UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
)
In re: ) Chapter 11
)
CAMBEX CORPORATION, ) Case No. 97-
19640-CJK
)
Debtor )
)
AMENDED DISCLOSURE STATEMENT WITH RESPECT TO
REORGANIZATION PLAN (MARCH 17, 1998) OF CAMBEX
CORPORATION
BROWN, RUDNICK, FREED & GESMER, P.C.
Attorneys for Cambex
Debtor-in-Possession
One Financial Center
Boston, MA 02111
617-856-8200
JOSEPH F. RYAN
STEVEN D. POHL
FRANK RUDY COOPER
DATED: Waltham, Massachusetts
March 17, 1998
A SUMMARY OF THE DISCLOSURE STATEMENT IS CONTAINED AT
PAGES A THROUGH D IMMEDIATELY AFTER THE TABLE OF
CONTENTS.
TABLE OF CONTENTS
A-I SUMMARY
I. INTRODUCTION 1
A. Definitions 1
B. Notice To Holders Of Claims And Holders
Of Interests 1
C. Solicitation Package 2
D. Voting Procedures, Ballots, And Voting
Deadline 2
E. Confirmation Hearing And Deadline For
Objections To Confirmation 3
II. HISTORY OF CAMBEX CORPORATION AND COMMENCEMENT
OF THE CASE 4
A. Cambex's Businesses 4
B. Need For Restructuring And Chapter 11
Relief 4
III. THE CHAPTER 11 CASE 4
A. Operations Of Cambex During The Chapter
11 Case 5
B. Parties In Interest 5
1. Cambex And Its Advisors 5
2. The Creditors' Committee And Its
Advisors 5
C. Other Significant Events 6
1. Sublease of Waltham Facility 6
D. Bar Dates, Notice Of Bar Dates, And
Filing Of Proofs Of Claim 6
IV. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 6
A. Results of Operations for the Years
Ended December 31, 1997 and December 31,
1996. 7
B. Liquidity and Capital Resources 8
V. CAMBEX'S BUSINESS PLAN 9
A. General 9
B. The Company's Business Strategy 9
C. Products 9
D. Competition 10
E. Management 11
1. Executive Compensation 11
F. Risk Factors 12
1. History of Operating Losses 12
3. Future Funding Needs; Uncertainty
of Future Funding 13
4. Competition and Technology Change 13
5. Uncertain Public Market for Common
Stock 13
VI. SUMMARY OF THE REORGANIZATION PLAN 13
A. Certain Matters Regarding Organization,
Classification, And Treatment Of Claims
And Interests 13
1. Organization And Classification 13
2. Treatment Of Claims And Interests 14
B. Directors And Officers 19
C. Revesting Of Assets 19
D. Description Of Securities To Be Issued
In Connection With The Plan; Limitation
on Stock Options 19
1. New Common Stock 19
2. Limitation on Issuance of Stock
Options 19
E. Distributions Under the Plan 20
1. Delivery Of Distributions 20
2. Procedures For Resolving And
Treating Disputed And Contingent
Claims 20
a. No Distributions Pending
Allowance 20
b. Distribution Reserve 21
c. Distributions After Allowance 21
F. Miscellaneous Matters 21
1. Post-Petition Interest 21
2. Substantial Contribution
Compensation And Expenses Bar Date 21
3. Treatment Of Executory Contracts
And Unexpired Leases 22
a. Assumed Contracts And Leases 22
b. Payments Related To Assumption
Of Executory Contracts And
Unexpired Leases; Bar to Pre-
Confirmation Date Claims 22
c. Rejected Contracts And Leases 22
d. [Intentionally Omitted] 23
e. Unidentified Executory
Contracts And Unexpired Leases 23
f. Disputes Relating To
Assumption, Assumption And
Assignment, And/Or Rejection
Of Executory Contracts 23
4. Committees 23
5. Retention Of Jurisdiction 23
6. Discharge 23
7. United States Trustee Fees 23
VII. CERTAIN OTHER FACTORS TO BE CONSIDERED 24
A. General Considerations 24
B. Inherent Uncertainty Of Financial
Projections 24
C. Risks Associated With Reorganized Cambex 24
VIII. CERTAIN SECURITIES LAW ASPECTS OF THE PLAN 24
A. General 25
B. Initial Issuance Of Securities Under The
Plan 25
C. Resale Of Securities 25
1. Persons Other Than Underwriters Or
Dealers. 25
2. Underwriters 25
3. Dealers 27
D. Absence Of Market For Securities 27
1. New Common Stock 27
2. Liquidity 28
IX. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
PLAN 28
A. Federal Income Tax Consequences To
Cambex 29
1. Cancellation Of Indebtedness 29
2. Utilization Of Net Operating Loss
Carryovers 29
3. Alternative Minimum Tax 30
B. Federal Income Tax Consequences To
Holders Of Claims 31
1. Class 4 Unsecured Creditors 31
2. Accrued Interest On Allowed Claims 32
3. Market Discount 33
4. Recapture On Later Disposition Of
Common Stock 33
5. Other Tax Effects Of Ownership Of
Common Stock 33
C. Federal Income Tax Consequences To
Holders Of Common Stock 34
X. FEASIBILITY OF THE PLAN AND THE BEST
INTERESTS OF CREDITORS 34
A. Feasibility Of The Plan 34
B. Acceptance Of The Plan 35
C. Best Interests Of Holders Of Claims 35
D. Liquidation Analysis 36
E. Application Of The Best Interests Of
Creditors And Equity Security Holders
Test To The Liquidation Analysis 37
F. Confirmation Without Acceptance Of All
Impaired Classes: The "Cramdown"
Alternative 37
G. Conditions To Confirmation And/Or
Consummation 38
1. Conditions To The Confirmation Date 38
2. Conditions To The Consummation Date 38
H. Waiver Of Conditions To The Confirmation
Date Or Consummation Date 40
XI. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION
OF THE PLAN 40
A. Continuation Of The Chapter 11 Case 40
B. Alternative Plans Of Reorganization 40
C. Liquidation Under Chapter 7 41
D. Plan Preferable To Alternatives 41
XII. VOTING REQUIREMENTS 41
A. Parties In Interest Entitled To Vote 42
B. Classes Impaired Under The Plan 43
XIII. CONCLUSION 43
A. Hearing On And Objections To
Confirmation 44
1. Confirmation Hearing 44
2. Date Set For Filing Objections To
Confirmation 44
B. Recommendation 44
EXHIBIT LIST
Exhibit 1 -- Reorganization Plan
Exhibit 2 -- Projected Financial Information
Exhibit 3 -- 1995 Audited Financial Statements
Exhibit 4 -- 1996 Audited Financial Statements
Exhibit 5 -- 1997 Unaudited Financial Statements
Exhibit 6 -- Liquidation Analysis
DISCLOSURE STATEMENT SUMMARY
This Summary is intended solely as a summary of
matters described herein. For a complete understanding
of the Plan ("Plan") you should read the Amended
Disclosure Statement ("Disclosure Statement") the
Plan, and the exhibits and schedules thereto in their
entirety. A copy of the Plan is appended to this
Disclosure Statement as Exhibit 1. Capitalized terms
used in this Summary are given the meanings ascribed to
them in the Disclosure Statement and the Plan.
The Reorganization. Cambex Corporation ("Cambex")
filed a petition for relief under Chapter 11 of the
Bankruptcy Code on October 10, 1997. On February 9,
1998, Cambex filed the Plan and amended the Plan on
March 17, 1998. The following Disclosure Statement
describes certain aspects of the Plan, Cambex's
business plan, and related matters.
CAMBEX HAS CONCLUDED THAT THE RECOVERY TO
CREDITORS WILL BE MAXIMIZED BY THE CONTINUED OPERATION
OF CAMBEX THROUGH APPLICATION OF THE BUSINESS STRATEGY
REFLECTED IN THE DISCLOSURE STATEMENT. THE PLAN IS
SUPPORTED BY THE CREDITORS' COMMITTEE. THE CREDITORS'
COMMITTEE'S SUPPORT IS PREDICATED ON CAMBEX'S ABILITY
TO DEMONSTRATE THAT IT HAS OBTAINED THE FINANCING
REFERENCED IN SECTION V.F.2 OR HAS OTHERWISE
DEMONSTRATED THAT IT CAN SATISFY ITS OBLIGATIONS UNDER
THE PLAN.
Certain Administrative, Priority, Secured and other
Claims will be paid in Cash. Holders of
Unsecured Claims have the option of being
paid in Cash or a combination of Cash and
Common Stock of Cambex. ANY HOLDER OF AN
UNSECURED CLAIM WHO DOES NOT SPECIFY EITHER
OPTION SHALL BE DEEMED TO HAVE ELECTED THE
OPTION TO BE PAID CASH ONLY. Cambex's
existing equity security holders will retain
their stock.
Treatment of Claims and Interests
Treatment of Claims and Interests under the Plan
shall be as follows:
Est. Summary of Treatment
Amount
Administrative
Claims $350,000 (i) Paid in Cash in full on
(i) Professional $ 50,000 Consummation Date
fees (ii) Paid in ordinary course
(ii) $135,000 of business
Trade payables
and accruals (iii) Paid in Cash in full
(iii) on Consummation Date
Payments
required to
Cure executory
contracts and
unexpired
leases to be
assumed
Priority Tax Claims $ 50,000 (a) Paid in Cash in full on
Consummation Date, or (b)
deferred Cash Payments, with
interest, over no more than
six (6) years from Assessment,
subject to prepayment in full
or part
Class 1: Other $ 50,000 (a) Paid in Cash on the
Priority Claims Consummation Date or (b)
Reinstatement
Class 2: Secured
Claims (i) (i) deferred cash payments,
(i) 2.01 - City $8,000 with interest, over six (6)
(ii) 2.02 - (ii) $-0- years, subject to prepayment
other in full or in part (ii) at the
option of Cambex or
Reorganized Cambex: (a)
retention of lien in
collateral and receipt of
deferred Cash payments
totaling at least unpaid
portion of Claim, of a value,
as of the Consummation Date,
of at least the value of the
holder's interest in the
collateral; (b) abandonment of
collateral to holder; c)
payments or liens amounting to
indubitable equivalent of
value of holder's interest in
collateral; or (d)
Reinstatement
Class 3: General $15,000 Paid in Cash in full on the
Unsecured Claims (estimated Consummation Date
Less than or Equal claimants
to $500 (Convenience - 75)
Class)
Class 4: All Other $5,000,000 (i) Option A. Paid in full in
General Unsecured (estimated Cash over thirty (30) months
Claims claimants starting six (6) months after
- 140) Consummation Date at a rate of
two and one-half percent (2 1/2%)
of Allowed Claim over first
six (6) months, three and one-
half percent (3 1/2%) over the
next twenty-three (23) months
and four and one-half percent
(4 1/2%) in the last month.
(ii) Option B. Paid in Cash
eighty percent (80%) of
Allowed Claim over thirty (30)
months starting six (6) months
after Consummation Date at a
rate of two percent (2%) over
the first six (6) months and
two and five-sixths percent (2
5/6%) over the next twenty-
four (24) months, plus, for
every one dollar ($1.00) of
Allowed Claim in excess of the
amount payable in Cash (i.e.,
20% of the Allowed Claim), two
shares of Common Stock of
Reorganized Cambex.
Class 5: All Stockholder N.A. Stockholders of Cambex will
Interests retain their common stock.
Cambex Corporation of Waltham, Massachusetts,
develops, manufactures and markets a variety of direct
access storage products that improve the performance of
large and midsize computers by manufacturers such as
IBM that are used as enterprise servers by
organizations throughout the world. These products
include central and expanded memory, controller cache
memory, DASD and disk array systems, disk and tape
subsystems and related software products. They are used
to enhance the performance of IBM, Sun Microsystems,
Hewlett-Packard and Windows NT computer platforms.
Cambex has invested in the development of disk
array products for both the enterprise and client-
server storage sector. The result has been the
introduction of major product families that seek to
take advantage of the $8 billion annual disk array
storage market.
Cambex's CascadeT memory storage systems generally
are faster and have larger capacities (up to 272
gigabytes per string) than products they replace.
Cambex's unique DatasequencingT architecture also
provides a variety of performance enhancements. They
include a three-level cache memory system that enables
Cascade units to eliminate a common disk problem,
called "RPS misses", that occurs when disk array usage
is very high, and a four-path access to the 3990
controller that minimizes resource contention and
performance degradation. In addition, Cascade systems
offer enhanced environmental capabilities. Cascade
products also incorporate ESCON support, record and
track-level caching and many significant extended
functions such as dual copy, remote dual copy (XRC),
PPRC, DASD fast-write and DFSMS data set placement and
migration.
Cambex's Centurion is a scalable RAID disk array;
a data center class product for mission critical
applications. Its high-availability features include
redundant disks, controllers, power supplies, fans,
platform interconnections and airflow and temperature
sensing systems eliminating single points of failure.
In addition its efficient failover software with large
cache memory capacity provides high level performance.
Cambex is developing a fiber channel connector
capability for its Centurion product family. This will
further enhance the Centurion performance and multi-
platform interconnect capability.
The recent rapid decline in the price of used IBM
mainframe memory has for the IBM 9021 computers led
Cambex to refocus its development effort on IBM's CMOS
parallel enterprise servers, which are rapidly
replacing older Model 9021 mainframes. Cambex will
continue to supply memory for selected mainframes as
well as cache memory for IBM 3990 storage control
units. It will also continue to develop new products as
the memory storage market undergoes changes.
DISCLAIMER
ALL CREDITORS ARE ADVISED AND ENCOURAGED TO READ THIS
DISCLOSURE STATEMENT AND THE PLAN IN THEIR ENTIRETY
BEFORE VOTING TO ACCEPT OR REJECT THE PLAN. THIS
DISCLOSURE STATEMENT CONTAINS SUMMARIES OF CERTAIN
PROVISIONS OF THE PLAN, CERTAIN STATUTORY PROVISIONS,
CERTAIN EVENTS IN CAMBEX'S CHAPTER 11 CASE, AND CERTAIN
FINANCIAL INFORMATION. ALTHOUGH CAMBEX BELIEVES THAT
THE PLAN AND RELATED DOCUMENT SUMMARIES ARE FAIR AND
ACCURATE, SUCH SUMMARIES ARE QUALIFIED TO THE EXTENT
THAT THEY DO NOT SET FORTH THE ENTIRE TEXT OF SUCH
DOCUMENTS OR STATUTORY PROVISIONS.
THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT
ARE MADE ONLY AS OF THE DATE HEREOF, AND THERE CAN BE
NO ASSURANCE THAT THE STATEMENTS CONTAINED HEREIN WILL
BE CORRECT AT ANY TIME AFTER THE DATE HEREOF. FACTUAL
INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT HAS
BEEN PROVIDED BY CAMBEX'S MANAGEMENT, EXCEPT WHERE
OTHERWISE SPECIFICALLY NOTED. CAMBEX IS UNABLE TO
WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED
HEREIN, INCLUDING THE FINANCIAL INFORMATION, IS WITHOUT
ANY INACCURACY OR OMISSION.
THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN
ACCORDANCE WITH SECTION 1125 OF THE BANKRUPTCY CODE AND
RULE 3016(c) OF THE FEDERAL RULES OF BANKRUPTCY
PROCEDURE AND NOT NECESSARILY IN ACCORDANCE WITH
FEDERAL OR STATE SECURITIES LAWS OR OTHER APPLICABLE
LAW. THIS DISCLOSURE STATEMENT HAS NEITHER BEEN
APPROVED NOR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION (THE "SEC"), NOR HAS THE SEC PASSED UPON THE
ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED
HEREIN. PERSONS OR ENTITIES TRADING IN, OR OTHERWISE
PURCHASING, SELLING, OR TRANSFERRING SECURITIES OF
CAMBEX CORPORATION OR REORGANIZED CAMBEX SHOULD
EVALUATE THIS DISCLOSURE STATEMENT AND THE PLAN IN
LIGHT OF THE PURPOSE FOR WHICH THEY WERE PREPARED.
AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS, AND
OTHER ACTIONS OR THREATENED ACTIONS, THIS DISCLOSURE
STATEMENT SHALL NOT CONSTITUTE OR BE CONSTRUED AS AN
ADMISSION OF ANY FACT OR LIABILITY, STIPULATION, OR
WAIVER, BUT RATHER AS A STATEMENT MADE IN SETTLEMENT
NEGOTIATIONS.
THIS DISCLOSURE STATEMENT SHALL NOT BE ADMISSIBLE IN
ANY NONBANKRUPTCY PROCEEDING INVOLVING CAMBEX
CORPORATION OR REORGANIZED CAMBEX, OR ANY OTHER PARTY,
NOR SHALL IT BE CONSTRUED TO BE CONCLUSIVE ADVICE ON
THE TAX, SECURITIES, OR OTHER LEGAL EFFECTS OF THE
CONSUMMATION DATE AS TO HOLDERS OF CLAIMS AGAINST, OR
EQUITY INTERESTS IN, CAMBEX CORPORATION.
DISCLOSURE STATEMENT WITH RESPECT TO
REORGANIZATION PLAN OF CAMBEX CORPORATION
I. INTRODUCTION
Cambex Corporation ("Cambex") hereby submits this
disclosure statement (the "Disclosure
Statement") pursuant to section 1125 of the
United States Bankruptcy Code (the
"Bankruptcy Code"), for use in the
solicitation of votes on the Reorganization
Plan (the "Plan") proposed by Cambex, filed
with the United States Bankruptcy Court for
the District of Massachusetts (the
"Bankruptcy Court") on February 9, 1998.
This Disclosure Statement sets forth certain
information regarding Cambex's pre-petition history,
significant events that have occurred during Cambex's
Chapter 11 Case, and the anticipated operations of
Reorganized Cambex. This Disclosure Statement also
describes the Plan, including certain alternatives to
the Plan, certain effects of confirmation of the Plan,
certain risk factors associated with 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 in impaired Classes must follow for their votes
to be counted.
FOR A DESCRIPTION OF THE PLAN AND VARIOUS RISK AND
OTHER FACTORS PERTAINING TO THE PLAN, PLEASE SEE
"SUMMARY OF THE REORGANIZATION PLAN," "COMPANY'S
BUSINESS PLAN" (INCLUDING "RISK FACTORS") AND "CERTAIN
OTHER FACTORS TO BE CONSIDERED."
A. Definitions
All terms not defined in this Disclosure Statement
have the meanings ascribed to them in the Plan (a copy
of which is appended hereto as Exhibit 1).
B. Notice To Holders Of Claims And Holders Of
Interests
This Disclosure Statement is being transmitted to
certain holders of Claims against Cambex. The purpose
of this Disclosure Statement is to provide adequate
information to enable you, as the holder of a Claim
against Cambex, to make a reasonably informed decision
with respect to the Plan prior to exercising your right
to vote to accept or to reject the Plan.
On March 17, 1998, the Bankruptcy Court approved
this Disclosure Statement as containing information of
a kind and in sufficient detail adequate to enable the
holders of Claims against Cambex to make an informed
judgment with respect to acceptance or rejection of the
Plan. THE BANKRUPTCY COURT'S APPROVAL OF THIS
DISCLOSURE STATEMENT DOES NOT CONSTITUTE EITHER A
GUARANTY OF THE ACCURACY OR COMPLETENESS OF THE
INFORMATION CONTAINED HEREIN OR AN ENDORSEMENT OF THE
PLAN BY THE BANKRUPTCY COURT.
ALL HOLDERS OF CLAIMS AGAINST CAMBEX ARE
ENCOURAGED TO READ THIS DISCLOSURE STATEMENT AND ITS
EXHIBITS CAREFULLY AND IN THEIR ENTIRETY BEFORE
DECIDING TO VOTE EITHER TO ACCEPT OR TO REJECT THE
PLAN. This Disclosure Statement contains important
information about the Plan, considerations pertinent to
acceptance or rejection of the Plan, and developments
concerning the Chapter 11 Case.
THIS DISCLOSURE STATEMENT IS THE ONLY DOCUMENT
AUTHORIZED BY THE BANKRUPTCY COURT TO BE USED IN
CONNECTION WITH THE SOLICITATION OF VOTES ON THE PLAN.
No solicitation of votes may be made except after
distribution of this Disclosure Statement, and no
person has been authorized to distribute any
information concerning Cambex other than the
information contained herein.
CERTAIN OF THE INFORMATION CONTAINED IN THIS
DISCLOSURE STATEMENT IS BY ITS NATURE FORWARD LOOKING
AND CONTAINS ESTIMATES, ASSUMPTIONS, AND PROJECTIONS
THAT MAY BE MATERIALLY DIFFERENT FROM ACTUAL FUTURE
RESULTS.
Except with respect to the projections and pro
forma opening balance sheet as of the projected
Consummation Date as set forth in Exhibit 2 hereto (the
"Projections") and except as otherwise specifically
stated herein, this Disclosure Statement does not
reflect any events that may occur subsequent to the
date hereof and that may have a material impact on the
information contained in this Disclosure Statement.
Cambex and Reorganized Cambex do not intend to update
the Projections. Thus, the Projections will not reflect
the impact of any subsequent events not already
accounted for in the assumptions underlying the
Projections. Further, Cambex and Reorganized Cambex do
not anticipate that any amendments or supplements to
this Disclosure Statement will be distributed to
reflect such occurrences. Accordingly, the delivery of
this Disclosure Statement shall not under any
circumstance imply that the information herein is
correct or complete as of any time subsequent to the
date hereof.
EXCEPT WHERE SPECIFICALLY NOTED, THE FINANCIAL
INFORMATION CONTAINED HEREIN HAS NOT BEEN AUDITED BY A
CERTIFIED PUBLIC ACCOUNTANT AND HAS NOT BEEN PREPARED
IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES.
C. Solicitation Package
Accompanying this Disclosure Statement are copies of(i)
the Plan; (ii) the notice of, among other
things, the time for submitting Ballots to
accept or reject the Plan; the date, time and
place of the hearing to consider the
confirmation of the Plan and related matters;
and the time for filing objections to the
confirmation of the Plan (the "Confirmation
Hearing Notice"); and (iii) one or more
Ballots (and return envelopes) to be used by
you in voting to accept or to reject the
Plan. FOR HOLDERS OF UNSECURED CLAIMS, THE
BALLOT ALSO WILL BE USED TO MAKE THE ELECTION
BETWEEN BEING PAID CASH OR A COMBINATION OF
CASH AND COMMON STOCK OF CAMBEX.
D. Voting Procedures, Ballots, And Voting Deadline
After carefully reviewing the Plan, this
Disclosure Statement, and the detailed instructions
accompanying your Ballot, please indicate your
acceptance or rejection of the Plan by voting in favor
of or against the Plan on the enclosed Ballot. Please
complete and sign your original Ballot (copies will not
be accepted) and return it in the envelope provided.
HOLDERS OF UNSECURED CLAIMS ALSO SHOULD INCLUDE IN
THEIR BALLOT WHICH PAYMENT OPTION THEY ELECT, CASH OR A
COMBINATION OF CASH AND COMMON STOCK OF CAMBEX, EVEN IF
THEY VOTE TO REJECT THE PLAN.
Each Ballot has been coded to reflect the Class of
Claims it represents. Accordingly, in voting
to accept or reject the Plan, you must use
only the coded Ballot or Ballots sent to you
with this Disclosure Statement.
IN ORDER FOR YOUR VOTE TO BE COUNTED, YOUR BALLOT
MUST BE PROPERLY COMPLETED AS SET FORTH ABOVE AND IN
ACCORDANCE WITH THE VOTING INSTRUCTIONS ON THE BALLOT
AND RECEIVED NO LATER THAN April 16, 1998 at 4:00 P.M.
EASTERN TIME (THE "VOTING DEADLINE") BY THE VOTING (OR
BALLOT) AGENT, WHOSE NAME AND ADDRESS APPEARS ON THE
FACE OF THE BALLOT.
If you have any questions about the procedure for
voting your Claim or with respect to the packet of
materials that you have received, please contact Cambex
at telephone no. (617) 890-6000 (Ext. 299).
If you have any questions about the amount of your
Claim, please contact Cambex at telephone no. (617) 890-
6000 (Ext. 235).
If you wish to obtain, at your own expense, unless
otherwise specifically required by Federal
Rule of Bankruptcy Procedure 3017(d), an
additional copy of the Plan, this Disclosure
Statement, and the exhibits to such
documents, please contact Brown, Rudnick,
Freed & Gesmer, One Financial Center, Boston,
MA 02111, Attn: Marnie A. Ratner.
FOR FURTHER INFORMATION AND INSTRUCTION ON VOTING
TO ACCEPT OR REJECT THE PLAN, SEE "VOTING
REQUIREMENTS."
E. Confirmation Hearing And Deadline For Objections
To Confirmation
Pursuant to section 1128(a) of the Bankruptcy Code and
Federal Rule of Bankruptcy Procedure 3017(c),
the Bankruptcy Court has scheduled the
Confirmation Hearing for April 23, 1998 at
10:30 a.m. before the Honorable Carol J.
Kenner, United States Bankruptcy Judge, in
Court Room 4, 10 Causeway Street, Boston,
Massachusetts. The Bankruptcy Court has
directed that objections, if any, to
confirmation of the Plan be served and filed
on or before April 16, 1998 at 4:00 p.m.
Eastern Time. The Confirmation Hearing may be
adjourned from time to time by the Bankruptcy
Court without further notice except for the
announcement of the adjournment date made at
the Confirmation Hearing or at any subsequent
adjourned Confirmation Hearing.
THE PLAN HAS THE SUPPORT OF THE CREDITORS'
COMMITTEE. THE CREDITORS' COMMITTEE'S SUPPORT IS
PREDICATED ON CAMBEX'S ABILITY TO DEMONSTRATE THAT IT
HAS OBTAINED THE FINANCING REFERENCED IN SECTION V.F.2
OR HAS OTHERWISE DEMONSTRATED THAT IT CAN SATISFY ITS
OBLIGATIONS UNDER THE PLAN. IN THEIR VIEW, THE
TREATMENT OF HOLDERS OF CLAIMS IN IMPAIRED CLASSES
UNDER THE PLAN CONTEMPLATES GREATER RECOVERY FOR
HOLDERS OF CLAIMS IN IMPAIRED CLASSES ELIGIBLE TO VOTE
ON THE PLAN THAN WOULD BE AVAILABLE IN LIQUIDATION.
ACCORDINGLY, THEY BELIEVE THAT THE PLAN IS IN THE BEST
INTERESTS OF HOLDERS OF CLAIMS IN SUCH IMPAIRED CLASSES
AND RECOMMEND THAT ALL HOLDERS OF CLAIMS IN IMPAIRED
CLASSES VOTE TO ACCEPT THE PLAN.
II. HISTORY OF CAMBEX CORPORATION AND
COMMENCEMENT OF THE CASE
A. Cambex's Businesses
Cambex is a public reporting company engaged in the
business of developing, manufacturing and
marketing products that enhance the storage
capacity and reliability of IBM mainframe
computers and client server computers
manufactured by IBM and other companies, such
as Hewlett Packard and Sun Microsystems. As
of October 10, 1997, Cambex employed
approximately 36 people, primarily at its
principal facility in Waltham, Massachusetts,
which it leases. Cambex's audited financial
statements for the years ending December 31,
1995 and 1996, respectively, are annexed
hereto as Exhibits 3 and 4, respectively and
Cambex's unaudited financial statements for
the year ending December 31, 1997 are annexed
hereto as Exhibit 5.
B. Need For Restructuring And Chapter 11 Relief
Cambex's primary business is the creation of additional
memory and storage systems for IBM mainframe
computers and client server computers
manufactured by IBM and others. The market
for such memory systems does not mature until
twelve to eighteen months after the
prospective customer has purchased and
utilized much of the storage capacity of its
mainframe computer. As IBM creates new models
of computers, the requirements for additional
memory subsides until such time as the market
for new memory for the new computer matures.
As a result, the market for Cambex's products
runs in cycles that lag behind the creation
of each new computer.
With the recent introduction of a new IBM mainframe
series, Cambex experienced a significant
decline in sales of its principal memory
storage product. As a result of Cambex's
decline in sales and resulting inability to
timely pay its vendors and other creditors,
some creditors commenced collection actions
and sought to attach Cambex's bank accounts.
Cambex commenced this proceeding in order to
stay those creditor actions and to provide
for a forum to reorganize.
II. THE CHAPTER 11 CASE
Following commencement of the Chapter 11 Case, all
actions and proceedings against Cambex and
all acts to obtain any property of Cambex's
Estate were automatically stayed under
section 362 of the Bankruptcy Code. This
relief gave Cambex an opportunity to assess
and reorganize its business. Described below
are some of the important measures taken by
Cambex during the Chapter 11 Case.
A. Operations Of Cambex During The Chapter 11 Case
Since the commencement of this Chapter 11 case, Cambex
has further reduced its operating expenses,
subleased part of its facilities and
aggressively refocused its business strategy
to concentrate on multiplatform shared
storage solutions. The first model of the
advanced cross enterprise storage became beta
site ready and the development of the fiber
channel open system storage product has
progressed on plan. Cambex's field service
and customer support operations continued
uninterrupted. Rebuilding Cambex's sales
force has begun and it is expected to
accelerate. Cambex is aggressively pursuing
partnerships and establishing reseller
channels.
B. Parties In Interest
The parties described below have been major
parties in interest in the Chapter 11 Case to date.
1. Cambex And Its Advisors.
During the course of the Chapter 1 I Case, Cambex has
managed its properties and operated its
business as debtor-in-possession. Cambex is
the Plan Proponent. Cambex has retained
Brown, Rudnick, Freed & Gesmer as Chapter 11
counsel. Cambex has consulted with its
counsel on all aspects of its business,
financial restructuring, and operations as a
debtor-in-possession in the Chapter 11 Case.
2. The Creditors' Committee And Its Advisors
The Creditors' Committee represents general unsecured
creditors of Cambex. The Creditors' Committee
is comprised of the following creditors
holding general unsecured claims: Carlo
Gavazzi, Inc., Arthur Andersen, LLP, Vitesse
Semiconductor Corporation, Hitachi Data
Systems, Boston Edison Company, Digital
Equipment Inc., EMC Corporation, CIT
GroupEquipment Financing, Inc., and Hillside
Associates. Gregory Mazmanian of EMC
Corporation serves as chair of the Creditors'
Committee. Goulston & Storrs, P.C. are the
attorneys for the Creditors' Committee and
Price Waterhouse is the Creditors'
Committee's financial advisor.
The Creditors' Committee has reviewed Cambex's
operations during the pendency of the Chapter
11 Case and has examined the measures taken
by Cambex to reorganize its business as set
forth above. The Creditors' Committee has
also monitored the proceedings before the
Bankruptcy Court and, where appropriate, has
advocated the interests of Cambex's creditors
by supporting certain motions made by Cambex.
The Creditors' Committee supports the Plan.
The Creditors' Committee's support is
predicated on Cambex's ability to demonstrate
that it has obtained the financing referenced
in section V.F.2 or has otherwise
demonstrated that it can satisfy its
obligations under the Plan.
C. Other Significant Events
1. Sublease of Waltham Facility
On January 16, 1998 Cambex entered into a Sublease
Agreement with a third party pursuant to
which Cambex sublet approximately 20,000
square feet in its leased Waltham facility
(which is approximately 30% of Cambex's total
leased space at the Waltham facility). Under
the Sublease Agreement, Cambex's subtenant
will pay rent at a rate substantially in
excess of the rent payable by Cambex under
its primary lease for this space.
Accordingly, the Sublease Agreement relieves
Cambex of the economic burdens associated
with 30% of the leased facility, and further
provides Cambex additional revenue based upon
a rental rate in the sublease in excess of
the rent under the primary lease. By order
dated January 30, 1998, the Court approved
the Sublease Agreement.
D. Bar Dates, Notice Of Bar Dates, And Filing Of
Proofs Of Claim
By order dated December 29, 1997 (the "Bar Date
Order"), the Bankruptcy Court, pursuant to Bankruptcy
Rule 3003(c) (3), fixed February 2, 1998 (April 8, 1998
for governmental entities) as the final date for filing
certain proofs of Claim in the Chapter 11 Case (the
"Bar Date"). The Bar Date Order also approved, pursuant
to Bankruptcy Rule 2002 (a)(8), the form of notice of
the Bar Date to be mailed to creditors and other
parties in interest. Cambex complied with the Bar Date
Order by serving notice of the Bar Date as required.
Proofs of claim aggregating in excess of $5.7
million have been filed in the Chapter 11 Case. Based
upon Cambex's preliminary evaluation of such proofs of
claim, Cambex estimates that approximately $5,000,000
may ultimately be allowed as Unsecured Claims under
Class 4. The balance of the Claims are principally
Priority Tax Claims (approximately $50,000) and Class 1
Other Priority Claims (approximately $50,000). Cambex
intends to file its objections to Disputed Claims prior
to the Confirmation Date. The aggregate amount of
Claims likely to be filed arising from rejection of
executory contracts and unexpired leases is unknown.
The process of Cambex's evaluation of, objection to,
and resolution of proofs of claim may continue after
the Confirmation Date, and Cambex cannot estimate
accurately the amount of Claims that will become
Allowed Claims.
The Plan provides for a Distribution Reserve with
respect to Disputed Claims, as more
particularly described in Section VI.E of
this Disclosure Statement.
IV. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cambex has prepared unaudited financial statements for
the year ended December 31, 1997 and
management's discussion and analysis compares
these results with the audited results for
the year ended December 31, 1996.
A. Results of Operations for the Years Ended December
31, 1997 and December 31, 1996.
Revenues
Total revenues were $9,762,000 and $22,917,000 in 1997
and 1996, respectively. Cambex's revenues for
the mainframe memory products for the IBM
ES/902l declined significantly in 1997.
Historically, Cambex's mainframe memory
revenues have been cyclical, dependent on the
technological changes initiated by IBM.
During 1997, IBM introduced a new CMOS
mainframe processor, and as a result,
customers reduced their purchases of
incremental memory for the ES/9021 machines.
The demand for additional memory usually lags
the introduction of new generations of
mainframes by twelve to eighteen months.
Cambex had planned to balance the decline in
mainframe memory revenues by selling
mainframe and client/server disk storage
products. Initial shipments of Cambex's
mainframe disk storage product (Cascade)
experienced operating problems, which
required additional time to resolve. These
problems were corrected by the end of 1997.
Costs and Expenses
Cambex has reduced its general level of expenses
since 1994 as a result of decreasing annual revenues.
The total number of employees at the end of each of the
years 1994, 1995 1996 and 1997 was 160, 140, 80, and
34, respectively. These staff reductions have impacted
all functional areas and should be considered when
analyzing comparative financial statements.
Cost of Sales as a percentage of revenues was 96%
and 75% in 1997 and 1996, respectively. The major
reason for the increased cost of sales percentage is
the decrease in total revenues and the resulting effect
of fixed overhead costs. Inventory write-downs in 1997
and 1996 were approximately $2,700,000 and $3,000,000,
respectively. Their effect on the cost of sales
percentage was 28% and 13% in 1997 and 1996,
respectively.
Research and development expenses represented 24%
($2,371,000) and 15% ($3,433,000) in 1997 and 1996,
respectively. The decrease in total expenses is due
mainly to reduced staffing.
Sales, general and administrative expenses were
$4,713,000 and $8,985,000 in 1997 and 1996,
respectively. The reduction in expenses is due
primarily to lower staffing levels.
Other Income and Expense
Cambex recognized a net expense of $1,822,000 in 1996,
which was entirely due to amortization of a
technology license and marketing agreement
that was acquired in 1992. The amortization
was over a five year period, ending in 1996.
Cambex recognized a net expense of $339,000
in 1997, of which approximately $200,000
relates to accrued professional services in
conjunction with the Chapter 11 services.
Cambex recorded $244,000 in interest expense
in 1996, which was related to a revolving
credit agreement with a bank. The entire
balance of the outstanding loan was repaid in
February 1997.
Income Taxes
Cambex recorded no income tax provision or credit in
1997 and a $200,000 net credit in 1996.
Net Income (Loss)
Cambex incurred a net loss of $7,038,000, or $.78 per
share, in 1997 and a net loss of $8,632,000,
or $.96 per share, in 1996.
B. Liquidity and Capital Resources
Cambex's ability to fund its long term operations is
dependent on several factors, including the
formulation and confirmation of a viable
reorganization plan and Cambex's ability to
achieve the revenues set forth in the
Projections attached to this Disclosure
Statement as Exhibit 2 and attract additional
funding through private financing. There can
be no assurance that adequate operating funds
will be generated from operations or that
additional funding can be obtained on
acceptable terms.
Operating activities generated $1,534,000 of cash
in 1997, which was due to a refund of federal income
tax of approximately $2,300,000. The 1997 net loss of
$7,038,000 included non-cash depreciation and
amortization of $648,000. In 1996, $1,358,000 was
generated from operations and the net loss of
$8,632,000 included non-cash depreciation and
amortization of $1,500,000. In 1997, Cambex reduced
inventory by $4,622,000, of which, $2,700,000 was due
to write-downs. Accounts receivable decreased by
$655,000 in 1997.
Accounts payable increased by $820,000 in 1997 and
accrued expenses decreased by $404,000.
During 1997, Cambex used $1,775,000 in financing
activities, which was repayment under the revolving
credit agreement.
At December 31, 1997 and 1996, Cambex had cash and
cash equivalents totaling $425,000 and $616,000
respectively. At December 31, 1997, Cambex had negative
working capital of $3,606,000, whereas it had positive
working capital of $3,l59,000 at December 31, 1996.
In the event the Plan is confirmed by the
Bankruptcy Court, continuation of Cambex's storage
business after reorganization is dependent upon the
success of future operations and Cambex's ability to
meet obligations as they become due. The financial
statements have been prepared on a going concern basis,
which contemplates continuity of operations,
realization of assets and liquidation of liabilities in
the ordinary course of business. As a result of the
reorganization proceedings, Cambex may have to sell or
otherwise dispose of assets and liquidate or settle
liabilities for amounts other than those reflected in
the financial statements. The financial statements do
not give effect to adjustments to the carrying value of
assets, or amount and reclassification of liabilities
that might be necessary as a consequence of these
bankruptcy proceedings. The appropriateness of using
going concern accounting is dependent upon, among other
things, confirmation of a plan of reorganization,
success of future operations and the ability of Cambex
to generate sufficient cash from operations and
financing sources to meet its obligations. There can be
no assurance that any of these events will occur.
V. CAMBEX'S BUSINESS PLAN
A. General
Cambex develops, manufactures and markets a
variety of direct access storage products for large and
midsize computers offered by IBM and IBM compatible
manufacturers as well as other server manufacturers,
such as Sun Microsystems, Hewlett Packard and Windows
NT platforms suppliers. These products include central
and expanded memories, cache memories for disk
controllers and RAID disk array subsystems to improve
the performance of enterprise and client servers.
B. Cambex's Business Strategy
Cambex has been a long-standing supplier of
memories for IBM large-scale mainframe computers. After
a five-year downturn, the mainframe market is
experiencing an emerging revival as the mainframes are
increasingly used as enterprise servers. At the same
time, the UNIX and Windows NT based server markets
continue their rapid growth. Cambex's business strategy
is based on the coexistence of the mainframe and open
systems (MVS and UNIX - Windows NT) markets. Cambex
intends to take advantage of the growing market for
computer storage which is being fueled by vast
appetites for storage to support the year 2000 problem,
the migration to data sharing and the focus on data
warehousing. The products presently offered and short-
term product plans described below indicate the
increased emphasis on high-availability multiplatform
RAID disk array products enhanced by value-added
software solutions.
C. Products
Cambex offers a full range of direct access
storage solutions to satisfy the needs of the customer.
The specific products providing these solutions are:
1. Add-in Memories. The STOR/9000 memories for
the IBM 9672 CMOS and the E5/9000 Model 9021
mainframe computers, Cache Memories for the
IBM 3990 Model 3 and Model 6 and the IBM 9390
Disk Controllers increase computer
performance and productivity in a cost
effective way. Although the mainframe
computer market had been in a steep decline
between 1992 and 1997, a resurgence began to
occur in 1997 with the introduction of the
cost-effective IBM 9672 CMOS Mainframe
Computers. These mainframes are increasingly
used as main enterprise servers for client
server networks. The memory market typically
lags the mainframe processor market by about
18 months, since users have sufficient
capacity of memory available for their
initial applications with the installation of
the central processor. As the user
applications increase, needs arise for
additional memory. Cambex expects the CMOS
memory market to emerge in 1998.
2. Mainframe or Enterprise Server Disk Storage
Products. Cambex offers RAID (Redundant Array
of Inexpensive Disks) Storage Arrays which
attach to IBM or IBM compatible mainframes or
servers. Cambex's newest Cascade XE cross-
enterprise storage can be shared between
mainframe (MVS, VM) and open systems (UNIX
and Windows NT) applications under user
control. Cambex believes that the Cascade XE
is an ideal solution for the Year 2000
Testing Problem since it protects the
customer's investment due to its
migratability to open systems storage with
high degree of scalability. The Cascade RAID
products enable users to fully utilize all
disk controller and software options features
provided by IBM while taking advantage of the
product's multiplatform capability.
3. Open Systems Disk Arrays. Cambex's Centurion
is a scalable RAID disk array; a data center
class product for mission critical
applications. Its high-availability features
include redundant disks, controllers, power
supplies, fans, platform interconnections and
airflow and temperature sensing systems
eliminating single points of failure. In
addition its efficient failover software with
large cache memory capacity provides high
level performance.
4. Cambex's proprietary Centurion Storage
Manager. The Centurion Storage Manager is a
GUI application which enables the Centurion
disk arrays to be configured and reconfigured
rapidly for changing workloads on
heterogeneous platforms. The motif-based
graphical Storage Manager also lets users
schedule batch jobs, monitor storage and then
operations such as triple-level fault
indication, and initiate dual simultaneous
controller paths, or active-active controller
mode. The Centurion Storage Manager is
currently available on SUN Solaris and IBM
AIX platforms and is expected to be available
for Windows NT in the near future.
Cambex expects to have Fiber Channel interface for
the Centurion products in the second half of 1998. This
fiber channel capability will further enhance the
performance and multiplatform interconnectivity of the
Cambex disk array product family.
D. Competition
Competition in the direct access storage market is
intense. Many of Cambex's competitors are
much larger and have significantly greater
resources to develop products and provide the
necessary sales coverage to gain market
acceptance. In the memory field, Cambex
competes with IBM and computer brokers and
certain leasing companies who offer used IBM
memory to users of mainframe computers. In
the mainframe and cross enterprise disk
storage market, Cambex competes with EMC
Corporation, IBM, Hitachi and Amdahl
Corporation. In the open system RAID disk
array market, the major competition are the
suppliers of open system servers, in addition
to EMC, Data General, Digital Equipment, MTI
Technology, Storage Computer and a number of
other firms for various applications.
E. Management
1. Executive Compensation
The following table provides certain summary
information concerning compensation paid or
accrued by Cambex to or on behalf of Cambex's
Chief Executive Officer and each of the other
executive officers of Cambex (determined as
of the end of the last fiscal year) for the
fiscal years ended December 31, 1997,
December 31, 1996 and August 31, 1995.
Summary Compensation Table
Annual Compensation
Commissions
Salary Salary and
Incentive
Name and Position Year Paid Deferred(1)
Bonuses
Joseph F. Kruy 1997 $ 136,270 $ 63,730 $
-
Chairman, President and CEO 1996 $ 200,000 $ -
$ -
1995 $ 195,385 $ - $
8,962
Sheldon M. Schenkler 1997 $ 96,091 $ 13,909 $
-
Vice President of Finance and 1996 $ 110,000 $ -
$ -
Chief Financial Officer 1995 $ 110,000 $ - $
1,680
Long Term Compensation Awards
All
Other
Name and Position Year Options (#)
Compensation (2)
1997 - -
Joseph F. Kruy 1996 - $ 3,854
Chairman, President and CEO 1995 - $ 2,250
Sheldon M. Schenkler 1997 -
Vice President of Finance and 1996
10,000 $ 3,237
Chief Financial Officer 1995 - $ 1,832
(1) Salary Deferred is a prepetition obligation of the
Debtor and will be paid as an unsecured claim
pursuant to the Plan (and to the extent
applicable, a portion may be treated as a priority
claim under Section 507(a)(3)).
(2) Cambex contribution in Cambex Common Stock on
officer's behalf to Cambex's 401(k) Plan.
2. Security Ownership of Certain Beneficial
Owners and Management
(#) Shares of Common
Stock Beneficially Owned
Name as of December 31, 1997 Percent of Class
Joseph F. Kruy 1,404,940(1) 15.43%
Philip C. Hankins 106,358 1.17%
C.V. Ramamoorthy 99,156 1.09%
Robert Spain 0 0%
Sheldon M. Schenkler 10,900(2) 0.11%
All directors and executive officers as a 1,621,354(3) 17.80%
group (5 persons)
(1) Includes 56,250 shares owned by Mr. Kruy as co-
trustee for his wife and children. Excludes
960,194 shares held by CyberFin Corporation, which
is owned by Mr. Kruy's son. Mr. Kruy disclaims any
beneficial interest in such shares.
(2) Excludes 31,100 shares as to which options are
exercisable currently or within 60 days, of which
none are in-the-money options.
(3) Directors and officers have shared investment
power with respect to 56,250 shares and sole
voting power with respect to 1,565,104 shares.
3. Director Compensation
Directors who are not employed by Cambex receive an
annual fee of $ 10,000 and a fee of $1,000
for each meeting of the Board attended.
F. Risk Factors
In addition to the other information in this
Disclosure Statement, the following factors should be
considered carefully in evaluating the securities
proposed to be issued under the Plan as described in
this Disclosure Statement.
1. History of Operating Losses
Cambex experienced significant operating losses in
1995, 1996 and 1997. As set forth in the
Projections attached to this Disclosure
Statement as Exhibit 2, Cambex expects to be
profitable in 1998. Cambex's ability to
achieve profitable operations is dependent in
large part on Cambex's ability to
successfully market its memory systems for
the most recent generation of IBM mainframe
computers and to continue to penetrate its
disk storage markets, now occupied by larger
and financially stronger competitors.
2. Future Funding Needs; Uncertainty of Future
Funding
Cambex will require additional funds in order to
continue operations after it emerges from Chapter 11.
Cambex intends to seek such additional funding through
either equity or debt financing. Presently, Cambex is
in negotiation with potential sources of such
financing. There can be no assurance, however, that
additional financing will be available from any of
these sources, or if available, will be available on
acceptable terms.
3. Competition and Technology Change
Competition in the memory field and the disk
storage market is intense and is subject to significant
technological change. Many of Cambex's competitors are
much larger and have significantly greater resources to
develop products and provide the necessary sales
coverage to gain market acceptance. There can be no
assurance that Cambex's competitors will not succeed in
developing technologies and products that are more
effective than any of which are now being sold or
developed by Cambex or which would render Cambex's
technology and products obsolete and not competitive.
4. Uncertain Public Market for Common Stock
Due to Cambex's failure to satisfy the minimum
listing requirements, Cambex's common stock was
delisted by the National Association of Securities
Dealers ("NASD") from trading on the Nasdaq National
Market in July 1997. Since that time, there has been
only sporadic trading in the "pink sheets" over-the-
counter market and the Nasdaq OTC Bulletin Board, with
low average daily volume. Cambex may apply for re-
listing of the Common Stock on the Nasdaq National
Market as soon as practicable after such time that
Cambex satisfies the listing requirements. There can be
no assurance that Cambex ever will satisfy the listing
requirements or that an active trading market ever will
`develop after confirmation of the Plan, or that any or
a significant number of brokerage firms will make a
market in Cambex's shares. See "Certain Securities Law
Aspects of the Plan."
VI. SUMMARY OF THE REORGANIZATION PLAN
THIS SECTION PROVIDES A SUMMARY OF THE CLASSIFICATION
AND TREATMENT OF CLAIMS AND INTERESTS, AND
IMPLEMENTATION OF THE PLAN, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE PLAN, WHICH IS APPENDED TO
THIS DISCLOSURE STATEMENT AS EXHIBIT 1, AND TO THE
OTHER EXHIBITS ATTACHED THERETO.
A. Certain Matters Regarding Organization,
Classification, And Treatment Of Claims And Interests
1. Organization And Classification
All Claims and Interests, except Administrative Claims
and Priority Tax Claims, are placed in
Classes as follows:
(a) Unimpaired Classes Of Claims (not
entitled to vote on the Plan)
(i) Class 1: Other Priority Claims
Class 1 consists of all Priority
Employee Claims.
(ii) Class 3: General Unsecured Claims
Less Than or Equal to $500
Class 3 consists of all General
Unsecured Claims less than or
equal to $500.
(b) Impaired Classes Of Claims (entitled to
vote on the Plan)
(i) Class 2: Secured Claims
Class 2 consists of all Secured Claims,
including the City Secured Claim and
other Secured Claims, if any. Each
holder of a Class 2 Secured Claim shall
be treated as a separate class for all
purposes under the Plan.
(iii) Class 4: All Other General
Unsecured Claims,.
Class 4 consists of all General
Unsecured Claims over $500.
(c) Unimpaired Class Of Interests (not
entitled to vote on the Plan)
Class 5: All Interests
Class 5 consists of all Common Stock
Interests.
2. Treatment Of Claims And Interests
a. Unclassified Claims
(i) Administrative Claims
Administrative Claims include (i) fees
owed to professionals in the Chapter 11 Case (estimated
to be approximately $350,000); (ii) wages, salaries and
commissions, debt incurred in the ordinary course of
business, and taxes owing, for any period after the
commencement of the Chapter 11 Case (estimated to be
approximately $50,000); and (iii) payments required to
Cure executory contracts and unexpired leases to be
assumed (estimated to be $135,000).
On the Consummation Date, or as soon
thereafter as practicable, a holder of an Allowed
Administrative Claim shall receive in full
satisfaction, settlement, release, and discharge of and
in exchange for such Allowed Administrative Claim, (a)
Cash equal to the unpaid portion of such Allowed
Administrative Claim, or (b) such other treatment as to
which CAMBEX or REORGANIZED CAMBEX and such holder
shall have agreed upon in writing; provided, however,
that Allowed Administrative Claims with respect to
liabilities incurred by CAMBEX in the ordinary course
of its business during the Chapter 11 Case shall be
paid by REORGANIZED CAMBEX in accordance with the terms
and conditions of any agreements relating thereto.
There may be disputes concerning the
applicable Cure amount with respect to executory
contracts or unexpired leases to be assumed (or assumed
and assigned) under the Plan. The Court has established
a bar date for filing objections to assumption (or
assumption and assignment) of such leases and
contracts, including any disputes as to applicable Cure
amounts. Assumption or assumption and assignment of
contracts and leases will require payment of Cure
amounts, as determined by the Bankruptcy Court, where a
dispute exists.
(ii) Priority Tax Claims
CAMBEX believes that the total amount of
Allowed Priority Tax Claims will not exceed $50,000.
On the Consummation Date, or as soon
thereafter as practicable, a holder of an Allowed
Priority Tax Claim shall be entitled to receive in full
satisfaction, settlement, release, and discharge of and
in exchange for such Allowed Priority Tax Claim,
either, at the option of REORGANIZED CAMBEX, (a) Cash
equal to the unpaid portion of such Allowed Priority
Tax Claim, or (b) deferred Cash payments in an
aggregate principal amount equal to the unpaid portion
of such Allowed Priority Tax Claim plus interest
thereon at a rate to be determined by the Bankruptcy
Court from the Consummation Date through the date of
payment thereof, or (c) such other treatment as to
which REORGANIZED CAMBEX and such holder shall have
agreed upon in writing. If deferred Cash payments are
made to a holder of an Allowed Priority Tax Claim,
payments of principal shall be made in annual
installments, each such installment amount being equal
to ten percent (10%) of such Allowed Priority Tax Claim
plus accrued and unpaid interest with the first payment
to be due on the Consummation Date or as soon
thereafter as practicable, and subsequent payments to
be due on the anniversary of the first payment date or
as soon thereafter as is practicable; provided,
however, that any installments remaining unpaid on the
date that is six (6) years after the date of assessment
of the tax that is the basis for the Allowed Priority
Tax Claim shall be paid on the first Business Day
following such date, together with any accrued and
unpaid interest to the date of payment; and provided,
further, that REORGANIZED CAMBEX reserves the right to
pay any Allowed Priority Tax Claim, or any remaining
balance of any Allowed Priority Tax Claim, in full at
any time on or after the Consummation Date without
premium or penalty; and provided, further, that no
holder of an Allowed Priority Tax Claim shall be
entitled to any payments on account of any pre-
Consummation Date interest accrued on or penalty
arising after the Petition Date with respect to or in
connection with such Allowed Priority Tax Claim.
b. Unimpaired Classes Of Claims
(i) Class 1 : Other Priority Claims
Other Priority Claims include Claims
other than Administrative Claims and Priority Tax
Claims entitled to priority under Section 507(a) of the
Bankruptcy Code. Such Claims include up to $4,000 of
wage and salary (including vacation and severance)
Claims of employees earned within ninety (90) days
before the Petition Date. CAMBEX estimates that the
total amount of Allowed Other Priority Claims, that
have not previously been paid pursuant to order of the
Bankruptcy Court, will not exceed $50,000.
On the Consummation Date, or as soon
thereafter as practicable, a holder of an Allowed Class
1 Claim shall receive in full satisfaction, settlement,
release, and discharge of and in exchange for such
Allowed Class 1 Claim (a) Cash equal to the unpaid
amount of such Allowed Class I Claim, or (b) such other
treatment as to which CAMBEX or REORGANIZED CAMBEX and
such holder shall have agreed upon in writing; or (c)
at the option of REORGANIZED CAMBEX, such Claims shall
be Reinstated.
(ii) Class 3: General Unsecured Claims
Less Than Or Equal to $500
CAMBEX estimates that the total amount
of Allowed Class 3 General Unsecured Claims is $15,000.
A holder of an Allowed Class 3 Claim
shall receive, in full satisfaction, settlement,
release, and discharge of and in exchange for such
Allowed Class 3 Claim, Cash payments totaling 100% of
its Allowed Class 3 Claims on the Consummation Date, or
as soon thereafter as practicable.
c. Impaired Classes Of Claims
(i) Class 2: Secured Claims
Class 2.01 City Secured Claim
The City purports to be the holder of a lien
for unpaid real estate taxes on certain undeveloped
land in the City of Poughkeepsie, New York. As of the
Petition Date, the unpaid real estate taxes were
approximately $6,500. Approximately $3,000 has accrued
unpaid since the Petition Date.
In full satisfaction, settlement, release, and
discharge of and in exchange for its Allowed Class 2.01
Claim and any and all other Claims of the City, secured
or unsecured, the City shall receive deferred Cash
payments over three (3) years, in equal quarterly
installments of principal, plus accrued and unpaid
interest from the Consummation Date through the date of
payment thereof, with the first payment to be due on
the Consummation Date or as soon thereafter as
practicable, and subsequent payments to be due each
quarter thereafter. The City shall retain the
collateral securing its claim.
Classes 2.02 et seq. Other Secured
Claims
CAMBEX does not believe that there are
any Other Secured Claims. Each Other Secured Claim, if
any, shall be classified as a subclass under Class 2
(which for all purposes, including voting, under the
Plan shall be considered a separate class).
On the Consummation Date, or as soon
thereafter as practicable, the holder of an Allowed
Class 2.02 Claim, in full satisfaction, settlement,
release and discharge of and in exchange for such
Allowed Class 2.02 Claim, shall, in the sole discretion
of REORGANIZED CAMBEX, (a) retain its liens in the
collateral securing the holder's Allowed Class 2.02
Claim and receive deferred Cash payments totaling at
least the unpaid portion of such Allowed Class 2.02
Claim, of a value, as of the Consummation Date, equal
to the value of such holder's interest in the Estate's
interest in the collateral securing the Class 2.02
Claim, (b) upon abandonment by REORGANIZED CAMBEX
receive and retain the collateral securing the Class
2.02 Claim, (c) receive payments or liens amounting to
the indubitable equivalent of the value of such
holder's interest in the Estate's interest in the
collateral securing the Class 2.02 Claim, (d) be
Reinstated, or (e) receive such other treatment as
CAMBEX and such holder shall have agreed upon in
writing as announced at or prior to the Confirmation
Hearing.
(ii) Class 4: General Unsecured Claims
Exceeding $500
Class 4 Claims filed or deemed filed,
including Disputed Claims, amount to approximately $5.5
million in the aggregate. CAMBEX believes that certain
of these Claims are invalid or overstated, and intends
to file an objection to such Disputed Claims. There may
also be additional Claims filed as a result of the
rejection of executory contracts and unexpired leases
to be rejected under the Plan. The aggregate amount of
such additional rejection Claims is unknown. CAMBEX
believes that the aggregate amount of Claims that will
be Allowed Class 4 Claims is not more than $5 million.
A holder of a Class 4 Claim (Allowed or
Disputed), in full satisfaction, settlement, release,
and discharge of and in exchange for such Class 4 Claim
(to the extent such claim is or becomes an Allowed
Class 4 Claim), may elect, at the time such holder
casts its ballot, treatment under either Class 4 Option
A or Class 4 Option B, as described below. ANY HOLDER
OF A CLASS 4 CLAIM WHO DOES NOT MAKE SUCH AN ELECTION
SHALL BE DEEMED TO HAVE ELECTED CLASS 4 OPTION A.
a. Class 4 Option A.
A holder electing treatment under Class 4
Option A shall receive Cash payments totaling 100% of
such Allowed Class 4 Claim, without interest, in thirty
(30) consecutive monthly payments, with the first such
payment to be made on the date six months after the
Consummation Date, and succeeding payments on the same
day of each month thereafter until paid. The first six
(6) payments shall be equal to two and one-half (2.5%)
percent of such Allowed Class 4 Claim; the next twenty-
three (23) payments shall be equal to three and one-
half (3.5%) percent of such Allowed Class 4 Claim; and
the last payment shall be equal to four and one-half
(4.5%) percent of such Allowed Class 4 Claim. See
discussion at the end of the next paragraph as to the
benefits and risks to holders of Unsecured Claims of
Class 4 Option A and Class 4 Option B.
b. Class 4 Option B.
A holder electing treatment under Class 4
Option B shall receive (i) Cash payments equal to 80%
of such Allowed Class 4 Claim on the terms described
below (the "Cash Portion"); and (ii) two shares of
Cambex Common Stock for every one dollar ($1.00) of
such Allowed Class 4 Claim in excess of the Cash
Portion (i.e., 20% of the Allowed Class 4 Claim) (the
"Stock Portion"). The Cash Portion shall be paid,
without interest, in thirty (30) consecutive monthly
payments, with the first such payment to be made on the
date six (6) months after the Consummation Date, and
succeeding payments on the same day of each month
thereafter until paid. The first six (6) payments shall
be equal to two percent (2%) of such Allowed Class 4
Claim; and the next twenty-four (24) payments shall be
equal to 2 5/6% of such Allowed Class 4 Claim. The
Stock Portion shall be issued on the Consummation Date,
or as soon as practicable thereafter.
A holder that elects Class 4 Option A will be
paid 100% of its Allowed Class 4 Claim, without
interest. A holder that elects Class 4 Option B, on the
other hand, will not receive Cash payments from Cambex
for the full amount of its Allowed Class 4 Claim, but
will receive Cash payments equal to 80% of its Allowed
Class 4 Claim, without interest, and Cambex stock.
There is no certainty that holders that elect to
receive Cambex stock ever will receive any more of
their Allowed Class 4 Claim on account of the Cambex
stock. However, if Cambex succeeds, holders that elect
Class 4 Option B may, by virtue of holding Cambex
Common Stock, participate in that success. In making
the election, holders of Class 4 Claims should
carefully review Section V.E.4 (Uncertain Public Market
for Common Stock) and VIII.D (Absence of Market for
Securities). If the exit financing for the Debtor is to
be equity financing, each holder electing Class 4
Option B will be given the opportunity to change its
election to Class 4 Option A after receiving a
description of the terms of the equity financing. Those
terms shall be distributed to holders electing Class 4
Option B by Federal Express on the day following entry
of the order confirming the Plan, and such holders will
have a period of fourteen (14) calendar days after
receipt thereof to change their election to Class 4
Option A. The form of disclosure of the terms of the
equity financing shall be filed by the Debtor no later
than April 20, 1998 at 12:00 p.m. and any issues as to
the adequacy thereof shall be heard at the Confirmation
Hearing.
c. Issuance of Common Stock;
On the Consummation Date shares of Common
Stock shall be issued to the Disbursing Agent and held
in the Distribution Reserve in accordance with Article
X of the Plan, for the benefit of the holders of
Disputed Class 4 Claims, in sufficient number to
satisfy the requirements of Class 4 Option B with
respect to such Disputed Claims.
d. Unimpaired Class Of Interests
Class 5: Common Stock Interests
Holders of Common Stock Interests shall
retain their Common Stock.
B. Directors And Officers
The current board of directors of CAMBEX, made up of
the following individuals, shall continue to
serve as the board of directors of
REORGANIZED CAMBEX:
Philip C. Hankins
Joseph F. Kruy
Dr. C. V. Ramamoorthy
Dr. Robert Spain
The executive officers of REORGANIZED CAMBEX shall be:
Joseph F. Kruy
Edward Hughes
Sheldon Schenkler
Arthur Ziskend
C. Revesting Of Assets
All property of CAMBEX transferred or to be transferred
to REORGANIZED CAMBEX pursuant to the Plan
shall vest in REORGANIZED CAMBEX free and
clear of all liens, encumbrances, Claims and
Interests, except as otherwise expressly
provided in the Plan or the Confirmation
Order. Thereafter, REORGANIZED CAMBEX may
operate its business and may use, acquire,
and dispose of property free of any
restrictions of the Bankruptcy Code, the
Bankruptcy Rules, and the Bankruptcy Court.
Without limiting the foregoing, REORGANIZED
CAMBEX may, without application to or
approval by the Bankruptcy Court, pay fees
that are incurred after the Confirmation Date
for professional services and expenses.
D. Description Of Securities To Be Issued In
Connection With The Plan; Limitation on Stock Options
1. Common Stock
The principal terms of the Common Stock to be issued by
REORGANIZED CAMBEX under the Plan shall be as
follows:
Par Value $.10 per share
Voting One vote per share
Preemptive Rights None
Transfer Limitations None
2. Limitation on Issuance of Stock Options
Until such time as holders of Allowed Class 4
Claims that have elected treatment under Class 4 Option
B have been paid in Cash an amount equal to fifty
percent (50%) of their Allowed Class 4 Claims, the
following limitations shall apply to the issuance of
stock options to officers, directors and employees of
Reorganized Cambex: (i) Reorganized Cambex may issue
stock options exercisable for no more than 1,000,000
shares of Common Stock, and (ii) the stock options must
be exercisable at a price which is not less than the
greater of(a) $.50 per share of Common Stock and (b)
the market value per share of the Common Stock at the
time of the issuance of the options; provided, however,
that notwithstanding the foregoing limitation,
Reorganized Cambex may issue stock options exercisable
for no more than 500,000 shares (in addition to the
1,000,000 shares described in the foregoing limitation)
without any price limitation, provided further that no
stock options with respect to such 500,000 shares may
be issued to Joseph F. Kruy, the President of Cambex
(or any Person that he owns or controls). None of the
foregoing limitations shall apply after holders of
Allowed Class 4 Claims electing treatment under Class 4
Option B have received cash equal to fifty percent
(50%) of their Allowed Class 4 Claims.
E. Distributions Under the Plan
1. Delivery Of Distributions
Distributions to holders of Allowed Claims shall
be made by the Disbursing Agent (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 CAMBEX or REORGANIZED
CAMBEX has been notified of a change of address), (b)
at the addresses set forth in any written notices of
address changes delivered to the Disbursing Agent after
the date of any related proof of claim, or (c) at the
addresses reflected in the Schedules if no proof of
claim has been filed and the Disbursing Agent has not
received a written notice of a change of address.
If any holder's distribution is returned as
undeliverable, no further distributions to such holder
shall be made unless and until the Disbursing Agent is
notified of such holder's then current address, at
which time all missed distributions shall be made to
such holder without interest. Amounts in respect of
undeliverable distributions made through the Disbursing
Agent shall be returned to REORGANIZED CAMBEX until
such distributions are claimed. All claims for
undeliverable distributions shall be made on or before
the second anniversary of the date of such
distribution. After such two-year period with respect
to any distribution, all property then unclaimed shall
revert to REORGANIZED CAMBEX and the claim of any
holder or successor to such holder with respect to such
property shall be discharged and forever barred
notwithstanding any federal or state escheat laws to
the contrary.
2. Procedures For Resolving And Treating
Disputed And Contingent Claims And Interests
a. No Distributions Pending Allowance
Notwithstanding any other provision of the
Plan, no payments or distributions 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, provided, however, where an objection
is made only to a portion of a Claim and no timely
objection is made to the balance of such Claim, such
undisputed balance shall be treated as an Allowed Claim
for purposes of distribution.
b. Distribution Reserve
The Disbursing Agent shall withhold the
Distribution Reserve from the Cash and other property
to be distributed under the Plan. As to any Disputed
Claim, upon a request for estimation by CAMBEX OR
REORGANIZED CAMBEX, the Bankruptcy Court shall
determine what amount is sufficient to include in the
Distribution Reserve. CAMBEX shall request estimation
for every Disputed Claim that is unliquidated and the
estimated amount of such Claims shall be used to
compute the Distribution Reserve. If CAMBEX elects not
to request such an estimation from the Bankruptcy Court
with respect to a Disputed Claim that is liquidated,
the Distribution Reserve shall be computed based upon
the Face Amount of such Claim. The Disbursing Agent
shall also place in the Distribution Reserve any
dividends, payments, or other distributions made on
account of, as well as any obligations arising from,
the property withheld as the Distribution Reserve under
this Section, to the extent that such property
continues to be withheld as Distribution Reserve at the
time such distributions are made or such obligations
arise. For purposes of establishing the Distribution
Reserve, disputed Cure amounts shall constitute
Disputed Claims.
c. Distributions After Allowance
Payments and distributions from the
Distribution Reserve to each holder of a Disputed
Claim, to the extent that all or part of such Claim
ultimately becomes an Allowed Claim shall be made in
accordance with the provisions of the Plan governing
the class of Claims to which the respective holder
belongs. Promptly after the date that the order or
judgment of the Bankruptcy Court allowing all or part
of such Claim becomes a Final Order, the Disbursing
Agent shall distribute to the holder of such Claim any
Cash and other property in the Distribution Reserve
that would have been distributed on or before the
Disputed Claim became an Allowed Claim had such Allowed
Claim been then allowed. The trading price of shares of
Common Stock distributed after the Consummation Date
may be higher or lower than the trading price of shares
of Common Stock distributed on the Consummation Date.
After a Final Order has been entered, or other final
resolution has been reached, with respect to each and
every Disputed Claim, (i) any Cash held in the
Distribution Reserve shall become property of
REORGANIZED CAMBEX, and (ii) any Common Stock shall be
canceled.
F. Miscellaneous Matters
1. Post-Petition Interest
Unless otherwise provided for in the Plan or
Confirmation Order, no holder of a Claim will be
entitled to interest accruing on or after the Petition
Date on account of such Claim.
2. Substantial Contribution Compensation And
Expenses Bar Date
Any Person or entity who intends to request
compensation or expense reimbursement for making a
substantial contribution in the Chapter 11 Case
pursuant to sections 503(b)(3), (4) or (5) of the
Bankruptcy Code must file a request with the clerk of
the Bankruptcy Court on or before May 8, 1998 at 4:00
p.m. Eastern Time, or be forever barred from seeking
such compensation or reimbursement. Payment of
professionals' fees and expenses which are incurred
prior to the Confirmation Date will be subject to
approval by the Bankruptcy Court.
3. Treatment Of Executory Contracts And
Unexpired Leases
a. Assumed Contracts And Leases
All executory contracts and unexpired leases
specifically listed on the schedule of assumed
contracts and leases attached as Exhibit A to the Plan
shall be deemed automatically assumed as of the
Consummation Date. The Confirmation Order shall
constitute an order of the Bankruptcy Court approving
such assumptions, pursuant to section 365 of the
Bankruptcy Code.
Each executory contract and unexpired lease
that is assumed and relates to the use or occupancy of
real property shall include (a) all modifications,
amendments, supplements, restatements, or other
agreements made directly or indirectly by any
agreement, instrument, or other document that in any
manner affect such executory contract or unexpired
lease and (b) all executory contracts or unexpired
leases appurtenant to the premises, including all
easements, licenses, permits, rights, privileges,
immunities, options, rights of first refusal, powers,
uses, usufructs, reciprocal easement agreements,
vaults, tunnel or bridge agreements or franchises, and
any other interests in real estate or rights in rem
related to such premises, unless any of the foregoing
agreements have been rejected pursuant to a Final Order
of the Bankruptcy Court or is listed on the schedule of
rejected contracts and leases attached as Exhibit B to
the Plan.
b. Payments Related To Assumption Of
Executory Contracts And Unexpired Leases; Bar to Pre-
Confirmation Date Claims
Any monetary amounts by which each executory
contract and unexpired lease to be assumed under the
Plan may be in default shall be satisfied, under
section 365(b)(l) of the Bankruptcy Code by Cure.
Exhibit A to the Plan sets forth as to each executory
contract and unexpired lease whether such contract or
lease is, in CAMBEX's opinion, in default, and the
amount, if any, required to Cure. Any dispute regarding
(i) whether or not an executory contract or unexpired
lease is in default; (ii) the nature or the amount of
any Cure, (iii) the ability of REORGANIZED CAMBEX to
provide "adequate assurance of future performance"
(within the meaning of section 365 of the Bankruptcy
Code) under the contract or lease to be assumed, or
(iv) any other matter pertaining to assumption (and,
where applicable, assignment) shall be heard and
determined by the Bankruptcy Court, and, except to the
extent determination of a particular dispute is
deferred with the consent of CAMBEX, all such disputes
shall be determined no later than the Confirmation
Date, and the Confirmation Order shall constitute an
order determining all such disputes.
c. Rejected Contracts And Leases
All executory contracts and unexpired leases
specifically listed on the schedule of rejected
contracts and leases attached to the Plan as Exhibit B
shall be deemed automatically rejected as of the
Consummation Date. The Confirmation Order shall
constitute an order of the Bankruptcy Court approving
such rejections, pursuant to section 365 of the
Bankruptcy Code.
d. [Intentionally Omitted]
e. Unidentified Executory Contracts And
Unexpired Leases
Any executory contract or unexpired lease of
CAMBEX which is not specifically listed on either
Exhibit A or B to the Plan, shall be deemed to be
automatically rejected as of the Consummation Date. The
Confirmation Order shall constitute an order of the
Bankruptcy Court approving such rejections, pursuant to
section 365 of the Bankruptcy Code.
f. Disputes Relating To Assumption,
Assumption And Assignment, And/Or Rejection Of
Executory Contracts
Court approval of assumption (or assumption
and assignment) of unexpired leases and executory
contracts, as proposed by CAMBEX under the Plan is a
condition to the Consummation of the Plan. It is more
particularly described in Section X.G of the Disclosure
Statement.
4. Committees
The Creditors Committee shall terminate on the
Consummation Date.
5. Retention Of Jurisdiction
As more fully set forth in the Plan, the
Bankruptcy Court will retain jurisdiction as necessary
after the Confirmation Date.
6. Discharge
All property distributed under the Plan shall be
in exchange for, and in complete satisfaction,
settlement, discharge, and release of, all Claims of
any nature whatsoever against CAMBEX and REORGANIZED
CAMBEX and/or any of their assets or properties, and,
except as otherwise provided herein or in the
Confirmation Order, and upon the Confirmation Date,
CAMBEX and REORGANIZED CAMBEX shall be deemed
discharged and released under Section 1l4l(d)(l)(A) of
the Bankruptcy Code from any and all debts. The
Confirmation Order shall be a judicial determination of
discharge of all liabilities of CAMBEX and REORGANIZED
CAMBEX, subject to the occurrence of the Consummation
Date.
7. United States Trustee Fees
The Debtor is current on its quarterly fee
payments owed to the United States Trustee.
VII. CERTAIN OTHER FACTORS TO BE CONSIDERED
The holder of a Claim against in Cambex should
carefully consider the following factors before
deciding whether to vote to accept or to reject the
Plan.
A. General Considerations
The formulation of a reorganization plan is the
principal purpose of a Chapter 11 case. The Plan sets
forth the means for satisfying the holders of Claims
against Cambex. Continuation of Cambex's business and
operations under the proposed Plan also avoids the
potentially adverse impact of a liquidation on Cambex
employees, and many of its customers, trade vendors,
suppliers of goods and services, and lessors.
B. Inherent Uncertainty Of Financial Projections
The Projections set forth in Exhibit 2 include
condensed statements of income, balance sheets and cash
flows covering the period ending December 31, 2000. The
information reflected for 1995 through 1997 represents
actual results for Cambex. The projected information
for 1998-2000 is for Reorganized Cambex. The
Projections also include a pro forma balance sheet for
Reorganized Cambex as of March 31, 1998, which Cambex
expects to be close to the projected Consummation Date.
These Projections are based on numerous assumptions
that are an integral part of the projections, including
confirmation and consummation of the Plan in accordance
with its terms, the anticipated future performance of
Reorganized Cambex, successful product development and
sales efforts by Reorganized Cambex, future product
prices and margins, industry performance, general
business and economic conditions, and other matters,
many of which are beyond the control of Reorganized
Cambex and some or all of which may not materialize. In
addition, unanticipated events and circumstances
occurring subsequent to the date that this Disclosure
Statement was approved by the Bankruptcy Court may
affect the actual financial results of Reorganized
Cambex's operations. These variations may be material.
Because the actual results achieved throughout the
periods covered by the projections may vary from the
projected results, the projections should not be relied
upon as a guaranty, representation, or other assurance
of the actual results that will occur.
C. Risks Associated With Reorganized Cambex
Holders who will receive securities of Reorganized
Cambex pursuant to the Plan should carefully read
Section V of this Disclosure Statement, including the
Risk Factors described in Section V.F.
VIII. CERTAIN SECURITIES LAW ASPECTS OF THE PLAN
THE ISSUANCE OF THE COMMON STOCK UNDER THE PLAN RAISES
CERTAIN SECURITIES LAWS ISSUES UNDER THE BANKRUPTCY
CODE AND FEDERAL AND STATE SECURITIES LAWS WHICH ARE
DISCUSSED IN THIS SECTION. THIS SECTION SHOULD NOT BE
CONSIDERED APPLICABLE TO ALL SITUATIONS OR ALL
CREDITORS RECEIVING COMMON STOCK UNDER THE PLAN.
CREDITORS SHOULD CONSULT THEIR OWN LEGAL COUNSEL.
A. General
Section 1145 of the Bankruptcy Code creates an
exemption from the registration and licensing
requirements of the Securities Act of 1933 (the
"Securities Act") and the corresponding provisions of
the state securities laws (together with the Securities
Act, the "Securities Laws") for the issuance and
certain resales of the securities issued in connection
with a Chapter 11 plan.
B. Initial Issuance Of Securities Under The Plan
Section 1145(a) of the Bankruptcy Code provides
that the securities registration and qualification
requirements of federal and state securities laws do
not apply to the offer or sale of stock, warrants or
other securities by a debtor, if the offer or sale
occurs under a plan of reorganization and the
securities are transferred in exchange for a claim
against or interest in a debtor.
For holders of Allowed Class 4 Claims that elect
Class 4 Option B treatment, CAMBEX and REORGANIZED
CAMBEX believe that issuance of Common Stock by
REORGANIZED CAMBEX to such holders will be exempt from
securities law registration and qualification
requirements pursuant to Section 1145(a) since issuance
of the Common Stock will be solely in exchange for a
portion of such holders' Allowed Class 4 Claim.
C. Resale Of Securities
1. Persons Other Than Underwriters Or Dealers.
The Common Stock received pursuant to the Plan
will not be deemed to be "restricted securities" and
may be freely sold or transferred by the recipients,
unless those recipients are "underwriters" or "dealers"
as described below.
2. Underwriters.
Resales and subsequent transactions by
"underwriters" in securities of REORGANIZED CAMBEX
issued pursuant to the Plan are subject to the
requirement that they be registered under the
Securities Laws or that they be transferred pursuant to
an available exemption. Unlike the general definition
of that term under the Securities Laws, for the
purposes of Section 1145(b)(l), the term "underwriter"
includes only:
a. Persons who have purchased Claims
against, Interests in or Administrative Claims against
CAMBEX with a view to distribution of any security
received in the Plan for such Claims or Interests
(sometimes referred to as "Accumulators");
b. Persons who offer to sell securities
issued under the Plan for the holders thereof
(sometimes referred to as "Distributors");
c. Persons who offer to buy securities
issued under the Plan from the holders where such offer
to buy is (i) with a view to distribution and (ii)
under certain agreements made in connection with the
Plan, the consummation of the Plan or the issuance of
securities under the Plan (sometimes referred to as
"Syndicators"); and
d. Persons who, after the Consummation Date
are in control of REORGANIZED CAMBEX, i.e., who have
the power, directly or indirectly, to control its
management and policies (sometimes referred to as
"Affiliates").
Further, Section 1145(b)(1) permits resales
by Accumulators, Distributors or Syndicators in
"ordinary trading transactions". Based upon prior
Securities and Exchange Commission ("SEC") no-action
letters, CAMBEX and REORGANIZED CAMBEX believe that a
transaction generally will be considered an "ordinary
trading transaction" if it is made on an exchange or in
the over-the-counter market at a time when REORGANIZED
CAMBEX is a reporting company under the Securities
Exchange Act of 1934 (the "Exchange Act") and does not
involve any of the following factors:
(a) (i) concerted action by recipients of
securities issued under the Plan in connection with the
sale of such securities, or (ii) concerted action by
Distributors on behalf of one or more such recipients
in connection with such sales or (iii) both;
(b) informational documents concerning the
offering of the securities prepared or used to assist
in the resale of such securities, other than the
Disclosure Statement and any supplements thereto, and
documents filed with the SEC by REORGANIZED CAMBEX
pursuant to the Exchange Act; or
(c) special compensation to brokers and
dealers in connection with the sale of such securities
designed as a special incentive to the resale of such
securities (other than the compensation that would be
paid pursuant to arms-length negotiations between a
seller and a broker or dealer, each acting
unilaterally, not greater than the compensation that
would be paid for a routine similar-sized sale of
similar securities of a similar issuer).
However, the views of the SEC have not been sought
in this particular case and, therefore, CAMBEX and
REORGANIZED CAMBEX can give no assurance regarding the
current position of the SEC on ordinary trading
transactions. It is possible that resale transactions
which include one or more of the above factors could
constitute an "ordinary trading transaction," but that
determination would have to be carefully made on a case-
by-case basis, and counsel to CAMBEX and REORGANIZED
CAMBEX have not sought any advice from the staff of the
SEC with respect to such transactions.
Persons deemed to be underwriters (including
Affiliates, as well as Accumulators, Distributors and
Syndicators) also may be able to sell securities
without registration subject to the provisions of Rule
144 under the Securities Act, which would permit the
public sale of securities received pursuant to the Plan
by statutory underwriters, subject to volume
limitations and certain other conditions. However,
resale under Rule 144 will not be possible until
REORGANIZED CAMBEX is current in its reporting under
the Exchange Act See Part D below.
The legislative history of Section 1145 of the
Bankruptcy Code suggests that a creditor with at least
20% of the securities of a company could be deemed a
controlling person, and thus an Affiliate. In addition,
the SEC historically has taken the position that
officers, directors and beneficial owners of 10% or
more of the outstanding stock of an issuer will be
presumed to be Affiliates of that issuer. Therefore,
they would be underwriters for purposes of Section
1145(b)(l) described above.
3. Dealers.
"Dealers" are persons who engage either all or
part of their time, directly or indirectly, as agents,
brokers or principals, in the business of offering,
buying, selling or otherwise dealing or trading in
securities. Section 4(3) of the Securities Act will
exempt transactions in the securities issued to the
holders of Claims under the Plan by Dealers taking
place more than 40 days after the Consummation Date.
Within the 40-day period after the Consummation Date,
transactions by Dealers who are stockbrokers are exempt
from the Securities Act pursuant to Section 1145(a)(4)
of the Bankruptcy Code, as long as the stockbrokers
deliver a copy of this Disclosure Statement (and
supplements hereto, if any, as ordered by the
Bankruptcy Court) at or before the time of the
transactions.
CAMBEX AND REORGANIZED CAMBEX HAVE NOT SOUGHT A "NO-
ACTION" LETTER FROM THE SEC OR ANY STATE SECURITIES
COMMISSION WITH RESPECT TO ANY MATTER DISCUSSED HEREIN.
BECAUSE OF THE SUBJECTIVE NATURE OF THE QUESTION OF
WHETHER A PARTICULAR HOLDER MAY BE AN UNDERWRITER,
NEITHER CAMBEX NOR REORGANIZED CAMBEX MAKES ANY
REPRESENTATION CONCERNING THE ABILITY OF ANY PERSON TO
DISPOSE OF THE SECURITIES TO BE DISTRIBUTED UNDER THE
PLAN. EACH RECIPIENT OF SECURITIES UNDER THE PLAN
SHOULD CONSULT ITS OWN LEGAL ADVISOR AS TO WHETHER
RESALES OF SUCH RECIPIENT'S SECURITIES ARE LAWFUL UNDER
FEDERAL AND STATE SECURITIES LAWS.
D. Absence Of Market For Securities
1. Common Stock
The Common Stock of CAMBEX was listed on the
Nasdaq National Market until it was delisted in July
1997 due to CAMBEX's failure to meet the minimum
listing requirements (including, for example, minimum
market capitalization and minimum net worth
requirement). REORGANIZED CAMBEX may apply for re-
listing of the Common Stock on the Nasdaq National
Market as soon as practicable after such time that
REORGANIZED CAMBEX satisfies the listing requirements.
There can be no guaranty, however, that REORGANIZED
CAMBEX will ever satisfy the listing requirements.
Further, there can be no assurance that a listing
application will be approved, or that the Common Stock
will be listed on an exchange or the Nasdaq National
Market or admitted for trading on any other over the
counter market.
The Common Stock of REORGANIZED CAMBEX will
continue to be registered under Section 12(g) of the
Exchange Act and will remain subject to the periodic
reporting requirements of that statute, including the
filing of Forms 10-K, l0-Q, etc.
2. Liquidity
Many of the recipients of Common Stock under the
Plan may prefer to liquidate their investment rather
than hold such securities on a long-term basis.
Accordingly, the market for Common Stock may be
volatile, at least for an initial period after the
Consummation Date, and indeed may be depressed for a
period of time until the market has had time to absorb
these sales and to observe the post-Consummation Date
performance of REORGANIZED CAMBEX. Other factors, such
as the likelihood that REORGANIZED CAMBEX will not
declare dividends for the foreseeable future, may
further depress the market for Common Stock. In
addition, REORGANIZED CAMBEX has not attempted to make
an estimate of the price at which the Common Stock may
trade in the market in connection with the development
of the Plan. No assurance can be given as to the market
price that will prevail following the Consummation
Date.
IX. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following is a general summary of certain
federal income tax consequences of the Plan for Cambex,
its creditors and its equity security holders. This
summary does not discuss all aspects of federal income
taxation that may be relevant to a particular creditor
or equity security holder in light of its personal
investment circumstances or to certain creditors or
equity security holders subject to special treatment
under the federal income tax laws (for example, tax-
exempt organizations, foreign corporations, or
individuals who are not citizens or residents of the
United States) or to Cambex, and does not discuss any
aspects of state, local, or foreign taxation.
This summary is based upon the laws, regulations,
and decisions in effect on the date hereof and upon
proposed regulations, all of which are subject to
change (possibly with retroactive effect) by
legislation, administrative action, or judicial
decision. No opinion of counsel will be rendered with
respect to the tax consequences of the consummation of
the Plan to Cambex, Cambex's equity security holders or
Cambex's creditors under the Plan. In addition, no
ruling will be sought from the Internal Revenue Service
("IRS") regarding the tax effects of the consummation
of the Plan. Finally, Congress is currently considering
a number of changes to the Internal Revenue Code of
1986, as amended (the "Tax Code"), some of which could
change the tax consequences of the Plan, and which may
apply retroactively even if enacted after consummation
of the Plan. It is impossible at this time to predict
what, if any, amendments to the Tax Code may be enacted
and whether such amendments will be made applicable to
the Plan.
FOR THE FOREGOING REASONS, CREDITORS AND EQUITY
SECURITY HOLDERS ARE URGED TO CONSULT WITH THEIR OWN
TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES
(FOREIGN, FEDERAL, STATE, AND LOCAL) TO THEM OF THE
PLAN.
A. Federal Income Tax Consequences To Cambex
1. Cancellation Of Indebtedness
Under the Tax Code, a taxpayer generally must
include in gross income the amount of any COD income
realized during the taxable year, except to the extent
payment of such indebtedness would have resulted in a
tax deduction. Section 108 of the Tax Code provides,
however, that when, as in this case, the COD income
occurs in a case under the Bankruptcy Code, gross
income does not include any amount that otherwise would
be included in gross income by reason of the
cancellation of indebtedness. Instead COD income will
generally be applied to reduce certain tax attributes
of the taxpayer, including NOL carryovers.
Under the Plan, holders of Administrative Claims,
Priority Tax Claims, Other Priority Claims, Secured
Claims and General Unsecured claims less than or equal
to $500 generally will be paid (in Cash or by means of
setoff), except as otherwise provided in the Plan, the
full amount of their Allowed Claims on or after the
Consummation Date or will have such Claims reinstated
pursuant to their original terms. Claims that are paid
in full on the Consummation Date or that are reinstated
should not result in any COD income.
The payment to the holders of an Allowed Class 4
Claim of (i) Cash in the amount of such claim, but
payable over time, or (ii) if the holder so elects,
Cash in the amount of 80% of the claim plus Common
Stock, could result in COD income to the extent that
the present value of the payments of Cash and (if
applicable) the fair market value of the Common Stock
issued in satisfaction of such claim is less than the
amount of the Claim. However, Cambex does not expect to
incur any substantial tax liability because any such
taxable income should be largely offset by its existing
net operating losses and tax credit carry forwards
("Tax Attributes").
2. Utilization Of Net Operating Loss Carryovers
(a) Amount And Limitation On Use Of Net Operating
Loss Carryovers
Cambex has filed federal income tax returns
reflecting NOL carryovers of approximately $5.4 million
as of the end of its taxable year ended December 31,
1997, which will expire through its taxable years
ending December 31, 2012. Reorganized Cambex will
continue to possess its Tax Attributes, including
unused NOL carryforwards, after the issuance of Common
Stock pursuant to the Plan. The balance of this
discussion will therefore deal with the ability of
Reorganized Cambex to utilize the NOL carryforward of
Cambex after consummation of the Plan.
Section 382 (in conjunction with section 383) of
the Tax Code generally restricts a corporation's
utilization of its tax attributes by limiting the
amount of income earned by the corporation after a
change in its ownership that may be offset by tax
attributes that arose prior to the change (the "Section
382 Limitation"). In general, the Section 382
Limitation applies where more than 50 percentage points
of the ownership of the stock of a corporation has
changed within a three year period (an "Ownership
Change"). The process for determination of whether such
a change has occurred is very complex; however, based
on currently available information, Cambex believes
that an Ownership Change will not occur as the result
of the consummation of the Plan. However, the
consummation of the Plan, coupled with other sales,
redemptions or exchanges of Common Stock that have
occurred in the past and those that may occur in the
future, could result in an Ownership Change at some
later date.
In general, when the Section 382 Limitation
applies, a corporation's utilization of its pre-
Ownership Change date tax attributes (including certain
amounts that otherwise would be allowable as deductions
during the five year period beginning on the ownership
change date (the "Change Date") that are attributable
to pre-Change Date periods) for taxable periods
following the Change Date is limited to an annual
amount of tax attributes equal to the product of (i)
the value of the corporation immediately before the
ownership change (for this purpose, the value of the
corporation is generally the fair market value of the
corporation's stock on the Change Date, including
preferred stock) multiplied by (ii) the long-term tax-
exempt rate (as announced each month by the Treasury
Department) on the Change Date, plus (iii) any unused
portion of the Section 382 Limitation from prior years.
This limitation is also increased by the amount of any
net unrealized built-in gain on the Change Date that is
recognized in subsequent taxable years. Furthermore,
certain losses recognized by Reorganized Cambex after
the Change Date may be subject to the Section 382
Limitation.
(f) Other Considerations
Section 269 of the Tax Code grants the IRS
the power to disallow any deduction, credit, or
allowance (including the utilization of tax attributes)
when a corporation undertakes certain transactions for
the principal purpose of avoiding or evading federal
income taxes. Application of section 269 of the Tax
Code depends upon an evaluation of the facts and
circumstances, and Cambex believes that utilization of
its Tax Attributes by Reorganized Cambex will not be
affected by section 269 of the Tax Code, although the
IRS and the courts could adopt a different view.
3. Alternative Minimum Tax
For purposes of computing Reorganized Cambex's
regular tax liability, all of the taxable income
recognized in a taxable year generally may be offset by
the carryover of Tax Attributes (to the extent
permitted under, among other sections, sections 269,
382, and 383 of the Tax Code). Although all of
Reorganized Cambex's regular tax liability for a
particular year may be reduced to zero by virtue of its
Tax Attributes, Reorganized Cambex in any particular
year may be subject to the alternative minimum tax
("AMT"). The AMT imposes a tax equal to the amount by
which 20% of a corporation's alternative minimum
taxable income ("AMTI") exceeds the corporation's
regular tax liability. AMTI is calculated pursuant to
specific rules in the Tax Code that eliminate or limit
the availability of certain tax deductions and other
beneficial allowances but which include as income
certain amounts not generally included in computing
regular tax liability, but do not include COD income
excluded under section 108 of the Tax Code. Of
particular importance to Reorganized Cambex is that in
calculating AMTI, only 90% of a corporation's AMTI may
be offset by net operating losses. Thus, in any year
for which Reorganized Cambex may be subject to the AMT,
it may not totally eliminate all tax liability on
recognized income through the use of net operating
losses. Any AMTI would generally be taxable at an
effective rate of 2% (i.e., 10 percent of the 20
percent AMT tax rate), assuming the applicability of
the Tax Attributes to all taxable income for the year.
B. Federal Income Tax Consequences To Holders Of
Claims
1. Class 4 Unsecured Creditors
The issuance of deferred Cash or deferred Cash and
Common Stock to holders of Allowed Class 4 Unsecured
Claims pursuant to the Plan will constitute an exchange
for federal income tax purposes. The federal income tax
consequences to holders of Class 4 Unsecured Claims of
such exchange will depend on whether any given Allowed
Class 4 Unsecured Claim constitutes a "security." The
term "security" is not defined in the Tax Code or
applicable regulations and has not been clearly defined
by court decisions. The determination of whether an
instrument constitutes a "security" for federal income
tax purposes is based on all the facts and
circumstances of the case. Factors generally considered
in determining whether an obligation represents a
security include (i) the term of the instrument, (ii)
whether the instrument is secured, (iii) the degree of
subordination of the instrument, (iv) the ratio of debt
to equity of the issuer, (v) the riskiness of the
business of the issuer, and (vi) negotiability of the
instrument. This determination will be made on a case-
by-case basis. Generally, trade accounts payable are
not "securities."
(a) If Class 4 Unsecured Claims Are Not
Securities
Generally, a holder of an Allowed Class 4
Unsecured Claim that is not a "security" will realize
gain or loss on the exchange in an amount equal to the
difference between (i) the "amount realized" in respect
of such Claim and (ii) the creditor's tax basis is his
existing claim (other than any claim in respect of
accrued interest). The "amount realized" will be equal
to the present value of the Cash plus the aggregate
fair market value of the Common Stock received.
Subject to the market discount rule discussed below
(see "Market Discount"), any gain or loss recognized on
the exchange will be capital gain or loss if the
Allowed Claims were capital assets in the hands of a
holder, and such gain or loss will be long-term capital
gain or loss if such holder's holding period for the
Claim surrendered exceeds one year at the time of the
exchange. The basis of the Common Stock in the hands
of such a creditor will be its fair market value on the
date of the exchange.
The right to receive a series of deferred payments
of Cash will be treated as a new obligation issued by
Cambex. The basis of such obligation will be the
present value of the deferred payments using the
"applicable federal rate" as the discount rate. The
deferred payment obligation will be treated as issued
with original issue discount. Such original issue
discount will be included in the taxable income of the
holder (and deductible by Reorganized Cambex) on an
economic accrual basis over the term of the obligation.
(b) If Class 4 Unsecured Claims Are Securities
An exchange of securities in corporation for stock
of that corporation generally qualifies as a
"recapitalization" and therefore a "reorganization"
within the meaning of section 368(a)(1)(E) of the Tax
Code. If section 368(a)(1)(E) of the Tax Code applies
to the exchange of Common Stock and Cash for Class 4
Unsecured Claims for holders that elect Class 4 Option
B treatment, with respect to those Allowed Class 4
Unsecured Claims that constitute securities and are
held as capital assets on the date of the exchange, the
exchange of such Claims for Common Stock and Cash would
result in taxable income to the exchanging creditor in
an amount equal to the lesser of (i) the excess of the
amount of Cash (if any) and the present value of any
deferred payment obligations) plus the aggregate fair
market value of the Common Stock received in exchange
for such securities over their basis in the hands of
the holder, or (ii) the amount of Cash (if any). No
loss would be allowed. Whether such gain would be
taxable as capital gain, rather than ordinary income,
is determined separately for each individual creditor
and would depend on the relative shareholdings of the
creditor before and after the transaction, whether
Reorganized Cambex had current or accumulated earnings
and profits as of the taxable year of the exchange, and
whether the holder is deemed to hold Common Stock of
any other person under attribution rules provided by
the Tax Code. Creditors holding Class 4 Claims as
capital assets should consult their personal tax
advisors in order to determine whether the character of
any gain recognized on the exchange is capital or
ordinary.
If section 368(a)(1)(E) of the Tax Code applies,
the basis of the Common Stock received in exchange for
a Class 4 Unsecured Claim would be the same as the
basis of the Class 4 Unsecured Claim surrendered (other
than as attributable to interest), increased by the
gain recognized by the creditor and decreased by the
amount of Cash (or the present value of any deferred
payment obligation) received by the creditor. The
holding period of the Common Stock would include the
holding period of the Claim surrendered in the
exchange.
The treatment of the receipt of a deferred payment
obligation would be the same as described above in the
case of claims that are not securities.
2. Accrued Interest On Allowed Claims
A holder of an Allowed Class 4 Unsecured Claim who
previously included in income accrued but unpaid
interest attributable to its Claim should recognize an
ordinary loss to the extent such previously included
accrued interest exceeds the amount of consideration
received by the creditor that is attributable to
accrued interest for federal income tax purposes. To
the extent that a portion of the consideration received
by a holder of an Allowed Class 4 Unsecured Claim which
has not previously included in its income accrued but
unpaid interest attributable to its Claim is treated
for Federal income tax purposes as attributable to such
interest, such creditor will recognize ordinary income
in the amount of such interest, whether or not the
creditor realizes an overall gain or loss upon the
surrender of its Claim and whether or not such gain or
loss is recognized.
Notwithstanding the general discussion above, the
tax basis of a holder of an Allowed Class 4 Unsecured
Claim in Common Stock treated as received in
satisfaction of accrued interest on such Claim, if any,
should be equal to the amount of interest income
treated as satisfied by the receipt of such
consideration. Additionally, a creditor's holding
period in the consideration received as interest income
should begin on the day following the date on which
such consideration is distributed.
3. Market Discount
The Internal Revenue Code generally requires
holders of "market discount bonds" to treat as interest
income any gain recognized on the disposition of such
bonds to the extent of the market discount accrued
during the holder's period of ownership. A "market
discount bond" is a debt obligation purchased at a
market discount, subject to certain exceptions,
including a de minimis exception. For this purpose, a
purchase at a market discount includes a purchase after
the original issue at a price below the stated
redemption price at maturity. The amount of market
discount on a bond generally equals the excess of (i)
the stated redemption price at maturity of a debt
obligation (or, in the case of a debt instrument issued
with original issue discount, its "revised issue
price") over (ii) the tax basis in the hands of the
holder immediately after the bond's acquisition. The
accrued market discount generally equals a ratable
portion of the bond's market discount, based on the
number of days the taxpayer has held the bond at the
time of such disposition, as a percentage of the number
of days from the date the taxpayer acquired the bond to
its date of maturity. Also, holders of market discount
bonds are required, under certain circumstances, to
defer the deduction of all or a portion of the interest
on any indebtedness incurred or maintained to acquire
or carry market discount bonds. Neither the rule
treating accrued market discount as ordinary income on
a disposition nor the rule deferring interest
deductions applies if the holder of a "market discount
bond" elects to include the accrued market discount in
income currently.
If a creditor's receipt of Cash (if any) plus
Common Stock in exchange for his Allowed Claim pursuant
to the Plan qualifies under Section 368(a)(1)(E) of the
Tax Code, the accrued market discount treated as
interest income is limited to the amount of any gain
the creditor recognizes as a result of the exchange. To
the extent that the amount of market discount that
accrued prior to the recapitalization exceeds the gain
recognized, such excess will be allocated to the Common
Stock received in the recapitalization. Upon a
subsequent disposition of such Common Stock, any
realized gain will be treated as ordinary income or
interest income, respectively, to the extent of the
allocable portion of the accrued market discount not
recognized at the time of the recapitalization.
4. Recapture On Later Disposition Of Common
Stock
A recipient of Cash (if any) plus Common Stock in
exchange for an Allowed Unsecured Claim who recognizes
gain on the disposition of such Common Stock may
recognize ordinary income equal to the amount of any
bad debt deductions taken with respect to such Claim,
increased by any loss and decreased by any gain,
recognized upon the exchange of the Claim for Cash (if
any) plus Common Stock.
5. Other Tax Effects Of Ownership Of Common
Stock
Cash dividends paid on the Common Stock will be
taxable as ordinary income to the holder to the extent
of the current or accumulated earnings and profits
("E&P") of Reorganized Cambex. Cash dividends in excess
of current or accumulated E&P will first be treated as
return of basis and then as gain from the sale of the
Common Stock. The sale or exchange of the Common Stock,
other than a nonrecognition transaction, will give rise
to taxable gain or loss equal to the difference between
the tax basis of the Common Stock and the amount
received in exchange therefor. Assuming that the Common
Stock is a capital asset on the date of the sale or
exchange, such gain or loss will be capital gain or
loss, and will be long or short term gain or loss
depending on whether the Common Stock has been held for
more than one year.
C. Federal Income Tax Consequences To Holders Of
Common Stock
The consummation of the Plan will not be a taxable
event for the current Cambex shareholders and the
consummation of the Plan will have no tax consequences
to them in their capacity as shareholders.
X. FEASIBILITY OF THE PLAN AND THE BEST INTERESTS OF
CREDITORS
A. Feasibility Of The Plan
In connection with confirmation of the Plan, the
Bankruptcy Court will have to determine that the Plan
is feasible pursuant to section 1129(a)(l 1) of the
Bankruptcy Code, which means that the confirmation of
the Plan is not likely to be followed by the
liquidation or the need for further financial
reorganization of REORGANIZED CAMBEX.
To support its belief in the feasibility of the
Plan, CAMBEX has prepared financial Projections for
January 1, 1998 through December 31, 2000, as set forth
in Exhibit 2 attached to this Disclosure Statement. The
Projections include a pro forma balance sheet as of
March 31, 1998, which Cambex expects to be close to the
projected Consummation Date, after giving effect to the
transactions contemplated to take place as of the
Consummation Date.
The Projections indicate that Cambex will incur
losses and have negative cash flow through the first
three quarters of 1998. At that time, the Projections
indicated that revenues from Cambex's mainframe memory
products will have reached a level to sustain
operations. The Projections indicate that after making
all cash payments estimated to be required under the
Plan on account of Allowed Claims, and before taking
into account any cash to be raised through equity
financing, Cambex will be able to meet its obligations
and maintain operations using cash on hand as of the
Consummation Date, together with short term debt or
equity financing of approximately $500,000. Cambex is
currently negotiating with several sources for short-
term debt or equity financing. In the event the Debtor
secures equity financing, the equity interests of
existing Cambex stockholders and of unsecured creditors
that elect Class 4 Option B treatment may be diluted.
(See Section VI.A.2.c.(ii)b. "Class 4 Option B" for
description of rights of holders electing Class 4
Option B to change election). Accordingly, Cambex
believes that the Plan complies with the financial
feasibility standard of Section 1l29(a)(l 1) of the
Bankruptcy Code. Although Cambex believes it will
secure such financing, there are no assurances that the
financing will be secured. Many of the assumptions upon
which the projections are based are subject to
uncertainties outside the control of Cambex. Some
assumptions inevitably will not materialize, and events
and circumstances occurring after the date on which the
projections were prepared may be different from those
assumed or may be unanticipated, and may adversely
affect Cambex's financial results. Therefore, the
actual results may vary from the projected results and
the variations may be material and adverse. See
"Certain Factors To Be Considered" for a discussion of
certain risk factors that may affect financial
feasibility of the Plan.
THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TOWARD
COMPLIANCE WITH THE GUIDELINES ESTABLISHED BY THE
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS OR
THE RULES AND REGULATIONS OF THE SECURITIES AND
EXCHANGE COMMISSION REGARDING PROJECTIONS. FURTHERMORE,
THE PROJECTIONS HAVE NOT BEEN AUDITED BY CAMBEX'S
INDEPENDENT CERTIFIED ACCOUNTANTS. ALTHOUGH PRESENTED
WITH NUMERICAL SPECIFICITY, THE PROJECTIONS ARE BASED
UPON A VARIETY OF ASSUMPTIONS, SOME OF WHICH HAVE NOT
BEEN ACHIEVED TO DATE AND WHICH MAY NOT BE REALIZED IN
THE FUTURE, AND ARE SUBJECT TO SIGNIFICANT PRODUCT,
BUSINESS, ECONOMIC, AND COMPETITIVE UNCERTAINTIES AND
CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF
REORGANIZED CAMBEX. CONSEQUENTLY, THE PROJECTIONS
SHOULD NOT BE REGARDED AS A REPRESENTATION OR WARRANTY
BY CAMBEX OR REORGANIZED CAMBEX, OR ANY OTHER PERSON,
THAT THE PROJECTIONS WILL BE REALIZED. ACTUAL RESULTS
MAY VARY MATERIALLY FROM THOSE PRESENTED IN THE
PROJECTIONS.
B. Acceptance Of The Plan
As a condition to confirmation, the Bankruptcy
Code requires that each Class of impaired Claims vote
to accept the Plan, except under certain circumstances.
Section 1126(c) of the Bankruptcy Code defines
acceptance of the Plan by a Class of impaired Claims as
acceptance by holders of at least two-thirds in dollar
amount and more than one-half in number of Claims in
that Class but for that purpose counts only those who
actually vote to accept or to reject the Plan. Thus, a
Class of Claims will have voted to accept the Plan only
if two-thirds in amount and a majority in number
actually voting cast their Ballots in favor of
acceptance. Holders of Claims who fail to vote are not
counted as either accepting or rejecting the Plan.
C. Best Interests Of Holders Of Claims
As noted above, even if the Plan is accepted by
each Class of holders of Claims, the Bankruptcy Code
requires the Bankruptcy Court to determine that the
Plan is in the best interests of all holders of Claims
that are impaired by the Plan and that have not
accepted the Plan. The "best interests" test, as set
forth in section 1l29(a)(7) of the Bankruptcy Code,
requires the Bankruptcy Court to find either that all
members of an impaired Class of Claims have accepted
the Plan or that the Plan will provide a member who has
not accepted the Plan with a recovery of property of a
value, as of the Consummation Date, that is not less
than the amount that such holder would recover if
CAMBEX were liquidated under Chapter 7 of the
Bankruptcy Code.
To calculate the probable distribution to members
of each impaired Class of holders of Claims if CAMBEX
were liquidated under Chapter 7, the Bankruptcy Court
must first determine the dollar amount that would be
generated from CAMBEX's assets if the Chapter 11 Case
were converted to a case under Chapter 7 of the
Bankruptcy Code. This "liquidation value" would consist
primarily of the proceeds from a forced sale of
CAMBEX's assets by a Chapter 7 trustee.
The amount of liquidation value available to
holders of Unsecured Claims would be reduced by, first,
the Claims of secured creditors to the extent of the
value of their collateral, and, second, by the costs
and expenses of liquidation, as well as by other
Administrative Claims and costs of both the Chapter 7
case and the Chapter 11 Case, and third, by Priority
Tax Claims and Other Priority Claims. Administrative
Claims under Chapter 7 of the Bankruptcy Code would
include the compensation of the trustee, as well as of
counsel and other professionals retained by the
trustee, asset disposition expenses, all unpaid
expenses incurred by CAMBEX in the Chapter 11 Case
(such as compensation of attorneys, financial advisors,
and accountants) that are allowed in the Chapter 7
case, litigation costs, and claims arising from the
operations of CAMBEX during the pendency of the Chapter
11 Case. The liquidation itself would trigger payment
of certain Administrative Claims and Priority Tax
Claims that otherwise would be due in the ordinary
course of business. Administrative Claims, Priority Tax
Claims and Other Priority Claims would be paid in full
from the liquidation proceeds before the balance would
be made available to pay Unsecured Claims or to make
any distribution in respect of equity Interests. The
liquidation would also prompt the rejection of a large
number of executory contracts and unexpired leases and
thereby create a significantly greater amount of
Unsecured Claims to share in the proceeds available for
distribution on account of Unsecured Claims.
Once the court ascertains the recoveries in
liquidation of secured creditors and administrative and
priority claimants, it must determine the probable
distribution to general unsecured creditors and equity
security holders from the remaining available proceeds
in liquidation. If such probable distribution has a
value greater than the distributions to be received by
such creditors and equity security holders under the
Plan, then the Plan is not in the best interests of
creditors and equity security holders. Since the Plan
provides for the payment in full, over time, to holders
of Unsecured Claims, CAMBEX believes that each member
of each Class of impaired Claims will receive more
under the Plan than would be received if CAMBEX were
liquidated. Similarly, since holders of equity
Interests are not impaired as they are retaining their
stock, CAMBEX believes that the holders of equity
Interests will receive more under the Plan than they
would receive if CAMBEX were liquidated.
D. Liquidation Analysis
CAMBEX believes that the Plan meets the best
interests of creditors and equity security holders test
of section 1129(a)(7) of the Bankruptcy Code. CAMBEX
believes that the members of each impaired Class will
receive more under the Plan than they would in a
liquidation. The liquidation analysis prepared by
CAMBEX is attached as Exhibit 6 to this Disclosure
Statement (the "Liquidation Analysis").
CAMBEX believes that any liquidation analysis is
speculative. To the extent that confirmation of the
Plan requires the establishment of hypothetical amounts
for the value of CAMBEX and the amount of funds
available to pay Claims or Interests, the Bankruptcy
Court will determine those amounts at the Confirmation
Hearing.
The Liquidation Analysis necessarily contains an
estimate of the amount of Claims which would ultimately
become Allowed Claims if CAMBEX were liquidated under
Chapter 7. This estimate is based solely upon CAMBEX's
review of Claims filed and CAMBEX's books and records,
and includes estimates for Claims arising from the
rejection of unexpired leases and executory contracts
that CAMBEX believes would occur in a liquidation, but
not under the Plan. Projecting the amount of rejection
Claims that would be allowed in a liquidation is highly
speculative. However, CAMBEX believes that it does not
have many executory contracts or leases that would
result in significant rejection damages in a Chapter 7
liquidation that are different than the claims CAMBEX
expects will be filed in the Chapter 11 case or are to
be rejected under the Plan. Most of CAMBEX's contracts
were terminated (or in default) prior to the Petition
Date or were rejected during the Chapter 11 case. The
only significant lease which CAMBEX intends to assume
and that would result in a large rejection claim in a
Chapter 7 liquidation is the lease for its Waltham
facility. No order or finding has been entered by the
Bankruptcy Court estimating or otherwise fixing the
amount of Claims at the projected amounts of Allowed
Claims set forth in the Liquidation Analysis. The
estimate of the amount of Allowed Claims set forth in
the Liquidation Analysis is for purposes of considering
the value of any distribution to be made on account of
Allowed Claims or Allowed Interests in a liquidation.
As it is anticipated that most of the leases and
contracts giving rise to such rejection Claims in a
liquidation will be assumed under the Plan, the
estimate of Allowed Claims in the Liquidation Analysis
should not be relied on for determining the value of
any distribution to be made on account of Allowed
Claims or Allowed Interests under the Plan.
E. Application Of The Best Interests Of Creditors And
Equity Security Holders Test To The Liquidation
Analysis
Under the Plan, holders of Allowed Class 3 Claims
(Unsecured Claims less than or equal to $500) shall
receive Cash distributions totaling 100% of their
Allowed Class 3 Claims. Under the Plan, holders of
Allowed Class 4 Claims (Unsecured Claims greater than
$500) shall receive Cash Distributions totaling 100% of
their Allowed Class 4 Claims or, at their election,
Cash Distributions totaling 80% of their Allowed Class
4 Claims plus two shares of Common Stock for each
dollar of Allowed Class 4 Claim in excess of the 80%
paid in Cash, as more particularly described in Section
VI.A.2.
CAMBEX estimates that in a liquidation holders of
Allowed Claims in Classes 3 and 4 would receive only
13% of their Allowed Claims. Accordingly, such holders
will receive significantly more under the Plan on
account of their Allowed Claims than they would receive
in a liquidation of CAMBEX.
In a liquidation, holders of the Common Stock
Interests would receive no distributions on account of
their Interests. Under the Plan, by contrast, holders
of Class S Interests will retain their Common Stock.
F. Confirmation Without Acceptance Of All Impaired
Classes: The "Cramdown" Alternative
Section 1129(b) of the Bankruptcy Code provides
that the Plan can be confirmed even if the Plan is not
accepted by all impaired Classes, as long as at least
one impaired Class of Claims has accepted it. The
Bankruptcy Court may confirm the Plan at the request of
CAMBEX if the Plan "does not discriminate unfairly" and
is "fair and equitable" as to each impaired Class that
has not accepted the Plan. The Plan does not
discriminate unfairly within the meaning of the
Bankruptcy Code if a dissenting Class is treated
equally with respect to other Classes of equal rank.
The Plan is fair and equitable as to a Class of
Secured Claims that rejects the Plan if the Plan
provides (a) (i) that the holders of Claims included in
the rejecting Class retain the liens securing those
Claims whether the property subject to those liens is
retained by CAMBEX or transferred to another entity, to
the extent of the allowed amount of such Claims and
(ii) that each holder of a Claim of such Class receive
on account of that Claim deferred Cash payments
totaling at least the allowed amount of that Claim, of
a value, as of the Consummation Date, of at least the
value of the holder's interest in the Estate's interest
in such property; (b) for the sale, subject to section
363(k) of the Bankruptcy Code, of any property that is
subject to the liens securing the Claims included in
the rejecting Class, free and clear of the liens, with
the liens to attach to the proceeds of the sale, and
the treatment of the liens on proceeds under clause (a)
or (c) of this paragraph; or (c) for the realization by
such holders of the indubitable equivalent of such
Claims.
The Plan is fair and equitable as to a Class of
unsecured Claims which rejects the Plan if the Plan
provides (a) for each holder of a Claim included in the
rejecting Class to receive or retain on account of that
Claim property that has a value, as of the Consummation
Date, equal to the allowed amount of such Claim; or (b)
that the holder of any Claim or Interest that is junior
to the Claims of such Class will not receive or retain
on account of such junior Claim or Interest any
property at all.
G. Conditions To Confirmation And/Or Consummation
1. Conditions To The Confirmation Date
The following are conditions precedent to
confirmation of the Plan that may be satisfied or
waived in accordance with Section IX.C of the Plan:
(a) The Bankruptcy Court shall have approved a
disclosure statement with respect to the Plan in form
and substance reasonably acceptable to the Proponent.
(b) The Confirmation Order shall be in form and
substance reasonably acceptable to the Proponent.
2. Conditions To The Consummation Date
The following are conditions precedent to the
occurrence of the Consummation Date, each of which may
be satisfied or waived in accordance with Section IX.C
of the Plan:
(a) The Confirmation Order shall have been
entered by the Court and shall not be stayed,
suspended, or vacated.
(b) The Confirmation Order shall, among other
things, provide that:
(i) The provisions of the Confirmation Order
are nonseverable and mutually dependent;
(ii) The Court shall approve the assumption
or the assumption and assignment, as the case may be,
of all executory contracts and unexpired leases
proposed to be assumed or assumed and assigned by
CAMBEX on the terms provided in the Plan, or
substantially similar thereto, and all executory
contracts or unexpired leases assumed (or assumed and
assigned) by CAMBEX during the Chapter 11 Case or under
the Plan and so designated by CAMBEX shall remain in
full force and effect for the benefit of REORGANIZED
CAMBEX, as assignee and transferee as the case may be,
notwithstanding any provision in such contract or lease
(including those described in sections 365(b)(2) and
(f) of the Bankruptcy Code) that prohibits such
assignment or transfer or that enables or requires
termination of such contract or lease;
(iii) The transfers of property by CAMBEX
to REORGANIZED CAMBEX (i) are or shall be legal, valid,
and effective transfers of property, (ii) vest or shall
vest REORGANIZED CAMBEX with good title to such
property free and clear of all liens, charges, Claims,
encumbrances, or Interests, except as expressly
provided in the Plan or Confirmation Order, (iii) do
not and shall not constitute avoidable transfers under
the Bankruptcy Code or under applicable bankruptcy or
nonbankruptcy law, and (iv) do not and shall not
subject or REORGANIZED CAMBEX to any liability by
reason of such transfer under the Bankruptcy Code or
under applicable nonbankruptcy law, including, without
limitation, any laws affecting successor or transferee
liability;
(iv) Except as expressly provided in the
Plan, CAMBEX shall be discharged effective upon the
Confirmation Date from any "debt" (as that term is
defined in section 101(12) of the Bankruptcy Code), and
CAMBEX's liability in respect thereof is extinguished
completely, whether reduced to judgment or not,
liquidated or unliquidated, contingent or
noncontingent, asserted or unasserted, fixed or
unfixed, matured or unmatured, disputed or undisputed,
legal or equitable, or known or unknown, or that arose
from any agreement of CAMBEX that has either been
assumed or rejected in the Chapter 11 Case or pursuant
to the Plan, or obligation of CAMBEX incurred before
the Confirmation Date, or from any conduct of CAMBEX
prior to the Confirmation Date, or that otherwise arose
before the Confirmation Date, including, without
limitation, all interest, if any, on any such debts,
whether such interest accrued before or after the
Petition Date;
(v) The Plan does not provide for the
liquidation of all or substantially all of the property
of CAMBEX and its confirmation is not likely to be
followed by the liquidation of REORGANIZED CAMBEX or
the need for further financial reorganization; and
(vi) The Bankruptcy Court shall have
determined that the Common Stock issued under the Plan
and distributed by the Disbursing Agent in exchange for
Claims against CAMBEX are exempt from registration
under the Securities Act of 1933 pursuant to section
1145 of the Bankruptcy Code, except to the extent that
holders of any such securities are "underwriters," as
that term is defined in section 1145 of the Bankruptcy
Code.
(c) The Bankruptcy Court shall have
estimated all Disputed Claims for purposes of
establishing the Distribution Reserve.
(d) No request for revocation of the
Confirmation Order under section 1144 of the Bankruptcy
Code shall have been made, or, if made, shall remain
pending.
H. Waiver Of Conditions To The Confirmation Date Or
Consummation Date
The conditions above may be waived by CAMBEX,
without notice or a hearing. The failure to satisfy or
waive any condition to the Confirmation Date or
Consummation Date may be asserted by CAMBEX regardless
of the circumstances giving rise to the failure of such
condition to be satisfied (including any action or
inaction by CAMBEX). The failure of CAMBEX to exercise
any of the foregoing rights shall not be deemed a
waiver of any other rights, and each such right shall
be deemed an ongoing right, which may be asserted at
any time.
XI. ALTERNATIVES TO CONFIRMATION AND
CONSUMMATION OF THE PLAN
Cambex believes that the Plan affords holders of
Claims and holders of Interests the potential for the
greatest realization on Cambex assets and, therefore,
is in the best interests of such holders.
If the Plan is not confirmed, however, the
theoretical alternatives include (a) continuation of
the pending Chapter 11 Case; (b) an alternative plan or
plans of reorganization; or (c) liquidation of Cambex
under Chapter 7 of the Bankruptcy Code.
A. Continuation Of The Chapter 11 Case
If it remains in Chapter 11, Cambex could continue
to operate its businesses and manage its properties as
debtor-in-possession, but it would remain subject to
the restrictions imposed by the Bankruptcy Code. It is
not clear whether Cambex could survive as a going
concern in a protracted Chapter 11 case. Cambex could
have difficulty sustaining the high costs, and the
erosion of customer confidence, which may be caused if
Cambex remained a Chapter 11 debtor in possession.
Ultimately, Cambex (or other parties in interest) could
propose another plan or liquidate under Chapter 7.
B. Alternative Plans Of Reorganization
If the Plan is not confirmed, Cambex or, if the
Bankruptcy Court did not grant further extensions of
Cambex's exclusive period in which to file a plan and
solicit acceptance thereof, any other party in interest
in the Chapter 11 Case could propose a different plan
or plans. Such plans might involve either a
reorganization and continuation of Cambex's business or
an orderly liquidation of its assets, or a combination
of both. No parties have sought to file an alternative
plan.
C. Liquidation Under Chapter 7
If no plan is confirmed, Cambex's Chapter 11 Case
may be converted to a case under Chapter 7 of the
Bankruptcy Code. In a Chapter 7 case, a trustee or
trustees would be appointed to liquidate the assets of
Cambex. It is impossible to predict precisely how the
proceeds of the liquidation would be distributed to the
respective holders of Claims against or Interests in
Cambex.
Cambex believes that in liquidation under Chapter
7, before creditors received any distribution,
additional administrative expenses involved in the
appointment of a trustee and attorneys, accountants and
other professionals to assist the trustee would cause a
substantial diminution in the value of the Estate. In
addition, liquidation would result in the rejection of
executory contracts and unexpired leases giving rise to
substantial rejection damages Claims that would
significantly increase the amount of Allowed Claims,
thereby reducing the distribution available to each
unsecured creditor.
Cambex's liquidation analysis is premised upon a
liquidation in a Chapter 7 case and is attached as
Exhibit 6 to this Disclosure Statement. In the
analysis, Cambex has taken into account the nature,
status, and underlying value of its assets, the
ultimate realizable value of its assets in liquidation,
and the extent to which such assets are subject to
liens and security interests. The analysis also
reflects the effect of additional Administrative Claims
that would likely be incurred in connection with the
liquidation and the substantial increase in the amount
of general unsecured Claims that would arise from the
rejection of unexpired leases and unexpired contracts
in Chapter 7.
D. Plan Preferable To Alternatives
Cambex's continued operation of its business is
preferable to a liquidation since it will enable Cambex
to take advantage of its expertise and take advantage
of market opportunities that will allow it to pay
creditors more than they would receive in a
liquidation.
XII. VOTING REQUIREMENTS
On March 17, 1998, the Bankruptcy Court entered an
order, among other things, setting voting
procedures and scheduling the hearing on
confirmation of the Plan. A copy of the
notice of the Confirmation Hearing is
enclosed with this Disclosure Statement. The
notice of the Confirmation Hearing sets
forth, among other things, voting deadlines
and objection deadlines. The notice of
Confirmation Hearing and the instructions
attached to the Ballot should be read in
connection with this section of this
Disclosure Statement
If you have any questions about the procedure for
voting your Claim or the packet of materials you
received, please contact Cambex at telephone no. (781)
890-6000 (ext 299).
If you have any questions about the amount of your
Claim, please contact Cambex at
telephone no. (781) 890-6000 (ext. 235).
If you wish to obtain an additional copy of the
Plan, this Disclosure Statement, and the exhibits to
such documents, at your own expense, unless otherwise
specifically required by Bankruptcy Rule 3017(d),
please contact Brown, Rudnick, Freed & Gesmer, One
Financial Center, Boston, MA 02111, Attn: Marnie A.
Ratner.
The Bankruptcy Court may confirm the Plan only if
it determines that the Plan complies with the technical
requirements of Chapter 11 of the Bankruptcy Code and
that the disclosures of Cambex concerning the Plan have
been adequate and have included information concerning
all payments made or promised by Cambex in connection
with the Plan and the Chapter 11 Case. In addition, the
Bankruptcy Court must determine that the Plan has been
proposed in good faith and not by any means forbidden
by law, and under Bankruptcy Rule 3020(b)(2), it may do
so without receiving evidence if no objection is timely
filed.
In particular, the Bankruptcy Code requires the
Bankruptcy Court to find, among other things, that (i)
the Plan has been accepted by the requisite votes of
all Classes of impaired Claims unless approval will be
sought under section 1129(b) of the Bankruptcy Code in
light of the dissent of one or more such Classes, (ii)
the Plan is "feasible," which means that there is a
reasonable probability that Reorganized Cambex will be
able to perform its obligations under the Plan and
continue to operate its business without further
financial reorganization or liquidation, and (iii) the
Plan is in the "best interests" of all holders of
Claims or Interests, which means that such holders will
receive at least as much under the Plan as they would
receive in a liquidation under Chapter 7 of the
Bankruptcy Code. The Bankruptcy Court must find that
all conditions mentioned above are met before it can
confirm the Plan. Thus, even if all the Classes of
impaired Claims against Cambex accept the Plan by the
requisite votes, the Bankruptcy Court must make an
independent finding that the Plan conforms to the
requirements of the Bankruptcy Code, that the Plan is
feasible, and that the Plan is in the best interests of
the holders of Claims against, and Interests in,
Cambex. These statutory conditions to confirmation are
discussed above.
UNLESS THE BALLOT OR MASTER BALLOT BEING FURNISHED
IS TIMELY SUBMITTED TO THE VOTING AGENT ON OR PRIOR TO
THE VOTING DEADLINE TOGETHER WITH ANY OTHER DOCUMENTS
REQUIRED BY SUCH BALLOT, CAMBEX MAY, IN ITS SOLE
DISCRETION, REJECT SUCH BALLOT AS INVALID AND,
THEREFORE, DECLINE TO COUNT IT AS AN ACCEPTANCE OR
REJECTION OF THE PLAN.
A. Parties In Interest Entitled To Vote
Under section 1124 of the Bankruptcy Code, a class
of claims or interests is deemed to be "impaired" under
a plan unless (i) the plan leaves unaltered the legal,
equitable, and contractual rights to which such claim
or interest entitles the holder thereof, or (ii)
notwithstanding any legal right to an accelerated
payment of such claim or interest, the plan cures all
existing defaults (other than defaults resulting from
the occurrence of events of bankruptcy) and reinstates
the maturity of such claim or interest as it existed
before the default.
In general, a holder of a claim or interest may
vote to accept or to reject a plan if (i) the claim or
interest is "allowed," which means generally that no
party in interest has objected to such claims or
interest, and (ii) the claim or interest is impaired by
the Plan. If the holder of an impaired claim or
interest will not receive any distribution under the
Plan in respect of such claim or interest, the
Bankruptcy Court deems such holder to have rejected the
plan. If the claim or interest is not impaired, the
Bankruptcy Court deems the holder of such claim or
interest to have accepted the Plan and the Plan
Proponent need not solicit such holder's vote.
The holder of a Claim against Cambex that is
"impaired" under the Plan is entitled to vote to accept
or reject the Plan if (i) the Plan provides a
distribution in respect of such Claim, and (ii) (a) the
Claim has been scheduled by Cambex (and such claim is
not scheduled as disputed, contingent, unliquidated, or
scheduled in the amount of zero), or (b) it has filed a
proof of claim on or before the bar date applicable to
such holder, pursuant to sections 502(a) and 1126(a) of
the Bankruptcy Code and Bankruptcy Rules 3003 and 3018.
Any Claim as to which an objection has been timely
filed and has not been withdrawn or dismissed is not
entitled to vote, unless the Bankruptcy Court, pursuant
to Bankruptcy Rule 3018(a), upon application of the
holder of the Claim with respect to which there has
been an objection filed, temporarily allows the Claim
in an amount that the Bankruptcy Court deems proper for
the purpose of voting on the Plan.
A vote may be disregarded if the Bankruptcy Court
determines, pursuant to section 1126(e) of the
Bankruptcy Code, that it was not solicited or procured
in good faith or in accordance with the provisions of
the Bankruptcy Code. The Bankruptcy Court order
scheduling the Confirmation Hearing also sets forth
assumptions and procedures for tabulating Ballots that
are not completed fully or correctly.
B. Classes Impaired Under The Plan
The following classes of Claims and Interests are
impaired under the Plan: Class 2 Secured Claims and
Class 4 General Unsecured Claims Greater than $500.
Class 1 Priority Claims, Class 3 General Unsecured
Claims Less Than or Equal to $500, and Class 5
Stockholder Interests are not impaired under the Plan,
are deemed under section 1126 to have accepted the
Plan, and their votes to accept or to reject the Plan
will not be solicited. Acceptances of the Plan are
being solicited only from those who hold Claims in an
impaired Class whose members will receive a
distribution under the Plan.
XIII. CONCLUSION
This Disclosure Statement was approved by the
Bankruptcy Court after notice and a hearing.
The Bankruptcy Court has determined that this
Disclosure Statement contains information
adequate to permit holders of Claims and
holders of Interests to make an informed
judgment about the Plan. Such approval,
however, does not mean that the Bankruptcy
Court recommends either acceptance or
rejection of the Plan.
A. Hearing On And Objections To Confirmation
1. Confirmation Hearing
The hearing on confirmation of the Plan has been
scheduled for April 23, 1998 at 10:30 a.m.,
Eastern Time, Courtroom 4, United States
Bankruptcy Court, 10 Causeway Street, Boston,
Massachusetts. Such hearing may be adjourned
from time to time by announcing such
adjournment in open court at the Confirmation
Hearing, all without further notice to
parties in interest, and the Plan may be
modified by Cambex pursuant to section 1127
of the Bankruptcy Code prior to, during, or
as a result of that hearing, without further
notice to parties in interest.
2. Date Set For Filing Objections To
Confirmation
The time by which all objections to confirmation
of the Plan must be filed with the Bankruptcy Court and
received by the parties listed in the Confirmation
Hearing Notice has been set for April 16, 1998, at 4:00
p.m., Eastern Time. A copy of that Notice has been
transmitted with this Disclosure Statement.
B. Recommendation
Cambex has concluded that the continued operation
of Cambex's business by Reorganized Cambex, consistent
with the terms of the Plan, provides greater value to
Cambex's creditors and equity security holders than
other alternatives, including liquidation of Cambex's
assets.
CAMBEX BELIEVES THAT CONFIRMATION OF THE PLAN IS IN THE
BEST INTERESTS OF CAMBEX, ITS CREDITORS, ITS
EQUITY SECURITY HOLDERS, AND ITS ESTATE, AND
ACCORDINGLY RECOMMENDS THAT HOLDERS OF CLAIMS
VOTE TO ACCEPT THE PLAN. The Plan provides
for a full payout to creditors, the retention
of stock by equity security holders, and
preserves the jobs of Cambex employees.
Cambex believes that any alternative to
confirmation of the Plan, such as liquidation
or attempts by another party in interest to
file a plan, could result in significant
delays, litigation, and costs, as well as the
loss of jobs by most Cambex employees.
Moreover, Cambex believes that Cambex's
creditors and equity security holders will
receive greater recoveries under the Plan
than those that would be achieved in
liquidation. FOR THESE REASONS, CAMBEX URGES
YOU TO RETURN YOUR BALLOT ACCEPTING THE PLAN.
Dated: As of March 17,1998 CAMBEX CORPORATION
Waltham, Massachusetts Debtor-in-Possession
By: /s/ Joseph F. Kruy
Name: Joseph F. Kruy
Title: President and
Chief Executive Officer
BROWN, RUDNICK, FREED & GESMER, P.C.
Attorneys for Cambex, Debtor-in-Possession
One Financial Center
Boston, MA 02111
617-856-8200
By: /s/ Joseph F. Ryan
Joseph F. Ryan
Steven D. Pohl
