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Thomas J. Salerno (AZ Bar No. 007492) [email protected]
Jordan A. Kroop (AZ Bar No. 018825) [email protected]
SQUIRE, SANDERS & DEMPSEY L.L.P.
Two Renaissance Squire, Suite 2700
40 North Central Avenue
Phoenix, Arizona 85004-4498
(602) 528-4000
Attorneys for Debtors




UNITED STATES BANKRUPTCY COURT

DISTRICT OF ARIZONA

In re

COYOTES HOCKEY, LLC,


Debtor.








Chapter 11
Case No. 2:09-bk-09488-RTBP
(Jointly Administered)


DISCLOSURE STATEMENT IN
SUPPORT OF AMENDED PLAN
Dated May 25, 2010

THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED FOR
USE BY ANY PARTY IN THIS CASE. YOU ARE NOT NOW BEING

ASKED TO VOTE. YOUR VOTE WILL NOT BE SOLICITED UNLESS
AND UNTIL THE BANKRUPTCY COURT APPROVES A DISCLOSURE

STATEMENT WITH RESPECT TO A PLAN. IF AND WHEN THAT

OCCURS, YOU WILL RECEIVE A SEPARATE MAILING DESCRIBING

THE PLAN VOTING PROCESS.

PHOENIX/510963.4



I.

II.

III.

IV.

V.

VI.

TABLE OF CONTENTS

INTRODUCTION AND SUMMARY ...........................................................................................1
Overview............................................................................................................................1
A.
Notice to Holders of Claims and Equity Interests..............................................................1
B.
Summary Of Treatment Of Claims And Equity Interests Under The Plan........................2
C.
NHL Subordinated Claims.................................................................................................3
Equity Interests ..................................................................................................................3
Voting Procedures, Ballots, and Voting Deadline .............................................................3
D.
Confirmation Procedures ...................................................................................................4
E.
BACKGROUND REGARDING THE DEBTOR ..........................................................................5
Overview and History........................................................................................................5
A.
B.
Prepetition Debt Structure .................................................................................................6
Prepetition Capital Structure..............................................................................................6
C.
D.
Events Precipitating the Chapter 11 Case..........................................................................8
SIGNIFICANT EVENTS IN CHAPTER 11 CASE.......................................................................8
Automatic Stay; Administrative Status..............................................................................8
A.
B.
Significant Events During the Chapter 11 Case; Asset Sale..............................................9
DESCRIPTION OF THE PLAN ..................................................................................................11
Introduction......................................................................................................................11
A.
Summary of Claims Process, Bar Date, and Professional Fees .......................................12
B.
Classification and Treatment of Claims and Equity Interests, Generally ........................12
C.
D.
Treatment of Unclassified Claims ...................................................................................12
Allowed Administrative Claims .........................................................................12
1.
Priority Tax Claims.............................................................................................13
2.
3.
Professional Fees ................................................................................................13
4.
Treatment............................................................................................................13
Treatment of Classified Claims and Interests ..................................................................14
Class 1 (Priority Claims).....................................................................................15
1.
2.
Class 2 (General Unsecured Claims) ..................................................................15
Class 3 (NHL Subordinated Claims) ..................................................................15
3.
4.
Class 4 (Equity Interests)....................................................................................16
IMPLEMENTATION OF THE PLAN.........................................................................................16
Effective Date Funding....................................................................................................16
A.
Liquidation Trust .............................................................................................................16
B.
1.
The Liquidation Trustee......................................................................................17
Purposes..............................................................................................................18
2.
Disputed Claims..................................................................................................18
3.
4.
Section 1145 Exemption.....................................................................................18
EXECUTORY CONTRACTS AND UNEXPIRED LEASES.....................................................18
Assumption and Rejection of Contracts and Leases........................................................18
A.

E.

PHOENIX/510963.4

IX.

A.
B.
C.

B.
C.
D.
E.

A.
B.
C.
D.
E.

Cure of Defaults...............................................................................................................19
Rejection Damages Bar Date...........................................................................................19
Indemnification Obligations ............................................................................................19
Benefit Plans....................................................................................................................20
VII. DESCRIPTION OF OTHER PROVISIONS OF THE PLAN .....................................................20
Vesting of Assets .............................................................................................................20
Injunction.........................................................................................................................20
Exculpation ......................................................................................................................21
Avoidance Actions and Litigation Claims.......................................................................21
Retention of Jurisdiction After the Effective Date...........................................................21
VIII. ACCEPTANCE AND CONFIRMATION OF THE PLAN.........................................................23
Acceptance of the Plan ....................................................................................................23
Feasibility of the Plan ......................................................................................................23
Best Interests Test............................................................................................................24
1.
Explanation.........................................................................................................24
Application of the Liquidation Analysis.............................................................25
2.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN..............................25
A.
Introduction......................................................................................................................25
United States Federal Income Tax Consequences to the Debtor .....................................26
B.
Federal Income Tax Consequences to Creditors..............................................................26
C.
1.
Generally.............................................................................................................26
Accrued Interest..................................................................................................29
2.
Market Discount .................................................................................................29
3.
Original Issue Discount ......................................................................................29
4.
5.
Other Claimholders.............................................................................................30
6.
Information Reporting and Backup Withholding ...............................................30
D.
Importance of Obtaining Professional Tax Assistance....................................................30
RISK FACTORS ..........................................................................................................................31
Generally..........................................................................................................................31
A.
B.
Risk of Non-Confirmation of the Plan.............................................................................31
ALTERNATIVES TO THE PLAN ..............................................................................................31
Continuation of the Chapter 11 Case...............................................................................32
A.
Alternative Plans of Reorganization ................................................................................32
B.
C.
Liquidation Under Chapter 7 ...........................................................................................32
CONCLUSION.............................................................................................................................32
Hearing on and Objections to Confirmation....................................................................32
A.
1.
Confirmation Hearing.........................................................................................32
2.
Deadline for Objections to Confirmation ...........................................................33
Recommendation .............................................................................................................33

X.

XI.

XII.






B.

PHOENIX/510963.4

ii



APPENDICES TO DISCLOSURE STATEMENT


Appendix 1 – Plan

Appendix 2 – Order Approving Disclosure Statement

Appendix 3 – CV of Michael Carmel

Appendix 4 – Selected Financial Information

Appendix 5 – Liquidation Analysis

PHOENIX/510963.4

iii





A.

Overview

I.

INTRODUCTION AND SUMMARY

Coyotes Hockey, LLC (the “Debtor”) filed its voluntary Chapter 11 bankruptcy petition
under Title 11 of the United States Code (the “Bankruptcy Code”) in the United States
Bankruptcy Court for the District of Arizona (the “Bankruptcy Court”) on May 5, 2009 (the
“Petition Date”), the same day the Debtor’s affiliates, Arena Management Group, Inc. (“AMG”),
Coyotes Holdings, LLC (“Holdings”), and Dewey Ranch Hockey, LLC (“Dewey”) filed
voluntary Chapter 11 petitions, commencing these jointly-administered cases.

The Bankruptcy Court has approved this disclosure statement (the “Disclosure
Statement”) under Bankruptcy Code § 1125 in connection with confirmation of the Plan (the
“Plan”) proposed by the Debtor in this case (the “Chapter 11 Case”). The Plan was filed with the
Bankruptcy Court on May 10, 2010. The Plan addresses the assets and liabilities of the Debtor
only; it does not address the assets and liabilities of AMG, Holdings, or Dewey.

The following introduction and summary is a general overview only and is qualified in its
entirety by, and should be read in conjunction with, the more detailed discussions, information,
and financial statements appearing elsewhere in this Disclosure Statement and the Plan. All
capitalized terms not defined in this Disclosure Statement have the meanings given to them in
the Plan. A copy of the Plan, separately filed in the Chapter 11 Case, is Appendix 1 to this
Disclosure Statement.

This Disclosure Statement sets forth certain information regarding the Debtor’s
prepetition operating and financial history, the circumstances giving rise to this Chapter 11 Case,
significant events that have occurred during the Chapter 11 Case, and the anticipated liquidation
of the Debtor under the Plan. This Disclosure Statement also describes terms and provisions of
the Plan, including certain alternatives to the Plan, certain effects of confirmation of the Plan,
certain risk factors associated with the Plan, and the manner in which distributions will be made
under the Plan. In addition, this Disclosure Statement discusses the confirmation process and
how voting on the Plan will occur. Certain provisions of the Plan, and the descriptions and
summaries contained in this Disclosure Statement, may be the subject of continuing negotiations
among the Debtor and various parties, may not have been finally agreed on, and may be
modified. Those modifications, however, will not have a material effect on the distributions
contemplated by the Plan.

The Debtor is the proponent of the Plan within the meaning of Bankruptcy Code § 1129.
The Plan contains separate Classes and proposes recoveries for holders of Claims against and
Equity Interests in the Debtor. After careful review of the Debtor’s current financial condition
and the needs associated with the liquidation of the Debtor’s assets, the Debtor has concluded
that the recovery to Creditors will be maximized by the structured liquidation of the Debtor as
contemplated by the Plan.

B.

Notice to Holders of Claims and Equity Interests

This Disclosure Statement is being used to solicit votes on the Plan only from holders of
impaired Claims, and is being transmitted to Creditors with unimpaired Claims and to Equity

PHOENIX/510963.4



Holders and other parties in interest for informational purposes. The purpose of this Disclosure
Statement is to provide adequate information to enable the holder of an impaired Claim to make
a reasonably informed decision with respect to the Plan before voting to accept or reject the Plan.

On DATE, 2010 the Bankruptcy Court entered an order, attached as Appendix 2 to this
Disclosure Statement, approving this Disclosure Statement as containing information of a kind
and in sufficient and adequate detail to enable Creditors to vote on the Plan as required by
Bankruptcy Code § 1125. The Bankruptcy Court’s approval of this Disclosure Statement
does not constitute either a guaranty of the accuracy or completeness of the information
contained in this Disclosure Statement or the Bankruptcy Court’s endorsement of the Plan.

Holders of Claims are encouraged to read this Disclosure Statement and its appendices
carefully and completely before deciding to accept or reject the Plan. If a description in this
Disclosure Statement and a term of the Plan conflict, the Plan governs.

This Disclosure Statement and the other materials included in the solicitation package are
the only documents authorized by the Bankruptcy Court to be used in connection with the
solicitation of votes on the Plan. No solicitation of votes may be made except after distribution of
this Disclosure Statement, and no person has been authorized to distribute any information
concerning the Debtor or the Plan other than the information contained in this Disclosure
Statement.

Certain of the information contained in this Disclosure Statement is by its nature forward-
looking and contains estimates, assumptions and projections that may be materially different
from actual or future results. Except as otherwise specifically stated, this Disclosure Statement
does not reflect any events that may occur after the date of this Disclosure Statement and that
may have a material effect on the information contained in this Disclosure Statement. The
Debtor does not intend to update the information contained in this Disclosure Statement.

The financial information contained in this Disclosure Statement has not been audited by
a certified public accountant and may not have been prepared in accordance with generally
accepted accounting principles.

This Disclosure Statement has been prepared in accordance and compliance with
Bankruptcy Code § 1125 and Bankruptcy Rule 3016(b) and not necessarily in accordance with
federal or state securities laws or other non-bankruptcy law. This Disclosure Statement has been
neither approved nor disapproved by the Securities and Exchange Commission (the “SEC”), nor
has the SEC passed on the accuracy or adequacy of the statements contained in this Disclosure
Statement.

This Disclosure Statement may not be construed to be conclusive advice on the tax,
securities, or other legal effects of the Plan on holders of Claims against, or Equity Interests in,
the Debtor.

C.

Summary Of Treatment Of Claims And Equity Interests Under The Plan

The Plan contains definitions and rules of interpretation and provides the treatment of
separate classes for holders of Claims against, and Equity Interests in, the Debtor. As provided

PHOENIX/510963.4

2





by Bankruptcy Code § 1123(a)(1), Administrative Claims and Priority Tax Claims are not
classified.

The table below summarizes the classification and treatment of the prepetition Claims
and Equity Interests under the Plan. The classification and treatment for all Classes are described
in more detail in Section IV of this Disclosure Statement and Articles 2 and 3 of the Plan.

Class

Description

Treatment

1

Priority Claims

(Unimpaired;
deemed to accept)



Each holder of an Allowed Priority Claim other than a Priority Tax
Claim will receive Cash in an amount equal to its Allowed Priority
Claim on the later of: (i) the Effective Date, or as soon after that date
as feasible; and (ii) 30 days after the Priority Claim is Allowed;
unless, before the later of those two dates, the holder of the Claim
and the Liquidation Trust agree in writing to a different date.

2

Unsecured Claims

(Impaired;
entitled to vote)

3

NHL Subordinated
Claims

(Impaired;
entitled to vote)

Each holder of an Allowed Class 2 Claim will receive, in full and
final satisfaction of its Allowed Class 2 Claim, a Pro Rata beneficial
interest in the Liquidation Trust.

The NHL will receive, on account of and in full and final satisfaction
of each of its Allowed Class 3 Claims, a Pro Rata beneficial interest
in the Liquidation Trust. The NHL agreed under the Asset Purchase
Agreement to voluntarily subordinate all NHL Subordinated Claims
to all Non-Insider Claims. Accordingly, all distributions from the
Liquidation Trust on account of the beneficial interests attributable to
the NHL Subordinated Claims are automatically redistributed Pro
Rata to the beneficial interests attributable to all Non-Insider Claims
until the latter beneficial interests have received distributions totaling
the amount of all Allowed Non-Insider Claims, after which the
beneficial interests attributable to the NHL Subordinated Claims and
the beneficial interests attributable to the Moyes Claims and the
Gretzky Claims receive all distributions Pro Rata.

4

Equity Interests

(Impaired;
deemed to reject)

The holders of Equity Interests will not receive or retain any rights,
property, or distributions on account of their Equity Interests under
the Plan.


Voting Procedures, Ballots, and Voting Deadline

D.

Accompanying this Disclosure Statement are, among other things, copies of: (1) the Plan
(Appendix 1 and separately filed in this Chapter 11 Case); (2) the notice of, among other things,
the time for submitting Ballots to accept or reject the Plan, the date, time, and place of the

PHOENIX/510963.4

3





hearing to consider confirmation of the Plan, and the time for filing objections to the
confirmation of the Plan (the “Confirmation Hearing Notice”); and (3) if you are entitled to vote,
a Ballot (and return envelope along with detailed instructions accompanying the Ballot) to be
used in voting to accept or reject the Plan.

After carefully reviewing the Plan, this Disclosure Statement, and (if you are entitled to
vote) the detailed instructions accompanying your Ballot, please indicate your acceptance or
rejection of the Plan by completing the Ballot. You must provide all the information requested on
the Ballot; failure to do so may result in your vote being disqualified. For your vote to be
counted, your Ballot must be properly completed and ACTUALLY RECEIVED no later than
DATE, 2010 at 5:00 p.m. Arizona Time (the “Voting Deadline”) by counsel for the Debtor,
whose address and contact information is on the Ballot.

Ballots should NOT be sent to the Debtor, the Bankruptcy Court, the U.S. Trustee,
or any other party other than the Debtor’s Counsel. Ballots not received by the Voting
Deadline by the Debtor’s counsel will not be counted.

If: (1) you have any questions about the procedure for voting or the packet of materials
that you have received; or (2) you wish to obtain an additional copy of the Plan, this Disclosure
Statement, or any exhibits to either of those documents, please contact: Karen Graves; Squire,
Sanders & Dempsey L.L.P.; 40 North Central Avenue, Suite 2700; Phoenix, AZ 85004;
Telephone: (602) 528-4000; e-mail [email protected]

E.

Confirmation Procedures

Under Bankruptcy Code § 1126(f), if a class of claims or interests is unimpaired under a
plan, that class (and each member of that class) is conclusively presumed to have voted in favor
of the plan and is not solicited to vote on the plan. In this Chapter 11 Case, the Plan contains two
Classes of Creditors and one Class of Equity Interests. All Unclassified Claims and Claims in
Class 1 are unimpaired by the Plan and holders of such Claims are presumed to have voted in
favor of the Plan and will not be solicited to vote on the Plan. All Claims in Classes 2 and 3 are
impaired and holders of such Claims are entitled to vote to accept or reject the Plan. Class 4
under the Plan (Equity Interests) is impaired under the Plan; members of that Class will neither
receive nor retain any property on account of their Equity Interests. Accordingly, Class 4 is
deemed to reject the Plan and its members will not be solicited to vote on the Plan.

The Bankruptcy Court has scheduled the Confirmation Hearing to begin on DATE, 2010
at _______ __.m. (Arizona time) before the Honorable Redfield T. Baum, United States
Bankruptcy Judge, at the United States Bankruptcy Court, 203 North 1st Avenue, Phoenix,
Arizona 85003. The Bankruptcy Court may adjourn the Confirmation Hearing from time to time
without further notice except for an announcement of the adjournment date made at the
Confirmation Hearing. The Bankruptcy Court has ordered that any objections to confirmation of
the Plan be filed with the Clerk of the Bankruptcy Court and served so that they are actually
received on or before DATE, 2010, at 5:00 p.m. (Arizona time) by Counsel to the Debtor and the
Office of the United States Trustee.

PHOENIX/510963.4

4





THE DEBTOR BELIEVES THAT THE PLAN PROVIDES THE BEST RECOVERIES
POSSIBLE FOR THE HOLDERS OF CLAIMS AND STRONGLY RECOMMENDS
THAT YOU VOTE TO ACCEPT THE PLAN.



II.

BACKGROUND REGARDING THE DEBTOR

A.

Overview and History

The Debtor, Coyotes Hockey, is a Delaware limited liability company based in Glendale,
Arizona that owned and operated the Phoenix Coyotes professional hockey team (the “Phoenix
Coyotes”), which is a member of the Pacific Division of the Western Conference of the National
Hockey League (the “NHL”). The NHL is a professional ice hockey league composed of 30
teams in North America. It is the premier professional ice hockey league in the world and one of
North America’s major professional sports leagues.

The Phoenix Coyotes were founded in 1972 as the Winnipeg Jets of the World Hockey
Association (the “WHA”). The Winnipeg Jets were the most successful team in the short-lived
WHA, winning three Avco World Trophies, the WHA’s championship trophy, and making the
finals five out of the WHA’s seven seasons. The NHL and WHA competed for players and fans
until the WHA folded in 1979 as part of an agreement under which four of the remaining six
WHA teams, including the Winnipeg Jets, entered the NHL as expansion teams.

In October 1995, the Winnipeg Jets were purchased by American businessmen Richard
Burke and Steven Gluckstern. Mr. Burke and Mr. Gluckstern relocated the team to Phoenix,
Arizona and renamed the team the “Phoenix Coyotes.” In 1997, Mr. Burke purchased Mr.
Gluckstern’s interest in the Phoenix Coyotes.

From the commencement of the 1996–1997 season until December 2003, the Phoenix
Coyotes played their home games in the America West Arena in downtown Phoenix (now US
Airways Arena). This location was a state-of-the-art basketball facility, but its small size made it
grossly inadequate for a professional hockey organization. Poor sight lines for hockey games
(more than 4,000 seats had obstructed views of the on-ice play) hurt ticket sales, and this—
combined with an unfavorable lease that had the Phoenix Coyotes turning over a sizeable portion
of its ticket revenues to the Phoenix Suns professional basketball team—resulted in financial
woes for the Phoenix Coyotes.

Mr. Burke sold the Phoenix Coyotes in 2001 to Phoenix-area real estate developer Steven
Ellman, with Wayne Gretzky as a part-owner and Managing Partner. Mr. Ellman was successful
in attracting new investors, the largest of whom was Jerry Moyes, the founder and Chief
Executive Officer of Phoenix-based trucking company Swift Transportation Co., Inc. With
significant financial support from Mr. Moyes, the Phoenix Coyotes were able to obtain
additional bank financing and the commitment of the City of Glendale to build a new hockey
arena. In this regard, the Phoenix Coyotes played their first game in the new Glendale Arena,
which has since been renamed “Jobing.com Arena,” on December 27, 2003.

PHOENIX/510963.4

5





Until September 2006, Steven Ellman and Jerry Moyes were co-owners of the Westgate
City Center Development, a suburban shopping and entertainment development that includes
Jobing.com Arena. In September 2006, Jerry Moyes, deciding to focus his energies on the
Phoenix Coyotes, entered into an agreement with Steven Ellman, that left Mr. Ellman and certain
of his affiliates in control of the Westgate City Center Development, and ultimately, through
various affiliated entities, left Mr. Moyes and his wife Vickie Moyes as super-majority owners of
the Phoenix Coyotes.

Coyotes Hockey is owned by a handful of investors, the foremost of whom (in terms of
ownership percentage and dollars invested) are ultimately Jerry and Vickie Moyes. Hockey Hall
of Fame member Wayne Gretzky also owns a portion of Coyotes Hockey, and, until shortly
before the start of the 2009-2010 season, was the team’s head coach.

B.

Prepetition Debt Structure

As of the Petition Date, the Debtor was the borrower under two significant secured debts.
The Debtor owed the NHL approximately $23.7 million as of the Petition Date for periodic
advances made to the Debtor beginning in November 2008, and approximately $13.3 million as
of the Petition Date under a February 2009 letter agreement. All loans from the NHL were
secured by a perfected security interest in substantially all the Debtor’s assets. Before the NHL
made those loans to the Debtor, the Debtor had borrowed approximately $75,000,000 from SOF
Investments, L.P., White Tip Investments, LLC, and Donatello Investments, LLC (collectively,
“SOF”). The loans from SOF were secured by a perfected security interest in substantially all the
Debtor’s assets. In connection with the NHL’s loans to the Debtor, SOF agreed to subordinate
their security interest in the Debtor’s assets to the NHL’s security interest in the Debtor’s assets
to the extent of any amounts loaned by the NHL to the Debtor.

Also as of the Petition Date, the Debtor had approximately $159,800,000 in unsecured
debt obligations, comprising trade debt of approximately $52,300,000 and two substantial
obligations to insiders: (a) a debt of approximately $100,000,000 to Jerry Moyes, the ultimate
owner of the Debtor and its affiliates, for unsecured loans made to the Debtor to fund substantial
operating losses (the “Moyes Claim”); and (b) a claimed debt of approximately $7,500,000 to
Wayne Gretzky, the Phoenix Coyote’s former head coach and minority owner of the Debtor, for
employment compensation (the “Gretzky Claim”). The City of Glendale, Arizona (“Glendale”)
and the Official Committee of Unsecured Creditors (the “Committee”) have objected to the
allowance and priority of both the Moyes Claim and the Gretzky Claim on various bases,
including that those Claims should be equitably subordinated under Bankruptcy Code § 510(c).
The Debtor has not taken a formal position as to the allowance or priority of the Moyes Claim or
the Gretzky Claim, and has assigned to the Committee its rights to object to the allowance and
priority of the Moyes Claim and related claims in accordance with a stipulated order entered by
the Bankruptcy Court on September 23, 2009.

C.

Prepetition Capital Structure

The Debtor is a Delaware limited liability company, who sole member is Holdings. The

organizational structure of the Debtor and its affiliates is reflected in the following chart:

PHOENIX/510963.4

6









Jerry and Vickie Moyes

(Jerry and Vickie Moyes are co-trustees and beneficiaries of The Jerry and Vickie Moyes Family Trust)

Jerry Moyes Owns 99% of Coyotes Holdings MemberCo., LLC
Vickie Moyes owns 1% of Coyotes Holdings MemberCo, LLC

The Jerry and Vickie Moyes Family Trust

owns 75.14% of Coyotes Holdings, LLC







Coyotes Holdings MemberCo, LLC



owns 24.86% of Coyotes Holdings, LLC





























is the Managing Member and owner of 91.79% of the Units of Coyote Hockey, LLC

is the Managing Member and 100% owner of Arena Management Group, LLC

Coyotes Holdings, LLC



and

Hunter
½ Class
A Unit




Breslow

IRA
1 Class
A Unit



Breslow
1 Class
A Unit




Wikert
1 Class
A Unit




Lake
Street
1 Class
A Unit



Gretzky
1 Class
A Unit




0.7463%

1.4925%

1.4925%

1.4925%

1.4925%

1.4925%

Arena Management Group, LLC

Coyotes Hockey, LLC









Dewey Ranch Hockey, LLC

Jerry Moyes is the Manager and
Coyotes Hockey, LLC is the sole

Member

PHOENIX/510963.4

7





D.

Events Precipitating the Chapter 11 Case

The Phoenix Coyotes have never operated at anything approaching a profit in any year
since relocating from Winnipeg, Manitoba (where they played as the Winnipeg Jets) for the 1996
season. Since moving from the America West Arena (now US Airways Center) in downtown
Phoenix to the Jobing.com Arena in Glendale, the Phoenix Coyotes’ operating losses deepened,
posting negative EBITDA of $21,870,000 for the 2005-2006 season, negative $29,511,000 for
2006-2007, and negative $21,727,000 for the 2007-2008 season.

Moyes determined that continued operations of the Debtor’s hockey team were not
sustainable and that he was unwilling to continue to provide unsecured loans to the Debtor to
maintain those operations. Although the NHL provided secured funding as outlined above, there
was no certain source of future funding for the Debtor and the NHL could discontinue funding at
any time. The Debtor, therefore, undertook a concerted effort to market the Debtor for sale or
other capital infusion. On behalf of the Debtor, Citi Private Bank Group at Citibank, N.A. (“Citi”)
and the Scudder Law Firm, P.C. (the “Scudder Firm”), identified and contacted strategic
investors that may be interested in purchasing the Debtor’s assets or investing in the organization.
Both Citi and the Scudder Firm provided interested investors and purchasers with substantial
amounts of information regarding the Debtor to assist them with their evaluation of the Debtor’s
business. Citi and the Scudder Firm received and evaluated proposals from interested purchasers
and investors, the descriptions of which were filed under seal.

After months of substantial prepetition marketing efforts to find one or more purchasers
or investors, the Debtor located PSE Sports & Entertainment, L.P. (“PSE”), which is an
acquisition vehicle owned by Jim Balsille, a Canadian millionaire and founder of Research In
Motion (the maker of the Blackberry communication devices). After substantial arm’s-length
negotiations, the Debtor and PSE entered into an asset purchase agreement dated May 5, 2009,
under which PSE agreed to purchase substantially all of the Debtor’s assets in the context of a
Chapter 11 bankruptcy for an aggregate purchase price of $212.5 million. This sale also
contemplated the relocation of the Phoenix Coyotes to Hamilton, Ontario in time to begin the
2009-2010 hockey season in October 2009. The Debtor commenced this Chapter 11 Case to,
among other things, effectuate the proposed sale to PSE under the PSE asset purchase agreement
and relocate the Phoenix Coyotes to Hamilton, Ontario.

III.

SIGNIFICANT EVENTS IN CHAPTER 11 CASE

A.

Automatic Stay; Administrative Status

The Chapter 11 Case was assigned to the Honorable Redfield T. Baum, United States
Bankruptcy Judge for the District of Arizona. Since the Petition Date, the Debtor has operated as
a debtor-in-possession under Bankruptcy Code §§ 1107 and 1108. The Debtor hired Squire,
Sanders & Dempsey, L.L.P. as its general bankruptcy counsel and Bryan Cave, LLP as special
conflicts counsel. An Official Committee of Unsecured Creditors was appointed in the Chapter
11 Case on DATE, 2009. The Committee hired Allen, Sala & Bayne, P.C. as its bankruptcy
counsel.

PHOENIX/510963.4

8





An immediate effect of the commencement of the Chapter 11 Case was the imposition of
the automatic stay under Bankruptcy Code § 362 that, with limited exceptions, enjoined the
commencement or continuation of all collection efforts by creditors, the enforcement of liens
against property of the Debtor, and the commencement or continuation of litigation against the
Debtor. This relief provided the Debtor with the “breathing room” necessary to pursue its
business objectives in the Chapter 11 Case without undue pressure or litigation by Creditors. The
automatic stay remains in effect, unless modified by the Bankruptcy Court, until consummation
of the Plan.

B.

Significant Events During the Chapter 11 Case; Asset Sale

Substantially all the activity in the Chapter 11 Case from the Petition Date was devoted to
an extensive sale process designed to solicit competitive bids for the purchase and sale, under
Bankruptcy Code § 363, of substantially all the Debtor’s assets (the “Sale Process”).

The Sale Process began shortly after the Petition Date, when the Debtor filed a motion
with the Bankruptcy Court seeking approval of certain procedures designed to solicit bids for a
sale of the Phoenix Coyotes (a “Sale”) competing with a “stalking horse” offer of approximately
$212.5 million in cash by PSE. The Debtor’s proposed sale procedures—and ultimate goal of a
Sale to PSE—met with immediate and profound opposition from, among other parties, the NHL
and Glendale. Among many other arguments, the NHL argued that the Debtor could not sell the
Phoenix Coyotes to a proposed buyer that had not been approved as an owner in accordance with
a vote of the other NHL team owners and under the terms of the NHL’s constitution and bylaws
and that any such approval was not possible within the deadlines required under the terms of
PSE’s proposed purchase. Glendale argued, among other things, that the Debtor’s agreement
with Glendale—the Arena Management, Use, and Lease Agreement (the “AMULA”)—could not
be rejected as an executory contract under Bankruptcy Code § 365 and that the Debtor could not
sell its assets to a purchaser that would relocate the team without violating alleged specific
performance provisions of the AMULA or incurring a debt of many hundreds of millions of
dollars.

Without resolving the issues pertaining to the AMULA, on June 15, 2009, the
Bankruptcy Court ruled that it could not approve a sale of the Phoenix Coyotes to PSE in
accordance with the PSE offer on the record before it. Specifically, the Bankruptcy Court ruled,
among other things, that the record did not establish that a bona fide dispute existed under
Bankruptcy Code § 363 to sell the assets free and clear of the NHL’s interests. Moreover, the
Bankruptcy Court ruled that it likely could not force the NHL to make a decision on the Debtor’s
and PSE’s relocation application prior to the June 29, 2009, deadline imposed under the PSE
asset purchase agreement. The Bankruptcy Court, therefore, denied the Debtor’s efforts to sell
the Debtor’s assets to PSE and relocate the Phoenix Coyotes without prejudice.

Notwithstanding that ruling, the Debtor negotiated with PSE a revised bid to purchase the
Debtor’s assets, renewed its motion to sell the Debtor’s assets to PSE, and sought to further
develop the record before the Bankruptcy Court to establish, among other things, a bona fide
dispute under Bankruptcy Code § 363. The Debtor and the NHL engaged in a disputed process to
have the Bankruptcy Court approve alternative sale procedures that would permit potential
buyers to again submit competing bids for the Phoenix Coyotes. The NHL prevailed, and the

PHOENIX/510963.4

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Bankruptcy Court limited the initial round of bid solicitation to only those potential buyers who
would agree to keep the Phoenix Coyotes in Glendale. After the completion of that initial round,
no party had submitted a qualified, unconditional bid to purchase the Phoenix Coyotes and keep
the team in Glendale. Under the procedures adopted by the Bankruptcy Court, the Debtor was
permitted at that point to solicit bids from any potential purchasers, including those that, like
PSE, would relocate the team out of Glendale.

Ultimately, only two qualified bidders agreed to pursue a purchase of the Phoenix
Coyotes: PSE, which would relocate the team to Hamilton, Ontario; and the NHL. The NHL’s
bid would have satisfied all secured debt either by credit bid (for its own secured debt) or cash
(of approximately $80 million, to satisfy SOF’s secured debt), and that would have paid, in cash,
substantially all unsecured claims against the Debtor other than the Moyes Claim and the
Gretzky Claim. The NHL’s bid was characterized generally as being worth approximately $140
million, while PSE’s bid was characterized as being worth approximately $212.5 million, but
ultimately included an offer to purchase Glendale’s claims for up to $50 million in cash. By the
time the Bankruptcy Court had scheduled an evidentiary hearing to consider the competing bids,
the NHL’s owners had voted to reject Balsille’s application to be approved as an owner, and the
NHL argued that PSE’s bid could not be approved because the NHL’s interest in protecting its
membership parameters as a private organization could not be adequately protected.

The Bankruptcy Court conducted a lengthy evidentiary hearing on the competing bids
and issued its ruling on September 30, 2009. The Bankruptcy Court ruled that the NHL had a
non-monetary interest in maintaining the integrity of its private membership, that such an interest
was not compensable by the payment of a “relocation fee” or other remuneration, and that the
interest could not be adequately protected as required under Bankruptcy Code § 363(e).
Accordingly, the Bankruptcy Court held that it could not approve the PSE bid and rejected that
bid with prejudice. The Bankruptcy Court also found that the NHL bid unfairly and unjustifiably
discriminated between similarly-situated unsecured claims—the NHL bid would have paid trade
claims in full while leaving nothing for the Moyes Claim and the Gretzky Claim, among other
discriminatory effects—and rejected the NHL bid without prejudice, expressly inviting the NHL
to amend its bid to correct the infirmities the Bankruptcy Court identified.

Balsille and PSE declined to continue any further involvement in the Chapter 11 Case. At
a hearing conducted in the Bankruptcy Court on October 26, 2009, the NHL announced the
terms of a revised bid to purchase the Debtor after lengthy and detailed consultation with the
Debtor, the Committee, and Jerry Moyes, represented by his own, separate counsel. The revised
NHL bid proposed to purchase or pay substantially all (in number) of the Debtor’s prepetition
unsecured creditors, and pay the secured prepetition debt and secured postpetition debtor-in-
possession financing debt owed to the NHL and SOF. The revised bid also proposed that the
NHL and the Debtor enter into a transition services agreement and a partial lease assignment
agreement under which the NHL will operate the Phoenix Coyotes and pay the Debtor’s
obligations under substantially all of its executory contracts and the AMULA for a period of time
to allow the NHL to market the Phoenix Coyotes. This would effectively allow the NHL to
solicit bids to purchase the Debtor’s assets and keep the Phoenix Coyotes in Glendale, while at
the same time leave open the possibility of a relocation of the Phoenix Coyotes (and rejection of
executory contracts and the AMULA) if the NHL cannot find a Glendale purchaser.

PHOENIX/510963.4

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The revised NHL bid is valued at approximately $128,382,121, which amount includes
the payment of approximately $13.3 million to the Debtor’s estate to satisfy professional
administrative claims and to pay the allowed unsecured claims of creditors the NHL did not
purchase or pay for under the revised NHL bid (effectively the Moyes Claim and the Gretzky
Claim).

On November 2, 2009, the Bankruptcy Court entered an order approving the revised
NHL bid, as further amended and described in that order, and the NHL closed the Sale the same
day, wiring approximately $13.3 million in cash into the Debtor’s estate.

As a part of the NHL sale transaction, the Debtor committed itself not to assume or reject
any executory contract or unexpired lease, including the AMULA, until June 30, 2009, so that
the NHL could continue to market the Phoenix Coyotes for sale to a buyer that will keep the
team in Glendale. If such a buyer is found, the NHL will direct the Debtor to assume and assign
some or all of the Glendale-related executory contracts and unexpired leases, including the
AMULA (possibly, as amended under agreement between the buyer and Glendale). If such a
buyer cannot be found by June 30, 2009—the approximate date of the end of the 2009-2010
NHL season—the NHL will likely pursue a sale of the team to a buyer that will relocate the team
out of the Glendale area, necessitating a rejection of substantially all Glendale-related executory
contracts and unexpired leases, including the AMULA.

Following the closing of the Sale, the Debtor’s estate consists of little more than cash in
the amount of $13.3 million and certain limited non-liquid assets, including causes of action
under Chapter 5 of the Bankruptcy Code, not purchased by the NHL in the Sale. The Holdings
and Dewey estates have essentially no debts and no assets. The AMG estate has some unsecured
debts and may, if the Glendale-related contracts and leases (including the AMULA) are rejected,
have additional, substantial debts. The AMG estate does not, however, have any substantial
assets. Accordingly, its estate, as well as the Holdings and Dewey estates, may ultimately be
liquidated under Chapter 7 of the Bankruptcy Code. The debts and assets of those estates are not
the subject of the Plan.

IV. DESCRIPTION OF THE PLAN

A.

Introduction

This section provides a summary of the Plan’s structure, classification, treatment, and
implementation. Although the statements contained in this Disclosure Statement include
summaries of the provisions contained in the Plan and in documents referred to in the Plan, this
Disclosure Statement is not a precise or complete statement of all the terms and provisions of the
Plan or documents referred to in the Plan. Refer to the Plan and its exhibits for a complete
statement of all the Plan’s terms.

The Plan itself and the documents it refers to will control the treatment of holders of
Claims against, and Equity Interests in, the Debtor under the Plan and will, on the Effective Date,
be binding on all parties-in-interest, including holders of Claims against, and Equity Interests in,
the Debtor. The Plan is designed to effect the complete liquidation of the Debtor’s assets and a
distribution of all Cash proceeds of that liquidation to Creditors.

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B.

Summary of Claims Process, Bar Date, and Professional Fees

The Bankruptcy Court entered an order (the “Bar Date Order”) setting August 14, 2009
as the deadline for filing proofs of claim against the Debtor (the “Bar Date”). The Bar Date does
not apply to certain types of Claims, including Administrative Claims, Professional Fee Claims,
and Rejection Claims arising after the Bar Date, as to which the bar date is controlled by
provisions of the Plan and orders of the Bankruptcy Court authorizing the rejection of contracts
or leases. Notice of the Bar Date was mailed to each person listed in the Schedules along with a
copy of the Bar Date Order and a proof of claim form.

All Administrative Claims, Professional Fee Claims and Rejection Claims must be filed

on or before the date that is the first Business Day that is 30 days after the Confirmation Date.

C.

Classification and Treatment of Claims and Equity Interests, Generally

Bankruptcy Code § 1122 requires that a plan of reorganization classify the claims of a
debtor’s creditors and the interests of its equity holders. The Bankruptcy Code also provides that,
except for certain claims classified for administrative convenience, a plan of reorganization may
place a claim of a creditor or an interest of an equity holder in a particular class only if the claim
or interest is substantially similar to the other claims or interests of that class. The Bankruptcy
Code also requires that a plan of reorganization provide the same treatment for each claim or
interest of a particular class unless the holder of a particular claim or interest agrees to a less
favorable treatment of its claim or interest.

The Debtor believes that it has classified all Claims and Equity Interests in compliance
with the requirements of the Bankruptcy Code. If a holder of a Claim or Equity Interest
challenges the Plan’s classification of Claims or Equity Interests and the Bankruptcy Court finds
that a different classification is required for the Plan to be confirmed, the Debtor, to the extent
permitted by the Bankruptcy Court, intends to modify the classifications of Claims or Equity
Interests under the Plan to provide for whatever classification might be required by the
Bankruptcy Court for confirmation. Except if a modification of classification adversely affects
the treatment of a holder of a Claim or Equity Interest, acceptance of the Plan by any holder of a
Claim or Equity Interest will be deemed to be a consent to the Plan’s treatment of the holder of a
Claim or Equity Interest regardless of the class as to which that holder ultimately is deemed to be
a member.

D.

Treatment of Unclassified Claims

As provided in Bankruptcy Code § 1123(a)(1), Administrative Claims and Priority Tax
Claims are not classified for purposes of voting on, or receiving distributions under, the Plan.
Holders of Administrative Claims and Priority Tax Claims are not entitled to vote on the Plan but,
rather, are treated separately in accordance with Sections 2.02 and 2.03 of the Plan and under
Bankruptcy Code § 1129(a)(9)(A).

1.

Allowed Administrative Claims

An Administrative Claim is a Claim for any cost or expense of administration of the
Chapter 11 Case Allowed under Bankruptcy Code §§ 503(b), 507(b) or 546(c)(2) and entitled to

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priority under Bankruptcy Code § 507(a)(2), including: (a) fees payable under 28 U.S.C. § 1930;
(b) actual and necessary costs and expenses incurred in the ordinary course of the Debtor’s
business; (c) actual and necessary costs and expenses of preserving the Estate or administering
the Chapter 11 Case; and (d) all Professional Fee Claims to the extent Allowed by Final Order
under Bankruptcy Code §§ 330, 331, or 503.

The Debtor estimates that, assuming an Effective Date of DATE, 2010, unpaid

Administrative Claims will total approximately $__________________, comprising:

Administrative Claim

Squire, Sanders & Dempsey – Counsel to Debtor
Bryan Cave – Special Counsel to Debtor
Miller Thomson LLP -- Special Arbitration Counsel to Debtor
Greenberg Traurig LLP -- Special Counsel to Debtor
BDO Seidman LLP -- Accountant for Debtor
Allen, Sala & Bayne – Counsel to the Committee
Bryan Cave – Special Counsel to the Committee

Operating Expenses






TOTAL















2.

Priority Tax Claims

Estimated Amt.

$ __________
$ __________
$ __________
$ __________
$ __________
$ __________
$ __________

$ __________


$ __________


These are Claims of a Governmental Unit for taxes entitled to priority under Bankruptcy

Code § 507(a)(8). The Debtor does not believe there are any substantial Priority Tax Claims.

3.

Professional Fees

Claims for Professional Fees are Claims of Professionals, including an entity
(a) employed in the Chapter 11 Case in accordance with an order of the Bankruptcy Court under
Bankruptcy Code §§ 327, 328, 363, or 1103 and to be compensated for services under
Bankruptcy Code §§ 327, 328, 329, 330, and 331 or order of the Bankruptcy Court; or (b) for
whom compensation and reimbursement has been Allowed by a Final Order under Bankruptcy
Code § 503(b). A significant portion of the Professional Fee Claims have been paid, on an
interim basis, from the proceeds of the Sale in accordance with orders of the Bankruptcy Court
approving interim fee applications.

4.

Treatment.



(i)

Allowed Administrative Claims. Each Allowed Administrative Claim
(other than a Professional Fee Claim) will be paid in full in Cash (or otherwise satisfied in
accordance with its terms) on the latest of: (a) the Effective Date, or as soon after that date as
feasible; (b) any date the Bankruptcy Court may fix, or as soon after that date as feasible; (c) 30

PHOENIX/510963.4

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days after the Claim is Allowed; and (d) any date on which the holder of the Claim and the
Debtor or the Liquidation Trust agree.



(iii) Allowed Priority Tax Claims. Any Allowed Priority Tax Claim will be
paid in full in Cash on the latest of: (a) the Effective Date (or as soon after that date as feasible);
and (b) 30 days after the Claim is Allowed. The Liquidation Trust may elect to pay any Allowed
Priority Tax Claim through regular installment payments in Cash of a total value, as of the
Effective Date, equal to the Allowed amount of the Claim, over a period ending not later than
five years after the Petition Date, and in a manner not less favorable than the most favored
General Unsecured Claim provided for by the Plan. If the Liquidation Trust so elects, the
installment payments will be made in equal quarterly installments of principal plus interest, at a
rate determined under applicable nonbankruptcy law, on the unpaid portion of the Allowed
Priority Tax Claim accruing from the Effective Date. The first payment will be made on the
latest of: (a) the Effective Date, or as soon after that date as feasible; (b) 30 days after the Claim
is Allowed, or as soon after than date as feasible; and (c) another date on which the holder of the
Claim and the Liquidation Trust agree. The Liquidation Trust retains the right to prepay any
Allowed Priority Tax Claim, or any remaining balance of such a Claim, in full or in part, at any
time on or after the Effective Date without premium or penalty.



(iv)

Professional Fee Claims. Each Allowed Professional Fee Claim will be
paid in full in Cash on the latest of: (a) three days after the Professional Fee Claim is Allowed;
and (b) another date on which the holder of the Professional Fee Claim and the Liquidation Trust
agree. Each Person seeking an award by the Bankruptcy Court of Professional Fees must file
with the Bankruptcy Court and serve on the Liquidation Trust its final application for allowance
of compensation for services rendered and reimbursement of expenses incurred through the
Confirmation Date by the Professional Fee Bar Date.

All claims of Professionals for services rendered or expenses incurred after the
Confirmation Date in connection with the Chapter 11 Cases and the Plan including those relating
to consummation of the Plan, any appeal of the Confirmation Order, the preparation, filing, and
review of Professional Fee Claims, the prosecution of Avoidance Actions and Litigation Claims,
and the resolution of Disputed Claims, will be paid by the Liquidation Trust on receipt of an
invoice, or on other terms on which the Liquidation Trust and the Professional agree, without the
need for further Bankruptcy Court authorization or entry of a Final Order.

E.

Treatment of Classified Claims and Interests

In accordance with Bankruptcy Code § 1123(a)(1), set forth below is a designation of
classes of Claims against, and Equity Interests in, the Debtor (except the unclassified Claims
receiving the treatment described in Section IV.D above). A Claim or Equity Interest is placed in
a particular Class for the purpose of receiving distributions in accordance with the Plan only if
that a Claim or Equity Interest has not been paid, released, or otherwise settled before the
Effective Date. The treatment of classified Claims and Equity Interests and the provisions
governing distributions on account of Allowed Claims and Allowed Equity Interests is set forth
in Articles 3 and 4 of the Plan. You should refer to the Plan itself for the complete provisions
governing the treatment of your particular Claim or Equity Interest.

PHOENIX/510963.4

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1.

Class 1 (Priority Claims)

Class 1 consists of all Priority Claims other than Priority Tax Claims. Class 1 is