Joint Plan of Reorganization - LVL Communications Corp., LVL Advertising Inc. and LVL Interactive Inc.
William C. Lewis, Esq., Bar No. 77193
Sally A. Morello, Esq., Bar No. 122814
LAW OFFICES OF WILLIAM C. LEWIS
510 Waverley Street
Palo Alto, CA 94301-2009
Telephone: (650) 322-3300
Facsimile: (650) 327-9720
Attorneys for Debtors
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
) Case Nos:
)
In re: )
)
LVL COMMUNICATIONS ) 985-2216 MM
CORPORATION, LVL ) 985-2219 MM
ADVERTISING, INC., and LVL ) 985-2222 MM
INTERACTIVE, INC., ) Jointly Administered Under
) Chapter 11
Debtors. )
)
----------------------------------- ) ORDER CONFIRMING
DEBTORS' FIRST AMENDED
JOINT PLAN OF
REORGANIZATION
Date: April 16, 1998
Time: 3:00 P.M.
Judge: Marilyn Morgan
Confirmation of Debtors' First Amended Joint Plan of Reorganization came
on for hearing on April 16, 1998 at 3:00 P.M. before The Honorable Marilyn
Morgan, United States Bankruptcy Judge. William C. Lewis, Esq., appeared on
behalf of Debtors. Other appearances, if any, were noted in the record. The
Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code and
Debtors' Joint Disclosure Statement filed by Debtors on March 23, 1998, having
ORDER CONFIRMING DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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<PAGE>
been transmitted to creditors and equity security holders; and
Notice of modification to Debtors' Joint Plan of Reorganization having
been transmitted to creditors and equity security holders on March 20, 1998, an
Amendment to Joint Plan of Reorganization having been filed on March 23, 1998,
and Debtors' First Amended Joint Plan of Reorganization ("Plan") which
incorporated and integrated the provisions of Debtors' Joint Plan of
Reorganization and the Amendment thereto, having been filed by Debtors on
April 15, 1998; and
Debtors and their representatives having solicited acceptances of the
Plan and participated in the offer, issuance and sale under the Plan of
securities of Reorganized LVL in good faith and in compliance with the
applicable provisions of the Bankruptcy Code within the meaning of Section
1125(e) of the Bankruptcy Code; and
Reorganized LVL being a successor to the Debtor within the meaning of
Section 1145 of the Bankruptcy Code; and
In connection with the distribution of Equity Securities of Reorganized
LVL to holders of claims and interests in Debtors, all of the conditions to
availability of the exemption set forth in Section 1145 of the Bankruptcy Code
having been met; and
It having been determined after hearing on notice that the requirements
of confirmation set forth in 11 U.S.C. Section 1129(a) have been satisfied;
IT IS ORDERED that:
1. Debtors' Joint Disclosure Statement is approved.
2. The Plan filed by Debtors on April 15, 1998 is confirmed. A
copy of the confirmed Plan is attached hereto as Exhibit "A."
ORDER CONFIRMING DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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3. The Court makes the following findings with regard to the
assumption and assignment of the Lease: The assignment of the Lease from Debtors
to Steelcase, Inc., is being made for reasonably equivalent value and is not
being made with actual intent to hinder, delay or defraud creditors or the
estate; therefore, the transfer is not a fraudulent conveyance.
4. Any indemnity claim Steelcase, Inc., may have against Debtors is
hereby granted administrative priority in the within jointly administered cases.
5. Steelcase, Inc., shall have relief from the automatic stay to
obtain possession of the Premises in the event Debtors do not vacate the
Premises as set forth in the Assumption Agreement or any Sublease entered into
by Debtors with Steelcase, Inc., extending the date on which Debtors are to
vacate the Premises.
6. Title to Debtor Commercial Lease, as subsequently amended
(collectively "Commercial Lease"), with RRC Partners, dated as of February 15,
1996 for the premises located at 499 University Avenue (480 Cowper Street),
Palo Alto, California, shall pass to Steelcase, Inc., free and clear of all
liens (specifically excluding the lien of Union Bank and the lien(s) of Santa
Clara County for real property taxes) and such liens shall be extinguished and
shall be of no further force or effect. Such extinguished liens shall include,
but are not limited to, the liens, if any, of Trident III, LLC; The Dot Printer,
Inc.; George Rice & Sons; K/P Corporation; Collectronics, Inc. dba Great Western
Collection; Colorgraphics, Inc. (Abstract of Judgment recorded October 10, 1997
as Instrument No. 13895015 of Official Records, Santa Clara County, CA);
ORDER CONFIRMING DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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Lyon Financial Services, Inc. (Manifest Group); Miller Freeman, Inc.; Pacific
Video Resources (Abstract of Judgment recorded January 26, 1998 as Instrument
No. 14025328 of Official Records, Santa Clara County, CA); W. Bradley Electric,
Inc. (Abstract of Judgment recorded October 3, 1997 as Instrument No. 13887537
of Official Records, Santa Clara County, CA); and Paula Weinstock.
7. The Order Approving Assumption and Assignment of Unexpired
Commercial Real Property Lease has been executed contemporaneously herewith and
is incorporated by reference herein.
8. The offer and sale under the Plan of Equity Securities of
Reorganized LVL in exchange for claims against Debtors or administrative
expenses in the cases concerning Debtors are exempt from the provisions of
Section 5 of the Securities Act of 1933, as amended, and any state or local law
requiring the registration or qualification for offer or sale of such Equity
Securities or registration or licensing of an issuer of, underwriter of, or
broker or dealer in such Equity Securities, except to the extent that (a) the
availability of such exemption with respect to Equity Securities issued to
insiders of Debtors is limited by the Plan or (b) such Equity Securities are to
be issued to underwriters, as such term is defined in Section 1145(b) of the
Bankruptcy Code.
9. The Committee shall continue to serve in the case until all
agreements, documents, and securities required or permitted in connection with
the Plan are entered into, executed and delivered, and/or issued. Without
limiting the generality of the foregoing, the Committee shall have the right to
(a) investigate and require the Debtors
ORDER CONFIRMING DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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to file objections to the allowance of any claim or interest pursuant to the
provisions hereof relating to Disputed Claims, (b) approve the form, prior to
the effectiveness thereof, of all agreements, documents, and securities required
or permitted in connection with this Plan (including the agreement for merger or
acquisition with Digital Power Holding Company, the amended Articles of
Incorporation thereof, and the provisions of any stock options or warrants
required or permitted hereunder) for the purpose of assuring that such
agreements, documents, and securities conform to the terms of this Plan, and (c)
employ and cause the Debtors and/or Reorganized LVL to compensate professionals
for services rendered after Confirmation in such amounts as the Committee shall
consider appropriate (subject to the right of the Debtors or Reorganized LVL to
request review by the Bankruptcy Court of the reasonableness of such
compensation). The Committee's right under clause (b) of the preceding sentence
shall include the right to bring a motion before the Bankruptcy Court to compel
modification of such agreements, documents, and/or securities to cause them to
conform to the terms of this Plan.
10. A quarterly fee shall be paid by Debtors to the United States
Trustee, for deposit into the Treasury, for each quarter (including any fraction
thereof) until this case is converted, dismissed, or closed pursuant to a final
decree, as required by 28 U.S.C. Section 1930(a)(6).
11. At the end of the first quarter after entry of this Order, Debtors
shall file a postconfirmation status report, the purpose of which is to explain
the progress made toward substantial consummation of the confirmed Plan. The
report shall include a statement of receipts and
ORDER CONFIRMING DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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disbursements, with the ending cash balance, for the entire quarter. The report
shall also include information sufficiently comprehensive to enable the Court to
determine: (1) whether the Order confirming the Plan has become final; (2)
whether deposits, if any, required by the Plan have been distributed; (3)
whether any property proposed by the Plan to be transferred has been
transferred; (4) whether Debtors under the Plan have assumed the business or the
management of the property dealt with by the Plan; (5) whether payments under
the Plan have commenced; (6) whether accrued fees due to the United States
Trustee under 28 U.S.C. Section 1930(a)(6) have been paid; and (8) whether all
motions, contested matters and adversary proceedings have been finally
resolved. Further reports must be filed at the end of every quarter thereafter
until entry of a final decree, unless otherwise ordered by the Court.
12. A copy of each report shall be served, no later than the day upon
which it is filed with the Court, upon the United States Trustee and such other
persons or entities as may request such report in writing by special notice
filed with the Court.
13. Upon Debtors filing an application for a final decree, Debtors
shall serve the application on the United States Trustee, together with a
proposed final decree. The United States Trustee shall have five (5) days within
which to object or otherwise comment upon the Court's entry of the final decree.
14. Debtor shall pay Dana Commercial Credit ("Dana") $46,636.57 on or
before close of business on May 7, 1998 by delivering said funds to Buchalter,
Nemer, Fields & Younger. Said payment shall represent
ORDER CONFIRMING DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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<PAGE>
payment in full of all obligations owed Dana by Debtors and Dana shall transfer
title, free and clear of all liens, to Debtors of the equipment leased from
Dana. In the event Dana does not receive such payment in a timely manner, Dana
may file for relief from the automatic stay to proceed with any action Dana
deems necessary to take possession of the leased equipment. Further, Dana may
file a claim in the Chapter 11 bankruptcy cases.
15. This Court hereby retains jurisdiction as set forth in the Plan.
Dated: April 16, 1998 MARILYN MORGAN
-----------------------------
MARILYN MORGAN
UNITED STATES BANKRUPTCY JUDGE
ORDER CONFIRMING DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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<PAGE>
William C. Lewis, Esq., Bar No. 77193 FILED
Sally A. Morello, Esq., Bar No. 122814 APR 15 1998
LAW OFFICES OF WILLIAM C. LEWIS KEENAN G. CASADY, CLERK
510 Waverley Street United State Bankruptcy Court
Palo Alto, CA 94301-2009 San Jose, California
Telephone: (415) 322-3300
Facsimile: (415) 327-9720
Attorneys for Debtors
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re: ) Case Nos:
)
)
LVL COMMUNICATIONS CORPORATION, ) 985-2216 MM
LVL ADVERTISING, INC., and LVL ) 985-2219 MM
INTERACTIVE, INC., ) 985-2222 MM
)
) Jointly Administered Under
Debtors. ) Chapter 11
--------------------------------- )
DEBTORS' FIRST AMENDED JOINT
PLAN OF REORGANIZATION
Date: April 16, 1998
Time: 3:00 P.M.
Judge: Marilyn Morgan
EXHIBIT "A"
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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<PAGE>
TABLE OF CONTENTS
DEFINITIONS..............................................................1
Defined Terms ......................................................1
"Administrative Expense Claim"..................................1
"Allowed Claim" or "Allowed Interest" ..........................1
"Allowed Secured Claim" ........................................2
"Ballot"........................................................2
"Bankruptcy Code" ..............................................2
"Bankruptcy Court"..............................................2
"Bankruptcy Rules"..............................................2
"Cash"..........................................................2
"Claimant"......................................................2
"Confirmation"..................................................2
"Confirmation Order"............................................2
"Creditors' Committee"..........................................2
"Debtor" or "Debtors" ..........................................3
"Digital" ......................................................3
"Disputed Claim" or "Disputed Interest" ........................3
"Distribution"..................................................3
"Effective Date"................................................3
"Employee Shareholders" ........................................3
"Equity Security"...............................................4
"Final Order" ..................................................4
"Plan"..........................................................4
"Preference Recoveries" ........................................4
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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<PAGE>
"Priority Claim"............................................... 4
"Priority Creditor"............................................ 4
"Pro Rata"..................................................... 4
"Reorganized LVL".............................................. 5
"Tax Claim".................................................... 5
"Unclaimed Property"........................................... 5
"Unimpaired Claims"............................................ 5
"Unpaid Claim Reserve"......................................... 5
"Unsecured Claims"............................................. 5
"Unsecured Claimants".......................................... 5
Undefined Terms................................................. 5
CLASSIFICATION OF CLAIMS AND INTERESTS........................... 5
Nonclassified Claims.......................................... 5
Classified Claims............................................. 6
Specification and Treatment of Claims and Interests........... 6
TREATMENT OF NONCLASSIFIED CLAIMS................................ 7
Administrative Expenses & Priority Claims..................... 7
SPECIFICATION AND TREATMENT OF CLASSIFIED CLAIMS................. 8
Class 1--Pacific Business Funding Corp........................ 8
Class 2--Bridge Investor (Trident)............................ 9
Class 3--Dot Printing......................................... 9
Class 4-A--George Rice & Sons................................ 10
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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Class 4-B--Judgment Creditors........................................... 10
Class 5--Unsecured Creditors............................................ 11
Dividend Preferences......................................... 12
Liquidation Preference....................................... 12
Redemption................................................... 13
Conversion Right............................................. 14
Antidilution Provisions...................................... 14
Voting Rights................................................ 15
Board Representation......................................... 15
Information Rights........................................... 15
Exemptions................................................... 16
Contractual Limitations...................................... 16
Class 6-A--LVL Common Shareholders...................................... 18
Class 6-B--LVL Rights Holders........................................... 18
Class 6-C--LVLA and LVLi Equity Holders................................. 19
MEANS FOR IMPLEMENTATION OF THE PLAN
SOURCE OF FUNDS......................................................... 19
Formation and Capitalization of Reorganized Debtor...................... 19
Liquidity and Transferability of Post-Confirmation Equity Interests..... 21
Current and Post-Confirmation Management and Consultants................ 22
Insider Shareholder Notes............................................... 24
Media Obligations....................................................... 25
Treatment of Security Interests......................................... 25
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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Employee Benefits..................................................... 25
Steelcase Lease Assumption............................................ 25
Continuing Creditors' Committee....................................... 26
RECOVERY OF AVOIDABLE TRANSFERS............................................... 27
UNPAID CLAIMS RESERVE......................................................... 27
UNCLAIMED PROPERTY............................................................ 28
RETENTION, ENFORCEMENT AND WAIVER OF CLAIMS................................... 29
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES......................... 29
TAXES......................................................................... 30
REVESTING..................................................................... 30
BAR DATE AND NOTICE........................................................... 30
Pre-Petition Claims........................................................ 30
Administrative Claims...................................................... 30
POST-CONFIRMATION BUSINESS TRANSACTIONS....................................... 31
RETENTION OF JURISDICTION..................................................... 31
POST-CONFIRMATION NOTICES..................................................... 32
UTILITIES..................................................................... 33
Exhibit "A"--Fujitsu and S3 Media Creditors
Exhibit "B"--Executory Contracts
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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LVL Communications Corporation ("LVL"), LVL Advertising, Inc. ("LVLA"),
and LVL interactive, Inc. ("LVLi"), (collectively referred to hereinafter as
"Debtor" or "Debtors") propose this First Amended Joint Plan of Reorganization
under Chapter 11 of the Bankruptcy Code.
I. DEFINITIONS
A. Defined Terms
1. "Administrative Expense Claim" means any cost or expense of
administration of the Chapter 11 cases allowed under Section 503(b) of the
Bankruptcy Code, including, without limitation, any actual and necessary
expenses to the extent allowed by the Bankruptcy Court under Section 330 of the
Bankruptcy Code.
2. "Allowed Claim" or "Allowed Interest" means a claim
against, or Equity Security interest in, the Debtors to the extent that
a. If the claim or interest arose or is deemed to have
arisen on or before the Filing Date, (1) proof of the claim or interest either
is timely filed or is deemed filed under Code Section 1111(a) and (2) the
claim or interest either is not the subject of a timely filed objection or is
allowed by a Final Order; or
b. If the claim arose after the Filing Date and is not
deemed to have arisen on or before such date, (1) the claim is of a kind that
can be voluntarily paid from the Debtors' estate without specific Bankruptcy
Court approval and is so paid or (2) the claim has been allowed by a Final
Order; and
c. Such claim is not subject to disallowance pursuant to
Section 502(d) of the Code.
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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3. "Allowed Secured Claim" means the Allowed Claim determined
to be secured under provisions of Section 506 of the Bankruptcy Code.
4. "Ballot" means the form distributed to holders of claims
and interests on which is to be stated an acceptance or rejection of Debtors'
Plan.
5. "Bankruptcy Code" means Title 11 of the United States Code
and any amendments applicable to this case.
6. "Bankruptcy Court" means the United States Bankruptcy Court
for the Northern District of California or, in the event such court ceases to
exercise jurisdiction over this Chapter 11 case, such court or adjunct thereof
which thereafter exercises jurisdiction over this Chapter 11 case.
7. "Bankruptcy Rules" means the Federal Rules of Bankruptcy
Procedure, as amended, as applicable to cases pending before the Bankruptcy
Court.
8. "Cash" means cash and cash equivalents including, but not
limited to, checks and other similar forms of payment or exchange.
9. "Claimant" means a holder of an Allowed Claim.
10. "Confirmation" means entry of the Confirmation Order.
11. "Confirmation Order" means the entered order of the
Bankruptcy Court confirming the Debtors' Plan.
12. "Creditors' Committee" means the committee of unsecured
creditors formed at a general meeting of creditors held on June 24, 1997 and
any committee appointed under Section 1102 of the Code.
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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<PAGE>
13. "Debtor" or "Debtors" means LVL Communications Corporation,
a California corporation, LVL Advertising, Inc., a California corporation, and
LVL interactive, Inc., a California corporation, collectively.
14. "Digital" means Digital Power Holding Company, a Nevada
corporation in good standing, subject to the reporting requirements under the
Securities Exchange Act of 1934, with 1,000,000 shares of common stock
outstanding.
15. "Disputed Claim" or "Disputed Interest" means a claim
against, or equity security interest in, a Debtor (a) which has been included
in the Debtors' schedules as disputed, contingent, or unliquidated, unless
proof of such claim has been filed which has not been objected to, or (b) as to
which the Debtor or any other party in interest has interposed an objection in
accordance with the Bankruptcy Code and the Bankruptcy Rules, which objection
has not been withdrawn or determined by a Final Order.
16. "Distribution" means the Cash or Equity Security to be
distributed under the Plan to holders of Allowed Claims, Allowed Interests or
other parties in interest under the terms of the Plan.
17. "Effective Date" means the date on which acquisition of
Debtors by Digital or merger of Debtors into Digital takes place, which shall
occur as soon as practicable after the order confirming the Plan becomes a
Final Order, but in no event later than 90 days after the Final Order.
18. "Employee Shareholders" means Steve Sousa, Ron Ewing and
Ed Dilworth, collectively.
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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19. "Equity Security" means any equity interest in Debtors or
in Reorganized LVL including, but not limited to, preferred and common stock,
options and warrants.
20. "Final Order" means an order of the Bankruptcy Court as to
which (a) any appeal that has been taken, with respect to which there has been
a stay pending appeal, has been finally determined or dismissed, or (b) the
time for appeal has expired and a notice of appeal has not been filed timely,
or (c) a notice of appeal has been timely filed for which there is no stay
issued pending appeal.
21. "Plan" means this First Amended Joint Plan of
Reorganization together with any amendments or modifications thereto which may
be filed by Debtors.
22. "Preference Recoveries" means proceeds, if any, from
pending or future preference actions commenced by Debtors.
23. "Priority Claim" means any claim, other than an
Administrative Expense Claim or a Tax Claim, to the extent entitled to priority
in payment under Section 507(a) of the Bankruptcy Code.
24. "Priority Creditor" means any creditor that holds a
Priority Claim.
25. "Pro Rata" means proportionately so that the ratio of the
consideration distributed on account of an Allowed Claim or Allowed Interest in
a class to the consideration distributed on account of all Allowed Claims or
Allowed Interests in the class is the same as the ratio of such Allowed Claim
or Allowed Interest to all Allowed Claims or Allowed Interests in the class,
subject to the provisions set forth in the Plan regarding fractional
distributions.
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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26. "Reorganized LVL" means Digital subsequent to Digital's
merger with LVL or LVL becoming a wholly owned subsidiary of Digital.
27. "Tax Claim" means any claim that is entitled to priority in
payment under Section 507(a)(8) of the Bankruptcy Code.
28. "Unclaimed Property" means any distributions which remain
unclaimed ninety (90) days following each distribution under the Plan.
29. "Unimpaired Claims" means any claims which are not impaired
under Debtors' Plan in accordance with Section 1124 of the Bankruptcy Code.
30. "Unpaid Claim Reserve" means an account which will contain
funds and/or Reorganized LVL Equity Securities designated for Claimants who
hold Disputed Claims. The funds held in the Unpaid Claim Reserve will be
maintained in an interest bearing account.
31. "Unsecured Claims" means all Allowed Claims other than
Allowed Secured Claims, Administrative Expense Claims, Priority Claims, Tax
Claims, and claims of Classes 1, 2, 3, 4-A, 4-B, 6-A, 6-B and 6-C.
32. "Unsecured Claimants" means any Claimant that is the holder
of an Unsecured Claim.
B. Undefined Terms: A term used, but not defined in Debtors' Plan,
but defined in the Bankruptcy Code has the meaning given to that term in the
Bankruptcy Code.
II. CLASSIFICATION OF CLAIMS AND INTERESTS
A. Nonclassified Claims: Priority claims pursuant to 11 U.S.C.
Section 507(a) are not classified under this Plan.
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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B. Classified Claims: All Allowed Claims (except Allowed Claims
treated under Article III of this Plan) and Allowed Interests are placed in the
following Classes:
Class 1: Pacific Business Funding Corporation secured
claim and warrants;
Class 2: Trident III, LLC, secured claim;
Class 3: Dot Printer claim;
Class 4-A: George Rice & Sons claim;
Class 4-B: Miscellaneous Claimants with judicial liens;
Class 5: Unsecured Claims;
Class 6-A: LVL common shareholders;
Class 6-B: Holders of rights to acquire common stock of LVL;
and
Class 6-C: LVLA and LVLi Equity Holders.
C. Specification and Treatment of Claims and Interests: The treatment
of the claims and interests described below applies only to Allowed Claims and
Allowed Interests. Distributions to holders of claims or interests that are not
Allowed Claims or Allowed Interests as of the Effective Date will be made, in
accordance with the Plan provisions for such classes of claims and interests,
after each such claim or interest becomes an Allowed Claim or Allowed Interest.
Debtors may file an objection to the allowance of any claim or interest no
later than 60 days after the Effective Date (the "First Claim Objection Date").
Within the 30 days following receipt of a report from Debtors identifying all
claims and indicating claims which Debtors have objected to, the Creditors'
Committee may identify to Reorganized LVL additional objections to claims which
the Creditors' Committee believes should be filed ("Creditor Objection Notice")
and Debtors shall file such objections within 60 days following receipt of the
Creditor Objection Notice if timely received.
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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III. TREATMENT OF NONCLASSIFIED CLAIMS
Administrative Expenses & Priority Claims
1. Except as provided in paragraphs 2 and 3, below, the holders of
Allowed Claims entitled to priority under Section 507(a) of the Bankruptcy
Code, except professional fees requiring court approval under Section 330 of
the Bankruptcy Code, shall be paid on the Effective Date or as soon thereafter
as such a claim becomes an Allowed Claim, except to the extent a holder of such
claim has agreed to other treatment. Professional fees shall be paid upon court
approval of a duly noticed fee application. All such Administrative Expense
Claims and Priority Claims shall retain their priority status until paid in
full. Such priority status shall continue in the event such claims are not paid
under this Plan, including, but not limited to, conversion of this case to
Chapter 7. Post Confirmation fees to professionals shall be paid in full,
monthly, unless otherwise agreed with such professionals. The Court shall
retain jurisdiction to address Debtors' objections to any fees.
2. The holders of Allowed Claims entitled to priority pursuant to 11
U.S.C. Section 507(a)(8) may be paid monthly by Debtors over a period of up to
six years or sooner at the discretion of Debtors, with interest at the rate
allowed by law.
3. Administrative Expense Claims for goods and services incurred in
the ordinary course of Debtors' business will be paid in accordance with
Debtors' agreement with the holders thereof.
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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IV. SPECIFICATION AND TREATMENT OF CLASSIFIED CLAIMS
Holders of Allowed Claims shall receive the distributions set forth in
this Article on account of, and in complete satisfaction of, all such Allowed
Claims.
All stock issued pursuant to this Plan shall be issued on the Effective
Date or as soon thereafter as is practicable. No fractional shares will be
issued, but will instead be rounded to the next nearest whole number.
1. Class 1 is impaired and consists of the Allowed Secured Claim
of Pacific Business Funding Corporation ("PBF"). PBF's Allowed Secured Claim is
comprised of the indebtedness and obligations of Debtors to PBF under certain
factoring agreements in effect at the commencement of the Chapter 11 cases,
which provide for a receivables line of credit (the "Factoring Agreements") and
related warrants for acquisition of Debtors' Equity Securities. The obligations
and indebtedness of Debtors under the Factoring Agreements are secured by a
security interest in all of the Debtors' personal property assets, described in
the Factoring Agreements as all "Collateral." This Plan shall not alter the
legal, equitable, or contractual rights of PBF except that all warrants held by
PBF to purchase shares of Debtors' Equity Securities shall be canceled on the
Effective Date and, on the Effective Date, PBF shall receive warrants to
purchase 50,000 shares of Reorganized LVL common stock at $0.50 per share.
PBF shall continue to be paid under and pursuant to the terms of
the Factoring Agreements and shall retain its liens upon and security interest
in all Collateral until it receives full and final payment of all
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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"Obligations" under and as defined in the Factoring Agreements. In the event
PBF continues to provide financing to Reorganized LVL, PBF may enter into a new
factoring agreement with Reorganized LVL and may incorporate in such new
factoring agreement all of the Obligations of Debtors to PBF under the
Factoring Agreements. All of the Debtors' obligations under any new factoring
agreement, including the Obligations under the Factoring Agreements, shall be
secured by all of the personal property assets of Reorganized LVL.
2. Class 2 Bridge Investor is Trident III, LLC ("Trident").
Trident loaned Debtors $600,000 ("Bridge Funding'), secured by Debtors'
leasehold interest in 499 University Avenue (480'Cowper Street), Palo Alto,
California ("Leasehold"). When the Order confirming the Plan becomes a Final
Order, Trident's security interest in the Leasehold shall terminate. Trident
shall be issued 600,000 shares of redeemable common stock in Reorganized LVL,
redeemable at $1.00 per share. These shares shall be redeemable only in the
event that there is a post-confirmation financing for a minimum of $3 million.
In addition, Trident shall be issued 440,000 shares of non-redeemable common
stock in Reorganized LVL.
3. Class 3 is impaired and consists of the Allowed Secured
Claim, if any, of The Dot Printer, Inc., a California corporation ("Dot"). To
the extent the Bankruptcy Court determines that Dot is secured pursuant to 11
U.S.C. Section 506, such amount shall be paid in full in equal quarterly
payments, including principal and interest, over a period of five (5) years
from the Effective Date, including interest at the rate of ten percent (10%)
per annum or such other interest rate as may be
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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determined by the Bankruptcy Court if Dot objects to such rate. Any unsecured
portion of Dot's claim will be treated as a non-priority, unsecured claim in
Class 5, below. To the extent secured by Section 506 of the Bankruptcy Code and
not otherwise avoidable, Dot will retain its lien (other than a lien on the
leasehold being transferred to Steelcase under the Plan) with the same
validity, priority and effect it held immediately prior to the filing date of
the Chapter 11 cases.
4. Class 4-A is impaired and consists of the Allowed Secured Claim,
if any, of George Rice & Sons, a division of World Color Press, Inc., a
Delaware corporation ("Rice"). To the extent the Bankruptcy Court determines
that Rice is secured and/or is not avoidable pursuant to 11 U.S.C. Sections
506 and 547 or other provisions of the Bankruptcy Code, such amount
shall be paid in full in equal quarterly payments, including principal and
interest, over a period of five (5) years from the Effective Date, including
interest at the rate of ten percent (10%) per annum or such other interest rate
as may be determined by the Bankruptcy Court if Rice objects to such rate. Any
unsecured portion of Rice's claim will be treated as a non-priority, unsecured
claim in Class 5, below. To the extent secured by Section 506 of the Bankruptcy
Code and not otherwise avoidable, Rice will retain its lien (other than a lien
on the leasehold being transferred to Steelcase under the Plan) with the same
validity, priority and effect it held immediately prior to the filing date of
the Chapter 11 cases.
Class 4-B is impaired and consists of the Allowed Secured Claims,
if any, of any other Creditors who obtain judgment liens or any other type of
judicial liens (including but not limited to attachments,
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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temporary protective orders, liens pursuant to an Order of Examination, or
personal or real property judgment liens) against Debtors' assets. To the extent
the Bankruptcy Court determines that any Class 4-B creditor is secured and/or is
not avoidable pursuant to 11 U.S.C. Sections 506 and/or 547 or other provisions
of the Bankruptcy Code, such amount shall be paid in full in equal quarterly
payments, including principal and interest, over a period of five (5) years from
the Effective Date, including interest at the rate of ten percent (10%) per
annum or such other interest rate as may be determined by the Bankruptcy Court
if any Class 4-B creditor objects to such rate. Any unsecured portion of any
Class 4-B creditor's claim will be treated as a non-priority, unsecured claim in
Class 5, below. To the extent secured by Section 506 of the Bankruptcy Code and
not otherwise avoidable, any Class 4-B creditor will retain its lien (other than
a lien on the leasehold being transferred to Steelcase under the Plan) with the
same validity, priority and effect it held immediately prior to the filing date
of the Chapter 11 cases.
5. Class 5 is impaired and consists of all non-priority Allowed
Unsecured Claims. Each Claimant with an Allowed Claim in Class 5 shall receive a
pro rata portion of 600,000 shares of Series A Convertible Preferred Stock
("Preferred Stock") in Reorganized LVL, unless such Claimant elects to receive
Cash in lieu of such portion pursuant to the next paragraph.
Class 5 Claimants holding claims of $5,000 or less may elect to receive
10% of their Allowed Claims, in Cash, on the Effective Date, in lieu of
receiving Preferred Stock in Reorganized LVL. In addition, Class 5 Claimants
holding Allowed Claims in excess of $5,000 may elect to
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reduce their Allowed Claims to $5,000 and receive $500 on the Effective Date
(10% of the reduced Allowed Claim), in lieu of receiving Preferred Stock in
Reorganized LVL. The election by any Class 5 Claimants to receive cash on the
Effective Date rather than Preferred Stock in Reorganized LVL pursuant to this
provision is hereinafter referred to as the "Cash Option." The pool of 600,000
preferred shares of Reorganized LVL will be reduced by the percentage in dollar
amount of Allowed Claims electing the Cash Option.
The Preferred Stock shall have the rights, privileges and preferences as
follows:
a. Dividend Preferences. The holders of the Preferred
Stock shall, upon the vote of the majority of the Board of Directors, be
entitled to receive, out of any funds legally available therefor, cumulative
dividends at a rate of $0.05 per share, per year, prior and in preference to
any payment of any dividend on the common stock. Such dividends shall be paid
when, as and if declared by the Board of Directors. The dividend rights and
preferences of the Preferred Stock shall be senior to those of the common
stock. After the dividend preferences of the Preferred Stock due in a given
year have been paid in full, all remaining dividends in such year, if any,
shall be paid equally on the common stock and the Preferred Stock.
b. Liquidation Preference. In the event of any
liquidation, dissolution or winding up of Reorganized LVL, or the sale, merger
or combination of Reorganized LVL, a public offering in excess of $25 million,
a merger or consolidation of Reorganized LVL in which its shareholders do not
retain a majority of the voting power in the
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surviving corporation, or a sale of all or substantially all of Reorganized
LVL's assets (singularly or collectively referred to as a "Liquidation
Preference Event") or a Liquidating Preference Event of LVL Subsidiary (as
hereafter defined) if LVL is not merged into Digital, the holders of the
Preferred Stock will be entitled to receive an amount equal to $6.67 per share
for the Preferred Stock, plus an amount equal to all declared but unpaid
dividends thereon (the "Preference Amount"). After the Preference Amount on all
outstanding shares of Preferred Stock has been paid, any remaining funds and
assets of Reorganized LVL legally available for distribution to shareholders
shall be distributed pro rata solely among the holders of the common stock. If
Reorganized LVL has insufficient assets to permit payment of the Preference
Amount in full to all holders of the Preferred Stock, then the assets of
Reorganized LVL shall be distributed ratably to the holders of the Preferred
Stock in proportion to the Preference Amount each such holder would otherwise
be entitled to receive. Reorganized LVL shall give Class 5 Claimants holding
Preferred Stock thirty (30) days advance written notice prior to a Liquidation
Preference Event and such persons shall have the right to convert to common
stock as described below during such thirty (30) day period.
c. Redemption. The Preferred Stock shall be redeemable
in part or in full at the option of Reorganized LVL on thirty (30) days advance
written notice to the holders of the Preferred Stock for a redemption price of
$6.67 per share. Upon receipt of notice of Reorganized LVL's intention to
redeem the Preferred Stock, each holder of the Preferred Stock shall have the
option to convert to common stock
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as described below. Any partial redemption shall be made on a pro rata basis.
d. Conversion Right. Each holder of the Preferred Stock
shall have the right to convert the Preferred Stock into shares of common stock
in part or in full at any time, including within 30 days after notice by
Reorganized LVL of its intention to redeem the Preferred Stock or of a
Liquidation Preference Event. The initial conversion rate for the Preferred
Stock shall be one-for-one. All rights incident to a share of Preferred Stock
(including but not limited to rights to any declared but unpaid dividends) will
terminate automatically upon any conversion of such share into common stock.
e. Antidilution Provisions. The number of shares of
common stock issuable upon conversion of each share of Preferred Stock shall be
subject to adjustment from time to time upon the occurrence of certain events
described below and the number of shares of common stock issuable for each
share of the Preferred Stock at any given time shall be subject to adjustment
as follows: In the event Reorganized LVL shall (i) pay a dividend or make a
distribution on its shares of common stock in shares of common stock, (ii)
subdivide or reclassify its outstanding common stock in shares of common stock
into a greater number of shares, or (iii) combine or reclassify its outstanding
common stock into a smaller number of shares, the conversion ratio in effect at
the time of the record date for such dividend or distribution or of the
effective date of such subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of the Preferred Stock converted
after such date shall be entitled to receive the aggregate
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number and kind of shares which, if the Preferred Stock had been converted by
such holder immediately prior to such date, the holder would have owned upon
such conversion and been entitled to receive upon such dividend, subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any such event listed above shall occur. The conversion ratio shall
be adjusted upon issuance of additional common stock or rights to acquire common
stock at a price of less than $1.00 per share, except those rights
specifically required or permitted in connection with this Plan.
f. Voting Rights. The holders of the Preferred Stock shall have
the right to vote as a class on (i) the merger, sale, liquidation or
dissolution of Reorganized LVL and/or LVL Subsidiary, (ii) a sale of all or
substantially all of Reorganized LVL's or LVL Subsidiary's assets, (iii) any
increase in the number of authorized shares of any class or series of
Reorganized LVL Equity Securities, (iv) creation of any new class or series of
Equity Securities in Reorganized LVL and/or LVL Subsidiary, (v) any increase in
the number of members of the Board of Directors of Reorganized LVL and LVL
Subsidiary, and (vi) election of one member of the Board of Directors of
Reorganized LVL and LVL Subsidiary.
g. Board Representation. The rights of the holders of the
Preferred Stock to elect a member of the Board of Directors shall terminate once
(1) more than 50% of the Preferred Stock has converted to common stock, (2) a
Liquidation Preference Event has occurred, or (3) more than 50% of the Preferred
Stock has been redeemed.
h. Information Rights. Reorganized LVL will furnish holders of
the Preferred Stock with annual unaudited consolidated
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financial statements together with such notes and commentary by management as is
usual and customary, as well as copies of all form 10-Q's and 10-K's filed by
Reorganized LVL.
i. EXEMPTIONS. Stock and warrants being issued to Classes 1,
2, 5 and 6-A in exchange for a claim against or interest in or a claim for an
administrative expense in the case (and all securities issued upon conversion or
exercise of such stock and warrants) are exempt pursuant to the provisions of
ss.1145(a) of the Bankruptcy Code. However, this provision shall nor be
construed as limiting any restrictions imposed on holders of control securities
by Rule 144 promulgated by the Securities and Exchange Commission or contractual
limitations imposed by this Plan.
j. CONTRACTUAL LIMITATIONS. Stock and warrants issued to
Classes 1, 2, 5 and 6-A and the shares issued to Mackenzie Shea, Inc. ("MSI")
and certain others will be subjected to the lock-up provisions described below
("Lock-up Provisions"). Lock-Up Provisions are contractual provisions on the
ability to transfer shares evidenced by a written agreement that shares will not
be sold, hypothecated, pledged, encumbered, or otherwise transferred for a
particular period of time and further evidenced by a legend on the stock
certificate. Lock-Up Provisions for shares issued to Classes 1, 2, 5, 6-A and
MSI and certain others as follows:
(1) Class 2 shares are subject to a twelve (12) month
Lock-Up Provision imposed as of the close of merger into Digital or acquisition
of LVL, and shall be released from such Lock-up Provision as follows: (a)
one-third after six (6) months; (b) one-third after nine
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(9) months; and (c) one-third after twelve (12) months ("Initial Class 2
Lock-Up"). Reorganized LVL may, at its discretion, release shares owned by Class
2 earlier than the release schedule set forth herein.
(2) Shares issued to (i) Classes 1, 5 and 6-A Claimants
and/or Equity Security holders and (ii) MSI and any other affiliates of Debtors,
as well as shares issued on exercise of options or warrants issued in connection
with this Plan to any affiliate of Debtors and to underwriters in connection
with the Post-Confirmation Investment shall not be sold by their holders for
twelve (12) months after the close of merger into Digital or Digital's
acquisition of LVL ("Initial General Lock-Up"). Such shares may be further
subject to subsequent Lock-Up Provisions imposed by underwriters in conjunction
with further financing representing a minimum of $1 million in the event such
financing occurs within the initial twelve (12) month restriction period, but,
with respect to Class 5, shall apply only to Class 5 holders who receive one
hundred (100) or more shares of stock in Reorganized LVL (the "Additional
Lock-Up"). The Additional Lock-Up, if it occurs, shall apply equally to all
parties receiving stock hereunder except Class 2, Class 5 creditors who receive
less than 100 shares, and the pre-existing shares of Digital. Reorganized LVL
shall have the right to release shares subject to the foregoing Lock-Up
Provisions as to any number of shares of Equity Securities provided that any
release of less than all Equity Securities subject to such Lock-Up Provisions
shall be allocated pro rata among all holders of such Equity Securities.
(3) Notwithstanding the foregoing, the Initial Class 2
Lock-Up, the Initial General Lock-Up and the Additional Lock-Up shall
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not prevent the sale, transfer or encumbrance of such securities in transactions
outside the public market if the transferor receives from the transferee written
acknowledgment that the securities will continue to be subject to the foregoing
restrictions in the hands of the transferees.
6. CLASS 6 Equity Security Interests:
a. CLASS 6-A is impaired and consists of the holders of common
stock of LVL which is not canceled on the Effective Date pursuant to "Insider
Shareholder Notes," paragraph V.D., below. Class 6-A equity holders whose stock
is not canceled on the Effective Date (Calbert Lai, Steven Venuti and Don
Sanders) shall receive pro rata portions of 600,000 shares of common stock in
Reorganized LVL in exchange for their Equity Security interests in LVL.
In addition to restrictions set forth in subparagraph 5(j)(2), above,
shares issued to Class 6-A Equity Security Holders may not be sold, transferred
or otherwise disposed of until the earliest of (1) thirty-six months (36) months
after the Effective Date, (2) a Liquidation Preference Event, or (3) the closing
bid price reported on the NASDAQ market system for the common stock of
Reorganized LVL has exceeded the conversion price of the Preferred Stock for ten
consecutive trading days. An encumbrance of such shares shall not be deemed to
be a sale or transfer.
b. CLASS 6-B is impaired and consists of the holders of all
rights to acquire common stock of Debtors, excluding PBF's warrants specifically
addressed in Class 1, above. All vested and unvested rights of Class 6-B shall
be canceled upon Confirmation.
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c. Class 6-C is impaired and consists of LVL, the holder of
Equity Securities in LVLA and LVLi. LVL holds 100% of the Equity Securities of
LVLA and LVLi. All Equity Securities held by LVL in LVLA and LVLi shall be
canceled on the Effective Date and in conjunction with the merger of LVLA and
LVLi into LVL.
V. MEANS FOR IMPLEMENTATION OF THE PLAN: SOURCE OF FUNDS
A. Formation and Capitalization of Reorganized Debtor: Digital will
merge with LVL or acquire Debtors' shares and will issue or reserve up to
4,900,000 shares of newly issued common stock and common stock equivalents upon
court Confirmation of Debtor's Plan.
Upon the Effective Date, (a) LVLA and LVLi shall be merged into LVL, and
(b) LVL shall be merged into Digital or become its wholly owned subsidiary ("LVL
Subsidiary"). Concurrently, Digital shall file amended Articles of Incorporation
which (a) rename the corporation "LVL Communications, Inc.," (b) authorize
600,000 shares of Series A Preferred Stock with the rights, privileges and
preferences set forth in IV.5., above, (c) authorize a number of shares of
common stock which is at least the number of shares required or permitted to be
issued in connection with this Plan, and (d) prohibit the issuance of non-voting
Equity Securities to the extent required by Section 1123 of the Bankruptcy Code.
LVL will pay $150,000 to the Digital shareholders as partial consideration for
the transaction.
Concurrently, Reorganized LVL shall issue (a) the warrants to be
distributed to PBF, (b) the common stock to be issued to Trident, (c) the
Preferred Stock, and (d) common stock to the holders of Allowed Claims in Class
6-A.
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In addition:
(a) Reorganized LVL may establish a stock option plan under which
options may be granted to acquire not more than 1,400,000 shares of common stock
of Reorganized LVL, provided that (i) such options may only be granted to
existing and future employees and consultants of Reorganized LVL, (ii) the
exercise price under such options shall be not less than the fair market value
of such shares on the date of grant, and (iii) such options shall vest ratably
over a period of not less than three years from the date of grant. The
individual employees to receive such options and the numbers of shares to be
covered by each option shall be determined by the Compensation Committee of the
Board of Directors. Stock options to be granted to Steve Venuti and Cal Lai
shall vest as follows: (1) one-half of the options shall vest ratably over a
period of not less than three years from the date of grant, and (2) the
remaining one-half of the options shall not vest until Reorganized LVL has had
sales of at least $12 million for any 12 consecutive month period and
Reorganized LVL is profitable on a quarterly basis throughout that same 12 month
period.
(b) Reorganized LVL may also issue 1,000,000 or more shares of
common stock at $1.25 or more per share to accredited investors for
post-Confirmation financing ("Post-Confirmation Investment"). In addition,
Trident and/or its affiliate will receive warrants in conjunction with the
Post-Confirmation Investment. Further, Reorganized LVL may issue 1,000,000
shares of common stock to MSI. Any shares issued to MSI shall be deemed control
securities whose resale is limited by Rule 144.
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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(c) Reorganized LVL may issue warrants to acquire its common
stock at an exercise price of not less than $0.50 per share to the following:
(i) 25,000 shares to Wayne Mascia and Associates, (ii) 25,000 shares to
underwriters and others in connection with the issuance of notes to Trident, and
(iii) 250,000 shares to underwriters and others in connection with obtaining
Post-Confirmation Investment, provided that none of such warrants may be issued
to MSI or its affiliates.
No other rights to acquire Equity Securities may be issued by Reorganized
LVL in connection with this Plan, nor may any shares of LVL Subsidiary or rights
to acquire such shares be issued. However, this restriction shall not prohibit
Reorganized LVL from issuing additional Equity Securities after consummation of
these transactions contemplated by the Plan as long as such issuances do not
violate the terms of this Plan.
Confirmation of the Plan is conditioned upon Trident having loaned Debtors
a minimum of $400,000 prior to filing of their Chapter 11 cases.
B. Liquidity and Transferability of Post-Confirmation Equity
Interests: Not later than 90 days after the Effective Date, Reorganized LVL
shall file an application for listing of its common stock on NASDAQ and shall
diligently pursue such application.
No representations are made to any party concerning the tax attributes and
effects of issuance of shares, options and warrants pursuant to the Plan. You
are advised to consult your own tax adviser.
THE STOCK OF REORGANIZED LVL IS STOCK WHICH WILL NOT HAVE A MARKET
INITIALLY AND WHICH DEBTORS ANTICIPATE WILL BECOME ACTIVELY TRADED. REORGANIZED
LVL WILL HAVE NO
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CONTROL OVER MARKET REACTIONS AND MAKES NO REPRESENTATION THAT IT WILL SUCCEED
IN CREATING AN ACTIVE TRADING MARKET OR ACHIEVING ANY SPECIFIC VALUE.
C. Current and Post-Confirmation Management and Consultants: Cal Lai
will continue to act as Chief Executive Officer of Reorganized LVL with a base
annual salary of $150,000, plus bonuses based on gross profit of Reorganized LVL
not to exceed fifty percent (50%) of base annual salary. A Chief Operating
Officer will be hired for Reorganized LVL with a base annual salary of
approximately $150,000.
The Board of Directors of Reorganized LVL shall consist initially of five
(5) directors: (i) one director elected by the holders of the Preferred Stock as
a class; (ii) Calbert Lai, (iii) the new Chief Operating Officer of Reorganized
LVL; (iv) one nominee of Trident who will be replaced by a nominee of the
parties making the Post-Confirmation Investment ("Investment Group"), if any;
and (v) Tom Schultz, or a nominee of the non-insider common shareholders. If LVL
is not merged into Digital but, instead, remains as the LVL Subsidiary, the
Board of Directors of LVL Subsidiary shall have the same size and composition as
the Board of Directors of Reorganized LVL and such Board shall be subject to the
same rights and responsibilities as to the LVL Subsidiary as does the Board of
Reorganized LVL.
The Boards of Directors of LVL and LVL Subsidiary shall have two
committees, the Compensation Committee and the Audit Committee which shall
continue in force as long as 50% of the Preferred Stock remains outstanding. The
Compensation Committee and the Audit Committee shall each consist of three (3)
members as follows:
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Person elected by holders of Preferred Stock as a class Tom Schultz,
or a nominee of the non-insider shareholders Nominee of Trident or
Investment Group
MSI has provided services to Debtors pre-Confirmation, and will continue
to provide services to Reorganized LVL post-Confirmation. For its services
rendered to Debtors, and subsequently Reorganized LVL, MSI will receive:
1. $20,000 non-refundable retainer paid $10,000 upon
engagement and $10,000 upon close of escrow on the Bridge Funding;
2. 750,000 shares of Reorganized LVL common stock on the
Effective Date (50% to MSI and 50% to Tom Schultz);
3. 250,000 shares of Reorganized LVL common stock (50% to MSI
and 50% to Tom Schultz) shall be issued on the Effective Date, held in escrow,
and released to MSI and Tom Schultz only upon the occurrence of one of the
following events:
(a) The net worth of Reorganized LVL increases by
$1,000,000 (excluding the effect of the lease assignment to Steelcase, Inc., and
any other non-financing transactions outside the ordinary course of business)
from immediately after the Effective Date to the end of the eighth month which
ends after the Effective Date; or
(b) A total of $1,000,000 in proceeds is received by
Debtors and/or Reorganized LVL from the Bridge Funding and any
Post-Confirmation Investment received within eight months after the Effective
Date.
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In the event that neither event (a) nor event (b) occurs within the
preceding time period, Reorganized LVL shall repurchase said 250,000 shares for
the total amount of $1.
4. A monthly fee of $10,000 payable for one year, beginning
upon engagement, to be paid as cash becomes available from operations or from
the proceeds of Debtors' financing efforts;
5. Separately budgeted per diem or project fees for specific
activities or projects undertaken from time to time by MSI at the request of
Debtors; and
6. Reimbursement of legal, travel, and other out-of-pocket
expenses pre-approved by Debtors.
Resale of shares issued to MSI will be restricted by Rule 144 and the same
Lock-Up Provisions as Classes 1, 5 and 6-A.
Tom Schultz has acted as Chief Operating Officer for LVL on a contract
basis. He will be compensated by Debtors and/or Reorganized LVL for his services
to Debtors and/or Reorganized LVL on an hourly basis until the hiring of a full
time Chief Operating Officer. After such time, his sole Cash compensation shall
be one-half of the MSI $10,000 monthly fee and he shall cease to act as Chief
Operating Officer. Mr. Schultz will serve on Reorganized LVL's Board of
Directors, Compensation Committee and Audit Committee.
D. Insider Shareholder Notes: On the Effective Date (a) all note
obligations created in conjunction with the purchase of Equity Securities of
Debtors held by Employee Shareholders shall be canceled, (b) such cancellation
shall discharge any and all claims which the Employee Shareholders may have or
have had against Debtors for any reason
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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based on any act or omission prior to the commencement of the Chapter 11 cases,
and (c) all Equity Securities in Debtors owned by Employee Shareholders shall
also be canceled (the "Canceled Employee Shares"). These provisions do not
affect Don Sanders.
E. Media Obligations: A compromise among the Debtors, the media
creditors listed on Exhibit "A" ("Media Creditors"), S3 and Fujitsu is being
negotiated pursuant to which, at confirmation of the Plan S3 would pay up to
$125,000 to LVL and Fujitsu would pay up to $100,000 to LVL in full satisfaction
of their respective obligations to LVL, and the media creditors listed on
Exhibit "A" who consent to this settlement will be deemed to have released S3
and Fujitsu from all claims arising from advertising placed on their behalf by
LVL. Such payments by S3 and/or Fujitsu will be reduced, pro rata, for any Media
Creditor who does not consent to the compromise or eliminated entirely if S3 or
Fujitsu rejects the settlement because it has not been consented to by all Media
Creditors associated with its obligation.
F. Treatment of Security Interests: All security interests and liens
including, but not limited to judicial liens and attachments, are extinguished
at Confirmation except security interests existing in favor of PBF and any
security interests determined to be held by Classes 3, 4-A and 4-B Claimants
which are preserved under the express terms of this Plan.
G. Employee Benefits: Accrued vacation pay and other employee
benefits for employees who are employed by Debtors as of the date of
commencement of the Chapter 11 cases shall continue to be paid in the ordinary
course of business by Reorganized LVL.
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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H. Steelcase Lease Assumption: Debtor shall assume and assign the
lease with RRC Partners for the premises located at 499 University Avenue (480
Cowper Street), Palo Alto, California to Steelcase, Inc., pursuant to the
agreement Debtor entered into with Steelcase, Inc., regarding such assignment.
On the Effective Date the following contractual requirements shall be performed:
(1) to the extent the automatic stay remains in effect after the Effective Date,
such automatic stay shall be vacated to permit Steelcase, Inc., to obtain
possession of the premises and to perform under the terms of the Steelcase
Agreement; (2) Steelcase, Inc., shall be granted possession of the subject
premises as of May 1, 1998 free and clear of all liens and encumbrances; and (3)
any indemnity claim that Steelcase, Inc., establishes as valid against LVL shall
be granted administrative priority in the bankruptcy case. Confirmation of this
Plan shall be deemed to be approval of such assumption and assignment by the
Bankruptcy Court and constitute a finding that the Steelcase, Inc., transaction
is not a fraudulent conveyance.
I. Continuing Creditors' Committee Notwithstanding Confirmation, the
Committee shall continue to serve in the case until all agreements, documents,
and securities required or permitted in connection with the Plan are entered
into, executed and delivered, and/or issued. Without limiting the generality of
the foregoing, the Committee shall have the right to (a) investigate and require
the Debtor to file objections to the allowance of any claim or interest pursuant
to the provisions hereof relating to Disputed Claims, (b) approve the form,
prior to the effectiveness thereof, of all agreements, documents, and
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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securities required or permitted in connection with this Plan (including the
agreement for merger or acquisition with Digital Power Holding Company, the
amended Articles of Incorporation thereof, and the provisions of any stock
options or warrants required or permitted hereunder) for the purpose of assuring
that such agreements, documents, and securities conform to the terms of this
Plan, and (c) employ and cause the Debtors and/or Reorganized LVL to compensate
professionals for services rendered after Confirmation in such amounts as the
Committee shall consider appropriate (subject to the right of the Debtors or
Reorganized LVL to request review by the Bankruptcy Court of the reasonableness
of such compensation). The Committee's right under clause (b) of the preceding
sentence shall include the right to bring a motion before the Bankruptcy Court
to compel modification of such agreements, documents, and/or securities to cause
them to conform to the terms of this Plan.
VI. RECOVERY OF AVOIDABLE TRANSFERS
The Debtors may commence any adversary proceeding to recover transfers
avoidable under the Bankruptcy Code within the time specified in the Bankruptcy
Code.
VII. UNPAID CLAIMS RESERVE
1. Except to the extent the Bankruptcy Court shall determine that a
sufficient reserve for Disputed Claims is less than the full amount asserted by
the holder thereof, in determining the amount of distributions due to the
holders of Allowed Claims and to be reserved for Disputed Claims, the
appropriate Pro Rata calculations required by
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
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section IV of this Plan shall be made as if all Disputed Claims were Allowed
Claims.
2. On the Effective Date, all distributions that would be delivered
to holders of Disputed Claims if they were Allowed Claims shall be deposited by
the Debtors in the Unpaid Claims Reserve.
3. All Cash held in the Unpaid Claims Reserve shall be invested in
such investments as are permitted under Section 345 of the Bankruptcy Code.
The earnings on such investments shall be first applied to reimburse the Debtors
for their costs and expenses incurred in connection with the maintenance of the
Unpaid Claims Reserve and the making of distributions subsequent to the
Effective Date. All earnings in excess of such costs and expenses shall be held
in the Unpaid Claims Reserve and shall be distributed only in the manner set
forth below.
4. When a Disputed Claim becomes an Allowed Claim, the distributions
due on account of such Allowed Claim shall be released from the Unpaid Claims
Reserve and disbursed to the holder of such Allowed Claim. If the objection is
resolved in favor of the Debtors, the funds (including interest) and/or
Reorganized LVL Equity Securities will be distributed Pro Rata among the other
members of the Class to which the Claimant belongs.
VIII. UNCLAIMED PROPERTY
1. Unclaimed Property shall be deposited in the Unpaid Claims
Reserve to be held in trust for the benefit of the holders of Allowed Claims
entitled thereto. For a period of ninety (90) days following each attempted
distribution, Unclaimed Property shall be held in the Unpaid Claims Reserve
solely for the benefit of the holders of Allowed Claims
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
-28-
<PAGE>
which have failed to claim such Property. During such ninety (90) day period,
Unclaimed Property due the holder of an Allowed Claim shall be released from the
Unpaid Claims Reserve and disbursed to such holder upon presentation of proper
proof by such holder of its entitlement thereto.
2. At the end of ninety (90) days after each attempted distribution,
the holders of Allowed Claims entitled to Unclaimed Property shall cease to be
entitled thereto. The Unclaimed Property shall then be treated as a portion of
funds available to pay creditors in the same class as the holder of Allowed
Claims that failed to claim his distribution. Such unclaimed funds shall be
promptly distributed Pro Rata to the other holders of Allowed Claims in the same
class as the holder of Allowed Claims that failed to claim his distribution.
IX. RETENTION, ENFORCEMENT AND WAIVER OF CLAIMS
Debtors shall retain and may enforce claims held by it or its estate
except such claims which have been waived, relinquished, or released in
accordance with this Plan.
X. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
All executory contracts and unexpired leases to which Debtors were parties
at the time the cases commenced will be rejected with the exception of the
executory contracts and unexpired leases listed on Exhibit "B" attached hereto
and incorporated by reference herein. The executory contracts and unexpired
leases listed on Exhibit "B" will be assumed at the Effective Date and assigned
to Reorganized LVL or LVL Subsidiary. The last date to file claims for rejected
contracts and/or unexpired leases shall be 30 days after the Effective Date. Any
entity
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
-29-
<PAGE>
with a claim that arises from the rejection of an executory contract or
unexpired lease shall have the rights of a Class 5 unsecured claimant to the
extent such claim becomes an Allowed Claim in that Class.
XI. TAXES
No representations are made to any party concerning the tax attributes and
affects of this Plan. You are advised to consult your own tax adviser.
XII. REVESTING
Except as provided in the Plan or in the Confirmation Order, on the
Effective Date, Reorganized LVL shall be vested with all the property of
Debtors' estates free and clear of all claims, liens, security interests,
charges and other interests of the creditors arising prior to Confirmation.
XIII. BAR DATE AND NOTICE
1. Pre-Petition Claims: In accordance with Federal Rules of
Bankruptcy Procedure, Rule 3003(c)(3), the Court will establish a bar date as
the last day by which creditors would be permitted to file Proofs of Claim in
this case (the "Bar Date"). Pursuant to Bankruptcy Code Section 502 and Federal
Rules of Bankruptcy Procedure, Rule 3003(c)(2), any creditor whose claim is not
scheduled by Debtors or was scheduled as disputed, contingent or unliquidated,
and who fails to file a Proof of Claim on or before the Bar Date, will not be
treated as a creditor with respect to such claim for purposes of voting on, and
receiving a distribution under, the Plan. Debtors intend to file objections to
all late filed claims and to all duplicate, excessive or otherwise defective
claims.
2. Administrative Claims: Any creditor who has an Administrative
Expense Claim (other than for ordinary business
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
-30-
<PAGE>
expenses payable in the ordinary course and other than professionals) shall file
a proof of claim or application for payment with the Court for such
administrative expenses on or before 45 days after the Effective Date and serve
a copy thereof on Debtors. Administrative Expense Claims filed after the
deadline set forth herein shall be barred and Debtors have no obligation to pay
such late filed claims. This provision specifically excludes administrative
claims of professionals employed in this Bankruptcy Case.
XIV. POST-CONFIRMATION BUSINESS TRANSACTIONS
Reorganized LVL shall have the flexibility to conduct its advertising and
interactive businesses as it deems necessary as long as Reorganized LVL does not
violate provisions of the Plan. Such business conduct may include, but is not
limited to, selling assets, selling equipment, entering into new lease
agreements, purchasing equipment and entering into new contracts. Reorganized
LVL may, at the same time, seek an opportunity for a merger or acquisition.
XV. RETENTION OF JURISDICTION
Notwithstanding Confirmation, the Bankruptcy Court shall retain full
jurisdiction as provided in 28 U.S.C. Section 1334 to enforce the provisions,
purposes, and intent of this Plan including, without limitation:
1. Determination of the allowability and priority of claims and
interests;
2. Determination of requests for payment of claims entitled to
priority under Section 507(a)(1) of the Bankruptcy Code, including compensation
of parties entitled thereto;
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
-31-
<PAGE>
3. Resolution of controversies and disputes regarding interpretation
of this Plan;
4. Implementation of the provisions of this Plan and entry of orders
in aid of Confirmation of this Plan, including, without limitation, appropriate
orders to protect the Debtor from creditor action;
5. Modification of this Plan pursuant to Section 1127 of the
Bankruptcy Code and amendments to this Plan after substantial consummation;
6. Adjudication of any causes of action brought by the Debtor;
7. Any determination or estimation necessary or appropriate under
Section 505 of the Bankruptcy Code or other determination or estimation relating
to tax returns filed or to be filed by the Debtors for periods through the end
of the fiscal year in which the Effective Date occurs, including the
determination of the amount of taxes, net operating losses, tax attributes, tax
benefits, tax refunds, and related matters of the Debtors; and
8. Entry of a final decree closing this case.
XVI. POST-CONFIRMATION NOTICES
In the event it is necessary to provide notice to creditors after the Plan
is confirmed, notice will be mailed only to the following: (1) parties affected
by the noticed action, (2) committees appointed in the case, (3) Debtors, (4)
Reorganized LVL, (5) United States Trustee, and (6) parties requesting special
notice of post-confirmation matters.
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
-32-
<PAGE>
XVII. UTILITIES
All deposits made to utility companies during the pendency of this case
shall be returned to Debtors within fifteen (15) days after the Effective Date
of this Plan.
Date: April 15, 1998
LVL COMMUNICATIONS
CORPORATION
A California Corporation
By: /s/
-------------------------------------
Cal Lai
Chief Executive Officer
LVL ADVERTISING, INC.
A California Corporation
By: /s/
-------------------------------------
Cal Lai
Chief Executive Officer
LVL INTERACTIVE, INC.
A California Corporation
By: /s/
-------------------------------------
Steve Venuti
Chief Executive Officer
LAW OFFICES OF WILLIAM C. LEWIS
By: /s/
---------------------------------------
William C. Lewis
Attorneys for Debtors
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
-33-
<PAGE>
Fujitsu Media Aging
-----------------------------------------------------------------------------------------------------------------
CMP
-----------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
-----------------------------------------------------------------------------------------------------------------
49244 8/7/96 $40,499.78
00376 8/12/96 $7,588.37
00614 8/12/96 $13,587.25
-----------------------------------------------------------------------------------------------------------------
Total $61,675.40 $61,675.40
=================================================================================================================
-----------------------------------------------------------------------------------------------------------------
Ziff-Davis
-----------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
-----------------------------------------------------------------------------------------------------------------
304548001 7/16/96 $20,797.67
304548001A 7/16/96 $8,576.77
305446001A 7/19/96 $8,604.49
305446002 7/19/96 $45,265.29
306417001 7/25/96 $32,779.33
309151001 8/13/96 $16,537.92
310137001 8/19/96 $19,089.92
-----------------------------------------------------------------------------------------------------------------
Total $154,631.39 $154,631.39
=================================================================================================================
-----------------------------------------------------------------------------------------------------------------
McGraw-Hill
-----------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
-----------------------------------------------------------------------------------------------------------------
04615950 7/19/96 $35,309.28
04615996 7/31/96 $73,776.17
04616044 8/15/96 $73,776.17
-----------------------------------------------------------------------------------------------------------------
Total $182,861.62 $182,861.62
=================================================================================================================
-----------------------------------------------------------------------------------------------------------------
Fortune
-----------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
-----------------------------------------------------------------------------------------------------------------
71896 7/18/96 $55,097.56
6424300 7/22/96 $64,145.25
-----------------------------------------------------------------------------------------------------------------
Total $119,242.81 $119,242.81
=================================================================================================================
-----------------------------------------------------------------------------------------------------------------
PC World
-----------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
-----------------------------------------------------------------------------------------------------------------
264507 7/18/96 $9,834.61
264508 7/18/96 $41,097.50
-----------------------------------------------------------------------------------------------------------------
Total $50,932.11 $50,932.11
=================================================================================================================
Page 1
<PAGE>
---------------------------------------------------------------------------------------------------------------
Forbes
---------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
---------------------------------------------------------------------------------------------------------------
48535 8/1/96 $46,827.16
46855 8/16/96 $54,516.58
---------------------------------------------------------------------------------------------------------------
Total $101,343.76 $101,343.76
===============================================================================================================
---------------------------------------------------------------------------------------------------------------
Transportation Media Inc.
---------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
---------------------------------------------------------------------------------------------------------------
004203 8/1/96 $16,352.60
037790 8/1/96 $17,425.00
038200 9/1/96 $11,475.00
038141 9/1/96 $17,425.00
---------------------------------------------------------------------------------------------------------------
Total $62,677.60 $62,677.60
===============================================================================================================
---------------------------------------------------------------------------------------------------------------
Dow Jones & Company, Inc.
---------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
---------------------------------------------------------------------------------------------------------------
24349963 7/31/96 $165,611.95
---------------------------------------------------------------------------------------------------------------
Total $165,611.95 $165,611.95
===============================================================================================================
Total $899,176.64
Current $0.00
30 - Day $0.00
60 - Day $0.00
90+ - Day $899,176.64
Page 2
<PAGE>
S31 Media Aging
---------------------------------------------------------------------------------------------------------------
Ziff-Davis
---------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
---------------------------------------------------------------------------------------------------------------
316210001 9/27/96 $11,493.53
316889001 10/2/96 $33,545.85
321519001 10/28/96 $11,493.63
322890001 11/6/96 $37,273.17
325814001 11/19/96 $6,637.63
316055001 11/20/96 $23,983.06
327422001 11/22/96 $12,621.45
327422002 11/22/96 $5,299.89
327422003 11/22/96 $5,299.89
328098002 11/26/96 $2,793.41
328098001 11/26/96 $2,793.41
328098004 11/26/96 $5,746.76
328098003 11/26/96 $2,793.41
329087001 12/5/96 $7,867.22
329087002 12/5/96 $7,867.22
329087003 12/5/96 $17,290.50
332548002 12/24/96 $5,299.89
332548001 12/24/96 $5,299.89
332548003 12/24/96 $12,621.45
333280003 12/26/96 $2,793.41
333280002 12/26/96 $2,793.41
333280001 12/26/96 $2,793.41
333280004 12/26/96 $5,746.76
335013003 1/9/97 $17,290.50
335013002 1/9/97 $7,867.22
335013001 1/9/97 $7,887.22
336754001 1/22/97 $19,211.67
336636001 1/22/97 $12,621.45
338361001 1/28/97 $6,047.71
341871001 2/18/97 $19,211.67
---------------------------------------------------------------------------------------------------------------
Total $0.00 $19,21l.67 $303,053.92 $322,265.59
===============================================================================================================
Page 1
<PAGE>
-----------------------------------------------------------------------------------------------------------------------------
PC World
-----------------------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
-----------------------------------------------------------------------------------------------------------------------------
279615 9/25/96 $31,450.00
292754 11/26/96 $15,725.00
298253 12/20/96 $17,061.63
-----------------------------------------------------------------------------------------------------------------------------
Total $0.00 $0.00 $64,236.63 $64,236.63
=============================================================================================================================
-----------------------------------------------------------------------------------------------------------------------------
Wired
-----------------------------------------------------------------------------------------------------------------------------
Invoice # Current 30 - Day 60 - Day 90+ - Day Total
-----------------------------------------------------------------------------------------------------------------------------
961023 9/5/96 $18,188.86
961424 11/7/96 $31,527.35
970153 12/9/96 $35,735.70
-----------------------------------------------------------------------------------------------------------------------------
Total $85,451.91 $85,451.91
=============================================================================================================================
-----------------------------------------------------------------------------------------------------------------------------
Addicted To Noise
-----------------------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
-----------------------------------------------------------------------------------------------------------------------------
212005 10/7/96 $5,100.00
301001 12/3/96 $5,100.00
-----------------------------------------------------------------------------------------------------------------------------
Total $10,200.00 $10,200.00
=============================================================================================================================
-----------------------------------------------------------------------------------------------------------------------------
Rolling Stone
-----------------------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60- Day 90+ - Day Total
-----------------------------------------------------------------------------------------------------------------------------
34399 9/9/96 $92,310.00
34980 11/4/96 $40,273.00
35521 12/2/96 $46,155.00
-----------------------------------------------------------------------------------------------------------------------------
Total $178,738.00 $178,738.00
=============================================================================================================================
-----------------------------------------------------------------------------------------------------------------------------
Jumbo
-----------------------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60- Day 90+ - Day Total
-----------------------------------------------------------------------------------------------------------------------------
269 10/31/96 $5,950.00
289 11/30/96 $5,950.00
318 1/3/97 $5,950.00
-----------------------------------------------------------------------------------------------------------------------------
Total $0.00 $17,850.00 $17,850.00
=============================================================================================================================
Page 2
<PAGE>
------------------------------------------------------------------------------------------------------------------------
Sports Illustrated
------------------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
------------------------------------------------------------------------------------------------------------------------
6562230 10/14/96 $101,904.38
6655200 11/25/96 $50,952.19
6744390 1/27/97 $53,518.12
------------------------------------------------------------------------------------------------------------------------
Total $0.00 $206,374.69 $206,374.69
========================================================================================================================
------------------------------------------------------------------------------------------------------------------------
Popular Science
------------------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
------------------------------------------------------------------------------------------------------------------------
4308740 11/10/96 $30,481.00
4336640 1/10/97 $28,751.20
------------------------------------------------------------------------------------------------------------------------
Total $0.00 $59,232.20 $59,232.20
========================================================================================================================
------------------------------------------------------------------------------------------------------------------------
Spotmedia Communications
------------------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
------------------------------------------------------------------------------------------------------------------------
247 11/1/96 $3,188.00
277 12/1/96 $3,188.00
332 1/1/97 $3,188.00
------------------------------------------------------------------------------------------------------------------------
Total $0.00 $9,564.00 $9,564.00
========================================================================================================================
------------------------------------------------------------------------------------------------------------------------
CNET: The Computer Network
------------------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
------------------------------------------------------------------------------------------------------------------------
6206 11/30/96 $12,112.50
6207 11/30/96 $12,112.50
6272 1/13/97 $12,112.50
6290 1/31/97 $12,112.50
------------------------------------------------------------------------------------------------------------------------
Total 30 - Day $0.00 $48,450.00 $48,450.00
========================================================================================================================
------------------------------------------------------------------------------------------------------------------------
KNDD
------------------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
------------------------------------------------------------------------------------------------------------------------
36784501 12/24/96 $10,132.00
------------------------------------------------------------------------------------------------------------------------
Total $10,132.00 $10,132.00
========================================================================================================================
------------------------------------------------------------------------------------------------------------------------
KUBE-FM
------------------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
------------------------------------------------------------------------------------------------------------------------
54640601 12/29/96 $11,288.00
------------------------------------------------------------------------------------------------------------------------
Total $11,288.00 $11,288.00
========================================================================================================================
Page 3
<PAGE>
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
-------------------------------------------------------------------------------------------------------------------
110105 11/30/96 $2,592.50
120055 12/22/96 $8,457.50
-------------------------------------------------------------------------------------------------------------------
Total $11,050.00 $11,050.00
===================================================================================================================
-------------------------------------------------------------------------------------------------------------------
Audio House Inc.
-------------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
-------------------------------------------------------------------------------------------------------------------
612192 12/22/96 $9,010.00
-------------------------------------------------------------------------------------------------------------------
Total $9,010.00 $9,010.00
===================================================================================================================
-------------------------------------------------------------------------------------------------------------------
KIIS FM
-------------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
-------------------------------------------------------------------------------------------------------------------
120100 12/29/96 $15,470.00
-------------------------------------------------------------------------------------------------------------------
Total $15,470.00 $15,470.00
===================================================================================================================
-------------------------------------------------------------------------------------------------------------------
KFOG
-------------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
-------------------------------------------------------------------------------------------------------------------
120184 12/29/96 $11,220.00
-------------------------------------------------------------------------------------------------------------------
Total $11,220.00 $11,220.00
===================================================================================================================
-------------------------------------------------------------------------------------------------------------------
KISW
-------------------------------------------------------------------------------------------------------------------
Invoice # Dale Current 30 - Day 60 - Day 90+ - Day Total
-------------------------------------------------------------------------------------------------------------------
30413801 12/22/96 $15,096.00
-------------------------------------------------------------------------------------------------------------------
Total $15,096.00 $15,096.00
===================================================================================================================
-------------------------------------------------------------------------------------------------------------------
KYLD
-------------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
-------------------------------------------------------------------------------------------------------------------
120090 12/29/96 $2,585.00
-------------------------------------------------------------------------------------------------------------------
Total $2,585.00 $2,585.00
===================================================================================================================
Page 4
<PAGE>
----------------------------------------------------------------------------------------------------------------------
KMEL
----------------------------------------------------------------------------------------------------------------------
Invoice # Date Current 30 - Day 60 - Day 90+ - Day Total
----------------------------------------------------------------------------------------------------------------------
120169 12/29/96 $6,375.50
----------------------------------------------------------------------------------------------------------------------
Total $6,375.50 $6,375.50
======================================================================================================================
Total $1,094,589.52
Current $0.00
30 - Day $0.00
60 - Day $19,211.67
90+ - Day $1,075,377.85
Page 5
<PAGE>
LEASE COMPANIES 10/30/97
Lease #/
COMPANY CONTACT/TITLE ADDRESS/PHONE AMOUNT OWED
AT&T Capitol Corp Kathy Sanchez 800-835-5699 x6245 $8,914.12
(Syquest, Quantum hard P.O. Box 85047 #00394847
drives/Quark software) Louisville, KY 40285 #00314014
AT& T Credit
Corporation P.O. Box 85340 about $12,000
(Merlin Legend voice Louisville, KY 40285 10044W207626-
mail system, accessories) Attn: Frank Taylor 00011, 00020,
00030, 00040,
00050, 00060,
00080, 00090,
00100, 00110,
00140
Copelco Steve Russell 609-231-9600 x 4103 $10,016.32
(Office Furniture) P.O. Box 8500-1700 #0546910
Philadelphia, PA 19178 #0427760
Goodman & Metz
(legal for 16000 Ventura Blvd., Ste. 905
Copelco) Encino, CA 91436
818-386-2889
Attn: Jordan Metz
Dana Commercial Darryl Bo 201 Big Beaver Road $17,414.27
(Duos, docking station, P.O. Box 7100 #334788
Mac computers, monitors) Troy, MI 48007 #340359
Juke box, Pinnacle OPT Attn: Darrell Bowe
disk, Phaser printer) Ph: 800-821-3921
<PAGE>
Lease #/
COMPANY CONTACT/TITLE ADDRESS/PHONE AMOUNT OWED
Greentree Vendor Vicki Maulner P.O. Box 6167 $3,515.91
Services (formerly Carol Stream, IL 60197
Cambridge) 201-712-3566 $3,798.96
(Sun Sparc station, #7191107
CD ROM drive, peripherals #7191906
for workstation)
IKON Office Jean Bell 510-988-4245 $19,431.25
(formerly Alco) #6583116001
(Canon Color copier, Lease 19058
Flery)
(Payment) File #73004
P.O. Box 60000
San Francisco, CA 94160-3004
(Correspondence) 1550 Parkside Dr.
Walnut Creek, CA 94596
LeaseTec Elaine Stuart 1401 Pearl Street $5,483.61
(Sun Ultra 170 Boulder, CO 80302 #CA4009
computer, upgrades, 303-443-8064 #L5503
Netscape server,
critical network gear)
Lucent Technologies Maggie Fields American Bureau of $9787.19
(voice mail add-on) Collections West, Inc #00181557463
(collections) 2500 Red Hill Avenue File#742-690
Suite 200
Santa Ana, CA 92705-9946
Ph: 714-261-1146
<PAGE>
Fax: 714-281-9149
Lease #/
COMPANY CONTACT/TITLE ADDRESS/PHONE AMOUNT OWED
Lucent Hal Glassberg Glassberg, Pollack & Auerbach
Technologies 44 Montgomery St. Ste 1660
(legal) San Francisco, CA 94104
Ph: 415-291-8320
Fax: 415-219-8111
Lucent Technologies P.O. Box 10193
Van Nuys, CA 91410-0193
800-247-700
Manifest Group Deb Johnson P.O. Box 5179 $10,016.32
(5 Quadras, Mac7100s,) Sioux Falls, SD 57117 #502859
9 monitors, keyboards, 800-325-2236 x3249
external drives, etc.)
Rockford
Industries Eric Treanor 800-736-0220 $11,374.90
(Lasermaster printer) 1055 Westlakes Drive #24120283
(collections) Berwyn, PA 19312 or #13719
Rockford Industries 800-736-02200
P.O. Box 105819
Atlanta, GA 30348-5819
* NOTE: Dollar amounts shown for leases are figures the lease companies--these
include accelerated payments FOR ENTIRE LEASES, LATE CHARGES AND OTHER AMOUNTS
THEY SAY NEED TO BE PAID TO REINSTATED LEASES.
<PAGE>
12/19/97 Rental Agremeent #/ PERSONAL GUARANTEE/
COMPANY CONTACT/TITLE ADDRESS/PHONE AMOUNT OWED KEEP OR RETURN EQUIP.
Xerox Corporation Western Admin Center Cust. #691901417 No guarantee: rental,
(color copier, Fiery, P.O. Box 25074 Keep equipment.
2 B&W copiers) Santa Ana, CA 92799
<PAGE>
LVL Communications lease for space at 499 Cowper Street, Palo Alto, CA,
from RRC Partners, a California limited liability company
LVL Communications lease for space at 1546 7th Street, Santa Monica,
CA, from 7th Street Partners, Ltd., a California Limited Partnership
Agreement to Assume Lease dated December 9, 1997 between LVL
Communications Corporation and Steelcase, Inc., for an assignment of the 499
Cowper Street Lease, and all related agreements
Exclusive Authorization and Right to Lease with Wayne Mascia and
Associates dated August 28, 1997, as amended by letter dated November 13, 1997
Agreement to Engage Mackenzie Shea, Inc. as Business Consultants for
LVL Communications, Inc., effective as of September 9, 1997, as amended by the
Plan
401(k) Plan
Accrued vacation pay and other employee benefits for employees who are
employed by the Debtors as of the date of commencement of the Chapter 11 Cases
Hartford Ins. Co. of the Midwest Package Policy #57UUCFH1184
Hartford Casualty Co. Umbrella Policy #57XHUYZ9729
Hartford Fire Ins. Co. Package Policy #57SBAEN8572
Hartford Casualty Co. Umbrella Policy #57XHUXK9788
State Fund Workers' Compensation Policy #1463048