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HomeMy WebLinkAbout8607RESOLUTION NO. 8607 A RESOLUTION ACCEPTING ESTRADA FOODS, INC. PLAN OF REORGANIZATION DATED DECEMBER 22, 1998 WHEREAS, Estrada Foods, Inc. ( "Company ") and Barshop /Estrada Acquisition Partners have jointly proposed a pre - packaged Plan of Reorganization dated December 22, 1998 for Estrada Foods, Inc. under Chapter 11 of the Bankruptcy(the "Plan "), and WHEREAS, if the Plan is confirmed and the undertakings of BVI Investments, Ltd. and BEAP Management LLC described in the Plan are fulfilled, the reorganized Company most likely will continue in business with accompaniment employment, and WHEREAS, if the Plan is not approved or confirmed, the Company will not likely file a Chapter 11 bankruptcy case and in such event the Company's real property will be lost through pending foreclosure sale and Company's personal property most likely will be liquidated by the secured creditors who hold liens on such property, and WHEREAS, the City of Pueblo has or will have claims against Company arising out of the Agreement between Company and the City of Pueblo dated November 13, 1995 ( "Agreement ") for repayment of funds advanced by the City to Company based upon the number of employees employed by Company, and WHEREAS, the claims against the Company are guaranteed by Caroline A. Fresquez, Anthony J. Estrada and Candelario J. Estrada ( "Guarantors ") pursuant to their Continuing Guaranty executed January 22, 1996, and WHEREAS, under the Plan, the City claims are classified as Class 6 and upon the Plan's effective date the City would receive the sum of $5,000.00 and all other Company's obligations to the City under the Agreement would cease and terminate, and WHEREAS, it would be in the best interest of the City to accept the Plan without however releasing or discharging the Guarantors from their obligations under the Continuing Guaranty. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1 The Estrada Foods, Inc. (the "Company ") and Barshop /Estrada Acquisition Partners' jointly proposed pre - packaged Plan of Reorganization dated December 22, 1998 for Estrada Foods, Inc. under Chapter 11 of the Bankruptcy Act (the "Plan ") is hereby approved and accepted subject to and contingent upon: (a) The Guarantors executing and delivering to the City an agreement in form and content approved by the City Attorney ratifying their Continuing Guaranty and providing that their obligations thereunder shall not be released or discharged by the City's acceptance of the Plan or the bankruptcy of Company. (b) The reorganized Company agrees to provide City with quarterly employee reports in the manner and content described in the Agreement. SECTION 2 The President of the City Council is authorized to sign and deliver in the name of the City any and all agreements and documents necessary to consummate subsections (a) and (b) of Section 1 and to evidence the City's acceptance of the Plan, including without limitation, the attached Ballot For Accepting or Rejecting Plan of Reorganization. ATTEST: City C k INTRODUCED: January 11, 1999 By Cathy A. Garcia Councilperson APP ED: L President of the City Council -2- D O E City of Pueblo OFFICE OF THE CITY ATTORNEY 127 Thatcher Building PUEBLO, COLORADO 81003 MEMORANDUM TO: Gina Dutcher, City Clerk FROM: City Attorney RE: Resolution No. 8607 DATE: January 19, 1999 We enclose the following documents to be included in your file relating to Resolution No. 8607: (a) copy of my letter to Joel Laufer, Esq. forwarding the City's Class 6 Ballot For Accepting the Plan of Reorganization regarding Estrada Foods, Inc. (b) Three copies of the January 11, 1999 Agreement between the City and Estrada Foods, Inc. signed by Estrada Foods, Inc. Please have the President of the City Council sign all three copies and return one fully executed copy to Anthony J. Estrada and one to me. (c) 3 copies of the Agreement And Ratification dated January 11, 1999 between the City and the Guarantors named therein who have signed the Agreement And Ratification. Please sign and have the President of the City Council sign, with your signatures being acknowledged. Return one fully executed copy to Anthony J. Estrada and one to me. If you have any questions, please call me. Thomas E. Jagg r -j /JP Enclosures 9 0 City of Pueblo OFFICE OF THE CITY ATTORNEY 127 Thatcher Building January 15, 1999 PUEBLO, COLORADO 81003 Joel Laufer, Esq. Attorney at Law 303 E. 17th Avenue, Suite 660 Denver, CO 80203 Re: Estrada Foods, Inc. Dear Mr. Laufer: Enclosed please find the City of Pueblo's Class 6 Ballot For Accepting Or Rejecting Plan Of Reorganization regarding Estrada Foods, Inc. Very truly yours, Thomas E. Jagger sm enc. • • [BANKRUPTCY CASE HAS NOT BEEN FILED AS OF DATE OF THIS MAILING] IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF COLORADO In re: ) ESTRADA FOODS, INC. ) Case No. a Colorado corporation, ) EIN No. 84- 1306133, ) (Chapter 11) Debtor. ) CLASS 6 BALLOT FOR ACCEPTING OR REJECTING PLAN OF REORGANIZATION The above Debtor and Barshop/Estrada Acquisition Partners LP ( "Joint Proponents ") have prepared a Plan of Reorganization dated December 22, 1998 for the Debtor ( "Plan ") and Disclosure Statement dated December 22, 1998 describing the Plan. The Plan and Disclosure Statement have been transmitted to the Debtor's creditors, shareholders and other interested parties. The Debtor has not filed a Chapter 11 case with the Bankruptcy Court as of the date of the transmittal of this ballot, and the Bankruptcy Court has not approved the adequacy of the Disclosure Statement. If the Requisite Approval is satisfied, as defined in the Plan, a Chapter 11 bankruptcy case will be filed with the Court. You should review the Disclosure Statement and the Plan before you vote. You may wish to seek legal advice concerning the Plan and your classification and treatment under the Plan. Your Claim has been placed in class 6 under the Plan. If you hold claims or equity interests in more than one class, you will receive a ballot for each class in which you are entitled to vote. The Plan referred to in this ballot can be confirmed by the Bankruptcy Court and thereby - made binding on you if it is accepted by (a) at least two-thirds in dollar amount and a majority in number of the Allowed- Claims in each impaired creditor class who cast a vote to accept or reject the Plan, and (b) at least two-thirds of the allowed interests in each impaired interest holder class who cast a vote to accept or reject the Plan. In the event the requisite acceptances are not obtained, the Court may nevertheless confirm the Plan if the Court finds that the Plan accords fair and equitable treatment to the class or classes rejecting it and otherwise satisfies the requirements of the Bankruptcy Code. To have your vote count, you must complete and return this ballot to Joel Laufer, Esq., attorney for Debtor, 303 East 17th Avenue, Suite 660, Denver, Colorado, 80203 so that the ballot is received on or before 5:00 p.m. on January 19, 1999. If your ballot is not received by Mr. Laufer on or before the foregoing deadline, your vote will not count as either an acceptance or a rejection -� of the Plan. If the Plan is confirmed by the Bankruptcy Court, it will be binding on you whether or not you vote. If an executed ballot is returned without a designation of an acceptance or rejection of the Plan, it will be tabulated as an acceptance of the Plan. Continued on the Reverse Side • The undersigned, the holder of a class 6 Allowed Claim in the amount of $ 5,000.00 (Check one box only) F x - xl Accepts the Plan ❑ Rejects the Plan Print or Type Name of Creditor or Equity Interest Holder: Ci W of Pueblo Signed: A 0 l,.C_- 1 /6..1 [If appropriate] By: Corinne Koehler Title: President of City Council Address: #1 City Hall Place Pueblo, CO 81003 Dated: 1 -11 -99 Telephone: 719- 584 -0800 AGREEMENT THIS AGREEMENT entered into as of January 11, 1999 between the City of Pueblo, a municipal corporation ( "City ") and Estrada Foods, Inc., a Colorado corporation ( "Company "), WITNESSETH: Recitals A. Company and Barshop/Estrada Acquisition Partners, LP have jointly proposed a pre- packaged Plan of Reorganization dated December 22, 1998 for Company under Chapter 11 of the Bankruptcy Act, ( "Plan"). B. Company has requested City to vote in favor of and to accept the Plan. Agreement 1. In consideration of the foregoing Recitals and to induce the City to accept and City's acceptance of the Plan, Company, as presently existing and as may be reorganized under the Plan, will within 15 days after the end of each Quarter during the Repayment Period and for one calendar month thereafter, submit or cause to be submitted to City's Director of Finance Company's Statement showing the Quarterly Employees for the preceding Quarter and the basis upon which Quarterly Employees were computed certified by an officer of the Company to be true and correct. For purposes of verifying employment, City shall have access to Company's books and records including payroll records. City will, however, respect the right of employees and Company as to confidentiality of personnel records. All capitalized terms used in this paragraph 1 shall have the same meaning as given in the November 13, 1995 Agreement between the City and Company and as same may be modified by the January 11, 1999 Agreement and Ratification between City and the Guarantors. 2. In consideration of Company's covenants and agreements set forth in paragraph hereof, City will vote in favor of and accept the Plan. 3. In the event of any litigation arising out of this Agreement, the Court shall award the prevailing party its costs and attorney fees. Company agrees that the provisions of paragraph 1 may be specifically enforced. 4. This Agreement shall be interpreted and construed in accordance with Colorado law and shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 5. No delay or failure by the City to exercise its right to enforce this Agreement, and no partial exercise of that right, shall constitute a waiver of that rights. 6. Within thirty (30) days after the Effective Date under the Plan, Company shall submit this Agreement to the reconstituted board of directors of Company for ratification and approval and immediately notify City in writing of the action taken by the reconstituted board of directors of Company. This Agreement shall not become effective until so ratified and approved by the reconstituted board of directors of Company. IN WITNESS WHEREOF, the parties have signed this Agreement as of the day and year first above written. PUEBLO, a Municipal Corporation By j jj President of the City Council ESTRADA FOODS, INC. B Y Title: President -2- AGREEMENT AND RATIFICATION This Agreement and Ratification ("Agreement") entered into as of January 11, 1999 between the City of Pueblo, a Municipal Corporation (the "City ") and Caroline A. Fresquez, Anthony J. Estrada and Candelario J. Estrada (the "Guarantors "), Witnesseth: RECITALS A. City and Estrada Foods, Inc. (the "Company ") entered into an Agreement dated November 13, 1995 and Addendum No. 1 dated January 5, 1996, Addendum No. 2 dated June 18, 1996, Addendum No. 3 dated October 15, 1996 and Addendum No. 4 dated April 10, 1997 (collectively the "November 13, 1995 Agreement ") whereby the City advanced $1,250,000 to Company for the purpose of renovating and completing its facilities within the City. B. As inducement to City to enter into the November 13, 1995 Agreement, Guarantors executed and delivered to City their Continuing Guaranty dated January 22, 1996, a copy of which is attached as Exhibit "A" (the "Continuing Guaranty "). C. Company and Barshop/Estrada Acquisition Partners, LP propose to jointly file a pre- packaged Plan or Reorganization (the "Plan ") under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court For The District of Colorado. D. City and Guarantors have received and acknowledge receipt of a copy of the Plan and Disclosure Statement and Ballot with respect thereto. E. Company and Guarantors have requested the City to vote in favor of and to accept the Plan. DEFINITIONS The capitalized terms used in this Agreement shall have the same meaning given in the above Recitals and in the November 13, 1995 Agreement unless the context clearly indicates otherwise, provided, however, that after the Effective Date and performance of the undertaking of BEAP, BVI and Redemptors under the Plan, the following terms used in this Agreement shall have the following meaning unless the context clearly indicates otherwise: "Company" shall mean Estrada Foods, Inc. as reorganized under the Plan. "Repayment Period" means the six (6) year period starting June 1, 1999 and ending May 31, 2005. "Quarterly Payments" means the amount computed in accordance with paragraph 2(a) below. AGREEMENT 1. In consideration of the foregoing Recitals and to induce the City to accept and City's acceptance of the Plan, Guarantors individually and jointly agree that neither the Plan, City's acceptance thereof, the confirmation of the Plan by the Bankruptcy Court, nor the satisfaction and discharge of City's claims against Company under the November 13, 1995 Agreement, or the Company's rejection of the November 13, 1995 Agreement under the Plan, nor any other Company bankruptcy filings or proceedings (herein collectively the "Company's Bankruptcy "), shall relieve, release or discharge Guarantors from or modify their several and joint obligations under the Continuing Guaranty except as herein provided. Guarantors confirm and ratify the Continuing Guaranty and agree that notwithstanding Company's Bankruptcy the Continuing Guaranty and, as between the City and Guarantors, the November 13, 1995 Agreement shall remain in force and effect enforceable against the Guarantors according to their terms as modified by this Agreement. 2. After (i) the Effective Date and the performance of the undertakings of BEAP, BVI and Redemptors under the Plan, and (ii) the ratification and approval of the January 11, 1999 Agreement between the City and Company by the reconstituted board of directors of Company, Guarantors and City agree that Guarantors' obligations and liabilities under the Continuing Guaranty and under this Agreement to the City shall be: (a) If Company does not employ the Quarterly Employees hereinafter specified during any Quarter of the Repayment Period, Guarantors jointly and severally unconditionally promise to the pay to City an amount equal to $184.51 multiplied by the difference between the Quarterly Employees actually employed by Company and the Quarterly Employees specified for that Quarter as follows (the "Quarterly Payment "): QUARTER FULL -TIME QUARTER FULL -TIME BEGINNING EMPLOYEES BEGINNING EMPLOYEES June 1, 1999 70 Sept. 1, 2000 170 Sept. 1, 1999 90 Dec. 1, 2000 190 Dec. 1, 1999 110 March 1, 2001 220 March 1, 2000 130 and thereafter June 1, 2000 150 (b) Quarterly Payments, if any, are due and shall be paid to City by Guarantors without notice, demand, deduction or setoff on or before the fifteenth (15) day of the calendar month after the end of each Quarter during the Repayment Period and for one month thereafter at the office of the Director of Finance of City, 1 City Hall Place, Pueblo, Colorado, 81003. Timely Quarterly Payments shall not bear interest. All past due Quarterly Payments shall bear interest at the rate of ten (10) percent per annum until paid. (c) The Repayment Obligation shall be reduced at the end of each Quarter during -2- the Repayment Period by an amount equal to $40,592.01 less any Quarterly Payment owed to City for that Quarter. (d) If any Quarterly Payment is not paid when due ( "Unpaid Quarterly Payment "), the full amount of the then balance of the Repayment Obligation may at the option of the City become immediately due and payable by the Guarantors. For purposes hereof, "full amount of the then balance of the Repayment Obligation" shall be computed by multiplying the product of 220 times $184.51 by the number of Quarters of the Repayment Period remaining after the Quarter for which an Unpaid Quarterly Payment is owed, and adding thereto any Unpaid Quarterly Payments plus interest. (e) Paragraph 5 of the November 13, 1995 Agreement is hereby canceled and shall no longer be binding upon City, Company or Guarantors and each party is released and discharged from all rights, remedies, or obligations thereunder. (f) As security for the performance of Guarantors' obligations under the Continuing Guaranty and payment of the Repayment Obligation and Quarterly Payments, City shall have and is hereby granted a security interest in the New Common Stock, 1999 Series A Preferred Stock and 1999 Series B Preferred Stock, if any, to be issued or issued to Guarantors under the Plan or pursuant to any stock options granted to Guarantors with respect to New Common Stock (the "Securities "). Immediately upon issuance of the Securities to Guarantors, Guarantors shall deliver to City the certificates evidencing the Securities endorsed in blank by Guarantors or accompanied by duly executed stock powers. All rights in connection with or incident to the ownership of such Securities shall be vested solely in the Guarantors, subject to the rights of the City as pledgee and secured party. (g) If at any time the full amount of the then balance of the Repayment Obligation becomes due and payable, the City shall have the right to sell the Securities or any part thereof, at public or private sale, at which the City may bid and purchase, on thirty (30) days notice in writing to Guarantors. City shall apply the proceeds of such sale to the expenses incident thereto, including attorney fees, and to the payment of the then balance of the Repayment Obligation. The surplus, if any, resulting from the sale of the Securities shall be paid over to Guarantors. (h) If the Securities are valued by a competent appraiser at any time hereafter, and such valuation shows the value of Guarantors' Securities delivered to City to be 125% or more of the then balance of the Repayment Obligation, City may upon request of Guarantors and approval of such valuation, release Securities from the pledge and security interest granted by (e) above which have a value over 150% of the then balance of the Repayment Obligation. (1) In the event the Company is sold, acquired, reorganized or merged into another entity and the acquiring or successor entity assumes Guarantors' obligations and liabilities under this Agreement and the Continuing Guaranty, upon request by Guarantors and approval by the City of such assumption and the financial ability of the acquiring or successor entity to perform -3- Guarantors' obligations and liabilities, the City may release and discharge Guarantors from this Agreement and Continuing Guaranty. 3. In consideration of the foregoing Recitals and the covenants and agreements of the Guarantors set forth in paragraphs I and 2 hereof, City will vote in favor of and accept the Plan. 4. This Agreement shall not become effective until signed personally by each Guarantor. 5. Time is of the essence hereof. This Agreement shall be binding upon and inure to the benefit of the City and Guarantors and their respective heirs, personal representatives, successors and assigns. 6. The singular includes the plural and the plural includes the singular, and the word "Guarantors" shall mean any one or more of the Guarantors where the context and construction so require. 7. This Agreement may not be modified or amended except by written instrument signed by all the parties. 8. This Agreement shall be interpreted and construed in accordance with Colorado law. The parties agree that the District Court for the County of Pueblo shall have jurisdiction over any suit or action which involves this Agreement or the Continuing Guaranty and venue in Pueblo County, Colorado shall be proper. The parties consent to the jurisdiction of that court and agree that service of process may be made upon Guarantors either within or without the State of Colorado. 9. In the event of any litigation arising out of this Agreement or the Continuing Guaranty, or both, the Court shall award to the prevailing party its costs and attorney fees. Guarantors agree that the provisions of paragraph 2(f) may be specifically enforced. 10. Any notice herender shall be sufficiently given if given personally or mailed by certified mail, postage prepaid, addressed (a) if to City, City Manager, City of Pueblo, 1 City Hall Place, Pueblo, Colorado, 81003, or (b) if to Guarantors, at the addresses shown after their respective signatures hereon, or to such other addresses as any party hereto shall specify in written notices to the other parties. 11. Guarantors acknowledge and agree that the Guarantors' obligations and liabilities under the Continuing Guaranty and this Agreement are joint and several and may extend beyond six (6) years from the date of this Agreement and of the Continuing Guaranty. Guarantors hereby waive any defense to the enforcement of the Continuing Guaranty or this Agreement based upon laches or -4- any statutory or other period of limitation. Guarantors agree that any such statutory or other period of limitation shall be extended to January 1, 2007. 12. No delay or failure by the City to exercise its right to enforce the Continuing Guaranty or this Agreement, and no partial or single exercise of that right, shall constitute a waiver of that right. In witness whereof, the undersigned Guarantors and City of Pueblo have executed this Agreement as of the day and year first above written. City r� blo, a Munici 'al Corporation ATTEST: � ' "'1 By resident of the City Council City rk COUNTY OF PUEBLO ) STATE OF COLORADO ss. The foregoing instrument was acknowledged before this day of January > 1999 by Corinne Koehler as President of City Council and Gina Dutcher as the City Clerk of the City of Pueblo, a Municipal Corporation. Witness my hand and official seal. My commission expires: 8 -21 -99 SEAL] Notary Public Name: Carolin A. Fresquez Address: 1628 20th Lane Pueblo, Colorado 81006 Social Security No. 521 -96 -3067 Name: Antho J. Estrada / Signatur l �G Address: 1655 Cliffd e Pueblo, Colorado 81006 Social Security No. 524 -94 -0671 -5- Name: Candelario J. Estrada Signature: A Address: 1214 Holly Pueblo, Colorado 81006 Social Security No. 523 -68 -17/7 9 r STATE OF COLORADO COUNTY OF PUEBLO ss. r ,A The foregoing was acknowledged before me this day of January, 1999 by Caroline A. Fresquez, Anthony J. Estrada and Candelario J. Estrada. My commission expires: Tom; [SEAL] Notary Public IN CONTINUING GUARANTY FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, and as inducement to the City of Pueblo, a municipal corporation (the "City ") to enter into the attached Agreement dated November 13, 1995 between City and Estrada Foods, Inc., a Colorado corporation (the "Company ") and Addendum No. 1 dated January 5, 1996 (collectively the "Agreement ") and to advance to Company the sum of $1,150,000 pursuant to the terms and covenants of the Agreement, the undersigned Caroline A. Fresques, Anthony J. Estrada and Candelario J. Estrada (the "Guarantors ") jointly and severally unconditionally guarantee and promise to pay to City, or order, on demand, in lawful money of the United States, the full amount of Company's Repayment Obligation described in and in accordance with the terms and provisions of paragraph 4 of the Agreement (the "Indebtedness "). The liability of Guarantors under this Guaranty shall not exceed at any one time the principal sum of $1,150,000. This is a continuing irrevocable guaranty relating to the Indebtedness, including successive transactions which shall either continue the Indebtedness or from time to time modify or renew it. Any payment by Guarantors shall reduce their maximum obligation hereunder. The obligations of Guarantors hereunder are joint and several, and independent of the obliga- tions of Company, and a separate action or actions may be brought and prosecuted against Guarantors, jointly and severally, whether action is brought against Company or whether Company be joined in an) such action or actions. Guarantors acknowledge that the payment of the Indebted- ness may extend beyond six (6) years from the date of this Agreement, Guarantors hereby waive any defense to the enforcement of this Guaranty based upon any statutory or other period of limitation. Guarantors authorize the City, without notice or demand and without affecting their liability hereunder, from time to time to (a) renew, compromise, extend, accelerate or otherwise change the time for payment of, or otherwise change or modify the terms of the Indebtedness or any part there- of, (b) fake and hold security for the payment of this Guaranty or the Indebtedness guaranteed, and exchange, enforce, waive and release any such security; (c) apply such security and direct the order or manner of sale thereof as City in its discretion may determine; and (d) release or substitute any one or more of the Guarantors. City may without notice assign this Guaranty in whole or in part. Guarantors waive any right to require City to (a) proceed against Company; (b) proceed against or exhaust any security held from Company; or (c) pursue any other remedy in City's power whatsoever. Guarantors waive any defense arising by reason of any disability or other defense of Company or by reason of the cessation from any cause whatsoever of the liability of Company. -- Until the Indebtedness of Company to City shall have been paid in full, Guarantors shall have no right of subrogation, and waive any right to enforce any remedy which City now has or may hereafter have against Company, and waive any benefit of, and any right to participate in any security now or hereafter held by City. Guarantors waive all presentn;ents, demands for performance, notices of non - performance, protests, notices of protest, notice of dishonor, and notices of acceptance of this Guaranty. Any debts or other financial obligations of Company now or hereafter held by Guarantors are hereby subordinated to the Indebtedness of Company to City and such debts or other financial obligations of Company to Guarantors, if City so requests, shall be collected, enforced and received by Guarantors as trustees for City and be p?i over to City on account of the Indebtedness of Company to City but without reducing or affecting in any manner the liability of Guarantors under the other provisions of this Guaranty. Guarantors agree that it is not necessary for City to inquire into the powers of Company or the officers, directors, or agents acting or purporting to act on its behalf, and the Indebtedness made or created in reliance upon the professed exercise of such powers is guaranteed hereunder. Guarantors agree to pay a reasonable attorneys' fee and all other costs and expenses which may be incurred by City in the enforcement of this Guaranty. Guarantors agree that this Guaranty is a contract entered into in Pueblo County, Colorado. The District Court for the County of Pueblo, State of Colorado shall have jurisdiction over any suit or action which involves this Guaranty and venue in Pueblo County, Colorado shall be proper. Guarantors consent to the personal jurisdiction of that Court and agree that service of process may be made upon Guarantors either within or without the State of Colorado. Any notice hereunder shall be sufficiently given if given personally or mailed by certified mail, postage prepaid, addressed: (a) if to City, City Manager, City of Pueblo, I City Hall Place, Pueblo, Colorado, 81003, or (b) if to Guarantors, at the addresses shown after their respective signatures hereon, or to such other addresses as any party hereto shall specify in written notice to the other parties. Time is of the essence hereof. This Guaranty shall be binding upon and inure to the benefit of City and Guarantors and their respective heirs, personal representatives, successors and assigns. The word "Guarantors" shall mean any one or more of them where the context and construction so require. IN WITNESS WHEREOF the undersigned Guarantors have executed this Guaranty in Pueblo, Colorado this �;, day of January, 1996. Name: Signatui Address: 1628 20th Lane Pueblo, Colorado 81006 Social Security No. 521 -96 -3067 Name: Anth �} ?J. Estrada l` ; , \, Signatur .i'�� � Address: 1655 Cliff e Pueblo, Colorado 81006 Social Security No. 524 -94 -0671 Name: Candelario J. Estrada Signature: Address: 1214 Holly Pueblo, Colorado 81006 Social Security No. 523 -68 -1787 STATE OF COLORADO ) ss. COUNTY OF PUEBLO ) The foregoing was acknowledged before me this O t 9 2y 9 4 ,� day of January, 1996 by Caroline A. Fresques, Anthony J. Estrada and Candelario J. Estrada. My commission expires [SEAL] MY COMMISSION aPTAE obl01 /1998 Notary Pub is -3- 1 4 -U D D D January 5, 1999 City of Pueblo OFFICE OF THE CITY ATTORNEY 127 Thatcher Building PUEBLO, COLORADO 81003 Ms. Gina Dutcher, City Clerk 1 City Hall Place Pueblo, CO 81003 Re: Estrada Foods, Inc. Dear Gina: Enclosed please find Plan of Reorganization and Disclosure Statement dated December 22, 1998 regarding Estrada Foods, Inc. This document should be kept with your official file. Very truly yours, Thomas E. Ja �!! sm enc. ESTRADA FOODS, INC. PLAN OF REORGANIZATION AND DISCLOSURE STATEMENT DECEMBER 22, 1998 To: The Creditors and Shareholders of Estrada Foods, Inc. Enclosed please find the Disclosure Statement and Plan of Reorganization proposed for Estrada Foods, Inc. If your records do not reflect that you are a creditor or shareholder of Estrada Foods, Inc., please disregard the enclosed materials. If you have any questions regarding the enclosed materials, please contact Mr. Hiram Lewis at (719) 542 - 3400. IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF COLORADO In re: ESTRADA FOODS, INC. a Colorado corporation, EIN 84- 1306133, Case No. Chapter 11 Debtor. PLAN OF REORGANIZATION Dated: December 22, 1998. The Debtor and Barshop /Estrada Acquisition Partners LP, Joint Proponents, propose the following Plan of Reorganization pursuant to 11 U.S.C. §1121 (a) . ARTICLE I. Definitions "Allowed Administrative Expense" shall mean those expenses incurred after the Filing Date which are allowed by order of the Court and entitled to priority pursuant to Sections 503 and 507(a)(1) of the Code. "Allowed Claim" shall mean (1) an unsecured Claim against the Debtor which is set forth in Debtor's schedules other than an unsecured Claim against the Debtor scheduled by the Debtor as disputed, contested, contingent or unliquidated, or (2) an unsecured Claim against the Debtor which has been timely filed pursuant to 11 U.S.C. §501 prior to the Bar Date, and with respect to which no objection to the allowance thereof has been timely interposed, or as to which any objection has been determined by Final Order; provided however that interest accrued after the Filing Date shall not be a part of any Allowed Claim unless otherwise provided in the Plan. Allowed Claims may include (a) Claims arising from the rejection of executory contracts, and (b) deficiency Claims (if any) of the holders of Allowed Secured Claims. !'Allowed Priority Claim" shall mean that portion, if any, of an Allowed Claim entitled to priority in payment under Section 507(a)(2) et seq of the Code. Allowed Priority Claims shall not include Allowed Administrative Expenses. EXHIBIT 1 "Allowed Secured Claim" shall mean an Allowed Claim secured by assets of the Debtor. "Bar Date" shall mean the date fixed by the Court for filing proofs of Claim in the Case. "Case" shall mean the Chapter 11 case to be filed in the Court by the Debtor if the Debtor receives the Requisite Approval. "Common Stock" shall mean the Debtor's common stock, no par value, issued and outstanding at the Filing Date. "Chapter 11" shall mean Chapter 11 of the Code. "Claim" shall mean a claim against the Debtor existing at the Filing Date as defined in Section 101(5) of the Code. "Code" shall mean Title I of the Bankruptcy Reform Act of 1978, 11 U.S.C. Sections 101 et seq., as amended, also known as the Federal Bankruptcy Code. "Confirmation" shall mean the entry of an order by the Court confirming and approving the Plan in accordance with Chapter 11 of the Code. "Confirmation Date" shall mean the date of Confirmation. "Confirmation Order" shall mean the order of the Court confirming the Plan. "Court" shall mean the United States Bankruptcy Court for the District of Colorado. "Debtor" shall mean Estrada Foods, Inc., a Colorado corporation. "D.I.P. Loan" shall mean a revolving line -of- credit loan not to exceed the sum of one million four hundred fifty thousand dollars and no cents ($1,450,000.00) to be made by BVI Investments, Ltd., and any participants with BVI Investments, Ltd. in such loan, to the Debtor after the Filing Date subject to Court approval after notice to creditors, shareholders and interested parties. It is anticipated that the D.I.P. Loan (a) shall accrue interest at the Chase Bank of Texas, N.A. prime rate plus three percent (3%) per annum, provided that the minimum rate shall not be less than ten percent (10 per annum, (b) shall be an Allowed Administrative Expense with priority over all other Allowed Administrative Expenses (except fees owing to the United States Trustee pursuant to 28 U.S.C. Section 1930) as provided in Section 364(c)(1) of the - 2 - Code, and (c) shall be secured by property of the Debtor pursuant to Section 364(d) of the Code as specifically described in Exhibit B attached hereto and incorporated herein by reference. "Disclosure Statement" shall mean the disclosure document, as amended, describing the Plan as required to be filed by the Debtor and distributed to the various classes under the Plan as provided in Section 1125 of the Code. "Disputed Claim" shall mean any Claim which has been scheduled by the Debtor as disputed, contested, contingent, or unliquidated or any proof of Claim as to which an objection to the allowance thereof has been interposed and allowance or disallowance of such Claim has not been determined by a Final order. "Effective Date" shall mean the first business day which is eleven (11) calendar days after the Confirmation Date. "Filing Date" shall mean the date a Chapter 11 Case is filed by the Debtor in the Court. "Final Decree" shall mean the final decree entered by the Court pursuant to Section 350 of the Code closing the Case. "Final Order" shall mean an order or a judgment as to which the time to appeal or seek review or rehearing has expired and as to which no appeal or petition for review or rehearing is pending. "Foreclosure Sale" shall mean the October 14, 1998 foreclosure sale (no. 6773) held by the Public Trustee for the County of Pueblo, State of Colorado at which sale a Certificate of Purchase for the Real Property was issued by the Public Trustee to Peak National Bank. "Joint Proponents" shall mean the Debtor and Barshop /Estrada Acquisition Partners LP, a Texas limited partnership. "Plan" shall mean this plan of reorganization filed by the Joint Proponents, as it may be amended from time to time. "Preferred Stock" shall mean the Debtor's 1996 Series A preferred stock issued and outstanding at the Filing Date. "Pro Rata" shall mean, with respect to the holder of a class 3 Allowed Claim, the percentage which the amount of such class 3 Allowed Claim bears to the aggregate amount of all class 3 Allowed Claims. - 3 - "New Common Stock" shall mean the Debtor's common stock with a par value of one cent ($.01) per share to be issued under the Plan on the Effective Date which: (a) shall be voting stock [one vote per share]; and (b) shall be junior to the 1999 Series A Preferred Stock and the 1999 Series B Preferred Stock in liquidation and dividend preferences. 11 1999 Series A Preferred Stock" shall mean the Debtor's series A preferred stock with a par value of one cent ($.01) per share to be issued under the Plan which: (a) shall have an issue price per share equal to the amount of the class 11 Allowed Claim divided by the sum of four million (4,000,000); (b) shall accrue dividends from the date of issuance at the rate of eight percent (8 %) of the issue price per share per annum; (c) shall at the election of the holder(s) be convertible at any time and from time to time after the Effective Date into an aggregate of four million (4,000,000) shares of New Common Stock (subject to appropriate adjustments in the event of any sub - divisions or combinations of New Common Stock into a greater or lesser number of shares, stock dividends and certain other distributions on account of New Common Stock and the like); (d) shall be voting stock [one vote for each share of New Common Stock into which such shares of 1999 Series A Preferred Stock is then convertible] and (e) shall be senior to the 1999 Series B Preferred Stock and the New Common Stock in liquidation and dividend preferences. 11 1999 Series B Preferred Stock" shall mean the Debtor's series B preferred stock with a par value of one cent ($.01) per share to be issued under the Plan which: (a) shall have an issue price of one hundred dollars ($100.00) per share; (b) shall accrue no dividends for the first twenty -four months after issuance and thereafter shall accrue dividends at the rate of six dollars ($6.00) per share per annum; (c) shall be subject to redemption, in whole or part, at the option of the Debtor (i) at any time during the first twelve months after issuance for a redemption price equal to seventy -five percent (75 %) of the issue price, (ii) at any time during the second twelve months after issuance for a redemption price equal to eighty -seven and one -half percent (87.5 %) of the issue price, and (iii) at any time after the second twelve months for a redemption price equal to the issue price; (d) shall be voting stock (one vote per share]; (e) shall be junior to the 1999 Series A Preferred Stock in liquidation and dividend preferences; (f) shall be senior to the New Common Stock in liquidation and dividend preferences; (g) may at the election of the holder(s) be convertible into shares of New Common Stock at any time after the Effective Date in an amount equal to four percent (4%) of the New Common Stock issued and outstanding on the Effective Date treating all outstanding 1999 Series A Preferred Stock as if it had been converted to New Common Stock (subject to appropriate adjustments - 4 - in the event of any sub- divisions or combinations of New Common Stock into a greater or lesser number of shares, stock dividends and certain other distributions on account of New Common Stock and the like) ; (h) shall be subject to mandatory redemption at the issue price after four (4) years from issuance if and when the fair market value of the Debtor is equal to or exceeds thirty million dollars ($30,000,000); and (i) may at the election of the holders be converted into shares of New Common Stock based upon the formula described in (g) above at any time the Debtor seeks to redeem the 1999 Series B Preferred Stock. "Real Property" shall mean the real property (a) previously owned by the Debtor, (b) subject to the equitable right of redemption by the Debtor and junior lienholders, and (c) described in Exhibit A attached hereto and incorporated herein by reference. The Real Property was sold by the Public Trustee for the County of Pueblo, State of Colorado at a Foreclosure Sale held on October 14, 1998. Peak National Bank was the successful bidder at the sale and was issued a Certificate of Purchase by the Public Trustee. "Requisite Approval" shall mean that the Plan has been accepted by classes 2, 6, 7, and 11 pursuant to Sections 1125 and 1126 of the Code and Rule 3018 of the Federal Rules of Bankruptcy Procedure. The Case will be filed with the Court if the Debtor obtains the Requisite Approval. "Small Claim" shall mean an Allowed Claim in an amount not exceeding $500.00, including an Allowed Claim greater than $500.00 which has been reduced to $500.00 at the election of the holder of such Allowed Claim. "Stock Options" shall mean options issued and outstanding at the Filing Date to purchase Common Stock or Preferred Stock. "Voting Deadline" means the last date for impaired classes to vote on the Plan. The Voting Deadline is set forth in the ballot and Disclosure Statement which accompanies the Plan. "Warrants" shall mean warrants issued and outstanding at the Filing Date to purchase Common Stock or Preferred Stock. ARTICLE II. Unclassified Allowed Administrative Expenses 2.1 On the Effective Date, the Debtor shall pay Allowed Administrative Expenses in cash in full or upon such other terms as any agreement so provides or as may be agreed upon by the Debtor and the respective holder of an Allowed Administrative Expense, provided however that holders of Allowed Administrative Expenses - 5 - .M YAW arising under Section 330 of the Bankruptcy Code shall be paid only after the Court has entered its order approving the Allowed Administrative Expense and such order has become a Final Order, and provided however that the D.I.P. Loan shall be paid according its terms, a general description of which is set forth in Exhibit B attached hereto and incorporated herein by reference. 2.2 All unpaid fees owing to the Office of the United States Trustee pursuant to 28 U.S.C. Section 1930 shall be paid in full on the later of the Effective Date or when due. The Debtor shall continue to pay such fees until the Court enters its Final Decree closing the Case or enters an order dismissing the Case or converting the Case to Chapter 7. ARTICLE III. Classification Of Claims And Interests 3.1 Claims Class 1 Allowed Priority Claims Class 2 Small Claims Class 3 Allowed Claims not otherwise classified Class 4 Allowed Claim of W.K. Capital Advisors, Inc. /Estrada International Foods, Inc. Class 5 Allowed Claim of the County of Pueblo, State of Colorado Class 6 Allowed Claim of the City of Pueblo, State of Colorado Class 7 Allowed Claims of Anthony Estrada, Candelario "Jess" Estrada, Caroline Fresquez, Rocky Mountain Cold Storage, Food Equipment Refabricators of Colorado, E. T. Construction, Fresquez Enterprises, and Casa de Oro, LLC Class 8 Allowed Secured Claim of Peak National Bank Class 9 Allowed Secured Claim of BVI Investments, Ltd. Class 10 Allowed Secured Claim of National Business Finance, Inc. - 6 - Class 11 Allowed Secured Claims of Barshop /Estrada Acquisition Partners LP 3.2 Interests Class 12 Holders of Common Stock Class 13 Holders of Preferred Stock Class 14 Holders of Stock Options Class 15 Holders of Warrants ARTICLE IV. Treatment Of Allowed Priority Claims Impaired Under The Plan Class l (Allowed Priority Claims) 4.1 Class 1 consists of the holders of Allowed Priority Claims. 4.2 On the Effective Date, each holder of an Allowed Priority Claim shall be paid in cash in full, or upon such other terms as any agreement with Debtor so provides or as may be agreed upon by the Debtor and the respective holder of the Allowed Priority Claim, provided however that any government unit holding an Allowed Priority Claim shall be paid as follows: 20% of the Allowed Priority Claim shall be paid in cash at the Effective Date with the balance payable in twenty -four (24) equal monthly installments of principal and interest commencing thirty (30) days after the Effective Date and continuing on the same day of each month thereafter with interest accruing after the Effective Date at the rate of 7% per annum. 4.3 Class 1 i impaired under the Plan. ARTICLE V. Treatment Of Allowed Claims Impaired Under The Plan Class 2 (Small Claims) 5.1 Class 2 consists of the holders of Small Claims. 5.2 On the Effective Date, each holder of Class 2 Small Claim shall receive a cash distribution equal to 100% of its Small Claim in full satisfaction and discharge of the Class 2 Small Claim. - 7 - 5.3 Class 2 is impaired under the Plan. Class 3 (Allowed Claims) 5.4 Class 3 consists of all Allowed Claims not otherwise separately classified under the Plan. 5.5 On the later of the Effective Date or the date that all class 3 Disputed Claims are allowed by Final Order, each holder of a Class 3 Allowed Claim shall receive a cash distribution equal to his /her /its Pro Rata share of Five Hundred Thousand Dollars and No Cents ($500,000.00) in full satisfaction of the class 3 Allowed Claim, provided however that after the Effective Date, the Debtor, in its sole and absolute discretion, may make interim distributions to the holders of class 3 Allowed Claims. 5.6 Class 3 is impaired under the Plan. Class 4 (W.K. Capital Advisors, Inc. /Estrada International Foods, Inc.) 5.7 Class 4 consists of the Allowed Claim of W.K. Capital Advisors, Inc. /Estrada International Foods, Inc. 5.8 On the Effective Date, the class 4 creditor shall have the option to either (a) exchange such class 4 Allowed Claim for 1999 Series B Preferred Stock at the ratio of one (1) share of 1999 Series B Preferred Stock for each one hundred dollars ($100.00) of class 4 Allowed Claim, or (b) exchange such class 4 Allowed Claim for shares of New Common Stock such that the class 4 creditor will own, as of the Effective Date, six percent (6%) of the New Common Stock issued and outstanding on the Effective Date treating all outstanding 1999 Series A Preferred Stock as having been fully converted to New Common Stock. The distribution of securities to class 4 shall be in full satisfaction of all Claims against and /or interests in the Debtor held by class 4 prior to the Effective Date. 5.9 If class 4 rejects the Plan, (a) the Plan provisions respecting class 4 shall be deemed of no force and effect and no Plan distributions shall be made to class 4; and (b) the class 4 Allowed Claim shall be subject to treatment as a class 3 Allowed Claim; and (c) the class 4 creditor shall be entitled to vote as a member of class 3. 5.10 Class 4 is impaired under the Plan. - 8 - Class 5 (County of Pueblo) 5.11 Class 5 consists of the Allowed Claim of the County of Pueblo, State of Colorado. 5.12 On the Effective Date, class 5 shall receive the sum of Five Thousand Dollars and No Cents ($5,000.00) in full satisfaction and discharge of the class 5 Allowed Claim. 5.13 If class 5 rejects the Plan, (a) the Plan provisions respecting class 5 shall be deemed of no force and effect and no Plan distributions shall be made to class 5; and (b) the class 5 Allowed Claim shall be subject to treatment as a class 3 Allowed Claim; and (c) the class 5 creditor shall be entitled to vote as a member of class 3. 5.14 Class 5 is impaired under the Plan. Class 6 (City of Pueblo) 5.15 Class 6 consists of the Allowed Claim of the City of Pueblo, State of Colorado. 5.16 On the Effective Date, class 6 shall receive the sum of Five Thousand Dollars and No Cents ($5,000.00) in full satisfaction and discharge of the class 5 Allowed Claim. 5.17 Class 6 is impaired under the Plan. Class 7 (Anthony Estrada, et al) 5.18 Class 7 consists of the Allowed Claims held by Anthony Estrada, Candelario "Jess" Estrada, Caroline Fresquez, Rocky Mountain Cold Storage, Food Equipment Refabricators of Colorado, E. T. Construction, Fresquez Enterprises, and Casa de Oro, LLC. 5.19 On the Effective Date, each holder of a class 7 Allowed Claim shall receive a cash distribution equal to twelve percent (12 %) of its Allowed Claim in full satisfaction and discharge of the class 7 Allowed Claim. 5.20 Class 7 is impaired under the Plan. - 9 - ARTICLE VI. Treatment Of Allowed Secured Claims Impaired And Not Impaired Under The Plan Class 8 (Peak National Bank) 6.1 Class 8 consists of the Allowed Secured Claim held by Peak National Bank. 6.2 Class 8 holds a Certificate of Purchase issued by the Public Trustee for the County of Pueblo, State of Colorado, in Public Trustee's Foreclosure Sale (no. 6773) held on October 14, 1998 respecting the Debtor's Real Property and improvements thereon. 6.3 Class 8 shall retain unaltered all of its legal, equitable and contractual rights as they existed as of the Filing Date. 6.4 Class 8 is not impaired under the Plan. Class 9 (BVI Investments, Ltd.) 6.5 Class 9 consists of the Allowed Secured Claim held by BVI Investments, Ltd. 6.6 Class 9 holds a lien on the Debtor's Real Property, improvements thereon and certain personal property. 6.7 The Class 9 creditor shall retain its existing lien on the Debtor's Real Property, improvements and personal property. 6.8 Class 9 shall retain unaltered all of its legal, equitable and contractual rights as they existed as of the Filing Date. 6.9 Class 9 is not impaired under the Plan. Class 10 (National Business Finance, Inc.) 6.10 Class 10 consists of the Allowed Secured Claim held by National Business Finance, Inc. - 10 - 6.11 Class 10 holds a security interest in the Debtor's accounts receivable, inventory and other personal property. 6.12 Class 10 shall retain unaltered all of its legal, equitable and contractual rights as they existed as of the Filing Date. 6.13 Class 10 is not impaired under the Plan. Class 11 (Barshop /Estrada Acquisition Partners LP) 6.14 Class 11 consists of the Allowed Secured Claims held by Barshop /Estrada Acquisition Partners LP. 6.15 Class 11 holds a security interest in the Debtor's accounts receivable, inventory and substantially all other personal property. 6.16 On the Effective Date and in full satisfaction and discharge of its Allowed Secured Claims, the class 11 creditor shall exchange its Allowed Secured Claim for (a) four million (4,000,000) shares of 1999 Series A Preferred Stock, and (b) if there is no distribution to class 12 and 13 interest holders under the Plan, one hundred (100) shares of New Common Stock. 6.17 On the Effective Date, the class 11 creditor shall release any lien or security interest encumbering property of the Debtor. 6.18 Class 11 is impaired under the Plan. ARTICLE VII. Treatment of Interests Impaired Under the Plan Class 12 (Common Stock) 7.1 Class 12 consists of the holders of the Debtor's Common Stock. 7.2 On the Effective Date, the holders of the Debtor's Common Stock shall exchange such Common Stock for shares of New Common Stock at the ratio of twenty (20) shares of Common Stock for one (1) share of New Common Stock, and the Common Stock so exchanged shall be cancelled. 7.3 Notwithstanding the foregoing, if class 3 or class 12 or class 13 rejects the Plan, then (a) classes 12 and 13 shall receive - 11 - nothing under the Plan; (b) the class 12 interests shall be cancelled and terminated at the Effective Date; and (c) the class 12 shares of Common Stock shall be cancelled. 7.4 Class 12 is impaired under the Plan. Class 13 (Preferred Stock) 7.5 Class 13 consists of the holders of the Debtor's Preferred Stock. 7.6 On the Effective Date, the holders of Preferred Stock shall either (a) exchange such Preferred Stock for New Common Stock at the ratio of (twenty) 20 shares of Preferred Stock for one (1) share of New Common Stock, and the Preferred Stock so exchanged shall be cancelled, or (b) receive a cash distribution equal to fifteen percent (15 %) of the issue price of the Preferred Stock held by the class 13 interest holder in complete redemption and full discharge and satisfaction of such interest holder's Preferred Stock, which shares shall thereupon be cancelled. The class 13 holders of Preferred Stock shall make the foregoing election on the ballot which accompanies the Plan and Statement. Any member of class 13 who fails to timely tender a ballot or tenders a ballot, but fails to make an election, shall be deemed to have elected to receive the cash distribution as described above. 7.7 Notwithstanding the foregoing, if class 3 or class 12 or class 13 rejects the Plan, then (a) classes 12 and 13 shall receive nothing under the Plan; (b) the class 13 interests shall be cancelled and terminated at the Effective Date; and (c) the class 13 shares of Preferred Stock shall be cancelled. 7.8 Class 13 is impaired under the Plan. Class 14 (Stock Options) 7.9 Class 14 consists of the holders of the Debtor's Stock Options. 7.10 On the Effective Date, the Debtor's Stock Options shall be cancelled and the holders of such Stock Options shall receive nothing under the Plan. 7.11 Notwithstanding the foregoing and notwithstanding any restriction contained in the Stock Option, the holders of class 14 Stock Options may exercise their rights under their Stock Options on or before the Voting Deadline. If the holder of a Stock Option - 12 - timely exercises his /her /its rights thereunder, then such holder shall be entitled to vote on the Plan as the holder of the securities so acquired (class 12 Common Stock and /or class 13 Preferred Stock) , and shall receive the Plan treatment with respect to the securities so acquired (class 12 Common Stock and /or class 13 Preferred Stock). 7.12 Class 14 is deemed to have rejected the Plan and is not entitled to vote on the Plan. Class 15 (Warrants) . 7.13 Class 15 consists of the holders of the Debtor's Warrants. 7.14 On the Effective Date, the Debtor's Warrants shall be cancelled and the holders of such Warrants shall receive nothing under the Plan. 7.15 Notwithstanding the foregoing and notwithstanding any restriction contained in the Warrant, the holders of class 15 Warrants may exercise their rights under their Warrants on or before the Voting Deadline. If the holder of a Warrant timely exercises his /her /its rights thereunder, then such holder shall be entitled to vote on the Plan as the holder of the securities so acquired (class 12 Common Stock and /or class 13 Preferred Stock), and shall receive the Plan treatment with respect to the securities so acquired (class 12 Common Stock and /or class 13 Preferred Stock) . 7.16 Class 15 is deemed to have rejected the Plan and is not entitled to vote on the Plan. ARTICLE VIII. Means for Execution of the Plan 8.1 Immediately after the Filing Date, the Debtor shall file a motion with the Court seeking approval of the D.I.P. Loan. Notice of the motion shall be given to all creditors, shareholders and interested parties. 8.2 The proceeds from the D.I.P. Loan shall be employed by the Debtor to (a) fund business operations, and (b) make the cash distributions required under the Plan on and after the Effective Date. - 13 - 8.3 All Plan distributions of cash and securities shall be made on and after the Effective Date unless otherwise provided for in the Plan. 8.4 All securities issued under the Plan shall be issued pursuant to Section 1145 of the Code. 8.5 Prior to the Effective Date, BVI Investments, Ltd. ( "BVI") or its assignee (hereafter collectively, the "Redemptor ") shall redeem the Real Property from the Foreclosure Sale free and clear of all liens as provided under applicable Colorado law. On the Effective Date, Redemptor shall transfer the Real Property to the Debtor in consideration for (a) a cash payment on the Effective Date equal to BVI's costs and expenses incurred in connection with negotiation and implementation of the Plan, including consultant and legal fees, and (b) a purchase money promissory note and first lien Deed of Trust encumbering the Real Property to be held by BVI and any participants in an amount equal to (i) the cost of Redemptor's redemption of the Real Property from the Foreclosure Sale plus (ii) an amount equivalent to the payoff on the Effective Date of the promissory note held by BVI which was secured by the Real Property with such payoff calculated as if there had been no Foreclosure Sale respecting the Real Property. Redemptor shall be under no obligation to convey the Real Property to the Debtor unless the Court enters the Confirmation Order. If the Plan is not confirmed by the Court, Barshop /Estrada Acquisition Partners LP and /or BVI Investments, Ltd. may, in their sole and absolute discretion, withdraw from further discussions with the Debtor incident to reorganization of the Debtor under Chapter 11. 8.6 After the redemption of the Real Property from the Foreclosure Sale by Redemptor and prior to the Effective Date of the Plan, Redemptor has agreed that the Debtor shall be entitled to maintain possession of the Real Property, provided however that Redemptor, in its sole and absolute discretion, may terminate without cause the Debtor's right to possession of the Real Property. ARTICLE IX. General Provisions 9.1 Pursuant to Sections 524 and 1141(d) of the Code and unless otherwise provided in the Plan, the Confirmation of the Plan and the distribution of cash and securities thereunder shall: (a) constitute a discharge of all pre - Confirmation debt, all Claims against the Debtor and all interests in the Debtor of every kind and nature, and (b) operate as an injunction against the initiation or continuation of any action to collect or recover Claims against or interests in the Debtor. - 14 - 9.2 On the Effective Date, all property of the Chapter 11 estate shall vest in the Debtor free and clear of any and all mortgages, liens, security interests, claims and /or interests of any kind or nature unless otherwise provided for in the Plan, the Confirmation Order or other order of the Court. 9.3 The automatic stay of actions against the Debtor which became effective on the Filing Date shall terminate upon the Effective Date. 9.4 The Joint Proponents reserve the right to modify the Plan prior to Confirmation, and thereafter to modify the Plan in accordance with Section 1127(b) of the Code, provided however that the Plan may not be amended without the written approval of both Joint Proponents. 9.5 Debtor reserves the right to reopen this Chapter 11 case for any or all of the purposes set forth in Article XII of this Plan. 9.6 Notwithstanding any other provision of the Plan, a Disputed Claim will be paid in accordance with the Plan only after and to the extent that the Court enters its order allowing all or some portion of the Disputed Claim as an Allowed Claim and such order has become a Final Order. 9.7 All parties bound by this Plan shall execute all documents, releases, assignments or other agreements necessary to implement the Plan. Subject to the terms of the Plan, if any necessary party refuses or fails to execute, deliver or join in the execution or delivery of any instrument required to effect a transfer of property dealt with by the Plan or perform any other act, including the satisfaction of a lien necessary to consummation of the Plan, or execution of an assignment pursuant to the Plan, the Court may order the same or order the Clerk of the Court to so execute the document, release, assignment or other agreement. 9.8 On the Effective Date, the Debtor's Articles of Incorporation shall be amended to prohibit the issuance of non- voting stock. The Debtor's Articles of Incorporation and By -Laws also shall be amended to the extent necessary to authorize, effectuate and facilitate the provisions of the Plan, including without limitation, the authorization and issuance of the New Common Stock, the 1999 Series A Preferred Stock and the 1999 Series B Preferred Stock. 9.9 Upon Confirmation, the initial Board of Directors for the Debtor shall consist of (a) Anthony J. Estrada, (b) Bruce B. Barshop, (c) Hiram W. Lewis III, and (d) Robert C. Pate. Upon - 15 - Confirmation, the following persons shall serve as the officers of the Debtor: (a) Chief Executive Officer - Hiram W. Lewis III, (b) President - Anthony Estrada, and (c) Vice President of Operations - Steve Castanedo. The foregoing directors shall serve until the next annual shareholders meeting, and until their successors are duly elected and qualified. The foregoing officers shall serve for the terms specified in the By -Laws of the Debtor. 9.10 The Joint Proponents, in their sole discretion, may withdraw the Plan and not seek Confirmation of the Plan at any time prior to Confirmation. 9.11 Securities issued under the Plan shall not be issued in partial shares with partial shares rounded up to the next whole share. 9.12 Any and all causes of action held by the Debtor and existing at the Confirmation Date, shall vest in the Debtor upon the Effective Date. ARTICLE X. Provision For Assumption Or Rejection Of Executory Contracts and unexpired Leases 10.1 As of the Effective Date, the Debtor assumes the executory contracts and unexpired leases set forth in Exhibit C attached hereto and incorporated herein by reference. On the Effective Date, the Debtor shall cure any monetary defaults under assumed executory contracts and unexpired leases unless otherwise agreed by the other party to the contract. The amounts (if any) necessary to cure monetary defaults under executory contracts and unexpired leases to be assumed under the Plan are set forth in Exhibit C. 10.2 The Debtor rejects all executory contracts and unexpired leases except as provided in Section 10.1. Any party to a rejected executory contract or unexpired lease must file a proof of claim for damages arising from such rejection not less than 15 days after the Effective Date, failing which such Claim shall be forever barred and the holder thereof shall receive nothing on account of such Claim. 10.3 Claims arising from the rejection of executory contracts and unexpired leases shall be subject to treatment under class 3 of the Plan. - 16 - ARTICLE XI. Claims Administration 11.1 The Debtor shall review all proofs of Claim filed in the Chapter 11 Case and file objections thereto not later than sixty (60) days after the Effective Date, unless such date is extended by order of the Court. 11.2 If the Debtor does not file an objection to a proof of Claim on or before sixty (60) days after the Effective Date or such other date as established by order of the Court, the proof of Claim automatically shall be deemed allowed. 11.3 The Debtor shall make reasonable efforts to locate all creditors entitled to receive distributions under the Plan. If the Debtor is unable to locate a creditor within nine (9) months after the Effective Date, the creditor shall receive no distribution under the Plan. ARTICLE XII. Retention Of Jurisdiction 12.1 The Court shall retain exclusive jurisdiction for the following purposes: a. To determine any and all objections to the allowance of Claims, and b. To insure the purposes and intent of the Plan are carried out, and C. To correct any defect, cure any omission, or reconcile any inconsistency in the Plan or the order of the Court confirming the Plan as may be necessary to carry out the purposes and intent of the Plan, and d. To enforce and interpret the terms and conditions of the Plan, and e. To enter orders modifying the Plan, and f. To determine disputes raised before or after the Confirmation Date by adversary proceedings or contested hearings, and g. To hear any action or proceeding, including pending actions and proceedings, brought by the Debtor under the provisions of the Code or other applicable law, whether initiated by adversary proceeding or contested matter, and - 17 - h. To enter a Final Decree concluding and closing this Case. ARTICLE XIII Cram Down 13.1 If any impaired class of Claims or interests rejects the Plan, the Joint Proponents request the Court confirm the Plan pursuant to the cram down provisions of Section 1129(b) of the Code. - 18 - 12/22/98 TUE 12:10 FAX 7195839585 ESTRADA FOODS DEC -22-98 TUE 12:19 ESTRADA FOODS FAX N0, 719 542 5472 12/22/1955 16:41 383e831189 ►MD IFADJEHI "I R i i 1 BSTRMA FOODS, 1=. , a Colorado cozporation, and Jo proponent J Anthony trada, ident 2001 P. 02 PAGE WtVie - 19 - 12/22/98 18:54 FAX 2102268395 COR & SMITH 01835 Z002 Barshop/Estrada Acquisition Par ncrs LP, a Tom limited partnership, Joint Proponent, By: BEAP Management LLC, general partner -�r— Bruce B. Barshop, President .o Holden ,P,4j en Joel Laufer #7728 Attorneys for Debtor 303 East 17th Avenue Suite - 660 Denver, Colorado 80203 Telephone (303) 863 -1100 Facsimile (303) 863 -1109 Cox & Smith Incorporated Teresa Ereon Giltner Texas State Bar #06639800 Patrick L. Huffstickler Texas State Bar #10199250 Attorneys for Barshop /Estrada Acquisition Partners LP 112 East Pecan Street Suite 1800 San Antonio, Texas 78205 -1521 Telephone (210) 554 -5500 Facsimile (210) 226 -8395 - 21 - �! "!'-� Book: 3044 Page: 878 Chris C. Munoz Page: 10 of 14 Pueblo CO.Clk.6$ec. LEGAL DESCRIPTION M= fullowing rat propectp situate in tba Ccm=y of Pueblo and State of Colorado, to wit • w •�• r • • 1• • • -•.w• • -• .'_� All that portion of the Sourhmst Quarter (SE 114) of the Southwest Quart= (SW 114) of Section Twenty -five (25) Township Twenty = South of Range =ty -five (65), West of thr 6' Priucigal Meridian des�� as follam: Commencing at the point wh= the North Line of 7 Street in the City of Pueblo in the East line in the Southwest Quarter (SW 114) of =aid section; the=ca West along the North line of said 7 StcGt if pro&med to the Fast ime of the right -of- -way of the D?e=cr & Santa Fe Railway Company; therttx m a Northwestedy dutcdon on the Northem Iiae of said r4#-of -way North 37 degrees and 58 N West to the South I ne of S` Su= in tic City of Pueblo if produced; thence Fist along the Soutar liaa of said e.Sa va if prod=ed to the Fast Jigs of tho Sothwest Quarts (SW 114) of raid secaaa; dc= South akmg the Fast H= of the Southwest Quarter (SW 114) of said section to tfL- Point of Beoaoing. EXCEPT that parcel of land C=Yeyed to West= PacSdng Company, Inc, by deed recorded is Book 1229 at Page 474 of the Pueblo County records, County of Pueblo, State of Colorado, with all its apt Irm==cs EXHIBIT A D.I.P. LOAN TERM SHEET Lender: BVI Investments, Ltd. and any participants (collectively, "BVI" or "Lender "). Principal Amount: Not to exceed One Million Four Hundred Fifty Thousand and No /100 Dollars ($1,450,000.00). Interest Rate on Unpaid Principal From Date: Greater of (i) Chase Bank of Texas, N.A.'s variable Prime Rate of Interest plus three percent (3 %) or (ii) ten percent (10 %) per annum. Interest Rate on Matured, Unpaid Amounts: Highest rate allowed by law. Commitment Fee: One percent (1 %). Collateral: First, prior and automatically perfected lien on all of Debtor's real and personal property, including, but not limited to, equipment, inventory, accounts receivable, trademarks and patents, provided, however, that the purchase money mortgage of BVI on the Real Property, upon conveyance of such Real Property to Debtor pursuant to the provisions of the Joint Plan of Reorganization proposed by Debtor and Barshop/Estrada Acquisition Partners LP, shall be superior to the liens hereunder; further provided, however, that the lien granted to BVI shall be inferior to any lien in favor of any factorer who is factoring specific receivables of Debtor as to those specific receivables only and further provided, however, that the lien granted to BVI shall be inferior to the existing lien, if any, of National Business Finance, Inc. Priority: Super- priority administrative expense claim subordinate only to payment of the U.S. Trustee fees pursuant to Title 28, Section 1930 of the United States Code. Advances: Advances by Lender shall be made in the Lender's sole and absolute discretion, in such amounts and at such times as Lender determines in Lender's sole EXHIBIT B and absolute discretion. Lender shall have no obligation or commitment to make any advance and to the extent Lender agrees to make any advance, Lender shall have no obligation or commitment to make any additional advance and no commitment or obligation shall be implied therefrom. However, if the Plan is confirmed by the Court and becomes effective, Lender will advance funds so that Debtor may make the disbursements provided for in the Plan. Customary loan covenants, representations and warranties by Debtor Events of Default: To include, but not be limited to, (i) Debtor fails to pay when due and payable or when declared due and payable any portion of the D.I.P. Loan (whether of principal, interest, fees and charges due Lender or reimbursement of Lender's expenses or any other amounts constituting part of the D.I.P. Loan), (ii) if Debtor fails or neglects to perform, keep or observe any term, provision, covenant or agreement contained within the Loan Agreement, (iii) if there is a "material adverse change" in Debtor, (iv) if the Interim Bankruptcy Court Order or the Final Bankruptcy Court Order approving the D.I.P. Loan is revoked, reversed, modified, amended or stayed pending an appeal, or if an event of default occurs under either of such orders, (v) if Debtor is enjoined, restrained or in any way prevented by court order from continuing to conduct all or any material part of its business affairs, (vi) if a notice of lien, levy or assessment is filed of record with respect to any of Debtor's properties or assets by the United States government, or any department, agency or instrumentality thereof, or by any state, county, municipal, or governmental agency, or if any taxes or debts owing at any time thereafter to any one or more such entities becomes a lien, whether choate or otherwise, upon any of Debtor's properties or assets if the same is not paid on the repayment date thereof, (vii) if a judgment or other claim becomes a lien upon any material portion of Debtor's assets and such judgment is not stayed, satisfied or released within thirty (30) days from the date thereof, (viii) any party obtain(s) relief from 230819.04 12.21 98 5:24 PM the automatic stay under Section 362 of the United States Bankruptcy Code which might have a material adverse affect on the D.I.P. Collateral or Debtor's business, (ix) if Debtor makes any payment on account of any indebtedness that has been contractually subordinated in right to the payment in respect of the D.I.P. Loan, except to the extent such payment is permitted by the terms of any subordination provisions applicable to such indebtedness, (x) if any material misstatement or material misrepresentation exists now or hereafter in any warranty, representation, statement or report made to Lender by Debtor or any officer, employee, agent, or director thereof, or if any such warranty or representation is withdrawn, (xi) if Debtor exceeds any Approved Budget during any reporting period without the prior written approval by Lender, (xii) any payments of unbudgeted expenditures are made without notice to and written consent of Lender, (xiii) failure to provide prior notice of any termination by Debtor of Debtor's senior management, (xiv) failure to pay administrative claims when due, (xv) filing a motion to reject any executory contracts without the prior written consent of Lender, (xvi) the breach of any of the agreements, stipulations, or covenants contained within the Loan Agreement, including, but not limited to, failure by the Debtor to comply with the Approved Budget, (xvii) the election or appointment of a trustee or examiner with enlarged powers in Debtor's Chapter 11 bankruptcy case, (xviii) the conversion of Debtor's Chapter 11 bankruptcy case to a case under Chapter 7 of the United States Bankruptcy Code, (xix) the dismissal of Debtor's Chapter 11 bankruptcy case without prior or immediate payment of all of the D.I.P. Loan, (xx) the filing of any motion or plan of reorganization by the Debtor or plan of reorganization by any party in interest at the expiration of any applicable exclusivity period proposing to sell substantially all of Debtor's assets or any interest in Debtor to any person or entity other than Lender, (xxi) if Debtor, prior to final order or any other party in interest after the final order, contests or attempts to invalidate, subordinate or avoid Lender's lien on or security interest in the 3 230819.04 12.'21;98 5:24 PM D.I.P. Loan collateral or to reduce or diminish, except as a result of payments, the D.I.P. Loan, by reason of avoidance, invalidation, offset or otherwise, (xxii) if the United States Bankruptcy Court enters any order priming Lender's lien or security interest in the D.I.P. Loan collateral, under any applicable section of the United States Bankruptcy Code or otherwise granting relief in respect of the D.I.P. Loan collateral except as specifically contemplated in the Loan Agreement or similar document, (xxiii) the sale, transfer, abandonment, or other disposition by Debtor of any material portion of the D.I.P. Loan collateral without Lender's prior written consent, (xxiv) use of D.I.P. Loan proceeds and/or cash collateral for any purpose other than the payment of an Approved Budget item, (xxv) Debtor's failure to comply with any duty or obligation required by the D.I.P. Loan documents or the United States Bankruptcy Code, (xxvi) the failure to confirm the Plan on or before March 31, 1999 and (xxvii) Confirmation of a plan of reorganization that contains provisions regarding repayment of the D.I.P. Loan that are not acceptable to Lender. Fees: One -half of one percent (.5 %) per annum on the average unused D.I.P.Loan balance, payable quarter annually on the last day of each calendar quarter. Maturity Date: March 31, 1999, unless the Plan is confirmed by March 31, 1999, in which event the maturity date shall be March 31, 2002, unless sooner accelerated by an Event of Default. Repayment Schedule: All unpaid principal and all accrued but unpaid interest shall be due and payable in full on March 31, 1999; provided, however, in the event the Maturity Date of the D.I.P. Loan is extended to March 31, 2002, interest only shall be due and payable monthly on the last day of each calendar month, commencing on the last day of the calendar month in which the Effective Date occurs and continuing regularly and monthly thereafter on the last day of each calendar month until March 31, 2002, on which date all unpaid principal and all accrued but unpaid interest shall be due and payable 2 230819.04 12,2158 5:24 I'M in full. Additionally, Debtor shall apply all funds in excess of its reasonable working capital reserves to the D.I.P. Loan, any such funds being applied by Lender first to accrued but unpaid interest and the balance to unpaid principal. Approved Budget: Debtor and Lender to agree upon an Approved Budget, provided, however, that Lender shall not be required to make any advances under such Approved Budget as advances are at Lender's sole and absolute discretion as provided above. Expenses: Debtor to pay all expenses of Lender relating to the D.I.P. Loan, including, but not limited to, Lender's attorney's fees and expenses. Pre - Petition Debt and Liens of Barshop/ Estrada Acquisition Partners LP: Debtor shall stipulate to the pre - petition debt to Barshop/Estrada Acquisition Partners LP (which is anticipated to be approximately $700,000.00) and that the liens securing such debt are valid, enforceable and unavoidable in exchange for subordination by Barshop/Estrada Acquisition Partners LP of its liens to those of BVI. Notwithstanding anything in this D.I.P. Loan Term Sheet to the contrary, the principal amount of the D.I.P. Loan is subject to reduction if the Collateral is insufficient to support the proposed D.I.P. Loan amount. Additionally, this D.I.P. Loan Term Sheet is subject to additional changes and modifications in connection with approval of the D.I.P. Loan by the Court, this D.I.P. Loan Term Sheet representing Debtor and BVI's most current D.I.P. Loan proposal. 5 130819 04 1171 98 5:24 P`1 EXHIBIT Executory Contracts and Unexpired Leases to be Assumed Taman. M X n =_ Type Name Date Description Leasing /Rental Agreements Praxair January 28, 1997 Lease Agreement- Re:Nitrogen /CO2 Tank Praxair April 2, 1997 Lease Agreement Re: Freeze Tunnel Praxair April 2, 1997 Purchase Agreement Re:Gases Refco Leasing December 1, 1996 Lease Agreemnt - Re:2 -All Fill Equip. Refco Leasing August 15, 1997 Lease Agreemnt - ReA -All Fill Equip. NEC Leasing October 6, 1998 Lease Agreement -Telephone System Contract to Purchase Agreement Reiser & Co. Inc. November 23, 1998 Contract to purchase V -Mag 'this euipment is on a trial basis with all rights reserved to return equipment if it does not meet the needs of Estrada Foods Consulting Agreements Stephen L. Castanedo September 10, 1997 Consulting Agreement "contract assumed subject to modification by new employment agreement. Ben Rodriquez Consulting Agreement 'Mr. Rodriquez's agreement will be assumed provided an agreement of modification of Mr. Rodriquez's agreement is reached. If no agreement is reached on the modification of the terms of the agreement of Mr. Rodriquez with Debtor, the agreement shall be rejected. insJHealth/We/fare Hartford Insurance April 10, 1998 General Liability Insurance RTW Compensation May 4, 1998 Workmen's Comp.insurance Right of Inspection Agreement (United State Dept. of Agriculture April 7, 1998 USDA Inspection Agreement Factoring Agreements I Business Resources December 1, 1998 A/R Factoring Agreement Co- Packing A reements Anchor Foods October 26, 1998 Co- Packing Agreement D.I.P. LOAN TERM SHEET Lender: BVI Investments, Ltd. and any participants (collectively, "BVI" or "Lender "). Principal Amount: Not to exceed One Million Four Hundred Fifty Thousand and No /100 Dollars ($1,450,000.00). Interest Rate on Unpaid Principal From Date: Greater of (i) Chase Bank of Texas, N.A.'s variable Prime Rate of Interest plus three percent (3 %) or (ii) ten percent (10 %) per annum. Interest Rate on Matured, Unpaid Amounts: Highest rate allowed by law. Commitment Fee: One percent (1 %). Collateral: First, prior and automatically perfected lien on all of Debtor's real and personal property, including, but not limited to, equipment, inventory, accounts receivable, trademarks and patents, provided, however, that the purchase money mortgage of BVI on the Real Property, upon conveyance of such Real Property to Debtor pursuant to the provisions of the Joint Plan of Reorganization proposed by Debtor and Barshop/Estrada Acquisition Partners LP, shall be superior to the liens hereunder; further provided, however, that the lien granted to BVI shall be inferior to any lien in favor of any factorer who is factoring specific receivables of Debtor as to those specific receivables only and further provided, however, that the lien granted to BVI shall be inferior to the existing lien, if any, of National Business Finance, Inc. Priority Super- priority administrative expense claim subordinate only to payment of the U.S. Trustee fees pursuant to Title 28, Section 1930 of the United States Code. Advances Advances by Lender shall be made in the Lender's sole and absolute discretion, in such amounts and at such times as Lender determines in Lender's sole EXHIBIT 2 and absolute discretion. Lender shall have no obligation or commitment to make any advance and to the extent Lender agrees to make any advance, Lender shall have no obligation or commitment to make any additional advance and no commitment or obligation shall be implied therefrom. However, if the Plan is confirmed by the Court and becomes effective, Lender will advance funds so that Debtor may make the disbursements provided for in the Plan. Customary loan covenants, representations and warranties by Debtor Events -of Default: To include, but not be limited to, (i) Debtor fails to pay when due and payable or when declared due and payable any portion of the D.I.P. Loan (whether of principal, interest, fees and charges due Lender or reimbursement of Lender's expenses or any other amounts constituting part of the D.I.P. Loan), (ii) if Debtor fails or neglects to perform, keep or observe any term, provision, covenant or agreement contained within the Loan Agreement, (iii) if there is a "material adverse change" in Debtor, (iv) if the Interim Bankruptcy Court Order or the Final Bankruptcy Court Order approving the D.I.P. Loan is revoked, reversed, modified, amended or stayed pending an appeal, or if an event of default occurs under either of such orders, (v) if Debtor is enjoined, restrained or in any way prevented by court order from continuing to conduct all or any material part of its business affairs, (vi) if a notice of lien, levy or assessment is filed of record with respect to any of Debtor's properties or assets by the United States government, or any department, agency or instrumentality thereof, or by any state, county, municipal, or governmental agency, or if any taxes or debts owing at any time thereafter to any one or more such entities becomes a lien, whether choate or otherwise, upon any of Debtor's properties or assets if the same is not paid on the repayment date thereof, (vii) if a judgment or other claim becomes a lien upon any material portion of Debtor's assets and such judgment is not stayed, satisfied or released within thirty (30) days from the date thereof, (viii) any party obtain(s) relief from 2 230819 04 1 : :1 98 5.24 PM the automatic stay under Section 362 of the United States Bankruptcy Code which might have a material adverse affect on the D.I.P. Collateral or Debtor's business, (ix) if Debtor makes any payment on account of any indebtedness that has been contractually subordinated in right to the payment in respect of the D.I.P. Loan, except to the extent such payment is permitted by the terms of any subordination provisions applicable to such indebtedness, (x) if any material misstatement or material misrepresentation exists now or hereafter in any warranty, representation, statement or report made to Lender by Debtor or any officer, employee, agent, or director thereof, or if any such warranty or representation is withdrawn, (xi) if Debtor exceeds any Approved Budget during any reporting period without the prior written approval by Lender, (xii) any payments of unbudgeted expenditures are made without notice to and written consent of Lender, (xiii) failure to provide prior notice of any termination by Debtor of Debtor's senior management, (xiv) failure to pay administrative claims when due, (xv) filing a motion to reject anv executory contracts without the prior written consent of Lender, (xvi) the breach of any of the agreements, stipulations, or covenants contained within the Loan Agreement, including, but not limited to, failure by the Debtor to comply with the Approved Budget, (xvii) the election or appointment of a trustee or examiner with enlarged powers in Debtor's Chapter 11 bankruptcy case, (xviii) the conversion of Debtor's Chapter 11 bankruptcy case to a case under Chapter 7 of the United States Bankruptcy Code, (xix) the dismissal of Debtor's Chapter 11 bankruptcy case without prior or immediate payment of all of the D.I.P. Loan, (xx) the filing of any motion or plan of reorganization by the Debtor or plan of reorganization by any party in interest at the expiration of any applicable exclusivity period proposing to sell substantially all of Debtor's assets or any interest in Debtor to any person or entity other than Lender, (xxi) if Debtor, prior to final order or any other party in interest after the final order, contests or attempts to invalidate, subordinate or avoid Lender's lien on or security interest in the 13 230819.04 12 21 98 5:24 P \f IBM D.I.P. Loan collateral or to reduce or diminish, except as a result of payments, the D.I.P. Loan, by reason of avoidance, invalidation, offset or otherwise, (xxii) if the United States Bankruptcy Court enters any order priming Lender's lien or security interest in the D.I.P. Loan collateral, under any applicable section of the United States Bankruptcy Code or otherwise granting relief in respect of the D.I.P. Loan collateral except as specifically contemplated in the Loan Agreement or similar document, (xxiii) the sale, transfer, abandonment, or other disposition by Debtor of any material portion of the D.I.P. Loan collateral without Lender's prior written consent, (xxiv) use of D.I.P. Loan proceeds and/or cash collateral for any purpose other than the payment of an Approved Budget item, (xxv) Debtor's failure to comply with any duty or obligation required by the D.I.P. Loan documents or the United States Bankruptcy Code, (xxvi) the failure to confirm the Plan on or before March 31, 1999 and (xxvii) Confirmation of a plan of reorganization that contains provisions regarding repayment of the D.I.P. Loan that are not acceptable to Lender. Fees: One -half of one percent (.5 %) per annum on the average unused D.I.P.Loan balance, payable quarter annually on the last day of each calendar quarter. Maturity Date: March 31, 1999, unless the Plan is confirmed by March 31, 1999, in which event the maturity date shall be March 31, 2002, unless sooner accelerated by an Event of Default. Repayment Schedule: All unpaid principal and all accrued but unpaid interest shall be due and payable in full on March 31, 1999; provided, however, in the event the Maturity Date of the D.I.P. Loan is extended to March 31, 2002, interest only shall be due and payable monthly on the last day of each calendar month, commencing on the last day of the calendar month in which the Effective Date occurs and continuing regularly and monthly thereafter on the last day of each calendar month until March 31, 2002, on which date all unpaid principal and all accrued but unpaid interest shall be due and payable 0 230819 04 12 21 98 524 P \1 in full. Additionally, Debtor shall apply all funds in excess of its reasonable working capital reserves to the D.I.P. Loan, any such funds being applied by Lender first to accrued but unpaid interest and the balance to unpaid principal. Approved Budget: Debtor and Lender to agree upon an Approved Budget, provided, however, that Lender shall not be required to make any advances under such Approved Budget as advances are at Lender's sole and absolute discretion as provided above. Expenses: Debtor to pay all expenses of Lender relating to the D.I.P. Loan, including, but not limited to, Lender's attorney's fees and expenses. Pre - Petition Debt and Liens of Barshop/ Estrada Acquisition Partners LP: Debtor shall stipulate to the pre - petition debt to Barshop/Estrada Acquisition Partners LP (which is anticipated to be approximately $700,000.00) and that the liens securing such debt are valid, enforceable and unavoidable in exchange for subordination by Barshop/Estrada Acquisition Partners LP of its liens to those of BVI. Notwithstanding anything in this D.I.P. Loan Term Sheet to the contrary, the principal amount of the D.I.P. Loan is subject to reduction if the Collateral is insufficient to support the proposed D. I. P. Loan amount. Additionally, this D.I.P. Loan Term Sheet is subject to additional changes and modifications in connection with approval of the D.I.P. Loan by the Court, this D.I.P. Loan Term Sheet representing Debtor and BVI's most current D.I.P. Loan proposal. 5 230819 04 12 2199 5 24 PM NAMES OF COMMON STOCK SHARE HOLDERS EXHIBIT INVESTORS NAME ADDRESS CITY STATE ZIP NO. OF SHARES Anthony Estrada 1655 Cliffdale Pueblo CO 81006 3,499,794 Jess Estrada 1214 Holly Street 1268 20th Lane Pueblo Pueblo CO CO 81006 81006 7 99,953 799 ,953 Caroline Fres uez Howard Klemmer 1503 Watts Place Pueblo CO 81008 229,500 WK Cap 7900 Union Ave. Ste. 1100 Denver CO 80237 125,000 Jeff Valdez 8322 Beverly Blvd. Suite 304 Los Angeles CA 90048 20,000 Edmund C. Decker 13023 Nicholas Omaha NE 68154 1,200 Jacqueline Cables 11040 E. Blue Groma Dr. Tuscon AZ 85748 5,000 BVI Investments, Ltd 1112 E. Pecan St. Suite 1440 San Antonio TX 78205 3 TOTAL 1 8,480,400 W � ao I. i BIT INVESTORS NAMES NAMES OF PERFERRED SHARE HOLDERS ADDRESS CITY STATE ZIP NO. OF SHARES Brett Kelley PO BOX 4316 Pueblo CO 81003 20,000 Victor & Margaret Moss 311 W. 24th Street Pueblo CO 81004 20,000 Benjamin Martinez 135 Kingsley Ave. Pueblo CO 81003 10,000 Charles Murphy 2245 Broadway Colorado Springs CO 80904 10,000 Darla K. Incerto 416 Clarks Street Pueblo CO 81003 10,000 Alfredo Vargas 459 W. 17th Street Pueblo CO 81003 20,000 Lee Johnson 5555 Erindale Dr. Co Springs CO 80918 20,000 James F. Pool 119 W. 8th Street Pueblo CO 81003 10,000 Dr. Edward Dainko 3231 Valencia Ave San Bernardino CA 92404 25,000 Roy J. Walker 8673 Cremona Dr. Las Vegas NV 89117 10,000 Steve Mullens 2003 Pine Grove Co Springs CO 80906 10,000 Marie Dowd Decker 725 N. 98th Street Omaha NE 68114 5,000 D & D Builders Inc. 1803 Humphrey Rd. Garden City KS 67846 10,000 Elizabeth Zawadowski One New York Plaza New York NY 10892 20,000 Terrance D. Urbanek 9853 Royal Valley Rd. North Royalton OH 44133 10,000 Barry P. Druzin 1650 Mayfair Mayfeild Heights OH 44124 12,500 Michael A. Occhiato 11 Herrogate Terrace Pueblo CO 81001 10,000 J.M. Occhiato Trust 62 Country Club Villag Pueblo CO 81008 50,000 Michael C. Giarratano 6995 Mariposa Denver CO 80221 10,000 Greg L. Smith 121 SanCarlos Rd. Pueblo CO 81005 20,000 Susan W. Foerster 14 Berthe Circle Co Springs CO 80906 20,000 Edmund Decker 13023 Nicholas Omaha NE 68154 15,000 Martin E. Ziesman Trust 4199 Eagle Watch Blv Palm Harbor FL 34684 50,000 Carolyn K. Zeisman Trust 4199 Eagle Watch Blv Palm Harbor FL 1 346841 50,000 NAMES OF PERFERRED SHARE HOLDERS EXHIBIT INVESTORS NAMES ADDRESS CITY STATE ZIP NO. OF SHARES Dr. Gary Wofford 4117 N. Elizabeth Pueblo CO 81008 10,000 Donald R. Groth 8730 La Sundora Circi Las Vegas NV 89129 20,000 Gene & Joan Meek 1410 Golden Hills Rd. Co Springs CO 80919 20,000 Craig S. Shaddy 9123 E. Mississippi Aurora CO 80231 20,000 Rick Guy 421 N. Tejon Co Springs CO 80903 30,000 Desert Snow Partners 1343 W. 133rd Way Westminister CO 80234 10,000 Carl Bon'irno 169 Fordham Circle Pueblo CO 81005 50,000 Gerald C.Perito 8849 Winona Ct. Westminister CO 80030 2,500 Carol A. Perito 8849 Winona Ct. Westminister CO 80030 2,500 Rosemary Tur 34 Oak Ridge Drive Castle Rock CO 80104 2,500 Richar D. Turelli 34 Oak Ridge Drive Castle Rock CO 80104 2,500 Eugene P. Maffeo 8609 E. Kenyon Ave. Denver CO 80237 2,500 Jun A. Ma ffeo 8609 E. Kenyon Ave. Denver CO 80237 2,500 Steven E. Maffeo 2155 Cloverdale Dr. Co Springs CO 80920 2,500 Mat hew P. As beq 8849 Winona Ct. Westminister CO 80030 3,000 Marcelo G & Rose T. Tara 300 So. Logan Denver CO 80209 2,500 Marcelo G Tara 300 So. Logan Denver CO 80209 5,000 Marcella C. Wain 14284 E. Baltic Cr. Aurora CO 80014 2,500 Dr. Ronald Daurio 3969 Redwood Ln. Pueblo CO 81005 25,000 Lola / Dale Spradley 920 N. Main Pueblo CO 81003 20,000 Joyce Kelle 53 Briar ate Terrace Pueblo CO 81001 20,000 Todd Pas uin 11 Temple Drive Pueblo CO 81005 20,000 Pamela Robbinson 67 MacArthur Rd. Pueblo CO 81001 2,000 Karen Robbinson 67 MacArthur Rd. Pueblo CO 81001 2,000 NAMES OF PERFERRED SHARE HOLDERS EXHIBIT INVESTORS NAMES ADDRESS CITY STATE ZIP NO. OF SHARES Frank Molinaro, Sr. 1113 Grant Trinidad CO 81082 5,000 Frank Molinaro, Jr. 27907 Cumbres Pueblo CO 81006 5,000 Dr. Harold Robbinson 67 MacArthur Rd. Pueblo CO 81001 16,000 L nelle Lee Spradley 920 N. Main Pueblo CO 81003 8,000 Larry D. Spradley 920 N. Main Pueblo CO 81003 12,000 Kenda Rippley Ripple 2008 Walden Blvd. FlowerMound TX 75028 20,000 Dr. David Robbinson 1560 Bonforte Blvd. Pueblo CO 81001 30,000 Blake Carere / Anna Prosser 4 Carefree Court Pueblo CO 81001 15,000 Hazardous Waste Tech. 2545 Platte Place Co Springs CO 80909 20,000 Gerald E. & Kim K. Ferch 18027 Rock Branch Dr Dallas TX 75287 20,000 Fugate Family Partners 1909 Kipling Dr. Flowermound TX 75028 20,000 Marrion C. Rutowsky 4600 Great Oak Drive Rockville MD 20853 5,000 David J. Rutowsky 18018 Wa onwheel Ct Olney MD 20832 5,000 Laura Blair 3828 Valley View Ln. FlowerMound TX 75028 10,000 Robert A. Rippley Ripple 4433 W. 49th Street Tulsa OK 74107 20,000 G. Bousselaire / R. Snowling PO BOX 1476 Baltimore MD 21203 5,000 Steven E. Berge 2998 So. Steele Street Denver CO 80210 10,000 Joel N. Struble 8638 Warner Rd Saline MI 48176 10,000 Louis H. Brown 222 Monarch Bay Dana Point CA 92629 5,000 Pamela Rut owsk Potur 4600 Great Oak Rd. Rockville MD 20853 5,000 Laura Rutkowsky Pullen 4600 Great Oak Rd. Rockville MD 20853 5,000 D &D Builders 1803 Humphrey Rd. Garden City KS 67846 10,000 SSE Inc. 115 W. College Dr. Marshall MN 56258 100,000 Lyle & Donna Johnson 4100 E. Hwy. 50 lGarden City KS 67846 20,000 NAMES OF PERFERRED SHARE HOLDERS EXHIBIT INVESTORS NAMES ADDRESS CITY STATE ZIP NO. OF SHARES Anthony Estrada 1655 Cliffdale Pueblo CO 81006 19,319 Caroline Fres uez 1 1503 1268 20th Ln. Pueblo CO 81006 672,217 Jess Estrada 1214 Holly Street Pueblo CO 81006 205,047 Howard Klemmer Watts Place Pueblo CO 81008 14,939 TOTAL 2,019,522 NAMES OF STOCK OPTION HOLDERS EXHIBIT INVESTORS NAME ADDRESS CITY STATE C ZIP NO.SHARES Anthony Estrada 1655 Cliffdale Pueblo CO 81006 558,000 Caroline Fres uez 1268 20th Ln. Pueblo CO 81006 100,000 Howard Klemmer 1503 Watts Place Pueblo CO 81008 204,000 Scott Swenson 5060 W. Quarles Dr. Pueblo CO 80123 25,000 Paul Turner 234 E. Auburn Pueblo West CO 81007 25,000 Steve Castanedo 720 W. 8th Street Pueblo CO 81003 200,000 Glenn Van Blaricom PO BOX 1842 Berthoud CO 80513 40,000 Matt Dunn 110 Kingsley Ave. Pueblo CO 81005 40,000 Jim Watts 2082 Michelson Dr. Suite 100 Irvine CA 92612 24 George Mottle 600 -B Clubhouse Ave. Newport Beach CA 92663 5,000 Bill Lundy 3400 Ave. of the Arts #F -210 Costa Mesa CA 92626 45,500 BVI Investments, Ltd 1 112 E. Pecan Suite 1440 San Antonio ITX 782051 1,416,667 Finders Fees Stock Options TIWf, m X Ln 2 TOTAL 1 2,683,292 TYW3 m = BIT o� INVESTORS NAMES NAMES OF WARRANT HOLDERS ADDRESS CITY STATE ZIP NO. OF SHARES Brett Kelley PO BOX 4316 Pueblo CO 81003 10,000 Victor & Margaret Moss 311 W. 24th Street Pueblo CO 81004 10 000 Benjamin Martinez 135 Kingsley Ave. Pueblo CO 81003 5 Charles Murphy 2245 Broadway Co Springs CO 80904 5,000 Darla K. Incerto 416 Clarks Street Pueblo CO 81003 5,000 Alfred Vargas 459 W. 17th Street Pueblo CO 81003 10 000 Lee Johns 5555 Erindale Dr. Co Springs CO 80918 10 James F. Pool 119 W. 8th Street Pueblo CO 81003 5 Dr. Edward Dainko 3231 Valencia Ave. San Bernardino CA 92404 12 Roy J. Walker 8673 Cremona Dr. Las Ve as ' NV 89117 5,000 Steve Mullens 2003 Pine Grove Co S rin s CO 80906 5 Marie Dowd Decker 725 N. 98th Street Omaha NE 68114 2 500 D & D Builders Inc. 1803 Hum phrey Rd. Garden City KS 67846 5 000 Elizabeth Zawadowski One New York Plaza New York NY 10892 10,000 Terrance D. Urbanek 9853 Royal Valley Rd. North Royalton OH 44133 5,000 Barry P. Druzin 1650 Mayfair Mayfeild Heights OH 44124 6,250 Michael A. Occhiato 11 Herro ate Terrace Pueblo CO 81001 5,000 J.M. Occhiato Trust 62 Country Club Village Pueblo CO 81008 25 Michael C. Giarratano 6995 Mariposa Denver CO 80221 5,000 Greg L. Smith 121 SanCarlos Rd. Pueblo CO 81005 10,000 Susan W. Foerster 14 Berthe Circle Co Springs CO 80906 10 Edmund Decker 13023 Nicholas Omaha NE 68154 7,500 Martin E. Ziesman Trust 4199 Eagle Watch Blvd. Palm Harbor FL 34684 25,000 Carol n K. Zeisman Trust 4199 E agle Watch Blvd. Palm Harbor FL 34684 25,000 Dr. Gary Wofford 4117 N. Eliz abeth Pueblo CO 81008 5 Donald R. Groth 8730 La Sundora Circle Las Vegas NV 89129 10,000 Gene & Joan Meek 1410 Golden Hills Rd. Co S rin s CO 809191 10 000 NAMES OF WARRANT HOLDERS EXHIBIT INVESTORS NAMES ADDRESS CITY STATE ZIP NO. OF SHARES Craig S. Shaddy 9123 E. Mississippi Aurora CO 80231 10 000 Rick Guy 421 N. Tejon Co Springs CO 80903 15 000 Desert Snow Partners 1343 W. 133rd Way Westminister CO 80234 5 000 Carl Bon'irno 169 Fordham Circle Pueblo CO 81005 25 000 Gerald C.Perito 8849 Winona Ct. Westminister CO 80030 1 250 Carol A. Perito 8849 Winona Ct. Westminister CO 80030 1 250 Rosemary Turelli 34 Oak Ridge Drive Castle Rock CO 80104 1 250 Richard D. Turelli 34 Oak Ridge Drive Castle Rock CO 80104 1 250 Eugene P. Maffeo 8609 E. Kenyon Ave. Denver CO 80237 1,250 June A. Maffeo 8609 E. Kenyon Ave. Denver CO 80237 1 250 Steven E. Maffeo 2155 Cloverdale Dr. Co Spring s CO 80920 1 250 Mathew P. Asbery 8849 Winona Ct. Westminister CO 80030 1 500 Marcelo G & Rose T. Tara 300 So. Logan Denver CO 80209 1 250 Marcelo G Tara 300 So. Logan Denver CO 80209 2 P 500 Marcella C. Wain 14284 E. Baltic Cr. Aurora CO 80014 1,250 Dr. Ronald Daurio 3969 Redwood Ln. Pueblo CO 81005 12 500 Lola / Dale Spradley N. Main Pueblo CO 81003 10 Joyce Kelley riar ate Terrace Pueblo CO 81001 10,000 Todd Pas uin em le Drive r67 Pueblo CO 81005 10 Pamela Robbinson acArthur Rd. Pueblo CO 81001 1 000 Karen Robbinson 67 MacArthur Rd. Pueblo CO 81001 1 000 Frank Molinaro Sr. 1113 Grant Trinidad CO 81082 2 P 500 Frank Molinaro Jr. 27907 Cumbres Pueblo CO 81006 2 Dr. Harold Robbinson 67 MacArthur Rd. Pueblo CO 81001 8,000 L nelle Lee Spradley 920 N. Main Pueblo CO 81003 4,000 Larry D. Spradley 920 N. Main Pueblo CO 81003 6,000 Kenda Rippley Ripple 2008 Walden Blvd. FlowerMound TX 75028 10 000 NAMES OF WARRANT HOLDERS EXHIBIT INVESTORS NAMES ADDRESS CITY STATE ZIP NO. OF SHARES Dr. David Robbinson 1560 Bonforte Blvd. Pueblo CO 81001 15 Blake Carere I Anna Prosser 4 Carefre Court Pueblo CO 81001 7 500 Hazardous Waste Tech. 2545 Platte Place Co Springs CO 80909 10,000 Gerald E. & Kim K. Ferch 18027 Rock Branch Drive Dallas TX 75287 10 Fugate Family Partners 1909 Kippling Drive Flowermound TX 75028 10 Marrion C. Rutowsky 4600 Great Oak Drive Rockville MD 20853 2,500 David J. Rutowsky 18018 Wa onwheel Ct. Olney MD 20832 2,500 Laura Blair 3828 Valley View Ln. FlowerMound TX 75028 5,000 Robert A. Rippley Ripple 4433 W. 49th Street Tulsa OK 74107 10,000 G. Bousselaire I R. Snowling PO BOX 147 Baltimore MD 21203 2 Steven E. Berge 2998 So. Steele Stree Denver CO 80210 5,000 Joel N. Struble 8638 Warner Rd Saline MI 48176 5,000 Louis H. Brown 222 Monarch Bay Dana Point CA 92629 2,500 Pamela Rutowsk Potur 4600 Great Oak Rd. Rockville MD 20853 2,500 Laura Rutkowsky Pullen 4600 Great Oak Rd. Rockville MD 20853 2,500 D&D Builders 1803 Humphrey Rd. Garden City KS 67846 5,000 SSE Inc. 115 W. College Dr. Marshall MN 56258 50 000 Lyle & Donna Johnson 4100 E. Hwy. 50 Garden City KS 67846 10 Anthon Estrada 1655 Cliffdale Pueblo CO 81006 9 660 Caroline Fres uez 1268 20th Ln. Pueblo CO 81006 336,109 Jess Estrada 1214 Holly Street Pueblo CO 81006 102,524 Howard Klemmer 1503 Watts Place Pueblo CO 81008 7,470 Jim Watts 2082 Michelson Dr. Suit 100 Irvine CA 92612 12 063 Bill Lundy 3400 Ave.of the Arts #F - 210 Costa Mesa CA 92626 22,750 Chuck Murphy 2245 Broadway Co S rings CO 80904 3 Carl Bon'irno 169 Fordham Circle Pueblo CO 81005 1 500 Ron Himstreet 13950 E. Oxford Pl. Suite B303 Aurora CO 80014 5 NAMES OF WARRANT HOLDERS EXHIBIT INVESTORS NAMES ADDRESS CITY STATE ZIP NO. OF SHARES R. Turelli 34 Oak Ridge Drive Castle Rock CO 80104 600 G. Perito 8849 Winona Ct. Westminister CO 80030 820 D. Flores 209 Starlite Dr. Pueblo Co 81005 400 BVI Investments LTD 112 E. Pecan St. Suite 1440 San Antonio TX 782051 591 174 TOTAL 1 1 Finaers Fee warrants - Book: 3044 Page: 878 Chris C. Munoz Page: 10 of 14 Pueblo Co.Clk. &Rec. JO ,g:II LEGAL DESCRIPTION The following real property situate in the County of Pueblo and State of Colorado, to wic: Lots 3 and 4, Block 55, County Addition Amwdai, ALSO All that portion of the Southeast Quarter (SE 1/4) of the Southwest Quarter (SW 1/4) of Section Twenty -five (`L5) Township Twenty (20) South of Range Slaty -t3vc (65), west of the 6* Prkcipal Meridian descrdted as follows: Commencing at the point whets tha North line of 7 Street in the City of Pueblo intersects the Fast line in dte Soathweat Quarter (SW 1/4) of acid section; thence West along the North line of said 7 Sheet If produced to the East lire of the rigk -wry of the Deaver & Saata Fe RaRwaay Cotapany; tree in a Northwesterly direr on the Northeast Ibm of said right- of-way North 37 degrees and 58 West to the South Iine of 9* Strict in the City of Pueblo if produced; thence East along the South lira of said a Street if Vroduced to dw Eat lire of the Southwest Quarter (SW 114) of said se�euoa; mace South along the Fast Iiae of the Southwest Quarter (SW I/4) of said section to the Point of Beginning- EXCM that parcel of land caaveyed to West= Pacidng Company, Ync, by dad recorded in Book 1229 at Page 424 of the Pueblo County rccords, County of Pueblo, State of Colorado, with all its EXHIBIT DEBTORS SCHEDULE OF PERSONAL PROPERTY EXHIBIT OF THE DISCLOSURE DOCUMENT Value shown reflects 10/31/98 Financial Statements CATEGORY DESCRIPTION BOOK VALUE LIQUIDATION VALUE OFFICE EQUIPMENT Craftsman Double Pedestal Desk $590 $510 Executive Chair 154 133 3 Stacker Burgundy Chairs 96 83 Credenza 571 494 Epson Stylus Printer 305 264 2 Task Chairs 247 214 4 Drawer lateral Files 572 495 Workstation 1 364 315 Workstation 2 293 254 Gateway 2000 Pentium Computer 1,261 1,091 Deskjet 693C Printer 180 156 Hewlett Packard Printer 482 417 4 Drawer lateral Files 292 253 Task chair 70 61 Sharp Copier 1,225 1,059 CSR File Server 3,968 3,432 CSR Pentium 200MHz Computer 1,984 1,716 CSR Pentium 200 MHz Computer 1,984 1,716 4 CSR Pentium 166MHz Computer 7,142 6,178 Novell Software 1,927 1,667 Telephone system 6,047 5,231 Sub - Total: Office Equipment 29,754 25,737 MACHINERY & EQUIPMENT 500 Gal. Hamilton Kettle 6,002 5,500 500 Gal. Hamilton Kettle 6,002 5,500 500 Gal. Hamilton Kettle 6,002 5,500 Control Panel - Hamilton 2,453 500 Conveyors - Fullerton 2,980 2,500 Cooler /Freezer Equip. 14,244 9,000 Forklift/manlif /pallet 3,944 2,000 Lab equipment/furniture 3,777 500 Lockers 1,938 500 Piping, stainless steel 8,620 1,000 Piston fillers - Fullerton 2,405 2,000 Pumps, 5 maddox, 2 Waukesau 9,535 5,000 Sinks, Wash w /foot pedals 475 400 Test Kitchen Equipment 2,389 2,000 Tradeshow Booth /Artwork 16,086 14,000 L- Sealer 1,415 800 EXHIBIT Page 1 H Racks & Pans 833 700 Scales, digital w /program 654 600 Gas Range 340 300 Tables, stainless steel 4,539 4,000 Racks, shelf & pans 1,068 900 Maddox Extruder 15,733 8,000 All Fills (Qty.6)" 110,162 0 Madison Kettle, 80 gal. 6,633 4,000 CO2 Injector Nozzles 2,711 0 Hamilton Kettle Parts 1,160 0 Glue System 3,580 300 Freezer Tunner & Discharge' 2,960 0 All Fill Assembly, frame 9,297 0 Cadye compressor, 15H 816 700 Meat Cutting Table 1,998 1,700 Burrito cut-off Heads 726 0 Doboy Hand Sealer 1,667 1,400 Conveyor, 19" x 24" Stainless Steel 9,757 4,500 Wash Sink, 60" long. Stainless Steel 1,344 800 Volumetric Sanitizing 1,575 650 Corn Tubs, 1000# 4,463 3,000 Scale, floor, 10,000 3,606 1,500 Maddox Extruder reconditioned 3,878 0 Bean Soak Tank 5,075 2,500 Cooler Repair 6,458 0 Guar Gum Applicator 6,615 900 Column dumper Installation 15,852 0 compressor rebuilds 9,780 0 Air Compressor 2,139 1,000 Bandrite 600 Sealer 7,640 2,500 3 Bay Stainless Steel Sinks 2,063 850 Hydroflaker MOD FS -100 6,666 2,500 Ribbon Blender & Column 64,856 7,500 Cooler Compressor 7,513 2,500 Key Metal Detector 3,310 0 Box Taping Machine 1,316 600 Metal Detector 3,035 2,000 100# Eclipse Scale 618 500 Ribbon Blender 1,078 0 Lightening Mixer /Kettle 2,528 0 Burrito Conveyor 9,995 4,500 Air compressor 2,056 1,000 Temporary Conveyor 1,451 500 Tray Washer 10,770 4,000 Fryer oil Tank 7,122 3,000 Casa Herrera Sheeter 5,504 4,800 Ammonia System Design 17,006 0 Bean Washer 4,000 1,600 Chili Roaster 7,707 6,700 Compactor, Depster 3,436 1,500 Condesor Units 20,596 18,000 MCC Equipment 10,022 10,022 Page 2 F11111 11 11 jJ II I1Ij Spiral Freezer 111,105 111,105 Wrapping Machine 5,082 2,500 Cutter Assembly 5,500 0 Deep Fryer 12,472 6,000 Tamale Extruder 3,500 3,000 Grinder Feeder 8 Conveyor 10,000 8,650 Sub - Total: Machinery & Equipment 671,629 299,977 VEHICLES $931,731 $384,918 1988 International Tractor Trailer 2,669 2,309 1981 International Refrig. Truck 2,408 2,083 Ottawa Yard Goat 963 833 Sub - Total: Vehicles 6,041 5,225 INVENTORY Raw Material 31,076 6,215 Work -in- Process 3,199 0 Finished Goods 88,934 17,787 Sub - Total: Inventory 123,209 24,002 DEPOSITS Deposits 50,799 0 Sub - Total: Deposits 50,799 0 PREPAIDS Prepaid Insurance 540 0 Prepaid Contracts 422 0 Prepaid Workmen's Compensation 12,195 0 Sub - Total: Prepaids 13,158 0 ACCOUNTS RECEIVABLE Accounts Receivable 37,141 29,977 Sub - Total: Accounts Receivable 37,141 29,977 Grand Total: Personal Property $931,731 $384,918 'Leased or rented equipment -no value. Page 3 ILiI ll!IIIIIIIIIINLVIII� Ili ESTRADA FOODS, INC. Payments to Related Entities Exhibit Name I Date I Amount I Description Anthony Estrada 1/23/98 1,000.00 Reimbursement of expense report 3/2/98 2,884.62 Gross Wages 3116/98 2,884.62 Gross Wages 3/30/98 2,884.62 Gross Wages 4/13/98 2,884.62 Gross Wages 4/27/98 2,884.62 Gross Wages 5/11/98 2,884.62 Gross Wages 5/15/98 650.00 Reimbursement of expense report 5/20/98 500.00 Reimbursement of expense report 6/2/98 500.00 Reimbursement of expense report 6/15/98 500.00 Reimbursement of expense report 7/3/98 500.00 Reimbursement of expense report 7/20/98 2,884.62 Gross Wages 8/17/98 2,884.62 Gross Wages 10/13/98 1,000.00 Reimbursement of expense report Total Paid $ 27,726.96 Caroline Fres uez 3/2/98 1,538.46 Gross Wages 8/17/98 1,538.46 Gross Wages Total Paid $ 3,076.92 Rocky Mtn. Cold Storage 1/20/98 3,500.00 Payment on accounts payable bal. 1/30/98 2,000.00 Payment on accounts payable bal. 2/2/98 23,000.00 Payment on accounts payable bal. 2/26/98 16,500.00 Payment on accounts payable bal. 3/13/98 3,000.00 Payment on accounts payable bal. 3/13/98 5,500.00 Payment on accounts payable bal. 4/27/98 2,000.00 Payment on accounts payable bal. 4/29/98 2,000.00 Payment on accounts payable bal. 6/18/981 3,600.00 Payment on accounts payable bal. 9/3/981 2,000.00 Payment on accounts payable bat. 9/25/98 5,020.80 Payment on accounts payable bat. 11/6/98 1.798.03 Payment on payable bal. 11/10/98 6.921.65 Payment on accounts payable bal. 11/20/98 4.000.00 Payment on accounts payable bar 11/23/98 1,000.00 Payment on accounts payable bal. Total Paid $ 81,840.48 E.T. Construction 1/20/98 4,000.00 Payment on accounts payable 1/30/98 2,000.00 IP a ment on accounts payable bal. 2/13/98 5,500.00 jPayment on accounts payable bal. 2/26/98 3,000.00 jPayment on accounts payable bal. LBIT Page 1 Page 2 6/10/98 2,000.00 Payment on accounts payable bal. Total Paid $ 16,500.00 Payment on accounts payable bal. Jess Estrada 5/22/98 200.00 Reimbursement of expense report 7/1/98 56.00 Payment for services COD 9/1/98 50.00 Payment for services COD 9/4/98 50.00 Payment for services COO Total Paid $ 356.00 Fres uez Enterprises 1112198 2,497.13 Payment on accounts payable bal. Total Paid $ 2,497.13 Food Equipment Refabricators 1/22/98 3,000.00 Payment on accounts payable bal. 1/30/98 7,000.00 Payment on accounts payable bal. 2/2/98 6,000.00 Pa ment on accounts payable bal. 2/17/98 6,000.00 Payment on accounts payable bal. 2/26/98 5,000.00 Payment on accounts payable bal. 3/2/98 2,500.00 Payment on accounts payable bal. 3/26/98 3,000.00 Payment on accounts payable bal. 3/31/98 2,000.00 Payment on accounts payable bal. 4/10/98 2,500.00 Payment on accounts payable bal. 4120/98 2,000.00 Payment on accounts payable bal. 4/27/98 2,500.00 Payment on accounts payable bal. 4128/98 3,200.00 Payment on accounts payable bal. 5/1/98 1,000.00 Payment on accounts payable bal. 5/21/98 2,000.00 Payment on accounts payabie bal. 7/3/98 2,000.00 Payment on accounts payable bal. 7/6/98 1,500.00 Payment on accounts payable bal. 9/3/98 1,000.00 Payment on accounts payable bal. 9/25/98 5,623.54 Payment on accounts payable bal. 11/10/98 1,567.87 Payment on accounts payable bal. 11/20/98 1,176.52 Payment on accounts payable bal. 11/23/98 2,000.00 Payment on accounts payable bal. Total Paid S 62,567.93 Howard Klemmer 1/5/98 4,992.32 Gross Wages 1/19/98 4,992.32 Gross Wages Total Paid $ 9,984.64 Page 2 Estrada Foods, Inc. Personal Guaranties EXHIBIT NAME OF COMPANY I GUARANTEED BY AMT. OF GUARANTEE Barshop Ventures, Inc. /BVI Investments, Ltd 3 Principles 1,400,000 City of Pueblo 3 Principles 1,200,000 Peak National Bank 3 Principles 1,000,000 SSE Foods Anthony Estrada 354,400 Marty Ziesman Anthony Estrada 200,000 County of Pueblo 3 Principles 183,327 Mission Foods Anthony Estrada 139,674 Mission Foods Caroline Fres uez 139,674 Refco Leasing Anthony Estrada 128,576 Beck Foods Anthony Estrada 66,608 Westco Products Anthony Estrada 43,224 R & R Heating Anthony Estrada 32,824 Waste Mana meet Anthony Estrada 11,412 Dawn Foods Anthon Estrada 10,675 Norwest Business Finance Anthony Estrada 7,954 NEC Leasing Anthony Estrada 6,195 Napa Auto Parts Howard Klemmer 319 A -1 Rental Caroline Fres uez Account Balance Colorado Container Anthony Estrada Account Balance Custom Blending Caroline Fres uez Account Balance DeTello Family Trust Anthony Estrada Account Balance Express Personnel Caroline Fres uez Account Balance H Genius Compliance Control Anthony Estrada Account Balance J.M. Swank Howard Klemmer Account Balance Monfort Food Dist. Anthony Estrada Account Balance Monfort Food Dist. Howard Klemmer Account Balance Multi Foods Anthony Estrada Account Balance Shamrock Foods Co. Anthony Estrada Account Balance 3 Principles: Anthony J. Estrada Caroline Fresquez Candelario J. Estrada EXHIBIT 10 I!I� I X111 I� II�I�'IAVIII��I INFORMATION SHEET ORDER NO: 98 -592 - Please direct correspondence to: Valley Title Company 1104 North Main Pueblo, Colorado 81003 TO: CAROLINE FRESQUEZ DATE: October 19,1998 at 7:00 A.M. LEGAL DESCRIPTION: SEE ATTACHED DEED Grantee in last instrument apparently transferring ownership: ESTRADA FOODS, INC. Trust Deeds, Mortgages and Lien Documents which apparently are unreleased and appear to affect the subject property since the above date: 1. Financing Statement from ESTRADA FOODS, INC., debtor to JOHN L. RAINALDI, secured party as shown in instrument recorded November 27, 1996 in Book 2950 at page 101 and Assignment recorded October 10, 1997 in Book 3044 at page 911. 2. Deed of Trust from: ESTRADA FOODS, INC to the Public Trustee of Pueblo County for the use of: JOHN L. RAINALDI to secure: $400,000.00 dated: November 21, 1996 recorded: November 27, 1996 in Book 2950 at page 103 NOTE Assignment, in connection with above Deed of Trust, to BARSHOP VENTURES, INC. recorded October 10, 1997 in Book 3044 at page 866, Modification and Extension of above Deed of Trust recorded October 10, 1997 in Book 3044 at page 869 and First Amendment to Second Lien Deed of Trust recorded October 10, 1997 in Book 3044 at page 893, Assignment to BVI INVESTMENTS, LTD recorded May 7, 1998 in Book 3120 at page 735 and Second Amendment to Deed of Trust recorded May 7, 1998 in book 3120 at page 756. 3. Deed of Trust from: ESTRADA FOODS, INC to the Public Trustee of Pueblo County for the use of: PEAK NATIONAL BANK to secure: $750,000.00 dated: June 19, 1997 recorded: June 20, 1997 in Book 3008 at page 552 (Continued) E HIBIT 11 Information Sheet (continued) NOTE: Subordination Agreement in connection with above - Deed of Trust recorded June 20, 1997 in Book 3008 at page 562. NOTE: Notice of Election and Demand for Sale by Public Trustee in connection with above Deed of Trust recorded August 21, 1998 at Reception No. 1235344. Public Trustee's Certificate of Purchase recorded October 16, 1998 at Reception No. 1243999. 4. Financing Statements from ESTRADA FOODS, INC., debtor to BARSHOP VENTURES, INC., secured party as shown in instrument recorded November 21, 1997 in Book 3058 at page 749 and to PEAK NATIONAL BANK recorded June 20, 1997 in Book 3008 at page 560. 5. Deed of Trust from: ESTRADA FOODS, INC. to the Public Trustee of Pueblo County for the use of: PUEBLO COUNTY to secure: $183,326,76 dated: June 26, 1997 recorded: July 10, 1997 in book 3014 at page 852 6. Transcript of judgment in favor of AIR TECH INC against ESTRADA FOODS, INC.; ET CONSTRUCTION /PROPERTY MANAGEMENT, in the amount of $7,757.32 plus court costs, Civil Action• 98c- 000100, Division 4, County Court, recorded January 28, 1998 in Book 3079 at page 316. 7. Notice of Intent to File Lien Statement recorded February 17, 1998 in Book 3085 at page 817 and Lien Statement recorded February 17, 1998 in Book 3085 at page 818 (FERGUSON). . 8. Notice of Intent to File Lien Statement recorded March 17, 1998 in Book 3098 at page 125 and Lien Statement recorded March 17, 1998 in Book 3098 at page 126. (ROYAL) 9. Statement of Lien recorded March 30, 1998 in Book 3103 at page 266. (Atlas Appliance) 10. Financing Statement from ESTRADA FOODS, INC., debtor to BARSHOP VENTURES, INC., secured party as shown in instrument recorded May 7, 1998 in Book 3120 at page 778. 11. Deed of Trust from: ESTRADA FOODS, INC. to the Public Trustee of Pueblo County for the use of: MARTIN ZIESMAN to secure: $200,000.00 dated: March 19, 1998 recorded: June 17, 1998 at Reception No. 1224178. (Continued) Information Sheet (continued) 12. Financing Statement from ESTRADA FOODS, INC., debtor to MARTIN ZIESMAN, secured party as shown in instrument ' recorded June 17, 1998 at Reception No. 1224181.. 13. Transcript of judgment in favor of DAWN FOOD PROD INC. against ESTRADA FOODS INC.;ANTHONY ESTRADA,in the amount of $12,725.36 plus court costs, Civil Action No. 98CV- 002468 District Court, recorded July 2,1 998 at Reception No. 1226926. 14. Transcript of judgment in favor of R&R HEATING AND AIR CONDITIONING, INC. against ESTRADA FOODS, INC.,, in the amount of $32,823.77 plus court costs, Civil Action No.98CV000287, District Court, recorded July 13, 1998 at Reception No. 1228630. 15. Deed of Trust from: ESTRADA FOODS, INC. to the Public Trustee of Pueblo County for the use of: ESTRADA INTERNATIONAL FOODS, INC. to secure: $950,000.00 dated: February 1, 1998 recorded: July 20, 1998 at Reception No. 1229757. 16. Financing Statement from ESTRADA FOODS, INC., debtor to ESTRADA INTERNATIONAL FOODS, INC., secured party as shown instrument recorded July 20, 1998 at Reception No. 1229758. 17. Federal Tax Lien by United States Internal Revenue Service against ESTRADA FOODS INC, in the amount of $121,778.21, Dated July 17, 1998 and recorded July 24, 1998 at Reception No. 1230518. 18. Transcript of judgment in favor of MIDWEST EXPRESS, INC., dba MIDWEST FREIGHT SERVICES, INC. against,ESTRADA FOODS, INC., in the amount of $7,668.23 plus court costs, Civil Action No. 98C3629, County Court, recorded August 20, 1998 Reception No. 1235113. This information is for your use and benefit only. The information has been taken from our tract indices and the instruments referred herein have not been examined to determine their legality or valid legal description. This information is neither guaranteed nor certified and is not an Abstract of Title, Title Opinion nor a Guaranty of Title and our liability is limited to the amount of the fees charged. No Name or Judgment Search has been made nor have the records of the County Treasurer been researched. VALL 1 TLE OMP P BLO,INC BY E t~ r ESTRADA FOODS, INC. = Schedule of Pending Litigation _ N Pending Case Court Total Action Filed Litigation Number Jud ment A -1 Rental vs. Estrada Foods, Inc. & Caroline Fresquez County Court 599 Judgment/Writ of Garnishment with notice of exemption and pending levy (supplier of rented equipment) Pueblo, CO Beck Foods vs. Estrada Foods, Inc., RMCS, A. Estrada 98 -CV -375 Div. E District Court 66,608 Civil Action, Trial scheduled for Feb.16,1999 (raw material supplier) Pueblo, CO Brucepac, Inc. vs. Estrada Foods, Inc. 98C -16756 Circuit Court 30,827 Summons has been issued and received (raw material supplier) of Maryland Consul -Tech vs. Estrada Foods, Inc. 98SC076358 Circuit Court 2,844 Judgment has been entered against Estrada Foods (computer equipment) of Missouri Dawn Foods vs. Estrada Foods, Inc. and A. Estrada 98 CV 2468.Ci. 9 Dist. Court 10,675 Judgment /Writ of Garnishment with notice of exemption and pending levy (raw material supplier) Denver, CO Federal Express vs. Estrada Foods, Inc. County Court 10,000 Summons has been received (shipments of freight) Pueblo, CO Howard Klemmer vs. Estrada Foods, Inc.,RMCS, and A. Estrada 98 CV 607, Div E District Court 32,270 Complaint and summons has been received (former CEO and director and shareholder - wages and expenses owed) Pueblo, CO Midwest Express vs. Estrada Foods, Inc. 9BC3629 County Court 7,437 Judgment /Writ of Garnishment with notice of exemption and pending levy (freight company) Pueblo, CO Merchants Publishing Co. vs. Estrada Foods, Inc. 98CV959A District Court 4,295 Motion for default judgment received (supplier of printed material) Pueblo, CO Norwest Business Credit, Inc. vs. Estrada Foods, Inc. and A. Estrada County Court 7,954 Summons received (factoring company) Denver, CO R &R Heatting vs. Estrada Foods, Inc. and A. Estrada 98 CV 287 Div. A District Court 32,824 Judgment/Order to answer interrogatories or to show cause (supplier of building materials) Pueblo, CO E t~ r EXHIBIT Pending Case Court Total Action Filed Litigation Number Jud ment Stone Container Corp. vs. Estrada Foods, Inc. 98 C 5531 County Court 8,581 Summons received (supplier of raw materials) Pueblo, CO Ticos Mexican Foods, Inc. vs. Estrada Foods, Inc. 3- N46603 County Court 7,056 Summons received and Motion for approval for interogatories (supplier of co- packed goods) Denver, CO U.S. Waste Industries, Inc, vs. Estrada Foods, Inc. 98C5491 County Court 7,283 Complaint and summons received (service company - waste disposal) Pueblo, CO Glenn Van Blancom vs. Estrada Foods, Inc.,C. Fresquez and A. Estrada 98CV702 Div. C District Court 7,538 Motion for default judgement received (former General Manager of Company - wages owed) Pueblo, CO Waste Management of Cob. vs. Estrada Foods, Inc, and A. Estrada (service company - waste disposal) 98-CV -981 Div.D District Court Pueblo, CO 9,963 Motion for entry of default and for entry of default judgment Westco Products, Inc. vs. Estrada Foods, Inc. 98CV259 Div. D. District Court 43,224 Judgment/Order to answer interrogatories or to show cause (raw material supplier) Pueblo, CO ESTRADA FOODS, INC. Exhibit Schedule of Settled Litigation Number Total Air Tech vs. Estrada Foods and E.T. Construction (refrigeration repair company) 980100 Div. 4 County Court Pueblo, CO 7,357 Settled via payment from garnishment Ferguson vs. Estrada Foods and E.T. Construction (supplier of bldg. materials) Lien Filed In 3,204 Paid in full from loan transaction due to lien Pueblo County Singleton Sheet Metal (supplier of bldg. materials) Lien Filed In 1,814 Paid in full from loan transaction due to lien Pueblo County t- m_ ESTRADA FOODS, INC. Schedule 10 To The Disclosure Statement Class 2 Small Claims Exhibit VENDOR Allowed Claim La Tolteca Foods, Inc. 496.34 Northstar Engineering & S 490.00 Transportation Services 480.00 Kirkpatrick Brokerage Co. 479.55 Hilvitz- Hansen 466.52 J. Scott Swenson 456.63 Melby & Anderson LLP 450.00 Kraft 449.20 Southwest Supply 439.33 Parkview Employee Assists 420.00 Ed Decker 385.87 Fairbanks Scales Inc. 384.00 Dan Fres uez 354.72 Porta Power 348.73 H.V. Covillo & Co. 342.88 Napa Auto Parts 319.47 Nobel /S sco Food Svcs. 297.63 W.W. Grainger, Inc. 284.86 John Martino Produce 282.12 Publishers Choice Reprint 280.00 TelWest Communications 269.92 Southern Colorado Wastewater 264.00 Harding Glass 251.68 Vidmar Motors 235.26 Eugenia Gallegos 232.80 Lyons Safety 215.86 M I R, Inc. 214.57 Honeyville Grain, Inc. 206.29 Clark Spring Water Com an 206.08 Perma Graphics 202.80 All Seasons Catering 200.00 City of Pueblo 200.00 G & M Transportation 200.00 Consolidated Plastics 199.61 W estern Mobile 196.32 Employers Council Service 190.56 Polar Services, Inc. 184.00 CHOICE Program Dept. of S 175.89 Ryder Transportation Sery 168.10 Communication Solutions 159.80 Vance Distributing 159.24 Automatic Data Processing 157.37 A.B.C. Plumbing 157.27 Industrial Gas Products 155.15 EXHIBIT Page 1 1d Totally Confused Tras ort 150.00 Paul Maes 145.90 Blumberg / Excelsior 145.74 CiRiZa Food Sales 144.72 Chem -Prof Door Co., Inc. 126.54 Sherril LaRocque 122.88 Grand Rental Center, Inc. 103.20 Abel Engeering Prof., Inc 102.00 Joseph Ruiz 100.00 TCI Cable 98.44 Clerk of the Court 97.17 Lucia Montoya 92.75 Cub Foods 87.02 Cherie Hefty 84.36 Royal Electrical Services 81.21 Stadia 75.00 Ronald Himstreet 72.13 Antique Rose Flower Shopp 72.05 Current Inc. 70.04 Venture Packaging 67.22 Food Markekting S ecialis 66.05 Norwest Bank 62.27 Goring Kerr 59.00 Ray's Rubber Stamps 55.90 Washington Label 55.00 Blueflame Gas, Inc. 51.60 Pikes Peak Scale Service 48.00 Mexican Foods Specialist 40.38 Joseph L. Hastings 40.00 Meinster & Franc y, Atty a 40.00 R & R Heating 40.00 James V. Hurson Associate 34.32 Flash Refrigeration 30.15 U S West The Directory So 27.56 Colorado Dept. of A ricul 26.00 Blazer Electric • 21.78 Candelario (Sonny) Estrad 17.39 MG Walbaum 15.82 My Friend The Printer, In 15.05 Beggs Safe & Lock Co, Inc 13.39 All Star Gas 12.00 Tharco 11.99 BatchMaster Software Corp 0.00 Cryogenic 0.00 Atlas Appliance 0.00 TOTAL S 15,532.44 Page 2 ESTRADA FOODS, INC. Schedule 11 To The Disclosure Statement Class 3 Allowed Claims In Excess of $500.00 Exhibit VENDOR Allowed Claim A -1 Rental, Inc. 665.70 Aardvark Box & Recycling 1,536.31 Advance Design Center, In 6,057.59 Advanced Burglar Alarm 670.90 Advanced Food System, Inc 1,314.21 All Fill, Inc. 13,972.78 American Portable Bld s. 924.98 Am cor Diagnostics, Inc. 2,422.50 Ashby Trans. - 650.00 AT & T Capital Corp. 2,281.39 AT &T 4,048.31 B.D. Associates 6,350.75 Barr Equipment 1,600.00 BatchMaster Software Corp 0.00 Beck Foods, Inc. 58,200.00 Benchmark Foods 10,338.80 Biggs, Kofford & Co.,P.C. 20,434.02 Bio Control Systems 865.59 Blakeman Transportation, 600.00 Board of Water Works 991.74 Bou hton's Precast, Inc. 659.81 Braden Frindt & Stinar LLC 1,006.50 BrucePac 30,826.70 Bun a Foods 536.21 Bush Boake Allen Inc. 24,229.89 Business Card 14,858.76 Carbonic Reserves 21,124.13 Cargill Inc. 10,472.03 CEI Supply, Inc. 1,953.18 Cellular One - Pueblo 2,790.09 Central Bag and Burlap Co 1,931.62 Charles E. Gallegos 2,564.40 Chem-Aqua 5,588.85 Cliff Brice 7,640.36 CO2 Services 3,308.95 Colorado Frozen Foods, In 1,326.50 Computer Resources 2,538.42 Consul Tech Management, t 3,441.87 Cope Office Supply 1,688.08 Corporate Express 1,899.49 Cryogenic 0.00 Dawn Food Products, Inc. 10,674.61 Define Box Co. 11,556.77 Deloss Industries 1,015.25 EIBIT Page 1 Doboy Packing Machinery 611.30 Dubois Chemicals 1,475.67 Eggering Truck & Auto Rep 5,369.20 Elsie Lopez 1,444.15 Emer icare corporate Offi 2,705.00 Environmental Safety Grou 1,652.41 Fedex 8,789.04 Ferguson Enterprises, Inc 534.74 FFE Transportation Servic 11,032.96 Fiesta Canning Co., Inc. 17,926.34 Fisher Scientific 1,406.73 G & C Packing 6,314.67 G & I Industries 514.48 Gaetano's Restaurant 532.72 Glenn Van Blaircom 7,560.00 Great West Life 40,411.87 Gurule Trucking, Inc. 700.00 Hartford 42,199.05 Harvest Distribution 1,593.84 Harvest Meat 5,927.02 Highland Marketing Group 4,363.28 Howard Klemmer 32,270.00 Hugh Clum, Architect 1,109.85 IBT 1,148.29 Industrial Laboratories C 4,021.00 Interwest 1,041.13 J. R. Simplot Company 1,206.00 Jacqueline H. Cables 5,362.70 Jess Valdez 1,300.00 John Remesnik 776.00 Kaman Industries 881.89 Kelly Temporary Services, 513.58 Kentec, Inc. 1,950.00 Koch Supplies, Inc. 6,523.52 Lab Safety Supply Inc. 9,300.72 Latino Chamber of Commdre 2,327.00 LeMasters Janitorial Supp 2,423.96 Lewan 754.51 Logigroup 950.00 Loma International 1,942.00 Machlica Creative 15,699.83 Mama's Mexican Foods and 14,911.76 Marbur er 730.75 Marty Zeisman 210,210.67 Matt Dunn 9,350.00 McMaster -Carr Supply Comp 4,458.70 Merchants Publishing Co. 3,917.98 Mettler Toledo 639.30 Micro Technologies 1,036.59 Midwest Freight Services 7,437.43 Milwaukee Seasoning 1,178.87 Mission Foods Pueblo 116,889.61 Page 2 Mountain States Employer' 5,191.44 Nature Quality 5,403.55 Neo en Corporation 6,414.90 Nick Martinez 21,260.91 Northem Beef Products, 1 1,719.00 NTA Investor & Media Rela 1,423.27 Oneida Cold Storage 774.00 OTD Trans. & Storage 500.00 Packaging Film Sales, Inc 850.00 Peak National Bank 551.25 Penny Garcia 702.00 Peppers Unlimited, Inc. 4,343.00 Praxair 44,399.41 Protein Technologies Int. 3,882.98 Public Service Co. of Col 4,509.00 Pueblo Disposal 5,973.65 Pueblo Hotel Supply 14,293.21 R &R Heating 32,824.00 Rheon U.S.A. 1,089.70 Roth erber Johnson &Lon 30,244.98 Sangre de Cristo Arts & C 6,000.00 Sav On Office Supplies 2,330.05 Schwans Food Service 217,019.18 Seatle Fish 3,852.75 Silliker Laboratories Gro 5,557.25 Sinton's Dairy 146,542.10 Sno -White Linen & Uniform 1,254.81 Special Fab & Machine, In 1,822.00 Sprint Press Denver 10,029.16 SSE Foods -2 64,117.27 Steel City Agencies, Inc. 21,987.00 Stone Container Corporati 8,581.34 Stonehand Industries 866.90 Sunland Sanitary Supply 8,084.16 Sunny Fresh 4,759.50 Sunrise Foods, Inc. 23,211.44 Ted Detello 16,068.11 Tem tee Brand Steak, Inc. 3,078.00 Tenneco Packaging 4,014.89 Terminex Intemational 1,965.00 The Hartford 7,578.60 Tico's Foods of Mexico 1.760.00 Travel Planners, Inc. 1,317.00 Trinidad Benham 22,726.50 U.S. Dept of Agriculture 12,159.17 U.S. West Communications 3,935.05 United Parcel Service 4,978.50 Vicki Estrada 599.09 Vigil's Heating & Air Con 2,374.73 Wagner Packaging Machiner 4,432.50 Waste Management of Puebl 11,412.21 Weber Trucking 734.20 Page 3 Westco Products, Inc. 43,224.31 WestPlains Energy 30,464.16 William K. Lundy 11,250.00 WLN Associates 592.14 Zee Service, Inc. 1,067.66 Sub -Total 1,820,317.43 Pueblo County 183,326.76 WK Capital-Estrada International Foods, Inc. 1,005,000.00 Grand Total $ 3,008,644.19 Page 4 ESTRADA FOODS, INC. Estrada Family Payable & Loans Schedule 2C Class 7 Allowed Claims Exhibit Vendor I Balance Food Equipment Refab. of Colo. 233,259.0 Casa de Oro, LLC 208,289.0 Caroline Fres uez 83,949.0 E.T. Construction 62,265.0 Jess Estrada 33,099.0 Fres uez Enterprises 20,787.0 Rocky Mountain Cold Storage 22,582.0 Anthony Estrada 1,790.0 Total Estrada Pa ables $ 666,020.00 EXHIBIT 16 DESCRIPTION OF EMPLOYMENT AGREEMENTS POST - EFFECTIVE DATE The following is a description of the post- Effective Date terms of employment of key employees of the Debtor and consultants to the Debtor. It is anticipated that employment or consulting agreements will be executed on the terms described below with other usual and customary employment agreement or consulting agreement provisions. (1) Hiram W. Lewis, III (a) Hiram W. Lewis, III will be the Chief Executive Officer of the Debtor. Mr. Lewis will report directly to the Board of Directors of the Debtor. (b) Mr. Lewis' salary will be $100,000.00 per annum. (c) Mr. Lewis will receive all of the regular benefits of executives of the Debtor including reimbursement of out -of- pocket expenses incurred on behalf of the Debtor, including travel expenses. (d) Mr. Lewis has agreed to an eighteen (18) month commitment with the Debtor and it is anticipated that Mr. Lewis, who lives in Wichita, Kansas, will be available on a full time basis with the Debtor and it is anticipated that he will be spending not less than four (4) days per week in Pueblo, Colorado for at least the first six months after the Effective Date. (e) Mr. Lewis will not, in his role as Chief Executive Officer of the Company, be provided with any stock options or warrants with respect to the Debtor's New Common Stock. (2) Anthony J. Estrada (a) Anthony J. Estrada will be the President of the Debtor post - Effective Date. Mr. Estrada will report to and be subject to the supervision of Mr. Lewis and the Board of Directors. (b) Mr. Estrada's salary will be $75,000.00 per year and Mr. Estrada will receive the regular benefits provided to executives of Debtor, including reimbursement of expenses incurred on behalf of the Debtor. EXHIBIT 17 (c) Mr. Estrada will be entitled to participate in a performance bonus program implemented by the Debtor which will enable Mr. Estrada to potentially earn up to one times his annual salary as a bonus. The performance bonus program will be established by the Debtor with bonuses determined on a sliding /gradiated scale tied to the performance of the Debtor. It is anticipated that the performance criteria will be based on the Debtor's quarterly gross revenues and quarterly profits on an EBITDA basis. (d) As part of Mr. Estrada's employment agreement, Mr. Estrada will agree to a non - competition agreement pursuant to the applicable provisions of Colorado law. (e) Mr. Estrada will be granted stock options with respect to the Debtor's New Common Stock such that Mr. Estrada will have the ability, over a five (5) year period, to purchase shares of Debtor's New Common Stock equivalent to 15% of the issued and outstanding New Common Stock as of the Effective Date treating all 1999 Series A preferred stock as if it had been converted into New Common Stock. The stock options shall be granted so that Mr. Estrada is able to exercise such stock options and purchase 3% (up to the total potential 15 %) at the end of each of the first five years after the Effective Date. The stock option exercise price shall be determined and established by the Debtor's Board of Directors on or after the Effective Date. (f) The stock options shall be also subject to full, immediate vesting in the event of certain changes of control of Debtor. (g) Mr. Estrada's employment contract will be for an initial term of five (5) years. (3) Steve Castanedo (a) Mr. Castanedo will be Vice President of Operations. Mr. Castanedo will report to and be subject to the supervision of Mr. Lewis. (b) Mr. Castanedo's salary will be $75,000.00 per year and Mr. Castanedo will receive the regular benefits provided to executives of Debtor, including reimbursement of expenses incurred on behalf of the Debtor. (c) Mr. Castanedo will be entitled to participate in a performance bonus program implemented by the Debtor which will enable Mr. Castanedo to potentially earn up to one times his annual 2 230761 01 12119198 11 34 AM salary as a bonus. The performance bonus program will be established by the Debtor with bonuses determined on a sliding /gradiated scale tied to the performance of the Debtor. It is anticipated that the performance criteria will be based on the Debtor's quarterly gross revenues and quarterly profits on an EBITDA basis. (d) As part of Mr. Castanedo's employment agreement, Mr. Castanedo will agree to a non - competition agreement pursuant to the applicable provisions of Colorado law. (e) Mr. Castanedo will be granted stock options with respect to the Debtor's New Common Stock such that Mr. Castanedo will have the ability, over a five (5) year period, to purchase shares of Debtor's New Common Stock equivalent to 3% of the issued and outstanding New Common Stock as of the Effective Date treating all 1999 Series A preferred stock as if it had been converted into New Common Stock. The stock options shall be granted so that Mr. Castanedo is able to exercise such stock options and purchase 0.6% (up to the total potential 3 %) at the end of each of the first five years after the Effective Date. The stock option price shall be determined and established by the Debtor's Board of Directors on or after the Effective Date. (f) The stock options shall also be subject to full, immediate vestment in the event of certain changes of control of Debtor. (g) Mr. Castanedo's employment contract will be for an initial term of five years. (h) Mr. Castanedo currently has an agreement with the Debtor. The agreement will be assumed by Debtor pursuant to the applicable provisions of the Plan of Reorganization and modified as described above post- Effective Date. The outstanding obligations under the existing agreement will be satisfied by Debtor paying 20% of the outstanding obligations on the Effective Date and satisfying the remaining balance by making equal monthly payments over a 24 month period with seven percent (7 %) interest. Debtor's obligation to Mr. Castanedo under the existing agreement is $61,800.00. 230761.01 12/19/98 11 34 AM (4) Caroline Fresquez (a) Ms. Fresquez will be employed as Assistant Controller of the Debtor. Ms. Fresquez shall report to and be subject to the supervision of Mr. Lewis. (b) Ms. Fresquez's salary will be $40,000.00 per year and Ms. Fresquez will receive the regular benefits provided to employees of Debtor, including reimbursement of expenses incurred on behalf of the Debtor. (c) Ms. Fresquez will be entitled to participate in a performance bonus program implemented by the Debtor which will enable Ms. Fresquez to potentially earn up to one -half (1/2) times her annual salary as a bonus. The performance bonus program will be established by the Debtor with bonuses determined on a sliding /gradiated scale tied to the performance of the Debtor. It is anticipated that the performance criteria will be based on the Debtor's quarterly gross revenues and quarterly profits on an EBITDA basis. (5) Paul Turner (a) Mr. Turner will be employed as Plant Engineer of the Debtor. Mr. Turner shall report and be subject to the supervision of Mr. Lewis. (b) Mr. Turner's salary will be $65,000.00 per year and Mr. Turner will receive the regular benefits provided to executives of Debtor, including reimbursement of expenses incurred on behalf of the Debtor. (c) As part of Mr. Turner's employment agreement, Mr. Turner will agree to a non - competition agreement pursuant to the applicable provisions of Colorado law. (d) Mr. Turner will be granted stock options with respect to the Debtor's New Common Stock such that Mr. Turner will have the ability, over a five (5) year period, to purchase shares of Debtor's New Common Stock equivalent to 1 % of the issued and outstanding New Common Stock as of the Effective Date treating all 1999 Series A preferred stock as if it had been converted into New Common Stock. The stock options shall be granted so that Mr. Turner is able to exercise such stock options and purchase 0.2% (up to the total potential 1 %) at the end of each of the first five years after the Effective Date. The stock option price shall be determined 4 230761.01 12/19/98 11:34 AM and established by the Debtor's Board of Directors on or after the Effective Date. (f) The stock options shall also be subject to full, immediate vestment in the event of certain changes of control of Debtor. (g) Mr. Turner's employment contract will be for an initial term of five years. (h) Mr. Turner will be entitled to participate in a performance bonus program implemented by the Debtor which will enable Mr. Turner to potentially earn up to one half (1/2) times his annual salary as a bonus. The performance bonus program will be established by the Debtor with bonuses determined on a sliding /gradiated scale tied to the performance of the Debtor. It is anticipated that the performance criteria will be based on the Debtor's quarterly gross revenues and quarterly profits on an EBITDA basis. (5) Robert C. Pate, Director of Debtor (a) Mr. Pate will be retained by the Debtor post- Effective Date. Mr. Pate will assist Mr. Lewis and the Debtor's Board of Directors in a variety of projects related to the Debtor's business post - confirmation. Mr. Pate will report directly to the Board of Directors and/or Mr. Lewis, depending upon the assigned project. Mr. Pate is a principal in Compadres Ventures, Inc. and is an attorney and certified public accountant. Mr. Pate was previously a State District Judge serving on the appointment of Governor George W. Bush. Also, Mr. Pate has represented Barshop related entities for over ten (10) years. Mr, Pate lives in Corpus Christi, Texas. (b) Mr. Pate's fee will be $75,000.00 per year payable monthly in the amount of $6,250.00. Mr. Pate will be entitled to reimbursement of out -of- pocket expenses incurred on behalf of the Debtor, including travel expenses. (c) Mr. Pate's contract will be for an initial 18 month term. (d) Mr. Pate will be available by phone and fax on a full time basis and it is anticipated that he will travel to Pueblo, Colorado on an as needed basis which likely will be at least two (2) days per month or more. 5 230761.01 12/19/98 11:34 AM Exhibit 18 Estrada Foods, Inc. Chapter 7 Liquidation Analysis Prepared by Debtor (Effective Date of the Plan assumed to be March 15, 1999) Liquidation value of assets other than causes of action (See Exhibit 18-A) Less: Class 10 Allowed Secured Claim Less: Class 9 Allowed Secured Claim Less: Class 11 Allowed Secured Claim (1) Net Liquidation Value of assets other than Causes of Action Net Liquidation Value of Causes of Action (See Exhibit 18 -13) Less: Chapter 7 trustee fee (est.) Chapter 7 professional fees (est.) Net Liquidation Value in Chapter 7 Less: Class 1 Allowed Priority Claims (IRSICDR) Net Liquidation Value for unsecured creditors in Chapter 7 (1) Projected class 11 allowed claim at 03/15/99 Page 1 of 2 $543,571 - $7,954 4272,000 4700,000 $0 $129,456 - $4,000 - $10,000 $115,456 - 5193,057 $0 EXHIBIT 1 18 Exhibit 18 Estrada Foods, Inc. Chapter 7 Liquidation Analysis Prepared by Debtor (Effective Dabs of the Plan assumed to be March 16, 1999) Estimated return under Chapter 11 Plan: Administrative Claimants: $30,000 Class 1: $193,058 Class 2: $15,532 Class 3: $500,000 Class 4: $0 Class 5: $5,000 Class 6: $5,000 Class 7: $79,922 Class 8: $0 Class 9: $0 Class 10: $0 Class 11: $0 Class 12: $0 Class 13: $302,928 (assumes cash election for entire class) Class 14: $0 Class 15: $0 Amounts to cure assumed $0 Executory Contracts $107,000 Estimated return under Chapter 7: Chapter 7 Trustee: $4,000 Chapter 7 Administrative: $10,000 Chapter 11 Administrative: $20,000 Class 1: $95,456 Class 2: $0 Class 3: $0 Class 4: $0 Class 5: $0 Class 6: $0 Class 7: $0 Class 8: (repaid to the extent of value of collateral in liquidation) Class 9: (repaid to the extent of value of collateral in liquidation) Class 10: (repaid to the extent of value of collateral in Nquidation) Class 11: (repaid to the extent of value of collateral in liquidation) Class 12: $0 Class 13: $0 Class 14: $0 Class 15: $0 Amount to cure Assumed Executory Contracts $0 Page 2 of 2 Exhibit 18 -A Estrada Foods, Inc. Chapter 7 Liquidation Analysis Prepared by Debtor (Effective Date of the Plan assured to be March 16, 1999) Estimated Value Current Assets 03!15199 Cash in Bank (1) $10,000 Deposits (2) $0 Accounts Receivable $38,361 Employee Advances $17,774 Inventory $123,209 Prepaids $23,288 Total Current Assets $212,632 Fixed Assets Land, Buildings & Improvements (3) $0 Machinery & Equipment (4) $299,977 Office Equipment (4) $25,737 Vehicles (4) $5,225 Accumulated Depreciation $0 Total Fixed Assets $330,939 :�it�TTI_TTr? Reorganization Costs (5) $0 Start Up Costs (5) $0 Loan Costs (5) $0 Factory Equip. — Inactive (6) $0 Total Other Assets $0 TOTAL ASSETS $543,571 (1) Estimated cash balance in liquidation (assume cessation of operations) (2) Assumed deposits do not result in realizable balance in liquidation (3) Assumed no real estate owned due to pre -filing foreclosure and junior Yen holder redemption (4) Scheduled values, attached (see Exhibit 8 to Disclosure statement) (5) No value realizable in liquidation (6) All equipment owned by Debtor is included in Machinery & Equipment, above Exhibit 18 -B Estrada Foods, Inc. Causes of Action The following payments may be subject to avoidance and recovery in a bankruptcy case pursuant to applicable bankruptcy law. The Debtor neither admits nor denies that the following payments would be recoverable,in a bankruptcy case. $204,456 Represents the total payments to related entities in calendar year 1998. These payments may be recoverable as preferences under 11 U.S.C. Section 547. Defenses exist to the recovery of these payments. 25,000 Represents the Debtor's estimate of total (estimated) payments to unrelated vendors and creditors during the 90 days prior to the anticipated bankruptcy filing date of January 21, 1999, which may not be in the ordinary course of business and thereby are possibly recoverable as preferences under 11 U.S.C. Section 547. Defenses exist to the recovery of these payments. 00 The Debtor is unaware of any payment or transfer of property during calendar year 1998 which could be recoverable as fraudulent conveyance pursuant to applicable bankruptcy law. $229,456 Sub -Total 100,000 Less: costs, attorney fees and adjustments for the risk of recovery. (This is an estimate). $129,456* Total estimated proceeds realized from causes of actions *There can be no assurance that these payments are recoverable and the recipients of these payments hold defenses to the causes of action. ASSETS CURRENT ASSETS: 11 75tra('a FJO:'.�,. Inc. BALANCE SI:EET DEC-'IBEER 31. 199b Checkinz account S 48,280.80 Construction Checking account 6.531.24 Health Benefits Account 405.49 Deposits 19,123.42 Petty cash 250.00 Accounts receivable 29.45 Expense account receivable L MM 1 Expense account receivable CF 1,000.00 Employee Payroll Advance 4,435.35 Loan Rec'vble - Casa de Oro 1,139.59 Loan Receivable - ET Construct 836.30 Loan Receivable - Food Equip. 33,937.46 Loan Receivable - RMCS 25.25S.99 PREPAID EXPENSES 6.451.65 TOTAL CURRENT ASSETS S PROPERTY AND EQUIPMENT: Land 5 90.000.00 Buildings 15,909.00 Building improvements 291.251.09 Construction Phase - Clearing 1.054,213.93 Equipment 517,754.56 Furniture and fixtures 4.782.75 Vehicles 29.299.63 TOT PROPERTY AND EQUIPMENT S OTHER A SSETS: Utility deposits S 1.396.00 Orzanization costs 1.602.66 Start Up Costs 9:.109.5" TOTAL OTTER ASSETS 5 TOTAL ASSETS 14S.9S ".S3 2.036.211.29 98.008.23 Final EXHIBIT 19 111-aw-L ins 04/' 9 at U l .3 "P`l LIABILITIES AND EQUITY ---------------- - - - - -- 1990 Estrada Fcods. Inc. BALANCE SHEET DECEMBER 31. 1996 CURRENT LIABILITIES: Accounts payable S Insurance Benefits Payable Notes payable - Short term Payroll Payable Deferred Compensation Payable Use taxes payable PAYROLL TAXES PAYABLE ACCRUED TAXES TOTAL CURRENT LIABILITIES NON- CURRENT LIABILITIES: LONG -TERM DEBT NET OF CURRENT $ NOTE PAYABLE - OFFICER TOTAL NON - CURRENT LIABILITIES EQUITY: 405.714.13 8.544.43 29.500.0.0 10.743.03 23.533.37 56.63 8.025.52 8.914.42 S 763,034.53 958,835.56 663.975.11 S 1,622.300-67 Common stock S 794,970.06 Retained earnings ( 235,949.33) NET INCOME (LOSS) ( 661.643.03) TOTAL EQUITY S( 102.627.90) TOTAL LIABILITIES AND EQUITY- S 2.253.20 - .3; Final J4 /04 /0 at 01 :46P�l SALES Sales Payment discount TOTAL SALES COST OF SALES: DIRECT MATERIALS FACTORY OVERHEAD TOTAL COST OF SALES GROSS PROFIT SELLING EXPENSES: 1990 Estrada Focus. inc. I NCO`IE STATE.',1E T FOR THE PERIOD(S ) Salaries - Sales Broker's Commisions Advertising Promotions Focus Groups Sales Samples /Promotions Training & Employee Developmnt Travel Uniforms Expense Payroll taxes - Sales TOTAL SELLING EXPENSES GENERAL & A D M I N I S T R A T I V E : , Salaries & stages Vacation /Holiday Pay Deferred Compensation Expense Moving expenses Salaries & Wages - Research & PrnFessional Services Human Res. Dues & Subscription Adv: sore Board Fees Auto expense Auto Repair /'Maintenance BanK service charges Dues S subscriptions Funlraising Expenses ut l ; l :les Insurance - Employee group :nsvranse - General Workmens Compensat :on 12/01/96 - 12/31/96 01/01/96 - 12/31/'96 ACTUAL S ACTUAL S -------------- - - - - -- -------------- - - - - -- S 133.13 S .19.526.94 ( 7.68) ( 33.40) ------- - - - - -- ------- - - - - -- 175.50 19,433.54 10.555.56 23.263.20 1,174.26 70,629.53 ------- - - - - -- 11,729.82 ------- - - - - -- ------- - - - - -- 93.892.73 ------- - - - - -- ( 11,554.32) ( 74,404.19) 0.00 95.00 53.22 158.58 4,065.92 21.070.SS 0.00 1,288.42 0.00 6,625.00 2.599.33 25,272.78 675.49 4,154.37 17.73 303.79 0.00 204.25 0.00 7.53 7.414.74 59. 214.10 17.91.76 193.529.46 60.00 1.755.36 l 1.3 - 5.00) 11.033.3 0. 00 1,2S6.93 2.491.66 10.13y.i5 2.623.25 13.439.20 48'.:0 1.0 0.00 4.200.00 0.00 1.50 0.00 2.423.49 0.00 235.92 73.6: 1. t 64.600.23) 0.00 5.124.95 11.152. 1.:62.00 12.61 556.92 6.633.04 bS .14 1.3_U.o; Final 0 9 at 01:4-SP.'d 1996 - 7 straca Foods. Inc. FOR THE PERIODS) Interest expense Interest Expense - Auto Loan Leasing Expense Legal & accounting Miscellaneous expense Office expense Outside services Postage expense Process Equip. Install /Trainin Production Equipment - Small Racks & Trays Rent expense Repairs & maintenance Taxes - Real estate Taxes - Payroll Taxes - Use (State & Local) Telephone Travel & Related ,Heals & Entertainment Financing Costs TOTAL GENERAL & ADMINISTRATI NET OPERATING INCOME (LOSS) 12/01/96 - 12/31/96 ACTUAL S 48.665.45 89.49 ( 3S,625.00) 6.712.32 0.00 3,476.35 0.00 29.20 1,738.48 19,125.74 2,774.75 491.75 0.00 8,914.42 860.55 313.03 2,78.5.60 ( 9,955.99) ( 496.71) 0.00 14,653.56 33,652.63) OTHER (INCOME) AND EXPENSES: Other income Temporary distrib. TOTAL OTHER (INCOME) AND EXP NET INCOME (LOSS) BEFORE TAY NET INCOME (LOSS) l 1 0.00 ( 1 ( 32..602.62) 5( 32.602.62) 01/01/96 - 1= /31/9u ACTUAL S 5 87. 76-.38 90 13,140.50 25,341.34 1,127.00 13,090.73 3,075. 14 160.63 1,738.48 27,736.06 2,774.75 5,901.00 261.99 8,914.42 ,12,136.23 313.03 21,100.13 27,262.85 4,614.69 450.00 532,560.54 666,173.83) ( 4,530.75) 0.00 f 4,530.75) ( 661,64S.08) S( 661,64S.08) 0 Fina; Estrada Foods, Inc. BALANCE SHEET DECEMBER 31, 1997 ASSETS CURRENT ASSETS CIB Operating Account CIB Payroll CIB Construction Account CIB Health Benefits Escrow Account Deposits Petty Cash Accounts Receivable - Trade Employee Advance Employee Advance VB Employee Advance GVB Employee Advance EG Employee Advance - JR Inventory - Raw Material Inventory Finished Goods Prepaid Insurance Prepaid Contracts Prepaid workmans Comp Prepaid Advertising TOTAL CURRENT ASSETS FIXED ASSETS $(50,042.82) (7,075.11) 75.19 (8,000.53) 16,690.89 55,021.36 250.00 34,813.51 610.71 2,651.38 1,000.00 500.00 400.00 78,382.68 204,698.57 3,211.79 422.30 4,240.70 12,227.78 --------- - - - - -- Buildings 1,643,548.45 Accum. Depr. Bldg. & Imp. (29,118.21) Building Improvements 376,563.85 Accum. Dep. Building Imp. (6,782.32) Factory Equipment 410,919.11 Accum. Dep. Factory Equipment (45,656.91) Office Equipment 40,594.08 Accum. Dep. Office Equipment (5,825.87) Vehicles 29,299.63 Accum. Dep. Vehicles (5,194.78) Lard 90,000.00 Computer Resources Computers 1,556.51 All -Fills (4 New) 89,731.96 3 Bay Sink 2,320.96 Groen SS Cook Kettle Med 200SP 8,700.00 Jaybird Foods Equipment 10,421.08 Hydroflaker (Maja) 7,500.00 Ribbon Blender Installation 72,970.01 Peerless Mixer 5,012.97 TOTAL FIXED ASSETS OTHER ASSETS 350,078.40 2,696,560.52 Organizational Cost 1,602.66 Estrada Foods, Inc. BALANCE SHEET DECEMBER 31, 1997 ASSETS (Continued) OTHER ASSETS (Continued) Start Up Cost $76,598.63 Loan Cost 65,238.04 Factory Equipment - Inactive 309,090.93 --------- - - - - -- TOTAL OTHER ASSETS TOTAL ASSETS 452,530.26 --------------- $3,499,169.18 --------- - - - - -- --------------- Estrada Foods, Inc. BALANCE SHEET DECEMBER 31, 1997 LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts Payable - Trade $1,314,346.30 Accounts Payable Accrual 107,300.97 Unearned Revenue 212,766.87 Garnishment Payables 490.96 Federal Withholdings 4,073.99 FICA Payable - Employer 2,951.50 FICA Payable - Employee 2,869.12 State Withholding Payable 1,398.85 FUTA Payable 152.27 SUTA Payable 606.66 Accrued Payroll 44,335.14 Accrued Payroll Taxes 16,460.74 Accrued Workmen Comp 22,106.29 Accrued Medical Insurance 3,962.67 Deferred Compensation Payable 3,133.37 Accrued - Taxes Other 14,804.58 Accrued Property Tax 8,171.57 Accrued Interest Expense 14,568.49 Short Term Lease - All Fills 18,126.43 Short Term Lease - Jeep 4,400.04 Short Term Lease - Refco 2 19,387.81 Short Term Lease - BCL 15,468.80 Short Term City Pueblo Grant 178,569.60 Short Term Peak National Loan 65,054.28 Notes Payable - Short Term 43,944.98 Notes Payable - Short Term -02 364,583.64 Notes Payable - Short Term EIF 225,585.56 TOTAL CURRENT LIABILITIES LONG -TERM LIABILITIES Long Term Lease All Fills 6,572.32 Long Term Lease Jeep 2,471.54 Long Term Lease Refco 2 57,833.61 Long Term Lease BCL 38,277.08 Notes Payable Peak National 917,309.26 Long Term City of Pueblo Grant 937,173.84 TOTAL LONG -TERM LIABILITIES TOTAL LIABILITIES EQUITY Ccmmon Stock 815,370.06 Preferred Stock 1997 Series A 1,914,521.65 Retained Earnings - Prior (897,242.00) RETAINED EARNINGS- CURRENT YEAR (3,002,739.66) r, e.rw..,.y Mi 14 2,709,621.48 1,959,637.65 --------------- 4,669,259.13 Estrada Foods, Inc. BALANCE SHEET DECEMBER 31, 1997 LIABILITIES AND EQUITY (Continued) EQUITY (Continued) TOTAL EQUITY TOTAL LIABILITIES AND EQUITY $(1,170,089.95) --------------- $3,499,169.18 Estrada Foods, Inc. INCOME STATEMENT FOR THE 12 PERIODS ENDED DECEMBER 31, 1997 + - -- PERIOD TO DATE - -+ + - - -- YEAR TO DATE - - -+ ACTUAL PERCENT ACTUAL PERCENT REVENUE Sales - Contracts $197,421.72 82.9 % 904,026.15 93.3 Sales - Food Service 39,878.22 16.7 65,132.40 6.7 Sales Return - Food Service 909.00 .4 (140.09) .0 TOTAL REVENUE --------- - - - - -- 238,208.94 - - - - - -- --------- 100.0 - - - - -- 969,018.46 - - - - - -- 100.0 COST OF SALES: COST OF SALES Tortilla 64,824.41 27.2 202,444.26 20.9 Meats 66,244.25 27.8 297,754.18 30.7 Cheese 38,346.75 16.1 79,647.87 8.2 Beans 11,821.94 5.0 26,423.73 2.7 Fruit 6,447.53 2.7 35,113.13 3.6 Seasonings 25,806.35 10.8 80,669.65 8.3 Other Ingredients 10,994.36 4.6 139,509.16 14.4 Corn Flour /Maseca 925.69 .4 19,736.87 2.0 Inventory Adjustment - WIP 615.00 .3 5,519.14 .6 Inventory Adjustment - F.G. (11,855.08) (5.0) (192,267.52) (19.8) Inventory Adjustment - Outdate .00 .0 6,989.22 .7 Packaging (293.15) (.1) 2,045.05 .2 Packaging - Prod. Liners 1,113.98 .5 4,264.20 .4 Packaging - Corrugated 11,441.42 4.8 30,709.06 3.2 Packaging - Paper Liners 427.49 .2 359.31 .0 Packaging - Label Typical 3,171.21 1.3 8,990.47 .9 Packaging - Quick Loks 323.40 .1 582.60 .1 Packaging - Stretch Wrap 575.48 .2 1,285.59 .1 Packaging - Tape 268.68 .1 1,054.85 1 Labor - D.C. Processing 5,016.06 2.1 169,950.54 17.5 Overtime - D.C. Processing .00 .0 3,460.04 .4 Vac & Hol - D.C. Processing 248.80 .1 644.39 .1 Labor - D.C. Packaging 58,785.28 24.7 311,497.17 32.1 Overtime - D.C. Packaging 6,240.75 2.6 19,693.02 2.0 Vac & Hol - D.C. Packaging 1,443.80 .6 4,002.22 .4 Ins. Health Ben. - D.C. 1,146.55 .5 5,009.98 .5 Ins. Worker Comp - D.C. 4,845.26 2.0 30,609.93 3.2 Payroll Taxes - D.C. 7,916.03 3.3 44,351.29 4.6 --------- TOTAL COST OF SALES - - - - -- 316,842.24 - - - - - -- 133.0 --------- - - - - -- 1,340,049.40 - - - - - -- 138.3 --------- TOTAL COST OF SALES - - - - -- 316,842.24 - - - - - -- 133.0 --------- - - - - -- 1,340,049.40 - - - - - -- 138.3 --------- GROSS PROFIT - - - - -- (78,633.30) - - - - - -- (33.0) --------- - - - - -- (371,030.94) - - - - - -- (38.3) OPERATING EXPENSES Salaries Mgmt. - Prod 20,900.43 8.8 98,525.81 10.2 Salaries Staff - Prod 2,427.90 1.0 11,458.96 1.2 Overtime - Prod 473.09 .2 3,839.14 .4 Vac'& Hcl - Prod 812.75 .3 1,136.75 .1 Auto Expense .00 .0 967.94 .1 1 , 1 1MIM11MEHEI I it . Estrada Foods, Inc. INCOME STATEMENT FOR THE 12 PERIODS ENDED DECEMBER 31, 1997 OPERATING EXPENSES Auto Repair & Maint. Depreciation Building Depreciation Equipment Depreciation Office Equip. Depreciation - Vehicles Dues & Subscriptions Fuel - Equipment Ins. Health Ben. - Prod Ins. Worker Comp - Prod Interest Expense - Prod Laundry & Uniforms Laundry & Uniform Tortilla Pro Lease Expense Miscellaneous Expense Operating Supplies Operating Supplies - Office Operating Supplies Tort. Prod Outside Service Outside Serv.- Pre - Employ Exp Outside Services Tort Prod. Postage Expense Payroll Taxes - Prod Rent Building Rent - Equipment Repair & Main - Building Repairs & Main Bldg. Tort. Repair & Main - Equip. Repair Main. Equip - Motors Repair & Main. Equip - Service Repair & Main Equip - Refrig. Repair & Main Equip. - Tort. Storage Exp. - Production Taxes - Prod. - Real Estate Taxes - Prod. - Other Telephone Expense Training & Seminars Travel & Related Travel - Meals & Enter. Prod Travel - Mileage Utilities - N2 Gas Utilities - CO2 Utilities - Electric Utilities - Natural Gas Utilities - Water & Sewer Utilities - Waste Water Utilities - Electric Tort Utilities - Natural Gas Tort Utilities - Water /Sewer Tort Utilities - Waste Water Tort Salaries Mgmt. - R & D Salaries Staff - R & D + - -- PERIOD TO DATE - -+ + - - -- YEAR TO DATE - - -+ ACTUAL PERCENT ACTUAL PERCENT (Continued) $1,097.47 .5 1,311.37 .1 18,500.53 7.8 35,900.53 3.7 (48,943.09) (20.5) 45,656.91 4.7 4,271.20 1.8 4,271.20 .4 2,892.04 1.2 2,892.04 .3 .00 .0 187.50 .0 509.36 .2 4,689.03 .5 368.42 .2 432.19 .0 95.26 .0 509.82 .1 7,828.67 3.3 9,679.43 1.0 2,696.95 1.1 16,728.83 1.7 101.36 .0 704.03 .1 1,637.46 .7 8,598.59 .9 40.00 .0 14,356.46 1.5 11,707.49 4.9 89,488.40 9.2 5.57 .0 2,774.97 .3 .00 .0 85.63 .0 3,691.09 1.5 58,897.62 6.1 .00 .0 4,998.80 .5 .00 .0 753.26 .1 .00 .0 87.07 .0 2,177.92 .9 23,418.23 2.4 7,000.00 2.9 81,841.09 8.4 3,793.29 1.6 29,631.69 3.1 2,219.74 .9 16,806.64 1.7 1,970.68 .8 11,740.60 1.2 523.45 .2 153,399.18 15.8 578.25 .2 5,716.92 .6 13,831.29 5.8 93,590.56 9.7 110.00 .0 14,919.21 1.5 .00 .0 1,305.66 .1 10,947.81 4.6 51,688.23 5.3 742.87 .3 7,428.70 .8 (524.14) (.2) 17,572.18 1.8 1,664.45 .7 9,512.73 1.0 913.79 .4 5,596.04 .6 757.00 .3 2,989.85 .3 249.83 .1 1,036.15 .1 40.00 .0 40.00 .0 5,261.43 2.2 48,712.56 5.0 48,762.85 20.5 140,875.09 14.5 5,139.70 2.2 35,346.34 3.6 8,349.67 3.5 34,565.51 3.6 1,353.98 .6 5,870.86 .6 (640.00) (.3) (640.00) (.1) 1,780.46 .7 12,784.71 1.3 947.53 .4 3,489.73 .4 37.81 .0 1,031.01 .1 .00 .0 568.35 .1 2,530.00 1.1 27,972.67 2.9 3,072.79 1.3 25,066.86 2.6 Estrada Foods, Inc. INCOME STATEMENT FOR THE 12 PERIODS ENDED DECEMBER 31, 1997 + - -- PERIOD TO DATE - -+ + - - -- YEAR TO DATE - - -+ ACTUAL PERCENT ACTUAL PERCENT OPERATING EXPENSES Overtime Wages - R & D Vac & Hol - R & D Ins. Health Ben. - R & D Ins. Worker Comp - R & D Operating Supplies Payroll Taxes - R & D Travel - Mileage Salaries Mgmt. - Maint Salaries Staff - Maint Overtime - Maint Vac & Hol -.Maint. Ins. Health Ben. - Maint Ins. Worker Comp. Maint Payroll Taxes - Maint. Labor - Sani. Overtime - Sani. Vac & Hol - Sani. Ins. Health Ben. - Sani. Ins. Worker Comp - Sani. Operating Supplies - Sani. Outside Services - Sani. Payroll Taxes - Sani. Salaries Mgmt. - Q.C. Salaries Staff - Q.C. Overtime - Q.C. Vac & Hol - Q.C. Ins. Health Ben. - Q.C. Ins. Worker Comp - Q.C. Operating Supplies - Q.C. Outside Services - Q Payroll Taxes - Q.C. Travel - Meals & Enter. Q.C. Travel - Mileage - Q.C. Salaries Mgmt. - HR Vac & Hol - HR Ins. Health Ben. - HR Operating Supplies HR Outside Services - HR Payroll Taxes - HR Training & Seminars HR Travel & Related HR Travel - Meals & Enter. HR Operating Supplies Commom Car Common Carrier Exp. Case Allowances Artwork & Plates Food Shows Fccus Groups Promctions Advercisina Salaries Mamt. - Sales (Continued) $447.16 .2 2,103.84 .2 163.80 .1 473.54 .0 440.55 .2 1,876.93 .2 394.68 .2 3,200.61 .3 124.83 .1 1,064.45 .1 612.67 .3 3,704.02 .4 .00 .0 964.44 .1 3,414.27 1.4 11,174.07 1.2 1,683.48 .7 1,683.48 .2 287.64 .1 287.64 .0 64.00 .0 839.60 .1 274.81 .1 1,284.26 .1 115.34 .0 115.34 .0 620.52 .3 1,240.58 .1 4,017.90 1.7 14,304.59 1.5 901.30 .4 1,063.22 .1 413.60 .2 657.20 .1 65.54 .0 451.43 .0 315.86 .1 1,225.52 .1 2,051.43 .9 20,665.02 2.1 11,628.74 4.9 83,605.16 8.6 575.51 .2 1,650.48 .2 1,938.49 .8 14,073.28 1.5 2,132.17 .9 11,606.37 1.2 497.22 .2 2,344.53 .2 647.27 .3 808.87 .1 131.25 .1 546.84 .1 331.25 .1 2,342.96 .2 3,164.37 1.3 29,434.97 3.0 19,315.89 8.1 43,244.20 4.5 499.32 .2 2,595.31 .3 .00 .0 118.48 .0 76.00 .0 76.00 .0 2,724.63 1.1 13,870.77 1.4 123.85 .1 123.85 .0 49.72 .0 196.71 .0 45.00 .0 45.00 .0 (111.76) .0 2,648.66 .3 365.92 .2 1,240.43 .1 .00 .0 485.00 .1 .00 .0 1,279.95 .1 .00 .0 30.50 .0 5.35 .0 (134.65) .0 3,170.01 1.3 20,682.41 2.1 425.51 .2 612.12 .1 65.75 .0 3,749.95 .4 .00 .0 463.40 .0 113.95 .0 6,177.95 .6 6.99 .0 7,138.26 .7 644.06 .3 11,048.96 1.1 4,247.73 1.8 48,216.99 5.0 Estrada Foods, Inc. INCOME STATEMENT FOR THE 12 PERIODS ENDED DECEMBER 31, 1997 + - -- PERIOD TO DATE - -+ + - - -- YEAR TO DATE - - -+ ACTUAL PERCENT ACTUAL PERCENT OPERATING EXPENSES (Continued) Vac & Hol - Sales $193.08 .1 193.08 .0 Auto Expense - Sales .00 .0 118.00 .0 Brokers Fees - Sales .00 .0 34,794.76 3.6 Ins. Health Ben. - Sales 290.00 .1 792.10 .1 Ins. Worker Comp - Sales 17.63 .0 119.21 .0 Operating Supplies - Sales 1,421.75 .6 3,377.09 .3 Outside Services - Sales .00 .0 20,254.32 2.1 Payroll Taxes - Sales 339.73 .1 5,566.22 .6 Telephone Expense - Sales .00 .0 78.48 .0 Travel & Related Sales .00 .0 3,771.12 .4 Travel - Meals & Enter. Sales .00 .0 237.85 .0 Travel - Mileage - Sales .00 .0 424.90 .0 Samples - Sales 148.71 .1 7,347.56 .8 Samples /Freight - Sales 993.75 .4 7,279.71 .8 Salaries Mgmt. - G&A 20,225.83 8.5 228,254.77 23.6 Salaries Staff G&A 1,422.30 .6 34,735.26 3.6 Overtime - G&A 224.28 .1 1,096.20 .1 Vac & Hol - G&A 884.39 .4 948.39 .1 Auto Expense - G&A 1,004.25 .4 8,069.46 .8 Auto Repair & Main. G&A 677.46 .3 4,490.75 .5 Bank Charges - G&A 1,732.20 .7 17,434.45 1.8 Finance Charges - G&A 415.00 .2 3,508.49 .4 Depreciation - Autos 2,302.74 1.0 2,302.74 .2 Deprec. Furn. & Fix. G&A 1,554.67 .7 1,554.67 .2 Amortization Start up 1,418.49 .6 8,510.94 .9 Donations - G&A .00 .0 6,360.00 .7 Dues & Subscriptions G&A .00 .0 1,863.76 .2 Fundraising Expense G&A 11,728.64 4.9 199,238.90 20.6 Insurance - General G&A 2,076.50 .9 20,954.83 2.2 Ins. Health Ben. - G&A 1,824.88 .8 18,505.71 1.9 Ins. Worker Comp - G&A 101.90 .0 3,470.38 .4 Interest Expense G&A 30,849.75 13.0 212,778.57 22.0 Lease Expense - G&A (4,571.85) (1.9) 3,017.13 .3 Loan Expense 10,123.92 4.3 30,264.02 3.1 Miscellaneous Expense - G&A (5,382.67) (2.3) 9,910.34 1.0 Office Expense G&A 578.78 .2 3,142.56 .3 Operating Supplies G&A .00 .0 15,802.23 1.6 Outside Services G&A (90.00) .0 31,658.20 3.3 Outside Serv. - Pre- Employ.Exp. .00 .0 120.00 .0 Postage Expense G&A 912.00 .4 3,609.23 .4 Payroll Taxes - G&A 1,488.95 .6 18,448.34 1.9 Prof. Services -Adv. Board G&A .00 .0 161.54 .0 Prof Services- Consulting G&A 4,639.00 1.9 17,225.94 1.8 Prof Services -Legal & Acct G&A 8,250.00 3.5 39,251.43 4.1 Renc- Building G&A 2,950.50 1.2 2,950.50 .3 Rent -Other G&A 752.49 .3 6,722.51 .7 Repair & Main - Equip G&A .00 .0 710.55 .1 Taxes - Real Estate G&A .00 .0 742.87 .1 Taxes Other G&A 350.58 .1 693.38 .1 Taxes - Use G&A .00 .0 1,201.15 .1 Telephone Expense G&A 3,378.60 1.4 30,045.64 3.1 DEC -12 -98 SAT 11;29 ESTRADA FOODS FAX NO, 719 542 5472 Estrada Foods, Inc. BALANCE SHEET OCTOBER 31, 1998 ASSETS CURRENT ASSETS CIB Operating Account CIB Payroll CIB Health Benefits CIB Canon Bank Deposits Petty Cash Accounts Receivable - Trade Employee Advance Employee Advance VB Employee Advance - EL Loan Receivable FEROC Loan Receivable RMCS Inventory - Raw Material Inventory WIP Inventory Finished Goods Prepaid Insurance Prepaid Contracts Prepaid Workmans Comp Prepaid Advertising TOTAL CURRENT ASSETS FIXED ASSETS Buildings Accum. Depr. Bldg. & Imp. Building Improvements Accum. Dep, Building Imp. Factory Equipment Accum. Dep. Factory Equipment Office Equipment Accum. Dep. Office Equipment Vehicles Accum. Dep. Vehicles Land Computer Resources Computers CO2 Equipment Pro50o Laptop Computer TOTAL FIXED ASSETS OTHER ASSETS $ (107.97) (18.81) (25.00) (9,374.35) 50,799.27 206.55 38,361.47 997.36 1,276.38 500.00 2,791.32 1,276.16 31,076.00 3,199.00 88,933.78 540.37 422.30 12,195.27 10,130.07 1,643,546.45 (64,050.38) 377,497.85 (14,827.22) 615,893.69 (158,795.42) 46,789.08 (17,034.92) 13,948.00 (7,907.72) 90,000.00 1,556.51 41,807.90 2,406.73 Start Up Cost 62,413.73 Loan Cost 54,384.75 Factory Equipment - Inactive 273,035.76 TOTAL OTHER ASSETS EXHIBIT 1 20 P. 13 233,179.17 2,570,832.55 389,834.24 Estrada Foods, Inc. INCOME STATEMENT FOR THE 12 PERIODS ENDED DECEMBER 31, 1997 + - -- PERIOD TO DATE - -+ + - - -- YEAR TO DATE ACTUAL PERCENT ACTUAL PE OPERATING EXPENSES (Continued) Training & Seminars G&A $.00 .0 2,546.97 Travel & Related G&A 5,107.79 2.1 45,630.89 Travel - Meals & Enter. G&A 77.24 .0 5,632.73 Utilities G&A .00 .0 2,284.56 Interest Income (72.96) .0 (1,554.32) Other Income .00 .0 (138,581.25) Misc. Income - Jobs Program (1,859.16) (.8) (17,424.21) Gain or Loss on Sale of Asset .00 .0 (2,450.00) TOTAL OPERATING EXPENSES --------- - - - - -- 332,411.11 - - - - - -- --------------- 139.5 2,631,708.72 NET INCOME FROM OPERATIONS --------- - - - - -- (411,044.41) - - - - - -- --------------- (172.6) (3,002,739.66) EARNINGS BEFORE INCOME TAX --------- - - - - -- (411,044.41) - - - - - -- --------------- (172.6) (3,002,739.66) NET INCOME (LOSS) --------- - - - - -- $(411,044.41) - - - - - -- --------------- (172.6)% (3,002,739.66) .3 4.7 .6 .2 (.2) (14.3) (1.8) (.3) 271.6 (309.9) (309.9) (309.9) DEC -12 -98 SAT 11:30 ESTRADA FOODS FAX N0, 719 542 5472 Estrada Foods, Inc. BALANCE SHEET OCTOBER 31, 1998 LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts Payable - Trade $2,002,103.26 Accounts Payable Accrual 11,150.89 Unearned Revenue 7,710.60 Garnishment Payables 638.21 Federal Withholdings 61,195.99 FICA Payable - Employer 41,403.03 FICA Payable - Employee 41,403.03 Medicare Payable - Employer 9,683.58 Medicare Payable - Employee 9,683.58 State Withholding Payable 24,672.74 FUTA Payable 301.62 SUTA Payable 59.05 Accrued Payroll 19,322.58 Accrued Workmen Comp 44,413.29 Accrued Medical Insurance 33,395.97 Deferred Compensation Payable 3,133.37 Accrued - Taxes Other 15,561.70 Accrued Property Tax 15,347.60 Accrued Interest Expense 64,020.41 Accrued Fundraising Expense 40,000.00 Short Term Lease - All Fills 9,762.93 Short Term Lease - Refco 2 19,387.81 Short Term L/P NEC America 841.68 Short Term City Pueblo Grant 178,569.60 Short Term Peak National Loan 65,054.28 Short Term - Nick Martinez 21,260.91 Short term NP SSE Foods 64,117.27 Notes Pay -Short Term CDO 215,911.81 N/P Short Term BVI - $50,000R 77,247.32 Notes Pay -S /Term Barshop -G /S 47,395.97 N/P Short Term BVI $100,000R 139,855.69 Notes Payable - Short Term EIF 754,109.37 Notes Payable- Norwest Finance 7,954.43 TOTAL CURRENT LIABILITIES LONG -TERM LIABILITIES Long Term Lease Refco 2 35,745.02 Long Term Lease - NEC America 4,736.29 Notes Payable - CF 19,123.06 Notes Payable AJE 14,423.10 Notes Payable - HWK 9,984.62 Notes Payable - M. Dunn 9,350.00 Notes Payable - D. Fresquez 2,400.00 Notes Payable - G Van Blaricom 7,560.00 Notes Payable Peak National 804,713.04 Long Term City of Pueblo Grant 836,449.04 Long term note payable - BVI 630,027.36 P. 15 4,046,669.57 DEC -12 -98 SAT 11:30 ESTRADA FOODS FAX NO. 719 542 5472 P.14 Estrada Foods, Inc. BALANCE SHEET OCTOBER 31, 1998 TOTAL ASSETS $3,193,845.96 DEC -12 -98 SAT 11 31 ESTRADA FOODS Estrada INCOME FOR THE 10 PERIODS FAX NO. 719 542 5472 Foods, Inc. STATEMENT ENDED OCTOBER 31, 1998 P. 17 + - -- PERIOD TO DATE - -+ + - - -- YEAR TO DATE - - -+ ACTUAL PERCENT ACTUAL PERCENT REVENUE Sales - Contracts $3,183.41 6.2 $ 1,652,178.17 86.1 Sales - Food Service 47,751.68 93.8 216,779.77 11.3 Sales - Deli .00 .0 2,109.60 .1 Sales - Other .00 .0 48,468.62 2.5 Sales Returns - Contract .00 .0 (768.24) 10 Sales Return - Food Service .00 .0 (504.45) .0 TOTAL REVENUE 50,935.09 100.0 1,918,263.47 100.0 COST OF SALES: COST OF SALES Unclassified Direct .00 .0 16,504.12 .9 Tortilla 6,156.59 12.1 377,477.97 19.7 Meats 4,957.70 9.7 232,324.58 12.1 Cheese 4,194.75 8.2 352,489.66 18.4 Beans 3,339.95 6.6 64,693.17 3.4 Fruit 1,444.16 2.8 12,103.35 .6 Seasonings 1,648.08 3.2 69,191.52 3.6 Other Ingredients 5,479.57 10.8 128,709.90 6.7 Corn Flour /Maseca .00 .0 4,981.61 .3 inventory Adjustment - WIP .00 .0 (3 (.2) Inventory Adjustment - F.G. 62,156.13 122.0 335,802.91 17.5 Packaging (410.40) (.8) 996.87 .1 Packaging - Prod. Liners .00 .0 1,806.44 .1 Packaging - Corrugated 113.11 .2 45,553.36 2.4 Packaging - Paper Liners .00 .0 46.49 .0 Packaging - Label Typical 783.64 1.5 1,548.02 .1 Packaging - Quick Loks .00 .0 (170.27) .0 Packaging - Stretch Wrap (34.50) (.1) 1,687.77 .1 Packaging - Tape 133.80 .3 1,749.11 .1 Purchased Products .00 .0 6,757.81 .4 Labor - D.C. Processing 3,517.39 6.9 61,370.67 3.2 Overtime - D.C. Processing 244.97 .5 6,995.85 .4 Vac & Hol - D.C. Processing .00 .0 1,930.00 11 Gainsharing -D.C. Processing 376.41 .7 5,020.95 ,3 Other Earnings - D.C.Processing .00 .0 233.59 10 Labor - D.C. Packaging 11,268.63 22.1 247,592.99 12.9 Overtime - D.C. Packaging .81 .0 8,824.80 .5 Vac & Hol - D.C. Packaging .00 .0 4,259.40 .2 Gainsharing - D.C. Packaging 1,332.18 2.6 25,849.36 1.3 Other Earnings - D.C. Packagin .00 .0 1,652.56 .1 Ins. Health Ben. - D.C. .00 .0 6,634.42 .3 Ins. Worker Comp - D.C. 939.73 1.8 22,661.56 1.2 Payroll Taxes - D.C. 1,551.09 3.0 31,658.62 1.7 TOTAL COST OF SALES 109,195.79 214.4 2,075,740.16 108.2 TOTAL COST OF SALES 109,195.79 214.4 2,075,740.16 108.2 GROSS PROFIT (58,260 70) (114.4) (157,476.69) (8.2) DEC -12 -98 SAT 11;31 ESTRADA FOODS FAX NO, 719 542 5472 P,16 Estrada Foods, Inc, BALANCE SHEET OCTOBER 31, 1998 LIABILITIES AND EQUITY (Continued) LONG -TERM LIABILITIES (Continued) Notes Payable M. ziesman $210,210.67 TOTAL LONG -TERM LIABILITIES 2,584,722.20 TOTAL LIABILITIES 6,631,391.77 EQUITY Common Stock 815,370.06 Preferred Stock 1997 Series A 1,929,521.65 Retained Earnings - Prior (3 RETAINED EARNINGS- CURRENT YEAR (2,282,455.86) TOTAL EQUITY (3,437,545.81) TOTAL LIABILITIES AND EQUITY $3,193,845.96 DEC -12 -98 SAT 11:32 ESTRADA FOODS FAX N0, 719 542 5472 P119 EsLrada Foods, Inc. INCOME STATEMENT FOR THE 10 PERIODS ENDED OCTOBER 31, 1998 + - -- PERIOD TO DATE - -+ + - - -- YEAR TO DATE - - -+ ACTUAL PERCENT ACTUAL PERCENT OPERATING EXPENSES (Continued) Salaries Mgmt. - R & D $.00 .0 690.00 .0 Salaries Staff - R & D .00 .0 1,685.52 11 Overtime rages - R & D .00 .0 156.15 .0 Vac & Hol - R & D .00 .0 163.80 .0 Gainsharing - R & D .00 .0 96.36 .0 Ins, Health Ben. - R & D .00 .0 1,537.88 .1 Ins. Worker Comp - R & D .00 .0 23.58 .0 Operating Supplies 188.45 .4 808.83 .0 outside Services .00 .0 81.25 .0 Payroll Taxes - R & D .00 .0 232.10 .0 Travel - Mileage .00 .0 424.40 .0 Salaries Mgmt. - Maint .00 .0 28,261.41 1.5 Salaries Staff - Maint (378.00) (.7) 9,452.91 .5 Overtime - Maint (59.54) (.1) 3,284.22 .2 Vac & Hol - Maint. .00 .0 1,472.40 .1 Other Earnings - Maint. .00 .0 86.50 .0 Gainsharing - Maint. (11.05) .0 1,011.66 .1 Ins. Health Ben. - Maint .00 .0 4,993.40 .3 Ins. Worker Comp. Maint (39.38) (.1) 3,258.70 .2 Payroll Taxes - Main. (34.67) (.1) 1,353.05 .1 Payroll Taxes - Maint. .00 .0 1,278.64 .1 Salaries - Mgt. Sanitation .00 .0 12,960.00 .7 Labor - Sani. 4,453.31 8.7 54,482.14 2.8 Overtime - Sani. 105.73 .2 2,306.90 .1 Vac & Hol - Sani. .00 .0 1,260.00 .1 Other Earnings - Sani. .00 .0 61.88 .0 Gainsharing - Sani. 463.96 .9 4,702.24 .2 Ins. Health Ben. - Sani. .00 .0 570.57 .0 Ins. Worker Comp - Sani. 364.72 .7 4,419.89 .2 Operating Supplies - Sani. 40.48 .1 3,590.47 .2 Outside Services - Sani. .00 10 534.56 .0 Payroll Taxes - Sani. 398.20 .8 5,640.82 .3 Salaries Mgmt. - Q.C. .00 .0 538.48 .0 Salaries Staff - Q.C. 3,803.58 7.5 56,924.75 3.0 Overtime - Q.C. 52.52 .1 2,141.42 .1 Vac & Hol - Q.C. .00 .0 2,307.24 .1 Other Earnings - Q.C. 9.88 .0 65.88 .0 Gainsharing - Q.C. 146.00 .3 1,239.08 .1 Ins. Health Ben. - Q.C. .00 .0 3,854.27 .2 Ins. Worker Comp - Q.C. 124.13 .2 1,948.14 .1 Operating Supplies - Q.C. 59.00 .1 3,208.64 .2 Outside Services - Q.C. .00 .0 39,671.56 2.1 Payroll Taxes - Q.C. 377.82 .7 4,986.98 .3 Salaries Staff - WHS 1,328.58 2.6 13,801.43 7 Overtime - WHS 160.69 .3 1,772.81 .1 Vac & Hol - WHS .00 .0 188.00 .0 Other Earnings - WHS .00 .0 176.01 .0 Gainsharing - WHS 142.18 .3 1,470.15 .1 Ins. Worker Comp - WHS 119.14 .2 1,348.07 .1 Payroll Taxes - WHS 125.68 .2 1,459.45 .1 Travel - Mileage - WHS .00 .0 10.00 .0 DEC -12 -98 SAT 11;32 ESTRADA FOODS FAX NO. 719 542 5472 P118 Estrada Foods, Inc. INCOME STATEMENT FOR THE 10 PERIODS ENDED OCTOBER 31, 1998 + - -- PERIOD TO DATE - -+ + - - -- YEAR TO DATE - - -+ ACTUAL PERCENT ACTUAL PERCENT OPERATING EXPENSES Salaries Mgmt. - Prod $8,984.60 17.6 ?6 91,480.78 4.8 Salaries Staff - Prod 3,714.82 7.3 21,061.65 1.1 Overtime - Prod 509.94 1.0 1,888.61 .1 Vac & Hol - Prod 261.54 .5 4,975.00 .3 Gainsharing - Prod. 113.32 .2 984.88 .1 Auto Expense 327.00 .6 680.00 .0 Auto Repair & Maint. .00 .0 178.71. .0 Depreciation Building 4,401.30 8.6 42,977.07 2.2 Depreciation Equipment 12,504.35 24.5 113,138.51 5.9 Depreciation Office Equip. 824.24 1.6 8,082.87 .4 Depreciation - Vehicles 511.47 1.0 5,015.68 .3 Dues & Subscriptions .00 .0 4,331.44 .2 Fuel - Equipment 30.00 .1 1,387.07 .1 Ins. Health Ben. - Prod .00 .0 10,986.97 .6 Ins. Worker Comp - Prod 86.17 .2 526.80 .0 Interest Expense - Prod 630.06 1.2 8,370.60 .4 Laundry & Uniforms 1,749.17 3.4 12,511.52 .7 Lease Expense 1,215.16 2.4 14,920.88 .8 Miscellaneous Expense .00 .0 (1,743.00) (.1) Operating Supplies 3,018.04 5.9 21,045.65 1.1 Operating Supplies - Office 4.56 .0 3,987.80 .2 Outside Service 5,198.69 10.2 22,002.32 1.1 Outside Serv.- Pre - Employ Exp .00 .0 125.00 .0 Postage Expense .00 .0 689.70 .0 Payroll Taxes - Prod 1,347.30 2.6 9,433.62 .5 Prof Services - Consulting Pro 8,250.00 16.2 82,975.00 4.3 Rent Building 9,500.00 18.7 54,500.00 2.8 Rent - Equipment .00 .0 4,055.75 .2 Repair & Main - Building 63.25 .1 3,909.94 .2 Repairs & Main Bldg. Tort. .00 .0 20.00 .0 Repair & Main - Equip. 740.28 1.5 26,103.09 1.4 Repair Main. Equip - Motors 2,014.64 4.0 2,014.64 .1 Repair & Main. Equip - Service (2,436.64) (4.8) 29,184.96 1.5 Repair & Main Equip - Refrig. 1,963.55 3.9 6,538.34 .3 Repair & Main Equip. - Tort. .00 .0 619.00 .0 Storage Exp. - Production 5,323.72 10.5 71,534.63 3.7 Taxes - Prod. - Real Estate 1,534.76 3.0 13,616.25 .7 Taxes - Prod. - Other 1,567.94 3.1 16,796.25 .9 Telephone Expense 907.83 1.8 13,969.86 .7 Travel & Related 30.00 .1 815.73 .0 Travel - Meals & Enter. Prod .00 10 986.40 .1 Travel - Mileage 30.00 .1 118.60 .0 Utilities - N2 Gas 3,117.59 6.1 36,059.54 1.9 Utilities - CO2 3,590.74 7.0 148,850.94 7.8 Utilities - Electric 3,158.46 6.2 28,289.19 1.5 Utilities - Natural Gas 1,341.29 2.6 17,411.53 .9 Utilities - Water & Sewer 1,512.97 3.0 10,738.94 .6 Utilities - Electric Tort .00 .0 12,893.42 .7 Utilities - Natural Gas Tort .00 .0 2,088.55 .1 Utilities - Water /Sewer Tort .00 .0 223.05 .0 Utilities - Waste Water Tort .00 .0 (568.35) .0 DEC -12-98 SAT 11:33 ESTRADA FOODS FAX NO. 719 542 5472 P -21 Estrada Foods, Inc. INCOME STATEMENT FOR THE 10 PERIODS ENDED OCTOBER 31, 1998 + - -- PERIOD TO DATE - -+ + - - -- YEAR TO DATE - - -+ ACTUAL PERCENT ACTUAL PERCENT OPERATING EXPENSES (Continued) Miscellaneous Expense - G&A $279.98 .5 (3,724.74) (.2) Office Expense G&A 53.48 .1 3,299.50 .2 Operating Supplies G&A .00 .0 489.50 .0 Outside Services G&A .00 .0 956.62 10 Postage Expense G&A 2.77 .0 1,607.40 .1 Payroll Taxes - G&A 345.22 .7 3,071.32 .2 Prof Services - Consulting G&A 10,000.00 19.6 71,271.03 3.7 Prof Services -Legal & Acct G&A (619.87) (1.2) 33,305.74 1.7 Rent - Building G&A 491.75 1.0 4,425.75 .2 Rent -Other G&A 799.56 1.6 7,945.62 .4 Repair & Main - Equip G&A .00 .0 664.51 .0 Taxes Other G&A .00 .0 599.66 .0 Telephone Expense G&A 1,911.21 3.8 13,151.51 .7 Training & Seminars G&A .00 .0 786.52 .0 Travel & Related G&A 2,386.98 4.7 22,645.98 1.2 Travel - Meals & Enter. G&A 6.45 .0 1,787.08 .1 Travel - Mileage G&A 27.16 .1 47.25 .0 Interest Income .00 .0 (34.68) .0 Other Income (1,220.00) (2.4) (68,191.24) (3.6) Misc. Income - Jobs Program .00 .0 (59,559.45) (3.1) Gain or Loss on Sale of Asset .00 .0 7,099.98 .4 TOTAL OPERATING EXPENSES 162,473.43 319.0 2,124,979.17 110.8 NET INCOME FROM OPERATIONS (220,734.13) (433.4) (2,282,455.86) (119.0) EARNINGS BEFORE INCOME TAX (220,734.13) (433.4) (2,282,455.86) (119.0) NET INCOME (LOSS) $(220,734.13) (433.4)$ (2,282,455.86) (119.0) DEC -12-98 SAT 11:33 ESTRADA FOODS FAX NO. 719 542 5472 p,20 Estrada Foods, Inc. INCOME STATEMENT FOR THE 10 PESRIODS ENDED OCTOBER 31, 1998 + - -- PERIOD TO DATE - -+ + - - -- YEAR TO DATE - - -+ ACTUAL PERCENT ACTUAL PERCENT OPERATING EXPENSES (Continued) Salaries Mgmt. - HR $2,724.61 5.3 26,379.22 1.4 Vac & Hol - HR .00 .0 495.40 .0 ins. Health Ben. - HR .00 .0 1,535.65 .1 Ins. Worker Comp - HR 18.57 .0 131.04 .0 Operating Supplies HR .00 .0 626.53 .0 Outside Services - HR .00 .0 1,881.58 .1 Payroll Taxes - HR 284.22 .6 2,047.39 .1 Professional Services /Consult .00 .0 1,450.00 .1 Training & Seminars HR .00 .0 159.00 .0 Common Carrier Exp. 2,318.14 4.6 24,044.42 1.3 Case Allowances (375.61) (.7) 4,788.64 .2 Demos .00 .0 87.02 .0 Artwork & Plates ,00 .0 42.47 .0 Food Shows .00 10 927.59 .0 Advertising 1,512.63 3.0 12,645.59 .7 Salaries Mgmt. - Sales .00 .0 49,585.41 216 Vac & Hol - Sales .00 .0 2,933.85 .2 Brokers Fees - Sales .00 10 1,944.72 .1 Ins. Health Ben. - Sales .00 .0 2,405.85 .1 Ins. Worker Comp - Sales (10.80) .0 211.23 .0 Operating Supplies - Sales 28.39 .1 462.53 .0 Outside Services - Sales .00 .0 1,918.43 .1 Payroll Taxes - Sales (165.24) (.3) 3,495.63 .2 Telephone Expense - Sales .00 .0 5.86 .0 Travel & Related Sales .00 .0 2,983.39 .2 Travel - Meals & Enter. Sales 20.00 .0 142.53 .0 Travel - Mileage - Sales .00 .0 349.37 .0 Samples - Sales .00 .0 468.62 10 Samples /Freight - Sales 2,486.03 4.9 10,183.55 ,5 Salaries Mgmt. - G&A 2,990.17 5.9 124,955.93 6,5 Salaries Staff G&A 2,971.20 5.8 22,339.59 1.2 Overtime - G&A 135.07 .3 11590.59 ,1 Vac & Hol - G&A 68.00 .1 11,246.16 .6 Other Earnings - G & A .00 .0 509.85 .0 Gainsharing - G & A 61.87 .1 61.87 .0 Auto Expense - G&A 39.29 .1 11546.37 ,1 Auto Repair & Main. G&A .00 .0 55.10 .0 Bad Debt Expense - G&A .00 .0 21,701.08 1.1 Bank Charges - G&A 570.92 1.1 17,107.52 .9 Finance Charges - G&A .00 .0 5,328.92 .3 Depreciation - Autos .00 .0 443.31 .0 Deprec, Furn. & Fix. G&A 378.89 .7 3,126.18 .2 Amortization Start up 1,418.49 2.8 14,184.90 .7 Dues & Subscriptions G&A .00 .0 300,00 .0 Fundraising Expense G&A .00 .0 41,051.55 2.1 Insurance - General G&A 2,633.40 5.2 24,108.06 1.3 Ins. Health Ben. - G&A 288.94 .6 13,353.33 .7 Ins. Worker Comp - G&A 40.16 .1 463.44 .0 Interest Expense G&A 26,448.80 51.9 281,124.33 14.7 Lease Expense - G&A .00 .0 2,412.87 .1 Loan Expense 1,539.08 3.0 71,210.88 3.7 ESTRADA FOODS, INC. Estrada Foods, Inc. Exhibit 21 Debtor -in- Possession Case No. Pro -Forma Plan Effective Date Balance Sheet (Unaudited) Liabilities and Shareholder's Equity Current Liabilities Accounts Payable (pro- forma) $ 100,000 Accrued Taxes -Other $ 15,562 Accrued Property Tax $ 15,348 Total Current Liabilities Long -Term Liabilities Leases BVI Investments, Ltd. BVI Investments, Ltd. IRS Payable Colorado Dept. Rev. Payable Total Long -Term Liabilities Shareholder's Equity Common (beginning/old) Preferred 1997 Series A Preferred 1999 Series A Preferred 1999 Series B New Common Gain on Reorganization Prior Period Retained Earnings Total Equity Total Liabilites and Shareholder's Equity $ 130,909 $ 62,319 $ 1,600,000 $ 1,250,000 $ 130,400 $ 20,000 $ 3,062,719 $ 815,370 $ 700,000 $ 1,005,000 $ 1,959,552 $ 2,064,554 $ (6,182,438) $ 362,038 $ 3,555,667 The accompanying notes are an integral part of this unaudited pro -forma balance sheet. Page 2 12/20/98 ESTRADA FOODS, INC. Estrada Foods, Inc. Exhibit 21 Debtor -in- Possession Case No. Pro -Forma Plan Effective Date Balance Sheet (Unaudited) Assets Current Assets Cash Deposits Accounts Recievable Employees Advances Inventory Prepaids Total Current Assets Fixed Assets Land, Buildings & Improvements Factory Equipment Office Equipment Vehicles Computers CO2 Equipment Accumulated Depreciation Total Fixed Assets Other Assets Reorganization Costs Start Up Costs Loan Costs Factory Equipment/Inactive Total Other Assets Total Assets $ 340,000 $ 50,799 $ 38,361 $ 17,774 $ 123,209 $ 23,288 $ 593,431 $ 1,600,000 $ 615,894 $ 46,789 $ 13,948 $ 3,963 $ 41,808 $ 2,322,402 $ 250,000 $ 62,414 $ 54,385 $ 273,036 $ 639,834 $ 3,555,667 The accompanying notes are an integral part of this unaudited pro -forma balance sheet. EXHIBIT Page I ExWbit 22 ESTRADA FOODS, INC. SUMMARY OF PROJECTED RESULTS DRAFT DATE: 12 /20/98 PERIOD ENDING Mar -00 Mar -01 Mar -02 Mar -00 Mar -01 Mar-02 CASH 38,266 369,888 658,787 4.42% 4.08% 3.66% NET PROFIT AFTER TAX 89,024 199,842 331,495 1.31% 2.80% 4.42% NET WORTH 395,063 538,905 724,400 TOTAL ASSETS 3,571,158 3,476,058 3,600,111 TOTAL DEBT 3,176,095 2,937,153 2,875,711 REVENUE & EXPENSE SUMMARY SALES: Burritos 1,020,000 1,071,000 1,124,550 15.00% 15.00% 15.00% Restaurants 2,788,000 2,927,400 3,073,770 41.00% 41.00% 41.00% Co -pack 2,992,000 3,141,600 3,298,680 44.00% 44.00% 44.00% TOTAL SALES 6,800,000 7,140,000 7,497,000 100.00% 100.00% 100.00% COST OF SALES: Burritos -COS 826,200 867,510 910,886 81.00% 81.00% 81.00% Rest -COS 2,007,360 2,107,728 2,213,114 72.00% 72.00% 72.00% Co -pack 987,360 1,036,728 1,088,564 33.00% 33.00% 33.00% TOTAL COST OF SALES 3,820,920 4,011,966 4,212,564 56.19% 56.19% 56.19% (GROSS PROFITS: Burritos 193,800 203,490 213,665 2.85% 2.85% 2.85% Restaurants 780,640 819,672 860,656 11.48% 11.48% 11.4 -3% Co -pack 2,004,640 2,104,872 2,210,116 29.48% 29.48% 29.48% TOTAL GROSS PROFIT 2,979,080 3,128,034 3,284,436 43.81% 43.81% 43.81% OPERATING EXPENSES 2,890,056 2,928,192 2,952,940 42.50% 41.01% 39.39% DEPRECIATION 221,886 210,052 189,046 3.26% 2.94% 2.52% NETPROFIT(OPER) 89,024 199,842 331,495 1.31% 2.80% 4.4 EBITDA 611,139 701,204 794,714 0.00% 9.82% 10.60% INTEREST EXPENSE 300,229 291,311 274,172 4.42% 4.08% 3.66% PROFIT AFTER TAX 89,024 199,842 331,495 1.31% 2.80% 4.42% EXHIBIT 22 PAGE 1 ACCO',fPA.';YrNG NOTES ARE AN rNTEGRAL PART OF THESE UNAUDITED PROJECTED STATEN ENTS ,�. uilt�lae ®iii�u m��i E � u a �I ESTRADA FOODS, INC. Notes to Pro -Forma Plan Effective Date Balance Sheet Estrada Foods, Inc. Debtor -in- Possession Case No. 1. This pro -forma balance sheet was prepared in anticipation of presentation to creditors, equity holders and other interested parties as part of a "pre- packaged" bankruptcy plan of reorganization and disclosure statement. This pro -forma is based upon the most current unaudited internal balance sheet of the Debtor, dated October 31, 1998, with adjustments to accounts pursuant to the proposed plan of reorganization. 2. Cash is an assumed number based upon the DIP loan drawn to the $1,250,000 balance on the Effective Date. 3. Reorganization costs are projected costs and fees incident to this reorganization to be paid by the Debtor. 4. Trade accounts payable are an assumed value based upon Debtor's estimated operations post petition and prior to Plan effective date. 5. It is assumed that W.K. Capital elects to covert its claims into the Debtor's proposed 1999 Series B Preferred Stock. It is assumed that its approved, allowed claim is in the amount of $1,005,000. 6. The value shown as Debtor's 1999 Series A preferred Stock investment is the estimated cash investment required to fund the Plan of Reorganization. This amount will probably increase depending upon the ultimate reorganization costs and expenses. 7. This pro -forma is unaudited and has not been prepared in compliance with generally accepted accounting principles. 8. This pro -forma assumes that the real property inclusive of land, buildings and improvements is reconveyed to the Debtor pursuant to the Plan in partial exchange for a secured real estate lien note in the original principle sum of $1,600,000; 15 year amortization 3 year term interest at 10 %. 9. This pro -forma assumes a Debtor -in- Possession loan in the unpaid balance of $1,250,000 on the Effective date. Exhibit 22 ESTRADA FOODS, INC. DRAFT DATE: 12 /20/98 PROJECTED BALANCE SHEET FIRST 3 YEARS Mar -00 Mar -01 Mar -02 Mar -00 Mar -01 Mar -02 (PERCENT OF TOTAL ASSETS) ASSETS CASH & EQUIVALENTS 38,266 369,888 658,787 1.1% 10.6% 183% ACCT & NOTES RECEIVABLE 509,734 352,110 369,715 14.3% 10.1% 103% INVENTORY 190,946 131,900 138,495 5.3% 3.8% 3.8% ALL OTHER CURRENT 91,862 91,862 91,862 2.6% 2.6% 2.6% TOTAL CURRENT 830,808 945,759 1,258,859 23.3% 27.2% 35.0% FIXED ASSETS 2,322,402 2,322,402 2,322,402 65.0% 66.8% 64.5% ACCUM. DEPRECIATION 221,886 431,938 620,984 6.2% 12.4% 17.2% TOTAL FIXED ASSETS 2,100,516 1,890,464 1,701,418 58.8% 54.4% 47.3% OTHER NON - CURRENT 639,834 639,834 639,834 17.9% 18.4% 17.8% TOTAL ASSETS 3,571,158 3,476,058 3,600,111 100.0% 100.0% 100.0% LIABILITIES: NOTES PAYABLE -SHT TERM 111,959 5,330 0 3.1% 0.2% 0.0% CURRENT MATURING L/I'/D 55,456 58,506 64,356 1.6% 1.7% 1.8% ACCTS & NOTES PAY -TRADE 238,683 164,875 173,119 6.7% 4.7% 4.8% ACCRUED EXPENSES 30,909 30,909 30,909 0.9% 0.9% 0.9% ALL OTHER CURRENT 0 0 0 0.0% 0.0% 0.0% TOTAL CURRENT 437,007 259,620 268,384 12.2% 7.5% 7.5% LONG TERM DEBT 2,739,088 2,677,533 2,607,326 76.7% 77.0% 72.4% ALL OTHER NON - CURRENT 0 0 0 0.0% 0.0% 0.0% TOTAL LONG TERM LIABILITIES 2,739,088 2,677,533 2,607,326 76.7% 77.0% 72.4% TOTAL LIABILITIES 3,176,095 2,937,153 2,875,711 88.9% 84.5% 79.9% NET WORTH 395,063 538,905 724,400 11.1% 15.5% 20.1% TOTAL LIA. & NET WORTH 3,571,158 3,476,058 3,600,111 100.0% 100.0% 100.0% PAGE 3 ACCOI4PANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED PROJECTED STATEMENTS Exhibit 22 ESTRADA FOODS, INC. DRAFT DATE: 12 /20/98 Profitability Ratios RETURN ON SALES RETURN ON EQUITY Leverage Ratios TOTAL ASSET/NEW WORTH Turnover Ratios SALES/TOTAL ASSETS Indicators of Solvency DEBTNW TIMES INTEREST EARNED Indicators of Liquidity CURRENT RATIO Funds Managment Ratios RECEIVABLE /SALES (ANNUAL) DAYS SALES IN RECEIVABLES PAYABLES /COST OF GOODS SOL DAYS COGS IN PAYABLE INVENTORY TURNOVER(ANNUA DAYS COGS IN INVENTORY SALES/NET FIXED ASSETS PAGE Z ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED PROJECTED STATEMENTS PROJECTED RATIOS 1.31% 2.80% 4.42 22.53% 37.08% 45.76 903.95% 645.02% 496.98 190.41% 205.41% 208.24 803.95% 545.02% 396.98 2.04 2.41 2.90 190.11% 364.29% 469.05 7.50% 4.93% 4.93 27 18 18 1.65% 0.07% 0.00 23 15 15 2.81% 1.85% 1.85 18 12 12 323.73% 377.68% 440.63 PAGE Z ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED PROJECTED STATEMENTS Exhibit 22 ESTRADA FOODS, INC. DRAFT DATE: 12/20/9Q, PROJECTED NOTES PAYABLE SCHEDULE FIRST 3 YEARS PERCENT OF TOTAL LOANS Mar -00 Mar -01 Mar -02 Mar -00 Mar -01 Mar -02 1 BALANCE 78,941 3,553 0 2.72% 0.13% 0.00% 2 BALANCE 33,018 1,777 0 1.14% 0.06% 0.00% 3 BALANCE 0 0 0 0.00% 0.00% 0.00% 4 BALANCE 0 0 0 0.00% 0.00% 0.00% 5 BALANCE 0 0 0 0.00% 0.00% 0.00% 6 BALANCE 0 0 0 0.00% 0.00% 0.00% TOTAL SHORT TERM LOANS 111,959 5,330 0 3.85% 0.19% 0.00% 1 BALANCE 1,551,493 1,500,318 1,444,025 53.38% 54.73% 54.05% 2 BALANCE 1,243,052 1,235,721 1,227,657 42.77% 45.08% 45.95% 3 BALANCE 0 0 0 0.00% 0.00% 0.00% 4 BALANCE 0 0 0 0.00% 0.00% 0.00% 5 BALANCE 0 0 0 0.00% 0.00% 0.00% 6 BALANCE 0 0 0 0.00% 0.00% 0.00% NEW LOAN BALANCE 0 0 0 0.00% 0.00% 0.00% TOTAL LONG TERM BALANCES 2,794,544 2,736,039 2,671,682 96.15% 99.81% 100.00% CURRENT PORTION LTD 55,456 58,506 64,356 1.91% 2.13% 2.41% LONG TERM DEBT 2,739,088 2,677,533 2,607,326 94.24% 97.67% 97.59% 67,906 1 PRINCIPLE -SHORT TERM 71,459 75,388 3,553 2 PRINCIPLE -SHORT TERM 29,301 31,241 1,777 3 PRINCIPLE -SHORT TERM 0 0 0 4 PRINCIPLE -SHORT TERM 0 0 0 5 PRINCIPLE -SHORT TERM 0 0 0 6 PRINCIPLE -SHORT TERM 0 0 0 SHT TERM PRIM REDUCTN 100,760 106,629 5,330 1 PRINCIPLE - LONG TERM 48,507 51,175 56,292 2 PRINCIPLE- LONG TERM 6,948 7,331 8,064 3 PRINCIPLE - LONG TERM 0 0 0 4 PRINCIPLE - LONG TERM 0 0 0 5 PRINCIPLE - LONG TERM 0 0 0 6 PRINCIPLE- LONG TERM 0 0 0 NEW PRINCIPAL 0 0 0 LNG TERM PRIN REDUCTN 55,456 58,506 64,356 TOTAL LOAN REDUCTIONS 156,216 165,134 69,686 PAGE 5 ACCO\fPANYI\G NOTES ARE .4k INTEGRAL PART OF THESE U\AUDITED PROJECTED STATEMENTS WIl 1111!1 T 1111 !I1I!IIIM1111 Exhibit 22 ESTRADA FOODS, INC. DRAFT DATE: 12 /20/98 PROJECTED STATEMENT OF REVENUES AND EXPENSES FIRST 3 YEARS OPERATING EXPENSES Prod'n Salaries & Benefits Mar -00 Mar -01 Mar -02 Mar -00 Mar -01 Mar -02 Burritos 1,020,000 130,900 1,124,550 15.0% 15.0% 15.0% 1,071,000 Restaurants 2,788,000 2,927,400 3,073,770 41.0% 41.0% 41.0% Co -pack 2,992,000 3,141,600 3,298,680 44.0% 44.0% 44.0% NET SALES 6,800,000 7,140,000 7,497,000 100.0% 100.0% 100.0% Burritos -COS 826,200 867,510 910,886 12.2% 12.2% 12.2% Rest -COS 2,007,360 2,107,728 2,213,114 29.5% 29.5% 29.5% Co -pack 987,360 1,036,728 1,088,564 14.5% 14.5% 14.5% COST OF SALES 3,820,920 4,011,966 4,212,564 56.2% 56.2% 56.2% GROSS PROFIT 2,979,080 3,128,034 3,284,436 43.8% 43.8% 43.8% OPERATING EXPENSES Prod'n Salaries & Benefits 226,667 238,000 249,900 3.3% 3.3% 3.3% Repairs 124,667 130,900 137,445 1.8% 1.8% 1.8% Supplies & Services 136,000 142,800 149,940 2.0% 2.0% 2.0% Rents/leases /taxes 100,000 100,000 100,000 1.5% 1.4% 1.3% Cold Storage 34,000 35,700 37,485 0.5% 0.5% 0.5% Utilities 96,000 96,000 96,000 1.4% 1.3% 1.3% R&D 78,000 78,000 78,000 1.1% 1.1% 1.0% Maintenance & Sanitation 248,867 248,000 248,000 3.7% 3.5% 3.3% QualityControl 139,400 146,370 153,689 2.1% 2.1% 2.1% Human Resources 40,000 40,000 40,000 0.6% 0.6% 0.5% Advertising & Promotions 113,333 119,000 124,950 1.7% 1.7% 1.7% Sales Salaries & Benefits 95,000 95,000 95,000 1.4% 1.3% 1.3% Brokers & other sales exp. 170,000 178,500 187,425 2.5% 2.5% 2.5% G &A Salaries & Benefits 450,000 450,000 450,000 6.6% 6.3% 6.0% Fundraising 12,000 12,000 12,000 0.2% 0.2% 0.2% Outside sevices 170,000 178,500 187,425 2.5% 2.5% 2.5% Rents/leases /taxes 34,000 35,700 37,485 0.5% 0.5% 0.5% Warehouse /traffic /frieght 50,140 50,000 50,000 0.7% 0.7% 0.7% INTEREST 300,229 291,311 274,172 4.4% 4.1% 3.7% DEPRECIATION 221,886 210,052 189,046 3.3% 2.9% 2.5% MISC. EXPENSES 49,867 52,360 54,978 0.7% 0.7% 0.7% TOTAL OPER'G EXPENSES 2,890,056 2,928,192 2,952,940 42.5% 41.0% 39.4% NET PROFIT(OPER NS) 89,024 199,842 331,495 1.3% 2.8% 4.4% INCOME ON EXCESS CASH 0 0 0 0.0% 0.0% 0.0% OTHER INCOME 0 0 0 0.0% 0.0% 0.0% OTHER EXPENSES 0 0 0 0.0% 0.0% 0.0% PROFIT BEFORE TAX 89,024 199,842 331,495 1.3% 2.8% 4.4% INCOME TAXES 0 0 0 0.0% 0.0% 0.0% PROFIT AFTER TAX 89,024 199,842 331,495 13% 2.8% 4.4% PAGE 4 ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED PROJECTED STATEMENTS Exhibit 22 ESTRADA FOODS, INC. PROJECTED SOURCES & USES OF CASH FIRST 3 YEARS Mar -00 Mar-01 Mar-02 BEGINING CASH CASH REQUIREMENTS FROM CHANGES IN: ACCOUNTS RECEIVABLE INVENTORY OTHER CURRENT ASSETS NOTES PAYABLE CURR LONG TERM DEBT ACCOUNTS PAYABLE ACCRUED EXPENSES OTHER CURRENT LIAB. OTHER NON - CURRENT LIAB TOTAL CASH CHANGES ADD:DEPRECIATION ADD:PROFIT AFTER TAX OPERATING CASH USES: NEW CAPITAL INVESTMENTS L.T.D. REDUCTIONS DIVIDEND/WITHDRAWALS TOTAL USES SOURCES: PROCEEDS FROM EQUIP SALE NEW EQUITY INVESTMENTS NEW LOAN PROCEEDS TOTAL SOURCES ENDING CASH 340,000 38,266 369,888 (471,374) 157,624 (17,605) (67,737) 59,046 (6,595) 0 0 0 111,959 (106,629) (5,330) 55,456 3050 5851 138,683 (73,808) 8,244 0 0 0 0 0 0 0 0 0 (233,014) 39,283 (15,436) 221,886 210,052 189,046 89,024 199,842 331,495 77,897 449,177 505,106 0 0 0 323,631 61,555 70,207 56,000 56,000 146,000 379631 117,555 216,207 0 0 0 0 0 0 0 0 0 0 0 0 38,266 369,888 658,787 DRAFT DATE: 12 /20/98 PAGE 7 ACC0lAPANYJNG NOTES ARE AN rNTEGRAL PART OF THESE UNAUDITED PROJECTED STATEMENTS Exhibit 22 INTEREST INTEREST INTEREST INTEREST INTEREST INTEREST INTEREST INTEREST INTEREST INTEREST INTEREST INTEREST NEW INTEREST TOTAL INTEREST DRAFT DATE: 12 /20/98 PAGE 6 ACCO.NTANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED PROJECTED STATE\,MNTS ESTRADA FOODS, INC. 11,824 7,894 355 5,901 3,962 213 0 0 0 0 0 0 0 0 0 0 0 0 1 57,817 155,149 150,032 124,687 124,305 123,572 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 300,229 291,311 274,172 DRAFT DATE: 12 /20/98 PAGE 6 ACCO.NTANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED PROJECTED STATE\,MNTS 12/15/1998 18:55 04040404040404040404: < i < i,,,g, PAGE 03 Y- Maintenance & Sanitation: EFI reviewed historical costs during the Schwann's production period and assumed a similar cost structure going forward. Quality Control: EFI has prepared a list of staff required to go forward plus concurrent operating costs based on a historical review to arrive at these estimates. Human Resources: EFI has prepared a list of staff required to go forward plus concurrent operating costs based on a historical review to arrive at these estimates. SALES & MARKETING Advertising & Promotions: EFI has estimated costs in this category based upon the currently anticipated customer requirement. As the customer mix changes, this category could increase significantly. Sales Salaries & Benefits: EFI has prepared a list of staff required to go forward plus concurrent operating costs based on a historical review to arrive at these estimates. Brokers & other sales exp.: EFI has estimated costs in this category based upon the currently anticipated customer requirement. As the customer mix changes, this category could increase significantly. GENERAL & ADMINISTRATIVE G &A Salaries & Benefits: EFI has prepared a complete list of all G&A support staff needed to produce low volume and higher volume activities, the result is found in this estimate. Fundraising: minimal fundraising expenses are anticipated. Outside & professional services: EFI reviewed historical costs during the Schwann's production period and assumed a similar cost structure going forward. G &A ReatsAcases/taxes: EFI scheduled all current costs in this category and added a few key leases based on equipment needs anticipated to complete the proposed projected sales. Warehouse /traffic /freight: EFI reviewed historical costs during the Schwann's production period and assumed a similar cost structure going forward. INTEREST: is calculated based upon the terms in the proposed loan agreements. DEPRECIATION: is based on a 10 year average life of all fixed assets. MISC. EXPENSES: EFI reviewed historical repair costs during the Schwann's production period and assumed a similar repair cost structure going forward. 12/15/98 TUE 17:55 (TTiRT NO 63081 0 003 12/15/1998 18:55 04040404040404040404 ;; PAGE e2 ESTRADA FOODS, INC. FINANCIAL ASSUMPTIONS Sales Revenues: Sales have been projected based upon compiling a list of current or high potential customers and estimating potential sales by month based upon volume and pricing discussions with each customers. Actual projection could vary substantially up or down due to the absence of steady historical revenues. Cost of Sales: Since most of the sales projections do not have a historical basis, costs of Wes have been estimated based upon preliminary discussions with potential customers, and estimates based on management's experience of the cost of producing the proposed products utilizing detailed costing models. Operating Expenses: Generally, operating expenses have been based upon management's judgement of likely future operating costs. These judgements were made by reviewing historical operating costs from December of 1997 through March of 1998 when the company was producing substantial burritos for Schwann's. Some adjustments were made based upon recent changes in staffing or other operating costs. The specific operating expense assumptions are outlined below: MANUFACTURING OVERHEAD Production Salaries & Benefits: EFI has prepared a complete list of all manufacturing production support staff needed to produce low volume and higher volume activities, the percentage of sales and the minimum operating expense summarizes this analysis. Repairs: EFI reviewed historical repair costs during the Schwann's production period and assumed a similar repair cost structure going forward. Supplies & Services: EFI reviewed historical Supplies & Services costs during the Schwann's production period and assumed a similar Supplies & Services cost structure going forward. Rents/leases /taxes: EFI scheduled all current costs in this category and added a few key leases based on equipment needs anticipated to complete the proposed projected sales. Cold Storage: EFI has calculated the average proposed account will require the stated amount cold storage cost covered by EFI, any additional costs are expected to be born by the customer. Utilities: EFI reviewed historical costs during the Schwann's production period and assumed a similar cost structure going forward. R & D: EFI has prepared a list of R&D staff required to go forward plus concurrent operating costs based on a historical review to arrive at these estimates. 12/15/98 TUE 17:55 (TX /R1 NO 63081 Z002 12/15/1998 18:55 04040404040404040404 PAGE 04 Days Receivable: EFI has assumed 50% of its clients paying in 30 days and 50% paying in 6Qiays. The financial projections developed by management represents their current best estimate of expected performance. It should be clearly understood that actual results will vary from these projections and the variance could be very significant up or down. No one can accurately predict the future, this is especially true with such little operating history. 1?i1Si0A Ti ?F 1 7.55 r'rV'nV X•n a 'knot rah— , or written notice of the date and time of said hearing. The Confirmation hearing will be held at the United States Bankruptcy Court, U.S. Custom House, Fifth Floor, 721 19th Street, Denver, Colorado 80202 -2508. At the Confirmation hearing, the Court will consider whether to approve the Plan. You are not required to attend the Confirmation hearing. Plan Definitions The Plan contains certain defined terms. These defined terms are capitalized in this Statement. It is essential to an understanding of the Plan and this Statement that all interested parties familiarize themselves with the defined terms. Joint Proponents The Plan is being jointly proposed by the Debtor and BEAP. BEAP is the holder of an Allowed Secured Claim against the Debtor. The Debtor and BEAP are defined in the Plan as the "Joint Proponents ". BVI Investments, Ltd. and BEAD BVI Investments, Ltd. ( "BVI") is a Texas limited partnership, the general partner of which is Barshop Ventures L.L.C., a Texas limited liability company. BEAP is a Texas limited partnership, the general partner of which is BEAP Management LLC, a Texas limited liability company. BVI and BEAP are the holders of Allowed Secured Claims against the Debtor. In addition, BVI is the holder of 3,000,000 shares of the Debtor's Common Stock. BVI and BEAP are affiliates. The Debtor and its current officers and directors hold no interests in BEAP or BVI. In August of 1998, the Debtor concluded that it was unable to pay its outstanding debts. As a result, the Debtor and BVI commenced discussions relating to the possible reorganization of the Debtor under Chapter 11. The Plan which is described in this Statement is the result of such negotiations. BVI The Debtor was the owner of certain Real Property as defined in the Plan. On October 14, 1998, the Debtor's Real Property was sold at a public trustee's Foreclosure Sale. The successful bidder at the sale was Peak National Bank, which held a first lien Deed of Trust on the Real Property. BVI, as a junior lienholder on the Real Property or its assignee (hereafter collectively, the "Redemptor ") anticipates redeeming the Real Property from the Foreclosure Sale thereby obtaining title to the Real Property free and clear of all other liens, claims and interests, subject to the rights of redemption of junior lienholders. Pursuant to the Plan, Redemptor will convey the Real Property to the Debtor on the Effective Date in consideration for (a) a cash payment to Redemptor - 2 - IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF COLORADO In re: ESTRADA FOODS, INC., a Colorado corporation, EIN 84- 1306133, Case No. (Chapter 11) Debtor. DISCLOSURE STATEMENT REGARDING PLAN OF REORGANIZATION FOR ESTRADA FOODS, INC. Dated: December 22, 1998 Filed by: Debtor and Barshop /Estrada Acquisition Partners LP Joint Proponents I. INTRODUCTION AND PLAN SUMMARY Joint Plan Estrada Foods, Inc. ( "Debtor ") and Barshop /Estrada Acquisition Partners LP ("BEAP") have jointly proposed a Plan of Reorganization for the Debtor ( "Plan ") . A copy of the Plan is attached hereto as Exhibit 1. This Disclosure Statement ( "Statement ") describes the Plan and its treatment of creditors and shareholders of the Debtor. Brief Explanation of Chapter 11 Chapter 11 is the principal reorganization Chapter of the Bankruptcy Code ( "Code" or "Bankruptcy Code ") . Pursuant to Chapter 11, the Debtor's business affairs may be reorganized for the benefit of its creditors and shareholders. The Plan is the legal document which accomplishes the reorganization. In particular, the Plan places creditors and shareholders in separate classes and provides for the treatment of the creditor Claims and shareholder interests in these classes. If the Plan is approved by the Court, (a) the Plan becomes binding upon all creditors and shareholders, and (b) the Debtor shall be discharged from all pre- Confirmation debts and Claims against and interests in the Debtor, except as otherwise provided in the Plan. After the filing of the Chapter 11 case, attempts at collection of pre- bankruptcy Claims against the Debtor, and any attempts to foreclose upon the property of the Debtor, are stayed during the pendency of the Chapter 11 case. After the filing of the Chapter 11 case, the Court will schedule a hearing on Confirmation of the Plan. You will be sent and Warrants to purchase stock of the Debtor) . To the extent there is an inconsistency between the Plan and the Statement, the Plan shall control. Pre - Packaged Plan The typical sequence of events for a debtor to obtain approval of a Chapter 11 plan is as follows. First, the Debtor files its Chapter 11 case. Second, the debtor files its plan and disclosure statement describing the plan. Third, after notice to creditors, the Court holds a hearing to consider whether the disclosure statement contains adequate information to permit creditors and shareholders to make a reasonably informed decision when voting on the plan. Fourth, after the Court approves the adequacy of the disclosure statement, the plan, disclosure statement and a ballot are transmitted to creditors and shareholders. Fifth, a date is fixed by the Court for creditors to object and vote on the plan. Sixth, after notice to creditors, the Court holds a hearing to consider approval of the plan. A pre - packaged plan changes the order of events described above. First, before the filing of the Chapter 11 case, the debtor prepares and transmits to creditors and shareholders the debtor's plan, disclosure statement and ballot. Second, the debtor fixes a date for creditors and shareholders to vote on the plan. Third, the plan provides that if various creditor and /or shareholder classes vote in favor of the plan, then the debtor will file a Chapter 11 bankruptcy case. Fourth, if the required plan acceptances are received by the debtor, the debtor files its Chapter 11 case. Fifth, after notice to creditors, the Court holds a hearing to: (a) determine retroactively whether the pre - bankruptcy disclosure statement sent to creditors and shareholders contains adequate information, and (b) whether to approve the plan. If the Court determines the pre- bankruptcy disclosure statement contains insufficient information, the Court could direct the debtor to amend the disclosure statement, transmit the plan and the amended disclosure statement to creditors and shareholders, and permit creditors and shareholders to again vote on the plan. Pre - packaged plans are contemplated by the Bankruptcy Code. See Section 1126(b) of the Bankruptcy Code and Rule 3018 of the Federal Rules of Bankruptcy Procedure. Pre - packaged plans are employed by debtors for several reasons. First, a pre - packaged plan significantly reduces the costs and attorney fees incurred by the debtor to reorganize its business affairs under Chapter 11. Second, a pre - packaged plan significantly reduces the duration of the Chapter 11 case and the associated negative publicity. Finally, a pre - packaged plan permits the debtor to know whether its creditors will accept a proposed plan before filing a bankruptcy case. The Debtor has elected to proceed with a pre - packaged plan in this case for all of the foregoing reasons. - 4 - on the Effective Date equal to BVI 's costs and expenses incurred in connection with negotiation and implementation of the Plan, including consultant and legal fees, (estimated to total approximately $200,000), and (b) a purchase money promissory note and first lien Deed of Trust encumbering the Real Property to be held by BVI and any participants in an amount equal to (i) the costs of Redemptor's redemption of the Real Property (estimated to be $832,111 plus interest, fees and costs) plus (ii) an amount equivalent to the payoff on the Effective Date of the promissory note held by BVI which was secured by the Real Property (estimated to be approximately $641,000 plus interest, fees and costs) with such payoff calculated as if there had been no Foreclosure Sale respecting the Real Property. Redemptor will not convey the Real Property to the Debtor unless the Plan is confirmed by the Court. In addition, BVI (with any participants) has agreed to fund the payments provided for under the Plan on and after the Effective Date pursuant to the D.I.P. Loan . The D.I.P. Loan and the purchase money loan described above shall survive confirmation of the Plan and will be repaid from future income of the Debtor. BEAP BEAP has agreed to exchange its Allowed Secured Claims and release its lien on the Debtor's personal property for securities of the Debtor to be issued under the Plan. Non - binding Undertak of BEAP, BVI and Redemptor The undertakings of BEAP, BVI and Redemptor described above are contingent upon, inter alia, Confirmation of the Plan as jointly proposed by the Debtor and BEAP. BVI and BEAP may determine not to proceed with such undertakings in their sole and absolute discretion for any reason, including but not limited to, the rejection of the Plan by any class of Claims or interests. Solicitation This Statement and the accompanying ballot are being furnished by the Joint Proponents prior to the filing of a Chapter 11 bankruptcy case by the Debtor. This Statement and the accompanying ballot are being furnished by the Joint Proponents to all of the Debtor's creditors and shareholders in connection with a solicitation by the Joint Proponents of the approval of the Plan, a copy of which is attached hereto as Exhibit 1. The Statement and Plan have been prepared by the Debtor. The Statement has not been approved as to adequacy by the United States Bankruptcy Court for the District of Colorado ( "Court "). The purpose of the Statement is to provide information sufficient to permit creditors and shareholders of the Debtor to make a reasonably informed decision in exercising their right to vote upon the Plan. The Statement, the Plan and the ballot are being mailed to all known creditors and shareholders of the Debtor (including the holders of Stock Options - 3 - Class 10 Allowed Secured Claim of Not Impaired National Business Finance, Inc. Class 11 Allowed Secured Claims of Impaired Barshop /Estrada Acquisition Partners LP INTEREST HOLDER CLASSES Class 12 Holders of Common Stock Impaired Class 13 Holders of Preferred Stock Impaired Class 14 Holders of Stock Options Impaired Class 15 Holders of Warrants Impaired Plan Summary The following summary sets forth the Plan treatment for the classes of creditor Claims and shareholder interests. Unclassified Allowed Administrative Expenses Allowed Administrative Expenses are not separately classified under the Plan and consist of certain debts incurred by the Debtor after the Chapter 11 case is filed, including the D.I.P. Loan, post- Filing Date vendor debt, attorney fees and accounting fees. Allowed Administrative Expenses shall be paid in cash in full on the Effective Date unless the holder agrees to, or any agreement with the Debtor provides for, different treatment, provided however that the D.I.P. Loan shall be paid in accordance with its terms, a general description of which is set forth in Exhibit B attached to the Plan and Exhibit 2 attached hereto. The holders of Allowed Administrative Expenses are not impaired under the Plan and are not entitled to vote on the Plan. Class 1 (Allowed Priority Claims) Class 1 Allowed Priority Claims consist of certain pre - bankruptcy unsecured Claims which are entitled to priority in payment by the Bankruptcy Code, including but not limited to certain unsecured tax Claims. The Debtor believes that two creditors hold Allowed Priority Claims consisting of the Internal Revenue Service and the Colorado State Department of Revenue. On the Effective Date, all class 1 Allowed Priority Claims shall be paid in cash in full, unless otherwise agreed by the holder of an Allowed Priority Claim, provided however that government units holding Allowed Priority Claims shall be paid as follows: 20% of the Allowed Priority Claim shall be paid in cash at the Effective 404 Effective Date of the Plan The Effective Date of the Plan is the first business day which is eleven calendar days after the Confirmation Date. The Confirmation Date is the date the Court enters its order approving the Plan. The Debtor estimates that the Effective Date will occur on or about March 15, 1999. Plan distributions and other events will occur on or after the Effective Date. Plan Classes The Plan provides for eleven classes of creditors and four classes of interest holders, e.g. shareholders. Only impaired classes are entitled to vote on the Plan. The Plan classes are described below. CREDITOR CLASSES Class 1 Allowed Priority Claims Impaired Class 2 Small Claims Impaired Class 3 Allowed Claims not otherwise classified Impaired Class 4 Allowed Claim of W.K. Impaired Capital Advisors, Inc./ Estrada International Foods, Inc. Class 5 Allowed Claim of the Impaired County of Pueblo, State of Colorado Class 6 Allowed Claim of the Impaired City of Pueblo, State of Colorado Class 7 Allowed Claims of Anthony Impaired Estrada, Candelario "Jess" Estrada Caroline Fresquez, Rocky Mountain Cold Storage, Food Equipment Refabricators, E. T. Construction and Casa de Oro, LLC Class 8 Allowed Secured Claim of Not Impaired Peak National Bank Class 9 Allowed Secured Claim of Not Impaired BVI Investments, Ltd. - 5 - PA $1,820,000.00, exclusive of the Allowed Claims held by the class 4 and class 5 creditors which are separately classified under the Plan. The class 4 Allowed Claim will be subject to treatment as a class 3 Allowed Claim if class 4 rejects the Plan. Similarly, the class 5 Allowed Claim will be subject to treatment as a class 3 Allowed Claim if class 5 rejects the Plan. See the discussion of classes 4 and 5 below. If classes 4 and 5 reject the Plan, the class 3 Allowed Claims would total approximately $3,008,000.00. On the later of the Effective Date or the date that all class 3 Disputed Claims are allowed by Final Order, each holder of a class 3 Allowed Claim shall receive a cash distribution equal to his /her /its Pro Rata share of $500,000.00 in full satisfaction and discharge of the class 3 Allowed Claim, provided however that after the Effective Date, the Debtor, in its sole and absolute discretion, may make interim distributions to the holders of class 3 Allowed Claims. Pro Rata means the percentage which the amount of the creditor's class 3 Allowed Claim bears to the aggregate amount of all class 3 Allowed Claims. The Debtor estimates that the distribution to the holders of class 3 Allowed claims will be in the range of 16.6 to 27.4 cents on the dollar depending upon the total amount of class 3 Allowed Claims. Class 3 is impaired under the Plan and is entitled to vote on the Plan. Class 4 (Allowed Claim of W.K. Capital Advisors, Inc. /Estrada International Foods, Inc.) Class 4 consists of the Allowed Claim of W.K. Capital Advisors, Inc. /Estrada International Foods, Inc. in the amount of $1,005,000.00. The class 4 creditor holds a pre- bankruptcy, Allowed Claim which is unsecured and not entitled to priority in payment under the Bankruptcy Code. On the Effective Date, the class 4 creditor shall have the option to either (a) exchange the class 4 Allowed Claim for 1999 Series B Preferred Stock at the ratio of one (1) share of 1999 Series B Preferred Stock for each one hundred dollars ($100.00) of class 4 Allowed Claim, or (b) exchange the class 4 Allowed Claim for shares of New Common Stock such that class 4 will own, as of the Effective Date, six percent (6%) of the New Common Stock issued and outstanding on the Effective Date treating all outstanding 1999 Series A Preferred Stock as having been fully converted to New Common Stock. Class 4 is impaired under the Plan and is entitled to vote on the Plan. If class 4 rejects the Plan, (a) the Plan provisions respecting class 4 shall be deemed of no force and effect and no Plan distributions shall be made to class 4; and (b) the class 4 Allowed Claim shall be subject to treatment as a class 3 Allowed Claim; and (c) the class 4 creditor shall be entitled to vote as a member of class 3. - 8 - Date with the balance payable in twenty -four (24) equal monthly installments of principal and interest commencing thirty (30) days after the Effective Date and continuing on the same day of each month thereafter with interest accruing after the Effective Date at the rate of 7% per annum. Class 1 is impaired under the Plan and is entitled to vote on the Plan. Class 2 (Small Claims) Class 2 Small Claims consist of Allowed Claims where the amount of the Allowed Claim does not exceed five hundred dollars and no cents ($500.00), including Allowed Claims where the holder thereof has voluntarily elected to reduce the Allowed Claim to $500.00. An election to reduce an Allowed Claim to $500.00 can be made on the ballot which accompanies this Statement. Class 2 Small Claims represent pre- bankruptcy, unsecured Claims which are not entitled to priority in payment under the Bankruptcy Code, including (a) Claims arising from the rejection of executory contracts and unexpired leases, (b) deficiency Claims of the holders of Allowed Secured Claims, and (c) Claims of creditors who assert mechanics liens and judgment liens against the Debtor's Real Property. The Debtor estimates that approximately 89 creditors hold Small Claims against the Debtor totaling approximately $15,532 (exclusive of any class 3 creditors who may voluntarily reduce their Allowed Claims to $500.00). on the Effective Date, class 2 creditors shall be paid cash equal to one hundred percent (100 %) of their Small Claims in full satisfaction and discharge of such Small Claims. Class 2 is impaired under the Plan and is entitled to vote on the Plan. Class 3 (Allowed Claims not otherwise classified) Class 3 consists of Allowed Claims not otherwise classified under the Plan. Class 3 Allowed Claims represent pre- bankruptcy, unsecured Claims in excess of five hundred dollars and no cents ($500.00) which are not entitled to priority in payment under the Bankruptcy Code, including (a) Claims arising from the rejection of executory contracts and unexpired leases, (b) deficiency Claims of the holders of Allowed Secured Claims, and (c) Claims of creditors who assert mechanics liens and judgment liens against the Debtor's Real Property. The Plan permits a class 3 creditor to voluntarily reduce his /her /its class 3 Allowed Claim to a class 2 Small Claim in the amount of $500.00. This election is made on the ballot which accompanies this Statement. If a class 3 creditor makes this election, the class 3 creditor is deemed to have accepted the Plan as a member of class 2. See class 2 above for the treatment of class 2 Small Claims. The Debtor estimates that approximately 151 creditors hold class 3 Allowed Claims against the Debtor totaling approximately - 7 - of the Debtor. The class 7 creditors hold pre- bankruptcy, Allowed Claims which are unsecured and not entitled to priority in payment under the Bankruptcy Code. On the Effective Date, class 7 creditors shall receive cash equal to twelve percent (12 %) of their Allowed Claims in full satisfaction and discharge of such Allowed Claims. Class 7 is impaired under the Plan and is entitled to vote on the Plan. Class 8 (Peak National Bank) Class 8 consists of the Allowed Secured Claim held by Peak National Bank. Class 8 holds a Certificate of Purchase issued by the Public Trustee for the County of Pueblo, State of Colorado respecting a public trustee's Foreclosure Sale of the Debtor's Real Property held on October 14, 1998. Class 8 shall retain its legal, equitable and contractual rights as they existed at the Filing Date. Class 8 is not impaired under the Plan and is not entitled to vote on the Plan. Class 9 (BVI Investments, Ltd.) Class 9 consists of the Allowed Secured Claims held by BVI Investments, Ltd. Class 9 holds a lien on the Debtor's Real Property and personal property, including inventory, equipment and accounts receivable. Class 9 shall retain its existing liens on the Debtor's Real Property and personal property, including inventory, equipment and accounts receivable; and shall retain its legal, equitable and contractual rights as they existed at the Filing Date. Class 9 is not impaired under the Plan and is not entitled to vote on the Plan. Class 10 (National Business Finance, Inc.) Class 10 consists of the Allowed Secured Claim held by National Business Finance, Inc. Class 10 holds a lien on the Debtor's personal property, including equipment, inventory and accounts receivable. Class 10 shall retain its existing lien on the Debtor's personal property; and shall retain its legal, equitable and contractual rights as they existed at the Filing Date. Class 10 is not impaired under the Plan and is not entitled to vote on the Plan. Class 11 (Barshop /Estrada Acquisition Partners LP) Class 11 consists of the Allowed Secured Claims held by Barshop /Estrada Acquisition Partners LP ( "HEAP"). Class 11 holds a lien on the Debtor's personal property, including inventory, equipment and accounts receivable. On the Effective Date, Class 11 - 10 - The ballot sent to class 4 permits the class 4 creditor to (a) vote as a member of class 4, and (b) if class 4 rejects the Plan, vote as a member of class 3. Class 5 (County of Pueblo) Class 5 consists of the Allowed Claim of the County of Pueblo, State of Colorado. The class 5 Allowed Claim represents the deficiency Claim held by the class 5 creditor which arises because the value of the collateral securing the class 5 lien is insufficient to pay liens which are senior to the class 5 creditor. As a result, the class 5 creditor holds a pre- bankruptcy, Allowed Claim which is unsecured and not entitled to priority in payment under the Bankruptcy Code. On the Effective Date, the class 5 creditor shall receive the sum of $5,000 in full satisfaction and discharge of the class 5 Allowed Claim. Class 5 is impaired under the Plan and is entitled to vote on the Plan. If class 5 rejects the Plan, (a) the Plan provisions respecting class 5 shall be deemed of no force and effect and no Plan distributions shall be made to class 5; and (b) the class 5 Allowed Claim shall be subject to treatment as a class 3 Allowed Claim; and (c) the class 5 creditor shall be entitled to vote as a member of class 3. The ballot sent to class 5 permits the class 5 creditor to (a) vote as a member of class 5, and (b) if class 5 rejects the Plan, vote as a member of class 3. Class 6 (City of Pueblo) Class 6 consists of the Allowed Claim of the City of Pueblo, State of Colorado. The class 6 creditor holds a pre- bankruptcy, Allowed Claim which is unsecured and not entitled to priority in payment under the Bankruptcy Code. On the Effective Date, the class 6 creditor shall receive the sum of $5,000.00 in full satisfaction and discharge of the class 6 Allowed Claim. Class 6 is impaired under the Plan and is entitled to vote on the Plan. Class 7 (Anthony Estrada, et al) Class 7 consists of the Allowed Claims of Anthony Estrada, Candelario "Jess" Estrada, Caroline Fresquez, Rocky Mountain Cold Storage, Food Equipment Refabricators of Colorado, E. T. Construction, Fresquez Enterprises and Casa de Oro, LLC. The class 7 creditors are (a) officers, directors or shareholders of the Debtor, (b) entities which are owned in whole or part by officers, directors or shareholders of the Debtor, or (c) entities owned in whole or party by relatives of officers, directors or shareholders nothing under the Plan. Class 14 is impaired under the Plan. Class 14 is deemed to have rejected the Plan and is not entitled to vote on the Plan. Notwithstanding the foregoing and notwithstanding any restriction contained in the Stock Option, the holders of class 14 Stock Options may exercise their rights under their Stock Options on or before the Voting Deadline. If the holder of a Stock Option timely exercises his /her /its rights thereunder, then such holder shall be entitled to vote on the Plan as the holder of the securities so acquired (class 12 Common Stock and /or class 13 Preferred Stock) , and shall receive the Plan treatment with respect to the securities so acquired (class 12 Common Stock and /or class 13 Preferred Stock). Class 15 (Warrants) Class 15 consists of the holders of the Debtor's Warrants. On the Effective Date, the Debtor's Warrants shall be cancelled and the holders of such Warrants shall receive nothing under the Plan. Class 15 is impaired under the Plan. Class 15 is deemed to have rejected the Plan and is not entitled to vote on the Plan. Notwithstanding the foregoing and notwithstanding any restriction contained in the Warrant, the holders of class 15 Warrants may exercise their rights under their Warrants on or before the Voting Deadline. If the holder of a Warrant timely exercises his /her /its rights thereunder, then such holder shall be entitled to vote on the Plan as the holder of the securities so acquired (class 12 Common Stock and /or class 13 Preferred Stock), and shall receive the Plan treatment with respect to the securities so acquired (class 12 Common Stock and /or class 13 Preferred Stock). Voting Deadline and Confirmation of Plan Only creditors and interest holders in impaired classes are entitled to vote on the Plan. Classes which are not impaired under the Plan are deemed to have accepted the Plan and are not entitled to vote on the Plan. Classes which neither retain nor receive any property under the Plan are deemed to have rejected the Plan and are not entitled to vote on the Plan. A summary of the Plan classes and their entitlement to vote on the Plan follows: Classes 14 and 15 impaired (a) Neither receiving nor retaining any property under the Plan (b) Deemed to have rejected the Plan (c) Not entitled to vote Classes 8, 9 and 10 not (a) Deemed to have accepted the impaired Plan - 12 - W IC 9111 H VIII I I IIIMIR shall exchange its Allowed Secured Claims and release its lien on the Debtor's personal property for (a) four million (4,000,000) shares of 1999 Series A Preferred Stock, and (b) if there is no distribution to class 12 and 13 interest holders under the Plan, one hundred (100) shares of New Common Stock. Class 11 is impaired under the Plan and is entitled to vote on the Plan. Class 12 (Common Stock) Class 12 consists of the holders of the Debtor's Common Stock. On the Effective Date, class 12 shall exchange such Common Stock for New Common Stock at the ratio of twenty (20) shares of Common Stock for one (1) share of New Common Stock, and such shares of Common Stock so exchanged shall be cancelled. Class 12 is impaired under the Plan and is entitled to vote on the Plan. Notwithstanding the foregoing, if class 2 or class 3 or class 12 or class 13 rejects the Plan, then classes 12 and 13 shall neither receive nor retain any property under the plan, and the class 12 interests shall be cancelled and terminated at the Effective Date. Class 13 (Preferred Stock) Class 13 consists of the holders of the Debtor's Preferred Stock. On the Effective Date, class 13 shall either (a) exchange such Preferred Stock for New Common Stock at the ratio of twenty (20) shares of Preferred Stock for one (1) share of New Common Stock, and such shares of Common Stock so exchanged shall be cancelled, or (b) receive a cash distribution equal to fifteen percent (15`x) of the issue price of the Preferred Stock held by the class 13 interest holder in complete redemption and full discharge and satisfaction of such interest holder's Preferred Stock, and such shares of Preferred Stock so exchanged shall be cancelled. The class 13 holders of Preferred Stock shall make the foregoing election on the ballot which accompanies the Plan and Statement. Any member of class 13 who fails to timely tender a ballot, or tenders a ballot, but fails to make an election, shall be deemed to have elected to receive the cash distribution as described above. Class 13 is impaired under the Plan and is entitled to vote on the Plan. Notwithstanding the foregoing, if class 2 or class 3 or class 12 or class 13 rejects the Plan, then classes 12 and 13 shall neither receive nor retain any property under the plan, and the class 13 interests shall be cancelled and terminated at the Effective Date. Class 14 (Stock Options) Class 14 consists of the holders of the Debtor's Stock Options. On the Effective Date, the Debtor's Stock Options shall be cancelled and the holders of such Stock Options shall receive - 11 - En Joel Laufer, Esq. Holden Padjen and Laufer LLC Attorneys for Debtor 303 East 17th Avenue Suite 660 Denver, Colorado 80203 Telephone (303) 863 -1100 Facsimile (303) 863 -1109 Mr. Laufer will tabulate the votes. If an improperly executed or unexecuted ballot is returned or if no ballot is returned at all, it will not be counted as a vote to accept or reject the Plan. Ballots must be received by Mr. Laufer on or before 5:00 p.m. on January 19, 1999. You will be sent a copy of the voting tabulation for all classes. Chapter 11 Case To Be Filed The Debtor is not currently a debtor in a Chapter 11 case. If the Debtor obtains the Requisite Approval as defined above, the Debtor immediately intends to (a) file a Chapter 11 bankruptcy case in the United States Bankruptcy Court for the District of Colorado, and (b) seek as promptly as practicable Confirmation and approval of the Plan described herein by the Court pursuant to Section 1129 of the Bankruptcy Code. You will receive subsequent notice of the filing of the Chapter 11 case. You will also receive notice if for any reason the Debtor does not file a Chapter 11 case. The Debtor anticipates filing its Chapter 11 case on or about January 22, 1999. The Debtor will be under no obligation to file a Chapter 11 case nor will the Joint Proponents be under any obligation to seek Confirmation of the Plan if, at any time prior to such filing or Confirmation hearing, there shall have occurred any event that, in the sole judgment of the Joint Proponents, regardless of the circumstances giving rise to such event, would or might prohibit, restrict or delay the Confirmation or consummation of the Plan or have a material adverse effect on the contemplated benefits of the Plan to the Joint Proponents. If the Debtor does not receive the Requisite Approval, the Debtor will explore all options available to it, and will take such action as the Debtor deems is in the best interest of its creditors and shareholders. Such action may include the commencement of a Chapter 11 bankruptcy case, including the use of any acceptances received pursuant to this solicitation to seek Confirmation of the Plan or any modification of the Plan that does not adversely change the treatment of the creditor Claims or shareholder interests who have accepted the Plan. - 14 - (b) Not entitled to vote on the Plan Classes 1, 2, 3, 4, impaired 5, 6, 7, 11, 12 and 13 (a) Entitled to vote on the Plan Each impaired class constitutes a separate class for voting and distribution under the Plan. The Plan can be confirmed by the Court and therefore become binding on all creditors and shareholders if the Plan is accepted by (a) at least two - thirds (2/3) in dollar amount and a majority in number of the Allowed Claims in each impaired creditor class who cast a vote to accept or reject the Plan, and (b) at least two - thirds of the interests in each impaired interest holder class who cast a vote to accept or reject the Plan. In addition, the Plan only can be confirmed by the Court if the Court finds that the Plan meets the standards for Confirmation as set forth in Section 1129(a) of the Bankruptcy Code. One of these requirements provides that the Plan must be accepted by at least one impaired class of creditors without including the acceptance of the Plan by any "insider" as defined in the Code. Without admitting that any entity is an "insider ", the Joint Proponents will not rely on the acceptance of the Plan by class 7 to satisfy this requirement. If a class of impaired creditors or interest holders rejects the Plan, the Court can nevertheless confirm the Plan by invoking the "cram down" provisions of Section 1129(b) of the Code with respect to such dissenting class(es) . In this case, the Joint Proponents will seek to obtain Confirmation of the Plan pursuant to Section 1129(b) : (a) if classes 1, 3, 4, 5, 12 and /or 13 reject the Plan, and (b) notwithstanding the "deemed" rejection of the Plan by classes 14 and 15. The Plan provides that the Debtor will file a Chapter 11 bankruptcy case if the following classes accept the Plan pursuant to the provisions of Sections 1125(a) and 1126(b) of the Bankruptcy Code: 2, 6, 7 and 11. Acceptance of the Plan by the foregoing classes is defined under the Plan as the "Requisite Approval ". You are urged to study the Statement and Plan in full and to consult your counsel about the Plan and its impact, including possible tax consequences, upon your legal rights. Please read the Statement and Plan carefully before voting on the Plan. Creditors and interest holders entitled to vote on the Plan should complete the enclosed ballot and return it to counsel for the Debtor at the following address: - 13 - HOLDERS AND OTHER PARTIES IN INTEREST SHOULD CONSULT WITH THEIR OWN TAX AND LEGAL ADVISORS TO DETERMINE THE EFFECT OF THE PLAN ON THEM. CERTAIN OF THE FINANCIAL INFORMATION CONTAINED IN THIS STATEMENT HAS NOT BEEN SUBJECT TO AN INDEPENDENT AUDIT, AND THE DEBTOR IS UNABLE TO WARRANT THAT THE INFORMATION IS WITHOUT INACCURACY. HOWEVER, EVERY EFFORT HAS BEEN MADE TO PROVIDE ACCURATE INFORMATION. ANY REPRESENTATION OR INFORMATION NOT HEREIN CONTAINED, IF MADE OR GIVEN, MUST NOT BE RELIED UPON WHEN VOTING ON THE PLAN. THE RESPECTIVE COUNSEL FOR THE JOINT PROPONENTS OF THE PLAN MAKE NO REPRESENTATIONS CONCERNING THE ACCURACY OF THE INFORMATION CONTAINED IN THIS STATEMENT. THE STATEMENT, BY ITS NATURE, IS FORWARD LOOKING AND CONTAINS ESTIMATES AND ASSUMPTIONS WHICH MAY BE MATERIALLY DIFFERENT FROM ACTUAL FUTURE RESULTS. THE INFORMATION CONTAINED IN THIS STATEMENT IS AS OF THE DATE SET FORTH BELOW. The date of this Statement is December 22, 1998. - 16 - Bar Date for Filing Claims After the Chapter 11 case is filed, the Court will set a Bar Date for creditors to file proofs of claim with the Court. You will be sent written notice of the Claims Bar Date. Confirmation and Discharge If the Court orders Confirmation of the Plan, the Debtor will be discharged pursuant to Section 1141(d) of the Bankruptcy Code from all pre- Confirmation debts and Claims, unless otherwise provided in the Plan. Confirmation of the Plan makes the Plan binding upon the Debtor, its creditors and shareholders. If the Court approves the Plan, the Plan will be binding upon you even if you did not vote on the Plan or you voted against the Plan. THE OFFER OF SECURITIES AS PROVIDED IN THE PLAN SHALL CONSTITUTE A PUBLIC OFFERING AS PROVIDED IN SECTION 1145(c) OF THE BANKRUPTCY CODE. A REGISTRATION STATEMENT RELATING TO THE SECURITIES TO BE ISSUED UNDER THE PLAN WILL NOT BE FILED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION. THE ISSUANCE OF SECURITIES UNDER THE PLAN IS EXEMPT FROM REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION AS PROVIDED IN SECTION 1145(a) OF THE BANKRUPTCY CODE. THIS STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY COURT OR GOVERNMENT AUTHORITY NOR HAS THE COMMISSION, ANY COURT OR GOVERNMENT AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS AND INFORMATION CONTAINED HEREIN. PURSUANT TO SECTION 1125 (e) OF THE BANKRUPTCY CODE, ANY PERSON (INCLUDING THE JOINT PROPONENTS AND THEIR ATTORNEYS, ACCOUNTANTS, EMPLOYEES, OFFICERS AND DIRECTORS) THAT SOLICITS OR PARTICIPATES IN GOOD FAITH AND IN COMPLIANCE WITH THE APPLICABLE PROVISIONS OF THE BANKRUPTCY CODE IN THE OFFER OF SECURITIES UNDER THE PLAN OF REORGANIZATION DESCRIBED IN THIS STATEMENT SHALL NOT BE LIABLE ON ACCOUNT OF SUCH SOLICITATION OR PARTICIPATION FOR VIOLATION OF ANY APPLICABLE LAW, RULE, OR REGULATION ENACTED BY THE UNITED STATES OR ONE OF ITS STATES GOVERNING THE OFFER, ISSUANCE, SALE, OR PURCHASE OF SECURITIES. THIS STATEMENT AND THE PLAN MAY NOT BE RELIED ON FOR ANY PURPOSE OTHER THAN TO DETERMINE HOW TO VOTE ON THE PLAN, AND NOTHING CONTAINED IN THEM SHALL CONSTITUTE AN ADMISSION OF ANY FACT OR LIABILITY BY ANY PARTY. NOTHING CONTAINED HEREIN SHALL BE ADMISSIBLE IN ANY PROCEEDING, CASE OR CONTROVERSY INVOLVING THE JOINT PROPONENTS OR ANY OTHER PARTY. THIS STATEMENT SHALL NOT BE DEEMED CONCLUSIVE ADVICE ON THE TAX OR OTHER LEGAL EFFECTS OF THE PLAN, AND ALL CREDITORS, INTEREST - 15 - . Al N II. THE DEBTOR A. Structure of the Debtor The Debtor is a privately held Colorado corporation formed in 1995. There are two classes of issued and outstanding stock consisting of the Common Stock and the Preferred Stock. Warrants and Stock Options also have been issued by the Debtor. A schedule of Common Stock holders is attached hereto as Exhibit 3. A schedule of Preferred Stock holders is attached hereto as Exhibit 4. A schedule of Stock Option holders is attached hereto as Exhibit 5. A schedule of Warrant holders is attached hereto as Exhibit 6. The Common Stock, the Preferred Stock, the Stock Options and the Warrants are not registered securities. The current officers and directors are set forth below, together with their current annual salaries: Directors Anthony Estrada Candelario "Jess" Estrada Caroline Fresquez James Watts Randy Earhart Officers Anthony Estrada President and CEO Caroline Fresquez Secretary and Treasurer Compensation None None None None None Salary: $150,000 - 1998 Amount Paid: $ 23,076 - 1998 Salary: $ 40,000 - 1998 Amount Paid: $ 3,076 - 1998 B. General Information About the Debtor's Business The Debtor operates a USDA - approved food manufacturing facility in Pueblo, Colorado. The Debtor produces or plans to produce frozen Mexican food products such as burritos, tacquitos, quesadillas, mini -chimichangas and enchiladas at its manufacturing facility. The Debtor was formed in 1995 by Anthony Estrada, Caroline Fresquez and Candelario ( "Jess ") Estrada. The Debtor's business headquarters are located at 602 W. Sixth Street, Pueblo, Colorado 81003. The Debtor leases its business headquarters from Anthony Estrada pursuant to a month -to -month unwritten lease. The Debtor's manufacturing facility is located at the Real Property described below. - 18 - „� d 'I III ®1111111; IIIIf i I I _! Exhibits 1. Plan of Reorganization 2. D.I.P. Loan Term Sheet 3. Schedule of the holders of Common Stock 4. Schedule of the holders of Preferred Stock 5. Schedule of the holders of Stock Options 6. Schedule of the holders of Warrants 7. Legal description of Real Property 8. Schedule of Personal Property 9. Schedule of Payments to Related Entities 10. Schedule of Guaranties 11. Ownership and Encumbrance Report re: Real Property 12. Schedule of Pending Litigation 13. Schedule of Settled Litigation 14. Schedule of class 2 Small Claims 15. Schedule of class 3 Allowed Claims 16. Schedule of class 7 Allowed Claims 17. Description of Employment Agreements Post - Effective Date 18. Liquidation Analysis 19. Debtor's Unaudited Financial Statements for the years ended 12/31/96 and 12/31/97 20. Debtor's Unaudited Financial Statements for the ten months ended 10/31/98 21. Debtor's Pro -forma Balance Sheet for the Reorganized Debtor as of the Effective Date 22. Debtor's three year Post - Effective Date Financial Projections - 17 - Robert E. Sutton director of Estrada International Foods, Inc. Howard Klemmer former CEO of the Debtor, shareholder of the Debtor and president of Estrada International Foods, Inc. Estrada International owned in part by Anthony Estrada Foods, Inc. and W.K. Capital Advisors, Inc., and Anthony Estrada is a former director W.K. Capital part owner of Estrada International Advisors, Inc. Foods, Inc. Rocky Mountain corporation owned by Loretta Estrada, Cold Storage and Anthony Estrada is vice - president Food Equipment owned by various members of the Fabricators of Estrada Family Colorado Inc. E.T. Construction owned by Anthony Estrada and /or Paul Turner Fresquez Enterprises owned by Dan Fresquez Casa de Oro, LLC owned by Anthony Estrada, Caroline A. Fresquez and Candelario "Jess" Estrada Holders of Common See Exhibit 3 attached hereto Stock Holders of Preferred See Exhibit 4 attached hereto Stock Holders of Stock See Exhibit 5 attached hereto Options Holders of Warrants See Exhibit 6 attached hereto E. Payments to Related Entities Attached hereto as Exhibit 9 is a schedule of payments made by the Debtor to related entities during 1998. F. Guaranties Various individuals have guaranteed certain of the Debtor's obligations. Attached hereto as Exhibit 10 is a schedule which - 20 - The Debtor's business primarily involves co- packing products for large food industry corporations which supply the exact recipes, processes and procedures under contracts to produce these products for a specific price per unit. These "co- pack" agreements generally require the Debtor to purchase raw materials and process the food to contract specifications after which the Debtor is paid for the finished product after it is shipped. While long -term relationships are common in the industry, these contracts are typically written with 30 to 90 day cancellation provisions. In addition to co- packing, the Debtor from time -to -time makes burritos and other products for customers who are in need of small volumes of product on a specific, limited purchase order. In these cases, the Debtor makes the product using its own recipes and processing methods and bills the customer for the finished goods when shipped. C. Debtor's Assets The Debtor was the owner of the Real Property and improvements thereon located at 720 West 8th Street, Pueblo, Colorado. The Debtor's manufacturing facility is located at the Real Property. A legal description of the Debtor's Real Property is attached to the Plan as Exhibit A and attached to this Statement as Exhibit 7. The Debtor owns no other real property. The Real Property was sold at a public trustee's Foreclosure Sale held on October 14, 1998. The Debtor's right to redeem the Real Property from the sale will expire 75 days after the sale date at which time the Debtor will lose its interest in the Real Property. All tangible property owned by the Debtor is located at the Debtor's business headquarters. A schedule of the Debtor's personal property, including equipment, furniture and fixtures, inventory and accounts receivable is attached hereto as Exhibit 8. D. Related Entities The following persons and entities are, or may be, related or in some manner affiliated with the Debtor. Anthony Estrada officer, director and shareholder of the Debtor Caroline Fresquez officer, director and shareholder of the Debtor Randy Earhart director of the Debtor Candelario "Jess" director and shareholder of the Estrada Debtor James L. Watts director and shareholder of the Debtor - 19 - to terminate its second shift operations, terminate personnel, reduce management and curtail operations. Simultaneously with these events, the Debtor was losing approximately $300,000 per month. At the end of March, 1998, the Debtor's current assets totaled $332,000 compared to current debts of $3,100,000. At March 31, 1998, total liabilities were $6,000,000. After the termination of the SSE contract, the Debtor closed its manufacturing facility. Revenues decreased from approximately $365,000 per month in April, 1998 to approximately $46,000 in June, 1998. In June, 1998, the Debtor incurred an operating loss of $276,000. At June 30, 1998, current assets totaled $138,000 and current liabilities had increased to $3,300,000. At June 30, 1998, the Debtor had a negative net worth of $2,800,000. In August 1998, the Debtor was able to reopen its manufacturing facility on a limited basis due to loans made to the Debtor by BVI Investments, Ltd. to fill a limited number of orders from August to October, 1998. In late October, 1998, the Debtor entered into "co- pack" agreement with a large distribution company to manufacture two products. As of the date of this Statement, the Debtor's manufacturing facility is operating at approximately one - third capacity to fulfill the Debtor's obligations under the foregoing co -pack agreement. In October, 1998, the Debtor had sales of approximately $51,000 and incurred a net loss of approximately $221,000. At October 31, 1998, current assets were $223,000 and current liabilities were slightly in excess of $4,000,000. At October 31, 1998, the Debtor had a negative net worth of approximately $3,200,000. The Debtor currently obtains raw materials on a C.O.D. basis with its trade creditors. As described later in this Statement, numerous civil actions have been filed against the Debtor to collect monies due and owing. Judgments have been entered against the Debtor and several suits are pending. Mechanics liens and judgment liens have been filed against the Debtor's Real Property. Ah a restructuring of its debt, the Debtor's business will fE.i, particularly given the potential loss of its manufacturing facility as described below. B. Foreclosure of Debtor's Real Property The Debtor's Real Property located at 720 W. 8th Street, Pueblo, Colorado is subject to several Deeds of Trust and other liens. See the Ownership and Encumbrance Report attached hereto as Exhibit 11 and incorporated herein by reference. The holder of the first lien Deed of Trust on the Real Property is Peak National Bank ( "Bank "). Due to its financial problems, the Debtor defaulted in - 22 - identifies the guarantor, the debt guaranteed and the amount of the debt. III. SIGNIFICANT PRE - BANKRUPTCY EVENTS A. Cause of Bankruptcy To Be Filed by the Debtor In July of 1997, the Debtor entered into an agreement with Schwan's Sales Enterprises, Inc. ( "SSE ") located in Marshall, Minnesota. The agreement provided that the Debtor would produce burritos for the Coyote Grill division of SSE which services approximately 75,000 schools across the United States. This contract was a bulk burrito program for distribution into central school district commissaries for preparation and further distribution. The SSE contract represented a large commitment of the Debtor's time, capital and personnel, and required a substantial expansion of the Debtor's production facilities. The Debtor commenced production under the SSE contract in August, 1997 for the 1997/1998 school year. The startup of production for this contract was neither smooth nor easy as the Debtor incurred an additional two million dollars in startup and equipment costs. By the end of October 1997, the Debtor was running a double shift and producing over 500 cases per day. In early November, 1997, problems arose respecting the SSE contract. The Debtor was notified that its burrito product may have been related to an outbreak of illnesses reported by children in Kansas as the burrito produced by the Debtor was one of the items on the menu. As a result, an extensive investigation was conducted in conjunction with the local health department, SSE and the USDA -FSIS. The investigation resulted in a "no causal" determination meaning that no connection could be made between the Debtor's burrito and the illnesses. After a brief interruption, production resumed on November 10, 1997 with the endorsement of SSE. Thereafter, additional equipment was purchased and production reached a high of 1,381 cases per day. On March 25, 1998, the Debtor suffered a second problem with the SSE contract. The Debtor was advised that its burrito was implicated in an outbreak of illnesses reported by school children after eating lunch. As a result, a sixteen day investigation was implemented by the USDA -FSIS Compliance Division. The investigation occurred in the field and at the Debtor's business headquarters. As in the previous incident, the results of the investigation resulted in a "no causal" determination meaning that no connection could be made between the Debtor's burrito and the illnesses. The events described above resulted in the termination of the SSE contract. As a result, in April, 1998, the Debtor was required - 21 - Potential Litigation The Debtor remains in default with respect to various trade creditors and lenders. It is possible that additional civil actions will be filed against the Debtor after the date of this Statement and prior to the Filing Date of the Chapter 11 case. Except as described above, the Debtor has not within the last year entered into any settlement agreements respecting pending or potential litigation. After the date of this Statement, the Debtor will not enter into or fund any new settlement agreements with any of its creditors or shareholders. D. Communication with Creditors The Debtor has had ongoing communication with its creditors and interest holders regarding its financial problems, including discussions regarding a possible restructuring of its debt and equity. By correspondence dated August 19, 1998 and September 23, 1998, the Debtor advised its creditors and interest holders of the Debtor's financial difficulties and notified them that a Chapter 11 reorganization was under consideration. IV. OVERVIEW OF THE PLAN A. The Plan The Plan is being proposed by the Joint Proponents who are the Debtor and BEAP. The Plan generally provides as follows: a. After the Filing Date and subject to prior Court approval, BVI and any participants, will make the D.I.P. Loan to the Debtor which will permit the Debtor to make all Plan payments on and after the Effective Date. The terms of the D.I.P. Loan are set forth in Exhibit 2 attached hereto. The D.I.P. Loan shall survive confirmation of the Plan and will be paid by the Debtor according to its terms from future income. b. Prior to the Effective Date, Redemptor will redeem the Real Property from the October 14, 1998 public trustee's Foreclosure Sale initiated by Peak National Bank. The redemption will vest title to the Real Property in the Redemptor free and clear of all other liens and Claims of any kind or nature, subject to the redemption rights of lienholders junior to Redemptor. C. On the Effective Date, Redemptor will convey the Real Property to the Debtor in consideration for (a) a cash payment to Redemptor on the Effective Date equal to BVI's costs and expenses incurred in connection with negotiation and implementation of the Plan, including consultant and legal fees, (estimated to total approximately $200,000), and (b) a purchase money promissory note and first lien Deed of Trust encumbering the Real Property to - 24 - its obligations to the Bank. As a result, the Bank initiated a public trustee's Foreclosure Sale of the Real Property which occurred on October 14, 1998. The Bank was the successful bidder at the sale bidding in the entire balance due ($832,111.39) under its promissory note and first lien Deed of Trust, including certain fees, interest and other charges. The bid made by Peak National Bank at the Foreclosure Sale represents a credit bid equal to the amount owing to Peak National Bank after application of a payment made to the Peak National Bank by the County of Pueblo pursuant to a written guarantee executed by the County of Pueblo in favor of Peak National Bank. The Debtor is entitled to redeem the Real Property from the Foreclosure Sale by paying the entire balance due to the Bank on the later of (a) 75 days from the date of the Foreclosure Sale pursuant to Colorado law, or (b) 60 days after the Filing Date pursuant to bankruptcy law if the redemption period has not expired prior to the bankruptcy Filing Date. The Debtor's redemption period will expire on or about December 27, 1998. BVI's redemption period will expire on or about January 7, 1999. Notwithstanding a possible Chapter 11 bankruptcy filing by the Debtor, if the Debtor fails to redeem as described above, the Debtor will lose its interest in the Real Property and improvements thereon. The Debtor is without sufficient funds to redeem the Real Property from the Foreclosure Sale. The Plan contemplates that Redemptor will redeem the Real Property from the Foreclosure Sale and convey the Real Property to the Debtor on the Effective Date of the Plan. It is possible that the Internal Revenue Service and the Colorado Department of Revenue may assert that they hold tax liens encumbering the Real Property which are senior to all Deeds of Trust, consensual liens and non - consensual liens. Similarly, the holders of any valid mechanics liens also may assert that their liens encumbering the Real Property are senior to all Deeds of Trust, consensual liens and non - consensual liens. C. Pending and Settled Litigation Due to its financial problems, the Debtor has been unable to pay various creditors. Some of these creditors have filed civil actions against the Debtor seeking to collect monies owing to them. A summary of the Debtor's pending, settled and potential litigation follows. Pending Litigation Attached hereto as Exhibit 12 is litigation. Settled Litigation Attached hereto as Exhibit 13 is litigation. a schedule of pending a schedule of settled - 23 - If the Plan is not confirmed for any reason, BEAD and BVI may elect not to pursue further reorganization efforts with the Debtor. In this event, Redemptor, as the prospective owner of the Real Property by way of redemption, could evict the Debtor from the Real Property resulting in the immediate cessation of the Debtor's business operations. Should eviction occur, it is likely that the Debtor would be liquidated as no reorganization would be feasible without the Real Property. B. Definitions Article I of the Plan contains certain defined terms. These defined terms are capitalized in this Statement. It is essential to an understanding of the Plan and this Statement that all interested parties familiarize themselves with the defined terms. C. Effective Date of the Plan The Effective Date of the Plan is the first business day which is eleven calendar days after the Confirmation Date. The Confirmation Date is the date the Court enters its order approving the Plan. The Debtor estimates that the Effective Date shall occur on or about March 15, 1999. Certain Plan distributions and other events occur on or after the Effective Date. D. Classification and Allowance of Claims and Interests The Debtor's creditors and shareholders are divided by the Plan into classes. The Plan classes are set forth in the introduction to this Statement. The Plan provides separately for each class. Distributions on account of Allowed Claims and shareholder interests in each impaired class will be in full settlement, satisfaction and discharge of all such Allowed Claims and shareholder interests, unless otherwise provided in the Plan. Upon Confirmation of the Plan, the Debtor will be discharged from all Claims and debt that arose prior to Confirmation of the Plan, except as otherwise provided in the Plan. A Claim is generally defined by the Plan to be a right to payment from the Debtor. An Allowed Secured Claim is defined as an Allowed Claim which is secured by property of the Debtor. An Allowed Priority Claim is defined as an Allowed Claim which is entitled to priority in payment under Section 507(a) (2) et. seq. of the Bankruptcy Code. The Plan defines an Allowed Claim to mean: (a) an unsecured Claim against the Debtor which is set forth in the Debtor's bankruptcy schedules other than an unsecured Claim scheduled by the Debtor as disputed, contested, contingent or unliquidated, or (b) an unsecured Claim against the Debtor which has been timely filed with the Court prior to the Bar Date, and with respect to which no objection to the allowance thereof is timely filed by the Debtor, or as to which any such objection has been determined by Final Order. A holder of a Claim or interest - 26 - be held by BVI and any participants in an amount equal to (i) the costs of Redemptor's redemption of the Real Property (estimated to be $832,111 plus interest, fees and costs) plus (ii) an amount equivalent to the payoff on the Effective Date of the promissory note held by BVI which was secured by the Real Property (estimated to be approximately $641,000 plus interest, fees and costs) with such payoff calculated as if there had been no Foreclosure Sale respecting the Real Property. The purchase money promissory note and first lien Deed of Trust on the Real Property shall survive Confirmation of the Plan and will be paid by the Debtor according to their terms from future income. Redemptor shall be under no obligation to transfer the Real Property to the Debtor unless the Court enters the Confirmation Order. d. On the Effective Date, all pre- Confirmation debt and all Claims against the Debtor and all interests in the Debtor will be discharged unless otherwise provided in the Plan. e. On the Effective Date, all property of the Debtor shall vest in the reorganized Debtor free and clear of liens, claims and interests except as otherwise provided in the Plan. f. On the Effective Date, securities shall be issued under the Plan to various creditor and interest holder classes pursuant to Section 1145 of the Code. g. After the redemption of the Real Property from the Foreclosure Sale by Redemptor and prior to the Effective Date of the Plan, Redemptor has agreed that the Debtor shall be entitled to maintain possession of the Real Property, provided however that Redemptor, in its sole and absolute discretion, may terminate without cause, the Debtor's right to possession of the Real Property. The Plan is attached here to as Exhibit 1. The Plan is a "pre- packaged" plan meaning that the Joint Proponents are seeking acceptance of the Plan from the Debtor's creditors and shareholders prior to the filing of a Chapter 11 bankruptcy case. If the Requisite Approval is obtained, then the Debtor intends to file a Chapter 11 bankruptcy case to obtain Court approval of the Plan. This Statement is a summary of the Plan. Creditors and shareholders are urged to read the Plan in full before voting on the Plan. Creditors and shareholders also are urged to consult with their counsel or other business adviser in order to understand the Plan fully. The Plan represents a proposed legally binding agreement. An intelligent judgment concerning the Plan cannot be made without fully understanding the Plan. In the event of a conflict between the Statement and the Plan, the Plan shall control. - 25 - shall file an application with the Court seeking authority to retain Mr. Laufer as bankruptcy counsel in the Chapter 11 case. Prior to the filing of the Chapter 11 case, the Debtor will pay in full all fees and costs incurred by Mr. Laufer prior to the filing of the Chapter 11 case. The Debtor estimates that after the filing of the Chapter 11 case and through the Confirmation Date, Mr. Laufer will incur fees and expenses totaling approximately $20,000.00. The foregoing estimate assumes that a Confirmation hearing to consider approval of the Plan will occur within 45 days after the filing of the Chapter 11 case. The foregoing is only an estimate and the fees may far exceed those estimated by the Debtor. Prior to the filing of the Chapter 11 case, Mr. Laufer will be paid a retainer in an amount not to exceed $30,000.00. The retainer is intended to secure payment of fees and expenses incurred by Mr. Laufer after the filing of the Chapter 11 case. The retainer may be applied to such fees and expenses only after prior Court approval. Mr. Laufer shall file a final fee application seeking Court approval of all fees and expenses to be paid to Mr. Laufer from the Filing Date of the Chapter 11 case through the Confirmation Date. The Debtor shall pay fees and expenses incurred by Mr. Laufer after the Confirmation Date in the ordinary course of business without Court approval. Mr. Laufer also may file interim fee applications. Unless otherwise agreed, attorney fees and expenses owing to Mr. Laufer after the Filing Date and through the Confirmation Date shall be paid in cash in full on the Effective Date unless the Court has not entered its order approving payment of such fees and expenses prior to the Effective Date in which event payment shall be made upon entry of an order approving such fees. Trustee Fees All unpaid fees owing to the Office of the United States Trustee pursuant to 28 U.S.C. Section 1930 shall be paid in full on the later of the Effective Date or when due. The Debtor shall continue to pay such fees until the Court enters its Final Decree closing the Chapter 11 case, or enters an order dismissing the Chapter 11 Case or converting the Chapter 11 Case to Chapter 7. Post - Filing Date Vendor Debt Vendor debt incurred after the Filing Date shall be paid in full in the ordinary course of business, or pursuant to any agreement with the respective vendor. - 28 - will receive distributions under the Plan only if the Claim is an Allowed Claim or the interest is an allowed interest. E. Claims Bar Date Immediately upon filing of the Chapter 11 case, the Debtor shall file a motion with the Court requesting that the Court set a Bar Date for creditors to file proofs of Claim in the Chapter 11 case, provided however that pursuant to the terms of the Plan, Claims arising on account of the rejection of executory contracts must be filed not later than 15 days after the Effective Date of the Plan. Notice of the Bar Date will be sent to creditors immediately after the Court fixes the Bar Date. F. Plan Treatment of Allowed Claims Unclassified Allowed Administrative Expenses Allowed Administrative Expenses consist of debts incurred by the Debtor after the Filing Date, including but not limited to the D.I.P. Loan, attorneys fees, accounting fees and post - Filing Date vendor debt. The Plan provides that the holders of Allowed Administrative Expenses shall be paid in cash in full on the Effective Date, or upon such other terms as any agreement with the Debtor so provides or as may be agreed upon by the Debtor and respective holder of the Allowed Administrative Expense, provided however that the D.I.P. Loan shall be paid according to its terms, a general description of which is set forth in Exhibit B attached to the Plan and in Exhibit 2 attached hereto. The holders of Allowed Administrative Expenses are not impaired under the Plan and are not entitled to vote on the Plan. D.I.P. Loan The D.I.P. Loan is a revolving line -of- credit loan in an amount not to exceed $1,450,000.00 which will be made by BVI Investments, Ltd. and any participants to the Debtor after the Filing Date. After the Filing Date, the Debtor will file a motion with the Court seeking approval of the D.I.P. Loan. All creditors, interest holders and interested parties will receive notice of the motion. The general terms of the D.I.P. Loan are set forth in Exhibit 2 attached hereto. The proceeds of the D.I.P. Loan shall be employed to fund the Debtor's business operations and to make payments required under the Plan on and after the Effective Date of the Plan. Debtor's Bankruptcy Counsel Joel Laufer, Esq., of the law firm of Holden Padjen and Laufer LLC, 303 East 17th Avenue, Suite 660, Denver, Colorado 80203 has been retained as bankruptcy counsel for the Debtor. Immediately upon the filing of the Chapter 11 case, the Debtor - 27 - Colorado Department of Revenue As of December 22, 1998, the Debtor and the Colorado Department of Revenue agree that the Debtor is indebted to the Colorado Department of Revenue in the amount of $23,120.43 representing unpaid withholding taxes, interest and penalties for the period January through October of 1998. The Allowed Priority Claim held by the Colorado Department of Revenue will continue to accrue interest through the Filing Date at which time interest will cease to accrue. On the Effective Date, the Debtor will pay to the Colorado Department of Revenue a sum equal to 20% of the Allowed Priority Claim held by the Colorado Department of Revenue at the Filing Date. The balance of the Allowed Priority Claim will be paid in twenty -four (24) equal monthly installments of principal and interest commencing thirty (30) days after the Effective Date and continuing on the same day of each month thereafter with interest accruing after the Effective Date at the rate of 7% per annum. The Debtor estimates that the monthly payment to the Colorado Department of Revenue will be approximately $828.00. Class 1 is impaired under the Plan and is entitled to vote on the Plan. A ballot has been sent to all class 1 creditors for this purpose. Acceptance of the Plan by class 1 is not a prerequisite to the Debtor filing a Chapter 11 case. See Requisite Approval discussed in the Introduction to this Statement. The Debtor intends to file a Chapter 11 bankruptcy case if the Debtor receives the Requisite Approval. If the Requisite Approval is not obtained, then the Debtor may not file a Chapter 11 case and no assurance can be made that any distribution ever will be made to class 1 creditors. Class 2 (Small Claims of $500.00 or less) Class 2 consists of the holders of Small Claims. Small Claims consist of the Debtor's prepetition, nonpriority, unsecured creditors holding Allowed Claims which do not exceed $500.00, including any Allowed Claim greater than $500.00 where the holder of the Allowed Claim has elected to reduce the Allowed Claim to $500.00. An election to reduce an Allowed Claim to $500.00 can be made on the ballot which accompanies this Statement. Class 2 Small Claims include prepetition vendors, lenders and trade creditors, including (a) Allowed Claims arising from the rejection of executory contracts and unexpired leases, (b) Allowed Claims representing the deficiency Claims of secured creditors, and (c) the holders of Small Claims who assert mechanics liens and judgment liens against the Debtor's Real Property. A schedule of all class 2 Small Claims is attached hereto as Exhibit 14. If you agree with the amount of the Small Claim set forth in Exhibit 14, then your Claim is not disputed and you need not file a proof of claim with the Court. You hold a class 2 Disputed Claim if: (a) your Claim is not listed in Exhibit 14, or (b) you disagree with the amount of - 30 - Class 1 Allowed Priority Claims Class 1 Allowed Priority Claims are entitled to priority in payment under the bankruptcy laws meaning that they are entitled to payment in full before general, unsecured creditors. See Section 507 (a) (2) et. seq. of the Bankruptcy Code. Allowed Priority Claims include, but are not limited to: (a) wages, salaries or commissions, including vacation pay, earned within ninety (90) days prior to the filing date of the Chapter 11 case not to exceed $4,000 per claimant; (b) Claims for contributions to employee benefits plans; (c) consumer deposits for goods or services; and (d) certain unsecured tax Claims held by government units. The Plan provides that all class 1 Allowed Priority Claims shall be paid in full on the Effective Date of the Plan, or upon such other terms as any agreement with the Debtor so provides or as may be agreed upon by the Debtor and the respective holder of the Allowed Priority Claim, provided however that any government unit holding an Allowed Priority Claim shall be paid as follows: 20% of the Allowed Priority Claim shall be paid in cash at the Effective Date with the balance payable in twenty -four (24) equal monthly installments of principal and interest commencing thirty (30) days after the Effective Date and continuing on the same day of each month thereafter with interest accruing after the Effective Date at the rate of 7% per annum. The Debtor believes that two creditors hold Allowed Priority Claims consisting of the United States of America, Internal Revenue Service and the Colorado Department of Revenue. Internal Revenue Service The IRS has asserted that it is owed $169,937.80 for unpaid withholding taxes, plus interest for the first and second quarters of 1998. The Debtor's records reflect that the Debtor is indebted to the IRS in a lesser amount. The Debtor anticipates that the amount of the Allowed Priority Claim held by the IRS for the tax period described above will be agreed upon by the Debtor and IRS prior to the Effective Date. The Allowed Priority Claim held by the IRS will continue to accrue interest through the Filing Date at which time interest will cease to accrue. On the Effective Date, the Debtor will pay to the IRS a sum equal to 20% of the Allowed Priority Claim held by the IRS at the Filing Date. The balance of the Allowed Priority Claim will be paid in twenty -four (24) equal monthly installments of principal and interest commencing thirty (30) days after the Effective Date and continuing on the same day of each month thereafter with interest accruing after the Effective Date at the rate of 7% per annum. The Debtor estimates that the monthly payment to the IRS will be approximately $6,100.00. - 29 - purpose. The Plan cannot be confirmed if class 2 fails to accept the Plan. Acceptance of the Plan by class 2 is a prerequisite to the Debtor filing a Chapter 11 case. See Requisite Approval discussed in the Introduction to this Statement. The Debtor intends to file a Chapter 11 bankruptcy case if the Debtor receives the Requisite Approval. If the Requisite Approval is not obtained, then the Debtor may not file a Chapter 11 case and no assurance can be made that any distribution ever will be made to class 2 creditors. Class 3 (Allowed Claims in excess of $500.00) Class 3 consists of the holders of Allowed Claims not otherwise classified under the Plan. Allowed Claims consist of the Debtor's prepetition, nonpriority, unsecured creditors holding Allowed Claims which exceed $500.00. Class 3 Allowed Claims include prepetition vendors, lenders and trade creditors, including (a) Allowed Claims arising from the rejection of executory contracts and unexpired leases, (b) Allowed Claims representing the deficiency Claims of secured creditors, and (c) the holders of Allowed Claims who assert mechanics liens and judgment liens against the Debtor's Real Property. A schedule of all class 3 Allowed Claims is attached hereto as Exhibit 15. If you agree with the amount of the Allowed Claim set forth in Exhibit 15, then your Claim is not disputed and you need not file a proof of claim with the Court. You hold a class 3 Disputed Claim if: (a) your Claim is not listed in Exhibit 15, or (b) you disagree with the amount of your Claim as set forth in Exhibit 15. Exhibit 15 reflects all known class 3 Allowed Claims, including (a) the class 4 Allowed Claim which will be subject to treatment as a class 3 Allowed Claim if class 4 rejects the Plan, and (b) the class 5 Allowed Claim which will be subject to treatment as a class 3 Allowed Claim if class 5 rejects the Plan. See the discussion of classes 4 and 5 below. The Plan permits a class 3 creditor to voluntarily reduce his /her /its class 3 Allowed Claim to a class 2 Small Claim in the amount of $500.00. This election is made on the ballot which accompanies this Statement. If a class 3 creditor makes this election, the class 3 creditor is deemed to have accepted the Plan as a member of class 2. See class 2 above for the treatment of class 2 Small Claims. IF YOU AGREE WITH THE AMOUNT OF THE ALLOWED CLAIM SET FORTH IN Exhibit 15, YOU NEED NOT FILE A PROOF OF CLAIM WITH THE COURT. IF YOU ARE NOT LISTED ON Exhibit 15, YOU MUST FILE A PROOF OF CLAIM WITH THE COURT ON OR BEFORE THE BAR DATE FIXED BY THE COURT. IF YOU FAIL TO TIMELY FILE A PROOF OF CLAIM, YOU WILL RECEIVE NO DISTRIBUTION UNDER THE PLAN AND ANY CLAIMS YOU HOLD WILL BE DISCHARGED. AFTER THE FILING OF THE CHAPTER 11 BANKRUPTCY CASE, - 32 - your Claim as set forth in Exhibit 14. Exhibit 14 reflects all known class 2 Small Claims. IF YOU AGREE WITH THE AMOUNT OF THE SMALL CLAIM SET FORTH IN Exhibit 14, YOU NEED NOT FILE A PROOF OF CLAIM WITH THE COURT. IF YOU ARE NOT LISTED ON Exhibit 14, YOU MUST FILE A PROOF OF CLAIM WITH THE COURT ON OR BEFORE THE BAR DATE FIXED BY THE COURT. IF YOU FAIL TO TIMELY FILE A PROOF OF CLAIM, YOU WILL RECEIVE NO DISTRIBUTION UNDER THE PLAN AND ANY CLAIMS YOU HOLD WILL BE DISCHARGED. AFTER THE FILING OF THE CHAPTER 11 BANKRUPTCY CASE, YOU WILL BE SENT NOTICE OF THE BAR DATE FIXED BY THE COURT TO FILE PROOFS OF CLAIM. IF YOU DISAGREE WITH THE AMOUNT OF YOUR SMALL CLAIM AS SET FORTH IN Exhibit 14, YOU MUST FILE A PROOF OF CLAIM WITH THE COURT ON OR BEFORE THE BAR DATE FIXED BY THE COURT. IF YOU FAIL TO TIMELY FILE A PROOF OF CLAIM, YOU WILL RECEIVE A DISTRIBUTION UNDER THE PLAN BASED UPON THE AMOUNT OF THE SMALL CLAIM SET FORTH IN Exhibit 14. AFTER THE FILING OF THE CHAPTER 11 BANKRUPTCY CASE, YOU WILL BE SENT NOTICE OF THE BAR DATE FIXED BY THE COURT TO FILE PROOFS OF CLAIM. The Plan provides that the Debtor shall review all proofs of Claim filed with the Court and file objections thereto (if any) not later than sixty (60) days after the Effective Date of the Plan. If the Debtor does not file an objection to a proof of Claim within sixty (60) days after the Effective Date, or such other date as established by the Court, then the proof of Claim automatically shall be deemed allowed. The Court may extend the time for the Debtor to object to proofs of claim upon motion of the Debtor. On the Effective Date, the Plan provides that each holder of a class 2 Small Claim shall receive a cash distribution equal to 100% of the amount of the Small Claim. The Plan distribution to the holder of a class 2 Small Claim shall be in full satisfaction and discharge of all Claims held by the class 2 creditor against the Debtor. If a class 2 Claim is disputed by the Debtor, no distribution shall be made on account of the class 2 Disputed Claim until the dispute is resolved and the Disputed Claim is allowed by Final Order of the Court. Based upon its records, the Debtor estimates that approximately 89 class 2 creditors hold Small Claims which total approximately $15,532. See Exhibit 14. Accordingly, on the Effective Date, the Debtor shall make a distribution to the holders of class 2 Small Claims in the total aggregate amount of approximately $15,532, plus amounts to be paid to any class 3 creditor electing to be treated as a member of class 2. Class 2 is impaired under the Plan and is entitled to vote on the Plan. A ballot has been sent to all class 2 creditors for this - 31 - Class 3 is impaired under the Plan and is entitled to vote on the Plan. A ballot has been sent to all class 3 creditors for this purpose. Acceptance of the Plan by class 3 is not a prerequisite to the Debtor filing a Chapter 11 case. See Requisite Approval discussed in the Introduction to this Statement. The Debtor intends to file a Chapter 11 bankruptcy case if the Debtor receives the Requisite Approval. If the Requisite Approval is not obtained, then the Debtor may not file a Chapter 11 case and no assurance can be made that any distribution ever will be made to class 3 creditors. Class 4 (W.K. Capital Advisors, Inc. /Estrada International Foods, Inc.) Class 4 consists of the Allowed Claim jointly held by W.K. Capital Advisors, Inc. /Estrada International Foods, Inc. in the amount of $1,005,000.00. In June of 1997, the Debtor entered into a consulting agreement with W.K. Capital Advisors, Inc. ( "WK") of Denver, Colorado whereby WK agreed to provide investment banking and corporate financing services to the Debtor. The Debtor and WK formulated a business plan to acquire a number of food processing companies such as the Debtor though an acquisition vehicle, namely Estrada International Foods, Inc. Pursuant to the business plan, WK proposed to obtain funds for the Debtor via a new form of security to be offered to investors by Estrada International Foods, Inc. Estrada International Foods, Inc. raised approximately one million dollars pursuant to its offering which was in turn loaned to the Debtor net of offering costs. The Debtor employed the funds for operating capital and /or to purchase equipment. The consulting agreement by and between the Debtor and WK was terminated in 1998. The business plan has been abandoned and no food processing companies have been acquired by Estrada International Foods, Inc., WK or the Debtor. The funds loaned to the Debtor as described above constitute the class 4 Allowed Claim held by W.K. Capital Advisors, Inc. /Estrada International Foods, Inc. The class 4 creditor holds a pre- bankruptcy, Allowed Claim which is unsecured and not entitled to priority in payment under the Bankruptcy Code. The class 4 creditor asserts a junior lien on the Debtor's personal property by reason of a purported security agreement dated December 31, 1997 and a financing statement filed on July 24, 1998 with the Clerk and Recorders Office, County of Pueblo, State of Colorado, at Reception No. 1229758. The Debtor disputes that class 4 holds a valid and duly perfected lien on the Debtor's personal property. However, assuming arguendo that class 4 holds a valid lien, the class 4 lien is of no value because it is junior to the liens held by the class 9 creditor (BVI), the class 10 creditor (National Business Finance) and the class 11 creditor (BEAP) . On the Effective Date, the class 4 creditor shall have the option to either (a) exchange the class 4 Allowed Claim for 1999 - 34 - YOU WILL BE SENT NOTICE OF THE BAR DATE FIXED BY THE COURT TO FILE PROOFS OF CLAIM. IF YOU DISAGREE WITH THE AMOUNT OF YOUR ALLOWED CLAIM AS SET FORTH IN Exhibit 15, YOU MUST FILE A PROOF OF CLAIM WITH THE COURT ON OR BEFORE THE BAR DATE FIXED BY THE COURT. IF YOU FAIL TO TIMELY FILE A PROOF OF CLAIM, YOU WILL RECEIVE A DISTRIBUTION UNDER THE PLAN BASED UPON THE AMOUNT OF THE ALLOWED CLAIM SET FORTH IN Exhibit 15. AFTER THE FILING OF THE CHAPTER 11 BANKRUPTCY CASE, YOU WILL BE SENT NOTICE OF THE BAR DATE FIXED BY THE COURT TO FILE PROOFS OF CLAIM. The Plan provides that the Debtor shall review all proofs of Claim filed with the Court and file objections thereto (if any) not later than sixty (60) days after the Effective Date of the Plan. If the Debtor does not file an objection to a proof of Claim within sixty (60) days after the Effective Date, or such other date as established by the Court, then the proof of Claim automatically shall be deemed allowed. The Court may extend the time for the Debtor to object to proofs of claim upon motion of the Debtor. On the later of the Effective Date or the date that all class 3 Disputed Claims are allowed by Final Order, the Plan provides that each holder of a class 3 Allowed Claim shall receive a cash distribution equal to his /her /its Pro Rata share of $500,000.00 in full satisfaction and discharge of the class 3 Allowed Claim, provided however that after the Effective Date, the Debtor, in its sole and absolute discretion, may make interim distributions to the holders of class 3 Allowed Claims. In the event that the Debtor elects to make interim distributions to the holders of class 3 Allowed Claims, such distributions shall be calculated as if all class 3 Disputed Claims were class 3 Allowed Claims. The Debtor anticipates making an interim distribution on or shortly after the Effective Date. Pro Rata is defined by the Plan to mean the percentage which the amount of the creditor's class 3 Allowed Claim bears to the aggregate amount of all class 3 Allowed Claims. If a class 3 Claim is disputed by the Debtor, no distribution shall be made on account of the class 3 Disputed Claim until the dispute is resolved and the Disputed Claim is allowed by Final Order of the Court. Based upon its records, the Debtor estimates that approximately 151 class 3 creditors hold Allowed Claims which total approximately $1,820,000, exclusive of the class 4 and class 5 Allowed Claims. See Exhibit 15. If classes 4 and 5 reject the Plan, then the class 3 Allowed Claims are estimated to total approximately $3,008,000. See Exhibit 15. Accordingly, the Debtor estimates that the Pro Rata distribution to the holder of a class 3 Allowed Claim will range from 16.6 to 27.4 cents on the dollar depending upon the total amount of class 3 Allowed Claims. - 33 - The County's Allowed Claim represents a deficiency Claim because the value of the Real Property securing the County's Allowed Claim is insufficient to pay the liens which are senior to the lien held by the County. In addition, the Real Property has been sold at a Foreclosure Sale held on October 14, 1998. Unless the County redeems the Real Property from the Foreclosure Sale, the County's third lien Deed of Trust will be extinguished by the Foreclosure Sale and the County shall receive nothing on account of its third lien Deed of Trust. See the discussion of class 8 below. The Plan provides that the County will receive on the Effective Date a one -time cash payment of $5,000.00 in full satisfaction of its Allowed Claim arising under the Guaranty. The Plan treatment of class 5 is less favorable than the treatment of other similar Allowed Claims which are subject to treatment under class 3 of the Plan. Class 3 Allowed Claims are estimated to receive a distribution in the range of 16.6 to 27.4 cents on the dollar in full satisfaction of such class 3 Allowed Claims. If class 5 rejects the Plan, (a) the Plan provisions respecting class 5 shall be deemed of no force and effect and no Plan distributions shall be made to class 5; and (b) the class 5 Allowed Claim shall be subject to treatment as a class 3 Allowed Claim; and (c) the class 5 creditor shall be entitled to vote as a member of class 3. Class 5 is impaired under the Plan and is entitled to vote on the Plan. A ballot has been sent to class 5 for this purpose. Acceptance of the Plan by class 5 is not a prerequisite to the Debtor filing a Chapter 11 case. See Requisite Approval discussed in the Introduction to this Statement. The Debtor intends to file a Chapter 11 bankruptcy case if the Debtor receives the Requisite Approval. If the Requisite Approval is not obtained, then the Debtor may not file a Chapter 11 case and no assurance can be made that any distribution ever will be made to the class 5 creditor. The ballot sent to class 5 permits the class 5 creditor to (a) vote as a member of class 5, and (b) if class 5 rejects the Plan, vote as a member of class 3. Class 6 (City of Pueblo) Class 6 consists of the Allowed Claim held by the City of Pueblo ( "City ") , State of Colorado. In November of 1995, the Debtor entered into an agreement with the City whereby the City provided $1,250,000 in financing to complete the renovation of the Debtor's Real Property (frozen food processing facility) . The proceeds of the financing were conveyed to the Debtor as a grant that will be free from repayment if the Debtor creates 220 jobs within two years and maintains those jobs for a five year period thereafter. If these employment levels are not reached and /or not - 36 - Series B Preferred Stock at the ratio of one (1) share of 1999 Series B Preferred Stock for each one hundred dollars ($100.00) of class 4 Allowed Claim, or (b) exchange the class 4 Allowed Claim for shares of New Common Stock such that class 4 will own, as of the Effective Date, six percent (6%) of the New Common Stock issued and outstanding on the Effective Date treating all outstanding 1999 Series A Preferred Stock as having been fully converted to New Common Stock. The Plan treatment of class 4 is less favorable than the treatment of other similar Allowed Claims which are subject to treatment under class 3 of the Plan. Class 3 Allowed Claims are estimated to receive a distribution in the range of 16.6 to 27.4 cents on the dollar in full satisfaction of such class 3 Allowed Claims. If class 4 rejects the Plan, (a) the Plan provisions respecting class 4 shall be deemed of no force and effect and no Plan distributions shall be made to class 4; and (b) the class 4 Allowed Claim shall be subject to treatment as a class 3 Allowed Claim; and (c) the class 4 creditor shall be entitled to vote as a member of class 3. Class 4 is impaired under the Plan and is entitled to vote on the Plan. A ballot has been sent to class 4 for this purpose. Acceptance of the Plan by class 4 is not a prerequisite to the Debtor filing a Chapter 11 case. See Requisite Approval discussed in the Introduction to this Statement. The Debtor intends to file a Chapter 11 bankruptcy case if the Debtor receives the Requisite Approval. If the Requisite Approval is not obtained, then the Debtor may not file a Chapter 11 case and no assurance can be made that any distribution ever will be made to the class 4 creditor. The ballot sent to class 4 permits the class 4 creditor to (a) vote as a member of class 4, and (b) if class 4 rejects the Plan, vote as a member of class 3. Class 5 (County of Pueblo) Class 5 consists of the Allowed Claim of the County of Pueblo, State of Colorado ( "County ") . On or about July 10, 1997, the County executed a written guaranty ( "Guaranty ") of the Debtor's obligation owing to Peak National Bank (class 8 creditor) not to exceed the sum of $183,326.76. The Debtor secured the Guaranty by granting a third lien Deed of Trust to the County on the Real Property which was recorded in the Clerk and Recorders office, County of Pueblo, State of Colorado on July 10, 1997, at Book 3014, Page 852. Upon the Debtor's information and belief, the County paid to Peak National Bank a sum not exceeding $183,326.76 pursuant to the Guaranty. Accordingly, the County holds an Allowed Claim against the Debtor for amounts paid to the Bank under the Guaranty. - 35 - of 16.6 to 27.4 cents on the dollar in full satisfaction of such class 3 Allowed Claims. Because class 7 is receiving less favorable treatment on account of its Allowed Claim, the Bankruptcy Code provides that the Plan cannot be confirmed unless class 7 unanimously accepts the Plan. Class 7 is impaired under the Plan and is entitled to vote on the Plan. A ballot has been sent to all class 7 creditors for this purpose. Unanimous acceptance of the Plan by all class 7 creditors is a prerequisite to the Debtor filing a Chapter 11 case. See Requisite Approval discussed in the Introduction to this Statement. The Debtor intends to file a Chapter 11 bankruptcy case if the Debtor receives the Requisite Approval. If the Requisite Approval is not obtained, then the Debtor may not file a Chapter 11 case and no assurance can be made that any distribution ever will be made to the class 7 creditors. Class 8 (Peak National Bank) Class 8 consists of the Allowed Secured Claim held by Peak National Bank ( "Bank ") . Funds borrowed from the Bank were employed by the Debtor for operating capital and /or the purchase of equipment. The obligation owing to the Bank was represented by a promissory note executed by the Debtor in the original face amount of $750,000 dated June 19, 1997, with a maturity date of June 19, 2007, as modified on November 5, 1997 to reflect additional funds advanced and a new face value of $1,000,000. The promissory note held by the Bank was secured by a first lien Deed of Trust encumbering the Real Property owned by the Debtor and recorded in the Clerk and Recorders Office, County of Pueblo, State of Colorado on June 20, 1997, at Book 3008, Page 553. The Bank's promissory note was also secured by a lien on the Debtor's inventory, equipment, accounts receivable and general intangibles as evidenced by a Security Agreement executed by the Debtor dated June 19, 1997, and a financing statement executed by the Debtor and filed with the Clerk and Recorders Office, County of Pueblo, State of Colorado on June 20, 1997, at Book 3008, Page 560. In 1998, the Debtor defaulted under the terms of the Bank's promissory note and Deed of Trust. Accordingly, the Bank elected to foreclose on its Deed of Trust encumbering the Real Property. On October 14, 1998, the Public Trustee for the County of Pueblo, State of Colorado, held a public trustee's Foreclosure Sale of the Real Property. The Bank was the successful bidder at the Foreclosure Sale bidding in the entire amount ($832,111) of its indebtedness represented by the promissory note. At the conclusion of the Foreclosure Sale, a Certificate of Purchase was issued to the Bank by the Public Trustee. Accordingly, the Bank's Allowed Secured Claim will be satisfied in full by the issuance of a Public Trustee's Deed to the Bank at the conclusion of all redemption - 38 - maintained, then the Debtor will be required to repay part of the grant based on the shortfall in actual employment levels. The grant funds were used to remove unneeded walls, doors and structure; to purchase materials; and to remodel the building interior with utilities, new plumbing and cleaning facilities that meet USDA requirements. In addition, upgraded production equipment was installed, including a nitrogen freezing system. The Plan provides that the City will receive on the Effective Date a one -time cash payment of $5,000.00 in full satisfaction of its Allowed Claim arising under the above described agreement. The Plan treatment of class 6 is less favorable than the treatment of other similar Allowed Claims which are subject to treatment under class 3 of the Plan. Class 3 Allowed Claims are estimated to receive a distribution in the range of 16.6 to 27.4 cents on the dollar in full satisfaction of such class 3 Allowed Claims. Because class 6 is receiving less favorable treatment on account of its Allowed Claim, the Bankruptcy Code provides that the Plan cannot be confirmed unless class 6 accepts the Plan. Class 6 is impaired under the Plan and is entitled to vote on the Plan. A ballot has been sent to class 6 for this purpose. Acceptance of the Plan by class 6 is a prerequisite to the Debtor filing a Chapter 11 case. See Requisite Approval discussed in the Introduction to this Statement. The Debtor intends to file a Chapter 11 bankruptcy case if the Debtor receives the Requisite Approval. If the Requisite Approval is not obtained, then the Debtor may not file a Chapter 11 case and no assurance can be made that any distribution ever will be made to the class 6 creditor. Class 7 (Anthony Estrada, et al) Class 7 consists of persons or entities which are affiliated in some manner with the Debtor and which hold prepetition, nonpriority, unsecured Allowed Claims. Exhibit 16 attached hereto identifies the class 7 creditors and the amounts owing to each creditor. The affiliation of each of the class 7 creditors is set forth earlier in this Statement. See the Section entitled Related Entities. Each class 7 creditor holds an Allowed Claim for monies loaned to the Debtor in the amounts set forth in Exhibit 16. On the Effective Date, the Plan provides that each holder of a class 7 Allowed Claim shall receive a cash distribution equal to twelve percent (12 %) of the amount of the Allowed Claim. The Plan distribution to the holder of a class 7 Allowed Claim shall be in full satisfaction and discharge of all Claims held by the class 7 creditor against the Debtor. The Plan treatment of class 7 is less favorable than the treatment of other similar Allowed Claims which are subject to treatment under class 3 of the Plan. Class 3 Allowed Claims are estimated to receive a distribution in the range - 37 - In October of 1997, Barshop Ventures, Inc. ( "Ventures acquired from John L. Rainaldi a promissory note and related Deeds of Trust each dated November 21, 1996 executed by the Debtor in favor of Mr. Rainaldi in the face amount of $400,000 ( "Rainaldi Note "). The Deed of Trust held by Mr. Rainaldi and encumbering the Real Property was recorded with the Clerk and Recorders Office, County of Pueblo, State of Colorado on November 27, 1996, at Book 2950, Page 103. The assignment of the Rainaldi Note and related Deeds of Trust from Mr. Rainaldi to Ventures was recorded with the Clerk and Recorders Office, County of Pueblo, State of Colorado on October 10, 1997, at Book 3044, Page 866. In addition, an amendment to the second lien Deed of Trust which encumbers the Real Property was filed with the Clerk and Recorders Office, County of Pueblo, State of Colorado at Book 3044, Page 869. The Rainaldi Note was secured by a second lien Deed of Trust on the Real Property, a second lien Deed of Trust on certain real property owned by Anthony Estrada and a first lien (subject to the prior and senior lien of the class 10 creditor) on all of the Debtor's personal property, including furniture and fixtures, inventory, accounts receivable and equipment. The lien on the Debtor's personal property was properly perfected by the filing of a financing statement with (a) the County of Pueblo, State of Colorado, U.C.C. Records, on October 10, 1997 (Filing No. 2878421, (b) the Clerk and Recorders Office, County of Pueblo, State of Colorado on November 21, 1997, at Book 3058, Page 749, and (c) the Colorado Secretary of States Office on October 21, 1997 (Reception No. 199720912651. The real property owned by Anthony Estrada which is subject to the above referenced second lien Deed of Trust was sold at a foreclosure sale held by the Public Trustee for the County of Pueblo, State of Colorado on November 4, 1998. The foreclosure sale was initiated by the holder of the first lien Deed of Trust. On October 8, 1997, the Rainaldi Note was modified and restated to reflect a prior loan of $50,000 made by Ventures to the Debtor. The face value of the modified and restated Rainaldi Note was $350,000 ( "First Amended Rainaldi Note "). The First Amended Rainaldi Note continued to be secured by a second lien Deed of Trust on the Real Property, a second lien Deed of Trust on certain real property owned by Anthony Estrada, and a lien on all of the Debtor's personal property. On December 30, 1997, BVI acquired the First Amended Rainaldi Note and related Deeds of Trust from Ventures. The assignment of the First Amended Rainaldi Note and related Deeds of Trust from Ventures to BVI was recorded with the Clerk and Recorders Office, County of Pueblo, State of Colorado on May 7, 1998, at Book 3120, Page 735. In addition, on May 7, 1998, an amendment to the second lien Deed of Trust encumbering the Real Property was filed with the Clerk and Recorders Office, County of Pueblo, State of Colorado at Book 3120, Page 756. - 40 - periods or by the payment to the Bank of all sums due to it by way of redemption by the Debtor or a junior lienholder on the Real Property. Upon redemption or issuance of the Trustee's Deed, the Bank's lien on the Debtor's personal property, including furniture and fixtures, inventory, equipment, accounts receivable and general intangibles will be extinguished and released. The Debtor has 75 days from the date of the sale to redeem the Real Property from the Foreclosure Sale. Redemption requires the Debtor to pay the Bank all sums owing to the Bank under the Bank's promissory note. The Debtor is without sufficient funds to redeem the Real Property from the Foreclosure Sale. The Plan contemplates the Redemptor will redeem the Real Property from the Foreclosure Sale and convey the Real Property to the Debtor on the Effective Date in consideration for (a) a cash payment to BVI on the Effective Date equal to BVI's costs and expenses incurred in connection with negotiation and implementation of the Plan, including consultant and legal fees, (estimated to total approximately $200,000), and (b) a purchase money promissory note and first lien Deed of Trust encumbering the Real Property to be held by BVI and any participants in an amount equal to (i) the costs of Redemptor's redemption of the Real Property (estimated to be $832,111 plus interest, fees and costs) plus (ii) an amount equivalent to the payoff on the Effective Date of the promissory note held by BVI which was secured by the Real Property (estimated to be approximately $641,000 plus interest, fees and costs) with such payoff calculated as if there had been no Foreclosure Sale respecting the Real Property. The Plan provides that the class 8 creditor shall retain unaltered all of its legal, equitable and contractual rights as they existed on the Filing Date of the Chapter 11 case. Accordingly, the class 8 creditor is not impaired under the Plan and is not entitled to vote on the Plan. Class 8 is deemed to have accepted the Plan. Class 9 (BVI Investments, Ltd.) Class 9 consists of the Allowed Secured Claim held by BVI Investments, Ltd. ( "BVI"). The obligation owing to BVI is represented by the promissory note executed by the Debtor as described below. Funds borrowed pursuant to the following promissory note were used for operating capital and /or the purchase of equipment. note 12/02/98 face amount date balance due interest rate maturity 600,000 3/17/98 $640,383 10% 12/31/00 MIM representing the difference between the estimated value of the Real Property and the amount paid by Redemptor to redeem the Real Property). b. The reduced Allowed Secured Claim held by BVI (approximately $272,000) shall remain secured by a first lien (subject only to the prior and senior lien of the class 10 creditor) on all of the Debtor's personal property, including furniture and fixtures, inventory, accounts receivable and equipment. On the Effective Date and subject to Confirmation of the Plan, BVI voluntarily will waive the balance due under its promissory note dated March 17, 1998. The Plan provides that the class 9 creditor shall retain unaltered all of its legal, equitable and contractual rights as they existed on the Filing Date of the Chapter 11 case. Accordingly, the class 9 creditor is not impaired under the Plan and is not entitled to vote on the Plan. Class 9 is deemed to have accepted the Plan. Class 10 (National Business Finance, Inc.) Class 10 consists of the Allowed Secured Claim held by National Business Finance, Inc. ( "NBF"). The Debtor and NBF entered into a Combined Account Purchase And Security Agreement dated March 13, 1997 ("NBF Agreement ") . Pursuant to the NBF Agreement, the Debtor sold certain accounts to NBF, and NBF established a credit line for the Debtor. Funds advanced to the Debtor under the credit line were employed by the Debtor for operating capital and /or the purchase of equipment. Amounts due under the NBF Agreement are secured by a first lien on the Debtor's inventory, equipment, accounts receivable, documents, contract rights, chattel paper, and general intangibles. The first lien held by NBF on the above described personal property is a valid and perfected first lien as evidenced by the recording of a financing statement with the Colorado Secretary of State on April 1, 1997 (Filing No. 19972025079). The balance owing to NBF under the NBF Agreement is approximately $7,954 as of December 22, 1998. On or after the Effective Date, the Debtor anticipates paying in full the class 10 Allowed Secured Claim. The Plan provides that the class 10 creditor shall retain unaltered all of its legal, equitable and contractual rights as they existed on the Filing Date of the Chapter 11 case. Accordingly, the class 10 creditor is not impaired under the Plan and is not entitled to vote on the Plan. Class 10 is deemed to have accepted the Plan. - 42 - On March 17, 1998, the First Amended Rainaldi Note was modified to reflect additional advances made by BVI to the Debtor. The face value of the modified and restated First Amended Rainaldi Note was $600,000 ( "Second Amended Rainaldi Note ") . The Second Amended Rainaldi Note continued to be secured by a second lien Deed of Trust on the Real Property, a second lien Deed of Trust on certain real property owned by Anthony Estrada, and a lien on all of the Debtor's personal property. The Second Amended Rainaldi Note, the second lien Deed of Trust on the Real Property, and the lien on all of the Debtor's personal property constitute the Allowed Secured Claim held by BVI. The Real Property which secures the Second Amended Rainaldi Note has been sold at a public trustee's Foreclosure Sale. See the discussion of Peak National Bank (class 8) above. Under Colorado law, Redemptor may exercise its right of redemption if the Debtor does not redeem the Real Property from the Foreclosure Sale. The Debtor is without sufficient funds to redeem the Real Property. It is anticipated that Redemptor will redeem the Real Property from the Foreclosure Sale and convey the Real Property to the Debtor on the Effective Date in consideration for (a) a cash payment to Redemptor on the Effective Date equal to BVI's costs and expenses incurred in connection with negotiation and implementation of the Plan, including consultant and legal fees, (estimated to total approximately $200,000), and (b) a purchase money promissory note and first lien Deed of Trust encumbering the Real Property to be held by BVI and any participants in an amount equal to (i) the costs of Redemptor's redemption of the Real Property (estimated to be $832,111 plus interest, fees and costs) plus (ii) an amount equivalent to the payoff on the Effective Date of the promissory note held by BVI which was secured by the Real Property (estimated to be approximately $641,000 plus interest, fees and costs) with such payoff calculated as if there had been no Foreclosure Sale respecting the Real Property. Redemptor's obligation to convey the Real Property to the Debtor is conditioned upon the Court confirming the Plan. The effect of the redemption on BVI's Allowed Secured Claim is as follows: a. The Allowed Secured Claim will be reduced by an amount equal to the difference between the value of the Real Property and the amount paid by Redemptor to redeem the Real Property from the Foreclosure Sale. The Debtor believes the value of the Real Property to be approximately $1,200,000 based upon an October 8, 1998 appraisal obtained by Peak National Bank, the class 8 creditor. The Debtor estimates that the amount necessary to redeem the Real Property from the Foreclosure Sale to be approximately $832,111.39, plus interest, costs and fees. Accordingly, upon redemption by Redemptor, the Allowed Secured Claim held by BVI (approximately $640,000) will be reduced to approximately $272,000 ($640,000 representing BVI's Allowed Secured Claim less $368,000 - 41 - on the Effective Date, 13EAP shall release its lien on property of the Debtor. Class 11 is impaired under the Plan and is entitled to vote on the Plan. A ballot has been sent to class 11 for this purpose. Acceptance of the Plan by class 11 is a prerequisite to the Debtor filing a Chapter 11 case. See Requisite Approval discussed in the Introduction to this Statement. The Debtor intends to file a Chapter 11 bankruptcy case if the Debtor receives the Requisite Approval. If the Requisite Approval is not obtained, then the Debtor may not file a Chapter 11 case and no assurance can be made that any distribution ever will be made to the class 11 creditor. G. Plan Treatment of Shareholder Interests Class 12 (Common Stock) Class 12 consists of the holders of the Debtor's Common Stock issued and outstanding at the Filing Date. A schedule of class 12 interest holders is attached hereto as Exhibit 3. The Plan provides that on the Effective Date, class 12 interest holders shall exchange their Common Stock for shares of New Common Stock at the ratio of twenty shares of Common Stock for one share of New Common Stock, and the shares so exchanged shall be cancelled. The securities issued pursuant to the Plan will dilute the equity position held by the class 12 Common Stock holders at the Filing Date. The Debtor estimates the dilution to class 12 will be from 59.98% ownership at the Filing Date to 9.16% ownership immediately after the Effective Date. Notwithstanding the foregoing, if class 2 or class 3 or class 12 or class 13 reject the Plan, then classes 12 and 13 will neither retain nor receive any property under the Plan. In the event that any of these classes rejects the Plan, (a) the class 12 interests shall be cancelled and terminated at the Effective Date; (b) class 12 shall receive nothing under the Plan; and (c) the class 12 shares of Common Stock shall be cancelled. Class 12 is impaired under the Plan and is entitled to vote on the Plan. A ballot has been sent to all class 12 interest holders for this purpose. Acceptance of the Plan by class 12 is not a prerequisite to the Debtor filing a Chapter 11 case. See Requisite Approval discussed in the Introduction to this Statement. The Debtor intends to file a Chapter 11 bankruptcy case if the Debtor receives the Requisite Approval. If the Requisite Approval is not obtained, then the Debtor may not file a Chapter 11 case and no assurance can be made that any distribution ever will be made to the class 12 interest holders. - 44 - Class 11 (BEAP) Class 11 consists of the Allowed Secured Claims held by Barshop /Estrada Acquisition Partners LP ("BEAP"). In December of 1998, BEAP acquired the following promissory notes and related security documents from BVI Investments, Ltd. The following promissory notes represent the Allowed Secured Claims held by BEAP. Funds borrowed pursuant to the following promissory notes were used by the Debtor for operating capital and /or the purchase of equipment. note 11/30/98 face amount date balance due interest rate maturity $ 200,000.00 9/30/98 $ 77,811.84 10% 3/31/99 $ 500,000.00 9/30/98 $389,885.92 10% 3/31/99 The two promissory notes held by BEAP are secured by a lien encumbering all of the Debtor's accounts receivable and inventory. The lien held by BEAP on the Debtor's accounts receivable and inventory is junior to the lien held by the class 9 creditor and junior to the lien held by the class 10 creditor. The lien held by BEAP is a perfected and valid lien as evidenced by two security agreements executed by the Debtor dated August 27, 1998, and UCC financing statements filed with the Colorado Secretary of State and the County of Pueblo, State of Colorado, U.C.C. Records: The Plan provides that BEAP shall exchange its Allowed Secured Claims for (a) four million (4,000,000) shares of the Debtor's 1999 Series A Preferred Stock, and (b) if there is no distribution to class 12 and 13 interest holders under the Plan, one hundred (100) shares of the Debtor's New Common Stock. The distribution of securities to BEAP shall be in full satisfaction and discharge of the class 11 Allowed Secured Claims. The Plan also provides that - 43 - Reception or Filing Date Filing Number Place of Recording [$500,000 promissory note] 9/1/98 19982055912 Secretary of State 9/1/98 288788 County of Pueblo [$200,000 promissory note] 9/1/98 19982055874 Secretary of State 9/1/98 288787 County of Pueblo The Plan provides that BEAP shall exchange its Allowed Secured Claims for (a) four million (4,000,000) shares of the Debtor's 1999 Series A Preferred Stock, and (b) if there is no distribution to class 12 and 13 interest holders under the Plan, one hundred (100) shares of the Debtor's New Common Stock. The distribution of securities to BEAP shall be in full satisfaction and discharge of the class 11 Allowed Secured Claims. The Plan also provides that - 43 - Date, the Stock Options shall be cancelled and the holders thereof will receive nothing under the Plan. Notwithstanding the foregoing and notwithstanding any restriction contained in the Stock Option, the holders of class 14 Stock Options may exercise their rights under their Stock Options on or before the Voting Deadline. The Voting Deadline is the last date for creditors and interest holders to vote on the Plan. The Voting Deadline is set forth in the Introduction to this Statement. If the holder of a Stock Option exercises his /her /its rights thereunder, then such holder shall be entitled to vote on the Plan as the holder of the securities so acquired (class 12 Common Stock and /or class 13 Preferred stock) , and shall receive the Plan treatment with respect to the securities so acquired (class 12 Common Stock and /or class 13 Preferred stock). The Debtor believes that the Stock Options have no value as of the date of this Statement and will have no value at the Filing Date. The Debtor believes that its Common Stock and Preferred Stock have no value as of the date of this Statement and will have no value at the Filing Date. If the Plan is confirmed, the holders of Common Stock and Preferred Stock will be subject to treatment as provided in classes 12 or 13 above. The holders of Stock Options should be aware that (a) the holders of Common Stock and Preferred Stock will be substantially diluted by the issuance of securities under the Plan, and (b) it is possible that the holders of Common Stock and Preferred Stock will neither retain nor receive any property under the Plan, and the Common Stock and Preferred Stock may be cancelled and terminated under the Plan. Any holder of a Stock Option contemplating the exercise of the rights thereunder should take these risks into consideration. See the discussion in classes 12 and 13 above. Class 14 is impaired under the Plan. Because class 14 is neither receiving nor retaining any property under the Plan, class 14 is deemed to have rejected the Plan and is not entitled to vote on the Plan. Acceptance of the Plan by class 14 is not a prerequisite to the Debtor filing a Chapter 11 case. See Requisite Approval discussed in the Introduction to this Statement. The Debtor intends to file a Chapter 11 bankruptcy case if the Debtor receives the Requisite Approval. If the Requisite Approval is not obtained, then the Debtor may not file a Chapter 11 case and no assurance can be made that any distribution ever will be made to the class 14 interest holders. Class 15 (Warrants) Class 15 consists of the holders of Warrants to purchase Common Stock and /or Preferred Stock. A schedule of the holders of Warrants is attached here to as Exhibit 6. On the Effective Date, - 46 - Class 13 (Preferred Stock) Class 13 consists of the holders of the Debtor's Preferred Stock issued and outstanding at the Filing Date. A schedule of class 13 interest holders is attached hereto as Exhibit 4. The Plan provides that on the Effective Date, class 13 interest holders shall either (a) exchange their Preferred Stock for shares of New Common Stock at the ratio of twenty shares of Preferred Stock for one share of New Common Stock, and the shares so exchanged shall be cancelled, or (b) receive a cash distribution equal to fifteen percent of the issue price of the Preferred Stock held by the class 13 interest holder in complete redemption and full discharge and satisfaction of such interest holder's Preferred Stock, which shares shall thereupon be cancelled. The class 13 holders of Preferred Stock shall make the foregoing election on the ballot which accompanies the Plan and Statement. Any member of class 13 who fails to timely tender a ballot, or tenders a ballot, but fails to make an election, shall be deemed to have elected to receive the cash distribution as described above. For those class 13 interest holders who elect to receive New Common Stock under the Plan, the securities issued pursuant to the Plan will dilute the equity position held by the class 13 Preferred Stock holders at the Filing Date. The Debtor estimates the dilution to class 13 will be from 14.28% ownership at the Filing Date to 2.18% immediately after the Effective Date. Notwithstanding the foregoing, If class 2 or class 3 or class 12 or class 13 reject the Plan, then classes 12 and 13 will neither retain nor receive any property under the Plan. In the event that any of these classes rejects the Plan, (a) the class 13 interests shall be cancelled and terminated at the Effective Date; (b) class 13 shall receive nothing under the Plan; and (c) the class 13 shares of Preferred Stock shall be cancelled. Class 13 is impaired under the Plan and is entitled to vote on the Plan. A ballot has been sent to all class 13 interest holders for this purpose. Acceptance of the Plan by class 13 is not a prerequisite to the Debtor filing a Chapter 11 case. See Requisite Approval discussed in the Introduction to this Statement. The Debtor intends to file a Chapter 11 bankruptcy case if the Debtor receives the Requisite Approval. If the Requisite Approval is not obtained, then the Debtor may not file a Chapter 11 case and no assurance can be made that any distribution ever will be made to the class 13 interest holders. Class 14 (Stock Options) Class 14 consists of the holders of Stock Options to purchase Common Stock and /or Preferred Stock. A schedule of the holders of Stock Options is attached here to as Exhibit 5. On the Effective - 45 - Effective Date shall be made by the Debtor from future income and /or the proceeds of the D.I.P. Loan. The following chart sets forth the estimated Plan payments due on the Effective Date. Allowed Administrative Expenses* Cash Payment To Acquire Real Property ++ Class 1 (Allowed Priority Claims) + ++ Class 2 (Small Claims) Class 3 (Allowed Claims) Class 4 (W.K. Capital Advisors, Inc. /+ Estrada International Foods) Class 5 (County of Pueblo)+ Class 6 (City of Pueblo) Class 7 (Anthony Estrada et al) Class 8 (Peak National Bank) Class 9 (BVI Investments, Ltd.) Class 10 (National Business Finance) Class 11 (BEAP) Class 12 (Common Stock) Class 13 (Preferred Stock) ** Class 14 (Stock Options) Class 15 (Warrants) Amounts to cure executory contracts + ++ and unexpired leases to be assumed TOTAL $ 30,000.00 $ 200,000.00 $ 39,000.00 $ 15,000.00 $ 500,000.00 $ .00 $ 5,000.00 $ 5,000.00 $ 80,000.00 $ .00 $ .00 $ 8,000.00 $ .00 $ .00 $ 303,000.00 $ .00 $ .00 $ 21,600.00 $1,206,600.00 + Assumes that classes 4 and 5 accept the Plan and the class 4 and 5 Plan treatment ++ Funds required by the Plan to purchase the Real Property on.the Effective Date + ++ 20% due at the Effective Date with the balance paid in deferred installments * Estimated fees for Debtor's attorney ** Assumes the Plan is accepted by classes 2, 3, 12 and 13 and assumes all class 13 interest holders elect to receive a cash distribution The following chart sets forth the distribution of shares of stock to occur on the Effective Date. Column C represents shares of New Common Stock. Column A represents shares of 1999 Series A Preferred Stock. Column B represents shares of 1999 Series B Preferred Stock. - 48 - the Warrants shall be cancelled and the holders thereof will receive nothing under the Plan. Notwithstanding the foregoing and notwithstanding any restriction contained in the Warrants, the holders of class 15 Warrants may exercise their rights under their Warrants on or before the Voting Deadline. The Voting Deadline is the last date for creditors and interest holders to vote on the Plan. The Voting Deadline is set forth in the Introduction to this Statement. If the holder of a Warrant exercises his /her /its rights thereunder, then such holder shall be entitled to vote on the Plan as the holder of the securities so acquired (class 12 Common Stock and /or class 13 Preferred stock), and shall receive the Plan treatment with respect to the securities so acquired (class 12 Common Stock and /or class 13 Preferred stock). The Debtor believes that the Warrants have no value as of the date of this Statement and will have no value at the Filing Date. The Debtor believes that its Common Stock and Preferred Stock have no value as of the date of this Statement and will have no value at the Filing Date. If the Plan is confirmed, the holders of Common Stock and Preferred Stock will be subject to treatment as provided in classes 12 or 13 above. The holders of Warrants should be aware that (a) the holders of Common Stock and Preferred Stock will be substantially diluted by the issuance of securities under the Plan, and (b) it is possible that the holders of Common Stock and Preferred Stock will neither retain nor receive any property under the Plan, and the Common Stock and Preferred Stock may be cancelled and terminated under the Plan. Any holder of a Warrant contemplating the exercise of the rights thereunder should take these risks into consideration. See the discussion in classes 12 and 13 above. Class 15 is impaired under the Plan. Because class 15 is neither receiving nor retaining any property under the Plan, class 15 is deemed to have rejected the Plan and is not entitled to vote on the Plan. Acceptance of the Plan by class 15 is not a prerequisite to the Debtor filing a Chapter 11 case. See Requisite Approval discussed in the Introduction to this Statement. The Debtor intends to file a Chapter 11 bankruptcy case if the Debtor receives the Requisite Approval. If the Requisite Approval is not obtained, then the Debtor may not file a Chapter 11 case and no assurance can be made that any distribution ever will be made to the class 15 interest holders. H. Means for Execution of the Plan Plan Distributions All Plan payments on the Effective Date shall be made from the proceeds of the D.I.P. Loan which provides funding to the Debtor in an amount not to exceed $1,450,000.00. Plan payments due after the - 47 - (b) a purchase money promissory note and first lien Deed of Trust encumbering the Real Property to be held by BVI and any participants in an amount equal to (i) the costs of Redemptor's redemption of the Real Property (estimated to be $832,111 plus interest, fees and costs) plus (ii) an amount equivalent to the payoff on the Effective Date of the promissory note held by BVI which was secured by the Real Property (estimated to be approximately $641,000 plus interest, fees and costs) with such payoff calculated as if there had been no Foreclosure Sale respecting the Real Property. In addition, on the Effective Date, BVI shall waive any Claim remaining under its promissory note secured by the Real Property. Redemptor's obligation to convey the Real Property to the Debtor and BVI' s waiver of its Claim under the foregoing promissory note is conditioned upon the Court confirming the Plan. I. Other Plan Provisions Executory Contracts and Unexpired Leases The Debtor is assuming those executory contracts and unexpired leases described in Exhibit C attached to the Plan. Assumption of an executory contract or unexpired lease means the Debtor intends to be bound by and shall comply with the terms of such contract or lease after Confirmation of the Plan. To the extent that the Debtor is in default under an executory contract or unexpired lease to be assumed, the Debtor shall cure such defaults on the Effective Date of the Plan, unless otherwise agreed by the other party to the contract or lease. Amounts necessary to cure such defaults (if any) are set forth in Exhibit C to the Plan. Any executory contract or unexpired lease which is not set forth in Exhibit C attached to the Plan shall be rejected upon the Effective Date of the Plan. Any party to a rejected executory contract or unexpired lease must file a proof of Claim for damages arising from such rejection within 15 days after the Effective Date of the Plan failing which such Claim shall be forever barred and the holder thereof shall receive nothing on account of such Claim. Allowed Claims arising on account of rejected executory contracts or unexpired leases shall be subject to Plan treatment as class 3 creditors. Discharge Except as otherwise provided in the Plan, the distributions under the Plan on account of Allowed Claims and shareholder interests shall be in full satisfaction and discharge of any Claims or shareholder interests held by the recipients of such distributions as provided in Section 1141 of the Bankruptcy Code. In addition, except as otherwise provided in the Plan, the Confirmation of the Plan shall operate as an injunction against the - 50 - Allowed Class 1 Class 2 Class 3 Class 4 Class Class Class Class Class Class Class Class Class Class Class 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 Administrative Expenses (Allowed Priority Claims) (Small Claims) (Allowed Claims) (W.K. Capital Advisors, Inc./ Estrada International Foods)* (County of Pueblo) (City of Pueblo) (Anthony Estrada et al) (Peak National Bank) (BVI Investments, Ltd.) (National Business Finance) (BEAP) ** (Common Stock holders) * ** (Preferred Stock holders) * ** (Stock Option holders) * ** (Warrant holders) * ** TOTALS C A B N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A None None 100,500 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 100 4,000,000 None 424,000 None None 100,976 None None None None None None None None 525,076 4,000,000 100,500 * Assumes class 4 accepts the Plan and elects to receive 1999 Series B Preferred Stock ** Shares of 1999 Series A Preferred stock are convertible to four million shares of New Common Stock (100 shares of New Common Stock reflected in the chart only will be issued if classes 12 and 13 receive no distribution under the Plan) ** *Assumes (i) classes 2, 3, 12 and 13 have accepted the Plan, (ii) all class 13 interest holders elect to receive New Common Stock rather than cash, and (iii) no class 14 or 15 interest holders elect to exercise their Stock Options and /or Warrants prior to the Voting Deadline Conveyance of Real Prcperty to the Debtor The Debtor's Real Property was the subject of a public trustee's Foreclosure Sale held on October 14, 1998 by the Public Trustee for the County of Pueblo, State of Colorado. The Real Property is essential to the Debtor's business operations as it houses the Debtor's plant, equipment and facilities. The Plan anticipates that Redemptor will redeem the Real Property from the Foreclosure Sale (subject to the right of redemption of junior lienholders) and convey the Real Property to the Debtor in consideration for (a) a cash payment to Redemptor on the Effective Date equal to BVI's costs and expenses incurred in connection with negotiation and implementation of the Plan, including consultant and legal fees, (estimated to total approximately $200,000), and - 49 - Officers Hiram W. Lewis III Anthony Estrada Steve Castanedo CEO President V. P. of Operations Officers compen- sation is set forth in Exhibit 17 attached hereto Anthony Estrada Mr. Estrada is a founding shareholder, officer and director of the Debtor. He was formerly the president and CEO of Candy's Tortilla Factory, Inc., building the tortilla manufacturer into a forty million dollar regional company in the food service and retail markets. Mr. Estrada is a member of the Board of Directors of several charitable organizations, and is active in various food industry associations. Steve Castanedo Mr. Castanedo has more than 20 years of experience in USDA facilities and possesses a multi- faceted background, including human resources management, sales management and plant operations /product development. He has been employed by various food industry companies, including Wilson Foods, Toppers Meat Company, H&M Food Systems, Design Foods (a Division of Sara Lee Meat Group), Harry's Farmers Market and Circle K Corporation. Mr. Castanedo has experience as a general manager, national account sales manager, vice - president of operations, director of food service and as a consultant in the industry. Bruce B. Barshop Mr. Barshop is the president of Barshop Ventures, L.L.C., a venture capital investment firm located in San Antonio, Texas. He oversees the daily operations of the firm. Mr. Barshop also serves as a director for various real estate and banking companies. His education includes an undergraduate degree, magna cum laude, from Princeton University and a J.D. with honors from the University of Texas. Hiram W. Lewis III Mr. Lewis graduated from Stanford University in 1969. He received his MBA from Stanford Graduate School of Business in 1972. Mr. Lewis has worked in various executive capacities for a number of small and medium -sized companies in the oil & gas exploration business from 1972 to 1992. Since 1992, Mr. Lewis has invested in oil and gas ventures and has served as a financial consultant for financially distressed companies. Mr. Lewis and Mr. Robert C. Pate are the co- owners of Compadres Ventures, Inc., an investment firm. Through Compadres Ventures, Inc. and a related partnership, Mr. Lewis, Mr. Pate, Compadres Ventures and trusts for the benefit of Mr. Lewis' and Mr. Pate's children, own an interest in BEAP. BEAP is the class 11 creditor under the Plan. Mr. Lewis owns no interest in BVI Investments, Ltd. or BEAP Management. - 52 - initiation or continuation of any action to collect or recover a pre- Confirmation debt or Claim against the Debtor or interest in the Debtor, or foreclose upon property of the Debtor. Vesting of Property of the Estate On the Effective Date of the Plan, and except as otherwise provided in the Plan, all property of the Chapter 11 bankruptcy estate shall vest in the Debtor free and clear of all liens and Claims of any kind or nature. Plan Modification The Joint Proponents may modify the Plan consistent with the provisions of the Bankruptcy Code. Retention of Jurisdiction by the Court The Court shall retain exclusive jurisdiction for the purposes set forth in Article XII of the Plan. Officers and Directors of the Reorganized Debtor Upon the Effective Date of the Plan, the following persons shall serve as the directors of the Debtor until the next annual shareholders meeting at the levels of compensation described below and until their successors are duly elected and qualified. Upon the Effective Date, the following persons shall serve as the officers of the Debtor at the levels of compensation described below for the terms specified in the By -Laws of the Debtor. A short biography of each of the officers and directors is set forth below. In addition, a description of the employment agreements which the Debtor will enter into at or after the Effective Date of the Plan is attached hereto as Exhibit 17. Board of Directors Office Compensation Anthony J. Estrada N/A Directors will receive expense Bruce B. Barshop N/A reimbursements only Hiram W. Lewis III N/A Robert C. Pate N/A - 51 - A. Confirmation Confirmation of the Plan means that the Court has approved the Plan. Upon Confirmation, the Plan becomes binding upon the Debtor, the Debtor's creditors and the Debtor's shareholders. If the Court confirms the Plan, it will be binding upon you even if you did not vote on the Plan or you voted against the Plan. B. Voting Each impaired class under the Plan constitutes a separate class for voting and distribution under the Plan. Ballots have been mailed with this Statement to the members of all impaired classes entitled to vote on the Plan. For a discussion of the classes entitled to vote on the Plan and the method of determining whether a class of impaired creditors or impaired interest holders has accepted or rejected the Plan, see the Introduction to this Statement. The Plan provides that the Debtor will file its Chapter 11 case and seek Court approval of the Plan if the Requisite Approval is satisfied. The Requisite Approval requires the following classes to accept the Plan: 2, 6, 7 and 11. If the Requisite Approval is satisfied, the Debtor will file its Chapter 11 case and immediately seek confirmation of the Plan. If the Requisite Approval is satisfied, the remaining impaired classes which are entitled to vote on the Plan, or will have been deemed to have rejected the Plan, are as follows: Class 1 Allowed Priority Impaired and Claims entitled to vote on Plan Class 3 Allowed Claims Impaired and entitled to vote on Plan Class 4 Allowed Claim Impaired and of W.K. Capital entitled to Advisors, Inc./ vote on Plan Estrada Interna- tional Foods Class 5 Allowed Claim of Impaired and County of Pueblo entitled to vote on Plan - 54 - Robert C. Pate Mr. Pate graduated from the University of Texas with honors in 1972 and the University of Texas Graduate School of Business in 1974. He received his law degree from Southern Methodist University in 1978. Mr. Pate is a certified public accountant as well as an attorney. He has represented Mr. Bruce Barshop and Mr. Barshop's related businesses since 1988. Mr. Pate has twice served as a Texas State District Court Judge by appointment of Governor George W. Bush. Mr. Pate practices law in Corpus Christi, Texas. Mr. Pate and Mr. Hiram W. Lewis III are the co- owners of Compadres Ventures, Inc., an investment firm. Through Compadres Ventures, Inc. and a related partnership, Mr. Lewis, Mr. Pate, Compadres Ventures and trusts for the benefit of Mr. Pate's and Mr. Lewis' children, own an interest in BEAP. BEAP is the class 11 creditor under the Plan. Mr. Pate owns no interest in BVI Investments, Ltd. or BEAP Management. Miscellaneous Plan Provisions The Plan contains various other miscellaneous provisions. Creditors and shareholders are urged to read the Plan in its entirety. V. ASSETS AND CAUSES OF ACTION The Debtor's assets and causes of action are described in the Liquidation Analysis attached hereto as Exhibit 18. VI. FINANCIAL INFORMATION Attached hereto as Exhibit 19 are the Debtor's unaudited Financial Statements for the years ended December 31, 1996 and December 31, 1997. Attached hereto as Exhibit 20 are the Debtor's unaudited Financial Statements for the ten months ended October 31, 1998. Attached hereto as Exhibit 21 is a pro forma balance sheet for the reorganized Debtor as of the Effective Date of the Plan. THE PRO FORMA BALANCE SHEET IS BASED ON PROJECTIONS AND ACTUAL RESULTS WILL VARY. The pro forma balance sheet was prepared by the Debtor. The pro forma balance sheet assumes, inter alia, the following: (a) the Plan is confirmed resulting in the discharge of all pre - Confirmation debts and Claims except as otherwise provided in the Plan, (b) all Plan payments and distributions required on the Effective Date are made, and (c) the Effective Date of the Plan is March 15, 1999. VII. CONFIRMATION OF THE PLAN - 53 - under the plan equal to the value of the shareholder interests. If the class of interests is "under water ", then such interests are valueless and the plan may be confirmed notwithstanding the dissent of the class even if the plan provides that class of interests will neither retain nor receive any property under the plan on account of such interests. In the present case, the shareholders interests in classes 12, 13, 14 and 15 are valueless. Therefore, the Plan can be confirmed over the dissent of these classes even if the Plan provides that such classes shall neither retain nor receive any property under the Plan. D. Confirmation Standards Assuming that the Requisite Approval has been satisfied and that the Court has found that the Plan can be confirmed notwithstanding a dissenting class or classes, the Plan only can be confirmed if the Court finds the standards for Confirmation have been satisfied as set forth in Section 1129(a) of the Bankruptcy Code. Pursuant to these Confirmation standards, the Court must find, among other things, that unless every member of an "impaired" class has voted to accept the Plan, the amount to be received under the Plan by each member of an impaired class is not less than the amount such class member would receive in liquidation under Chapter 7 of the Bankruptcy Code on the Effective Date of the Plan. Also, the Court must find that the Plan is feasible, that is, the Plan payments can be made and that Confirmation of the Plan is not likely to be followed by liquidation or the need for further financial reorganization of the Debtor. Feasibility Feasibility requires a showing that the Debtor can make the Plan distributions and can continue with successful business operations such that Confirmation of the Plan will not be followed by further financial problems. Real Property Debtor's business operations are conducted at the Real Property. Accordingly, the Real Property is necessary for the successful reorganization of the Debtor's business. The Debtor lost its interest in the Real Property at the public trustee's Foreclosure Sale which occurred on October 14, 1998. The Plan provides that Redemptor shall redeem the Real Property from the Foreclosure Sale and convey the Real Property to the Debtor on the Effective Date in consideration for (a) a cash payment to Redemptor on the Effective Date equal to BVI's costs and expenses incurred in connection with negotiation and implementation of the Plan, including consultant and legal fees, (estimated to total approximately $200,000), and (b) a purchase money promissory note and first lien Deed of Trust encumbering the Real Property to be held by BVI and any participants in an amount equal to (i) the - 56 - Classes 12 and 13 Holders of Common Impaired and Stock and Preferred entitled to Stock vote on Plan Classes 14 and 15 Warrant holders Deemed to and Stock Option have rejected holders Plan The Joint Proponents intend to seek confirmation of the Plan pursuant to Section 1129(b) of the Code notwithstanding the deemed rejection of the Plan by classes 14 and 15 and the possible rejection of the Plan by classes 1, 3, 4, 5, 12 and /or 13. C. Cram Down The cram down provisions of the Code permit the Court to confirm a plan of reorganization notwithstanding that an impaired class or classes has rejected the plan. A discussion of the cram down provisions contained in Section 1129(b) of the Code follows. Holders of Allowed Secured Claims With respect to a class of dissenting, impaired, secured creditors, the Code provides several means by which a plan may be confirmed notwithstanding such a dissenting class. Section 1129(b). In the present case, the Joint Proponents will not seek to obtain Confirmation over the dissent of any secured creditor class. Holders of class 3 Allowed Claims With respect to a class of dissenting, unsecured creditors, Section 1129(b) provides that the Plan can be made binding on such a dissenting class if the Plan does not unfairly discriminate against the dissenting class and any junior class of Claims or interests is not receiving or retaining any property under the plan. In the present case, the Joint Proponents believe that the Plan does not discriminate in any manner with respect to the class 3 Allowed Claims. In addition, there are four interest holder classes (classes 12, 13, 14 and 15) which are junior to class 3. Classes 14 and 15 are neither retaining nor receiving any property under the Plan. Classes 12 and 13 will not retain or receive any property under the Plan if class 3 rejects the Plan. Therefore, the Joint Proponents believe that the Plan can be confirmed notwithstanding a dissenting vote by class 3. Holders of Interests With respect to a class of dissenting, impaired shareholder interests, Section 1129(b) provides that a plan can be made binding on a dissenting class of interests if the class receives property - 55 - after the Effective Date. Accordingly, class 1 is not receiving less under the Plan than what it would receive in liquidation under Chapter 7 on the Effective Date. Class 2 (Small Claims of $500.00 or less) Class 2 consists of Small Claims. Small Claims are to be paid in cash in full on the Effective Date. Accordingly, class 2 is not receiving less under the Plan than what it would receive in liquidation under Chapter 7 on the Effective Date. Class 3 (Allowed Claims greater than $500.00) The Debtor has completed a liquidation analysis, a copy of which is attached hereto as Exhibit 18. The liquidation analysis compares the distribution to the holders of class 3 Allowed Claims under the Plan versus the anticipated distribution to class 3 creditors if the Debtor were liquidated on the Effective Date pursuant to Chapter 7 of the Bankruptcy Code. The Plan provides that each holder of a class 3 Allowed Claim shall receive a cash distribution equal to his /her /its Pro Rata Share of $500,000.00. The Debtor estimates that such a Pro Rata distribution shall provide class 3 creditors with a distribution in the range of 16.6 to 27.4 cents on the dollar depending upon the total class 3 Allowed Claims. The liquidation analysis reflects that the holders of class 3 Allowed Claims are estimated to receive no distribution on account of their class 3 Allowed Claims if the Debtor were liquidated under Chapter 7 on the Effective Date. Therefore, class 3 creditors are not receiving less under the Plan than what they would receive in liquidation under Chapter 7 on the Effective Date. Classes 4 and 5 (County of Pueblo and W.K. Capital Advisors et al) The liquidation analysis because if class 4 or class 5 Allowed Claim and /or the class treatment as a member of class pursuant to class 4 and /or clas of class 3 above. does not apply to these classes reject the Plan, then the class 4 5 Allowed Claim will be subject to 3 and nc distribution will be made s 5 of the Plan. See the discussion Classes 6 and 7 (City of Pueblo and Anthony Estrada et al) The liquidation analysis does not apply to these classes because the Joint Proponents believe that all members of each of these classes will have accepted the Plan. - 58 - costs of Redemptor's redemption of the Real Property (estimated to be $832,111 plus interest, fees and costs) plus (ii) an amount equivalent to the payoff on the Effective Date of the promissory note held by BVI which was secured by the Real Property (estimated to be approximately $641,000 plus interest, fees and costs) with such payoff calculated as if there had been no Foreclosure Sale respecting the Real Property. Redemptor has no obligation to convey the Real Property to the Debtor unless the Plan is confirmed and becomes effective. Plan Distributions On the Effective Date, the Plan requires the Debtor to make payments to various classes totaling approximately $1,206,600. See the section of this Statement entitled "Means for the Execution of the Plan ". The foregoing payments will be made from the proceeds of the D.I.P. Loan. The D.I.P. loan provides financing to the Debtor in an amount not to exceed $1,450,000.00. Financial Projections Attached hereto as Exhibit 22 are financial projections for the Debtor for the 3 years after the Effective Date of the Plan. The projections were prepared by the Debtor. FINANCIAL PROJECTIONS ARE BY NATURE FORWARD LOOKING AND BASED UPON ASSUMPTIONS AND THEREFORE ACTUAL RESULTS WILL VARY. The financial projections contained in Exhibit 22 assume, inter alia, the following: (a) the Plan is confirmed resulting in the discharge of all pre - Confirmation debts and Claims except as otherwise provided in the Plan, (b) all Plan payments required on the Effective Date are made, and (c) the Effective Date of the Plan is March 15, 1999. The financial projections indicate that the Debtor will not likely incur further financial problems after Confirmation of the Plan and the discharge of its debts as provided for in the Plan. Comparison to Chapter 7 Liquidation As described above, unless all members of an impaired class accept the Plan, such "impaired" classes must receive under the Plan not less than they would have received if the Debtor were liquidated under Chapter 7 of the Bankruptcy Code on the Effective Date. Accordingly, the following discussion relates only to the Plan treatment of impaired classes where all members of the class do not accept the Plan. Class 1 (Allowed Priority Claims) Class 1 consists of Allowed Priority Claims. Class 1 Allowed Priority Claims are to be paid in cash in full on the Effective Date or are to be paid in full in deferred payments with interest - 57 - securities under the Plan raises several legal issues under the Code and Securities Act which are discussed below. Section 1145 Exemption from Securities Act Registration Section 1145 of the Code provides that state and federal registration requirements do not apply to the issuance of securities by the Debtor under the Plan to holders of (a) Claims against or interests in the Debtor, or (b) principally in exchange for such Claims or interests and property. With certain exceptions discussed below, recipients of securities issued under the Plan may resell them without restriction. Issuance Section 1145 exempts the original issuance of securities under the Plan from registration under the Securities Act and applicable state law. For the original issuance to be exempt, three principal requirements must be satisfied (a) the securities must be issued by the Debtor under the Plan, (b) the recipients of the securities must hold a Claim against the Debtor, and interest in the Debtor, or an Allowed Administrative Expense, and (c) the securities must be issued entirely in exchange for the recipient's Claim against or interest in the Debtor, or principally in such exchange and partly for cash or property. The Debtor believes the issuance of securities under the Plan will satisfy all three conditions because (a) the securities are being issued by the Debtor under the Plan, (b) the recipients of the securities hold Claims against or interests in the Debtor, and (c) the securities are being issued entirely in exchange for Claims against or interests in the Debtor. Resale Although the Debtor believes the resale of the securities issued under the Plan would be exempt from registration in most circumstances, certain recipients of the securities (those recipients who may be deemed underwriters as defined in Section 1145(b)) may be unable to resell them absent registration of those securities under the Securities Act or other exemptions available under applicable federal and state law. All recipients of securities issued under the Plan should consult with their legal advisors regarding this risk. Section 1145(b) defines four types of underwriters (a) a person who purchases a Claim against, interest in, or Allowed Administrative Expense against the Debtor with a view to distributing any security received in exchange therefor, (b) a person who offers to sell securities offered under the Plan for the holders of such securities, (c) a person who offers to buy such securities from the holders of them, if the offer is (i) with a view to distributing them, or (ii) made under a distribution agreement, and (d) a person who is an issuer with respect to the securities, as the term issuer is defined in Section 2(11) of the Securities Act. Under Section 2(11), an issuer includes any person - 60 - Classes 8, 9 and 10 (Peak National Bank, BVI and NBF) The liquidation analysis does not apply to these classes because these classes are not impaired under the Plan. Class 12, 13, 14 and 15 (interest holders) In liquidation, these classes would receive no distribution on account of their interests. See the liquidation analysis attached hereto as Exhibit 18. Accordingly, these classes are not receiving less under the Plan than what they would receive in liquidation under Chapter 7 on the Effective Date. VIII. POST - EFFECTIVE DATE BUSINESS OPERATIONS Upon the Effective Date, the reorganized Debtor's business operations will be governed by its new officers and new Board of Directors. The reorganized Debtor will continue with, and seek to substantially expand, its "co- pack" operations and will continue to manufacture and sell its frozen Mexican line of food products. The successful reorganization coupled with new management will permit the reorganized Debtor to establish trade credit and other business and financial relationships necessary to normalize its business operations. Once its business operations are stabilized, the Debtor believes that it can attract new business from a variety of sources. Finally, the reorganized Debtor will institute new and improved financial controls and other measures to assure margins sufficient to cover general and administrative costs, debt service and provide a return to its equity holders. IX. TAX CONSEQUENCES All creditors are advised to consult with their tax advisors respecting the tax consequences to them of the Confirmation and consummation of the Plan, including federal, state and local tax consequences. X. EFFECT OF SECURITIES LAWS The Plan provides for the issuance of securities consisting of New Common Stock, 1999 Series A Preferred Stock and 1999 Series B Preferred Stock in exchange for Claims against and interests in the Debtor. RECIPIENTS OF SECURITIES ISSUED UNDER THE PLAN SHOULD BE AWARE THAT THE JOINT PROPONENTS BELIEVE THE SECURITIES ISSUED UNDER THE PLAN SHALL HAVE NO VALUE AT THE EFFECTIVE DATE OF THE PLAN. Section 1145 of the Code exempts this issuance from the registration requirements of (a) the Securities Act of 1933 ( "Securities Act "), and (b) applicable state law. The issuance of Elm_ 12/22/98 TUE 17:43 FAX 7195839585 ESTRADA FOODS __�_ 12/ 16:12 633631'_ rn ud n.LCnf r ru u .+ •i _ . �. 001 B$TRADA F=S I =C. , a Colorado carwratl=, D and Joint gonwmt By: Xntbony BsC ada, Pres dent m directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common control with it. Whether a person is an issuer, and therefore an underwriter, for purposes of Section 1145(b) depends upon a number of facts. These include: the person's equity interest in the Debtor; the distribution and concentration of other equity interests in the Debtor; whether the person is an officer or director of the Debtor; whether the person, either alone or acting in concert with others, has contractual or other relationships giving that person power over management policies and decisions of the Debtor; and whether the person actually has such power notwithstanding the absence of formal indicia of control. An officer or director of the Debtor may be deemed a controlling person, particularly if his /her position is coupled with ownership of a significant percentage of the Debtor's securities. In addition, a holder of 10% of the Debtor's securities could be deemed a controlling person. To the extent persons deemed underwriters receive securities pursuant to the Plan, resales by them would not be exempted by Section 1145 from registration under the Securities Act. Given the complex, subjective nature of the question of whether a particular holder may be an underwriter, the Debtor makes no representation concerning the right of any person to trade the securities issued under the Plan. The Debtor recommends that potential recipients of securities under the Plan consult with their legal advisors concerning whether they may freely trade the securities. XI. ALTERNATIVES TO CONFIRMATION OF THE PLAN If Confirmation of the Plan is denied by the Court, the Court may, in its discretion: (1) permit the Joint Proponents, if both agree, to modify the Plan and again seek acceptance and Confirmation of the amended Plan, (2) convert the Chapter 11 case to a Chapter 7 case wherein a trustee would be appointed to liquidate the Debtor's assets, or (3) dismiss the Chapter 11 case. XII. CONCLUSION If the Requisite Approval is not satisfied, the Debtor likely will not file a Chapter 11 bankruptcy case. In this event or in the event that the Plan is not approved by the Court, the Debtor's Real Property will be lost through the pending Foreclosure Sale and the Debtor's personal property most likely will be liquidated by the secured creditors who hold liens on such property. Accordingly, the Joint Proponents believe the Plan provides the only means for making a distribution to the Debtor's unsecured creditors and shareholders, and urges you to cast a vote accepting the Plan. - 61 - Holden Padj ep--ajld LLC Joey' Laufer #77/28 ( \ Att eys for the ebtor 303 East 17th Avenue Suite 660 Denver, Colorado 80203 Telephone (303) 863 -1100 Facsimile (303) 863 -1109 Cox & Smith Incorporated Teresa Ereon Giltner Texas State Bar #06639800 Patrick L. Huffstickler Texas State Bar #10199250 Attorneys for Barshop /Estrada Acquisition Partners LP 112 East Pecan Street Suite 1800 San Antonio, Texas 78205 Telephone (210) 554 -5500 Facsimile (210) 226 -8395 - 64 - 12/22/98 18:54 FAX 2102288395 COX & SMITH #1835 BARSHOP/ESTRADA ACQUISITION PARTNERS LP, a Texas limited partnership, Joint Proponent, By: BEAD Management LLC, general partaer By: Zs===::-- Bruce B. Barshop, President Z003 M