UNITED STATES 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 report) NOVEMBER 8, 1999
TELEPAD CORPORATION
-------------------
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
1-111150 98-0122944
- -------- ----------
(Commission File Number) (IRS Employer Identification No.)
1550 54th STREET, BROOKLYN, NEW YORK 11219
------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (718) 436-5525
KURT F. GWYNNE, CHAPTER 11 TRUSTEE FOR TELEPAD CORPORATION
TWO LOGAN SQUARE, 12TH FLOOR, PHILADELPHIA, PA 19103-2756
---------------------------------------------------------
(Former name or former address, if changed since last report)
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TELEPAD CORPORATION
FORM 8 - K
NOVEMBER 8, 1999
Item 1. CHANGE IN CONTROL.
The former Board of Directors of Telepad Corporation (the "Registrant")
resigned during the bankruptcy proceedings. Stuart Eisenberger was appointed
interim officer and director by the representative of the creditors of the
Registrant and holders of all outstanding common stock of the Registrant.
Item 3. BANKRUPTCY OR RECEIVERSHIP.
On March 17, 1999, the Registrant filed a voluntary petition for
reorganization under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the District of Delaware (Case No. 99-633 (PJW)).
On October 8, 1999, the United States Bankruptcy Court for the District of
Delaware issued an Order confirming the Debtor's Modified Amended Plan of
Reorganization (the "Plan") dated September 28, 1999, as modified on October 8,
1999.
The confirmed Plan became effective on November 8, 1999. As part of the
Plan of Reorganization, the Registrant will not be continuing its former
business. The Plan, however, specifically extinguishes all legal and other
interests of the holders of the Registrant's common stock, preferred stock and
redeemable warrants effective as of November 7, 1999. There are 1,000,000 shares
issuable to various creditors.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
99.1 Amended Disclosure Statement Accompanying Amended Plan of
Reorganization dated September 28, 1999.
99.2 Order of the United States Bankruptcy Court for the District of
Delaware dated October 8, 1999 confirming Debtor's Modified Amended Plan of
Reorganization dated September 28, 1999 as modified on October 8, 1999.
99.3 Debtor's Modified Amended Plan of Reorganization dated September 28,
1999 as modified on October 8, 1999.
<PAGE>
FORM 8 -K
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 hereunto duly authorized.
TELEPAD CORPORATION
(Registrant)
By:
-------------------------
Stuart Eisenberger
President and Director
Dated: November 10, 1999
Exhibit 99.1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: : Chapter 11
:
TELEPAD CORPORATION :
: Bankruptcy No. 99-633(PJW)
Debtor. :
- ------------------------------------------------------------------------------
AMENDED DISCLOSURE STATEMENT ACCOMPANYING
AMENDED PLAN OF REORGANIZATION PROPOSED BY KURT F. GWYNNE,
CHAPTER 11 TRUSTEE FOR DEBTOR TELEPAD CORPORATION
DATED SEPTEMBER 28, 1999
ERIC LOPEZ SCHNABEL KURT F. GWYNNE
KLETT LIEBER ROONEY & SCHORLING CHAPTER 11 TRUSTEE FOR
A Professional Corporation TELEPAD CORPORATION
One Commerce Center, Suite 1001 Two Logan Square, 12th Floor
1201 Orange Street Philadelphia, PA 19103-2756
Wilmington, DE 19801 (215) 567-7500
(302) 651-0335
Proposed Counsel
for Chapter 11 Trustee
<PAGE>
TABLE OF CONTENTS
Page
----
I. OVERVIEW OF THE PLAN...................................................2
II. SIGNIFICANT EVENTS PRECEDING THE DEBTOR'S FILING OF ITS
VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 OF THE
BANKRUPTCY CODE ON MARCH 17, 1999......................................3
A. The Debtor's Acquisition of L&E Mobile Computer Mounts, Inc.....3
B. The Debtor's Sale of $1,500,000 in Convertible Notes............5
C Viasystems f/k/a Pagg Corporation's Asserted Possessory
Lien on Kitted Inventory........................................6
III. SIGNIFICANT EVENTS DURING THE CHAPTER 11 BANKRUPTCY
PROCEEDING.............................................................6
A. Approval of Factoring Agreement with Commerce Funding
Corporation.....................................................6
B. Appointment of The Official Committee of Unsecured Creditors....6
C. Litigation Among The Debtor, L&E, LeMaire and Eisenberger.......7
D Debtor's Inability/Ability to Use Cash Collateral...............8
E. The Claims Against the Directors and Officers Liability
Policy, The Expiration of the Policy and the Resignation
of the Debtor's Directors and Officers..........................8
F. The Appointment of a Chapter 11 Trustee.........................9
G. The Status of the Estate as of the Appointment of The
Chapter 11 Trustee..............................................9
H. The Termination of the Debtor's Employees.......................9
I. The Montgomery County Bids and The Status of Contract
Negotiations...................................................10
J. The Status of Negotiations With L&E............................11
K. The Status of Negotiations With Cycomm.........................12
L. The Complaint to Avoid the Lenders' Security Interests.........13
IV. SUMMARY OF CLASSES AND TREATMENT OF CLAIMS AND INTERESTS..............13
A. Unclassified Claims............................................13
1. Allowed Administrative Expense Claims...................13
2. Allowed Tax Priority Claims.............................14
B. Classified Claims..............................................14
1. Class 1 Claim - The Viasystems f/k/a Pagg Allowed
Secured Claim...........................................14
2. Class 2 Claims - Lenders' Allowed Secured Claims........15
3. Class 3 Claims - Other Priority Claims..................15
4. Class 4 Claims - Non-Priority Unsecured Claims..........15
5. Class 5 - Interests.....................................16
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V. DUTIES AND RESPONSIBILITIES OF DISBURSING AGENT.......................16
VI. FUNDING OF THE PLAN...................................................16
VII. BAR DATE; DISPUTED CLAIMS OR INTERESTS AND SEGREGATION OF
RESERVES..............................................................16
VIII. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES;
REJECTION CLAIMS......................................................17
IX. RETENTION AND ENFORCEMENT OF CLAIMS BELONGING TO THE DEBTOR
AND/OR THE ESTATE.....................................................17
X. RETENTION OF JURISDICTION.............................................18
XI. BEST INTERESTS OF CREDITORS TEST-HYPOTHETICAL CHAPTER 7
LIQUIDATION ANALYSIS..................................................18
XII. VOTING AND CONFIRMATION OF THE PLAN...................................18
A. In General.....................................................18
B. Voting Procedures and Requirements.............................20
XIII. EFFECT OF CONFIRMATION................................................20
A. Parties in Interest are Bound by the Plan......................21
B. Extinguishing of Class 5 Interests.............................21
C. Revesting of Property of the Estate............................21
D. No Discharge of Debtor.........................................21
E. No Discharge or Release of Affiliates, Insiders or Other
Third Parties..................................................21
F. Injunction.....................................................21
G. Release of Claims..............................................21
H. Exculpation....................................................21
I. Release and Discharge of Duties................................22
XIV. REQUEST FOR CONFIRMATION UNDER SECTION 1129(b) OF THE CODE............22
PROPONENT'S RECOMMENDATION....................................................23
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re : Chapter 11
:
TELEPAD CORPORATION, : Case No. 99-633 (PJW)
:
EIN #52-1680936 :
Debtor. :
- ------------------------------------:
AMENDED DISCLOSURE STATEMENT ACCOMPANYING AMENDED PLAN
OF REORGANIZATION PROPOSED BY THE CHAPTER 11 TRUSTEE
DATED SEPTEMBER 28, 1999
THE CHAPTER 11 TRUSTEE OF TELEPAD CORPORATION, KURT F. GWYNNE (the
"Trustee"), BELIEVES THAT THE AMENDED PLAN OF REORGANIZATION DATED SEPTEMBER 28,
1999 (the "Plan") IS IN THE BEST INTERESTS OF THE CREDITORS OF THE ESTATE OF
TELEPAD CORPORATION (the "Debtor"). CREDITORS ARE ENCOURAGED TO READ AND
CONSIDER CAREFULLY THIS ENTIRE DISCLOSURE STATEMENT AND THE ACCOMPANYING PLAN
PRIOR TO VOTING. EACH CREDITOR MUST MAKE ITS OWN INDEPENDENT DETERMINATION AS TO
WHETHER OR NOT THE PLAN IS ACCEPTABLE TO THAT CREDITOR.
The Trustee seeks confirmation of the Plan and submits this Disclosure
Statement in connection with the Trustee's solicitation of acceptances of the
Plan. The information contained in this Disclosure Statement, including the
information concerning the Debtor's business and the liquidation of the Debtor's
assets, is included in this Disclosure Statement for purposes of soliciting
acceptances of the Plan. All defined terms and phrases used in this Disclosure
Statement and not otherwise defined in this Disclosure Statement shall have the
meanings ascribed to them in the Plan, or as indicated in the Plan, the meaning
ascribed to those terms in the Bankruptcy Code, 11 U.S.C. Section 101-1330, or
the Federal Rules of Bankruptcy Procedure.
Requirements for confirmation of the Plan, including a vote to accept the
Plan by at least one impaired class of Claim(s) and certain of the statutory
findings that must be made by the Bankruptcy Court, are described below under
the caption "Voting and Confirmation of the Plan." This Disclosure Statement is
a summary of the most important provisions of the Plan. THE SUMMARY CONTAINED IN
THIS DISCLOSURE STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PLAN
ITSELF. TO THE EXTENT THAT THIS DISCLOSURE STATEMENT CONFLICTS WITH THE PLAN,
THE PLAN SHALL GOVERN.
A true and correct copy of the Plan is attached as Exhibit A.
<PAGE>
I. OVERVIEW OF THE PLAN
The Plan provides for the payment of Allowed Secured Claims in full by
deferred cash payments totaling at least the allowed amount of such Claim. The
Plan provides for the payment in full of Allowed Administrative Expense Claims,
Allowed Priority Tax Claims, and Allowed Other Priority Claims from the proceeds
of Property of the Estate, including inventory, accounts, equipment, Causes of
Action, the Montgomery County bids and/or contracts, general intangibles and any
other Property of the Estate (to the extent such property is not encumbered) in
the order of priority set forth in Section 507 of the Bankruptcy Code. The Plan
further contemplates the payment, Pro Rata, of Allowed Unsecured Nonpriority
Claims out of the proceeds of such Property of the Estate.
The Plan generally contemplates the liquidation of the Debtor's assets,
including inventory, accounts, equipment, general intangibles and the Causes of
Action. The Plan further contemplates the completion of negotiations concerning
the bid submitted by the Debtor and L&E Computer Mobile Mounts, Inc. (the "MC
Installation Bid") in response to the TRW RFP No. X01098.PSDS-R002 dated October
12, 1998 (a request for proposals) from Montgomery County, Maryland concerning
the installation of ruggedized mobile subscriber equipment and the performance
under any contract for such installation (the "MC Installation Contract"). On
June 22, 1999, Montgomery County advised the Debtor that the MC Installation Bid
was the highest scored bid for that project. Contract negotiations commenced on
September 9, 1999.
In addition, the Plan contemplates the Debtor's performance under the
Debtor's bid (the "MC PC Bid") in response to the TRW RFP No. X01098.PSDS-S004
dated October 12, 1998 (a request for proposals) from Montgomery County,
Maryland concerning the purchase of PCMobile computers and any resulting
contract for the sale of such PCMobile computers to Montgomery County (the "MC
PC Contract"). Contract discussions concerning an MC PC Contract also commenced
on September 9, 1999.
Montgomery County has advised the Debtor that the county will not complete
a contract with the Debtor if the Debtor is not "out of Chapter 11" within
thirty (30) days from September 9, 1999. Although the Trustee intends to meet
that deadline, the Trustee is pursuing an alternative. Specifically (and without
waiving the Debtor's rights and remedies against Montgomery County for enforcing
that deadline), the Trustee is currently negotiating agreements with other
vendors interested in purchasing the Debtor's interests in the MC Installation
Bid, the MC Installation Contract, the MC PC Bid, and the MC PC Contract.
If the Plan is not confirmed on a relatively short timetable, the Debtor
will likely not be able to benefit from the MC Installation Bid and MC PC Bid.
If such bids proceed to the MC Installation Contract and the MC PC Contract,
those contracts may
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result in as much as Nine Hundred Fifteen Thousand Five Hundred Dollars
($915,500) to the Estate, less certain expenses. In contrast, those contracts
would have little, if any value, in a Chapter 7 because Montgomery County would
refuse to enter into any contract with the Debtor if it has not successfully
reorganized.
The Plan generally provides that executory contracts and unexpired leases
shall be rejected effective as of the Petition Date.
The Disbursing Agent under the Plan will be the Trustee or such other
person designated in a writing by The Official Committee of Unsecured Creditors
(the "Committee") filed and served upon the Trustee prior to the Confirmation
Hearing.
As the Debtor is insolvent, the Plan provides that holders of Allowed
Interests shall be extinguished and shall not receive any Property of the Estate
under the Plan. Therefore, the holders of Allowed Interests are deemed to have
rejected the Plan and are not entitled to vote on the Plan.
The Debtor will not receive a discharge under the Plan because the Plan
provides for the liquidation of substantially all of the Debtor's assets.
For all of the reasons set forth in this Disclosure Statement, the Trustee
believes that confirmation and consummation of the Plan is preferable to any
other alternative and is in the best interests of the estate. Therefore, the
Trustee urges all holders of impaired Claims to vote to ACCEPT the Plan.
II. SIGNIFICANT EVENTS PRECEDING THE DEBTOR'S FILING OF ITS VOLUNTARY PETITION
FOR RELIEF UNDER CHAPTER 11 OF THE BANKRUPTCY CODE ON MARCH 17, 1999.
A. The Debtor's Acquisition of L&E Mobile Computer Mounts, Inc.
The Debtor is a publicly-traded Delaware corporation with former
headquarters in Herndon, Fairfax County, Virginia. The Debtor designs, develops
and markets mobile computing and communications systems for customers, such as
police departments, with mobile field workers in remote locations. From 1993
through 1996, the Debtor concentrated primarily in the development and
manufacture of its computer hardware line.
In 1996, Donald Barrett, the Debtor's former CEO, attempted to expand the
Debtor's operations through acquisitions. As part of those expansion efforts,
Barrett considered acquiring all of the stock in L&E Mobile Computer Mounts,
Inc. ("L&E"). L&E was engaged primarily in the installation of ruggedized
computer hardware in the public safety sector.
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On May 27, 1998, the Debtor entered into a Share Purchase Agreement with
Christine LeMaire and Dean N. Eisenberger, the sole shareholders of L&E.
Pursuant to the Share Purchase Agreement, LeMaire and Eisenberger received,
inter alia, One Million Three Hundred Thousand Dollars ($1,300,000) in cash for
all of the stock in L&E (the "L&E Stock"). In addition, LeMaire and Eisenberger
received 900,000 shares of common stock in the Debtor and 950,000 shares of
preferred stock in the Debtor. LeMaire and Eisenberger continued to manage the
business operations of L&E after the sale of the L&E Stock.
The Debtor also agreed to pay LeMaire and Eisenberger an additional cash
payment on the third anniversary of the Share Purchase Agreement based upon
L&E's financial performance over that time (the "Earn-Out Payment"). The amount
of the Earn Out-Payments was contingent upon the financial success of L&E.
In exchange for the L&E Stock, the Debtor also executed and delivered to
L&E a Promissory Note in the amount of Three Hundred Thirty Three Thousand
Dollars ($333,000), which was payable on July 27, 1998 (the "Note"). The Share
Purchase Agreement also required Debtor to make a $333,333 working capital
payment to L&E on the first anniversary, and $333,334 working capital payment on
the second anniversary, of the Share Purchase Agreement. If L&E did not cancel
or sought to enforce payment under the Note (or the other working capital
payments) and such payment was actually made, LeMaire and Eisenberger's
percentage of participation in the Earn-Out Payment would decrease.
To secure the Debtor's obligations to LeMaire, Eisenberger and L&E, the
Debtor executed a Pledge and Security Agreement (the "Pledge Agreements") in
favor of each of LeMaire, Eisenberger and L&E. Under the Pledge Agreements, the
Debtor granted a security interest in the L&E Stock to LeMaire, Eisenberger and
L&E.
Upon the Debtor's acquisition of the L&E Stock, L&E became a wholly-owned
subsidiary of the Debtor. Pursuant to the Share Purchase Agreement, L&E was
required to dividend to the Debtor a sum sufficient to pay L&E's stand-alone tax
liability. The Debtor also contends that L&E was required to change its
accounting method from a cash basis to an accrual basis for the purpose of
making such dividends. L&E asserts that it was not required to change its
accounting method on any schedule, but rather had the discretion to determine
when it would do so.
The Note was not paid on July 27, 1998. The Debtor contends that L&E,
through Eisenberger, appeared to be "on board" with the proposal for L&E to
borrow the funds from a third party and cancel the Note. The Debtor contends
that L&E's borrowing of funds from a third party would have enabled L&E to
maintain a higher Earn-Out Payment for LeMaire and Eisenberger. LeMaire and
Eisenberger maintain
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that L&E did not agree to forego payment under the Note, but rather demanded
payment on the Note by October 13, 1998.
The Debtor maintains that it informed L&E that a tax dividend in the amount
of $263,835 was due to the Debtor on June 30, 1998. LeMaire and Eisenberger
maintain that based on the Share Purchase Agreement no such taxes were due.
On November 20, 1998, LeMaire and Eisenberger sent a Notice of Default-
Election of Remedies to the Debtor (the "Election of Remedies"). The Election of
Remedies, which was drafted by LeMaire and Eisenberger's counsel, stated that
LeMaire and Eisenberger had taken title to the L&E Stock. LeMaire and
Eisenberger took action to purportedly transfer the L&E Stock to themselves. The
Debtor asserts that the Election of Remedies was a surprise because Eisenberger
had informed the Debtor that LeMaire and Eisenberger would consider the Debtor's
proposal for L&E's borrowing of the working capital from a third party.
On January 21, 1999, LeMaire and Eisenberger issued another letter to the
Debtor in which they asserted that the transaction set forth in the Share
Purchase Agreement was "rescinded." The January 21, 1999, letter was drafted by
counsel for LeMaire and Eisenberger. A Dunn & Bradstreet report stated that the
Debtor's acquisition of L&E "did not take place." (1)
On March 17, 1999 (the "Petition Date"), due to the Election of Remedies
and the January 21, 1999, recission notice, the Debtor filed a voluntary
petition for relief under Chapter 11 of the Bankruptcy Code before the Honorable
Peter J. Walsh in the United States Bankruptcy Court for the District of
Delaware.
B. The Debtor's Sale of $1,500,000 in Convertible Notes
Prior to the Petition Date on May 27, 1998, the Debtor sold convertible
notes totaling approximately $1.5 million to the following private investors
(the "Lenders"):
(i) Balmore Funds, S.A., (ii) Austost Anstalt Schaan, (iii) Beeston Investments,
Ltd., (iv) Ellis Enterprises Ltd., (v) Investor LLC, (vi) The Gross Foundation,
Inc., and (vii) The Hewlett Fund, Inc. The Notes, which matured on May 27, 1999,
bear interest at the rate of eight percent (8%) per annum.
The Debtor granted a security interest to the Lenders in substantially all
of the Debtor's assets, except the L&E Stock. The Lenders filed a UCC-1
financing statement with the Virginia Department of State, the Delaware
Department of State and
- --------
(1) The Plaintiffs claim that the Dunn & Bradstreet quote is misleading.
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the New York Secretary of State. The Lenders, however, did not file a UCC-1
financing statement in the Office of the Clerk for Fairfax County, Virginia.
Balmore (and perhaps other Lenders) intends to assert that New York or
Delaware law governs the perfection of their security interests. Balmore further
intends to assert that it was properly perfected under the law of New York or
Delaware. The Trustee, however, believes that Virginia law governs the issue of
the Lenders' perfection. As Virginia law required a local filing in the Office
of the Clerk for Fairfax County, Virginia, the Trustee believes that the
Lenders' security interests will be avoided, and the Lenders will be deemed
unsecured nonpriority creditors.
C. Viasystems f/k/a Pagg Corporation's Asserted Possessory Lien on Kitted
Inventory
Viasystems f/k/a Pagg Corporation ("Viasystems f/k/a Pagg") is holding and
asserting a common law possessory lien on approximately one hundred (100) units
of kitted inventory, which is being held in Viasystems f/k/a Pagg's warehouse in
Massachusetts. Kitted inventory is inventory that is almost completed but for
additional testing and minor assembly. The Trustee believes that the value of
the one hundred units of kitted inventory is approximately $200,000 to $300,000.
Viasystems f/k/a Pagg asserts that it is owed approximately $40,000 by the
Debtor.
III. SIGNIFICANT EVENTS DURING THE CHAPTER 11 BANKRUPTCY PROCEEDING
A. Approval of Factoring Agreement with Commerce Funding Corporation
On April 13, 1999, the Bankruptcy Court entered a Final Order Authorizing
Debtor in Possession to Continue Factoring Agreement and To Obtain Credit
Pursuant to Section 364 (the "Factoring Order"). The Factoring Order authorized
the Debtor to maintain its pre- petition factoring agreement with Commerce
Funding Corporation ("Commerce") where the Debtor had the consent of Balmore
Funds or Bankruptcy Court approval to factor any particular receivable. Pursuant
to the factoring agreement, Commerce advances eighty percent (80%) of an account
receivable to the Debtor and receives an assignment of that invoice. The
factoring agreement provides for interest on outstanding balances at prime plus
three percent (3%) per annum until Commerce is repaid. In addition, Commerce
charges One Thousand Dollars ($1,000) for each month that a receivable is
outstanding.
Commere has factored the account receivable under the Time Warner
Agreement. Specifically, Commerce has paid the Debtor's estate $105,000 for such
account receivable, which totaled approximately $131,000. Time Warner has not
paid Commerce, however, because the Debtor stated that it will not complete the
contract
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unless Time Warner pays an additional $15,000 to the Debtor's estate to
cover, in part, increased costs due to Time Warner's delay. The Trustee has been
negotiating with Time Warner concerning the terms of completing the Time Warner
Agreement. Time Warner has recently suggested that it will pay the additional
$15,000 if the Debtor provides assurances that it will complete the Time Warner
Agreement. If Time Warner agrees to pay the additional $15,000, the Debtor may
be able to complete the contract without a net loss going forward. If the Debtor
does not complete the contract, Commerce will have a $105,000 administrative
expense claim against the Debtor's estate.
B. Appointment of The Official Committee of Unsecured Creditors
On May 13, 1999, pursuant to Section 1102(a)(1) of the Bankruptcy Code, the
United States Trustee filed a Notice of Appointment of Committee of Unsecured
Creditors. As set forth in that notice, the United States Trustee appointed the
following creditors to the Committee: (i) Sanmina Corp., (ii) Distributed
Database Consulting, Inc., (iii) Gamber Johnson, and (iv) GWD Services, Inc. The
Committee is represented by Michael B. Schaedle of Blank Rome Comisky &
McCauley, LLP, located at One Logan Square, Philadelphia, PA 19103.
C. Litigation Among The Debtor, L&E, LeMaire and Eisenberger
On April 15, 1999, LeMaire, Eisenberger, and L&E (collectively, the
"Plaintiffs") filed a Complaint for Declaratory Relief Or, in the Alternative,
Motion for Relief from the Automatic Stay (the "Complaint") thereby commencing
adversary proceeding #99-110 (the "Adversary Proceeding") in the Bankruptcy
Court. In the Complaint, the Plaintiffs sought, inter alia, an order declaring
that L&E had properly and effectively foreclosed upon the L&E Stock thereby
eliminating the Debtor's ownership in L&E.
On April 28, 1999, the Debtor filed an Answer and Counterclaim in the
Adversary Proceeding. In the Answer, the Debtor asserted, inter alia, a
fraudulent conveyance counterclaim against the Plaintiffs. The Debtor sought an
order providing, inter alia, that the Plaintiffs had improperly (i) noticed
their intent to foreclose upon the Stock because the Election of Remedies was
issued by LeMaire and Eisenberger rather than L&E, (ii) purported to rescind the
Share Purchase Agreement where the Plaintiffs had failed to repay the $1,300,000
to the Debtor and had not made the tax payment dividend to the Debtor, and (iii)
noticed the strict foreclosure upon the L&E Stock in violation of the Uniform
Commercial Code. The Debtor further challenges the Election of Remedies and the
recission notice as an unenforceable penalty.
On June 29 and 30, 1999, the Bankruptcy Court conducted a trial on the
merits of the Adversary Proceeding. The Plaintiffs have filed their post-trial
memorandum. The Plaintiffs and the Trustee have executed a stipulation extending
the
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Trustee's time for filing its post-trial memorandum pending the resolution of
continuing settlement negotiations.
The Plaintiffs also filed a motion to compel the Debtor to assume or reject
the Share Purchase Agreement as an "executory contract" within the purview of
Section 365 of the Bankruptcy Code. The Trustee, however, believes that the
Share Purchase Agreement is not an executory contract, but rather constitutes
part of a secured transaction between the Debtor and the Plaintiffs. If the
Plaintiffs are correct, the Debtor would be forced (i) to assume the Share
Purchase Agreement and to cure all alleged defaults thereunder, which the
Plaintiffs allege to include at least $700,000 in payments on put stock and
approximately $667,000 in working capital payments or (ii) to reject the Share
Purchase Agreement and, the Plaintiffs assert, lose or weaken the Debtor's
claims against the Plaintiffs.
As discussed more fully below, the Trustee is attempting to settle its
disputes with the Plaintiffs. If the Trustee is unable to do so, the Trustee
intends to file its post-trial memorandum and to continue prosecuting its
counterclaims against the Plaintiffs.
D. Debtor's Inability/Ability to Use Cash Collateral
On April 8, 1999, the Lenders moved the Bankruptcy Court for an order
seeking, inter alia, adequate protection for or to further prohibit the Debtor
from using the Lenders' purported cash collateral. A hearing was held on July
21, 1999, and on July 27, 1999, the Bankruptcy Court entered an order precluding
the Debtor's further use of cash collateral without further order by the
Bankruptcy Court (the "Cash Collateral Order").
On or about September 17, 1999, the Trustee filed an Emergency Motion of
Kurt F. Gwynne, Chapter 11 Trustee of Telepad Corporation to Authorize Interim
Use of Property Pursuant to 11 U.S.C. ss. 363 and Fed.R.Bankr.P. 4001 (the "Cash
Collateral Motion"). On September 22, 1999, the Bankruptcy Court executed an
Interim Consent Order authorizing the Trustee to utilize cash collateral to pay
Bill Jones the approximate sum of $7,900, plus $6,000 per month compensation as
a consultant for the months of September and October 1999 (subject to Bankruptcy
Court approval of the application to employ Mr. Jones as a consultant). The
Interim Consent Order also authorized the Trustee to utilize additional cash
collateral in an amount not exceeding $26,000 to pay direct costs and
administrative expenses associated with the MC Installation Contract and MC PC
Contract Projects, costs and expenses associated with marshaling the Debtor's
books and records, costs and expenses associated with preparing the Debtor's
inventory for sale, and any other administrative expense claims incurred in the
ordinary course of operating the Debtor's business or in discharging the
Trustee's
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duties. A final hearing on the Cash Collateral Motion was scheduled for October
8, 1999.
E. The Claims Against the Directors and Officers Liability Policy, The
Expiration of the Policy and the Resignation of the Debtor's Directors
and Officers
By a letter dated July 29, 1999, counsel for the Committee notified the
Debtor's officers and directors, and Reliance Insurance Company of Illinois (the
issuer of the Debtor's D&O insurance policy) of certain claims against the
Debtor's D&O insurance policy #NDA0148307 (the "D&O Policy"). Specifically,
counsel for the Committee placed such parties on notice of claims arising out
of, inter alia, Donald Barrett's gross negligence, bad faith, recklessness, or
carelessness in suffering the consequences of the alleged default under the
Stock Purchase Agreement where the Debtor's lenders had offered funding that
would have eliminated the default. Counsel for the Committee also notified
Reliance of claims relating to LeMaire's purported foreclosure on the L&E Stock
while she was a Director of Telepad (although LeMaire claims that she was not
aware of such status).
Thereafter, all of the Debtor's officers and directors resigned. On August
10, 1999, the D&O Policy expired.
F. The Appointment of a Chapter 11 Trustee
Upon the resignation of the Debtor's officer and directors, counsel for
Balmore Funds, S.A., filed an Emergency Motion for the Appointment of a Chapter
11 Trustee. At a hearing held on August 12, 1999, the Bankruptcy Court entered
an order providing for the appointment of a Chapter 11 trustee. On September 1,
1999, the Bankruptcy Court entered an order approving the United States
Trustee's appointment of Kurt F. Gwynne as the Chapter 11 trustee. On September
3, 1999, the Trustee filed an application to employ Eric Lopez Schnabel of Klett
Lieber Rooney & Schorling as counsel for the Trustee.
G. The Status of the Estate as of the Appointment of The Chapter 11
Trustee
As of September 1, 1999, the Debtor's estate had accrued significant unpaid
post-petition claims. The following constitutes a summary estimate of the unpaid
post-petition claims (without any setoff, recoupment, or other reduction for
disputes relating to any such claims) of which the Trustee is aware:
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a) approximately $53,000 in asserted unpaid wages, salaries, and
benefits; (2)
b) approximately $12,000 in asserted unpaid withholding taxes;
c) approximately $80,000 in unpaid trade vendor claims;
d) approximately $29,000 due to Commerce Funding Corp. (factoring
agreement); and
e) approximately $280,000 in unpaid Administrative Expense Claims of
professionals (as discussed below).
H. The Termination of the Debtor's Employees
As of the Trustee's appointment, the Debtor had not paid any employees'
salaries since August 1, 1999. In addition, no payroll taxes had been paid since
mid-July 1999. Due to the Cash Collateral Order and the resulting inability to
use the alleged cash collateral of the Lenders, the Trustee was forced to
terminate the Debtor's employees (in the event they had not already resigned) on
September 2, 1999, to avoid the accrual of any further payroll and payroll
taxes. Bill Jones, a salesperson for the Debtor, continued to work as a
consultant for the Debtor after such termination without receiving any
compensation during the month of August 1999. The Trustee moved and was granted
authority by the Bankruptcy Court by an interim consent order to use the alleged
cash collateral to make payments, inter alia, to Bill Jones. The Trustee has
also applied to the Bankruptcy Court to retain Bill Jones as an independent
contractor consultant for the purposes of closing and performing under the MC PC
Contract and the MC Installation Contract and to assist in the sale of the
Debtor's inventory. The Trustee proposes to pay Bill Jones the sum of $6,000 per
month, plus a five percent (5%) commission on any inventory sales. In addition,
the Trustee further proposes to pay Bill Jones additional commissions in
connection with the MC Installation Contract and the MC PC Contract (as
discussed below). This application is scheduled for a hearing on October 8,
1999, at 9:30 a.m.
I. The Montgomery County Bids and The Status of Contract Negotiations
Montgomery County issued the TRW RFP No. X01098 PSDS - R002 dated October
12, 1998, which requested proposals concerning the installation of ruggedized
mobile subscriber equipment for Montgomery County's public safety personnel. The
Debtor issued a bid in Response to the RFP. On June 22, 1999,
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(2) Donald Barrett, the Debtor's former President and CEO, asserts that he
is owed $37,000 in accrued but unpaid post-petition salary.
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Montgomery County notified the Debtor that the MC Installation Bid was selected
as the highest rated bid in response to the RFP.
The Debtor and L&E dispute who has the right to proceed with the MC
Installation Bid and who has the right to the proceeds of any MC Installation
Contract. The Debtor contends that it was the only authorized bidder because L&E
missed a mandatory qualified bidders' meeting. The Debtor further contends that
there was approximately $700,000 in profit built into the MC Installation Bid
for the Debtor.
L&E contends that the MC Installation Bid was based upon L&E's prior
performance history. L&E further asserts that it was going to perform the
installation of the ruggedized mobile subscriber equipment pursuant to any MC
Installation Contract. L&E further contends that the only reason the Debtor was
also listed as a bidder on the MC Installation Bid is because L&E missed the
qualified bidders' meeting. L&E maintains that Montgomery County has since
accepted L&E as a qualified bidder. Finally, L&E contends that no profit for the
Debtor was built into the MC Installation Bid. L&E maintains that it never added
profit for any other entity in L&E's bids.
On September 9, 1999, the Trustee and L&E began contract negotiations with
Montgomery County. Montgomery County notified the Debtor that it must "be out of
Chapter 11" within thirty (30) days after the meeting in order to obtain the MC
Installation Contract. The Trustee is attempting to confirm the Plan on or
before that "deadline." In addition, Montgomery County has stated its desire to
contract directly with L&E on the MC Installation Contract and Cycomm
International, Inc. ("Cycomm") on the MC PC Installation Contact.
The Debtor also issued the MC PC Bid in response to another request for
proposals issued by Montgomery County. Montgomery County set the same deadline
concerning the MC PC Bid.
L&E and the Debtor also dispute who has the right to proceed with the MC PC
Bid and who has the right to the proceeds of any MC PC Contract. The Debtor
asserts that, although L&E was listed on the cover page of the MC PC Bid, the
Debtor made that bid without L&E. Again, the Debtor contends that L&E was not a
qualified bidder due to L&E's failure to attend a mandatory bidders meeting.
L&E counters that it was accepted by Montgomery County as a qualified
bidder on the MC PC Bid. L&E further contends that the Debtor was not licensed
to sell PCMobile computers at the time of the MC PC Bid (although the Debtor
contends that Cycomm authorized the Debtor to make the MC PC Bid). L&E asserts
that it had already sold approximately 20 PCMobile units to Montgomery County as
part of a pilot program well before MC PC Bid was made.
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The Trustee is also negotiating with L&E and Cycomm for the assignment of
the Debtor's interests in the MC Installation Bid, any MC Installation Contract,
the MC PC Bid, and any MC PC Contract.
J. The Status of Negotiations With L&E
L&E and the Trustee have agreed in principle, subject to Bankruptcy Court
approval and the memorialization and execution of a settlement agreement, to
settle their disputes concerning the the MC Installation Bid, the MC
Installation Contract, the MC PC Bid, the MC PC Contract, and the Adversary
Proceeding. The Plaintiffs have offered to cause Montgomery County to pay the
sum of Two Hundred Ninety Thousand Dollars ($290,000) to the Debtor's estate for
the estate's interest in the MC Installation Contract. The $290,000 represents
ten percent of the current contract price. L&E has also offered to pay a one
half percent (0.5%) commission to Bill Jones (which commission is based upon the
full $2.9 million contract value). The Debtor will also pay a 0.5% commission to
Bill Jones (which commission is based upon the full $2.9 million contract
value). Thus, the Debtor's estate would receive the sum of Two Hundred Seventy
Five Thousand Five Hundred Dollars ($275,500) from the sale of the estate's
interest in the MC Installation Contract. The $275,500 would be paid over time
during the term of the contract, which is expected to last approximately two (2)
years. The Debtor's estate would be paid one tenth (1/10th) of each payment
under the MC Installation Contract. L&E is attempting to negotiate the advance
payment of twenty five percent (25%) of the MC Installation Contract proceeds.
If such advance payment is made, the Debtor's estate would receive one-tenth
(1/10th) of such payment.
The Plaintiffs and the Trustee have also agreed in principle, subject to
Bankruptcy Court approval and the memorialization and execution of a settlement
agreement, to settle the Adversary Proceeding for the sum of One Hundred Ninety
Five Thousand Dollars ($195,000). Counsel for the Plaintiffs has proposed the
payout of the $195,000 as follows: (i) $130,000 within approximately two (2)
weeks after the execution of a settlement agreement, with such funds to be held
in escrow pending Bankruptcy Court approval of the agreement and (ii) $65,000
within one (1) year after the payment of the $130,000. Other terms of the
proposed agreement include the subordination Claims of the Plaintiffs' claims
against the Debtor's estate to all Allowed Unsecured Nonpriority Claims. Those
claims include L&E's claim for $1,000,000 in working capital payments and
LeMaire's and Eisenberger's claim (in the aggregate) for $700,000 pursuant to
their put of stock in L&E. As discussed above, such claims were being vigorously
contested by the Debtor in the Adversary Proceeding.
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K. The Status of Negotiations With Cycomm
Cycomm and the Trustee have also agreed in principle for the Debtor's
assignment to, and Cycomm's assumption of, the Debtor's rights under the MC PC
Contract. Specifically, Cycomm has agreed to cause Montgomery County to pay five
percent (5%) of the MC PC Contract proceeds to the Debtor's estate. That is the
same percentage profit that the Debtor intended to obtain from the completion of
the MC PC Contract. As the MC PC Contract will take an estimated two (2) years
to complete, the Debtor will receive its 5% over time. The Debtor will receive
5% of the proceeds of each payment under the MC PC Contract. Cycomm is
attempting to negotiate a twenty five percent (25%) advance payment of the MC PC
Contract proceeds.
Pursuant to the MC PC Contract, each PCMobile computer will be purchased by
Montgomery County for the sum of $6,253.20. As Montgomery County requested bids
for 1,859 PCMobile computers, the MC PC Contract price is approximately
$11,624,698. Thus, the Debtor's estate would receive approximately $581,234.50
(which is 5%) out of such proceeds.
Montgomery County, however, has already advised Wilbur D. Jones, the
Debtor's consultant, that Montgomery County intends to purchase a total of 2,200
PCMobile computers. The MC PC Contract proceeds would total $13,757,040. The
Debtor's estate would receive approximately $687,852 (which is 5%) out of such
proceeds.
The Trustee has filed an application for Bankruptcy Court approval of the
Trustee's engagement of Mr. Jones as a consultant in connection with the MC PC
Contract. Pursuant to the application Wilbur Jones will receive seven percent
(7%) of the Debtor's proceeds of the MC PC Contract. Thus, if the Debtor's
estate receives $687,852, Mr. Jones would receive a $48,150 commission out of
those funds.
Although the Trustee believes that he will be able to finalize a settlement
agreement with L&E and an assignment agreement with Cycomm, there is no
guarantee that the Trustee will be able to do so. In the event that the Trustee
is unable to finalize those agreements, the Trustee will seek to negotiate the
MC Installation Contract and the MC PC Contract. Specifically, the Trustee will
seek to replace L&E with another installer and will seek to perform directly
under the MC PC Bid (pursuant to which the Debtor is acting as a distributor).
Any disputes concerning whether the Debtor or L&E is entitled to negotiate,
perform under, and receive the proceeds of, the MC Installation Contract and the
MC PC Contract, however, may cause the Debtor and L&E to lose the benefit of
both contracts. If that were to happen, the Debtor's estate may be
administratively insolvent, and unsecured creditors would likely receive little
or no distribution absent success in the litigation against the Plaintiffs.
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L. The Complaint to Avoid the Lenders' Security Interests
Prior to or shortly after a confirmation hearing on the Plan, the Trustee
intends to file a complaint to avoid the Lenders' security interests in
substantially all of the Debtor's assets, including but not limited to,
inventory, accounts, equipment and general intangibles. The Complaint will
include a count to avoid the Lenders' security interests pursuant to Section 544
of the Bankruptcy Code. The Complaint will also include a request for a
determination of the validity, priority and extent of the Lender's security
interests (if any). The Committee has indicated its support of the Trustee's
action to avoid the Lenders' lien on the purported collateral as will be set
forth more fully in the Complaint.
IV. SUMMARY OF CLASSES AND TREATMENT OF CLAIMS AND INTERESTS
A. Unclassified Claims
1. Allowed Administrative Expense Claims
Allowed Claims for costs and expenses of administering the Estate pursuant
to Sections 503(b) and 507(b) of the Bankruptcy Code shall, unless otherwise
agreed to by the holder of such Claim and the Trustee or Disbursing Agent,
receive payment in full in Cash equal to the Allowed amount of such
Administrative Expense Claim on the Effective Date, or if such Administrative
Claim is not allowed as of the Effective Date, within thirty (30) days after the
date on which an order allowing such Administrative Expense Claim becomes a
Final Order.
Prior to the Petition Date, the Debtor paid at least the sum of $15,000 to
The Bayard Firm as a retainer. As of September 11, 1999, The Bayard Firm
asserted that it was owed approximately $125,000 net of the retainer.
Prior to the Petition Date, the Debtor also paid the sum of $25,000 to The
Gary Rosen, Chartered law firm as a retainer. The Gary Rosen, Chartered law
firm, co-counsel for the Debtor, asserts that it is owed approximately $40,000,
net of the retainer.
The law firm of Blank Rome Comisky & McCauley, LLP ("Blank Rome") is
counsel for the Committee. The Blank Rome firm estimates that its fees will be
at least $70,000 as of the Confirmation Date. The Blank Rome firm's fees could
be higher or lower depending upon the date of the Confirmation Hearing and the
amount of litigation prior to that date.
The law firm of Klett Lieber Rooney & Schorling ("Klett Lieber"), proposed
counsel for the Trustee, estimates that its fees will total approximately
$45,000 as of the Confirmation Date. The Klett Lieber firm's fees could be
higher or lower
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depending upon the date of the Confirmation Hearing and the amount of litigation
prior to that date.
Additional administrative expenses are discussed above in Section III.G
"The Status of the Estate as of the Appointment of the Chapter 11 Trustee."
The Trustee and the Committee reserve their rights to object to any
Administrative Expense Claim.
2. Allowed Tax Priority Claims
Unless otherwise agreed to by the holder of an Allowed Tax Priority Tax
Claim, such Claim shall be paid in full, in Cash by Semi-Annual Payments over a
period not exceeding six (6) years after the date of assessment of such Claim,
of a value, as of the Effective Date, equal to the allowed amount of such Claim,
except that the holder of an Allowed Tax Priority Claim may be paid on such date
and upon such other terms as may be agreed upon by that holder, the Committee
and the Trustee or Disbursing Agent. The Trustee believes that Claimants may
assert the following as Priority Tax Claims (among others):
(a) approximately $23,074.86 (Fairfax County, Virginia);
(b) approximately $ 6,551.36 (Va. Dept. of Taxation); and
(c) approximately $9,000.54 (1997 and 1998 taxes to Town of Herndon,
Va.)
B. Classified Claims
1. Class 1 Claim - The Viasystems f/k/a Pagg Allowed Secured Claim. The
holder of a Class 1 Allowed Claim shall be paid in full in Cash by Semi-Annual
Payments with interest at the rate of three percent (3%) or such other rate as
is ordered by the Bankruptcy Court, over a three (3) year period commencing on
the Effective Date; except that the holder of such a Claim may be paid on such
dates and upon such other terms as may be agreed upon by such holder, the
Committee and the Trustee or Disbursing Agent.
In the alternative, pursuant to Section 1129(b)(2)(A)(iii), the Disbursing
Agent, with the consent of the Committee, may surrender to Viasystems f/k/a Pagg
the inventory securing the Viasystems f/k/a Pagg Allowed Secured Claim.
Based upon a recent invoice from Viasystems f/k/a Pagg, the Trustee
believes that Viasystems f/k/a Pagg will assert an Allowed Secured Claim in an
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approximate amount of $40,000. The Trustee reserves the right to object to the
validity, priority or extent of the Viasystems f/k/a Pagg Allowed Secured Claim.
2. Class 2 Claims - Lenders' Allowed Secured Claims. Each holder of a Class
2 Allowed Claim shall be paid in full, in Cash by Semi-Annual Payments with
interest at the agreed upon rate as set forth in the Security Agreements, or
such other rate as ordered by the Bankruptcy Court, over a three (3) year period
commencing on the Effective Date; except that the holder of such a Claim may be
paid on such dates and upon such other terms as may be agreed upon by such
holder, the Committee and the Trustee or Disbursing Agent.
The Trustee believes that the Lenders' Secured Claims will be disallowed.
Specifically, the Trustee believes that the Lenders' security interests will be
avoided under 11 U.S.C. Section 544 (or otherwise) because the Lenders did not
file a UCC-1 financing statement in the County of Fairfax in the State of
Virginia as the Trustee believes is required by Va. Stat. Ann. Section
8.9-401(1)(c). If the Lenders' security interests are avoided, the Lenders'
Claims will become Class 4 Non-Priority Unsecured Claims.
In the alternative, pursuant to Section 1129(b)(2)(A)(iii), the Disbursing
Agent, with the consent of the Committee, may surrender to the Lenders the
inventory securing the Lenders' Allowed Secured Claims. If the Lenders hold
unavoidable security interests, the Lenders would also have the right to the
proceeds of their other collateral, including but not limited to, accounts and
general intangibles.
3. Class 3 Claims - Other Priority Claims. Each holder of a Class 3 Allowed
Other Priority Claim shall be paid in full in Cash on the later of (a) the
Effective Date or (b) the first Business Day that is thirty days (30) days after
the date any such Claim becomes an Allowed Claim, except that the holder of an
Allowed Other Priority Claim may be paid on such dates and upon such other terms
as may be agreed upon by such holder, the Committee and the Trustee or
Disbursing Agent.
4. Class 4 Claims - Non-Priority Unsecured Claims. After the Allowed Claims
in Classes 1, 2 and 3 have been paid in full, each holder of a Class 4 Allowed
Non- Priority Unsecured Claim, including Allowed Rejection Claims, if any, shall
receive a Pro Rata Distribution by Semi-Annual Payments, except that the holder
of such a Claim may be paid on such dates and upon such other terms as may be
agreed upon by such holder, the Committee and the Trustee or Disbursing Agent.
The Class 4 Allowed Non-Priority Unsecured Claims shall be paid out of the
proceeds of the Property of the Estate, including, but not limited to, the
following:
a. personal property including, without limitation, goods, equipment,
inventory, fixtures, commercial paper, chattel paper, negotiable instruments,
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money, accounts receivables, general intangibles and any other legal or
equitable interests of the Debtor within the meaning of Section 541 of the
Bankruptcy Code;
b. avoidance actions pursuant to 11 U.S.C. Section 544, 545, 547, 548, 549,
550, 551, and 553(b);
c. other Causes of Action;
d. the MC PC Bid and the MC PC Contract; and
e. the MC Installation and the Bid MC Installation Contract.
5. Class 5 - Interests. The holders of Class 5 Interests shall receive no
distribution under the Plan and, pursuant to Section 1126(g) of the Bankruptcy
Code, shall be deemed to reject the Plan. Upon the Confirmation Date, all the
holders of Class 5 Interests shall have all of their rights and legal and equity
interests in the Interests extinguished and canceled.
V. DUTIES AND RESPONSIBILITIES OF DISBURSING AGENT
The Disbursing Agent shall make payments to the holders of Allowed Claims
as provided in the Plan. The Disbursing Agent shall establish any deposit
account(s) necessary or appropriate to effectuate the Plan. Pursuant to Section
1123(b)(3)(B) of the Bankruptcy Code, the Property of the Estate belonging to
the Debtor and/or the Estate, including but not limited to Causes of Action
shall be retained by the Debtor and shall be enforced by the Disbursing Agent
who shall prosecute any such Causes of Action pursuant to this Plan. The
proceeds of such Causes of Action and Property of the Estate shall be used by
the Disbursing Agent to make the Cash Distributions to Classes 1 through 4,
inclusive, as set forth in the Plan. No bond covering the Disbursing Agent shall
be required.
VI. FUNDING OF THE PLAN
The Disbursing Agent will utilize Property of the Estate to the extent
necessary to ensure that Classes 1 through 4 are paid pursuant to the terms of
the Plan.
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VII. BAR DATE; DISPUTED CLAIMS OR INTERESTS AND SEGREGATION OF RESERVES
The Trustee intends to file a motion requesting that this Court establish
one or more bar date(s) for the filing of Administrative Expense Claims and
unsecured Claims. Creditors will receive notice of such bar date(s). Any entity
failing to file a proof of claim prior to the bar date may be forever barred
from asserting such claim (absent a finding by the Bankruptcy Court of excusable
neglect).
The Trustee, the Committee and/or the Disbursing Agent shall have the
standing to object, in full or in part, to any Claim or Interest. Any other
party in interest shall have the standing to object, in full of in part, to any
Claim or Interest if the Trustee, the Committee and the Disbursing Agent fail to
object to such claim or interest within thirty (30) days after their receipt of
a written demand for such an objection by that party in interest. Except as may
be otherwise agreed with respect to any Disputed Claim, no Distribution shall be
made on a Disputed Claim unless such Disputed Claim shall have become an Allowed
Claim. Upon any Distribution to a Class for which there exists any Disputed
Claim, the Disbursing Agent shall set aside an amount of Cash equal to the
amount of the Distribution on account of the Disputed Claim(s). At such later
time when any Disputed Claim becomes an Allowed Claim, the Disbursing Agent
shall pay to such holder a Disbursement in the amount such holder would have
received if such holder's Disputed Claim been an Allowed Claim as of the
Effective Date. Excess Cash set aside for Disputed Claims after they have been
disallowed or become an Allowed Claim in a reduced amount, shall be distributed
Pro Rata to the remaining class members holding Allowed Claims, or if none, to
the next class junior in priority that is receiving Distributions under this
Plan.
VIII. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES; REJECTION CLAIMS
All Executory Contracts and Leases shall be rejected effective as of the
Petition Date. All Claims arising from rejection of Executory Contracts or
Leases shall be forever barred unless a Rejection Claim is duly filed with the
Bankruptcy Court and served on counsel for the Committee and the Trustee or the
Disbursing Agent within thirty (30) days after the Confirmation Date, or such
earlier date as may be set by the Bankruptcy Court. Any Rejection Claim shall be
classified in Class 4 pursuant to Section 502(g) of the Bankruptcy Code.
The term Executory Contract is defined in the Plan as any contract which is
executory within the meaning of Section 365(a) of the Bankruptcy Code and any
unexpired lease to which the Debtor is a party; provided, however, the MC PC
Bid, the MC PC Contract, the MC Installation Bid, the MC Installation Contract,
the Time Warner Agreement, the Share Purchase Agreement, the Note, or the Pledge
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Agreements, and any post-petition contract shall not be an executory contract or
unexpired lease.
IX. RETENTION AND ENFORCEMENT OF CLAIMS BELONGING TO THE DEBTOR AND/OR THE
ESTATE
The Plan provides for the retention of all Causes of Action, of whatever
nature, belonging to the Debtor and/or the Estate. Those claims and causes of
action include, but are not limited to, all claims and causes of action for
preferential, fraudulent, post-petition, unauthorized or other avoidable
transfers under Chapter 5 of title 11, including but not limited to Sections
544, 545, 547, 548, 549, 550, and 553 of the Bankruptcy Code. The retention of
such avoidance actions includes but is not limited to claims against all
entities listed in the Debtor's response to Questions 3(a) and (b) on its
Statement of Financial Affairs. The Plan further provides for the retention of
all other claims of the Debtor and the Estate, including but not limited to any
claims under the D&O Policy.
X. RETENTION OF JURISDICTION
The Plan provides that the Bankruptcy Court will retain jurisdiction over
the Case and all related proceedings to the fullest extent permitted by law. A
non-exhaustive list of matters of which the Bankruptcy Court will retain
jurisdiction is set forth in Article XI of the Plan.
XI. BEST INTERESTS OF CREDITORS TEST-HYPOTHETICAL CHAPTER 7 LIQUIDATION ANALYSIS
With respect to each impaired class of Claims or Interests, each holder of
a Claim or Interest in such class must accept the Plan or the Bankruptcy Court
must determine that such holder will receive or retain under the Plan on account
of such Claim or Interest property of a value, as of the Effective Date of the
Plan, that is not less than the amount such holder would receive or retain if
the Estate were liquidated under chapter 7 of the Bankruptcy Code on the
Effective Date. The Trustee believes that the Plan offers the holders of Claims
the potential for a distribution well in excess of the distribution that such
holders would receive if the Estate's assets were liquidated in a Chapter 7
liquidation. The Trustee further believes that the Interests will not receive
any distribution under the Plan or in any Chapter 7 liquidation.
A copy of the Trustee's Liquidation analysis is attached as Exhibit B. An
explanation of the assumptions and contingencies set forth in the Liquidation
Analysis, as well as other potential liquidation scenarios are discussed in the
Notes accompanying the Liquidation Analysis.
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Pursuant to the Plan, the Trustee believes that the holders of unsecured
nonpriority claims, which total approximately $3.1 million, may receive a pro
rata distribution of approximately $600,000 to $800,000 after the payment of
Administrative Expense Claims. Such a distribution would represent a recovery of
approximately 19% to 26% of each unsecured nonpriority creditor's claim. Such
distribution may actually be less than 19% to 26% because those estimates have
to be discounted to reflect the present value of such distributions over
approximately two (2) years.
If the Debtor is unable to effect settlement agreements and/or assignment
agreements with the Plaintiffs and Cycomm, and if the Debtor is unable to
complete the MC Installation Contract and the MC PC Contract without the
cooperation of the Plaintiffs and Cycomm, the unsecured creditors may receive
little or no distribution even in a Chapter 11 bankruptcy case.
XII. VOTING AND CONFIRMATION OF THE PLAN
A. In General
To confirm the Plan, the Bankruptcy Code requires that the Bankruptcy Court
make a series of findings concerning the Plan and the Trustee, including that
(i) the Plan complies with the applicable provisions of title 11 of the
United States Code,
(ii) the Trustee complies with the applicable provisions of title 11 of the
United States Code,
(iii) the Plan has been proposed in good faith and not by any means
forbidden by law,
(iv) any payment made under the Plan for services or for costs and expenses
incurred in connection with the Debtor's bankruptcy case has been approved, or
is subject to approval, by the Bankruptcy Court as reasonable,
(v) the Plan discloses the identity and affiliations of certain insiders
and affiliates,
(vi) the identity of any insiders that will be employed or retained by the
Debtor and the nature of any compensation to such insider,
(vii) adequate disclosure required by Section 1125 of the Bankruptcy Code
has been made,
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(viii) the Plan has been accepted by holders of Claims and Interests that
possess at least 2/3 (two-thirds) in amount and more than 1/2 (one-half) in
number of the Allowed Claims or Interests held by Claimants or Interest holders
in each class that have voted on the Plan (except to the extent that cramdown is
available under Section 1129(b) of the Bankruptcy Code),
(ix) the Plan is feasible and confirmation of the Plan will not likely be
followed by liquidation or further reorganization not provided for in the Plan,
(x) all fees and expenses payable pursuant to 28 U.S.C. Section 1930 have
been paid or will be paid on the Effective Date, and
(xi) at least one class of claims that is impaired has voted to accept the
Plan by more than one-half in number of claim holders and at least two-thirds in
the amount of claims in such class (without considering any acceptance of the
Plan by any insiders).
In addition, to the extent that the holder of a Claim has not agreed to a
different treatment, the Plan must provide that
(i) with respect to a Claim of a kind specified in Section 507(a)(1) or
507(a)(2) of the Bankruptcy Code, the holder of such Claim will receive on the
Effective Date cash equal to the Allowed amount of such Claim,
(ii) with respect to a Claim of a kind specified in Section 507(a)(3),
(a)(4), (a)(5), (a)(6), or (a)(7) of the Bankruptcy Code, the holder of such
Claim will receive deferred cash payments of a value, as of the Effective Date,
equal to the Allowed amount of such Claim, if such class has accepted the Plan,
or cash on the Effective Date equal to the Allowed amount of such Claim, if such
class has not accepted the Plan, and
(iii) with respect to a Claim of a kind specified in Section 507(a)(8) of
the Bankruptcy Code, the holder of such Claim will receive deferred cash
payments over a period not exceeding six (6) years after the date of assessment
of such Claim, of a value, as of the Effective Date of the Plan, equal to the
Allowed amount of such Claim.
B. Voting Procedures and Requirements
Only classes of Claims or Interests that are "impaired" within the meaning
of Section 1124 of the Bankruptcy Code are entitled to vote to accept or to
reject the Plan. A class is "impaired" if the legal, equitable or contractual
rights relating to the Claim or Interests are altered other than by curing
defaults, reinstating maturity, and compensating the holder of such Claim or
Interest for any damages incurred by such
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holder as a result of any reasonable reliance on such contractual provisions or
applicable law.
Classes of Claims and Interests that are unimpaired are not entitled to
vote on a plan and are conclusively presumed to have accepted the plan.
Conversely, classes of Claims and Interests that receive no distributions under
a plan are deemed to have rejected the plan.
All Classes 1 through 5 of the Plan are impaired within the meaning of
Section 1124 of the Bankruptcy Code. Holders of Claims in Classes 1 through 4
are entitled to vote. The Trustee shall solicit acceptances or rejections of the
Plan from the holders of Claims in Classes 1 through 4.
Although the Interests in Class 5 are impaired, the holders of such
Interests shall not receive any distribution under the Plan. Therefore, pursuant
to Section 1126(g) of the Bankruptcy Code, the holders of Interests in Class 5
are conclusively presumed to have rejected the Plan, and solicitation of
acceptances of the Plan from such Interest holders is not required.
The holder of any Allowed Claim that fails to vote on the Plan shall be
deemed to have voted to accept the Plan.
XIII. EFFECT OF CONFIRMATION
A. Parties in Interest are Bound by the Plan. Pursuant to Section 1141(a)
of the Bankruptcy Code, confirmation of the Plan shall bind the Trustee, the
Debtor, the holder of each Claim, the holders of any Interest, and any entity
receiving Property of the Estate under the Plan whether or not the holder's
Claim or Interest is impaired under the Plan and whether or not such holder has
accepted the Plan.
B. Extinguishing of Class 5 Interests. Upon the Confirmation Date, all the
holders of Class 5 Interests shall have all of their rights and legal and equity
interests in the Interests extinguished and canceled. Contemporaneously
therewith, the Debtor shall issue one (1) share of stock to the Disbursing
Agent, who shall hold that stock for the benefit of and in trust for the holders
of Allowed Class 4 Claims.
C. Revesting of Property of the Estate. All Property of the Estate shall
revest in the Debtor pursuant to Section 1141(b) and (c) of the Bankruptcy Code.
D. No Discharge of Debtor. Pursuant to Section 1141(d)(3)(A) of the
Bankruptcy Code, the Plan provides that the Debtor shall not receive a
discharge.
E. No Discharge or Release of Affiliates, Insiders or Other Third Parties.
Nothing herein is intended to, or does, discharge or release any Affiliate,
Insider or
22
<PAGE>
other third party. Recourse may be had against the Affiliates, Insiders or other
third parties in accordance with applicable law.
F. Injunction. The commencement or continuation of any action, the
employment of process or act to collect, offset or recover any debts of, or
Claims against, either or both of the Trustee and the Debtor, or the
commencement or continuation of any action to enforce any Lien on, or security
interests in, Property of the Estate or the reorganized Debtor, which debts,
Claims, Liens, or security interests arose at any time on or before the
Effective Date, shall be permanently stayed and enjoined, except as otherwise
specifically provided for in the Plan.
G. Release of Claims. Any and all claims, demands, allegations or causes of
action against the Committee or the Trustee relating to the Chapter 11 Case that
accrued subsequent to the Petition Date and prior to the Effective Date shall be
released and all entities bound by the Plan shall be enjoined from commencing or
asserting any such claims, demands, allegations or causes of action; provided
however, that the Trustee, the Disbursing Agent or their authorized agents or
assigns may commence and prosecute against any member(s) of the Committee one or
more actions under Chapter 5 of the Bankruptcy Code, and/or any objections to
the Committee members' claims.
H. Exculpation. The Trustee, Disbursing Agent, the Estate, the Committee,
and their respective members, officers, directors, employees, or agents
(including any professionals retained by such persons) shall have no liability
to any holder of a Claim or Interest for any act or omission in connection with
or arising out of the formulation of the Plan, the pursuit of approval of the
Disclosure Statement, the solicitation of votes for or confirmation of the Plan,
the consummation of the Plan, or the administration of the Plan or the property
to be distributed under the Plan, except for willful misconduct or gross
negligence, and in all respects, shall be entitled to rely upon the advice of
counsel with respect to their duties and responsibilities under the Plan.
I. Release and Discharge of Duties. Upon the Effective Date, the Trustee
shall be released from all duties as and discharged from the office of the
Chapter 11 trustee of the Debtor.
VOTING ON THE PLAN BY EACH HOLDER OF AN IMPAIRED CLAIM IS IMPORTANT. IF YOU
HOLD CLAIMS IN MORE THAN ONE CLASS, YOU MAY RECEIVE MORE THAN ONE BALLOT. YOU
SHOULD COMPLETE, SIGN, AND RETURN EACH BALLOT YOU RECEIVE.
TO BE COUNTED, YOUR BALLOT MUST ACTUALLY BE RECEIVED BY 5:00 P.M., EASTERN
STANDARD TIME (EST), ON _______________ , 1999, AT THE ADDRESS SET FORTH IN THE
VOTING INFORMATION AND INSTRUCTIONS ACCOMPANYING YOUR BALLOT.
23
<PAGE>
XIV. REQUEST FOR CONFIRMATION UNDER SECTION 1129(b) OF THE CODE
The Trustee requests that the Bankruptcy Court confirm the Plan under the
"cram down" provisions of Section 1129(b) of the Bankruptcy Code. The Trustee
believes that the Plan will satisfy all of the provisions of Section 1129(a) of
the Bankruptcy Code, except Section 1129(a)(8) because the Interests in Class 5
are deemed to have rejected the Plan under Section 1126(g) of the Bankruptcy
Code. Pursuant to Section 1129, the Bankruptcy Court shall confirm the Plan
under Section 1129(b) if the Plan does not discriminate unfairly, and is fair
and equitable, with respect to each class of Claims and Interests that is
impaired under, and has not accepted, the Plan.
24
<PAGE>
PROPONENT'S RECOMMENDATION
For all of the reasons set forth in this Disclosure Statement, the Trustee
believes that confirmation and consummation of the Plan is preferable to any
other alternative. Therefore, the Trustee urges all holders of impaired Claims
to vote to ACCEPT the Plan.
Respectfully submitted,
KURT F. GWYNNE, CHAPTER 11 TRUSTEE
By:
-----------------------------------
Kurt F. Gwynne
Chapter 11 Trustee for
Telepad Corporation
Two Logan Square, 12th Floor
Philadelphia, PA 19103-2756
(215) 567-7500
- and -
KLETT LIEBER ROONEY & SCHORLING
A Professional Corporation
By:
-----------------------------------
Eric Lopez Schnabel (#3672)
One Commerce Center, Suite 1001
Wilmington, DE 19801
(302) 651-0335
Proposed Counsel to Chapter 11 Trustee
25
<PAGE>
TELEPAD CORPORATION
HYPOTHETICAL CHAPTER 7 LIQUIDATION ANALYSIS
I. ASSETS
A. Cash $ 69,000
B. Accounts Receivable $ 10,000
C. Inventory $ 200,000
D. Bids/Potential Contracts
1. MC Installation Contract $ 0
2. MC PC Contract $ 0
E. Avoidance Actions $ 40,000
F. Settlement with L&E $ 280,000
G. D&O Litigation $uncertain
Total Assets: $ 599,000
II. COSTS ASSOCIATED WITH
CHAPTER 7 LIQUIDATION
A. Administrative Expenses
1. Chapter 7 Trustee's Fees
& Trustee's Counsel's Fees $ 60,000
2. Operating Costs $ 10,000
Total Liquidation Costs: $ 70,000
NET LIQUIDATION PROCEEDS: $ 529,000
III. ALLOCATION OF NET
LIQUIDATION PROCEEDS
A. Viasystems f/k/a Pagg's Secured Claim $ 40,000
B. Administrative Expense Claims
1. Debtor's Counsel $ 165,000
2. Committee's Counsel $ 70,000
3. Chapter 11 Trustee's Fees
& Trustee's Counsel's Fees $ 45,000
4. unpaid wages, salaries, and benefits $ 53,000
5. unpaid withholding taxes $ 12,000
6. Commerce Bank (Factor
Agreement Debt) $ 29,000
7. Operational Expenses $ 80,000
Total Secured Claims and Priority
Administrative Expense Claims $ 494,000
<PAGE>
C. Unsecured Priority Claims
1. Tax Priority Claims $ 38,000
2. Other Priority Claims $ 59,000
Total Priority Claims $ 97,000
NET PROCEEDS AVAILABLE FOR
DISTRIBUTION TO NON-PRIORITY
UNSECURED CREDITORS $ 0(3)
D. Unsecured Non-Priority Claims
1. Lenders' Claim (if Security
Interests avoided) $1,500,000
2. Trade Vendors and Other
Unsecured Non-Priority
Claimants $1,600,000
Total Unsecured Non-Priority Claims $3,100,000
PRO RATA DISTRIBUTION IN
HYPOTHETICAL CHAPTER 7
LIQUIDATION 0%(4)
- --------------------------------------------------------------------------------
Notes to Hypothetical Chapter 7 Liquidation Analysis
Assets
The foregoing Hypothetical Chapter 7 Liquidation Analysis assumes that the
Debtor will not be able to complete the work on the MC Installation Contract and
the MC PC Contract. The Debtor will have no opportunity to complete work under
any
- --------
(3) The $0 of net proceeds available for distribution to Non-Priority
Unsecured Creditors was calculated by taking the sum of the Secured and
Administrative Expense Claims ($494,000) and the Priority Claims ($97,000), and
subtracting that sum from the net liquidation proceeds ($529,000). Thus, the net
liquidation proceeds are less than all the Secured, Administrative Expense and
Priority Claims combined.
(4) The 0% distribution was determined by dividing the amount available for
distribution to Non-Priority Unsecured Claims, $0, by the amount of such
Non-Priority Unsecured Claims, $3,100,000.
2
<PAGE>
such contracts or to sell its interests in the MC Installation Bid or the MC PC
Bid if the case is converted to a Chapter 7 liquidation.
The Accounts are discounted due to the circumstances concerning the
Debtor's contract with Time Warner. With respect to the Time Warner contract,
the Debtor will earn approximately $87,000 to complete the remainder of the
Contract. The Debtor, however, will incur obligations in the approximate amount
of $102,000 to complete the Time Warner contract. The Debtor's factor, Commerce,
has already paid the Debtor for the account receivable under the Time Warner
Contract. If the Debtor does not complete that contract and Commerce does not
receive the proceeds of the account, as well as the $105,000 Time Warner is
currently withholding, the Debtor may owe an additional administrative expense
claim to Commerce in the approximate amount of $105,000 (which represents the
amount not yet collected by Commerce). Accordingly, the Debtor presently intends
to complete the Time Warner Contract at a ($15,000) loss going forward from the
date of this Disclosure Statement.
The Plan is premised upon the belief that maximizing the value of Property
of the Estate requires the Debtor's completion of contract negotiations and
performance (or the assignment of the Debtor's rights) under the MC Installation
Bid, the MC PC Bid, the MC Installation Contract and the MC PC Contract.
Pursuant to the Plan, the Debtor will have the opportunity to earn approximately
$1,400,000 from such contracts.
The Debtor has been involved in settlement negotiations with L&E, LeMaire
and Eisenberger. The $280,000 estimated settlement amount may be higher or lower
than the actual settlement amount. In addition, if the Debtor's litigation with
L&E does not settle, the Debtor could obtain a judgment in the amount of
$1,300,000. The Debtor, however, would have to collect that judgment from the
assets of a closely held corporation, L&E, and the assets of individual judgment
debtors, Christine LeMaire and Dean Eisenberger. Mr. Eisenberger's marital
status and Ms. LeMaire's residence in Texas may make collection upon any such
judgment difficult or impossible. Moreover, there is always risk and uncertainty
in litigation. The Debtor could recover a judgment substantially less than
$1,300,000.
The D&O litigation claims were not valued for purposes of the Liquidation
Analysis. The Trustee believes that the D&O litigation could be pursued in
either Chapter 7 or Chapter 11 with relatively equal efficiency and, therefore,
the valuation of the D&O litigation is inconsequential to the Liquidation
Analysis. The proceeds available under the D&O Policy are at least One Million
Dollars ($1,000,000). The Trustee believes that the damages to be sought in such
litigation may exceed the available proceeds.
Liabilities
The Liquidation Analysis assumes that the Trustee and the Committee are
successful in filing and prosecuting an adversary proceeding against the Lenders
to avoid their security interests in the Debtor's assets. If the Trustee and the
Committee were unsuccessful
3
<PAGE>
in that litigation, the Lenders may have a secured claim in the amount of
approximately $1,000,000, and a deficiency claim for the remainder of their
claim. The Lenders may also have a post-petition claim based upon the diminution
of their collateral.
The Liquidation Analysis further assumes that holders of Administrative
Expense Claims, Tax Priority Claims, Other Priority Claims, and Non-Priority
Unsecured Claims will receive compensation based upon the full amounts that they
have requested or estimate will be due. The Disbursing Agent is likely to object
to many Claims. Thus, the ultimate amount of Allowed Claims will likely be
smaller than the amounts utilized in the Liquidation Analysis.
Tax Priority Claims were listed on the Debtor's Schedule D in the amount of
approximately $19,000, and the analysis estimates that additional $19,000 in Tax
Priority Claims will be asserted. Other Priority Claims were listed on the
Debtor's Schedule D in the amount of approximately $59,000. The estimated unpaid
Operational Expenses are comprised primarily of unpaid wages, unpaid payroll
withholding taxes, unpaid administrative rent, and unpaid post-petition claims
of other trade vendors.
The amount of scheduled unsecured claims totals approximately $1,600,000.
The Liquidation Analysis further assumes that an additional $1,500,000 in
unsecured claims will exist upon avoidance of the Lenders' security interests.
Thus, the Liquidation Analysis assumes unsecured claims totaling approximately
$3,100,000.
4
Exhibit 99.2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- ------------------------------------- ------------------------------------------
In re: : Chapter 11
:
TELEPAD CORPORATION : Case No. 99-633(PJW)
:
Debtor. :
:
- ------------------------------------- ------------------------------------------
ORDER CONFIRMING THE MODIFIED AMENDED PLAN OF REORGANIZATION PROPOSED BY THE
CHAPTER 11 TRUSTEE DATED OCTOBER 8, 1999
AND NOW, this 8th day of October 1999, upon consideration of the motion of
Kurt F. Gwynne, the Chapter 11 trustee (the "Trustee") for an order confirming
the Amended Plan of Reorganization Proposed by the Chapter 11 Trustee Dated
September 28, 1999 (the "Plan"), as modified by the Modified Amended Plan of
Reorganization Proposed by the Chapter 11 Trustee Dated October 8, 1999 (the
"Modified Plan"), and the Trustee having transmitted the Plan to all creditors
and equity security holders of record, and after notice pursuant to
Fed.R.Bankr.P. 2002(b)(2) and 9006(c) and a hearing pursuant to 11 U.S.C.
Section 1128(a) and Fed.R.Bankr.P. 3020(b)(2), this Court makes the following
findings of fact and conclusions of law pursuant to Fed.R.Bankr.P. 7052, as
incorporated by Fed.R.Bankr.P. 9014:
1. The Modified Plan complies with all applicable provisions of title 11
of the United States Code;
<PAGE>
2. The Trustee complied with all applicable provisions of title 11 of the
United States Code;
3. The Modified Plan has been proposed in good faith and not by any means
forbidden by law;
4. Notice of the confirmation hearing pursuant to 11 U.S.C. Section
1128(a) and Fed.R.Bankr.P. 3020(b)(2) was sufficient and proper;
5. The Modified Plan is feasible, and is not likely to be followed by
liquidation, or the further need for financial reorganization, of the
Debtor, except to the extent that such liquidation is contemplated by
the Modified Plan;
6. Classes 1 through 5 are impaired;
7. Each class of claims (Classes 1 through 4) has accepted the Modified
Plan pursuant to 11 U.S.C. Section 1126(c);
8. The class of interests (Class 5) is deemed to have rejected the
Modified Plan pursuant to 11 U.S.C. Section 1126(g);
9. The Modified Plan does not discriminate unfairly and is fair and
equitable;
10. The Modified Plan does not adversely change the treatment of the claim
of any creditor or the interest of any equity security holder who has
not accepted in writing the modification and, therefore, no additional
voting or solicitation of the Modified Plan is required, see
-2-
<PAGE>
11 U.S.C. Section 1127; Fed.R.Bankr.P. 3019; H.R. Rep. No. 595,
95th Cong., 1st Sess. at 411 (1977).
NOW THEREFORE, it is hereby
ORDERED THAT, the Modified Plan is incorporated herein by reference;
ORDERED THAT, the Modified Plan is confirmed pursuant to 11 U.S.C. Section
1129(a);
ORDERED THAT, the Debtor shall be, and hereby is, discharged from all of
its debts, liabilities and obligations under 11 U.S.C. Section 1141 and 524;
ORDERED THAT the transfer of Property of the Estate (as defined in the
Modified Plan) to the Liquidating Trust (as defined in the Modified Plan) shall
be free and clear of all Liens, Claims and Interests (as those terms are defined
in the Modified Plan);
ORDERED THAT, pursuant to 11 U.S.C. Section 1146(c), the transfer of the
Property of the Estate to the Liquidating Trust shall not be subject to
transfer, stamp, or other similar taxes;
ORDERED THAT, the issuance of the New Common Stock (as defined in the
Modified Plan) is subject to the exemptions and protections of 11 U.S.C. Section
1145, if applicable, and Section 1146;
ORDERED THAT, the Debtor shall not create, assume, or incur directly or
indirectly any mortgage, deed of trust, pledge, lien or security interest with
respect to any Property of the Estate;
ORDERED THAT, the Debtor shall not take any direct or indirect act to
interfere with or hinder the implementation of the Modified Plan;
-3-
<PAGE>
ORDERED THAT, this Court shall retain jurisdiction over the Modified Plan
and the Causes of Action, including but not limited to all claims under Chapter
5 of the Bankruptcy Code; and it is further
ORDERED THAT this Court shall further retain jurisdiction to the extent
provided in Article XI of the Modified Plan.
BY THE COURT:
---------------------------------------
PETER J. WALS
CHIEF U.S. BANKRUPTCY JUDGE
-4-
Exhibit 99.3
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: : Chapter 11
:
TELEPAD CORPORATION :
: Bankruptcy No. 99-633(PJW)
Debtor. :
- --------------------------------------------------------------------------------
MODIFIED AMENDED PLAN OF REORGANIZATION
PROPOSED BY KURT F. GWYNNE, CHAPTER 11 TRUSTEE
FOR DEBTOR TELEPAD CORPORATION
DATED OCTOBER 8, 1999
ERIC LOPEZ SCHNABEL KURT F. GWYNNE
KLETT LIEBER ROONEY & SCHORLING CHAPTER 11 TRUSTEE FOR
A Professional Corporation TELEPAD CORPORATION
One Commerce Center, Suite 1001 Two Logan Square, 12th Floor
1201 Orange Street Philadelphia, PA 19103-2756
Wilmington, DE 19801 (215) 567-7500
(302) 651-0335
Proposed Counsel
for Chapter 11 Trustee
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - DEFINITIONS........................................................1
ARTICLE II - PROVISIONS FOR THE TREATMENT OF UNCLASSIFIED
ADMINISTRATIVE EXPENSE CLAIMS AND TAX PRIORITY CLAIMS.....................7
2.1 Administrative Expense Claims......................................7
2.2 Tax Priority Claims................................................7
ARTICLE III - CLASSIFICATION OF CLAIMS AND INTERESTS/ELIGIBILITY
TO VOTE ..................................................................8
ARTICLE IV - IDENTIFICATION OF CLASSES OF CLAIMS AND INTERESTS
IMPAIRED AND UNIMPAIRED BY THIS PLAN......................................8
4.1 Designation of Unimpaired Class....................................8
4.2 Designation of Impaired Classes and Interests......................8
4.3 Voting and Non-Voting Classes......................................8
4.4 Non-Voting Holders of Allowed Claims...............................8
ARTICLE V - TREATMENT OF CLAIMS AND INTERESTS..................................9
5.1 Class 1 Claim - The Viasystems Allowed Secured Claim...............9
5.2 Class 2 Claims - Lenders' Allowed Secured Claim....................9
5.3 Class 3 Claims - Other Priority Claims............................10
5.4 Class 4 Claims - Non-Priority Unsecured Claims....................10
5.5 Class 5 - Interests...............................................10
ARTICLE VI - IMPLEMENTATION OF THE PLAN.......................................11
6.1 Funding...........................................................11
6.2 Pre-Payments of Distributions.....................................11
6.3 Responsibilities of Disbursing Agent; Retention and Enforcement
of Claims by Disbursing Agent...................................11
6.4 Distributions Concerning Disputed Claims..........................11
6.5 Unclaimed Distributions...........................................12
6.6 De Minimis Distributions..........................................12
6.7 Issuance of New Common Stock and Related Exculpation..............12
<PAGE>
ARTICLE VII - EFFECT OF REJECTION BY ONE OR MORE CLASSES OF CLAIMS............13
7.1 Failure of a Class to Accept the Plan and Request for Confirmation
Pursuant to Section 1129(b) of the Bankruptcy Code..............13
ARTICLE VIII - ADDITIONAL MEANS TO IMPLEMENT THE PLAN.........................13
8.1 Further Acts......................................................13
8.2 Tax Returns.......................................................13
8.3 Stamp Taxes.......................................................13
8.4 Retention of Professionals........................................13
ARTICLE IX - EXECUTORY CONTRACTS AND UNEXPIRED LEASES.........................13
9.1 Rejection of Executory Contracts and Unexpired Leases.............13
9.2 Rejection Claims..................................................14
ARTICLE X - EFFECT OF CONFIRMATION............................................14
10.1 Parties in Interest are Bound.....................................14
10.2 No Revesting of Property of the Estate............................14
10.4 Discharge of Debtor...............................................14
10.5 No Discharge or Release of Affiliates, Insiders or Other
Third Parties.....................................................14
10.6 Injunction........................................................14
10.7 Release of Claims.................................................15
10.8 Exculpation.......................................................15
10.9 Prohibition Against Issuing Nonvoting Equity Securities in
Articles of Incorporation........................................15
10.10 Release and Discharge of Duties...................................15
10.11 Survival of the Committee.........................................15
10.12 Extinguishing of Class 5 Interests.........................15
ARTICLE XI - RETENTION OF JURISDICTION
11.1 Scope of Jurisdiction.............................................15
ARTICLE XII - MODIFICATIONS OF THE PLAN.......................................17
12.1 Prior to Confirmation Date........................................17
12.2 Prior to the Effective Date.......................................17
12.3 After the Effective Date..........................................17
<PAGE>
ARTICLE XIII - GENERAL PROVISIONS.............................................17
13.1 Headings..........................................................17
13.2 Severability......................................................18
13.3 Governing Law.....................................................18
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: : Chapter 11
:
TELEPAD CORPORATION :
: Bankruptcy No. 99-633(PJW)
Debtor. :
- --------------------------------------------------------------------------------
MODIFIED AMENDED PLAN OF REORGANIZATION PROPOSED
BY KURT F. GWYNNE, CHAPTER 11 TRUSTEE
FOR TELEPAD CORPORATION
DATED OCTOBER 8, 1999
Kurt F. Gwynne, the Chapter 11 Trustee for the debtor in the
above-captioned case, hereby proposes the following Chapter 11 Plan of
Reorganization for TelePad Corporation:
ARTICLE I
DEFINITIONS
As used in this Plan the following terms shall have the respective meanings
assigned to them below, unless the context otherwise requires:
1.1 "Administrative Expense Claim" means any right or entitlement to
payment that arises from a cost or expense of administration of the Estate
allowed under Section 503(b) of the Bankruptcy Code that is entitled to priority
under Section 507(a)(1) of the Bankruptcy Code. A right or entitlement for which
Bankruptcy Court approval is required is an Administrative Expense Claim only
upon entry of a Final order approving such Administrative Expense Claim, which
approval must be sought by application filed not later than thirty (30) days
after the Confirmation Hearing. The failure to file an Application for Payment
of Administrative Expense Claim within such time shall result in any claim for
payment of such an expense to be forever barred.
1.2 "Affiliate" shall mean the entities within the purview of Section
101(2) of the Bankruptcy Code.
1.3 "Allowed Claim or Allowed Interest" means a Claim or Interest, as the
case may be, that (i) has been listed on the Debtor's Schedules filed with the
bankruptcy court (including any amendments filed prior to the Bar Date) and is
not listed as contingent, unliquidated, or disputed, and as to which no
objection to the allowance thereof has been interposed prior to the Effective
Date; (ii) has been timely filed with the clerk of the
<PAGE>
Bankruptcy Court prior to the Bar Date and as to which no objection to the
allowance thereof has been interposed prior to the Effective Date; (iii) has
been allowed (but only to the extent allowed) by a Final Order; or (iv) is
specified herein to be an Allowed Claim or Allowed Interest. In addition, any
Claim held by an entity that received one or more transfers avoidable under
Section 544, 545, 547, 548, 549, 550, 551, or 553(b) of the Code shall be
permanently disallowed if such holder does not repay to the Estate the amount of
such avoidable transfer or deficiency in accordance with a court order under
Section 550, 553 or other avoidance action, on or prior to the later of (i) the
Effective Date or (ii) fifteen (15) days after entry of such order.
1.4 "Balmore" means Balmore Funds, S.A.
1.5 "Bankruptcy Code" means title 11 of the United States Code, 11 U.S.C.
Sections 101- 1330, as in effect on the Petition Date.
1.6 "Bankruptcy Court" means the United States Bankruptcy Court for the
District of Delaware, or such other court as may exercise jurisdiction over the
Case.
1.7 "Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure, as
amended from time to time, applicable to the Case.
1.8 "Bar Date" means the date to be set by Bankruptcy Court order upon
which creditors, as defined in Section 101(10) of the Bankruptcy Code, must file
proofs of Claim in the Case.
1.9 "Business Day" means any day, except Saturday, Sunday or any other
legal holiday as provided for in Bankruptcy Rule 9006.
1.10 "Case" means the bankruptcy case commenced by the filing of the
voluntary petition by the Debtor on the Petition Date in the Bankruptcy Court,
bearing case number 99-633(PJW).
1.11 "Cash" means legal tender of the United States for the payment of
public and private debts, including without limitation, cash, cash equivalents,
bank deposits, checks and other similar items.
1.12 "Causes of Action" means all Claims, choses in action, and causes of
action now owned or hereafter acquired by the Debtor, by Debtor as
debtor-in-possession, by the Trustee, or his designee, and the Cash and non-Cash
proceeds thereof, whether arising under the Code or other federal, state or
foreign law, including without limitation, any causes of action arising under
Sections 544, 545, 547, 548, 549, 550, 551, 553(b), 723 or other Section(s) or
Chapters of the Bankruptcy Code and any claims under any insurance policy held
by, issued to or for the benefit of the Debtor.
2
<PAGE>
1.13 "Claim" means a Claim against Debtor, whether or not asserted, as
defined in Section 101(5) of the Bankruptcy Code.
1.14 "Class" means a category, designated herein, of holders of Claims or
Interests.
1.15 "Confirmation Date" means the date on which the Confirmation Order is
entered by the Bankruptcy Court.
1.16 "Confirmation Hearing" means the hearing to confirm the Plan pursuant
to Section 1129 of the Bankruptcy Code and Federal Rule of Bankruptcy Procedure
3020(b)(2).
1.17 "Confirmation Order" means an order of the Bankruptcy Court entered in
the Case confirming the Plan pursuant to Section 1129 of the Bankruptcy Code.
1.18 "Committee" means the Official Committee of Unsecured Creditors in the
Case.
1.19 "Cycomm" means Cycomm International, Inc.
1.20 "Debtor" means TelePad Corporation, a Delaware corporation with
federal tax identification number 52-1680936.
1.21 "Disbursing Agent" means Kurt F. Gwynne or any other person or entity
designated by the Committee in a writing served upon the Trustee and the United
States Trustee prior to the Confirmation Hearing to serve as the disbursing
agent under the Plan, and its successor or replacement.
1.22 "Disclosure Statement" means the document, as may be modified and
amended from time to time, together with all addenda, exhibits, schedules and
other attachments, which are incorporated by reference, served and filed by the
Trustee in this Case in connection with the Plan pursuant to Section 1125 of the
Bankruptcy Code.
1.23 "Disputed Claim or Disputed Interest" means a Claim or Interest, or
any portion of a Claim or Interest which is not an Allowed Claim or Allowed
Interest and the allowance or disallowance of which is not the subject of a
Final Order.
1.24 "Distribution" means a distribution of Cash or property to holders of
Allowed Claims pursuant to the terms of the Plan.
1.25 "Effective Date" means the thirtieth (30th) day after entry of the
Confirmation Order.
3
<PAGE>
1.26 "Estate" means the bankruptcy estate of the Debtor created in the Case
pursuant to Section 541 of the Bankruptcy Code.
1.27 "Executory Contract" means any contract which is executory within the
meaning of Section 365(a) of the Bankruptcy Code and any unexpired lease to
which the Debtor or Trustee is a party, provided, however, that the MC PC Bid,
the MC PC Contract, the MC Installation Bid, the MC Installation Contract, the
Time Warner Agreement, Share Purchase Agreement, the Note, the Pledge
Agreements, and any post-petition contract shall not be an executory contract or
unexpired lease.
1.28 "Final Order" means a court order that (i) has not been reversed,
stayed, or vacated, and as to which the time to appeal, petition for certiorari
or seek review or rehearing has expired and as to which no appeal, petition for
certiorari, review or rehearing is pending or (ii) as to which any right to
appeal, petition for certiorari, review or rehearing has been waived in a manner
satisfactory to Trustee, or (iii) if any appeal, petition for certiorari, review
or rehearing thereof has been denied, the time to take any further appeal, to
petition for certiorari or further review or rehearing has expired.
1.29 "Insider" means the Affiliates or any person or entity as defined in
Section 101(31) of the Bankruptcy Code.
1.30 "Interests" means the legal, equitable and contractual rights accruing
to the owner or holder of any equity interest in the Debtor.
1.31 "L&E" means L&E Mobile Computer Mounts, Inc.
1.32 "Lease" means an unexpired, unterminated agreement, which satisfies
the applicable statute of frauds, creating an interest in real or personal
property for a period of time and giving rise to a relationship between the
Debtor and the other party.
1.33 "Lenders" means, collectively and/or individually, Austost Anstalt
Schaan, Balmore Funds, S.A., Beeston Investments, LTD, Ellis Enterprises LTD,
Investor LLC, The Gross Foundation, Inc., and The Hewlett Fund, Inc.
1.34 "Lenders' Allowed Secured Claims" means the Class 2 Secured Claim held
by the Lenders, which shall be allowed in the aggregate amount of Thirty Five
Thousand Dollars ($35,000).
1.35 "Lenders' Deficiency Claims" means each Lender's Claim in excess of
its allocated share of the Lenders' Allowed Secured Claim.
1.36 "Lender Payment" shall mean the payment of the Lenders' Allowed
Secured Claim to Balmore, as the representative of the Lenders.
4
<PAGE>
1.37 "Lien" shall have the meaning set forth in Section 101(37) of the
Bankruptcy Code.
1.38 "Liquidating Trust" means the trust established pursuant to a
liquidating trust agreement in form and content satisfactory to the Committee,
the Lenders, the Trustee and the Disbursing Agent, into which trust all Property
of the Estate shall be transferred upon the Effective Date.
1.39 "Montgomery County" means Montgomery County, Maryland.
1.40 "MC Installation Bid" means the TRW RFP No. X01098.PSDS-R002 dated
October 12, 1998 and the response submitted by Telepad and L&E for the
installation of ruggedized mobile subscriber equipment.
1.41 "MC Installation Contract" means any contract created by and among
Montgomery County, the Trustee on behalf of the Debtor and/or any other party as
the result of the MC Installation Bid.
1.42 "MC PC Bid" means the June 22, 1999, acceptance by Montgomery County
of the Debtor and L&E's bid in response to the TRW RFP No. X010.98.PSDS-S004 by
Montgomery County for the sale of mobile personal computers.
1.43 "MC PC Contract" means any contract created by and among Montgomery
County, the Trustee on behalf of the Debtor and/or any other party as the result
of the MC PC Bid.
1.44 "New Common Stock" means 1,000,000 shares of common stock of the
reorganized Debtor, which shall be evidenced by a single stock certificate.
1.45 "Non-Priority Unsecured Claim" means a Claim, including a deficiency
claim, other than a Secured Claim, an Administrative Expense Claim, a Tax
Priority Claim, or an Other Priority Claim.
1.46 "Note" means that certain promissory note in the amount of Three
Hundred Thirty Three Thousand Dollars ($333,000), which was payable on July 27,
1998, executed and delivered by the Debtor in exchange for the L&E Stock
pursuant to the Share Purchase Agreement.
1.47 "Other Priority Claim(s)" means any Claim which is an unsecured Claim
entitled to priority under Sections 507(a) of the Bankruptcy Code other than (i)
an Administrative Expense Claim and (ii) a Tax Priority Claim.
1.48 "Petition Date" means March 17, 1999.
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1.49 "Plan" means this Plan of Reorganization, as may be modified and
amended from time to time, together with all addenda, exhibits, schedules and
other attachments, which are incorporated by reference.
1.50 "Pledge Agreements" means those certain agreements executed by the
Debtor to secure the Debtor's obligations to LeMaire, Eisenberger and L&E in
favor of each of LeMaire, Eisenberger and L&E granting a security interest in
the L&E Stock to LeMaire, Eisenberger and L&E.
1.51 "Professional Fees" means a Claim of a professional retained in the
Case pursuant to Sections 327 and 1103 of the Bankruptcy Code or otherwise, for
compensation or reimbursement of costs and expenses relating to services
incurred after the Petition Date and prior to and including the Confirmation
Date. Professional Fees also includes any attorneys' fees and expenses payable
pursuant to Section 503(b)(3)(D) and (4) of the Bankruptcy Code.
1.52 "Property of the Estate" means all property of the Estate, including,
without limitation, all personal property, goods, equipment, inventory,
fixtures, commercial paper, chattel paper, negotiable instruments, money,
investment property, accounts receivables, general intangibles, the Causes of
Action, and any other legal or equitable interests of the Debtor within the
meaning of Section 541 of the Bankruptcy Code.
1.53 "Pro Rata" means, from time to time, the proportion that the dollar
amount of an Allowed Claim in a particular Class or Classes bears to the
aggregate dollar amount of all Allowed Claims in such Class or Classes.
1.54 "Rejection Claim" means any Claim arising under Section 502(g) of the
Bankruptcy Code.
1.55 "Secured Claim" means those Claims held by a person or entity to the
extent such Claim is secured by a lien on any asset of the Debtor, or a right of
setoff, which lien is valid, perfected and enforceable under applicable law and
is not subject to avoidance under the Bankruptcy Code or applicable
nonbankruptcy law, but only to the extent of the value, as determined by the
Court pursuant to Section 506(a) of the Bankruptcy Code, of any interest of the
claimant in Property of the Estate securing such Claim.
1.56 "Security Agreement" means any agreements within the meaning of
Section 101(50) of the Bankruptcy Code between the Debtor and any holder of an
Allowed Secured Claim relating to such Allowed Claim.
1.57 "Semi-Annual Payment" means a payment made by the Disbursing Agent
pursuant to the Plan on or about the last Business Day of every June and
December;
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provided, however, that Disbursing Agent shall not make any such payment within
sixty (60) days of the Effective Date.
1.58 "Share Purchase Agreement" means that certain agreement dated May 27,
1998, by and among the Debtor and Christine LeMaire and Dean N. Eisenberger, the
sole shareholders of L&E, pursuant to which Ms. LeMaire and Mr. Eisenberger
received, inter alia, One Million Three Hundred Thousand Dollars ($1,300,000) in
cash for all of the stock in L&E.
1.59 "Tax Priority Claims" means an unsecured Claim of any person for the
payment of taxes entitled to priority under Section 507(a)(8) of the Bankruptcy
Code.
1.60 "Time Warner Agreement" means that certain contract between the Debtor
and Time Warner for the installation of a computer system in Milwaukee,
Wisconsin.
1.61 "Trustee" means Kurt F. Gwynne, the Chapter 11 Trustee for the Debtor.
1.62 "Viasystems" means Viasystems f/k/a Pagg Corporation.
1.63 Rules for Interpreting Undefined Terms. All terms used in this Plan
and not defined herein but that are defined in the Bankruptcy Code shall have
the respective meanings assigned to such terms in the Bankruptcy Code. All terms
used in this Plan and not defined herein or in the Bankruptcy Code but that are
defined in the Bankruptcy Rules shall have the respective meanings assigned to
such terms in those rules.
1.64 Rules of Construction. The words "herein," "hereof" and "hereunder"
and other words of similar import refer to the Plan as a whole and not to any
particular section, subsection or clause contained in the Plan unless the
context requires otherwise. Whenever from the context it appears appropriate,
each term stated in either the singular or the plural includes the singular and
the plural, and pronouns stated in the masculine feminine or neuter gender
include the masculine, feminine and the neuter.
ARTICLE II
PROVISIONS FOR THE TREATMENT OF UNCLASSIFIED
ADMINISTRATIVE EXPENSE CLAIMS AND TAX PRIORITY CLAIMS
2.1 Administrative Expense Claims. Each holder of an Allowed Administrative
Expense Claim shall be paid in full in Cash upon the Effective Date, except that
(a) Administrative Expenses Claim representing obligations incurred in the
ordinary course of business by the Debtor shall be paid in accordance with the
terms of any agreement upon which such Allowed Administrative Expense Claim is
based and (b) each holder of an Allowed Administrative Expense Claim may be paid
on such other dates and upon such other terms as may be agreed upon by such
holder and the Trustee or Disbursing
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Agent. Claims for Professional Fees shall be paid on the later of the Effective
Date or the date upon which any order awarding fees becomes a Final Order.
2.2 Tax Priority Claims. Each Allowed Tax Priority Claim shall be paid in
full, in Cash by Semi-Annual Payments over a period not exceeding six years
after the date of assessment of such Claim, of a value, as of the Effective
Date, equal to the allowed amount of such Claim, except that the holder of an
Allowed Tax Priority Claim may be paid on such date and upon such other terms as
may be agreed upon by that holder, the Committee and the Trustee or Disbursing
Agent.
ARTICLE III
CLASSIFICATION OF CLAIMS AND INTERESTS/ELIGIBILITY TO VOTE
3.1 For the purpose of voting on this Plan and receiving Distributions
thereunder, pursuant to Section 1122 of the Bankruptcy Code, Claims and
Interests are divided into the Classes set forth below. Administrative Expense
Claims and Tax Priority Claims of the kinds specified in Sections 507(a)(1) and
507(a)(8) of the Bankruptcy Code, the treatment of which is set forth in Article
II hereof, have not been classified and are excluded from the following classes
in accordance with Section 1123(a)(1) of the Bankruptcy Code:
Class 1 Claim. Viasystems' Allowed Secured Claim.
Class 2 Claims. Lenders' Claims.
Class 3 Claims. Other Priority Claims.
Class 4 Claims. Non-Priority Unsecured Claims.
Class 5 Claims. Interests.
ARTICLE IV
IDENTIFICATION OF CLASSES OF CLAIMS AND INTERESTS
IMPAIRED AND UNIMPAIRED BY THIS PLAN
4.1 Designation of Unimpaired Class. In accordance with Section 1126(f) of
the Bankruptcy Code, holders of Claims and Interests in unimpaired classes are
conclusively presumed to have accepted the Plan, and solicitation of acceptances
of the Plan from such Class members is not required. No Class is unimpaired
under the Plan within the meaning of Section 1124 of the Bankruptcy Code.
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4.2 Designation of Impaired Classes and Interests. Classes 1, 2, 3, 4 and 5
are impaired under the Plan.
4.3 Voting and Non-Voting Classes. The holders of Claims in Classes 1, 2, 3
and 4 are entitled to vote to accept or reject this Plan. Pursuant to Section
1126(g) of the Bankruptcy Code, Class 5 is not entitled to vote on the Plan
because Class 5 is deemed to have rejected the Plan as a result of the Plan not
entitling holders of Class 5 Interests to receive or retain any property under
the Plan on account of such Interest.
4.4 Non-Voting Holders of Allowed Claims. Any holder of an Allowed Claim in
Classes 1, 2, 3 and 4 who fails to vote on the Plan shall be deemed to have
voted to accept the Plan.
ARTICLE V
TREATMENT OF CLAIMS AND INTERESTS
5.1 Class 1 Claim - The Viasystems Allowed Secured Claim. The holder of a
Class 1 Allowed Claim shall (a) be paid in full in Cash upon the sale of the
Debtor's inventory held by Viasystems or, at Viasystems' election, (b) receive
the sum of Twenty Thousand Dollars ($20,000) within six (6) months after the
Effective Date.
5.2 Class 2 Claims - Lenders' Allowed Secured Claim.
A. The Lender Payment shall be paid to Balmore, as the representative for
the Lenders, at the time of the initial distribution on and in respect of
Professional Fees. The holder of such a Lenders' Allowed Secured Claim may be
paid on such dates and upon such other terms as may be agreed upon by such
holder, the Committee and the Trustee or other Disbursing Agent.
B. After the Allowed Claims in Classes 1 and 3 have been paid in full, and
after the Lender Payment has been made, the Lenders' Allowed Deficiency Claim
shall receive by Semi-Annual Payments a distribution of the greater of (a) sixty
percent (60%) of the Property of the Estate available for distribution to the
holders of Class 4 Allowed Non-Priority Unsecured Claims or (b) a percentage of
the Property of the Estate available for distribution to the holders of Class 4
Allowed Non-Priority Unsecured Claims that is equal to the proportion of the
Lenders' Allowed Deficiency Claim to the total of all Allowed Non-Priority
Unsecured Claims. The holder of such a Lenders' Allowed Deficiency Claim may be
paid on such dates and upon such other terms as may be agreed upon by such
holder, the Committee and the Trustee or Disbursing Agent.
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Illustration of Section 5.2: Assume that the Lenders' Allowed
Deficiency Claims total $1,450,000 and that other Allowed Non-Priority
Unsecured Claims total $1,600,000. The Lenders' Allowed Deficiency Claims
would constitute 48.3% of the total of Allowed Non-Priority Unsecured
Claims. The Lenders would receive 60% of the amount available for
distribution to the holders of Allowed Non-Priority Unsecured Claims.
Assume that the Lenders' Allowed Deficiency Claims total $1,450,000
and that other Allowed Non-Priority Unsecured Claims total $1,000,000. The
Lenders' Allowed Deficiency Claims would constitute 61.7% of the total of
Allowed Non-Priority Unsecured Claims. The Lenders would receive 61.7% of
the amount available for distribution to the holders of Allowed
Non-Priority Unsecured Claims.
Allocation of Lenders' Allowed Secured Claim and Lenders' Allowed
Deficiency Claim: The allocation of the Lenders' Allowed Secured Claim and
Lenders' Allowed Deficiency Claim shall be agreed to by and among the Lenders.
The Lenders shall provide written notice of such allocations to the Disbursing
Agent and the Committee prior to receiving any distribution under this Plan.
C. Balmore, or its designee, as the agent for the Lenders, shall receive
the New Common Stock pursuant to Section 6.7 of this Plan.
5.3 Class 3 Claims - Other Priority Claims. Each holder of a Class 3
Allowed Other Priority Claim shall be paid in full in Cash on the later of (a)
the Effective Date or (b) the first Business Day 30 days after the date any such
Claim becomes an Allowed Claim, except that the holder of an Allowed Other
Priority Claim may be paid on such dates and upon such other terms as may be
agreed upon by such holder, the Committee and the Trustee or Disbursing Agent.
5.4 Class 4 Claims - Non-Priority Unsecured Claims. Each holder of a Class
4 Allowed Non-Priority Unsecured Claim, including Allowed Rejection Claims, if
any, shall receive a Pro Rata Distribution by Semi-Annual Payments, except that
the holder of such a Claim may be paid on such dates and upon such other terms
as may be agreed upon by such holder, the Committee and the Trustee or
Disbursing Agent. The holders of the Class 4 Allowed Non- Priority Claims shall
be paid out of the proceeds of the Property of the Estate, including, but not
limited, to the following:
(a) personal property including, without limitation, goods, equipment,
inventory, fixtures, commercial paper, chattel paper, negotiable
instruments, money, investment property, accounts receivables, general
intangibles and any other legal or equitable interests of the Debtor
within the meaning of Section 541 of the Bankruptcy Code;
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(b) avoidance actions pursuant to 11 U.S.C. Section 544, 545, 547, 548,
549, 550, 551, and 553(b) and otherwise under all Chapter of title 11;
(c) other Causes of Action;
(d) the MC PC Bid and the MC PC Contract; and
(e) the MC Installation and the Bid MC Installation Contract.
5.5 Class 5 - Interests. Class 5 Interests shall be extinguished pursuant
to Section 10.12. The holders of Class 5 Interests shall receive no distribution
under the Plan and, pursuant to Section 1126(g) of the Bankruptcy Code, shall be
deemed to reject the Plan.
ARTICLE VI
IMPLEMENTATION OF THE PLAN
6.1 Funding. The Disbursing Agent will utilize Property of the Estate to
the extent necessary to ensure that Classes 1 through 4 are paid pursuant to the
terms of this Plan, including, but not limited to, the Disbursing Agent is
authorized to provide for a sale of all or substantially all of the Property of
the Estate, and provide for a Distribution of the proceeds of such sale among
the holders of Allowed Claims in Classes 1 through 4 pursuant to Section
1123(b)(4) of the Bankruptcy Code. The Disbursing Agent shall receive
compensation at the same formula as is set for a trustee under Section 326 of
the Bankruptcy Code.
6.2 Pre-Payments of Distributions. The Disbursing Agent, with the consent
of the Committee, may pre-pay, including, without limitation, an acceleration in
the timing and/or frequency of the Semi-Annual Payments, any Distribution made
under the Plan without paying any unaccrued interest or incurring any penalty as
a result of such pre-payment.
6.3 Responsibilities of Disbursing Agent; Retention and Enforcement of
Claims by Disbursing Agent. The Disbursing Agent shall be the trustee of the
Liquidating Trust. In addition, the Disbursing Agent shall make payments to the
holders of Allowed Claims as provided in the Plan. The Disbursing Agent shall
establish any deposit account(s) necessary or appropriate to effectuate the
Plan. Pursuant to Section 1123(b)(3)(B) of the Bankruptcy Code, the Property of
the Estate belonging to the Debtor and/or the Estate, including but not limited
to Causes of Action and the claims under Sections 544, 545, 547, 548, 549, 550,
551, 553(b), and 723 of the Bankruptcy Code, shall be transferred to the
Liquidating Trust and shall be enforced by the Disbursing Agent and/or the
Committee who shall prosecute any such Causes of Action
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and claims pursuant to this Plan. The proceeds of such Causes of Action, claims
and Property of the Estate shall be used by the Disbursing Agent to make the
Cash Distributions to Classes 1 through 4, inclusive, as set forth above in
Article V. No bond covering the Disbursing Agent shall be required.
6.4 Distributions Concerning Disputed Claims:
(a) The Trustee, the Committee or the Disbursing Agent shall have standing
to object, in full or in part, to any Claim or Interest. Any other
party in interest shall have standing to object, in full of in part,
to any Claim or Interest if each of the Trustee, the Committee and the
Disbursing Agent fails to object to such Claim or Interest within
thirty (30) days after their receipt of a written demand for such an
objection by that party in interest.
(b) Except as may be otherwise agreed by the Disbursing Agent with respect
to any Disputed Claim, no Distribution shall be made on a Disputed
Claim unless such Disputed Claim shall have become an Allowed Claim.
(c) Upon any Distribution to a Class for which there exists any Disputed
Claims, the Disbursing Agent shall set aside an amount of Cash equal
to the amount of the Distribution on account of the Disputed Claim(s).
At such later time when the Disputed Claim(s) becomes an Allowed
Claim, the Disbursing Agent shall pay such holder in accordance with
Article V in Cash a Disbursement in the amount such holder would have
received if such holder's Disputed Claim been an Allowed Claim as of
the Effective Date. Excess Cash set aside for Disputed Claims after
they have been disallowed or become an Allowed Claim in a reduced
amount, shall be distributed Pro Rata to the remaining class members
holding Allowed Claims, or if none, to the next class junior in
priority that is receiving Distributions under this Plan.
6.5 Unclaimed Distributions. The Disbursing Agent shall make payments to
holders of Allowed Claims at the address specified in the Schedules unless a
different address is specified on a proof of Claim or at such other address as
shall be specified in writing to the Disbursing Agent before the Effective Date.
If any distribution is returned as undeliverable or if any check delivered
pursuant to the Distribution remains uncashed, all undeliverable, uncashed or
unclaimed Distributions shall be distributed Pro Rata to the remaining class
members holding Allowed Claims, or if none, to the next class junior in priority
that is receiving Distributions under this Plan.
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6.6 De Minimis Distributions. No cash payment of less than twenty-five
dollars ($25) shall be made by the Disbursing Agent to any holder of any Class
of Claim or Interest.
6.7 Issuance of New Common Stock and Related Exculpation.
(a) On the Effective Date or as soon thereafter as is practicable, the
reorganized Debtor shall issue the New Common Stock. The Lenders shall
indemnify and exculpate the reorganized Debtor, the Trustee, the
Disbursing Agent, and the Liquidating Trust for all liability in
connection with or related to the New Common Stock, its issuance or
otherwise.
(b) The issuance of the New Common Stock is subject to the protections of
Sections 1145 and 1146 of the Bankruptcy Code, if applicable, and
otherwise applicable nonbankruptcy law.
ARTICLE VII
EFFECT OF REJECTION BY ONE OR MORE CLASSES OF CLAIMS
7.1 Failure of a Class to Accept the Plan and Request for Confirmation
Pursuant to Section 1129(b) of the Bankruptcy Code. If any impaired Class fails
to accept this Plan in satisfaction of the requirement of Section 1129(a)(8) of
the Bankruptcy Code, the Trustee requests that the Bankruptcy Court confirm this
Plan by cramdown in accordance with Section 1129(b) of the Bankruptcy Code.
ARTICLE VIII
ADDITIONAL MEANS TO IMPLEMENT THE PLAN
8.1 Further Acts. To the fullest extent permitted by Section 1142 of the
Bankruptcy Code, the Trustee shall have the right to apply to the Bankruptcy
Court for an order (i) excusing compliance with any otherwise applicable
non-bankruptcy law or (ii) directing any entity to execute and deliver any
instrument or perform any other act necessary or appropriate to effectuate the
terms of the Plan.
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8.2 Tax Returns The Disbursing Agent shall file tax returns for the Debtor.
8.3 Stamp Taxes. In accordance with Section 1146(c) of the Bankruptcy Code,
neither the Estate, the Disbursing Agent nor the Trustee, or its nominee, shall
be liable for any stamp tax or similar tax on the transfer or transfers of the
Property of the Estate or its proceeds under the Plan.
8.4 Retention of Professionals. After the Effective Date, the Committee,
the Trustee or the Disbursing Agent, without further approval of the Court, may
retain such professionals as they deem appropriate for the discharge of their
duties under this Plan. The Professional Fees of such professionals, including
the Professional Fees and other fees and expenses for the Trustee or Disbursing
Agent, incurred from time to time after the effective Date shall be paid, upon
the agreement of the Committee and the Trustee or Disbursing Agent, without need
for further Court approval.
ARTICLE IX
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
9.1 Rejection of Executory Contracts and Unexpired Leases. All Executory
Contracts and Leases, unless specifically assumed or unless they terminate or
expire by their own terms or otherwise terminate, shall be rejected as of the
Petition Date; provided, however, that the MC Installation Bid, the MC
Installation Contact, the MC PC Bid, the MC PC Contract, the Time Warner
Agreement, Share Purchase Agreement, the Note, the Pledge Agreements, and any
post-petition contract or lease are neither Executory Contracts nor Leases under
the Bankruptcy Code and shall not be rejected or deemed rejected.
9.2 Rejection Claims. All Claims arising from rejection of Executory
Contracts or Leases shall be forever barred unless a Rejection Claim is duly
filed with the Bankruptcy Court and served on counsel for the Trustee within ten
(10) days after the Confirmation Date, or such earlier date as may be set by the
Bankruptcy Court. Any Rejection Claim shall be classified in Class 4 pursuant to
Section 502(g) of the Bankruptcy Code.
ARTICLE X
EFFECT OF CONFIRMATION
10.1 Parties in Interest are Bound. Pursuant to Section 1141(a) of the
Bankruptcy Code, confirmation of the Plan shall bind the Trustee, the Debtor,
the holder of each Claim, the holders of any Interest, and any entity receiving
Property of the Estate under this Plan whether or not the holder's Claim or
Interest is impaired under the Plan and whether or not such holder has accepted
the Plan.
10.2 No Revesting of Property of the Estate. No Property of the Estate
shall revest in the Debtor pursuant to Section 1141(c) of the Bankruptcy Code.
10.3 Establishment of Liquidating Trust. On the Effective Date, all
Property of the Estate shall be transferred to the Liquidating Trust, pursuant
to a liquidating trust
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agreement in form and content satisfactory to the Committee, the Trustee and the
Disbursing Agent (if other than the Trustee).
10.4 Discharge of Debtor. The Debtor shall be discharged from all of its
debts, liabilities, and obligations.
10.5 No Discharge or Release of Affiliates, Insiders or Other Third
Parties. Nothing herein is intended to, or does, discharge or release any
Affiliate, Insider or other third party. Recourse may be had against the
Affiliates, Insiders or other third parties in accordance with applicable law.
10.6 Injunction. The commencement of or continuation of any action,
employment of process or act to collect, offset or recover any debts of, or
Claims against, either or both of the Trustee and the Debtor, or the
commencement or continuation of any action to enforce any Lien on, or security
interests in, Property of the Estate or the reorganized Debtor, which debts,
Claims, Liens, or security interests arose at any time on or before the
Effective Date, shall be permanently stayed and enjoined, except as otherwise
specifically provided for in the Plan.
10.7 Release of Claims. Any and all claims, demands, allegations or causes
of action against the Trustee or the Committee relating to the Chapter 11 Case
shall be released and all entities bound by the Plan are hereby enjoined from
commencing or asserting such claims, demands, allegations or causes of action;
provided however, nothing herein shall prevent the Trustee, Disbursing Agent or
their authorized agents or assigns from commencing and prosecuting against any
member(s) of the Committee one or more actions under Chapter 5 of the Bankruptcy
Code, and /or any objections to the Committee members' Claims.
10.8 Exculpation. The Trustee, Disbursing Agent, the Committee, and their
respective members, officers, directors, employees, or agents (including any
professionals retained by such persons) shall have no liability to any holder of
a Claim or Interest for any act or omission in connection with or arising out of
the formulation of the Plan, the pursuit of approval of the
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Disclosure Statement, the solicitation of votes for or confirmation of the Plan,
the consummation of the Plan, or the administration of the Plan or the property
to be distributed under the Plan, except for willful misconduct or gross
negligence, and in all respects, shall be entitled to rely upon the advice of
counsel with respect to their duties and responsibilities under the Plan.
10.9 Prohibition Against Issuing Nonvoting Equity Securities in Articles of
Incorporation. Upon the Confirmation Date, the Articles of Incorporation of the
Debtor shall contain a provision prohibiting the issuance of nonvoting equity
securities pursuant to Section 1123(a)(6) of the Bankruptcy Code.
10.10 Release and Discharge of Duties. Upon the Effective Date, the Trustee
shall be released from all duties as and discharged from the office of the
Chapter 11 trustee of the Debtor.
10.11 Survival of the Committee. The Committee shall continue to exist and
exercise its powers, subject to duties, all consistent with Section 1103 of the
Bankruptcy Code after the Confirmation Date and the Effective Date until such
time thereafter as it may, in its sole discretion, take action (by resolution)
to dissolve.
10.12 Extinguishing of Class 5 Interests. Upon the Effective Date, all the
holders of Class 5 Interests shall have all of their rights and legal and equity
interests in the Interests extinguished and canceled.
ARTICLE XI
RETENTION OF JURISDICTION
11.1 Scope of Jurisdiction. Until entry of a Final Order closing this Case,
the Bankruptcy Court shall have exclusive jurisdiction over all proceedings and
contested matters arising under, arising in, or relating to the Case or this
Plan, to the fullest extent permitted by 28 U.S.C. Section 1334(b) to hear and
to the fullest extent permitted by 28 U.S.C. Section 157 to determine all such
proceedings and contested matters, including, but not limited to, the following:
(a) to effectuate this Plan;
(b) to consider any modification of this Plan;
(c) to recover all assets and property of the Debtor, wherever located;
(d) to determine any and all motions to assume, reject or assign an
executory contract or unexpired lease to which the Debtor is a party
or with respect to which the Debtor may be liable;
(e) to determine and fix all claims arising from the rejection or
assumption of executory contracts or unexpired leases;
(f) to hear and determine all controversies, suits, and disputes that may
arise in connection with the interpretation or enforcement of this
Plan, or the Confirmation Order;
(g) to enter and implement such orders as may be appropriate in the event
the Confirmation Order is stayed, reversed, revoked or vacated for any
reason;
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(h) to hear and determine all requests for compensation or reimbursement
of expenses which may be made after the Confirmation Date;
(i) to hear and determine all objections to claims, controversies, suits,
and disputes that may be pending as of or initiated after the
Confirmation Date;
(j) to consider and act on the compromise and settlement of any Claim or
Cause of Action;
(k) to liquidate or estimate damages or determine the manner and time for
such liquidation or estimation in connection with any disputed,
contingent or unliquidated Claim;
(l) to adjudicate all claims to or any lien, mortgage, or security
interest on any Property of the Estate of the Debtor or any proceeds
thereof;
(m) to hear and determine matters concerning state, local, and federal
taxes in accordance with Sections 1146, 106, 505 and 1141 of the
Bankruptcy Code, and to direct the recordation of any instrument or
document that is in any way related to the payment of such taxes;
(n) to correct any defect, cure any omission, or reconcile any
inconsistency in the Plan or in the Confirmation Order as may be
necessary to carry out the purpose and intent of this Plan;
(o) to enforce any injunctions, warranties and representations, and
releases incorporated or set forth in this Plan;
(p) to consider and act on such other matters as are consistent with the
Plan;
(q) to hear and determine any disputes concerning the Distributions under
the Plan;
(r) to hear and determine any disputes concerning MC Installation Bid, MC
Installation Contract, the MC PC Bid, the MC PC Contract, the Time
Warner Agreement, any agreements by and among the Trustee and L&E
and/or Cycomm, and any post-petition contract; and
(s) to enter a final decree closing the Case.
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ARTICLE XII
MODIFICATIONS OF THE PLAN
12.1 Prior to Confirmation Date. The Trustee, in its sole discretion, may
amend, modify or withdraw the Plan at any time prior to the Confirmation Date.
12.2 Prior to the Effective Date. The Trustee may amend or modify this Plan
in accordance with Section 1127 of the Bankruptcy Code at any time on or prior
to the Effective Date.
12.3 After the Effective Date. After the Effective Date, the Trustee or the
Disbursing Agent may propose amendments to the Plan for approval by the
Bankruptcy Court.
ARTICLE XIII
GENERAL PROVISIONS
13.1 Headings. The headings in the Plan are for convenience of reference
only and shall not limit or otherwise affect the meaning of the Plan.
13.2 Severability. Should any provision of this Plan be determined to be
unenforceable for any reason, such determination shall in no way limit or affect
the enforceability or operative effect of any other provision of the Plan,
except at the option of the Trustee.
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13.3 Governing Law. Except to the extent the Bankruptcy Code is applicable,
the rights and obligations arising under this Plan shall be governed and
enforced in accordance with the laws of the State of Delaware.
Respectfully submitted,
KURT F. GWYNNE, CHAPTER 11 TRUSTEE
By:
------------------------------------------
Kurt F. Gwynne
Chapter 11 Trustee for
TelePad Corporation
Two Logan Square, 12th Floor
Philadelphia, PA 19103-2756
(215) 567-7500
- and -
KLETT LIEBER ROONEY & SCHORLING
A Professional Corporation
By:
------------------------------------------
Eric Lopez Schnabel (#3672)
One Commerce Center, Suite 1001
1201 Orange Street
Wilmington, DE 19801
(302) 651-0335
Proposed Counsel to Chapter 11 Trustee
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