Now What? Evaluating Your Position Upon a Counterparty’s Bankruptcy Brandy A. Sargent November 9, 2009

Gather Your Information Internal Materials:  Ongoing Contracts  Non-Contract Materials ( s, letters, verbal agreements)  Current Accounts Receivable, Accounts Payable  Recent History (one year’s A/R is very helpful)  Upcoming Events (goods in transit, shipments to be made, payments due, etc.)

Gather Their Information Where is the Bankruptcy Case Pending?  State, District, Company Name, Case Number How can you get the information?  From the Company  From a Notice Agent  From the Court (fee for use service) Pay attention to notices you receive!  They can affect you and your ability to recover

Gather Their Information First Day Motions (in larger corporate cases)  Omnibus Affidavit  Post-Petition Financing, Cash Collateral Use  Goods In Transit/Ordered Pre-Bankruptcy  Lien Claimants  Critical Vendors/503(b)(9) Claims  Customer Programs  Utility Providers  Sale Motions

Stop The Bleeding (If you Can) Automatic Stay  You must stop activities that seek to collect funds due, force delivery of goods, or cancel most “executory contracts” Consider Whether to Stop Selling/Purchasing  If you sell or buy on a non-contract, open account basis, you are not required to continue Stop Goods in Transit (but don’t resell them yet)  If you are delivering or using a common carrier

Protect (Enhance?) Your Position Critical Vendors  Watch out for the stick that comes with the carrot 503(b)(9) Claims “20-day Claims”  Goods delivered in the ordinary course within 20 days before bankruptcy  Are not required to be paid immediately Reclamation Demands  Not a violation of the stay  Subject to prior security interests  Look back 45 days, must be asserted within 20 days of bankruptcy Setoff Rights  Governed by underlying law  Must seek relief from the automatic stay Liens  Your ability to assert them post- bankruptcy depends on underlying law

Going Forward If you are a party to an on-going “Executory Contract”  Your obligation to perform generally continues during bankruptcy The Debtor may assume or reject the contract, but does not have to make the decision immediately Sometimes you can request that the Court force the debtor to make the decision early or provide adequate assurance of performance  Watch for assumption, rejection, assignment and cure notices  Special rules apply to: real property leases, commodities contracts, intellectual property agreements

Proof of Claim Deadlines will vary depending on the Court and type of case Form and location for filing will vary by Court and case Applies to pre-bankruptcy claims  Pay special attention to 503(b)(9) claims, “gap” claims, secured claims  Does not cover administrative claims or cure claims Consider whether there is any reason you do NOT want to file a claim

Other Events/Considerations Creditors’ Committees Plan Process Conversion/Dismissal Claims Objections Claims Sales Preference Actions Doing Business After the Bankruptcy