SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): May 7, 1996
Symbolics, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State of incorporation or organization)
0-13412 95-3548781
(Commission File Number) (I.R.S. Employer Identification No.)
9000 Fulbright Avenue, Chatsworth, California 91311
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 998-3600
PAGE 1 of 21 PAGES
Item 2. Acquisition or Disposition of Assets.
(a) On May 7, 1996, the Chapter 11 bankruptcy
case of Symbolics, Inc., a Delaware corporation and the debtor-
in-possession, Case No. 93-10789-WCH in the United States
Bankruptcy Court for the District of Massachusetts (Eastern
Division) (the "Company"), was dismissed pursuant to an order of
that Court, upon the motion of the Company. In accordance with
that order, all of the assets of the Company are to be
distributed to its priority and administrative creditors, with no
assets remaining for distribution to the Company's shareholders.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(c) Exhibits
Exhibit 99.1 -- Order Granting
Debtor's Motion to
Dismiss, dated as of
May 7, 1996.
Exhibit 99.2 -- Debtor's Motion to
Dismiss, dated as of
January 18, 1996.
PAGE 2 of 21 PAGES
SIGNATURE
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, the counsel to its
bankruptcy estate.
SYMBOLICS, INC.
DATE: June 19, 1996 By: Thomas M. Tomlinson
Counsel to Bankruptcy
Estate of Symbolics, Inc.
PAGE 3 of 21 PAGES
EXHIBIT INDEX
Exhibit Description of Exhibit Page
99.1 Order Granting Debtor's Motion to
Dismiss, dated as of May 7, 1996. 5
99.2 Debtor's Motion to Dismiss, dated as of 8
January 18, 1996.
PAGE 4 of 21 PAGES
Exhibit 99.1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
(Eastern Division)
)
In re: )
)
SYMBOLICS, INC., ) Chapter 11
) Case No. 93-10789-WCH
)
Debtor. )
)
ORDER GRANTING DEBTOR'S MOTION TO DISMISS
This matter came on for hearing before this Court on
May 7, 1996 on the Debtor's Motion to Dismiss (the "Dismissal
Motion"), after due notice to all parties in interest.
Objections to the Dismissal Motion were filed by Catherine D.
Groom, Theresa Dellabella and John Palmer Moving & Storage, Inc.
(collectively, the "Objections").
Upon consideration of the written submissions and
arguments of the various parties and the pleadings and
proceedings heard to date in this case, and due cause appearing
therefor, this Court hereby finds as follows:
1. Dismissal of this case, on the terms and
conditions set forth below, is in the best interests of the
Debtor, its creditors and its estate. Dismissal will result in
an efficient, expeditious and complete resolution of this
Chapter 11 case since, following the sale of substantially all of
the Debtor's assets to Princeton Capital Finance Company, all of
the Debtor's assets have been reduced to cash for final
PAGE 5 of 21 PAGES
distribution pursuant to the terms of this Order. Dismissal of
this case likewise will avoid the costs and delays associated
with the conversion of the Debtor's case to a case under
Chapter 7 of the Bankruptcy Code, which this Court finds is
unnecessary under the facts and circumstances of this case.
2. No purpose would be served by forcing the
Debtor and other parties in interest to achieve a less favorable
result through a conversion to Chapter 7. To the contrary, it
would result in unnecessary expense, delay and imposition on this
Court and other parties in interest. Moreover, denial of the
Dismissal Motion would unnecessarily further delay payment of all
allowed or allowable administrative and priority unsecured claims
in accordance with applicable law and the terms of this Order.
Accordingly, and for the foregoing reasons, it is
hereby:
ORDERED, that the Objections be, and they hereby
are, overruled; and it is further
ORDERED, that the Dismissal Motion be, and it hereby
is, allowed. This Court shall enter an order dismissing this
case promptly upon the filing of a statement by counsel to the
Debtor listing payments made by the Debtor of all remaining
assets of its estate, consisting of funds currently held in
escrow, to all allowed or allowable administrative expense and
priority unsecured claims; and it is further
ORDERED, that funds held in escrow at Choate, Hall &
Stewart, which funds constitute all of the Debtor's known assets,
PAGE 6 of 21 PAGES
shall be distributed first to pay in full holders of allowed or
allowable Section 507(a)(3) and 507(a)(7) priority unsecured
claims and secondly, to holders of allowed administrative expense
claims in accordance with the terms of the Agreed Order Regarding
Fee Applications Of Professionals; and it is further
ORDERED, that the counsel to the Debtor shall cause
copies of all checks evidencing payment in accordance with this
Order to be provided to the Office of the United States Trustee;
and it is further
ORDERED, that the Debtor be, and it hereby is,
authorized without further Order of this Court to execute and
deliver any and all documents and take any and all actions which
it deems necessary or appropriate to effectuate dismissal of this
case in accordance with this Order and the Dismissal Motion.
Entered at Boston, Massachusetts, in said District,
this 7th day of May, 1996, at 10:11 a.m.
/s/ William C. Hillman
William C. Hillman
United States Bankruptcy Judge
PAGE 7 of 21 PAGES
Exhibit 99.2
UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
(Eastern Division)
__________________________________
)
In re: )
)
SYMBOLICS, INC., ) Chapter 11
) Case No. 93-10789-WCH
)
Debtor. )
__________________________________)
DEBTOR'S MOTION TO DISMISS
Symbolics, Inc., the debtor and debtor-in-possession
in this case (the "Debtor"), hereby moves this Court pursuant to
Sections 305(a)(1) and 1112(b) of the Bankruptcy Code, 11 U.S.C.
Sections 101 et seq., for entry of an order dismissing its Chapter 11
case. The Debtor contends that no useful purpose can be served
by maintenance of the case under Chapter 11 or conversion of the
case to Chapter 7 and therefore asserts that such dismissal is in
the best interests of its creditors.
In support of this motion, the Debtor respectfully
represents as follows:
BACKGROUND
1. The Debtor commenced this case by filing a
voluntary petition under Chapter 11 of the Bankruptcy Code on
January 27, 1993 (the "Petition Date"). No trustee has been
appointed and therefore the Debtor has all of the rights and
duties of a debtor-in-possession pursuant to Sections 1107 and
1108 of the Bankruptcy Code.
PAGE 8 OF 21 PAGES
2. The Debtor's primary business consisted of the
manufacture, sale, and servicing of proprietary computer systems.
The Debtor was also engaged in the marketing and servicing of
various software products.
3. On July 27, 1995, this Court authorized and
approved the sale of substantially all of the Debtor's assets to
Princeton Capital Finance Company, LLC ("Princeton"), following
the receipt of competitive bids by the Court. Prior to the
Princeton sale, the Debtor vigorously pursued reorganization, and
sought an infusion of capital from various sources as a means to
achieving that goal.[FN1] The Debtor also engaged in negotiations
with no fewer than fifteen (15) interested parties for the
possible sale of all or part of its business. The total purchase
price paid by Princeton after allowance for closing adjustments
was approximately $535,215.75, including a deposit in the amount
of $30,000. The Princeton sale was closed on August 9, 1995 (the
"Princeton Closing"). In accordance with an agreement between
the Debtor and CIT Group/Credit Finance, Inc. ("CIT"), the
Debtor's pre- and post-petition lender, the proceeds of the sale
(net of the deposit paid by Princeton) were deposited with CIT.
The deposit on the purchase price remained in an interest-earning
escrow account held for the benefit of the Debtor's estate by its
counsel.
____________________
1. The Debtor, the Official Committee of Unsecured Creditors,
and their respective attorneys negotiated and prepared several
proposed plans throughout the course of this case.
PAGE 9 of 21 PAGES
THE DEBTOR'S REMAINING ASSETS
a. Cash
4. As of the Princeton Closing, the Debtor had
approximately $320,000 in outstanding accounts receivable. Of
that amount, the Debtor has collected approximately $120,000
since the Princeton Closing. The Debtor had maintained three
bank accounts at Bank of Boston which had been used to hold the
Debtor's cash assets, including collected accounts receivable.
In October of 1995, following application of the Princeton sale
proceeds to its debt, CIT deposited substantially all of the
funds owed to the Debtor from the sale to Princeton in the Bank
of Boston accounts.[FN2] On or about November 11, 1995, these
accounts were merged into a single account which currently
contains approximately $44,616. The remainder of the sum that
had been held in this account has been deposited in escrow
accounts with Debtor's counsel. The deposits in these escrow
accounts with Debtor's counsel have a current composite balance
of approximately $669,970.11. The Debtor's counsel also holds a
retainer from the Debtor of approximately $62,000, which has not
been applied. Thus, the Debtor currently has cash available for
the payment of its creditors in the total amount of approximately
$776,586.11.
____________________
2. CIT continues to withhold approximately $6,000 from the
proceeds of the Princeton sale in anticipation of attorneys' fees
it apparently expects to incur in connection with the Debtor's
case. The Debtor anticipates that all or substantially all of
this sum will be returned to the estate, voluntarily or
involuntarily.
PAGE 10 of 21 PAGES
b. Accounts Receivable
5. The Debtor has collected all of its outstanding
accounts receivable, with the exception of an outstanding account
receivable that was due from the Debtor's former British
subsidiary, Symbolics, Ltd. The assets of Symbolics, Ltd. were
liquidated subsequent to the Petition Date in a proceeding which
is pending in England. The Debtor is informed and believes that
negligible assets will be distributed from the Symbolics, Ltd.
estate to creditors. Accordingly, the Debtor believes that its
claim against Symbolics, Ltd. is of little, if any, value.
c. Avoidance Actions
6. The Debtor has analyzed all potential avoidance
causes of action and has brought over ten (10) preference
actions. Each of those actions has been concluded and the
proceeds realized from settlements approved by this Court have
been remitted to the Debtor.
7. As a result of the sale of assets to Princeton,
the Debtor has no remaining assets other than the available cash
and accounts receivables set forth in the foregoing paragraphs.
Since the Princeton Closing, the Debtor has not engaged in any
ongoing software or hardware business, but has concentrated its
efforts on the orderly wind-down of its affairs. The only
remaining task for the Debtor is the distribution of its
remaining assets, consisting almost exclusively of cash, to its
creditors.
PAGE 11 of 21 PAGES
CLAIMS AGAINST THE DEBTOR
a. Priority Claims
8. This Court set April 29, 1993 as the bar date
for the filing of proofs of claim by all creditors asserting a
claim against the Debtor which arose prior to the Petition Date.
The Debtor has analyzed the proofs of claim filed against it. As
a result of its review, the Debtor believes that claims
(exclusive of administrative claims which are discussed below)
are in excess of $12,000,000. Included within that estimate are
employee claims entitled to priority under Section 507(a) of
the Bankruptcy Code, which aggregate approximately $63,171.58[FN3]
and tax claims entitled to priority under Section 507(a)(7)[FN4] of
the Bankruptcy Code which approximate $231,271.70.[FN5]
____________________
3. The Debtor has prepared Symbolics, Incorporated's
Objection To Overstated Employee Priority Claims Under 11 U.S.C.
Section 502 And Federal Rule of Bankruptcy Procedure 3007.
Depending on the disposition of that objection, these claims could
be reduced to $23,635.99.
4. Since this case was filed prior to October 22, 1994, the
amendments to the Bankruptcy Code enacted by Pub. L. No. 103-394
do not apply to this case.
5. This Court ruled on February 9,1995 that the claim of the
California State Board of Equalization for $315,367.97 was filed
late and will therefore be subordinated and treated as an
unsecured claim. Accordingly, the State of California's claim is
not included in this estimate.
Furthermore, the Debtor has prepared Symbolics, Incorporated's
First Omnibus Objection To Priority Tax Claims Under 11 U.S.C.
Section 502 And Federal Rule Of Bankruptcy Procedure 3007. As a
result of that objection, the priority tax claims against the
Debtor's estate could be reduced to $165,280.89.
PAGE 12 of 21 PAGES
b. Priority Claims Without Merit
9. In addition to those priority claims against
the estate, other creditors have made priority claims totalling
approximately $576,746.69. The Debtor has prepared Symbolics,
Incorporated's Objection To Certain Secured And Priority Claims
Under 11 U.S.C. Section 502 And Federal Rule Of Bankruptcy Procedure
3007, objecting to the priority status of these claims. The
Debtor believes that this objection will successfully strike all
of these claims.
c. Administrative Claims
10. On information and belief, the Debtor has
timely paid all of its post-petition obligations (trade or
otherwise). There are, however, a variety of administrative
expenses against the Debtor's estate. The Debtor's counsel,
Choate, Hall & Stewart, has incurred fees of approximately
$427,835.48 (through January 10, 1996), and is likely to incur
additional fees and expenses as the Debtor's affairs are wound-
down. At the inception of its Chapter 11 case, the Debtor also
engaged Hutchins, Wheeler & Dittmar to serve as special counsel
with regard to various corporate matters. That firm asserts an
administrative claim in the sum of approximately $60,000. The
Debtor also engaged Yoshida, Croyle & Sokolski, P.C. to prepare
federal and state tax returns and related accounting services,
which has a claim for unpaid professional fees in the sum of
$38,600.87. Finally, counsel to the Creditors Committee, Testa,
PAGE 13 of 21 PAGES
Hurwitz & Thibeault, has incurred fees of $147,941 and is likely
to incur additional fees and expenses as the Debtor's affairs are wound-down.
In addition to the professionals outlined above, two other creditors assert
administrative claims. First, under a settlement authorized and approved
by this Court on December 16, 1994, Matsco Financial Corporation enjoys
a $5,000 administrative claim. Secondly, the County of Los Angeles has
an administrative claim of $25,811.49 for post-petition property taxes
which were incurred prior to the Princeton Closing. All told, the Debtor
has incurred total administrative costs of $705,188.84.
11. The administrative claimants listed above have
not filed fee applications with this Court. Indeed, during the
three (3) years this case has been pending neither counsel to the
Debtor nor counsel to the Committee have received any payment
from the Debtor's estate. Because no fee applications have yet
been reviewed by the Court, the Debtor requests that this Court
retain jurisdiction for the limited purpose of reviewing all fee
applications for Debtor's counsel, counsel for the Creditors'
Committee, and any other entity filing an administrative claim
wishing to be compensated out of the estate.
PAGE 14 of 21 PAGES
d. Secured and Unsecured Creditors
12. Following the sale of the Debtor's business to
Princeton, the Debtor has no secured creditors.[FN6] The Debtor's
unsecured creditors have filed claims totalling approximately
$11,694,470.13.[FN7]
13. The Debtor has cash on hand of approximately
$776,586.11 in its bank account and in the escrow accounts
maintained by Choate, Hall & Stewart. The Debtor holds
sufficient cash to pay its administrative claimants in full and
anticipates making a pro rata distribution of any remaining cash
to the Debtor's prepetition priority creditors in order of their
priority under the Bankruptcy Code.[FN8] No assets are available for
distribution on account of general unsecured claims.[FN9]
____________________
6. The Georgia Institute of Technology has filed a secured
proof of claim in the amount of $1,778.04. The Debtor believes
that this claim is unsecured, and has objected to its
classification as a secured claim in Symbolics, Incorporated's
Objection To Certain Secured And Priority Claims Under 11 U.S.C.
Section 502 And Federal Rule Of Bankruptcy Procedure 3007.
7. This amount includes claims by employees above the $2,000
cap for employee priority claims imposed by Section 507(a)(3).
It also includes a claim for Deutschmarks which was converted to
dollars for calculation purposes using the exchange rate for
September 19, 1995.
8. Accordingly, all employee claims entitled to priority
under Section 507(a)(3) of the Bankruptcy Code would be paid in
full before any pro rata distribution would be made to tax claims
entitled to priority under Section 507(a)(7) of the Bankruptcy
Code.
9. Alternatively, the Debtor could make a pro rata
distribution to all allowed administrative and priority claims.
PAGE 15 of 21 PAGES
GROUNDS FOR DISMISSAL
14. The dismissal of this case will bring an
efficient and complete resolution to this Chapter 11 case.
Dismissal will avoid the costs associated with the preparation of
a plan and disclosure statement and the confirmation process,
which costs the Debtor respectfully submits are unnecessary in
this case as the Debtor proposes a distribution of its cash
consistent with the priorities of the Bankruptcy Code. Moreover,
a liquidating plan would serve no purpose as the funds held by
the Debtor are insufficient to pay any claimants other than
administrative claims and a pro rata distribution to holders of
priority claims and, thus, there would be no impaired class of
creditors entitled to vote with respect to any such plan.
15. Conversion of this case to Chapter 7 would not
be in the best interests of the Debtor's creditors. Conversion
to Chapter 7 would serve no purpose other than to delay any
distribution and create increased costs of administration,
thereby further depleting the funds available for payment of
existing administrative expense claims and a pro rata
distribution on account of priority unsecured claims.
16. Section 1112(b) of the Bankruptcy Code
authorizes this Court to dismiss or convert a Chapter 11 case
"for cause." While Section 1112(b) enumerates several grounds
which constitute cause, the list is not exhaustive. See In re
Markhon Ind., 100 B.R. 432, 434 (Bankr. N.D. Ind. 1989). Section
1112(b) requires that this Court exercise its sound discretion in
PAGE 16 of 21 PAGES
determining whether dismissal is in the best interests of
creditors and the estate.
17. Similarly, Section 305(a)(1) of the Bankruptcy
Code allows the court at any time to dismiss a case if the
interests of the creditors and the debtor would be better served
by such dismissal. The foremost considerations in determining
whether dismissal under Section 305(a)(1) is in the best
interests of the debtor and creditors are the efficiency and
economy of administration. See In re Michael S. Starbuck, Inc.,
14 B.R. 134, 135 (Bankr. S.D.N.Y. 1981). Failure to dismiss this
case will only result in a depletion of the assets of the estate
as well as the unnecessary delay of distribution to the creditors
and further imposition on limited judicial resources.
18. The duties of a trustee, as set forth in
Section 704, would be either redundant or irrelevant in this
case. Those duties remaining in the case that could be performed
by a trustee can be more effectively and swiftly performed by the
Debtor, with less cost to its creditors. As the debtor-in-
possession, the Debtor has already reduced the property of the
estate to cash and has investigated its financial affairs in
order to collect on any possible claims. Without limiting the
foregoing, the Debtor has commenced, prosecuted, and settled
preference claims. While the Debtor has not yet filed its
objections to all disputed priority claims, it is in a better
position than a trustee to make such objections, since it has
already investigated the validity of the claims and determined
PAGE 17 of 21 PAGES
which of them may be open to challenge. The Debtor also has
already prepared such objections and intends to file them
shortly.
19. The remaining duties of a trustee would not
apply to this case. The Debtor no longer has any business that
could be operated or wound up by the trustee. Since the Debtor
is a corporation, there could be no discharge proceeding for the
trustee to participate in. 11 U.S.C. Section 727(a)(1).
20. While a trustee would not be able to perform
any functions that would be helpful to the Debtor's creditors,
the attendant expenses involved in conversion of this case to
Chapter 7 would draw funds away from the resources from which
those creditors will be paid. The pool of cash that currently
exists to pay creditors cannot grow, as the Debtor no longer has
a business to operate or any other means of generating revenue.
Appointment of a trustee would only increase the total
administrative expenses that would have to be paid from this
existing pool, 11 U.S.C. Sections 330(a), 503(a)(2), further limiting
the pro rata distribution among prepetition priority creditors.
The Debtor's unsecured creditors would still be unable to recover
on their claims. The procedure involved in the conversion of the
case, election of a trustee, and continuation of the case would
also drain the existing assets of the estate due to the
administrative costs from Debtor's counsel and the Creditors'
Committee's counsel necessarily incurred in relation to that
procedure.
PAGE 18 of 21 PAGES
21. Dismissal of this case is therefore in the best
interests of the Debtor's creditors. This Motion has been
reviewed by both the United States Trustee overseeing this case
and counsel for the Creditors Committee prior to its submission
to the Court and neither party now opposes dismissal of the case.
Furthermore, case law supports the idea that a debtor should
generally be free to voluntarily dismiss its own case, provided
that its creditors are not harmed thereby. See In re Geller, 74
B.R. 685, 690 (Bankr. E.D. Penn. 1987) (noting that the court
would "grant such a motion [to voluntarily dismiss] in all but
extraordinary situations"); In re Kimball, 19 B.R. 301, 302
(Bankr. D. Maine 1982)(refusing to allow a voluntary dismissal
only because of the "substantial legal prejudice" that creditors
would suffer if the debtor was allowed to file a new petition
which would lead to a more encompassing discharge). The
creditors in this case would not be harmed, and would in fact be
benefitted by dismissal of the case, which would lead to the
maximum possible distribution to the creditors entitled to
distribution under the priority provisions of the Bankruptcy
Code.
22. On facts virtually identical to the case at
bar, this Court in In re Edgewood Associates Limited Partnership,
Chapter 11 Case No. 92-19992-WCH, ordered dismissal of the
Chapter 11 case in order to permit the remaining assets of the
estate to be distributed to pay administrative claims in full and
PAGE 19 of 21 PAGES
to make a pro rata distribution to prepetition priority
creditors. While that case involved an original motion to dismiss that
was brought by the United States Trustee and was assented to by the Debtor,
this case comparably involves a motion by the Debtor which is not
opposed by the United States Trustee or the Official Committee of
Unsecured Creditors. In both cases, the best interests of the
creditors in receiving the maximum possible distribution with a
minimum of needless delay can be met by dismissal of the case.
23. If this case is dismissed, the Debtor shall
distribute its remaining cash assets first in payment of allowed
administrative expenses and then any remaining cash assets pro
rata to priority creditors in the same order of priority as
specified in Bankruptcy Code Section 507. The Debtor does not
anticipate that any assets will remain after payment to priority
creditors. Dismissal will, therefore, result in distribution of
the Debtor's assets consistent with the provisions of the
Bankruptcy Code without the need for the estate to incur the
costs associated with a formal liquidation proceeding and without
the need for any further delay of such distributions.
24. In order to ensure a swift distribution of the
Debtor's remaining assets, the Debtor will commit to a
distribution date of 60 days after the date that an order is
entered granting dismissal of this case. The Debtor hereby
commits to send checks in accordance with the distribution set
forth herein on or before such distribution date. After the
PAGE 20 of 21 PAGES
distribution date, the Debtor shall furthermore supply this Court
with an affidavit from its counsel, Choate, Hall & Stewart that
such distribution has been made.
WHEREFORE, the Debtor respectfully requests that
this Court grant this Motion to Dismiss and grant the Debtor such
other and further relief as this Court deems just and proper.
SYMBOLICS, INC.,
By its counsel,
/s/ Douglas R. Gooding
Paul D. Moore, P.C. (bma 02282)
Douglas R. Gooding (bma 04607)
CHOATE, HALL & STEWART
Exchange Place
53 State Street
Boston, Massachusetts 02109
(617) 248-5000
Dated: January 18, 1996
PAGE 21 of 21 PAGES
