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EXHIBIT 99.2
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
In re: ) Chapter 11
)
CELLNET DATA SYSTEMS, INC., ET AL., ) Case No. 00-00844 (PJW)
)
) (Jointly Administered)
Debtors. )
STIPULATION MODIFYING AUTOMATIC STAY BY AND AMONG
CELLNET FUNDING, LLC, CELLNET DATA SYSTEMS, INC.,
THE BANK OF NEW YORK, AS ESCROW AGENT
AND THE UNOFFICIAL COMMITTEE OF HOLDERS
OF PREFERRED SECURITIES OF CELLNET FUNDING, LLC.
BACKGROUND
A. On February 4, 2000 (the "Petition Date"), CellNet Data Systems, Inc.
("CellNet"), CellNet Funding, LLC ("Funding") and certain of CellNet's other
subsidiaries and affiliates (collectively, the "Debtors") each filed
voluntary petitions for relief under chapter 11 of title 11 of the United
States Code, 11 U.S.C. Sections 101 ET SEQ. (the "Bankruptcy Code"). The
chapter 11 case commenced by Funding is hereinafter referred to as the
"Chapter 11 Case".
B. The Debtors have remained in possession of their assets and continue
their business operations as debtors in possession pursuant to sections 1107 and
1108 of the Bankruptcy Code. The Debtors' chapter 11 cases are being jointly
administered pursuant to an order of this Court.
C. This Court has jurisdiction over this matter pursuant to 28 U.S.C.
Sections 157 and 1334. This matter is a core proceeding pursuant to 28 U.S.C.
Section 157(b)(2)(A). Venue is proper pursuant to 28 U.S.C. Sections 1408 and
1409.
THE PREFERRED SECURITIES
D. Funding is a special purpose limited liability company organized under
the laws of the State of Delaware. SEE Amended and Restated Limited Liability
Company Agreement of CellNet Funding, LLC, dated as of May 13, 1998 (the
"Funding LLC Agreement"). All of Funding's common limited liability interests
are owned directly by CellNet, its parent and managing member.
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E. Funding was organized for the sole purposes of (i) issuing 7%
Exchangeable Limited Liability Company Preferred Securities Mandatorily
Redeemable 2010 having a liquidation preference of $25 per preferred security
(the "Funding Preferred Securities"), (ii) using the proceeds thereof to
purchase Preferred Stock Redeemable 2010 of CellNet having a liquidation
preference of $10 per preferred share (the "CellNet Preferred Stock") and (iii)
using the remaining proceeds thereof to purchase, and "place into escrow,"
Treasury Strips in an amount sufficient to fund the cash payment of the first
twelve distributions on the Funding Preferred Securities.
F. On May 19, 1998, Funding issued and sold 4,400,000 of the Funding
Preferred Securities in a public offering underwritten by Morgan Stanley & Co.
Incorporated ("Morgan Stanley").(1)
G. Pursuant to a Guarantee Agreement, dated as of May 19, 1998 (the
"Guarantee Agreement"), CellNet guaranteed Funding's obligations to the holders
of the Funding Preferred Securities (the "Funding Preferred Securityholders").
THE ESCROW AGREEMENT
H. On May 19, 1998, CellNet, Funding and The Bank of New York, as Escrow
Agent (the "Escrow Agent") entered into an Escrow and Security Agreement (the
"Escrow Agreement"). A portion of the Offering Proceeds (approximately
$21,405,388.44) were retained and used by Morgan Stanley to purchase, and
immediately place into the escrow established pursuant to the Escrow Agreement
(the "Escrow"), Treasury Strips (together with all cash and other securities in
the Escrow Account (as defined in the Escrow Agreement), the "Escrowed
Property"), in an amount anticipated to be sufficient upon maturity to provide
for the payment in cash of the first twelve distributions to the Funding
Preferred Securityholders.
THE UNOFFICIAL COMMITTEE
I. Certain of the Funding Preferred Securityholders have formed an
Unofficial Committee of Holders of Preferred Securities of CellNet Funding, LLC
(the "Unofficial Committee").
J. On April 17, 2000, the Unofficial Committee, joined by The Bank of New
York, as Escrow Agent (together, the "Movants"), filed its Limited Objection to
CellNet's Motion to Sell Substantially all of its Assets and Motion for an Order
(i) Dismissing CellNet Funding LLC's Chapter 11 Case, or Alternatively (ii)
Granting the Movants Relief from Automatic Stay (the "Dismissal Motion").
K. The Dismissal Motion asked the Court to dismiss Funding's chapter 11
case as a bad faith filing. The Dismissal Motion argued that as a special
purpose vehicle beyond
____________________________
(1)The proceeds of such offering are hereinafter referred to as the
"Offering Proceeds". At present, 4,364,000 Funding Preferred Securities
remain outstanding (after redemption of 53,600 Funding Preferred Securities).
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the reach of CellNet and its creditors, Funding did not belong in chapter 11
under any circumstances. The Dismissal Motion also asked that the Court
determine that the Escrow is not property of Funding's estate under section
541 of the Bankruptcy Code. Finally, the Dismissal Motion requested that,
even if Funding's case survived and the Escrow did constitute property of
Funding's estate, the Court grant relief from the stay.
L. CellNet and Funding maintain that the decision to commence the Chapter
11 Case was consistent with their directors' respective fiduciary duties and
that the Chapter 11 Case was not a bad faith filing.
M. CellNet and Funding have now determined (after conducting further
analysis during the pendency of these cases) that the Escrowed Property is not
property of Funding's estate. Cell Net and Funding have now further determined
that if the Escrowed Property were considered to be property of Funding's
estate, that the Movants are entitled to relief from the automatic stay to
pursue their remedies against the Escrowed Property. With respect to the
automatic stay, CellNet and Funding have concluded that if the Escrowed Property
were considered to be property of Funding's estate, that cause exists to modify
the automatic stay because Funding has no equity in the Escrowed Property and
the Escrowed Property is not necessary to an effective reorganization.
Consequently, CellNet and Funding determined that modifying the automatic stay
to permit the Escrow Agent to resume distributions under the Escrow Agreement
and to exercise its other rights and remedies under the Escrow Agreement and
state law would avoid the incurrence of additional administrative expenses and
unnecessary litigation costs and would be in the best interests of their
respective estates.
THIS STIPULATION
N. The parties are entering into this Stipulation to modify the automatic
stay pursuant to section 362 of the Bankruptcy Code to permit the Escrow Agent
to resume distributions under the Escrow Agreement and to exercise its rights
and remedies under the Escrow Agreement and state law as described below.
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED, by and between the
parties hereto, subject to approval by this Court, as follows:
1. To the extent that the Escrowed Property is considered to be property of
Funding's estate, the automatic stay in the Chapter 11 Case is hereby modified
to permit the Escrow Agent to distribute the Escrowed Property as follows: (a)
an amount equal to the March 1, 2000 cash dividend shall be paid to the holders
of record (the "Record Holders") as of the Approval Date (as defined below); (b)
in lieu of the payment of the remaining secured quarterly cash dividends on June
1, 2000, September 1, 2000, December 1, 2000, March 1, 2001 and June 1, 2001,
the Treasury Strips now in Escrow shall be liquidated not later than the fifth
business day after the Approval Date (the "Distribution Date"); and (c) on the
Distribution Date all funds then in Escrow shall be paid out as follows: first,
to the Escrow Agent and counsel to the Unofficial Committee in respect of their
fees and costs; second to CellNet the amount of $200,000 to cover the costs (the
"CellNet Costs") of (i) processing the K-1's and tax returns and
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tracking the Funding Preferred Securities and (ii) the salary of a Funding
officer to wind-up Funding (collectively, the "Administrative Actions"); and
third (pro rata on the basis of the 4,400,000 Funding Preferred Securities
originally issued) to the Record Holders of the Funding Preferred Securities
outstanding on the Distribution Date, and to CellNet in respect of the Funding
Preferred Securities previously exchanged for CellNet common stock.
2. Upon the Escrow Agent's distribution of the Escrowed Property to the
Funding Preferred Securityholders, the Unofficial Committee and the Escrow Agent
for themselves and for each of their members, subsidiaries, affiliates and
predecessors (the "Funding Releasors"), hereby irrevocably waive and fully and
forever release and discharge Funding and CellNet, and each of CellNet's and
Funding's present and former officers, directors, employees and attorneys (the
"CellNet Releasees"), of and from any and all debts, demands, actions,
contracts, agreements, promises, judgments, damages, causes of action, claims,
rights, obligations, liabilities, suits, sums and sums of money, accounts,
reckonings and presentments whatsoever, both at law and in equity, known or
unknown, which exist now or which may arise in the future (collectively,
"Claims"), which in any way relate to or arise out of (x) the Guarantee or (y)
the commencement or continuation of the Chapter 11 Case, including without
limitation, all Claims against any of Funding's officers or directors for breach
of fiduciary duty (collectively, the "Funding Released Claims," which Funding
Released Claims the Funding Releasors represent and warrant they have not
transferred or assigned in whole or in part to any other person or entity), that
the Funding Releasors had, have, can, shall or may have against any of the
CellNet Releasees; PROVIDED, HOWEVER, that the waivers and releases hereunder by
the Escrow Agent shall not bind any of the Funding Preferred Securityholders.
3. Notwithstanding anything contained in Paragraph 2 hereof to the
contrary, each of the Funding Preferred Securityholders, the Unofficial
Committee and the Escrow Agent, do not release or waive, and hereby specifically
preserve all rights with respect to, and all Claims and security interests which
they may have against the Escrowed Property and all rights to enforce this
Stipulation and Order against CellNet and Funding.
4. The Recitals hereto are incorporated herein and made a part hereof as if
fully set forth herein.
5. Funding agrees to perform the Administrative Actions.
6. From and after the Approval Date, Funding and its officers and directors
(x) shall provide reasonable cooperation to the Escrow Agent in pursuing its
rights and remedies under the Escrow Agreement and (y) consent to the Escrow
Agent's exercise of its rights and remedies under the Escrow Agreement,
including, without limitation, the distribution of the Escrowed Property to the
Funding Preferred Securityholders.
7. Each of the parties' obligations to consummate the transactions
contemplated by this Stipulation are expressly subject to this Court having (x)
"so ordered" this Stipulation and (y) approved this Stipulation and authorized
the Debtors to enter into and consummate the transactions contemplated by this
Stipulation (the "Approval"), and such Approval shall be in full force and
effect, no stay having been granted with respect thereto. The
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date that this Stipulation shall have been entered is hereinafter referred
to as the "Approval Date."
8. This Stipulation shall take effect and be binding on the parties upon
the Approval Date. Absent the Approval, this Stipulation shall be void.
9. If this Court does not "so order" this Stipulation or such order does
not become final and non-appealable, the Movants shall not be deemed to have
waived any of their rights and claims against Funding, CellNet or the Escrowed
Property as described in the Dismissal Motion or otherwise.
10. This Stipulation may not be amended or modified except by subsequent
agreement in writing signed by all parties.
11. This Stipulation shall constitute the entire agreement between the
parties with respect to the subject matter hereof and shall supersede any
previous negotiations, commitments and writings with respect to such subject
matter.
12. This Stipulation shall be governed by, and construed in accordance
with, the laws of the State of New York (without regard to the conflicts of laws
provisions thereof) and of the United States. This Court shall retain sole and
exclusive jurisdiction over any claim, dispute, matter or otherwise that may
arise with respect to the subject matter hereof.
13. This Stipulation may be executed in one or more counterparts, all of
which shall be considered one and the same document, and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party, it being understood that all parties need not sign
the same counterpart.
RICHARDS, LAYTON & FINGER, P.A.
/s/ John H. Knight
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Mark D. Collins (No. 2981)
John H. Knight (No. 3848)
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Telephone: (302) 658-6541
Facsimile: (302) 658-6548
-and-
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SIMPSON THACHER & BARTLETT
Mark Thompson
425 Lexington Avenue
New York, New York 10017
Telephone: (212) 455-7355
Facsimile: (212) 455-2502
Attorneys for CellNet and Funding
COZEN & O'CONNOR
/s/ Mark E. Felger
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Mark E. Felger
David W. Carickhoff, Jr. (No. 3715)
Chase Manhattan Centre
1201 North Market Street, Ste. 1400
Wilmington, Delaware 19801
(302) 295-2000
-and-
PAUL, WEISS, RIFKIND, WHARTON &
GARRISON
Andrew N. Rosenberg
1285 Avenue of the Americas
New York, New York 10019-6064
Attorneys for the Unofficial Committee of
Holders of Preferred Securities
-and-
CARTER, LEDYARD & MILBURN
/s/ James Gadsden (MEF with permission)
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James Gadsden
2 Wall Street
New York, New York 10005
(212) 732-3200
Attorneys for The Bank of New York,
as Escrow Agent
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SO ORDERED:
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Peter J. Walsh
CHIEF U.S. BANKRUPTCY JUDGE
Dated: Wilmington, Delaware
June ____, 2000
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