustee so appointed shall consent to and accept its appointment as successor

Trustee, which may be done by e-mail or through acquiescence in not objecting to a motion for

approval of its appointment as successor Trustee. Any successor Trustee may be appointed to

serve only on a interim basis.

9.6 Powers and Duties of Successor Trustee. A successor Trustee shall have all the

rights, privileges, powers, and duties of its predecessor under this Agreement, the Plan, and

Confirmation Order.

9.7 Trust Continuance. The resignation, death, incapacitation, dissolution,

liquidation, or removal of the Trustee shall not terminate the Trust or revoke any existing agency

created pursuant to this Agreement or invalidate any action theretofore taken by the Trustee.

9.8 Compensation of Trustee and Costs of Administration. The Trustee shall receive

fair and reasonable compensation for his services in accordance with the terms and conditions of

the Plan, which shall be a charge against and paid out of the Trust Assets. All costs, expenses,

and obligations incurred by the Trustee (or professionals who may be employed by the Trustee in

administering the Trust, in carrying out their other responsibilities under this Agreement, or in


32

any manner connected, incidental, or related thereto) shall be paid by the Trust from the Trust

Assets prior to any Distribution to the Beneficiaries. The terms of the compensation of the

Trustee are set forth on Exhibit A hereto.

9.9 Appointment of Supplemental Trustee. If any of the Trust Assets are situated in

any state or other jurisdiction in which the Trustee is not qualified to act as trustee, subject to

consulting with the Advisory Committee (if applicable), the Trustee shall nominate and appoint a

Person duly qualified to act as trustee (the “Supplemental Trustee”) in such state or jurisdiction

and require from each such Supplemental Trustee such security as may be designated by the

Trustee in its discretion. The Trustee may confer upon such Supplemental Trustee all of the

rights, powers, privileges and duties of the Trustee hereunder, subject to the conditions and

limitations of this Agreement, except as modified or limited by the laws of the applicable state or

other jurisdiction (in which case, the laws of the state or other jurisdiction in which such

Supplemental Trustee is acting shall prevail to the extent necessary. The Trustee shall require

such Supplemental Trustee to be answerable to the Trustee for all monies, assets and other

property that may be received in connection with the administration of all property. Subject to

consulting with the Advisory Committee (if applicable), the Trustee may remove such

Supplemental Trustee, with or without cause, and appoint a successor Supplemental Trustee at

any time by executing a written instrument declaring such Supplemental Trustee removed from

office and specifying the effective date and time of removal.

ARTICLE X

DURATION OF TRUST


33

10.1 Duration. Once the Trust becomes effective upon the Effective Date of the Plan,

the Trust and this Agreement shall remain and continue in full force and effect until the Trust is

terminated.

10.2 Termination On Payment of Trust Expenses and Distribution of Trust Assets.

Upon the payment of all costs, expenses, and obligations incurred in connection with

administering the Trust, and the Distribution of all Trust Assets in accordance with the

provisions of the Plan, the Confirmation Order, and this Agreement, the Trust shall terminate and

the Trustee shall have no further responsibility in connection therewith except as may be

required to effectuate such termination under relevant law.

10.3 Termination After Five Years. If the Trust has not been previously terminated

pursuant to Article 10.2 hereof, on the fifth anniversary of the Effective Date, and unless the

Trust term has been otherwise extended by the Bankruptcy Court (such extension to be approved

by the Bankruptcy Court within six (6) months of the beginning of the extended term), the

Trustee shall distribute all of the Trust Assets to the Beneficiaries in accordance with the Plan,

and immediately thereafter the Trust shall terminate and the Trustee shall have no further

responsibility in connection therewith except to the limited extent set forth in section 10.5 of this

Agreement.

10.4 No Termination by Beneficiaries. The Trust may not be terminated at any time

by the Beneficiaries.

10.5 Continuance of Trust for Winding Up; Discharge and Release of Trustee. After

the termination of the Trust and solely for the purpose of liquidating and winding up the affairs

of the Trust, the Trustee shall continue to act as such until its duties have been fully performed.

Except as otherwise specifically provided herein, upon the Distribution of the Trust Assets


34

including all excess reserves, the Trustee shall be deemed discharged and have no further duties

or obligations hereunder. Upon a motion by the Trustee, the Bankruptcy Court may enter an

order relieving the Trustee, its employees, professionals, and agents of any further duties,

discharging and releasing the Trustee from all liability related to the Trust, and releasing the

Trustee’s bond, if any.

ARTICLE XI

MISCELLANEOUS

11.1 Cumulative Rights and Remedies. The rights and remedies provided in this

Agreement are cumulative and not exclusive of any rights and remedies under law or in equity.

11.2 Notices. All notices to be given to Beneficiaries may be given by ordinary mail,

or may be delivered personally, to the Holders at the addresses appearing on the books kept by

the Trustee. Any notice or other communication which may be or is required to be given, served,

or sent to the Trustee shall be in writing and shall be sent by registered or certified United States

mail, return receipt requested, postage prepaid, or transmitted by hand delivery or facsimile (if

receipt is confirmed) addressed as follows:

If to the Trust:

[_____________________]

or to such other address as may from time to time be provided in written notice by the Trustee.

11.1 Bond. The Trustee shall be not required to post a bond. Notwithstanding any

state law to the contrary, the Trustee (including any successor Trustee) shall be exempt from

giving any bond or other security in any jurisdiction. The Trustee is hereby authorized to obtain

all reasonable insurance coverage for itself, its agents, representatives, employees or independent


35

contractors, including, without limitation, coverage with respect to the liabilities, duties and

obligations of the Trustee and its agents, representatives, employees or independent contractors

under this Agreement.

11.2 Governing Law. This Agreement shall be governed by and construed in

accordance with the laws of the State of New York.

11.3 Successors and Assigns. This Agreement shall inure to the benefit of and shall be

binding upon the Parties and their respective successors and assigns.

11.4 Particular Words. Reference in this Agreement to any Section or Article is,

unless otherwise specified, to that such Section or Article under this Agreement. The words

“hereof,” “herein,” and similar terms shall refer to this Agreement and not to any particular

Section or Article of this Agreement.

11.5 Execution. All funds in the Trust shall be deemed in custodia legis until such

times as the funds have actually been paid to or for the benefit of a Beneficiary, and no

Beneficiary or any other Person can execute upon, garnish or attach the Trust Assets or the

Trustee in any manner or compel payment from the Trust except by Final Order of the

Bankruptcy Court. Payments will be solely governed by the Plan and this Agreement.

11.6 Amendment. This Agreement may be amended by written agreement of the

Trustee and the Advisory Committee or by order of the Bankruptcy Court.

11.7 No Waiver. No failure or delay of any party to exercise any right or remedy

pursuant to this Agreement shall affect such right or remedy or constitute a waiver thereof.


36

11.8 No Relationship Created. Nothing contained herein shall be construed to

constitute any relationship created by this Agreement as an association, partnership or joint

venture of any kind.

11.9 Severability. If any term, provision covenant or restriction contained in this

Agreement is held by a court of competent jurisdiction or other authority to be invalid, void,

unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants

and restrictions contained in this Agreement shall remain in full force and effect and shall in no

way be affected, impaired or invalidated.

11.10 Further Assurances. Without limitation of the generality of section 2.4 of this

Agreement, the Parties agree to execute and deliver all such documents and notices and to take

all such further actions as may reasonably be required from time to time to carry out the intent

and purposes and provide for the full implementation of this Agreement and the pertinent

provisions of the Plan, and to consummate the transactions contemplated hereby.

11.11 Counterparts. This Agreement may be executed simultaneously in one or more

counterparts, each of which shall be deemed an original and all of which together shall constitute

one and the same instrument.

11.12 Jurisdiction. The Bankruptcy Court shall have jurisdiction of the Trust, Trustee,

and Trust Assets, including, without limitation, the determination of all disputes arising out of or

related to administration of the Trust. The Bankruptcy Court shall have exclusive jurisdiction

and venue to hear and finally determine all matters among the Parties arising out of or related to

this Agreement or the administration of the Trust.


37

IN WITNESS WHEREOF, the Parties have or are deemed to have executed this

Agreement as of the day and year written above.

ATRINSIC, INC. By: Name Title: [_______________________] By:


38

Exhibit A

Terms of Compensation of Trustee

1.) Compensation. In consideration for the services of the Trustee under this Agreement, the

Trustee shall receive the following compensation from the Trust Assets: (i) start-up costs

not to exceed [$10,000]; (ii) a monthly fee of [$_____]; and (iii) reimbursement of

reasonable and necessary expenses, including payment of all fees and expenses of the

Trustee’s attorneys incurred in drafting, reviewing, revising, negotiating, and executing

this Agreement and any related documents.

2.) Payment of Monthly Fee and Start-Up Costs; Full Fee for Initial Month. The Trustee’s

monthly fee, together with payment of any start-up costs and expenses under the above

paragraph, shall be payable out of the Trust Assets beginning on the Effective Date and

continuing thereafter until the Trustee is discharged. The first monthly fee shall be

incurred immediately on appointment of the Trustee even if the Trustee is appointed

before the Effective Date, although in such case the monthly fee(s) shall not become

payable until the Effective Date but shall accrue each month and remain unpaid until that

date occurs. The Trustee shall be entitled to payment of its entire monthly fee, without

prorating, for and beginning with the month in which the Trustee is appointed

3.) Means and Timing of Payment. The Trustee’s monthly fee shall be automatically paid in

advance by wire transfer or equivalent electronic means or in any means that the Trustee

prefers in the Trustee’s discretion on the Effective Date and thereafter on the first day of

each month though and including the month in which the Trustee is discharged.


12-12553-jmp Doc 75-3 Filed 01/22/13 Entered 01/22/13 15:29:23 Exhibit Plan Ex. B - Stipulation Between Debtor Board of Direcotrs and Creditor Pg 1 of 12

In re Atrinsic, Inc. - Debtor in Possession Case No. 12-12553 Debtor Reporting Period: December 2012

The Balance Sheet is to be completed on an accrual basis only. Pre-petition liabilities must be classified separately from post-petition oblig

ASSETS BOOK VALUE AT END OF CURRENT REPORTING

MONTH

BOOK VALUE AT END OF PRIOR REPORTING

MONTHCURRENT ASSETS

Unrestricted Cash and Equivalents 872,943.60 898,890.66Restricted Cash and Cash Equivalents (see continuation sheet)

349,395.28 349,395.28

Accounts Receivable (Net) 462,446.05 1,362,952.71Notes ReceivableInventoriesPrepaid Expenses 483,426.38 503,161.18Professional RetainersOther Current Assets (attach schedule) 9,343,727.44 9,347,694.32TOTAL CURRENT ASSETS 11,511,938.75 12,462,094.15PROPERTY & EQUIPMENT

Real Property and ImprovementsMachinery and EquipmentFurniture, Fixtures and Office Equipment 0.00 0.00Leasehold Improvements 0.00 0.00VehiclesLess: Accumulated Depreciation 0.00 0.00TOTAL PROPERTY & EQUIPMENT 0.00 0.00OTHER ASSETS

Amounts due from Insiders*Other Assets (attach schedule) 414,335.90 479,331.20TOTAL OTHER ASSETS 414,335.90 479,331.20TOTAL ASSETS 11,926,274.65 12,941,425.35

LIABILITIES AND OWNER EQUITY BOOK VALUE AT END OF CURRENT REPORTING

MONTH


MONTHLIABILITIES NOT SUBJECT TO COMPROMISE (Postpetition)

Accounts Payable Taxes Payable (refer to FORM MOR-4)Wages PayableNotes PayableRent / Leases - Building/EquipmentSecured Debt / Adequate Protection PaymentsProfessional Fees 120,869.96 109,241.26Amounts Due to Insiders*Other Post-petition Liabilities (attach schedule)TOTAL POST-PETITION LIABILITIES 120,869.96 109,241.26LIABILITIES SUBJECT TO COMPROMISE (Pre-Petition)

Secured Debt 2,613,675.00 2,613,675.00Priority Debt 6,528.85 6,528.85Unsecured Debt 17,410,697.47 18,124,891.05

BALANCE SHEET

12-12553-jmp Doc 75-4 Filed 01/22/13 Entered 01/22/13 15:29:23 Exhibit Balance Sheet Pg 1 of 7

TOTAL PRE-PETITION LIABILITIES 20,030,901.32 20,745,094.90TOTAL LIABILITIES 20,151,771.28 20,854,336.16OWNERS' EQUITY

Capital Stock 976,858.37 976,858.37 Additional Paid-In Capital 182,305,035.48 182,305,035.48 Partners' Capital AccountOwner's Equity AccountRetained Earnings - Pre-Petition (183,918,324.58) (183,918,324.58)Retained Earnings - Post-petition (2,608,264.18) (2,295,678.36)Adjustments to Owner Equity (attach schedule) (4,980,801.72) (4,980,801.72)Post-petition Contributions (attach schedule)NET OWNERS’ EQUITY (8,225,496.63) (7,912,910.81)TOTAL LIABILITIES AND OWNERS' EQUITY 11,926,274.65 12,941,425.35 *"Insider" is defined in 11 U.S.C. Section 101(31).

BALANCE SHEET - continuation sectionASSETS BOOK VALUE AT END OF

CURRENT REPORTING MONTH


MONTHOther Current AssetsRelated Party Receivables 9,303,223.50 9,303,223.50

Receivable - Funds Due from Escrow Account 0.00 0.00

Unamortized Debt Issue 35,688.45 35,688.45

Receivable - COBRA Clearing (1,407.11) 2,559.77

Deferred Income Taxes - Current (2,685.85) (2,685.85)

Security Deposit for 116 W.23 Street 4,500.00 4,500.00

Other Miscellaneous Receivables 4,408.45 4,408.45

Other AssetsIntangible Assets - Net 74,043.97 74,043.97

Investment in TBR (0.00) 64,995.30

Deferred Income Taxes - Non Current 340,291.93 340,291.93

LIABILITIES AND OWNER EQUITY BOOK VALUE AT END OF CURRENT REPORTING

MONTHOther Post-petition Liabilities

Adjustments to Owner’s EquityTreasury Stock 4,980,801.72 4,980,801.72

Post-Petition Contributions


Restricted Cash: Cash that is restricted for a specific use and not available to fund operations.Typically, restricted cash is segregated into a separate account, such as an escrow account.


gations.

BOOK VALUE ON PETITION DATE OR SCHEDULED

(36,639.34)349,395.28

1,362,952.71

600,060.06

10,218,995.9812,494,764.69

1,759,113.531,711,232.38

1,533,742.171,936,603.74

548,050.54548,050.54

14,979,418.97

BOOK VALUE ON PETITION DATE

0.00 Accrued Legal Fees plus accrual for Robert Half for the Wk Ended 12/

0.00

2,613,675.006,528.85

18,003,186.96


20,623,390.8120,623,390.81

976,858.37 182,278,296.09

(183,918,324.58)0.00

(4,980,801.72)

(5,643,971.84)14,979,418.97


9,303,223.50

860,000.00

35,688.45

18,361.43

(2,685.85)

0.00

4,408.45

74,043.99

133,714.62

340,291.93


4,980,801.73


/21, accrual for Amy Johnson, and accrual for Donlin, Recano


1

ATRINSIC INC. CHAPTER 11 CASE NO. 12-12553

ESTIMATED LIQUIDATION ANALYSIS AS OF 12/31/2012

BOOK LIQUIDATION

VALUE VALUE ASSETS: Cash $872,943.60 $750,000.001 Inventory $462,446.05 $325,000.00 Prepaid Expenses $483,426.38 $250,000.00 Other Current Assets $9,343,727.44 $-0-2 Other Assets $414,335.90 $-0-3 TOTAL ASSETS: $11,926,274.65 $1,325,000.00 LESS COSTS ASSOCIATED WITH LIQUIDATION: Chapter 7 Professional Fees $50,000.00 Auctioneer Fees & Costs $5,000.00 Chapter 7 Trustee (11 U.S.C. SEC. 326) $60,000.00 TOTAL LIQUIDATION COSTS: $115,000.00 LESS SECURED CLAIMS: $2,613,675.004 LESS CHAPTER 11 NET PROFESSIONAL CLAIMS $200,000.00 LESS PRIORITY CLAIMS $15,000.00 TOTAL CHAPTER 11 ADMINISTRATIVE/ PRIORITY CLAIMS: $215,000.00 MIN. NET AVAILABLE FOR UNSECURED CREDITORS: ($1,403,675.00) PROJECTED DISTRIBUTION IN CHAPTER 7 (Total Claims approx. $11,500,000) 0% Note: Chapter 11 Plan provides approximate pro rat cash and stock distribution to unsecured creditors

1 Assumes Cash Position will slightly erode in the face of impending liquidation. 2 Other Current Assets are substantially comprised of uncollectable intercompany receivables. 3 Other Assets consist of intangibles and deferred income tax credits – no liquidation value. 4 Amount reflect minimum amount of aggregate secured claims of Senior Noteholders. Amounts claimed aggregate $20,420,668 based upon Event of Default redemption Notices.

12-12553-jmp Doc 75-5 Filed 01/22/13 Entered 01/22/13 15:29:23 Exhibit Liquidation Analysis Pg 1 of 1

Executive Summary

December 1, 2012

Version: 02-09

Prepared By:

Barry M. Eisenberg

T: 917-270-7240

[email protected]

12-12553-jmp Doc 75-6 Filed 01/22/13 Entered 01/22/13 15:29:23 Exhibit New Business Plan Summary Pg 1 of 16

Executive Summary

© BME Enterprises, LLC 2008. All Rights Reserved. CONFIDENTIAL – DO NOT DISTRIBUTE

- 2 -

Information Regarding Momspot’s Executive Summary This Executive Summary [the “Summary”] contains certain information regarding the current and planned operations and business of Momspot, (“Momspot” or the “Company”), including information regarding the projected financial performance of the Company. This Summary has been provided to the recipient solely for the purpose of assisting the recipient in deciding whether to proceed with an in-depth investigation of the Company in accordance with procedures established by the Company. By accepting a copy of this Summary, the recipient hereby agrees, among other things, to keep the information contained herein and the existence of this Summary confidential and to restrict the use of any information contained herein to those people within the recipient’s organization or its designated representatives who have been informed of the confidential nature of such information and who need to have such information in connection with the organization’s evaluation of the Company. This Summary has been prepared by Barry Eisenberg on the basis of internally prepared information, as well as information from public and private sources, including trade and statistical sources commonly used in the industry. The Summary does not purport to contain all of the information that may be required to evaluate all of the factors that would be relevant to a recipient in considering a transaction with the Company. The Company makes no warranty or representation, express or implied, as to the accuracy or completeness of either the material contained herein or any other written or oral information provided by the Company to the recipient, and no liability shall attach thereto. Nothing contained in this Summary is, or should be relied on as, a promise or representation as to the future. The projected financial information contained herein was prepared expressly for use herein and is based upon the stated assumptions and the Company’s analysis of information available at the time that this Summary was prepared. There is no representation, warranty, or other assurance that any of the projections set forth herein will be realized. This Summary does not purport to contain all of the information that may be required to evaluate the Company and any recipient hereof should conduct its own independent investigation and analysis of the business described herein. Any questions regarding the Company should be directed to the following representatives named below. Barry Eisenberg

917-270-7240


Executive Summary


- 3 -

Introduction

Momspot aims to be an innovative ‘click ‘n mortar’ retail and social networking company operating in both the

virtual and physical realms that markets its products and services specifically to the “Mom” market.

Specifically, we intend to develop an online and mobile personal management system consisting of social

utilities and calendaring tools that help Moms manage their daily routine and that of their family.

The business plan calls for two large phase of the business. In Phase 1, Momspot will develop an online

retail capability that resells products marketed to the “Mom Market”, a social networking capability and

personal organization and management tools geared specifically to Moms. In Phase 2, Momspot will

leverage its brand success to establish a physical presence and create stores that provide a “third-space” for

Moms, which caters specifically to their needs.

We understand many of the tools Momspot is proposing exist in some form on the Internet today. However,

a key differentiator for Momspot is that we are the first company to bundle these various products and

services into a unique brand marketed specifically to mothers. Unlike other companies today that market

their products and services for babies and/or children, Momspot intends to shift this paradigm and make

moms the focal point of the marketing and branding strategies.

We outline our plan to build the Momspot online capabilities that will allow us to test and prove our concept,

begin generating revenue and raise additional financing.

Phase 1: Online

In the first phase, resources will be dedicated to developing an online presence that includes a web-based

retail market place called the Momspot Market, as well as social networking capabilities and personal

organization and management tools bundled together in what we refer to as the Momspot Mommy

Management System.

Online Momspot Market:

o Momspot intends to be the reseller of choice for merchandise, apparel, and food brands that

service the “Mom” market. We believe established brands that manufacture and sell good to

Moms will find great value in leveraging the Momspot brand, our web capabilities, and our

valuable database of mothers to market and sell their products online.

o Our online market will have three main categories of products: merchandise, apparel, and food.

Within each category will be numerous subcategories organized according to age and target

consumer (e.g. mom, baby, toddler, etc.). Moreover, the online Momspot market will have a

baby registry in which expecting mothers can register and select all the products they desire for

their baby shower.

Momspot Mommy Management System (MMMS):

o One of the key differentiators of Momspot will be its Mommy Management System. The

Momspot Mommy Management System (MMMS) comprises and number of individual services

that aim to be an easy-to-use online tool to help Moms organize their lives around the most

important things in it: her children, family and friends.

o At the core of MMMS will be an integrated dynamic calendar and scheduling tool and social

utility that allow Moms to manage their schedules and those of their children, as well as view the


Executive Summary


- 4 -

calendars of individuals in their network and the public calendars of any number of commercial

and noncommercial organizations in their local community.

o Specific functionality can be organized into the following two categories:

Integrated dynamic calendaring and scheduling tool:

o Public calendar selection and viewing - Provides the ability for users to select

public calendars to display in their calendar, and associate any public calendar with

any child they’ve added to their profile. This allows for dynamic filtering of calendar

events based on that child.

o Play-date search and scheduling - Provides the ability to easily and quickly

identify Moms in their area that are looking for play dates, and provides the tools

necessary to communicate (instant messaging or email) and schedule these play-

dates

o Carpool search and scheduling – integrated with Momspot’s innovative “Carpool

Coordinator” tool, this allows for carpooling appoints to be automatically added to

your calendar

o Social network calendar selection and viewing

Social networking utilities:

o Communication tools (email and messaging)

o “Carpool Coordinator” – Momspot’s innovative way for Moms to easily coordinate

with their neighbors and friends for carpooling needs

o Status and picture posting

o Child profile tool - Will provide the ability to create and maintain children’s profiles

containing useful information about their child and their child’s activities and

schedules. Moms have the choice of providing as little or as much information as

they want, including such things as:

School information

School activities (including dates/times/locations)

Non-school activities (including dates/times/locations)

Health and medical information (including doctor’s names, contact

information, vaccination information, medication/prescription

information, etc.)

Friends (including friend’s parents and nature of connection, such

as school friend, athletic team friend, etc.)

o Momspot groups/communities - Allows users to create and name a Momspot

group. Momspot groups are entities much like Moms in that they can have a profile,

and maintain a calendar and network (managed by members designated as group

administrators).

Below is a mock-up of what MMMS may look like:


Executive Summary


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Phase 1 will be further broken down into 6 different stages of business development that coincide with any

Internet company lifecycle. These stages are:

1. Website development

2. Beta testing & Marketing

3. Follow-on financing

4. Operational start-up

5. Commercialization

6. Growth

7. Steady operations

Phase 2: Brick and Mortar Retail

In the second phase of the business, we intend to leverage the Momspot brand success and move into the

physical retailing space by creating a “third space” that caters specifically to Moms. “The Momspot” will

provide her with all of the goods and services she may want in a single location, such as a place to purchase


Executive Summary


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merchandise, apparel, and groceries, a place to eat and socialize with friends, and a place to play with her

children or meet for her child’s play date.

Each store will contain of the following sections:

Momspot Market: The Momspot physical retail store will carry similar products as sold on the

online Momspot market, which including merchandise, apparel and food.

Café: The café will provide a spot where Moms can meet up with friends and socialize, while

enjoying healthy, high-quality gourmet food and drinks.

Supervised play space: Whether meeting for a play-date or simply playing with their own children,

the supervised play space will provide Mom’s the area they need so both them, and their children,

can have fun.


Executive Summary


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Market Opportunity

We feel Momspot has enormous potential for three reasons:

1. The favorable trend in social media and growth of niche sites

2. The sheer magnitude of the “Mom Market”

3. The current Internet usage trends and behaviors of Moms

4. The fact no brand has yet been marketed specifically to Moms.

Digital media is an essential and important part of a Mom’s life today, and the Internet is a rapidly growing

media outlet that Moms turn to for information and entertainment. According to America Online DMS,

mothers who use the Internet spent up to 16 hours and 52 minutes per week online, which is more than

teens (who are online approximately 12 hours and 17 minutes).1

Momspot’s potentially served market (PSM) numbers approximately 113 million given that there are

approximately 141 million women with children in the U.S., and 80% of Moms have online service available

to them. Moreover, the size of the Mom Market is growing around 1% a year.2 Couple this with the fact that

Moms account for 85% of the purchase decisions of U.S. households, and the Mom Market comprises a very

powerful consumer market. 3

What are Mom’s doing online? According to Simmons Market Research Bureau, Mothers are more inclined

to use the Internet for communicating, socializing and meeting people, as well as for family entertainment,

than are women who are not Mothers.4 Per the same survey mentioned above, Moms spend an average of

86 minutes per day reading and sending emails and 38% of those surveyed indicated the Internet is their

prime source of information, second only to television with 48%.5 What makes these facts even more

interesting is that, when compared to women without children, Moms appear to favor the Internet in many

different aspects of their life. The following table supports this conclusion as it indicates Moms’ attitudes and

actions with respect to the Internet (based on index of 100):6

1 The U.S. Mom Market Report, November 2005; Silver Stork Research & Packaged Facts

2 Simmons Market Research Bureau, Spring 2005 Study of Media and Markets

3 ABCNews.com, 4/11/2008 (http://abcnews.go.com/Video/playerIndex?id=4614331&affil=wftv)


5 The U.S. Mom Market Report, November 2005; Silver Stork Research & Packaged Facts



Executive Summary


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Company Management

Barry Eisenberg, Founder & Chief Executive Officer

Mr. Eisenberg will be responsible for all financial aspects of the company, the overall day-to-day

management of the company and ensuring execution per the agreed business plan. In the CEO role, Mr.

Eisenberg will also be responsible for raising capital to fund the initial development of all Momspot products,

and regularly communicating status to investors. Once operational, Mr. Eisenberg will continue day-to-day

management, with a focus on financial budgeting and both financial and operational performance analysis.

Mr. Eisenberg has a proven track record for managing the design, development, and implementation of

complex technological and analytical tools, which spans more than 15 years at well-known consulting and

financial services firms such as PricewaterhouseCoopers and Morgan Stanley.

Prior to founding Momspot, Mr. Eisenberg was a Vice President and Portfolio Manager in the Acquisitions

and Investment Management unit of Mubadala Development Company, a prestigious sovereign wealth fund

and strategic investment firm of the Government of Abu Dhabi, with more than $50bn AUM. In this role, Mr.

Eisenberg was responsible for the acquisition and investment management of private equity assets that

deliver both financial returns and long-term social benefits to the Emirate of Abu Dhabi. This included the

acquisition of mature, private companies as well as the brown-field development of new UAE-based

companies through joint ventures with established industry partners, in sectors aligned with the firm’s capital

allocation strategy. Mr. Eisenberg was also the Head of the firm’s Portfolio Analytics group,

responsible overseeing the development of the investment and portfolio performance analytics and reporting

capabilities for the entire firm.

Mr. Eisenberg also has extensive experience as a Product Manager with Morgan Stanley, working as part of

team responsible for developing an analytic platform to institutionalize a proprietary accounting and valuation

framework across the firm’s Investment Banking, Institutional Sales & Trading, and Equity Research

businesses. Mr. Eisenberg has a M.B.A. in Finance and International Business from the Lawrence Zicklin

School of Business at City University New York, and a B.A. in Managerial Economics and Computer Science

from Union College in Schenectady, NY.

In addition to the CEO role, we envisage the following roles will be required, for which individuals have yet to

be identified:

Chief Operating Officer (COO): will be responsible for managing all commercial and business development

operations of the business including managing all revenue channels (ad sales, commissions, sponsored

promotions, app sales, etc.) and functions necessary to enable and support these channels. These

functions include brand marketing efforts, negotiating agreements and managing relationships with sales and

merchandising partners for selling partner’s products via the Momspot Market, as well negotiating and

managing relationships with online advertising and sponsored promotion customers. The COO will also be

responsible for expanding existing revenue channels while identifying new revenue channels and strategic

partners to help market and promote the Momspot brand, and thus enhance user traffic.

Chief Technology Officer (CTO): will be responsible for all development and technology related activities of

the company, including the development and support of the external-facing Momspot products, including

websites and mobile applications across all platforms, and internal tools and applications used to analyze

and manage user traffic and usage for all external-facing products. Additionally, the CTO will be responsible

for managing and supporting the overall technology infrastructure of the organization the supports the

external-facing products and all internal tools and business processes.


Executive Summary


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Chief “Mom” Officer (CMO): will be responsible for helping to create and drive the overall vision and

strategy for the company. She will need to engage with the users and understand the demands and needs

of the market, and help steer product development to meet these needs. She will also be critical in advising

on marketing and business development strategies.


Executive Summary


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Business Model

Phase 1:

Momspot intends to generate revenue through the following channels:

1. Online Retail Sales & Affiliate Marketing Commissions: Momspot does not intend to carry any

inventory, but rather will simply be helping to increase customer purchases of retailers’ products by

providing them an additional sales channel, and helping to push focused traffic to their products. Thus

Momspot will act more as an affiliate marketer and sales lead generator for those companies looking to

increase sales.

Although Momspot intends to showcase all products within the Momspot Market area of its website, and

from the user perspective the transaction will appear to be executed with Momspot via their web-store,

Momspot will simply be acting as an intermediary, or broker, between the buyer and seller. Given this

broker model, Momspot will establish commercial terms with each of its suppliers that define the

percentage of sales received by Momspot (commission revenue).

2. Web and Mobile Advertising: Momspot will focus on two advertising revenue channels: display

advertising and pay-per-click advertising (PPC). Momspot brings additional value to companies looking

to target Moms as Momspot offers numerous other tools and services to entice Moms to use our website

and mobile apps, thus increasing the number of ad views and the level of engagement with users. This

should allow Momspot to charge a premium price for its modes of advertising.

a. Display Ads: Like most Websites, Momspot will sell ad-space to place various types of ads on

its website and mobile apps

b. PPC Ads: Momspot will dedicate various space on its web pages for advertisers to publish ads

and offers which result in revenue for Momspot only in the event the user clicks the ad. This

type of advertising will include product placements in the Momspot market place as well. In

effect, this allows Momspot to monetize marketplace web real estate multiple times: once when

a user clicks on a product, and another if/when the user makes a purchase of that product.

3. Sponsored Promotions: Momspot will engage with certain retailers to promote their specific products

through a specialty focused advertising/promotional campaign throughout all venues of the Momspot

website, for which Momspot will earn a monthly fee during the time in which these campaigns run.

4. Data Analytics: All consumer information and purchases will be tacked and stored and analyzed by

Momspot analysts to distill meaningful insights of consumer buying behavior of this valuable market,

which can then be sold to different interested parties.

5. Premium Mobile App Sales: Momspot intends to give users the choice of downloading the free version

of the Momspot mobile app, or allow users to download a premium version free of advertisements for a

nominal application charge

Momspot will leverage the established online marketing mechanisms for driving traffic to its site, and

promoting its products and services. These include employing marketing managers to develop campaigns to

drive traffic and facilitate search engine optimization.

Phase 2:

Momspot intends to generate revenue through the following channels:


Executive Summary


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1. Owning and Operating Retail Locations: Retail sales will include purchases of products (merchandise,

apparel and food), as well as purchases from the café. No charge will be applied to the use of the play

space.

2. Franchising and Licensing Opportunities: We intend for the Momspot brand to become well-known

and recognized around the world. As such, we feel there is tremendous opportunity to license the brand

and franchise the retail format domestically and internationally.


Executive Summary


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Revenue Drivers & Financial Projections

We have identified the key drivers of revenues and costs for this business (listed below),

Volumes: o Monthly unique site users o User growth rates o Registration conversion rate o Online sales conversion rate o Average value of online sales o Mobile application download rate o Retail affiliate growth rates o Space for display and PPC ads o PPC conversion rates

Pricing o Momspot affiliate sales commissions o Advertising rates for both display and PPC o Sponsored promotion rates o Premium app fees

Using assumed inputs for the key drivers listed above we have compiled five years of financial projections for Momspot. These projections, shown in the table below, forecast Momspot to begin generating modest revenues through online advertising sales by the time it begins beta testing (Stage 2) in May 2013. We forecast these revenues to increase significantly as the number of incremental unique users to the website increases, and as additional revenue-generating services, such as sponsored promotions and premium app sales, come online.

Revenues 2012 2013 2014 2015 2016 2017

Online Retail Sales 0 77,410 16,053,777 32,815,867 48,430,750 55,695,362

Momspot Affiliate Marketing Rev 0 3,871 1,259,073 3,380,034 5,986,041 6,883,947

Display Ad Revenue 0 734 67,579 98,448 188,691 216,995

Premium Mobile App Sales 0 502 84,119 127,239 117,060 134,619

Sponsored Promotion Fees 0 2,963 271,437 532,095 611,909 703,696

Data Analytics Sales

PPC Ad Revenue 0 2,868 839,382 1,831,954 2,289,942 2,633,433

Total Revenue 0 10,938 2,521,590 5,969,770 9,193,644 10,572,690 The table below shows our complete five-year P&L forecasts for Momspot. We forecast Momspot to generate a net loss in its first two years of operation, resulting in a total net loss of ~$140,000 and turning to profit in 2014. Moreover, these forecasts show the improving margins over time as Momspots additional products services come online, and economies of scale are realized as the number of monthly unique users grows.


Executive Summary


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P&L 2012 2013 2014 2015 2016 2017

Revenues

Total Revenue 0 10,938 2,521,590 5,969,770 9,193,644 10,572,690

Total Cost of Sales 400 8,825 1,064,506 2,276,826 3,067,858 3,527,110

Gross Profit (400) 2,113 1,457,083 3,692,944 6,125,786 7,045,580

Margin 0% 19% 58% 62% 67% 67%

Indirect Costs

Total Labor Costs 11,000 94,000 230,750 556,200 896,100 896,100

Total Opex 1,550 30,775 153,950 260,178 260,178 260,178

Total Indirect Costs 12,550 124,775 384,700 816,378 1,156,278 1,156,278

EBITDA (12,950) (122,662) 1,072,383 2,876,566 4,969,508 5,889,302

Margin 0% -1121% 43% 48% 54% 56%

Depreciation & Amortization 700 4,200 4,200 4,200 4,200 4,200

EBIT (13,650) (126,862) 1,068,183 2,872,366 4,965,308 5,885,102

Interest Expense

Fees on Debt

Profit Before Tax (13,650) (126,862) 1,068,183 2,872,366 4,965,308 5,885,102

Income Tax 25% 0 0 267,046 718,091 1,241,327 1,471,276

Net Income (13,650) (126,862) 801,138 2,154,274 3,723,981 4,413,827

Margin 0% -1160% 32% 36% 41% 42%

Accumulated Profit/Loss (breakeven) (13,650) (140,512) 660,625 2,814,900 6,538,880 10,952,707

Please note that straight line depreciation was used to depreciate the capital expenditures discussed in the next section was assuming a useful life of 10 years. The following tables shows the user and retailer volume assumptions we are using to drive this P&L forecast. Momspot has based these assumptions on a rigorous analysis of comparable websites such as Cafemom.com, Thenest.com, and Mothersclick.com. The user volume assumptions and growth rates used represent a very conservative approach considering the historical traffic patterns and recent trends of those comparable sites analyzed.

Year 2012 2013 2014 2015 2016 2017

Period 0 1 2 3 4 5

Incremental Unique Users - 14,402 923,480 1,062,002 1,221,302 1,404,498

Cumulative Users - 14,402 937,882 1,999,885 3,221,187 4,625,685

Incremental Registrations - 4,312 365,039 419,795 482,764 555,179

Total Registered 4,312 369,351 789,146 1,271,910 1,827,089

Mobile App Downloads - 839 107,690 123,843 142,419 163,782

Incremental Retail Affiliates - 17 165 69 - -

Total Retail Affiliates 17 181 250 250 250

Phase 1 3 4 5 6 6


Executive Summary


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Capital Requirement, Cash Flows & Valuation

We anticipate capital requirement of approximately $42,000 for development of the front-end website, mobile

application and back-end technology to bring Momspot Phase 1 operational.

Non-Recurring CostsCapital Investment NOV DEC JAN FEB MAR APR

Website design and UX 2,000 2,000 1,500 1,000 1,000 7,500

Website development - front end 1,000 2,000 2,500 3,000 2,000 10,500

Website development - back end 2,000 2,000 3,000 2,000 9,000

Computer hardware 1,000 1,000 1,000 3,000

URL Pruchases 2,000 2,000

Branding 1,500 1,500

Mobile App Development 5,000 5,000

Total Capex 6,000 8,500 12,000 7,000 5,000 - 38,500

Other Fixed Costs

Inorporation 1,000 1,000

Software 500

Licensing and trademark 2,000

Other SG&A (Overhead) 1,500 2,000 - - - - 3,500

-

Total Non-Recurring Costs 7,500 10,500 12,000 7,000 5,000 - 42,000

Momspot anticipates site development to take approximately six months long, and will include building all the

functionality as stated in this business plan (Momspot Market and MMMS). During the development stage

we plan to consistently test the efficacy of the design and prove the Momspot concept, and will be regularly

analyzing data and how users are interacting with the site so that we can make the necessary adjustments

and modifications in order to generate as much traffic to the site as possible.

Funds will be used for both capital investments as indicated above (hardware purchases, website design and

development, mobile app development, etc.) as well as working capital needs to cover recurring operational

expenses, such as web hosting services, technology support, utilities and Internet costs.

Cash Flows & Valuation

The table below shows forecasted cash flows for five years, which incorporates the capital investment cash

requirements proposed above, as well as the accumulated net loss anticipated in the first few years.

Cash Flows, Valuation, Payback & IRR Year 2012 2013 2014 2015 2016 2017

EBIT (13,650) (126,862) 1,068,183 2,872,366 4,965,308 5,885,102

-Tax - - 267,046 718,091 1,241,327 1,471,276

+Depreciation & Amortization 700 4,200 4,200 4,200 4,200 4,200

+ Delta NWC - - - - - -

-Capex 18,000 24,000 - - - -

Free Cash Flow to Firm (Unlevered) (30,950) (146,662) 805,338 2,158,474 3,728,181 4,418,027

-Repayment of borrowings

-Interest expense - - - - - -

Free Cash Flow to Equity (Levered) (30,950) (146,662) 805,338 2,158,474 3,728,181 4,418,027

Cumualtive FCFF (30,950) (177,612) 627,725 2,786,200 6,514,380 10,932,407


Executive Summary


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Per this forecasts, we anticipate a total capital need of $177,612, which includes the $42,000 of capital

investment discussed above, and covers the operating expense in the first year before Momspot turns a

profit and become cash flow positive, at which point it will be able to finance itself.

Momspot will become cash flow positive in 2014, and will earn enough cash that year to cover all prior years

cash outflows. As such, investor payback period appears to be just over one year. Moreover, making very

conservative assumptions of 35% required return and 2x fifth year EBITDA terminal value, we can use these

cash flows to calculate the NPV and IRR of this investment, which is illustrated in the tables and charts

below.

Valuation (100%) Discount Rate 1.00 1.35 1.82 2.46 3.32 4.48

Investor Cash Flow (100%) (30,950) (146,662) 805,338 2,158,474 3,728,181 4,418,027

Terminal Value (2x) 11,778,605

PV Cash Flows (30,950) (108,639) 441,886 877,295 1,122,437 3,612,068

Cumulative Cash Flow (30,950) (139,589) 302,297 1,179,592 2,302,029 5,914,097

NPV 5,914,097 IRR Analysis 985,280 3,612,068 6,238,855 8,865,643

Payback Analysis 1 years Assumed Exit Multiple

Equity Multiple 42.37x IRR Sensitivies 0.00x 2.00x 4.00x 6.00x

IRR 111.0% #### 177,612 155.4% 165.9% 174.3% 181.4%

ROI 3408% #### 202,612 131.4% 142.3% 150.8% 157.8%

#### 227,612 116.1% 127.3% 135.8% 142.8%

#### 252,612 105.1% 116.4% 125.0% 131.9%

#### 277,612 96.6% 108.1% 116.6% 123.5%

#### 302,612 89.8% 101.3% 109.8% 116.7%

#### 327,612 84.0% 95.7% 104.2% 111.0%

#### 352,612 79.2% 90.9% 99.4% 106.2%

#### 377,612 74.9% 86.7% 95.2% 101.9%

#### 402,612 71.2% 83.0% 91.5% 98.2%

#### 427,612 67.9% 79.7% 88.2% 94.8%

#### 452,612 64.9% 76.8% 85.2% 91.8%

#### 477,612 62.2% 74.1% 82.5% 89.1%

#### 502,612 59.7% 71.6% 80.0% 86.6%

#### 527,612 57.4% 69.4% 77.7% 84.3%

#### 552,612 55.3% 67.3% 75.6% 82.2%

Init

ial I

nve

stm

en

t (U

SD)

Given these assumptions, we believe Momspot to be worth nearly $6m, which results in a cash-on-cash

(equity) multiple of 42.3x and an IRR of more than 110% given the initial capital requirements discussed

above.


Executive Summary


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Project Timeline & Funding Milestones Our strategy is to secure most of the financing to complete stages 1 and 2 of the business lifecycle indicated

here:

Once we have received our initial start-up capital and complete the formation of the legal entity, we will

immediately begin with the website developing. This project will entail the following activities:

Website design and UX

Website development - front end

Website development - back end

Once we have completed these stages, and are confident with the product and the business strategy, we will

raise additional funding for the next four stages of the business lifecycle. Momspot has been given

assurances by both Hudson Bay Capital and Iroquois Capital that if Momspot meets these development

milestones, they will both participate in a second round of financing.

We anticipate this project to take approximately 11 weeks. The second stage, Beta Test and Refinement,

will take approximately 11 weeks as well, but can begin before stage one is complete. Assuming we begin

development in November, 2012, stage one and two of Phase 1 should be complete by March 2012 (five

months) if funding is completed and development beings the beginning of November.

The initial project plans for the first two stages is given here:

Key ActivitiesTarget

Date 11/05 11/12 11/19 11/26 12/03 12/10 12/17 12/24 12/31 01/07 01/14 01/21 01/28 02/04 02/11 02/18 02/25 03/04

Stage 1: Website Development 15-Jan




Stage 2: Beta Testing and Refinement 25-Feb




Full Website Ready 4-Mar X


Atrinsic and MomSpot Consolidated ProForma 3 Year Income Statement Year 1 Year 2 Year 3 Online Retail Sales 77,410 16,053,777 32,815,867 Revenue Momspot Affiliate Marketing Rev 3,871 1,259,073 3,380,034 Display Ad Revenue 734 67,579 98,448 Premium Mobile App Sales 502 84,119 127,239 Sponsored Promotion Fees 2,963 271,437 532,095 Data Analytics Sales PPC Ad Revenue 2,868 839,382 1,831,954 Total Revenue 10,938 2,521,590 5,969,770 Cost of Sales IT hosting services 2,700 5,000 6,180 Procurment & affiliate management 774 190,963 338,003 Ad Sales (% of ad rev) 153 10,473 9,845 Sponsored Promotions (% of promo rev) 908 69,261 106,419 Paid traffic (% of rev) 4,139 767,506 1,790,931 App Store Commissions (% of app rev) 151 21,302 25,448 Total Cost of Sales 8,825 1,064,506 2,276,826 Gross Profit 2,113 1,457,083 3,692,944

12-12553-jmp Doc 75-7 Filed 01/22/13 Entered 01/22/13 15:29:23 Exhibit Debtors Post-Confirmation Pro Forma Financial Statement Projectio Pg 1 of 4

Atrinsic and MomSpot Consolidated ProForma 3 Year Income Statement (continued)

Indirect Costs Labor Costs Salaries & Benefits 94,000 230,750 556,200 Total Labor Costs 94,000 230,750 556,200 Operating Expenses Graphic Design 4,500 - - Website Optimization (eg. SEO) 4,000 9,500 12,360 Website support & maintenance 4,000 7,750 12,360 Telephone & Utilities 1,500 2,400 2,472 Internet 1,350 1,800 1,854 Office expenses & supplies 950 4,500 12,360 Software 650 2,250 3,090 Misc Expenses 500 600 618 Licenses/Fees/Permits 400 600 618 Equipment Rental 550 1,900 3,090 Dues & Subscriptions 275 950 1,236 Legal & Consulting 3,000 15,500 30,900 Rent 0 70,000 123,600 Marketing (non-SEO) 5,500 19,000 30,900 PR 3,000 12,000 12,360 Travel 300 2,600 6,180 Meals & Entertainment 300 2,600 6,180 Total Opex 30,775 153,950 260,178 Total Indirect Costs 124,775 384,700 816,378


Atrinsic and MomSpot Consolidated ProForma 3 Year Income Statement (continued)Corporate Overhead Payroll and Fringe 144,000 180,000 216,000 T & E 12,000 12,000 12,000 Rent 12,000 12,000 12,000 Utilities 2,000 2,000 2,000 Office Expense 2,000 2,000 2,000 General Insurance 12,000 12,000 12,000 Legal * 30,000 30,000 30,000 Accounting * 50,000 60,000 90,000 Public Costs * 30,000 30,000 30,000 D & O Insurance * 50,000 60,000 60,000 Miscellaneous 12,000 12,000 12,000 Total Corporate Overhead 356,000 412,000 478,000 EBITDA (478,662) 660,383 2,398,566 * Public Overhead Costs are estimates and subject to negotiation


Atrinsic BK Doc 75

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