-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sro108FABrZlUdDcj9ZDamfK1QzhmVpGggHVzV9vWHpuHihOTckyP0+32KlfBjfs eWMGrNodRBnhcD6X+gtRSA== 0000903423-96-000088.txt : 19960830 0000903423-96-000088.hdr.sgml : 19960830 ACCESSION NUMBER: 0000903423-96-000088 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960814 ITEM INFORMATION: Bankruptcy or receivership ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960829 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPECTRUM INFORMATION TECHNOLOGIES INC CENTRAL INDEX KEY: 0000812551 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 751940923 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15596 FILM NUMBER: 96622688 BUSINESS ADDRESS: STREET 1: 2700 WESTCHESTER AVE CITY: PURCHASE STATE: NY ZIP: 10577 BUSINESS PHONE: 9142511800 MAIL ADDRESS: STREET 1: 2700 WESTCHESTER AVE. CITY: PURCHASE STATE: NY ZIP: 10577 FORMER COMPANY: FORMER CONFORMED NAME: SPECTRUM CELLULAR CORP DATE OF NAME CHANGE: 19890925 FORMER COMPANY: FORMER CONFORMED NAME: SPECTRUM CELLULAR COMMUNICATIONS CORP DATE OF NAME CHANGE: 19870715 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) August 14, 1996 Spectrum Information Technologies, Inc. (Exact name of registrant as specified in its charter) Delaware 0-15596 75-1940923 (State or other (Commission I.R.S. Employer jurisdiction of File Number) Identification No.) incorporation or organization 2700 Westchester Avenue, Purchase, New York 10577 (Address of principal executive offices) Registrant's telephone number, including area code (914) 251-1800 (Former name or former address, if changed since last report) Item 3. Bankruptcy or Receivership On August 14, 1996, the United States Bankruptcy Court of the Eastern District of New York entered an order confirming the Third Amended Consolidated Plan of Reorganization, as amended, proposed by Spectrum Information Technologies, Inc. and Spectrum Cellular (the "Plan"). Consummation of the Plan and its Effective Date remain contingent upon District Court approval of the Class Action Settlement (See Plan Contingencies). A copy of the Plan is incorporated by reference herein. The Plan Some of the statements in this report regarding consummation of the Plan are not historical facts and may be considered "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Consummation of the Plan is contingent upon final District Court approval of the Class Action Settlement (as defined below). If the District Court does not approve the Class Action Settlement and the Plan is not consummated, alternatives include: (a) continuation of the pending Chapter 11 cases; (b) alternative plans of reorganization; or (c) liquidation of Debtors under Chapter 7 or Chapter 11 of the Bankruptcy Code. A discussion of the Company's operating risks is included in the Company's most recent Annual Report on Form 10-K. The Plan, if consummated, will settle all material litigation now pending and provide all general unsecured creditors with 100% of the value of their claims plus 6% interest per annum from the filing date thereon. The Company has segregated approximately $3.5 million for the payment of general unsecured claims, the priority non-tax claim and the Company's cash contribution to the settlement of the class action lawsuits. To date, the Company has reconciled the majority of the general unsecured creditor claims, with interest, in the amount of approximately $2.6 million. Several outstanding claims remain that the Company is attempting to reconcile before the effective date of the Plan (the "Effective Date"). The Company does not believe that the reconciliation of such claims will have a material effect on the reserve established for payment to unsecured creditors. The Plan also provides for the payment of approximately $264,000 on the Effective Date to the holder of the one priority nontax claim filed against Spectrum. The Plan will also settle all of the class action lawsuits filed against the Company by the payment of $250,000 by the Company (the "Class Action Settlement") and the delivery of approximately 45% of the equity ownership in reorganized Spectrum to a trustee to be distributed to the members of the class. Under the terms of the Plan, existing shareholders will be substantially diluted but 1 should obtain the majority of the 45% equity ownership in reorganized Spectrum set aside for such shareholders and certain creditors. This should hold true based on Spectrum's current market value even after the issuance of $300,000 of stock to the Chapter 7 trustee of Computer Bay in connection with the recent settlement of his claim. Holders of allowed administrative claims (as agreed upon or ordered by the Bankruptcy Court) will be paid in full under the Plan. The Company intends to seek a waiver of accrued professional fees that to date have been held back by the Bankruptcy Court. There can be no assurance, however, that the Company will be successful in obtaining such waiver. The Company will amend its certificate of incorporation and by-laws on the Effective Date. The Amended Certificate contains certain provisions affecting the rights of shareholders, corporate governance, and the transferability of Class A Preferred Stock and Reorganized Spectrum Common Stock (as defined below). Under the amended certificate of incorporation, the authorized capital stock of the Company shall be comprised of (i) 10 million shares of reorganized Spectrum common stock ("Reorganized Spectrum Common Stock"), (ii) 1.5 million shares of Class A preferred stock reserved for issuance in connection with the Class Action Settlement ("Class A Preferred Stock") and (iii) 2 million shares of preferred stock ("Preferred Stock"). A description of the amount of shares that will be issued within each class is set forth below. Issued and outstanding shares of the Company's common stock will be canceled on the Effective Date and replaced with one (1) share of Reorganized Spectrum Common Stock for each seventy-five (75) shares of existing common stock. The Company currently has authorized 110 million shares of common stock, of which approximately 76.7 million are issued and outstanding. Therefore, approximately 1 million shares of Reorganized Spectrum Common Stock will be issued to existing shareholders on the Effective Date. An additional $300,000 of Reorganized Spectrum Common Stock will be issued to the Computer Bay trustee in connection with the settlement of his claim (collectively, the Reorganized Spectrum Common Stock issued to existing shareholders and the Computer Bay trustee is defined as "Distributable Common Stock"). Stock options issued under the Company's existing stock option plans will also be reverse split at a 75 to 1 ratio and the exercise price adjusted accordingly. Pursuant to the Class Action Settlement, the Company will issue a number of shares of Class A Preferred Stock equal to the number of shares of Distributable Common Stock. The Class A Preferred Stock is convertible to Reorganized Spectrum Common Stock at any time within two years of its date of issuance and automatically converts to Reorganized Spectrum Common Stock at the expiration of two years. 2 As part of a bonus or success fee to employees, officers and all non-executive directors for confirming a plan of reorganization, the Company will also issue Reorganized Spectrum Common stock pursuant to the two incentive compensation programs described in the Plan, the Spectrum 1996 Stock Incentive Plan and the Spectrum 1996 Incentive Deferral Plan, which collectively authorize the issuance of an aggregate number of shares of Reorganized Spectrum Common Stock equal to one-ninth (1/9) of the aggregate number of shares of Distributable Common Stock and Class A Preferred Stock (i.e., 10% of the reorganized equity ownership) to directors, officers and employees of the Company on the Effective Date. Except for 300 shares of Reorganized Spectrum Common Stock that will be distributed to directors on the Effective Date, the distribution of stock to directors, officers and employees pursuant to such incentive programs shall be distributed in three equal installments. The first installment shall be distributed during the three day period commencing three days after Reorganized Spectrum files its Quarterly Report on Form 10-Q for its fiscal quarter ending June 30, 1997; the second installment shall be distributed during the three day period commencing three days after Reorganized Spectrum files its Quarterly Report on Form 10-Q for its fiscal quarter ending December 31, 1997; and the third installment shall be distributed during the three day period commencing three days after Reorganized Spectrum files its Quarterly Report on Form 10-Q for its fiscal quarter ending June 30, 1998. Under the Stock Incentive Plan, employees, officers and directors will also be eligible to receive future grants of performance based incentive awards with respect to an aggregate number of shares equal to an additional one-ninth (1/9) of the aggregate number of shares of Distributable Common Stock and Class A Preferred Stock. Also, on the Effective Date, the Company will distribute a $300,000 success bonus among all employees. Consummation of the Plan does not contemplate issuance of the remainder of the 10 million authorized shares of Reorganized Spectrum Common Stock, the remainder of the 1.5 million shares of Class A Preferred Stock, or the 2 million shares of authorized preferred stock. The details of the Plan, the proposed recapitalization, and copies of the certificate of incorporation and by-laws are set forth in detail in the Plan and associated Disclosure Statement, which the Company filed with the SEC on its Current Report on Form 8-K dated as of March 26, 1996. Plan Contingencies On July 21, 1995, The Home Insurance Company of Illinois ("The Home"), the Company's former directors' and officers' primary insurance carrier, commenced an adversary proceeding (the "Home Action") in the Company's bankruptcy proceeding. The Honorable Frederick Block, United States District Judge of the District Court, subsequently withdrew the reference with respect 3 to the Home Action such that the litigation is now pending before him. The Home sought to rescind a renewal of a directors' and officers' liability and company reimbursement policy issued in June 1993 to the Company for the benefit of its directors and officers (the "Renewal Policy") and alleged certain material misrepresentations and/or omissions in the application for the Renewal Policy. The Home also sought a declaration that coverage is not afforded under the Renewal Policy for the claims made against the policy by the Company and certain of its officers and directors. In addition to the primary policy, the Company obtained three excess policies for the insurance year at issue in the Home Action. Two of the excess carriers, the Agricultural Excess and Surplus Insurance Company ("AESIC") and The Aetna Casualty and Surety Company ("Aetna") have intervened in the Home Action. AESIC has agreed to be bound by any final judicial resolution regarding The Home (a similar agreement was previously reached with the third excess carrier) and is no longer actively participating in the Home Action. The District Court heard the trial in the Home Action on February 28 and 29, 1996 and issued a decision on July 15, 1996. On July 15, 1996, the District Court ruled against the insurance carriers in their attempt to rescind the directors' and officers' insurance policies at issue in the Home Action. The Court also ruled that any losses in the Class Action Suits related to Spectrum's February 1994 restatement of earnings would be covered by the policies at issue. The Court concluded that it could not decide, based on the record before it, whether the policies at issue would cover claims in the Class Action Suits related to alleged insider trading by certain of the Company's former officers and alleged misstatements regarding John Sculley's employment with the Company. Home and Aetna have informed the Company that they intend to appeal certain aspects of the decision. Notwithstanding this intended appeal, the parties to the Class Action Suits and the insurance carriers have tentatively reached an agreement to implement the Class Action Settlement. Under this agreement, each insurance carrier has agreed to contribute the full coverage available under its disputed insurance policy, up to $6 million, if they are unsuccessful in the appeal. This agreement to implement the Class Action Settlement remains subject to the completion and execution of a definitive agreement. The Class Action Settlement also remains contingent upon several factors, including completion and execution of a definitive agreement, consummation of the Plan and District Court approval. The Plan will be consummated after District Court approval of the Class Action Settlement becomes final. The District Court 4 has scheduled a hearing on this proceeding for November 25, 1996. Financial Information The following unaudited balance sheet is reported on a historical basis. The Company has not adopted "Fresh-Start Accounting" as defined in AICPA Statement of Position "SOP" No. 90-7 because there is a material unsatisfied condition precedent to the consummation of the Plan. Following consummation of the Plan, the Company will adopt the "Fresh-Start" accounting rules if both of the following criteria as defined in the SOP are met: a. The reorganization value of the assets of the emerging entity immediately before the date of consummation is less than the total of all postpetition liabilities and allowed claims; and b. The holders of existing voting shares immediately before consummation receive less than 50% of the voting shares of the emerging entity. 5 Spectrum Information Technologies, Inc. and Subsidiaries (Debtors in Possession) Consolidated Balance Sheets (Amounts in thousands) Assets July 31, 1996 (Unaudited) Current assets: Cash and cash equivalents $10,929 Marketable securities 789 Accounts receivable (net of allowance for doubtful accounts of $80) 745 Prepaid expenses and other current assets 491 ------- Total current assets 12,954 ------- Furniture, fixtures and equipment 471 ------- 471 Less - accumulated depreciation (255) ------- Net property and equipment 216 ------- Intangible assets, net 351 ------- Total assets $13,521 ======= 6 Spectrum Information Technologies, Inc. and Subsidiaries (Debtors in Possession) Consolidated Balance Sheets (Amounts in thousands) Liabilities and Stockholders' Equity July 31, 1996 (Unaudited) Current Liabilities Accounts payable $ 2,910 Accrued liabilities 578 ------- Total current liabilities 3,488 ------- Liabilities subject to compromise: Accounts payable and accrued liabilities 1,455 Reserve for litigation 4,719 Reserve for restructuring 1,972 Net liabilities of discontinued operations 531 Other liabilities 185 ------- Total liabilities subject to compromise 8,862 ------- Total liabilities 12,350 ------- Commitments and contingencies Stockholders' Equity: Common stock, $.001 par value, 110,000 shares authorized, 76,675 issued, respectively 77 Paid-in capital 63,961 Accumulated deficit (62,404) ------- 1,634 Treasury stock, 100 shares at cost (300) Unrealized loss on marketable securities (163) ------- Total stockholders' equity 1,171 ------- Total liabilities and stockholders' equity $13,521 ======= 7 Item 7. Financial Statements and Exhibits. (b) The following documents are filed as part of this Current Report on Form 8-K: 1. Consolidated Balance Sheet is filed as a part of this report in Item 3. (c) Exhibits. Exhibit No. Description 2 Plan of Reorganization Proposed by Spectrum Information Technologies, Inc. and Spectrum Cellular Corporation, dated as of March 18, 1996 was previously filed as an exhibit to the Company's Current Report on Form 8-K filed March 26 1996, and incorporated herein by reference. 27 Financial Data Schedule 99 Amendment to Plan of Reorganization Proposed by Spectrum Information Technologies, Inc. and Spectrum Cellular Corporation, dated as of March 18, 1996. 8 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. Dated: August 26, 1996 SPECTRUM INFORMATION TECHNOLOGIES, INC. By /s/ Donald J. Amoruso ----------------------------------- Donald J. Amoruso President, Chief Executive Officer and Chairman of the Board of Directors By /s/ Barry J. Hintze ----------------------------------- Barry J. Hintze Controller and Principal Accounting Officer 9 EXHIBIT INDEX Exhibit No. Description 2 Plan of Reorganization Proposed by Spectrum Information Technologies, Inc. and Spectrum Cellular Corporation, dated as of March 18, 1996 was previously filed as an exhibit to the Company's Current Report on Form 8-K filed March 26 1996, and incorporated herein by reference. 27 Financial Data Schedule 99 Amendment to Plan of Reorganization Proposed by Spectrum Information Technologies, Inc. and Spectrum Cellular Corporation, dated as of March 18, 1996. 10 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SPECTRUM INFORMATION TECHNOLOGIES, INC. AND SUBSIDIARIES (DEBTORS IN POSSESSION) UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 4-MOS JUL-31-1996 MAR-31-1997 10,929 789 825 80 0 12,954 471 255 13,521 3,488 0 0 0 77 1,171 13,521 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-99 3 Return Date: August 14, 1996 Time: 11:00 a.m. UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NEW YORK - ---------------------------------------X Chapter 11 Case Nos. 195 10690 260 In re : 195 10693 260 SPECTRUM INFORMATION : TECHNOLOGIES, INC., and SPECTRUM : CELLULAR CORPORATION (Substantively Consolidated), : Debtors. : - ---------------------------------------X NOTICE RESPECTING AMENDMENT OF THIRD AMENDED PLAN OF REORGANIZATION --------------------------------------- PLEASE TAKE NOTICE that in accordance with sections VII(B) and XII(A) of the third amended consolidated plan of reorganization (the "Plan") proposed by Spectrum Information Technologies, Inc. ("Spectrum") and Spectrum Cellular Corporation ("Cellular," and collectively with Spectrum, the "Debtors") the Debtors will seek confirmation of the Plan with the following modifications: 1. Section VII(A)(2) is amended to make entry of a final order of the District Court granting the Class Action Settlement Motion (as defined in the Plan) a condition precedent to consummation of the Plan, rather than a condition precedent to confirmation of the Plan. 2. Section VII(A)(3) is modified so that to the extent that it makes entry of a final order in the Home Action Litigation a condition precedent to confirmation, such condition is waived. Dated: New York, New York August 8, 1996 CLEARY, GOTTLIEB, STEEN & HAMILTON By /s/ George Weisz ------------------------ George Weisz (GW-7120) A Member of the Firm One Liberty Plaza New York, New York 10006 (212) 225-2000 Attorneys for Debtors and Debtors in Possession Spectrum Information Technologies, Inc. et al. -- --- 2 -----END PRIVACY-ENHANCED MESSAGE-----