SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) JUNE 24, 1999
---------------------
PAGE AMERICA GROUP, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 1-10682 13-2865787
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) ID Number)
c/o Bariston Associates, Inc.
ONE INTERNATIONAL PLACE, BOSTON, MASSACHUSETTS 02110
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number,
including area code: (617) 330-8950
- --------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 3. Bankruptcy or Receivership
On June 16, 1999, Page America Group, Inc. ("Page America") and its
wholly-owned subsidiaries, Page America of New York, Inc., Adirondack Radio
Telephone Co., Inc. and Page America of Pennsylvania Inc. (the "Debtors") filed
Chapter 11 bankruptcy cases in the United States Bankruptcy Court for the
Southern District of New York and the presiding judge is Jeffrey H. Gallet. In
addition to filing customary "first day" papers, the Debtors filed a prepackaged
and presolicited Plan and Disclosure Statement which contemplate the complete
liquidation of the Debtors. The Plan was accepted, prior to the filing of the
bankruptcy petitions, by the holders of the Debtors' 15% Subordinated Notes due
2003 and Page America's Series One Preferred Stock, which are the only holders
of claims and interests in the Debtors that are entitled to vote on the Plan.
Generally, under the terms of the Plan, the holders of Page America's
Subordinated Notes are to receive 70% of all amounts available for distribution
after all other allowed claims for administrative expenses and general unsecured
claims have been paid in full in cash. The remaining 30% of such available
amounts are to be distributed 21% to the holders of Page America's Preferred
Stock and 9% to the holders of the 16,024,585 outstanding shares of Page America
Common Stock. At June 23, 1999, based on the assets held by the Debtors and the
market value of the Metrocall, Inc. common stock (shares of which were received
by Page America on July 1, 1997 as part of the consideration for its sale of
substantially all of its assets to Metrocall, Inc.) and known liabilities at
that time, the maximum aggregate amount distributable to holders of the
Subordinated Notes, Preferred Stock and Common Stock, less amounts to pay taxing
authorities and other creditors, would have been approximately $9,780,000,
$2,934,000 and $1,257,000, respectively. The actual distributions will be more
or less depending primarily on the market value of the Metrocall, Inc. common
stock for a specified period prior to the Effective Date of the Plan and subject
to any claims that arise in connection with the Plan. The distributions to
holders of the Subordinated Notes and Preferred Stock will be in cash, to the
extent available, and shares of Metrocall, Inc. common stock, while holders of
Page America Common Stock will receive cash.
The proceedings are captioned In re: Page America Group, Inc; Page
America of New York, Inc.; Adirondack Radio Telephone Co., Inc.; Page America of
Pennsylvania, Inc. (Chapter 11 Case Nos. 99-10281 (JHG); 99-10282 (JHG);
99-10283 (JHG); 99-10284 (JHG)).
ITEM 7 Financial Statements and Exhibits
(c) Exhibits
2.1 Disclosure Statement, dated May 17, 1999 (including Plan
of Reorganization).
99.1 Press Release, dated June 24, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAGE AMERICA GROUP. INC.
By:_______________________
Name:
Title:
Dated:
<PAGE>
EXHIBIT INDEX
EXHIBIT
2.1 Disclosure Statement, dated June 24, 1999, (including Plan of
Reorganization).
99.1 Press Release, dated June 24, 1999.
EXHIBIT 2.1
THIS DISCLOSURE STATEMENT HAS NOT YET BEEN APPROVED BY THE BANKRUPTCY
COURT. PAGE AMERICA GROUP, INC. AND ITS SUBSIDIARIES FILED PETITIONS FOR RELIEF
UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE AND ARE SEEKING
CONFIRMATION OF A CHAPTER 11 PLAN. THIS DISCLOSURE STATEMENT HAS BEEN SUBMITTED
TO THE BANKRUPTCY COURT FOR APPROVAL.
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ----------------------------------------------------------------
In re: : Jointly Administered
:
PAGE AMERICA GROUP, INC., : Chapter 11 Case No. 99-
10281 (JHG)
PAGE AMERICA OF NEW YORK, INC., : Chapter 11 Case No. 99-
10282 (JHG)
ADIRONDACK RADIO TELEPHONE CO., INC., : Chapter 11 Case No. 99-
10283 (JHG)
PAGE AMERICA OF PENNSYLVANIA, INC., : Chapter 11 Case No. 99-
10284 (JHG)
:
Debtors. : Tax ID No. 13-2865787
- ----------------------------------------------------------------
DISCLOSURE STATEMENT, DATED May 17, 1999
For The
Prepackaged Liquidating Chapter 11 Plan
For
PAGE AMERICA GROUP, INC., PAGE AMERICA OF NEW YORK, INC.
ADIRONDACK RADIO TELEPHONE CO., INC., AND PAGE AMERICA OF
PENNSYLVANIA, INC.
STROOCK & STROOCK & LAVAN LLP
180 Maiden Lane
New York, NY 10038
(212) 806-5400
Robin E. Keller, Esq.
Counsel to Debtors
<PAGE>
TABLE OF CONTENTS
I. INTRODUCTION............................................................1
II. SUMMARY OF TRANSACTIONS AND TREATMENT OF CLAIMS AND
INTERESTS UNDER THE PLAN................................................3
A. Summary of Transactions Contemplated under the
Plan.................................................................3
B. Summary of Treatment of Claims and Interest
under the Plan.......................................................3
III. THE DEBTORS, THE CURRENT DEBT STRUCTURE.................................6
A. General Background...................................................6
B. Events Leading to the Solicitation of the Plan......................12
C. The Company's Objectives in Filing the Chapter
11 Case.............................................................13
1. Continuation as Debtors-in-Possession ...........................13
2. Immediate Relief to be Sought in
Bankruptcy Case..................................................14
3. Hearing on Confirmation of the Plan/Distributions................14
IV. DESCRIPTION OF PREPACKAGED LIQUIDATING CHAPTER 11 PLAN.................15
A. Classification and Treatment of Claims and
Interests under the Plan............................................15
1. Administrative Claims............................................16
2. Priority Claims..................................................16
3. Class 1 Claims...................................................16
4. Class 2 Claims...................................................17
5. Class 3 Interests................................................17
6. Class 4 Interests................................................18
B. Means of Implementation of the Plan.................................18
C. Disputed Claims.....................................................19
D. Releases-Injunctions; Limitations of Liability......................19
1. Releases ........................................................19
2. Injunctions......................................................20
3. Limitations of Liability.........................................21
E. Distribution Provisions Relating to Holders of
the Subordinated Notes..............................................21
F. Distribution Provisions Relating to Holders of
the Preferred Stock Interests.......................................23
G. Distribution Provisions Relating to Holders of
the Common Stock Interests..........................................25
H. Unclaimed Funds.....................................................26
I. Disbursing Agent and Distribution Reserve...........................27
J. Jurisdiction of the Bankruptcy Court................................29
K. Conditions to Confirmation and Effective Date.......................30
L. Modification, Revocation or Withdrawal of the Plan..................31
M. Substantive Consolidation...........................................32
N. Executory Contracts and Unexpired Leases............................32
V. THE PLAN OF REORGANIZATION - VOTING INSTRUCTIONS AND
CONFIRMATION REQUIREMENTS..............................................33
A. General.............................................................33
B. Voting on the Plan..................................................33
C. Confirmation Requirements...........................................35
1. Acceptance by Impaired Classes...................................35
2. Best Interests Test..............................................36
3. Feasibility......................................................38
4. Classification...................................................39
5. Confirmation Without Acceptance by All Impaired Classes..........39
VI. RELEVANT FINANCIAL INFORMATION.........................................41
VII. FEDERAL INCOME TAX CONSEQUENCES........................................41
A. TAX CONSEQUENCES TO DEBTORS ARISING FROM PLAN.......................42
1. Net Operating Losses and Loss Carryovers
("NOLS") and Other Tax Attributes ...............................43
2. Discharge of Indebtedness........................................43
3. Transfer of Stock................................................44
B. Tax Consequences to Holders of Allowed Claims and Interests.........44
1. Income, Gain or Loss on Payment of Claims........................44
2. Federal Income Treatment of Holders of
Allowed Class 1 Subordinated Notes
Claims...........................................................46
3. Federal Income Tax Treatment of Holders of
Class 3 Preferred Stock .........................................47
4. Federal Income Tax Treatment of Holders of
Class 4 Common Stock.............................................48
5. Backup Withholding and Information Reporting.....................48
C. Taxation of the Distribution Reserve................................48
D. Importance of Obtaining Professional Tax Assistance.................49
VIII. CONCLUSION............................................................50
<PAGE>
EXHIBITS
Exhibit A: Prepackaged Liquidating Chapter 11 Plan for Page
America Group, Inc., Page America of New York, Inc.,
Adirondack Radio Telephone Co., Inc. and Page America
of Pennsylvania, Inc.
Exhibit B: Plan of Liquidation
Exhibit C: Form 10-K for the Fiscal Year Ended December 31,
1998 (without Exhibits)
<PAGE>
I. INTRODUCTION
PAGE AMERICA GROUP, INC. (THE "COMPANY") AND ITS WHOLLY-OWNED
SUBSIDIARIES, PAGE AMERICA OF NEW YORK, INC., ADIRONDACK RADIO TELEPHONE CO.,
INC. AND PAGE AMERICA OF PENNSYLVANIA, INC. (COLLECTIVELY, THE "DEBTORS") ARE
NOT CURRENTLY DEBTORS OR DEBTORS-IN-POSSESSION IN ANY CASE UNDER TITLE 11 OF THE
UNITED STATES CODE (THE "BANKRUPTCY CODE"). HOWEVER, THE DEBTORS WISH TO SOLICIT
VOTES ON A "PREPACKAGED" LIQUIDATING CHAPTER 11 PLAN (THE "PLAN"), A COPY OF
WHICH IS ANNEXED HERETO AS EXHIBIT "A." THE PLAN CONTEMPLATES THE COMPLETE
LIQUIDATION OF THE DEBTORS.
THE DEBTORS RECOMMEND THAT ALL HOLDERS OF IMPAIRED CLASS 1
SUBORDINATED NOTES CLAIMS AND CLASS 3 PREFERRED STOCK INTERESTS SUBMIT BALLOTS
ACCEPTING THE PLAN AND THE TRANSACTIONS CONTEMPLATED THEREBY. IF THE PLAN IS
ACCEPTED BY THE CLASS OF SUBORDINATED NOTEHOLDERS (CLASS 1) AND THE CLASS OF
PREFERRED STOCKHOLDERS (CLASS 3), THE DEBTORS INTEND TO FILE A CHAPTER 11 CASE
IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK (THE
"BANKRUPTCY COURT"), AND MOVE FOR CONFIRMATION OF THE PLAN PURSUANT TO SECTION
1129 OF THE BANKRUPTCY CODE. IF THE PLAN IS NOT ACCEPTED BY THOSE IMPAIRED
CLASSES, THE DEBTORS MAY ELECT NOT TO COMMENCE THE CHAPTER 11 CASE OR,
ALTERNATIVELY, MAY COMMENCE A CASE UNDER CHAPTER 11 AND SEEK CONFIRMATION OF AN
ALTERNATIVE PLAN.
IF THE REQUISITE ACCEPTANCES ARE RECEIVED, AND THE PLAN IS
SUBSEQUENTLY CONFIRMED BY THE BANKRUPTCY COURT AND IS CONSUMMATED, ALL HOLDERS
OF CLAIMS AGAINST AND INTERESTS IN THE DEBTORS (WHETHER OR NOT SUCH HOLDERS
SUBMIT BALLOTS TO ACCEPT OR REJECT THE PLAN) WILL BE BOUND BY THE TERMS OF THE
PLAN AND THE TREATMENT AFFORDED SUCH HOLDERS THEREUNDER.
THE SOLICITATION OF VOTES ON THIS PLAN IS NOT SUBJECT TO THE PROXY
RULES OF THE SECURITIES AND EXCHANGE COMMISSION SINCE THE SECURITIES HELD BY THE
HOLDERS OF SUBORDINATED NOTES AND PREFERRED STOCK ARE NOT REGISTERED UNDER SS.
12 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE VOTES OF HOLDERS OF
COMMON STOCK INTERESTS ARE NOT BEING SOLICITED. NOTWITHSTANDING THE PROPOSED
DISTRIBUTIONS TO THEM UNDER THE PLAN, HOLDERS OF COMMON STOCK ARE TREATED AS IF
THEY HAVE REJECTED THE PLAN.
This Disclosure Statement is being provided to holders of the Impaired
Class 1 Subordinated Note Claims and Class 3 Preferred Stock Interests, in
connection with the solicitation of their votes on the Plan, in order to provide
information deemed by the Debtors to be material and necessary to enable such
creditors to make reasonably informed decisions in the exercise of their rights
to vote on the Plan. HOLDERS OF CLASS 1 CLAIMS (SUBORDINATED NOTES) AND CLASS 3
(PREFERRED STOCK) INTERESTS ARE URGED TO REVIEW ALL OF THE TERMS AND CONDITIONS
OF THE PLAN CAREFULLY, AND NOT RELY SOLELY ON THE SUMMARY IN THIS DISCLOSURE
STATEMENT. SUCH HOLDERS SHOULD CAREFULLY REVIEW THE VOTING INSTRUCTIONS SET
FORTH IN ARTICLE V OF THIS DISCLOSURE STATEMENT.
Capitalized terms utilized in this Disclosure Statement, if not
defined herein, shall have the meaning used or defined in the Plan, the
Bankruptcy Code or the Bankruptcy Rules as applicable unless the context hereof
requires a different meaning.
HOLDERS OF CLAIMS AND INTERESTS SHOULD NOT CONSTRUE THE CONTENTS OF
THIS DISCLOSURE STATEMENT AS PROVIDING ANY LEGAL, BUSINESS, FINANCIAL OR TAX
ADVICE. EACH SUCH HOLDER SHOULD, THEREFORE, CONSULT WITH ITS OWN LEGAL,
BUSINESS, FINANCIAL AND TAX ADVISORS AS TO ANY MATTERS CONCERNING THE
SOLICITATION, THE PLAN AND THE TRANSACTIONS CONTEMPLATED THEREBY.
THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS BASED UPON
FINANCIAL AND OTHER INFORMATION DEVELOPED BY THE DEBTORS. ALTHOUGH THE DEBTORS
HAVE REASONABLY ENDEAVORED TO OBTAIN AND SUPPLY ALL MATERIAL INFORMATION, THE
INFORMATION PROVIDED HAS NOT BEEN SUBJECT TO CERTIFIED AUDIT OR INDEPENDENT
REVIEW EXCEPT WHERE EXPRESSLY INDICATED. ACCORDINGLY, THE DEBTORS ARE UNABLE TO
WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED HEREIN IS WITHOUT ANY
INACCURACY OR IS COMPLETE. NO REPRESENTATION CONCERNING THE DEBTORS IS
AUTHORIZED OTHER THAN AS SET FORTH IN THIS DISCLOSURE STATEMENT.
The ballots being solicited hereby will not be used by the Debtors for
any purpose other than to determine votes for acceptance or rejection of the
Plan (and any permitted modified version thereof) under Chapter 11 of the
Bankruptcy Code.
<PAGE>
II. SUMMARY OF TRANSACTIONS AND TREATMENT
OF CLAIMS AND INTERESTS UNDER THE PLAN
A. SUMMARY OF TRANSACTIONS CONTEMPLATED UNDER THE PLAN
The Plan contemplates the final liquidation of the Debtors, which have
already sold substantially all of their operating assets. The proceeds of their
liquidation will be used to fund distributions to creditors holding Allowed
Claims and holders of Preferred and Common Stock Interests in accordance with
the terms and conditions of the Plan. The Plan provides that Administrative
Claims, Priority Claims and General Unsecured Claims will be paid in full in
cash. Excess amounts will be distributed 70% to the holders of the Subordinated
Notes, 21% to the holders of Preferred Stock and 9% to the holders of Common
Stock until the holders of Class 1 Claims shall have indefeasibly received $19
million, and thereafter 50% to the holders of Class 1 Claims, 35% to the holders
of Class 3 Interests and 15% to holders of Class 4 Interests. All distributions
to the holders of Common Stock will be made in cash, while distributions to
holders of Preferred Stock and holders of Subordinated Notes will be made in
cash, to the extent available, with the balance payable in shares of common
stock of Metrocall, Inc. The Subsidiaries shall be dissolved as of the Effective
Date and Page America Group, Inc. shall be dissolved as of the Final
Distribution Date under the Plan. B. SUMMARY OF TREATMENT OF CLAIMS AND
INTERESTS UNDER THE PLAN
The Plan provides for the treatment of Administrative and Priority
Claims, and classifies all other Claims against and Interests in the Debtors
which the Debtors believe will exist on the date the Debtors file their
voluntary petition for relief under Chapter 11 of the Bankruptcy Code (the
"Filing Date") into four separate Classes. Set forth below is a chart
summarizing the classification and treatment of Claims and Interests under the
Plan.
<PAGE>
DESIGNATION OF PROJECTED TREATMENT OF CLAIMS OR INTERESTS
CLAIMS OR AMOUNTS OF UNDER PLAN
INTERESTS CLAIMS
ADMINISTRATIVE
EXPENSE CLAIMS $150,000 Not impaired. Holders of Administrative Expense
Claims will receive one hundred percent (100%) of
their Allowed Claims in cash on the later of (i)
the Effective Date, (ii) the date such claims are
Allowed or come due, (iii) upon entry of a court
order allowing claims for professional fees and
expenses, or (iv) as otherwise agreed to by the
claimant and the Debtors.
PRIORITY
CLAIMS -0- Not impaired. Holders of Priority Claims will
receive one hundred percent (100%) of their
Allowed Claims in cash on the later of (i) the
Effective Date, (ii) the date such claims are
Allowed or come due, or (iii) as otherwise agreed
to by the claimant and the Debtors.
CLASS 1
(SUBORDINATED
NOTE CLAIMS $23,627,500 Impaired. Holders of Class 1 Claims will receive
seventy percent (70%) of all amounts available for
distribution after all other Allowed Claims have
been paid, payable in cash to the extent
available, with the balance payable in shares of
common stock of Metrocall, Inc., until $19 million
has been indefeasibly paid to them, and thereafter
shall receive 50% of all other Assets available
for distribution, plus a portion of the funds not
claimed by other distributees.
CLASS 2
(GENERAL
UNSECURED $50,000 -
CLAIMS) 1,500,000 Not impaired. Holders of Class 2 Claims will
receive one hundred percent (100%) of their
Allowed Claims in cash on the later of (i) the
Effective Date, (ii) the date such Claims are
Allowed or come due, or (iii) as otherwise agreed
to by the claimant and the Debtors.
CLASS 3
(PREFERRED 286,361
INTERESTS IN (Number of
THE COMPANY) Shares) Impaired. Holders of Preferred Stock Interests
shall receive, pro rata with the holders of
Subordinated Notes, twenty-one percent (21%) of
all amounts available for distribution after all
Allowed Claims (other than Class 1 Claims) have
been paid, payable in cash to the extent
available, with the balance payable in shares of
Common Stock of Metrocall, Inc. After satisfaction
of all Allowed Claims, including the payment of
$19 million to Class 1 Subordinated Noteholders,
Class 3 holders shall receive 35% of any remaining
Assets available for distribution, plus a portion
of the funds not claimed by other distributees.
CLASS 4
(COMMON 16,024,585
INTERESTS IN (Number of
THE COMPANY) Shares) Impaired. Holders of Common Stock Interests will
receive, pro rata with the holders of Subordinated
Notes, nine percent (9%) of all amounts available
for distribution after all Allowed Claims (other
than Class 1 Claims) have been paid, payable in
cash. After satisfaction of all Allowed Claims,
including the payment of $19 million to Class 1
Subordinated Noteholders, Class 4 holders shall
receive 15% of any remaining Assets available for
distribution, plus a portion of the funds not
claimed by other Class 4 distributees.
At March 31, 1999, based on the Assets held by Debtors, the value of
Metrocall Common Stock and the known liabilities (excluding any potential tax
claims), the maximum aggregate amount distributable to the holders of Class 1
Claims, Class 3 Interests and Class 4 Interests would have been approximately
$10,080,000, $3,024,000 and $1,296,000, respectively.
For a more detailed description of the treatment of the foregoing
Classes of Claims and Interests, see Section IV below.
III. THE DEBTORS, THE CURRENT DEBT STRUCTURE
AND OBJECTIVES IN FILING THE PLAN
A. GENERAL BACKGROUND
Each Debtor is a corporation organized and existing under the laws of
the State of New York, except that Page America of Pennsylvania, Inc. is a
Pennsylvania corporation. The Debtors previously had been engaged in the radio
paging business.
Debtors previously provided paging, messaging and information products
and services through networks which they owned and operated as radio common
carriers under licenses from the Federal Communications Commission. As of
December 31, 1996, the Debtors provided paging services to approximately 205,000
pagers and were among the largest radio paging companies in the United States.
The strategy of the Debtors was to concentrate their operations in major
metropolitan markets in which they could achieve both critical mass and a
substantial market share position. These operations were obtained as the result
of acquisitions or from internal growth.
From their inception in 1976, the Debtors experienced a deficiency in
working capital and recurring losses. The Debtors' operations and acquisitions
were funded by money borrowed from banks and other institutional lenders and
from the sale of equity securities. The major sources of borrowed money were
from a credit facility with certain banks entered into in 1993 (the "Credit
Facility") and the sale of subordinated notes in 1993 (the "Subordinated
Notes"). In 1994, the Credit Facility was amended to terminate the revolving
credit portion thereof. As a result, Debtors did not have any readily available
unused bank line. This severely restricted their ability to purchase pagers and
to grow. In response to this, in May 1994, Debtors retained a financial advisor,
Smith Barney Inc., to render financial advisory services to Debtors and to
explore the sale of capital stock or assets of Debtors.
In July 1995, Debtors sold substantially all of their Florida and
California paging assets for a sales price of $19.4 million. The proceeds of
such sale were used to repay indebtedness under the Credit Facility and to
improve the Debtors' working capital position. This sale of assets and use of
proceeds required approval under the Credit Facility. As a condition of this
approval, the Credit Facility was amended to accelerate the maturity date of
such facility to December 29, 1995 from June 30, 1996. The amendment further
provided that if on December 29, 1995, the Debtors had entered into a letter of
intent for the sale of assets sufficient to repay in full the indebtedness, the
maturity date would be extended to February 29, 1996. The maturity date would be
further extended to June 28, 1996, if on February 29, 1996, Debtors had an
agreement to sell assets or, if on or before December 29, 1995 (or February 29,
1996 if the maturity date had been extended as provided in the prior sentence),
had a commitment for the refinancing in full of the indebtedness under the
Credit Facility. At the same time, the Subordinated Notes were modified to
provide for a final maturity six months subsequent to the final maturity of the
Credit Facility and to eliminate the cash payment of interest until maturity.
In order to repay amounts due under the Credit Facility and the
Subordinated Notes and to obtain sufficient capital to purchase an adequate
number of pagers to at least maintain its level of business, Debtors determined
that they would have to actively pursue opportunities to obtain long-term debt
and equity financing or to sell some or all their remaining assets. In August
1995, Debtors retained a new financial advisor, Daniels & Associates, to
identify and contact prospective financing sources for Debtors as well as to
identify and contact prospective purchasers of the assets or stock of Debtors.
In addition, Debtors met with a number of investment banking firms to determine
the viability of a refinancing or recapitalization of Debtors. In December 1995,
Debtors furnished to their banks under the Credit Facility a letter from Brenner
Securities pursuant to which this firm expressed its confidence and intent to
complete a recapitalization of Debtors. The banks under the Credit Facility
determined that the letter did not satisfy the conditions precedent to the
extension of the Credit Facility and they refused to extend the maturity date
beyond December 29, 1995. Subsequent to December 29, 1995, the banks advised
Debtors that they were in default under the terms of the Credit Facility and
that all amounts were immediately due and payable under the Credit Facility. As
the result, Debtors defaulted under the Credit Facility on December 29, 1995.
In addition, in August 1995, the American Stock Exchange (the "AMEX")
notified the Company that it failed to meet certain financial and other
guidelines for continued listing of its Common Stock and that the AMEX intended
to pursue the steps required to delist the Common Stock. After many months of
meetings and an appeal by the Company to the AMEX, the Company's Common Stock
was delisted by the AMEX in May 1996.
Debtors' financial situation during this period was such that many
vendors were unwilling to extend credit and provide pagers. With very limited
access to pagers, Debtors not only could not grow their business but experienced
significant difficulty obtaining pagers for new subscribers. In view of the lack
of funds available to Debtors and acceleration of its Credit Facility, Debtors
continued to explore all avenues, consisting of the sale of some or all of their
assets or a recapitalization. The recapitalization alternative, as contemplated
by the aforementioned letter of intent, was explored and considered very
thoroughly. Debtors ultimately concluded that the proceeds available to their
shareholders resulting from the transaction with Metrocall, Inc. described below
and the significantly higher certainty of outcome made the transaction with
Metrocall a superior alternative.
On July 1, 1997, Debtors sold (the "Sale") substantially all of their
remaining assets to Metrocall, Inc. ("Metrocall") pursuant to the provisions of
an Amended and Restated Asset Purchase Agreement dated as of January 30, 1997,
as amended (the "Sale Agreement"). As a result of the Sale, Debtors discontinued
all their operations and no longer engaged in any business. Metrocall paid a
purchase price (as adjusted) of approximately $60.7 million including the
assumption of $2.2 million of liabilities. Debtors received $24.8 million in
cash, $15 million of Series B Junior Convertible Preferred Stock of Metrocall
and $18.7 million of Common Stock of Metrocall. Excluded from the Sale were
cash, assets related to the employee benefit plans and to the Florida and
California operations which had been previously sold, liabilities under the
Credit Facility, Subordinated Notes, NEC America leasing contract, obligations
with respect to federal, state and local taxes and certain other liabilities.
The Debtors recognized a gain from the Sale of assets to Metrocall of
approximately $22.9 million, net of expenses related to the Sale of
approximately $1.5 million.
Concurrently with the Sale, the Credit Facility was amended. Among
other things, the amendment provided for an extension of the maturity date to
December 31, 1998 and a waiver of all existing covenant defaults. In addition,
the Company was required to use $20.5 million of the cash proceeds from the Sale
to reduce the debt by approximately $18.4 million and pay accrued interest of
$2.0 million and certain closing expenses. Pending payment in full of the Credit
Facility, the Company was not permitted to make any payments to the holders of
Subordinated Notes or to its shareholders. Any amounts received from the sale of
securities of Metrocall in excess of appropriate cash reserves were required to
be paid in reduction of amounts outstanding under the Credit Facility.
In connection with the Sale, the holders of Subordinated Notes and the
Debtors entered into a Forbearance Agreement, as amended pursuant to which the
holders have agreed to forbear from collecting on such Subordinated Notes until
August 31, 1999. During the forbearance period, the holders of the Subordinated
Notes agreed not to initiate any action, exercise any remedy or make any claim
against the Debtors with respect to the Subordinated Notes. In consideration of
such forbearance, and in complete satisfaction of all amounts of principal and
interest due, after all amounts have been paid in full under the Credit Facility
and all other liabilities of the Debtors have been satisfied, the holders of the
Subordinated Notes agreed that they would only be entitled to receive 70% of the
cash and other assets (consisting of Metrocall Common Stock) available for
distribution to the Subordinated Noteholders and the shareholders of the
Company, up to an aggregate distribution to Subordinated Noteholders of $19
million, with the remaining 30% to be distributed 21% to holders of Preferred
Stock and 9% to holders of Common Stock. After the holders of Subordinated Notes
have indefeasibly received a total of $19 million, any remaining amounts
available for distribution to the Subordinated Noteholders and the shareholders
of the Company will be made 50% to the holders of the Subordinated Notes, 35% to
holders of Preferred Stock and 15% to holders of Common Stock. Interest will
continue to accrue on the Subordinated Notes until the Filing Date. At March 31,
1999, $23,627,500 of principal and interest was due and owing to the holders of
the Subordinated Notes.
Under the Forbearance Agreement, Debtors are not permitted to enter
into transactions with their stockholders, officers or directors or conduct any
business or incur any debt other than in connection with the satisfaction of
their obligations under the Credit Facility, payment of other permitted
liabilities and the implementation of the plan of liquidation.
The Company, with the consent of the holders of the Preferred Stock,
will distribute to holders of the Company's Common Stock 30% of any
distributions otherwise payable to holders of the Company's Preferred Stock. In
addition, holders of the Preferred Stock waived their rights to receive accrued
dividends of $4,295,000 and their rights to further dividends.
At a meeting of shareholders held June 12, 1997, shareholders of the
Company approved the Sale and the adoption by the Company of a Plan of
Liquidation, a copy of which is annexed hereto as Exhibit "B." The Plan of
Liquidation provides that (i) the Company shall enter into and effect the
transactions contemplated by the Sale, (ii) upon the closing of the Sale, the
Company shall continue in existence for the sole purpose of winding up its
affairs, and that it shall not thereafter engage in any business activities
other than activities related to the implementation of the Plan of Liquidation,
(iii) the Company shall take all necessary action to settle and discharge, or
otherwise provide for, all of its remaining liabilities either through the
payment of monies received as the consideration for the Sale, its available
cash, the delivery of shares of Metrocall Common Stock and Series B Preferred
Stock received as consideration pursuant to the Sale and/or pursuant to the sale
of any or all of such shares and the application of the proceeds of the sale of
such shares to the payment of the Debtors' liabilities, all of their remaining
assets (less any assets retained as reasonable provisions to meet claims,
including unasserted, contingent, conditional or unmatured liabilities or
expenses, and specifically set aside for such purpose) will be distributed to
the holders of Subordinated Notes and shareholders of the Debtors and (iv) each
Debtor shall thereafter dissolve as a corporate entity.
The cash received by the Debtors from the Sale was not sufficient for
the Debtors to pay in full their outstanding liabilities. In order to pay
existing liabilities, the Debtors commenced the sale of shares of common stock
of Metrocall. At the time of the Sale, the Metrocall common stock had a closing
price of approximately $4.1825 per share. From the dale of Sale through December
31, 1998, the Debtors sold an aggregate of 855,000 shares of Metrocall common
stock and received net cash proceeds of $6.1 million. In January 1999, the
Debtors sold all the Series B Junior Convertible Preferred Stock for $15.7
million in cash, $11.1 million of which was used to repay in full the Credit
Facility.
COMMON STOCK
The Company is authorized to issue up to 100,000,000 shares of Common
Stock, par value $.10 per share, of which at March 31, 1999, 16,024,585 shares
of Common Stock were issued and outstanding. Subject to the rights of the
holders of any series of Preferred Stock, holders of the Common Stock of the
Company are entitled to share equally on a per share basis in such dividends as
may be declared by the Board of Directors out of funds legally available
therefor. Upon liquidation, dissolution or winding-up of the Company, after
payment of creditors and the holders of any senior securities of the Company,
including Preferred Stock, the assets of the Company will be divided pro rata on
a per share basis among the holders of the shares of Common Stock. The Common
Stock is not subject to any liability for further assessments. There are no
conversion or redemption privileges nor any sinking fund provisions with respect
to the Common Stock, and the Common Stock is not subject to call. The holders of
Common Stock do not have any preemptive or other subscription rights.
Holders of Common Stock are entitled to cast one vote for each share
held at all shareholders' meetings for all purposes, including the election of
directors. The Common Stock does not have cumulative voting rights.
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of Preferred
Stock, par value $.01 per share. The Preferred Stock may be issued by the Board
of Directors from time to time in one or more series. The Board of Directors is
authorized to determine the rights, preferences, privileges and restrictions,
including the dividend rights, conversion rights, voting rights, terms of
redemption (including sinking provisions, if any) and liquidation preferences of
any series of Preferred Stock and to fix the number of shares of any such series
without any further vote or action by the shareholders.
The Company may not declare or pay any dividends on its Common Stock
or make, directly or indirectly, any payment on the account of the redemption,
purchase or other acquisition of such stock unless all cumulative dividends on
the Company's outstanding Preferred Stock shall have been paid in full.
SERIES ONE PREFERRED STOCK
On December 30, 1993, the Company issued an aggregate of 305,768
shares of Series One Preferred Stock (the "Preferred Stock"), convertible into
an aggregate of 6,794,164 shares of Common Stock, of which 286,361 shares of
Series One Preferred Stock are currently outstanding. Holders of the Preferred
Stock are entitled to vote the number of votes that they would be entitled to
vote if their shares of Preferred Stock were converted into shares of Common
Stock. Holders of a majority of the Preferred Stock, as a class, are entitled to
elect two representatives to the Board of Directors of the Company.
Each share of Preferred Stock had a 10% dividend, payable
semi-annually in arrears, and is convertible into Common Stock at an initial
price of $4.50 per share, subject to certain anti-dilution provisions. Payment
of dividends may be made in cash or in Common Stock of the Company registered
under the Securities Act of 1933. Any dividend payments not made would accrue at
the 10% annual rate. Any dividend payments not made when permitted under the
Credit Facility and the Subordinated Notes would have resulted in, among other
things, an increase in the dividend rate to 15% per annum and would have
entitled holders of a majority of Preferred Stock to elect an additional
representative to the Board of Directors of the Company.
The holders of Preferred Stock have a liquidation preference of
$105.00 per share (or $30,067,905 in the aggregate) (the "Liquidation
Preference") in any distribution by the Company of its assets to its
shareholders. In addition to the liquidation preference, the holders of
Preferred Stock are entitled to any accrued and unpaid dividends prior to any
distribution to the holders of Common Stock upon liquidation. As of December 31,
1996, accrued and unpaid dividends on the Company's outstanding Preferred Stock
aggregated $2,863,610. In 1997, the holders of Preferred Stock waived and
relinquished all right to these accrued and any future dividends.
B. EVENTS LEADING TO THE SOLICITATION OF THE PLAN
At March 31, 1999, Debtors' Assets consisted of $5,133,263 in cash and
3,056,856 shares of Metrocall Common Stock which had a market value on that date
of $9,266,095. On that date, $23,627,500 of principal and interest was due and
owing under the Subordinated Notes, plus Debtors had other known and unknown
claims, the precise amount of which is unknown and is expected to be between
$50,000 and $1,500,000. Thus, Debtors' liabilities were far in excess of their
assets. The Debtors, in attempting to dissolve under the Plan of Liquidation,
determined that it would take several years to obtain all necessary tax
clearances. In addition, the market price for the Metrocall common stock had
declined and there was no ability to sell large blocks of Metrocall common stock
at prices considered reasonable.
C. THE COMPANY'S OBJECTIVES IN FILING THE CHAPTER 11 CASE
The Debtors are of the opinion that the Plan is the most favorable
mechanism for the distribution of their Assets to their creditors and equity
holders. Further, Chapter 11 provides an ideal forum for: (i) the liquidation
and wind-up of the Debtors; (ii) the fixing of liabilities; (iii) binding and
equal treatment of all holders of Claims in a particular class; (iv) the
resolution of any and all Disputed Claims in a fair and expeditious manner; and
(v) the effectuation of mutual, binding releases of all parties. Moreover, the
Debtors anticipate that by commencing the solicitation in advance of commencing
its Chapter 11 case, the pendency of the bankruptcy case should be significantly
shortened, and the administration and associated cost of such a case should be
lessened.
As discussed previously, if the one Impaired Creditor Class and the
class of holders of Preferred Stock vote to accept the Plan, the Debtors are
obligated to file a prepackaged Chapter 11 case in the Bankruptcy Court together
with the Plan, the Disclosure Statement, and Ballots relating to the Plan. The
effects of a bankruptcy filing are multifaceted, the more significant of which
are highlighted below.
1. CONTINUATION AS DEBTORS-IN-POSSESSION
Immediately following the commencement of the Bankruptcy Case, the
Debtors intend to continue to function as debtors- in-possession under the
protection of the Bankruptcy Code. The Bankruptcy Court will have certain
supervisory powers over the Debtors during the pendency of the bankruptcy case.
The Debtors will be authorized to operate in the ordinary course of business.
However, any transactions that are outside of the ordinary course of business
will require Bankruptcy Court approval.
2. IMMEDIATE RELIEF TO BE SOUGHT IN BANKRUPTCY CASE
Upon the filing of its Chapter 11 petition, the Debtors anticipate
submitting several so-called "first day orders," along with supporting
applications, to the Bankruptcy Court. These first day orders will include,
among others, (i) an order authorizing the retention by the Debtors of Stroock &
Stroock & Lavan LLP as special bankruptcy and corporate counsel, Ernst & Young
LLP as accountants, and Bariston Associates, Inc., as Manager of the Debtors and
Disbursing Agent; (ii) an order authorizing the Debtors to maintain their
prepetition bank or other investment accounts, business forms, stationery and
checks; (iii) an order setting bar dates for the filing of Claims; and (iv) an
order setting a hearing date for and approving notice of a hearing on the
adequacy of the Disclosure Statement and the confirmation of the Plan.
The Debtors also intend to move for an order authorizing them to sell
Metrocall Common Stock at any time prior to its distribution under the Plan, if
Bariston Associates, acting as Manager or Distribution Agent, determines that in
the exercise of its prudent judgment it would be reasonable to do so.
FOR MORE COMPREHENSIVE DISCUSSION OF THE PROCEDURES GOVERNING
DISTRIBUTIONS TO CREDITORS AND SHAREHOLDERS, SEE SECTION IV OF THIS DISCLOSURE
STATEMENT, AND ARTICLE VII OF THE PLAN.
3. HEARING ON CONFIRMATION OF THE PLAN/DISTRIBUTIONS
Upon the commencement of the Chapter 11 case, the Debtors intend to
file motions requesting the scheduling of a hearing to consider confirmation of
the Plan and approval of the Disclosure Statement.
The Subsidiaries shall be dissolved as of the Effective Date, and Page
America Group, Inc. shall be dissolved as of the Final Distribution Date under
the Plan. Distributions to creditors and equity holders will be made by or at
the direction of the Debtors on and after the Effective Date. There may be one
or more distributions made, depending on the timing of the resolution of all
Disputed Claims. The Disbursing Agent will be responsible for distributions
after the Effective Date, with the assistance of the Transfer Agent for the
Common Stock and shall have the discretion to determine the timing and number of
post-Effective Date distributions.
IV. DESCRIPTION OF PREPACKAGED LIQUIDATING CHAPTER 11 PLAN
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE PLAN. IT IS
NOT A COMPLETE STATEMENT OF THE PLAN OR ITS OPERATION AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE PLAN ITSELF. THE PLAN IS ANNEXED TO THIS DISCLOSURE
STATEMENT AS EXHIBIT "A". THE PLAN, SUBJECT TO THE PROVISIONS OF THE BANKRUPTCY
CODE, PROVIDES FOR THE TREATMENT OF ALL CREDITORS THAT HOLD CLAIMS ARISING PRIOR
TO THE CONFIRMATION DATE OF THE PLAN, ALL EQUITY INTERESTS OF THE DEBTORS AND
FOR THE COSTS OF LIQUIDATION OF THE DEBTORS.
SINCE THE PLAN DEALS WITH SOPHISTICATED LEGAL CONCEPTS, AND
INCORPORATES THE DEFINITIONS AND REQUIREMENTS OF THE BANKRUPTCY CODE, YOU MAY
WISH TO CONSULT WITH COUNSEL OF YOUR CHOICE IN MAKING YOUR DECISION REGARDING
YOUR VOTE ON THE PLAN. TO THE EXTENT THAT THE TERMS OF THIS DISCLOSURE STATEMENT
VARY FROM THE TERMS OF THE PLAN THE TERMS OF THE PLAN SHALL BE CONTROLLING.
A. CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS UNDER THE PLAN
The Plan provides for the treatment of Administrative and Priority
Claims, and divides all other holders of Claims (I.E., creditors) and Interests
(I.E., shareholders) into four (4) Classes. The Classes and distributions to be
made in respect of or treatment proposed to be accorded to Allowed Claims or
Interests under the Plan are summarized and described below. The Plan also
provides for the treatment of Disputed Claim(s), which treatment is likewise
summarized below.
1. ADMINISTRATIVE CLAIMS
Under the Plan, the holders of Administrative Claims, to the extent
not previously paid, shall be paid, in full and complete satisfaction of their
Claims, either (A) one hundred percent (100%) of their Allowed Claims in cash on
the later of: (i) the Effective Date; (ii) the date such claims are Allowed or
come due; or (iii) in the case of Claims of professionals, upon entry of an
order of the Court authorizing the payment of such claims, PROVIDED, HOWEVER,
that (x) professional fees incurred subsequent to the Confirmation Date shall be
paid without the need for Bankruptcy Court approval and (y) claims, liabilities
or obligations incurred in the ordinary course of business of the Debtors will
be paid or performed in accordance with their terms; or (B) such other treatment
as may be agreed upon in writing by the holder of the Claim and the Debtors.
Administrative Claims are not Impaired, and are not entitled to vote
on the Plan. Including expenses of administering the bankruptcy case,
professional fees and disbursements incurred after the Filing Date, the Debtors
estimate that the aggregate amount of Administrative Claims will be
approximately $150,000.
2. PRIORITY CLAIMS
Under the Plan, the holders of Priority Claims, including all Claims
for Taxes entitled to priority under subsection 507(a)(8) of the Bankruptcy
Code, shall be paid, in full and complete satisfaction of their Claims, one
hundred percent (100%) of their Allowed Claims in cash on the later of (i) the
Effective Date, (ii) the dates such claims are Allowed or come due, or (iii) as
otherwise agreed to by the holder of the Claim and the Debtors.
Priority Claims are not Impaired and are not entitled to vote on the
Plan. The Debtors can only estimate the amount of Allowed Priority Claims since,
if any exist, they will consist primarily of State tax liabilities, the amount
of which is not presently known, but which the Debtors estimate at zero.
3. CLASS 1 CLAIMS
The Class 1 Claims consist of the Subordinated Notes Claims. Class 1
Claims shall be deemed Allowed Claims in the amount of principal plus interest
as of the Filing Date. The holders of the Class 1 Claims shall be paid, in full
and complete satisfaction of their Allowed Claims, seventy (70%) percent of all
amounts available for distribution after all other Allowed Claims have been paid
until $19 million has been indefeasibly paid to the holders of Class 1 Claims
and thereafter shall receive 50% of all other Assets available for distribution.
In addition, holders of Class 1 Claims shall receive unclaimed funds as provided
in Section IV.H. of this Disclosure Statement.
The Plan treats the holders of Class 1 claims as impaired. The Debtors
believe the holders of Class 1 Claims will accept the Plan.
The outstanding principal amount of and interest on the Class 1 Claims
as of March 31, 1999 was $23,627,500. Interest is payable in additional
pay-in-kind notes semi-annually on June 30 and December 31 at 15% per annum. The
Class 1 Claims shall be paid in cash, to the extent available, and the balance
in shares of Metrocall Common Stock, which stock shall be valued at the average
of the closing prices for the 10 trading days ended 5 days prior to the
Effective Date. The payment of cash and stock shall be made on a pro rata basis
with the Class 3 Interests.
4. CLASS 2 CLAIMS
Class 2 Claims consist of the Allowed General Unsecured Claims. This
class consists of all Unsecured Claims other than Unsecured Claims that are
classified in another Class under the Plan. The holders of the Allowed Class 2
Claims shall have their Allowed Claims paid in full in cash in complete
satisfaction of their Allowed Claims on the later of (i) the Effective Date,
(ii) the date such Claims are Allowed, or (iii) as otherwise agreed to by the
claimant and the Debtors.
Holders of Class 2 Claims are not Impaired under the Plan, are deemed
to have accepted the Plan under Section 1126(f) of the Bankruptcy Code, and are
not entitled to vote on the Plan. Other General Unsecured Claims, if any, are
expected to consist of any unpaid pre-Filing Date expenses and fees of the
Indenture Trustee allowed under the Subordinated Notes Indenture, any unpaid
Pre-Filing Date expenses and fees of the Transfer Agent, and State tax
liabilities the amount of which is unknown. The Debtors estimate the Class 2
Claim amounts will be between $50,000 and $1,500,000.
5. CLASS 3 INTERESTS
The holders of the Class 3 Interests shall receive twenty-one (21%)
percent of all amounts available for distribution after all Allowed Claims
(other than Class 1 Claims) have been paid, and their Interests shall be
canceled as of the Final Distribution Date. Once Class 1 holders have been
indefeasibly paid $19 million, Class 3 Interests shall thereafter receive 35% of
all other Assets available for distribution. Class 3 Interests shall be paid in
cash and Metrocall Common Stock, pro rata with the Class 1 Claims, which
Metrocall Common Stock shall be valued as set forth in Section IV.A.3. In
addition, holders of Class 3 Interests shall receive unclaimed funds as provided
in Section IV.H. of this Disclosure Statement. Class 3 Interests are treated as
Impaired under the Plan, and are entitled to vote on the Plan. The Debtors
believe the holders of Class 3 Interests will accept the Plan.
6. CLASS 4 INTERESTS
The holders of the Class 4 Interests shall receive nine (9%) percent
of all amounts available for distribution after all Allowed Claims (other than
Class 1 claims) have been paid and their Interests shall be canceled as of the
Final Distribution Date. Once Class 1 holders have been indefeasibly paid $19
million, Class 4 Interests shall thereafter receive 15% of all other property
available for distribution. In addition, holders of Class 4 Interests shall
receive unclaimed funds as provided in Section IV.H. of this Disclosure
Statement. Class 4 Interests shall be paid in cash. Class 4 Interests are
treated as Impaired under the Plan, and are determined to have rejected the
Plan, thus their votes are not being solicited.
7. Should the Bankruptcy Court determine that Class 2 is Impaired by
its treatment under the Plan, the Plan provides that Class 2 will be deemed to
have rejected the Plan, and the Debtors will seek to confirm the Plan
notwithstanding the rejection by that Class of Claims.
B. MEANS OF IMPLEMENTATION OF THE PLAN
The funds required for the consummation and performance of the Plan
shall be provided from: (i) all cash held by the Debtors as of the Effective
Date; and (ii) the Metrocall Common Stock held as of the Effective Date.
C. DISPUTED CLAIMS
The Plan further provides that in connection with distributions to be
made to holders of Administrative or Priority Claims, or Claims in Class 2,
there shall be reserved from any distribution to the holder of a Disputed Claim
the amount of cash which otherwise would be paid in respect of that portion of
such Claim that is a Disputed Claim. Pending the determination of a Disputed
Claim by a Final Order, an amount of cash equal to the amount so reserved, or
such lesser amount as the Court may have determined, shall be held by the
Disbursing Agent in the Distribution Reserve as long as such Claim remains a
Disputed Claim. Upon such Claim becoming an Allowed Claim by a Final Order, any
distribution then due to be made in respect of such Claim shall be paid and
distributed within seven Business Days in accordance with the provisions hereof
and of such Final Order. The Disbursing Agent shall have the right to assert any
defenses, offsets or counterclaims held by the Debtors.
D. RELEASES; INJUNCTIONS; LIMITATIONS OF LIABILITY
Pursuant to Section 1141(d)(3) of the Bankruptcy Code, a corporation
that liquidates its assets under chapter 11 is not entitled to a discharge.
However, in order to ensure the cooperation and best efforts of key parties to
the implementation of the Plan, and to fully implement the purpose of the Plan,
the Plan provides for the following releases, injunctions and limitations of
liability.
1. RELEASES
As of the Effective Date, the Debtors, their Affiliates and
shareholders, acting derivatively, are deemed to have forever waived and
released unconditionally (i) each of the Debtors' present and former officers,
directors, employees, agents, consultants, advisors, attorneys, accountants and
other representatives and their respective successors, assigns, and Affiliates
(collectively, the "Company Releasees"), and (ii) the holders of Interests, the
Indenture Trustee (except as otherwise provided in the Indenture), the
Disbursing Agent, the Stock Transfer Agent, the holders of Subordinated Notes
and the holders of Class 2 Claims (in their capacity as holders of such Claims
and except for defenses or set-offs the Debtors may have to any Class 2 claims)
(collectively, the "Third Party Releasees") from any and all claims,
obligations, suits, judgments, damages, rights, causes of action and liabilities
whatsoever whether known or unknown based in whole or in part of any act or
omission by, or any transaction, agreement, event or other occurrence taking
place prior to, on or after the Confirmation Date, in any way relating to the
Debtors, the Bankruptcy Case, the Plan, or the treatment of liabilities arising
prior to or subsequent to the Confirmation Date (the "Released Claims").
In addition, as of the Effective Date, except as otherwise provided in
the Plan, each holder of a Claim or Interest (i) that has accepted the Plan, or
(ii) whose Claim or Interest is in a Class that has accepted or deemed to have
accepted the Plan, or (iii) that may be entitled to receive a distribution of
property under the Plan, shall be deemed to have waived and released the
Debtors, their Affiliates and shareholders, the Company Releasees and the Third
Party Releasees from the Released Claims, EXCEPT FOR (i) Allowed Claims that can
be asserted under the Plan and (ii) claims third parties may have against each
other that are unrelated to the Debtors and the Bankruptcy Case.
2. INJUNCTIONS
Except as otherwise provided in the Plan, confirmation of the Plan
shall, provided the Effective Date occurs, permanently enjoin all entities
holding Claims against, Interests in or other debts or liabilities of the
Debtors whether arising before, on or after the Effective Date, from taking any
actions to assert or enforce any such Claims, Interests, debts or liabilities
against the Debtors, the Company Releasees and the Third Party Releasees, EXCEPT
FOR (i) Allowed Claims that may be asserted under the Plan or (ii) claims
creditors or other third parties may have against each other that are not
related to the Debtors or the Bankruptcy Case.
3. LIMITATIONS OF LIABILITY
The Plan provides that Entities that solicit acceptances or rejections
of the Plan in good faith pursuant to Section 1125(e) and other provisions of
the Bankruptcy Code (the "Exculpated Persons") are not liable on account of such
solicitation for violation of any applicable law, rule or regulation governing
the solicitation. The Plan further provides that neither the Debtors, the
Company Releasees, the Third Party Releasees, or any of their Affiliates,
officers, directors, employees, agents or professionals shall have any liability
to any Entity for any act or omission made in good faith in connection with the
Plan, the Disclosure Statement, the Indenture, or any contract or other document
created in connection with the Plan or the administration of the Bankruptcy Case
(except for gross negligence or willful misconduct as finally determined by the
Bankruptcy Court), including the failure to satisfy or waive any conditions to
the Confirmation Date or the Effective Date.
The Debtors know of no claims that have been asserted or threatened,
nor any basis for any claims being asserted or threatened, against the Debtors,
the Company Releasees or the Third Party Releasees.
E. DISTRIBUTION PROVISIONS RELATING TO HOLDERS OF THE SUBORDINATED NOTES
As of the close of business on the Record Date for purposes of
distributions to be made to holders of Allowed Class 1 Claims pursuant to this
Plan, the transfer ledger in respect of the Subordinated Notes (and the
certificates issued in connection therewith) shall be closed, and the Debtors
and the Disbursing Agent shall have no obligations to recognize any transfer of
the Subordinated Notes after the Record Date, but instead shall be entitled to
recognize and deal for all purposes with respect to this Plan with only those
holders of record stated on the transfer ledger for the holders of the
Subordinated Notes as of the close of business on the Record Date, unless an
Entity establishes to the satisfaction of the Debtors or the Disbursing Agent
that it is the legal successor to such holder.
There are two Beneficial Holders of the Subordinated Notes. Any
distributions to which the holders of the Subordinated Notes are entitled shall
be made by the Disbursing Agent to the Beneficial Holders. The Indenture
Trustee's pre-Filing Date compensation and expenses are intended to be treated
as Class 2 Claims, and its post-Filing Date compensation and expenses, if any,
will be treated as Administrative Claims, and post-Effective Date liquidation
costs. If the Court does not approve the payment by the Debtors of compensation
and expense reimbursement claims made by the Indenture Trustee under the
Indenture, the Debtors and the Disbursing Agent will recognize the Indenture
Trustee's lien and permit it to assert its rights against a portion of the cash
distribution payable to the holders of the Subordinated Notes under this Plan
until its compensation and expense reimbursement claims are satisfied in full.
Consequently, amounts actually received by holders of the Subordinated Notes may
be less than the gross distributions provided for under this Plan by the amount
of distributions applied to the Indenture Trustee's compensation and expense
reimbursement claims.
No holder of Subordinated Notes shall be entitled to receive any
distribution respecting such Claim unless and until such holder shall have first
either (i) surrendered or caused to be surrendered to the Disbursing Agent the
original notes or certificates held by it or (ii) in the event that such holder
is unable to surrender its original note or certificate because same has been
lost, destroyed, stolen or mutilated, (a) furnished the Disbursing Agent with an
executed affidavit of loss and indemnity with respect thereto in form
customarily utilized for such purposes that is reasonably satisfactory to the
Disbursing Agent, and (b) provided to the Disbursing Agent a bond in such amount
and form as the Disbursing Agent shall direct, sufficient to indemnify the
Disbursing Agent against any claim that may be made against the Disbursing Agent
on account of the alleged loss, theft or distribution of any such certificate or
the distribution of property hereunder. The method and procedure to be followed
for surrendering Subordinated Notes and for providing affidavits and bonds shall
be prescribed by the Disbursing Agent upon reasonable notice to holders of the
Subordinated Notes. Promptly upon surrender of such instruments, the Disbursing
Agent shall cancel the Subordinated Notes or otherwise dispose of such
Subordinated Notes. In the event a holder of a Subordinated Note fails to
surrender its Subordinated Note(s) or certificate(s) or provide an affidavit and
adequate bond on or before the first anniversary of the Effective Date, such
holder shall be conclusively deemed to have forfeited its distribution under
this Plan, and all such property not claimed by such holder shall be retained by
the Disbursing Agent and distributed to other holders of Claims and Interests
entitled to distributions of unclaimed funds.
On the Effective Date, the Indenture shall, except as provided in this
Plan, be deemed canceled, terminated and of no further force or effect.
Notwithstanding the foregoing, such cancellation of the Indenture (a) shall not
impair the rights of holders of the Subordinated Notes to receive distributions
on account of such Claims pursuant to this Plan, and (b) shall not impair the
rights and duties under the Indenture as between the Indenture Trustee, and the
beneficiaries of the trust or arrangements created thereby, as set forth in the
applicable provisions of the Indenture, including INTER ALIA the rights of the
Indenture Trustee to enforce its lien. The Subordinated Notes shall not be
canceled other than pursuant to the Plan and, until such cancellation, such
Subordinated Notes shall be evidence of the entitlement of the holder thereof to
receive distributions pursuant to this Plan. On the Filing Date, the term of the
forbearance period under the Forbearance Agreement shall automatically be deemed
extended to the Final Distribution Date and any provisions of the Forbearance
Agreement which are in conflict with the Plan shall automatically be deemed to
have been waived by the holders of Subordinated Notes.
F. DISTRIBUTION PROVISIONS RELATING TO HOLDERS OF THE PREFERRED STOCK INTERESTS
As of the close of business on the Record Date for purposes of
distributions to be made to holders of Class 3 Interests pursuant to this Plan,
the transfer ledger in respect of the Preferred Stock (and the certificates
issued in connection therewith) shall be closed, and the Debtors and the
Disbursing Agent shall have no obligations to recognize any transfer of the
Preferred Stock after the Record Date, but instead shall be entitled to
recognize and deal for all purposes with respect to this Plan with only those
holders of record stated on the transfer ledger maintained by the Debtors or the
Disbursing Agent for the holders of the Preferred Stock as of the close of
business on the Record Date, unless an Entity establishes to the satisfaction of
the Disbursing Agent that it is the legal successor to such holder. The
Preferred Stock is held by approximately sixty (60) holders, all of whom are
both Record Holders and Beneficial Holders.
No holder of Preferred Stock shall be entitled to receive any
distribution from the Disbursing Agent respecting such Interests unless and
until such holder shall have first either (i) surrendered or caused to be
surrendered to the Disbursing Agent the original certificates held by it or (ii)
in the event that such holder is unable to surrender its original certificate
because same has been lost, destroyed, stolen or mutilated, (a) furnished the
Disbursing Agent with an executed affidavit of loss and indemnity with respect
thereto in form customarily utilized for such purposes that is reasonably
satisfactory to the Disbursing Agent and (b) provided to the Disbursing Agent a
bond in such amount and form as the Disbursing Agent shall direct, sufficient to
indemnify the Disbursing Agent against any claim that may be made against the
Disbursing Agent on account of the alleged loss, theft or distribution of any
such certificate or the distribution of property hereunder. The method and
procedure to be followed for surrendering certificates and for providing
affidavits and bonds shall be prescribed by the Disbursing Agent upon reasonable
notice to holders of the certificates. In the event a holder of a certificate
fails to surrender its certificate(s) or provide an affidavit and adequate bond
on or before the first anniversary of the Effective Date, such holder shall be
conclusively deemed to have forfeited its distribution under this Plan, and all
such property not claimed by such holder shall be retained by the Disbursing
Agent and distributed to other holders of Claims and Interests entitled to
distributions of unclaimed funds. All Preferred Stock Interests and certificates
evidencing such Interests shall be canceled as of the Final Distribution Date.
G. DISTRIBUTION PROVISIONS RELATING TO HOLDERS OF THE COMMON STOCK INTERESTS
As of the close of business on the Record Date for purposes of
distributions to be made to holders of Class 4 Interests pursuant to this Plan,
the transfer ledger in respect of the Common Stock (and the certificates issued
in connection therewith) shall be closed, and the Debtors, the Transfer Agent
and the Disbursing Agent shall have no obligations to recognize any transfer of
the Common Stock after the Record Date, but instead shall be entitled to
recognize and deal for all purposes with respect to this Plan with only those
holders of record stated on the transfer ledger maintained by the Transfer Agent
for the holders of the Common Stock as of the close of business on the Record
Date, unless an Entity establishes to the satisfaction of the Transfer Agent or
the Disbursing Agent that it is the legal successor to such holder.
Any distributions to which the holders of the Common Stock are
entitled shall be made to the Transfer Agent for the benefit of Record Holders
of the Common Stock and, where applicable, Beneficial Holders, in accordance
with the provisions of this Plan.
The Transfer Agent's pre-Filing Date compensation and expenses are
intended to be treated as Class 2 Claims, and its post-Filing Date compensation
and expenses will be treated as Administrative Claims, and post-Effective Date
liquidation costs. If the Court does not approve the payment by the Debtors of
compensation and expense reimbursement claims made by the Transfer Agent, the
Transfer may seek to withhold a portion of the cash distribution it receives on
behalf of holders of the Common Stock under this Plan until its compensation and
expense reimbursement claims are satisfied in full pursuant to a lien for this
purpose granted to the Transfer Agent. Consequently, amounts actually received
by holders of the Common Stock may be less than the gross distributions provided
for under this Plan by the amount of distributions applied by the Transfer Agent
to its compensation and expense reimbursement claims.
No holder of Common Stock shall be entitled to receive any
distribution from the Transfer Agent respecting such Interests unless and until
such holder shall have first either (i) surrendered or caused to be surrendered
to the Transfer Agent the original certificates held by it or (ii) in the event
that such holder is unable to surrender its original certificate because same
has been lost, destroyed, stolen or mutilated, (a) furnished the Transfer Agent
with an executed affidavit of loss and indemnity with respect thereto in form
customarily utilized for such purposes that is reasonably satisfactory to the
Transfer Agent and (b) provided to the Transfer Agent a bond in such amount and
form as the Transfer Agent shall direct, sufficient to indemnify the Transfer
Agent against any claim that may be made against the Transfer Agent on account
of the alleged loss, theft or distribution of any such certificate or the
distribution of property hereunder. The method and procedure to be followed for
surrendering Common Stock and for providing affidavits and bonds shall be
prescribed by the Transfer Agent upon reasonable notice to holders of the Common
Stock. The Transfer Agent shall retain all surrendered certificates, and all
Common Stock Interests and certificates evidencing those Interests shall be
canceled as of the Final Distribution Date.
In the event a holder of a certificate fails to surrender its
certificate(s) or provide an affidavit and adequate bond on or before the first
anniversary of the Effective Date, such holder shall be conclusively deemed to
have forfeited its distribution under this Plan, and all such property not
claimed by such holder shall be returned to the Disbursing Agent and distributed
to holders of other Claims and Interests entitled to distributions of unclaimed
funds. No Beneficial Holder of Common Stock shall be entitled to receive any
distribution under the Plan if the amount to be distributed to such holder would
be less than $5.00. In addition, the Disbursing Agent will not be obligated to
make a distribution to Class 4 if there is less than $150,000 available for
distribution. If on the Final Distribution Date less than $150,000 is available
for distribution to Class 4 Interests, then the Disbursing Agent may distribute
such amounts to holders of Class 1 Claims and Class 3 Interests, in the ratio of
70% and 30%, respectively, and no holder of Class 4 Interests shall have any
further rights in or claims to such amounts.
H. UNCLAIMED FUNDS
Amounts forfeited by holders of Class 1 Claims or Class 3 or 4
Interests who fail to timely claim their distributions shall be distributed as
follows:
(a) If there are unclaimed funds with respect to Class 4 Interests,
those unclaimed funds shall be distributed to Class 1 Claims, Class 3 Interests
and Class 4 Interests (other than those Class 4 Interests which did not
originally claim the money) in the ratio of 70%, 21% and 9%, respectively.
(b) Unclaimed funds with respect to Class 3 Interests shall be paid to
holders of Class 1 Claims and Class 3 Interests (other than those Class 3
Interests which did not originally claim the money) in the ratio of 70% and 30%,
respectively.
(c) Unclaimed funds with respect to Class 1 Claims shall be
distributed to holders of Class 1 Claims only, other than those holders of Class
1 Claims that did not originally claim the money.
I. DISBURSING AGENT AND DISTRIBUTION RESERVE
The Plan provides that on the Effective Date, Bariston Associates,
Inc. ("Bariston"), an entity which currently manages the Debtors' winddown, will
be appointed by the Court as the Disbursing Agent. Bariston is a Massachusetts
corporation controlled by David A. Barry, the President, Chief Executive Officer
and a director of the Debtors. Bariston directly or through affiliates owns an
aggregate of 158,874 shares of Preferred Stock and 4,406,235 shares of Common
Stock of the Company. The Debtors do not have any employees. Bariston has been
engaged by the Debtors to assist in the orderly liquidation of the Debtors, for
which it currently receives a fee of $9,087 per month, plus reimbursement for
expenses.
The duties of the Disbursing Agent, acting on behalf of the Debtors,
shall include: maintaining the Distribution Reserve; investing the cash held in
the Distribution Reserve; pursuing objections to, estimations and settlements of
Claims; prosecuting retained causes of action if any; calculating and
implementing all distributions to be made under this Plan to holders of Allowed
Claims and Interests; filing all required tax returns and paying all obligations
incurred by the Disbursing Agent in implementing the Plan from funds in the
Distribution Reserve; preparing and filing one or more reports to the Bankruptcy
Court on the implementation of the Plan, including a Final Report, and such
other responsibilities as may be vested in the Disbursing Agent pursuant to this
Plan, or Bankruptcy Court order or as may be necessary and proper to carry out
the provisions of this Plan.
The powers of the Disbursing Agent, acting on behalf of the Debtors,
shall, without Bankruptcy Court approval in each of the following cases, include
the power to invest funds in Permitted Investments, to make distributions and
pay taxes and other obligations owed by the Debtors or incurred by the
Disbursing Agent from the Distribution Reserve; the power to engage employees
and professional persons to assist the Disbursing Agent with respect to its
responsibilities; the authority to pay the fees and expenses of the professional
persons, agents and employees engaged by the Disbursing Agent and to pay all
other expenses for winding down the affairs of the Debtors; the power to
compromise and settle claims and causes of actions; the authority to act on
behalf of the Debtors in all adversary proceedings and contested matters pending
in the Court and in all actions and proceedings pending elsewhere, and to
settle, retain, enforce, dispute or adjust any Claim or Interest and otherwise
pursue actions involving assets of the Debtors that could arise or be asserted
at any time under the Bankruptcy Code; and such other powers as may be vested in
or assumed by the Disbursing Agent pursuant to the Plan, or Bankruptcy Court
order or as may be necessary and proper to carry out the provisions of the Plan.
In addition to reimbursement for the actual out-of-pocket expenses
incurred, the Disbursing Agent, and any employees or professionals engaged or
retained by the Disbursing Agent, shall be entitled to reasonable compensation
for services rendered in connection with the implementation of the Plan. The
Debtors have agreed, with the consent of the holders of Class 1 Claims, to
continue to pay a fee to the Disbursing Agent, which will primarily cover
salaries and other employee expenses, office overhead and insurance, of $9,087
per month, plus out-of-pocket expenses, through December 31, 1999. Thereafter,
the Disbursing Agent's compensation shall be in an amount approved by the
Bankruptcy Court, determined in consultation with the holders of Class 1 Claims.
No other salaries or expenses for officers, directors or employees of the
Debtors shall be paid after the Effective Date of the Plan. With respect to any
employees engaged and professionals retained, such compensation shall be in an
amount and on such terms as may be agreed to by the Debtors or the Disbursing
Agent and such employees or professionals, subject to court approval of
professional fees incurred prior to the Confirmation Date. Any dispute with
respect to such compensation shall be resolved by agreement among the parties
or, if the parties are unable to agree, as determined by the Bankruptcy Court.
J. JURISDICTION OF THE BANKRUPTCY COURT
The Plan provides that the Bankruptcy Court shall retain exclusive
jurisdiction of this case after the Effective Date for the following purposes:
(a) To determine any and all objections to the allowance, disallowance
or subordination of Claims or any controversy as to the classification of
Claims;
(b) To liquidate any disputed, contingent, or unliquidated Claims
including through estimation under Section 502(c) of the Bankruptcy Code, and
finally determine damages and other amounts in connection with such disputed,
contingent or unliquidated claims;
(c) To determine any and all applications for professional and similar
fees and for the reimbursement of disbursements and expenses with respect to
services rendered and expenses incurred prior to the Confirmation Date;
(d) To determine any and all pending motions and applications for
assumption or rejection of executory contracts and leases and the allowance and
classification of any Claims resulting from the rejection of executory contracts
and leases;
(e) To determine any and all motions, applications, adversary
proceedings, contested and litigated matters or such other matters over which
the Bankruptcy Court has jurisdiction prior to the Confirmation Date, including
the enforcement, prosecution, litigation, settlement and/or other disposition of
claims and counterclaims of the Debtors;
(f) To enforce the provisions of, and resolve any and all disputes
under or pertaining to the Plan;
(g) To determine the amount or legality of any tax, any fine or
penalty relating to a tax or any addition to a tax pursuant to Sections 346, 505
and 1146 of the Bankruptcy Code;
(h) To modify the Plan or correct any defect, cure any omission or
reconcile any inconsistency in the Plan or in the order of the Bankruptcy Court
confirming the Plan, or to enter such orders as may be necessary to effectuate
the terms and conditions of the Plan to the extent authorized by the Bankruptcy
Code as may be necessary to carry out the purpose and intent of the Plan;
(i) To hear and determine all controversies, suits and disputes, if
any, as may arise with regard to orders of this Court in the Bankruptcy Case;
(j) To hear and determine any and all controversies and disputes
arising under, or in connection with, the Plan or the order confirming the Plan;
(k) To adjudicate all Claims to a security or ownership interest in
any property of the Debtors or in any proceeds thereof;
(l) To adjudicate all Claims or controversies arising out of any
purchases, sales or contracts made or undertaken by the Debtors during the
pendency of this bankruptcy case;
(m) To recover all assets and properties of the Debtors wherever
located, including the prosecution and adjudication of all causes of action
available to the Debtors;
(n) To determine all questions and disputes regarding recovery of and
entitlement to the Debtors' assets and determine all claims and disputes between
the Debtors and any other Entity, whether or not subject to an action pending as
of the Confirmation Date;
(o) To enter any order, including injunctions, necessary to enforce
the title, rights and powers of the Debtors and to impose such limitations,
restrictions, terms and conditions on such title, rights and powers as the Court
may deem necessary or appropriate;
(p) To enter an order or final decree closing and terminating the
Bankruptcy Case; and
(q) To make such orders as are necessary or appropriate to carry out
the provisions of this Plan, including but not limited to orders interpreting,
clarifying or enforcing the provisions thereof.
K. CONDITIONS TO CONFIRMATION AND EFFECTIVE DATE
The Confirmation Date shall not occur unless the following conditions
set forth in Section 9.1 of the Plan are satisfied or, if waivable pursuant to
the Plan, waived:
(a) An order approving the adequacy of the Disclosure Statement shall
have been entered;
(b) The Confirmation Order, in form and substance acceptable to the
Debtors, shall have been entered by the Bankruptcy Court which provides, INTER
ALIA, that all applicable requirements of Section 1129 of the Bankruptcy Code
have been satisfied, and that the Subsidiaries shall be dissolved as of the
Effective Date, and Page America Group, Inc. shall be dissolved as of the Final
Distribution Date;
(c) The Bankruptcy Court shall have approved the identity and
appointment of the Disbursing Agent and shall have determined that the
Disbursing Agent is duly authorized to take the actions contemplated to be taken
pursuant to the Plan effective on the Effective Date; and
(d) The Confirmation Order shall not have modified, amended or deleted
the provisions of Article X of the Plan.
The Effective Date shall not occur unless the conditions set forth in
Section 9.2 of the Plan are satisfied or, if waivable pursuant to the Plan,
waived:
(a) the Confirmation Order shall have become a Final Order, or shall
not have been reversed, revoked, modified in any manner unacceptable to the
Debtors, or stayed; and
(b) The Bankruptcy Court shall have approved the amounts proposed to
be reserved by the Disbursing Agent on account of Disputed Claims.
The Debtors may, in their sole discretion, waive the provisions of
Section 9.1(d) of the Plan.
L. MODIFICATION, REVOCATION OR WITHDRAWAL OF THE PLAN
The Debtors reserve the right to modify the Plan in accordance with
Section 1127 of the Bankruptcy Code, and Bankruptcy Rule 3019, prior to or
subsequent to the Confirmation Date, and reserve the right to revoke or withdraw
the Plan prior to the Confirmation Date. After the Confirmation Date and prior
to the substantial consummation of the Plan, the Debtors and any
party-in-interest may modify the Plan including in order to remedy any defect or
omission, or reconcile any inconsistencies in the Plan, the Disclosure Statement
or the Confirmation Order or implement any other matters as may be necessary to
carry out the purpose and effects of the Plan; provided the treatment of holders
of Claims under the Plan is not adversely affected, that appropriate prior
notice of any modifications is given, and the Plan as modified is confirmed by
order of the Bankruptcy Court.
If the Debtors revoke or withdraw the Plan prior to the Confirmation
Date, then the Plan shall be deemed null and void. In such event, nothing
contained herein shall be deemed to constitute a waiver or release of any claims
by or against the Debtors or any other Entity or to prejudice in any manner the
rights of the Debtors or any Entity in any further proceedings involving the
Debtors.
M. SUBSTANTIVE CONSOLIDATION
The Plan assumes the substantive consolidation of the Debtors. As of
the Effective Date (i) all intercompany claims shall be canceled and no
distributions shall be made on account thereof; (ii) all assets and liabilities
of all of the Debtors shall be treated as provided in the Plan; (iii) all
guarantees by any Debtor of the payment, performance or collection of
obligations of the other Debtors shall be eliminated and canceled; (iv) any
obligation of any Debtor and all guarantees thereof by any other Debtor shall be
treated as a single obligation of the consolidated Debtors; (v) all joint
obligations of the Debtors, and all multiple claims against such entities on
account of such joint obligations shall be treated and allowed as a single claim
against the consolidated Debtors; and (vi) each Claim filed in the Chapter 11
Case of any Debtor shall be deemed filed against the consolidated Debtors and to
be a single obligation of the consolidated Debtors.
The subsidiaries of Page America Group, Inc. have no assets and are
believed to have no separate liabilities. The subsidiaries are jointly liable on
the Subordinated Notes.
N. EXECUTORY CONTRACTS AND UNEXPIRED LEASES
As of the Effective Date , all executory contracts and unexpired
leases that exist between the Debtors and any third party that have not
previously been assumed or rejected shall be rejected. Proofs of Claim for
damages arising from the rejection pursuant to this Plan or the Confirmation
Order of any executory contract or unexpired lease must be filed with the
Bankruptcy Court no later than twenty-five (25) days after service of notice of
entry of the confirmation order on such claimant. Any such rejection claims not
filed within that time shall be forever barred from assertion against the
Debtors, the Disbursing Agent, the Distribution Reserve, and any entity
receiving distributions under the Plan. Objections to such proofs of claim shall
be filed by the Disbursing Agent within sixty (60) days after such claims are
filed, or by such later date as the Bankruptcy Court may approve, and the
Bankruptcy Court shall determine any such objection. Unsecured Claims arising
out of the rejection of executory contracts and unexpired leases shall be Class
2 Claims under the Plan.
The Debtors know of no executory Contracts or Unexpired Leases that
exist, other than the Management Agreement with Bariston, which is to be brought
to the court for assumption immediately after the Filing Date. Thus, the Debtors
believe no Claims will arise as a result of this provision.
V. THE PLAN OF REORGANIZATION - VOTING INSTRUCTIONS
AND CONFIRMATION REQUIREMENTS
A. GENERAL
The Debtors are seeking the acceptance of the Plan by holders of Class
1 Claims and Class 3 Interests. Administrative Expense Claims, Priority Claims,
and General Unsecured Claims (Class 2), are not Impaired under the Plan and are
conclusively presumed to have accepted the Plan. Class 4 Interests are Impaired,
and are treated as having rejected the Plan.
A Ballot to be used to accept or reject the Plan has been enclosed
with all copies of this Disclosure Statement mailed to holders of Class 1 Claims
and Class 3 Interests.
B. VOTING ON THE PLAN
THE PERIOD DURING WHICH BALLOTS WITH RESPECT TO THE PLAN WILL BE
ACCEPTED BY THE DEBTORS WILL TERMINATE AT 5:00 P.M. EASTERN DAYLIGHT TIME, ON
JUNE 9, 1999 (THE "VOTING DEADLINE"), UNLESS THE DEBTORS EXTEND THE VOTING
DEADLINE PURSUANT TO A LETTER SENT BY THE DEBTORS TO THE HOLDERS OF CLASS 1
CLAIMS AND CLASS 3 INTERESTS, IN WHICH EVENT SUCH SOLICITATION PERIOD WILL
TERMINATE AT SUCH EXTENDED TIME AND DATE. EXCEPT TO THE EXTENT THE DEBTORS SO
DETERMINE OR AS PERMITTED BY THE BANKRUPTCY COURT, BALLOTS THAT ARE RECEIVED
AFTER THE VOTING DEADLINE WILL NOT BE ACCEPTED OR USED BY THE DEBTORS IN
CONNECTION WITH THE DEBTORS' REQUEST FOR CONFIRMATION OF THE PLAN (OR ANY
PERMITTED MODIFICATION THEREOF).
RECORD HOLDER BALLOTS MUST BE MAILED OR HAND DELIVERED TO BARISTON
ASSOCIATES, INC., ONE INTERNATIONAL PLACE, BOSTON, MA 02110, TELEPHONE NUMBER
617-330-8950.
Consistent with the provisions of Bankruptcy Rule 3018, the Debtors
have fixed the Voting Record Date -- the time and date for the determination of
holders of record of Claims who are entitled to vote on the Plan -- as the close
of business, Eastern Daylight Time, on May 17, 1999.
If a Ballot is signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations, or others acting in a
fiduciary or representative capacity, such persons should indicate such capacity
when signing and, unless otherwise determined by the Debtors, must submit proper
evidence satisfactory to the Debtors of their authority to so act.
Unless otherwise directed by the Bankruptcy Court, all questions as to
the validity, form, eligibility (including time of receipt), acceptance, and
revocation or withdrawal of Ballots will be determined by the Debtors whose
determination will be final and binding.
An executed Ballot may be withdrawn by receipt of a notice of
withdrawal at the address set forth above at any time on or prior to the Voting
Deadline. To be valid, a notice of withdrawal must (i) contain the description
of the Claim to which it relates and the initial aggregate principal amount
represented by such Claim, (ii) be signed by the beneficial holder of such
Claim, in the same manner as the Ballot was signed, and (iii) be received by the
Debtors on or prior to the Voting Deadline at the address set forth above. An
executed Ballot may be revoked and superseded by receipt of a properly completed
and subsequently dated Ballot at the address set forth above at any time on or
prior to the Voting Deadline. After the Voting Deadline, an executed ballot may
not be changed or withdrawn unless, for cause shown, the Bankruptcy Court, after
notice and a hearing, permits a holder of a Claim to change or withdraw an
acceptance in accordance with Bankruptcy Rule 3018(a).
C. CONFIRMATION REQUIREMENTS
In order to obtain confirmation of the Plan, all of the requirements
of Section 1129 of the Bankruptcy Code must be satisfied. These requirements
include, but are not limited to, findings that the Plan complies with the
applicable provisions of Chapter 11 of the Bankruptcy Code, that the Debtors
have complied with the applicable provisions of Chapter 11 of the Bankruptcy
Code and that the Plan has been proposed in good faith and not by any means
forbidden by law.
1. ACCEPTANCE BY IMPAIRED CLASSES
The Debtors intend to count all validly executed Ballots received
prior to the Voting Deadline for purposes of determining whether each Impaired
voting class has accepted or rejected the Plan. Bankruptcy Rule 3018(b)
prescribes the conditions that must be satisfied in order to count the Ballots
cast with respect to a plan prior to the commencement of a Chapter 11 case. The
rule requires that for the Ballot of a creditor to count (i) such Chapter 11
plan and a disclosure statement must be distributed to substantially all
creditors of the same class, (ii) the time prescribed for voting on such a plan
must not be unreasonably short and (iii) the solicitation must be conducted in
compliance with Section 1126 of the Bankruptcy Code, which Section requires that
the solicitation be conducted in compliance with all applicable nonbankruptcy
laws, rules, or regulations or, if there are no such applicable laws, rules, or
regulations, that the disclosure statement for such plan contains "adequate
information." Under Section 1125 of the Bankruptcy Code, "adequate information"
is defined as information of a kind and in sufficient detail to the extent it is
reasonably practicable in light of the nature and history of a company and the
condition of such company's books and records, that would enable a hypothetical
reasonable investor typical of holders of claims or equity interests of the
relevant class to make an informed judgment about the plan.
Except as described herein, the Bankruptcy Code generally requires as
a condition to confirmation that each class of Claims or Interests that is
impaired under the Plan accept the Plan. A Class of Claims has accepted the Plan
if the Plan has been accepted by holders of Claims that hold at least two-thirds
in dollar amount and more than one-half in number of the Allowed Claims of such
class that actually vote to accept or reject the Plan. Holders of Claims that
fail to vote are not counted as either accepting or rejecting the Plan. A Class
of Interests has accepted the Plan if the Plan has been accepted by holders of
at least two-thirds in amount of the Allowed Interests in that Class that
actually vote to accept or reject the Plan.
For the reasons discussed below, the Debtors believe that all the
requirements of Bankruptcy Rule 3018(b) will be satisfied. The Debtors are
soliciting votes from the ultimate Beneficial Holders of Impaired Claims and
Interests in Classes 1 and 3. The Debtors also believe that this Disclosure
Statement contains adequate information within the meaning of Section 1125 of
the Bankruptcy Code.
2. BEST INTERESTS TEST
Before the Plan may be confirmed, the Bankruptcy Court must find with
respect to any impaired class containing members that have rejected the Plan,
that the Plan provides that each holder of a Claim will receive or retain under
the Plan on account of such Claim property that has a value, as of the Effective
Date of the Plan, that is not less than the value of the distribution each such
entity would receive or retain if the Debtors were, on the Effective Date,
liquidated under Chapter 7 of the Bankruptcy Code. As set forth in Section VI of
this Disclosure Statement, the Debtors believe that this test will be satisfied.
To determine what members of each impaired Class of Claims would
receive if the Debtors were liquidated under Chapter 7, the Court must consider
the values that would be generated from a liquidation of the assets and
properties of the Debtors in the context of a hypothetical liquidation case
under Chapter 7. Since the Plan contemplates liquidation of the Debtors' assets,
if the Debtors' Estate were to be liquidated under Chapter 7 of the Bankruptcy
Code, the result would be similar to the result achieved under the Plan.
However, in the absence of a confirmed plan, the estate would incur the costs of
a trustee on top of other expenses of administering the liquidation process, and
the risk of a distress sale of Metrocall Common Stock could substantially
depress the value of those shares. In addition, failure to abide by the
agreed-upon distribution allocations reflected in the Plan could generate
inter-Creditor litigation which would increase costs, thereby reducing as well
as delaying distributions to Creditors and Shareholders.
A conversion of the Chapter 11 case to Chapter 7 would entail the
mandatory appointment of a trustee. Thus, the costs of liquidation under Chapter
7 would include reasonable compensation payable to the Chapter 7 trustee1 (which
amount could exceed $400,000, although in all likelihood would be less), as well
as those which might be payable to attorneys and other professionals that such
trustee may engage.
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1 Section 326(a) of the Bankruptcy Code provides that a chapter 7 trustee's
compensation shall not exceed 3% of the moneys in excess of $1 million
disbursed or turned-over in the case by the trustee to parties-in-interest,
including holders of secured claims.
To administer the estate responsibly, a Chapter 7 trustee, and the
trustee's staff and professionals, would necessarily devote substantial time and
effort to familiarizing themselves with the affairs of the Debtors and the
Bankruptcy Case, including asset dispositions and investigation of claims in
addition to performing the same services to be performed by the Disbursing
Agent. This could entail hundreds of hours of additional professional services
and concomitant expense. Not only will the costs increase as a result thereof,
but the creditors will suffer a loss on the time value of their money as the
Chapter 7 trustee will necessarily require more time to liquidate the assets,
resolve disputed and unliquidated Claims and ultimately make distributions to
creditors.
Following the Effective Date, the administrative costs to the estate
will consist of the operating expenses of the Disbursing Agent, an entity
already very familiar with the Debtors' assets and liabilities, and its
professionals and staff. The Debtors intend to appoint Bariston as the
Disbursing Agent, and that the Debtors' current counsel will act as counsel to
the Disbursing Agent. Bariston's president is president and chief executive
officer of the Debtors, and Bariston currently manages the Debtors' operations.
The Debtors believe implementation of the Plan by Bariston is the most
cost-effective, efficient way to wind-down the Debtors' affairs and complete the
liquidation and distribution of the Estate. Bariston has the familiarity with
the Debtors' books, records and affairs to effectively resolve Disputed Claims,
and effectuate distributions in an orderly and prompt manner.
If Bariston acts as Disbursing Agent, there will be no additional
expenditure of time and costs in bringing in a transition team. It is the
Debtors' belief that a Chapter 7 trustee would have to incur at a minimum these
same costs. Further, even assuming that a Chapter 7 trustee employed one or more
of the Debtors' current officers and Debtors' current counsel to assist the
trustee, there would still be an additional cost and delay to the estate from
bringing the Chapter 7 trustee up the learning curve.
Notwithstanding the releases of claims by and against the Debtors and
other third parties under the Plan, the Debtors believe that administration
under Chapter 7 would not increase the amounts available for distribution
through avoidance actions under the Bankruptcy Code, or other causes of action,
since the Debtors are not aware of any basis for preference, fraudulent
conveyance, equitable subordination or other claims against any third parties.
Based upon the foregoing analysis, it is the view of the Debtors that
in a Chapter 7 liquidation there would (i) be an additional layer of
administrative expense (including the trustee's commissions and fees for
professionals) which would materially increase the obligations to be satisfied
out of the funds remaining from the sale of the Debtors' assets, and would,
correspondingly, reduce the funds available to satisfy Class 1 Claims, (ii)
likely be significant delays in distributions and (iii) be no increment in value
and might be significant reductions in recoverable values of the assets of
Debtors due to the conversion of the case. Thus the Debtors believe that the
Plan meets the "best interests" test by providing each holder of an Impaired
Claim with a recovery that is not less than it would receive pursuant to a
liquidation of the Debtors under Chapter 7 of the Bankruptcy Code as of the
Effective Date of the Plan.
3. FEASIBILITY
Section 1129(a) (11) of the Bankruptcy Code requires a finding that
confirmation of a plan is not likely to be followed by the liquidation, or the
need for further financial reorganization, of the debtor or any successor in
interest, unless as here, liquidation is expressly contemplated by the Plan.
Given that the Plan contemplates the distribution of all of the Debtors' assets,
the Debtors submit that no further showing of "feasibility" is necessary.
4. CLASSIFICATION
Section 1122 of the Bankruptcy Code sets forth the requirements
relating to classification of claims. Section 1122(a) provides that claims or
interests may be placed in a particular class only if they are substantially
similar to the other claims or interests in that class. The Debtors believe that
all Classes under the Plan satisfy the requirements of Section 1122(a).
5. CONFIRMATION WITHOUT ACCEPTANCE BY ALL IMPAIRED CLASSES
The Bankruptcy Code contains provisions which could enable the
Bankruptcy Court to confirm the Plan, even though the Plan has not been accepted
by all Impaired classes, provided that the Plan has been accepted by at least
one Impaired class of Claims without including the votes of Insiders. The
Debtors believe that the Plan will be able to meet the statutory standards set
forth in the Bankruptcy Code.
Section 1129(b)(1) of the Bankruptcy Code states:
Notwithstanding section 510(a) of this title, if all of the
applicable requirements of subsection (a) of this section
other than paragraph (8) are met with respect to a plan, the
court, on request of the proponent of the plan, shall confirm
the plan notwithstanding the requirements of such paragraph if
the plan does not discriminate unfairly, and is fair and
equitable, with respect to each class of Claims or interests
that is impaired under, and has not accepted the plan.
This section makes clear that a plan must be confirmed notwithstanding
the failure of an Impaired class to accept the plan, so long as the plan "does
not discriminate unfairly" and it is "fair and equitable" with respect to each
class that is Impaired under, and has not accepted, the plan. This "fair and
equitable" requirement applies only with respect to dissenting classes.
The Bankruptcy Code sets forth three different standards for
establishing that a plan is "fair and equitable" with respect to a dissenting
class, depending on whether the class is comprised of secured or unsecured
Claims or Interests. In general, Section 1129(b) of the Bankruptcy Code permits
confirmation notwithstanding non-acceptance by an Impaired class if that class
and all classes junior to it are treated in accordance with the "absolute-
priority" rule, which requires either that the dissenting class be paid in full,
or if it is not, that no junior class receives or retains property under the
plan. In addition, the "fair and equitable" standard has been interpreted to
prohibit any class senior to a dissenting class from receiving under a plan more
than one hundred percent of its Allowed Claims.
As a further condition to approving a cramdown, the Bankruptcy Court
must find that the Plan does not "discriminate unfairly" in its treatment of
dissenting Classes. A plan does not "discriminate unfairly" if (a) the Plan does
not treat any dissenting impaired Class of Claims or Interests in a manner that
is materially less favorable than the treatment afforded to another Class with
similar legal Claims against or Interests in the debtor and (b) no Class
receives payments in excess of that which it is legally entitled to receive for
its Claims or Interests. The Debtors believe the Plan meets all the requirements
of the fair and equitable standard, and that it does not discriminate unfairly
as to any Impaired Class of Claims or Interests. Class 4, while deemed to have
rejected the Plan, can be "crammed-down" under Section 1129(b) since no junior
class is receiving any distributions, and no senior Class is receiving more than
its legal entitlement.
The Debtors believe that its major creditors and Preferred
Stockholders support the Plan. Notwithstanding the "deemed rejection" of the
Plan by Class 4 Holders of Common Stock, those holders have previously ratified
the distribution scheme embodied in the Plan at the June 12, 1997 Special
Meeting of Shareholders, pursuant to proxies solicited in compliance with
applicable securities laws. Thus, since the Plan simply accelerates the process
whereby those distributions can be made by facilitating the liquidation of
Disputed Claims, the Debtors believe that holders of Common Stock will not
object to confirmation of the Plan.
The Debtors believe that the proposed Plan is in the best interest of
their creditors and shareholders because under the Plan it is expected that
holders of Claims and Interests will receive in excess of what otherwise would
be recovered by such holders if the Debtors were liquidated under Chapter 7, and
will receive distributions sooner than if the Bankruptcy Case was dismissed.
VI. RELEVANT FINANCIAL INFORMATION
For the most current financial information regarding the Debtors, all
holders of Claims and Interests are referred to the Company's Annual Report on
Form 10-K for the year ended December 31, 1998, a copy of which (without
exhibits) is annexed hereto as Exhibit "C".
VII. FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING DISCUSSION IS A SUMMARY OF CERTAIN SIGNIFICANT,
POTENTIAL FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN TO THE DEBTORS AND HOLDERS
OF ALLOWED CLAIMS AND INTERESTS, AND IS BASED UPON THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "TAX CODE") AND THE LAWS, REGULATIONS, RULINGS AND COURT
DECISIONS NOW IN EFFECT, ALL OF WHICH ARE SUBJECT TO CHANGE, POSSIBLY WITH
RETROACTIVE EFFECT.
THE FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF ALLOWED CLAIMS AND
INTERESTS MAY VARY BASED ON THE PARTICULAR CIRCUMSTANCES OF EACH SUCH HOLDER OF
ALLOWED CLAIMS AND INTERESTS. THIS SUMMARY DOES NOT ADDRESS ASPECTS OF FEDERAL
INCOME TAXATION APPLICABLE TO HOLDERS WHICH ARE SUBJECT TO SPECIAL TREATMENT FOR
FEDERAL INCOME TAX PURPOSES INCLUDING, BUT NOT LIMITED TO, FINANCIAL
INSTITUTIONS, TAX EXEMPT ENTITIES, INSURANCE COMPANIES, PASS-THROUGH ENTITIES,
FOREIGN COMPANIES, NONRESIDENT ALIEN INDIVIDUALS, FOREIGN PERSONS, AND PERSONS
WHO RECEIVED THEIR SUBORDINATED NOTES, COMMON STOCK OR PREFERRED STOCK, OR WHO
ARE RECEIVING DISTRIBUTIONS PURSUANT TO THE PLAN, BY EXERCISE OF OPTIONS OR
OTHERWISE AS COMPENSATION OR AS A FEE.
MOREOVER, THE FEDERAL INCOME TAX CONSEQUENCES OF CERTAIN ASPECTS OF
THE PLAN ARE UNCERTAIN DUE TO A LACK OF DEFINITIVE LEGAL AUTHORITY. THIS SUMMARY
ALSO DOES NOT ADDRESS ANY STATE, LOCAL OR FOREIGN TAX CONSEQUENCES OF THE PLAN.
THE SUMMARY ASSUMES THAT THE HOLDERS OF ALLOWED CLAIMS AND INTERESTS
HELD THEIR SUBORDINATED NOTES, OR PREFERRED OR COMMON STOCK, AS THE CASE MAY BE,
AS CAPITAL ASSETS WITHIN THE MEANING OF SECTION 1221 OF THE TAX CODE (GENERALLY
PROPERTY HELD FOR INVESTMENT). FURTHERMORE, IT IS ASSUMED THAT THE SUBORDINATED
NOTES QUALIFY AS TRUE INDEBTEDNESS (AND NOT AS EQUITY OR AN INTEREST IN STOCK)
FOR ALL FEDERAL INCOME TAX PURPOSES.
NO RULING HAS BEEN OBTAINED OR WILL BE REQUESTED FROM THE INTERNAL
REVENUE SERVICE (THE "IRS") WITH RESPECT TO ANY OF THE FEDERAL INCOME TAX
ASPECTS OF THE PLAN, AND NO OPINION OF COUNSEL HAS BEEN OR WILL BE OBTAINED BY
THE DEBTORS WITH RESPECT THERETO. NO ASSURANCES CAN BE GIVEN THAT THE IRS WILL
NOT CHALLENGE ANY OR ALL TAX CONSEQUENCES OF THE PLAN.
EACH HOLDER OF AN ALLOWED CLAIM OR INTEREST IS STRONGLY URGED TO
CONSULT ITS OWN TAX ADVISOR REGARDING THE FEDERAL, STATE AND LOCAL INCOME AND
OTHER TAX CONSEQUENCES TO IT OF THE PLAN.
A. TAX CONSEQUENCES TO DEBTORS ARISING FROM PLAN
The Company files a consolidated federal income tax return with its
Subsidiaries under the provisions of Sections 1501 through 1504 of the Tax Code.
U.S. Treasury Regulations ("Treasury Regulations") provide that the Company, as
parent of the consolidated group, is the agent for purposes of filing the
consolidated Federal income tax returns, paying the tax due, and in general for
dealing with the IRS. In addition, Treasury Regulations provide that every
corporation that is or has been a member of a consolidated group is severally
liable for any tax incurred by the consolidated group for the period that such
member joined in the filing of the consolidated return.
1. NET OPERATING LOSSES AND LOSS CARRYOVERS ("NOLS") AND OTHER TAX
ATTRIBUTES
The Company's consolidated Federal income tax return for the taxable
year ended December 31, 1998, is expected to show NOLs for regular tax purposes
of approximately $71 million, a substantial portion of which are attributable to
the Company. If not utilized, the NOLs will expire at various dates between 1999
and 2018. The amount of these NOLs is subject to challenge by the IRS and there
is no assurance that such NOLs will not be reduced or substantially limited by
the IRS or otherwise including, as discussed below, as a result of certain
discharge of indebtedness in connection with the consummation of the Plan. The
amount of these NOLs that may be used to offset taxable income in any taxable
period may also be limited under Section 382 of the Tax Code if there has been,
or there is in the future, certain direct or indirect changes in the stock
ownership of the Company. The Company experienced an ownership change in
December 1993, as a result of which the ability to use $51.7 million of the NOLs
is subject to limitation under the "ownership change" provisions of Section 382
of the Tax Code. Moreover, any other "ownership changes" that the Company
experienced, or will experience, will further limit the Company's ability to use
its NOLs to offset taxable income.
In addition, the Debtors have investment tax credit carryforwards of
approximately $467,513 which expire principally in 1999 through 2000, and are
also subject to limitation. Furthermore, the Company anticipates that it will
have capital loss carryforward of approximately $ 2.7 million as of December 31,
1999.
2. DISCHARGE OF INDEBTEDNESS
Under the Tax Code, a taxpayer generally must include in gross income
the amount of any cancellation of indebtedness ("COD") income that is realized
during the taxable year. COD income is the difference between the amount of the
taxpayer's indebtedness that is canceled and the amount or value of the
consideration exchanged therefor.
Section 108 of the Tax Code, however, provides that a debtor in a
bankruptcy proceeding is not required to recognize COD income, but must instead
reduce certain of its tax attributes ("Tax Attributes"), if any, by the amount
of any such unrecognized COD income. Tax Attributes include NOLs, capital losses
and loss carryovers, certain tax credits and, subject to certain limitations,
the tax basis of property. The Tax Attributes are not reduced, however, until
after the tax for the year of discharge has been determined, and, with respect
to the reduction of tax basis, until the first day of the taxable year following
the year of the discharge. COD income is also not recognized with respect to the
discharge of indebtedness which, if paid, would have given rise to a deduction.
In addition, it is not clear whether a taxpayer would realize COD income in
connection with a liquidating plan of reorganization under Chapter 11 of the
Bankruptcy Code.
3. TRANSFER OF STOCK
The following discussion assumes that assets held in the Distribution
Reserve will be treated for tax purposes as owned by the Company. The
distribution of the Metrocall Common Stock to holders of Allowed Class 1
Subordinated Notes Claims and Class 3 Preferred Stock Interests in connection
with the consummation of the Plan will be treated as a taxable sale of such
stock for Federal income tax purposes. Accordingly, the Company will recognize
gain or loss equal to the difference between the fair market value of the
Metrocall Common Stock on the date it is distributed to such holders and the
Company's tax basis for such stock (approximately $4.81 per share) . If the
Company were to recognize gain on such distribution of the Metrocall Common
Stock, the Company expects that it would have available sufficient usable NOLs
to offset the gain. If, however, the amount of gain were to exceed the usable
NOLs and the amount of any available capital loss carryforwards, the Company
would be subject to tax on such excess.
B. TAX CONSEQUENCES TO HOLDERS OF ALLOWED CLAIMS AND INTERESTS
1. INCOME, GAIN OR LOSS ON PAYMENT OF CLAIMS
The following discussion does not address the tax treatment of any
fees, expenses or premiums paid or reimbursed to holders of Allowed Claims or
Interests in connection with the distributions made on their Allowed Claims and
Interests. Furthermore, the following discussion assumes that all distributions
made to holders of Allowed Class 1 Subordinated Notes Claims, Class 3 Preferred
Stock Interests, and Class 4 Common Stock Interests pursuant to the Plan will be
made by the Company in exchange for such holders' Subordinated Notes or stock,
as the case may be. Holders of Allowed Claims and Interests should consult their
tax advisor regarding the tax treatment of any such payments or reimbursements.
2. FEDERAL INCOME TREATMENT OF HOLDERS OF ALLOWED CLASS 1 SUBORDINATED
NOTES CLAIMS
The distribution of cash and interests by the Disbursing Agent to
holders of Allowed Class 1 Claims will be treated as a taxable distribution to
such holders in exchange for their Claims. Accordingly, a holder of a Class 1
Claim generally will recognize gain or loss in an amount equal to the difference
between (i) the "amount realized" in respect of its Claim (other than any Claim
for accrued interest) and (ii) the tax basis in its Claim (other than any Claim
for accrued interest). It is possible, however, that a holder realizing a loss
on a Class 1 Claim may not be able to recognize that loss until there has been a
final determination of the amount of its entire recovery pursuant to the Plan.
The character of any gain or loss recognized by a holder in respect of
its Class 1 Claim as long-term or short-term capital gain or loss, or as
ordinary income or loss, will be determined by a number of factors, including
the tax status of the holder, whether the Claim constitutes a capital asset in
the hands of the holder, whether the Claim has been held for more than one year,
whether the Claim was purchased at a discount, and whether and to what extent
the holder has previously claimed a bad debt deduction.
(a) DISTRIBUTION IN DISCHARGE OF ACCRUED INTEREST
Holders of Allowed Class 1 Claims will recognize interest income to
the extent that any consideration received (or deemed received) is allocable to
accrued interest (including any "original issue discount") which was not
previously included in the holders' gross income. Such a holder will recognize a
deductible loss (or, possibly, a write-off against a reserve for bad debts) to
the extent any accrued interest previously included in gross income is not paid
in full.
The Debtors presently intend to treat all amounts payable in respect
of the Subordinated Notes as having been applied, for Federal income tax
purposes, first to the payment of the principal amount of such Allowed Class 1
Claims, and second to accrued interest, if any, on such Allowed Class 1 Claims.
The IRS may, however, require a different allocation of the amounts payable, in
which case the holder of an Allowed Class 1 Claim may recognize additional
interest income even though it may otherwise realize a loss with respect to the
principal amount of such Allowed Class 1 Claim.
(b) ACCRUED MARKET DISCOUNT
A holder which acquired a Note or Claim subsequent to its original
issuance with more than a "de minimis" amount of "market discount" will be
subject to the market discount rules of the Tax Code. Under those rules,
assuming that no election to include market discount in income on a current
basis has been made by the holder with respect to any market discount
instrument, any gain recognized on the exchange of a Note/Claim would be
characterized as ordinary income to the extent of the accrued market discount on
such Note/Claim as of the Effective Date. Since Treasury Regulations with
respect to the market discount rules have not yet been issued, holders of
Notes/Claims that may have been acquired with market discount are urged to
consult their own tax advisors.
3. FEDERAL INCOME TAX TREATMENT OF HOLDERS OF CLASS 3 PREFERRED STOCK
INTERESTS
The amount of cash and the fair market value of Metrocall Common Stock
received by a holder of Class 3 Preferred Stock Interests pursuant to the Plan
will be treated as a dividend to the extent of any accrued but unpaid dividends.
Such amount will be taxable as ordinary income to the extent of the Company's
earnings and profits. However, the Company has no current or accumulated
earnings and profits at this time, and it is expected that the Company will not
have any current or accumulated earnings and profits at any time at which
distributions are made to any holders of Allowed Claims or Interests.
The amount of cash and the fair market value of Metrocall Common Stock
received by a holder of Class 3 Preferred Stock Interests pursuant to the Plan
which is not treated as a dividend will be treated as the amount realized in
exchange for the holder's Class 3 Preferred Stock Interests. A holder will
recognize gain or loss equal to the difference between the amount realized and
the holder's basis in its Class 3 Preferred Stock Interests. It is possible,
however, that a holder realizing a loss on a Class 3 Preferred Stock Interest
may not be able to recognize that loss until there has been a final
determination of the amount of its entire recovery pursuant to the Plan.
Any Metrocall Common Stock received by a holder of a Class 3 Preferred
Stock Interest pursuant to the Plan will have a basis in the hands of such
holder equal to the fair market value of the Metrocall Common Stock on the date
of distribution.
4. FEDERAL INCOME TAX TREATMENT OF HOLDERS OF CLASS 4 COMMON STOCK
INTERESTS
A holder of a Class 4 Common Stock Interest will be treated as
exchanging its Class 4 Common Stock Interest for an amount realized equal to the
sum of the cash received pursuant to the Plan. A holder of a Class 4 Common
Stock Interest will recognize gain or loss equal to the difference between its
amount realized and its basis in its Class 4 Common Stock Interest. It is
possible, however, that a holder realizing a loss on a Class 4 Common Stock
Interest may not be able to recognize that loss until there has been a final
determination of the amount of its entire recovery pursuant to the Plan.
5. BACKUP WITHHOLDING AND INFORMATION REPORTING
Payors of interest, dividends, and certain other reportable payments
generally are required to withhold thirty-one percent (31%) of such payments if
the payee fails to furnish his or her correct taxpayer identification number
(social security number or employer identification number) to the payor. Exempt
shareholders (including, among others, corporations) are not subject to back-up
withholding and reporting requirements. The Disbursing Agent or the Stock
Transfer Agent may be required to withhold a portion of any payments made to a
holder of an Allowed Claim or Interest which does not provide its taxpayer
identification number. Accordingly, every holder of an Allowed Claim or Interest
is urged to complete and return to the Disbursing Agent or the Stock Transfer
Agent, as applicable, all the relevant tax forms provided in connection with its
distribution.
C. TAXATION OF THE DISTRIBUTION RESERVE
Under the Tax Code, amounts earned by an escrow account, settlement
fund or similar fund must be subject to current tax. Although certain Treasury
Regulations have been issued, no Treasury Regulations have as yet been
promulgated to address the tax treatment of such funds in a bankruptcy setting.
Thus, depending on the facts, such funds possibly could be treated as a grantor
trust, a separately taxable trust, or otherwise.
Holders of Allowed Claims and Interests are urged to consult their tax
advisors regarding the potential taxation of the Distribution Reserve (including
the effect on the computation of such holder's gain or loss in respect of its
Claim or Interest and the subsequent taxation of any distributions from the
Distribution Reserve). The Company presently intends to treat the assets held in
the Distribution Reserve as held by a grantor trust for the benefit of the
Company or as otherwise owned by the Company for tax purposes. Accordingly, the
Company will treat all income earned by the Distribution Reserve as earned by
and taxable to the Company. The Company, however, expects that it will have
available sufficient expenses and deductions to offset any such income.
There can be no assurance that the IRS will respect the treatment of
the Distribution Reserve as an asset of the Company. For example, the IRS may
characterize the Distribution Reserve as a so-called "complex trust" subject to
a separate entity level tax on its earnings, except to the extent such earnings
are distributed during the same taxable year. Moreover, due to the possibility
that the amounts of the consideration received by a holder of an Allowed Claim
or Interest may increase or decrease, depending on whether the Distribution
Reserve is treated as a grantor trust, such a holder of an Allowed Claim or
Interest could be prevented from recognizing a loss until the time at which
there are no assets at all remaining in the Distribution Reserve.
D. IMPORTANCE OF OBTAINING PROFESSIONAL TAX ASSISTANCE
THE FOREGOING IS INTENDED AS A SUMMARY ONLY, AND IS NOT A SUBSTITUTE
FOR CAREFUL TAX PLANNING WITH A TAX PROFESSIONAL. THE FEDERAL, STATE AND LOCAL
INCOME AND OTHER TAX CONSEQUENCES OF THE PLAN ARE COMPLEX AND, IN SOME CASES,
UNCERTAIN. SUCH CONSEQUENCES MAY ALSO VARY BASED ON THE PARTICULAR CIRCUMSTANCES
OF EACH CREDITOR. ACCORDINGLY, EACH HOLDER OF A CLAIM OR INTEREST IS STRONGLY
URGED TO CONSULT WITH HIS, HER OR ITS OWN TAX ADVISOR REGARDING THE FEDERAL,
STATE AND LOCAL INCOME AND OTHER TAX CONSEQUENCES UNDER THE PLAN.
VIII. CONCLUSION
The Debtors believe that the Plan provides the best possible
recoveries for creditors and shareholders that can be achieved in any reasonable
time frame and that possible alternatives are likely to result in delayed
distributions for all and diminished recoveries for other holders of Claims or
Interests. Therefore, the Debtors urge all holders of Claims in Class 1 and of
Interests in Class 3 to vote to accept the Plan.
Dated: New York, NY
May 17, 1999
PAGE AMERICA GROUP, THE
PAGE AMERICA OF NEW YORK, INC.
ADIRONDACK RADIO TELEPHONE CO.,
INC. and
PAGE AMERICA OF PENNSYLVANIA,
INC.
One International Place
Boston, MA 02110
By: /S/ DAVID A. BARRY
Name: David A. Barry
Title: President
Stroock & Stroock & Lavan LLP
Counsel to the Company
180 Maiden Lane
New York, New York 10038
(212) 806-5424
By: /S/ ROBIN E. KELLER
A Member of the Firm
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Boston, Massachusetts
June 24, 1999
PAGE AMERICA ANNOUNCES FILING OF
PREPACKAGED CHAPTER 11 LIQUIDATING PLAN
On June 16, 1999, Page America Group, Inc. ("Page America") and its
wholly-owned subsidiaries, Page America of New York, Inc., Adirondack Radio
Telephone Co., Inc. and Page America of Pennsylvania Inc. (the "Debtors") filed
Chapter 11 bankruptcy cases in the United States Bankruptcy Court for the
Southern District of New York. The Debtors are represented by the New York law
firm of Stroock & Stroock & Lavan LLP and the presiding judge is Jeffrey H.
Gallet. In addition to filing customary "first day" papers, the Debtors filed a
prepackaged and presolicited Plan and Disclosure Statement which contemplate the
complete liquidation of the Debtors. The Plan was accepted, prior to the filing
of the bankruptcy petitions, by the holders of the Debtors' 15% Subordinated
Notes due 2003 and Page America's Series One Preferred Stock, which are the only
holders of claims and interests in the Debtors that are entitled to vote on the
Plan.
The Debtors previously provided paging, messaging and information
products and services through networks they owned and operated as radio common
carriers under licenses from the Federal Communications Commission. On July 1,
1997, the Debtors sold substantially all of their assets to Metrocall, Inc. for
cash and shares of Metrocall common stock and ceased operations.
Generally, under the terms of the Plan, the holders of the Debtor's
Subordinated Notes are to receive 70% of all amounts available for distribution
after all other allowed claims for administrative expenses and general unsecured
claims have been paid in full in cash. The remaining 30% of such available
amounts are to be distributed 21% to the holders of Page America's Preferred
Stock and 9% to the holders of the 16,024,585 outstanding shares of Page America
Common Stock. At June 23, 1999, based on the assets held by the Debtors and the
market value of the Metrocall common stock and known liabilities at that time,
the maximum aggregate amount distributable to holders of the Subordinated Notes,
Preferred Stock and Common Stock, less amounts to pay taxing authorities and
other creditors, would have been approximately $9,780,000, $2,934,000 and
$1,257,000, respectively. The actual distributions will be more or less
depending primarily on the market value of the Metrocall common stock for a
specified period prior to the Effective Date of the Plan and subject to any
claims that arise in connection with the Plan. The distributions to holders of
the Subordinated Notes and Preferred Stock will be in cash, to the extent
available, and shares of Metrocall common stock, while holders of Page America
Common Stock will receive cash.
Contact:
David Barry or Mark Greene
617-330-8950
