EXHIBIT 10.3
GUC DISTRIBUTION
AGREEMENT
BETWEEN
XYBERNAUT
CORPORATION,
XYBERNAUT SOLUTIONS,
INC.
AND
HOWARD S.
COHEN
DATED AS OF NOVEMBER
__, 2006
1
GUC DISTRIBUTION
AGREEMENT
PREAMBLE
This Agreement (the
“Agreement”) is made as of this
day of November, 2006, by and
among Xybernaut Corporation and Xybernaut Solutions, Inc., as
reorganized and merged by the confirmed Plan (as that term is
defined herein) and pursuant to State law
(“Xybernaut”), on the one hand, and Howard S. Cohen
(the “GUC Representative”) on the other. Capitalized
terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Debtors’ Amended Joint Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code, dated
October 11, 2006, as may be further modified by order of the
Bankruptcy Court (the “Plan”). Notwithstanding the date
of execution, this Agreement shall only become effective on the
Effective Date.
RECITALS
WHEREAS, on July 25, 2005,
Xybernaut Corporation and Xybernaut Solutions, Inc. (the
“Debtors”) each filed a voluntary petition for relief
under chapter 11 of the Bankruptcy Code, in the Bankruptcy Court;
and
WHEREAS, on October 11, 2006,
the Debtor filed the Plan with the Bankruptcy Court; and
WHEREAS, on November
, 2006, the Bankruptcy Court
entered an Order confirming the Plan; and
WHEREAS, pursuant to, and upon the
Effective Date of, the Plan, the Debtors’ property and assets
shall vest in the Reorganized Debtors pursuant to the terms of the
Plan;
WHEREAS, as provided for in the Plan,
Mr. Cohen shall be the GUC Representative; and
NOW, THEREFORE, in consideration of
the foregoing and the covenants and agreements set forth herein,
the parties hereto agree as follows:
ARTICLE
I
DEFINITIONS
Section 1.1
Plan Definitions . To the extent an initially capitalized
term is not otherwise defined herein, such term shall have the
meaning set forth in the Plan.
Section 1.2
Defined Terms . As used herein, the terms below shall have
the following meanings:
(a) “Administrative
Reserve” has the meaning set forth in
Sections 3.1(a)(ii) and 3.3 hereof.
(b) “Agreement” has
the meaning set forth in the Preamble.
(c) “Catch-Up
Distribution” has the meaning set forth in
Section 3.2(c) herein.
(d) “Debtors” has
the meaning set forth in the Preamble.
(e) “Disputed Claims
Reserve” has the meaning set forth in Sections 3.1(a)(i)
and 3.2 herein.
(f) “Distributions”
has the meaning set forth in Section 3.1(a) herein.
(g) “GUC
Representative” has the meaning set forth in the Preamble and
as set forth in Section 1.41 of the Plan.
(h) “Initial
Distribution” means, with respect to an Allowed General
Unsecured Claim, the first distribution of Cash made on account of
such Allowed General Unsecured Claim to the holder thereof.
(i) “Indemnified
Parties” has the meaning set forth in Section 5.6
hereof.
(j) “One-Year
Period” has the meaning set forth in Section 3.4(a)
hereof.
(k) “Plan” has the
meaning set forth in the Preamble.
(l) “Plan
Documents” means any documents, agreements, orders or
instruments evidencing or implementing the Plan, including without
limitation this Agreement, the Plan, the Confirmation Order and
documents contained in the Plan Supplement.
(m) “Reserves” has
the meaning set forth in Section 3.1(a) herein.
(n) “Supplemental
Distribution” means, on each Distribution Date, the amount of
Available Cash to be distributed to holders of Allowed General
Unsecured Claims under the Plan.
(o) “Unclaimed
Property” has the meaning set forth in Section 3.4(a)
herein.
(p) “Unclaimed Property
Reserve” has the meaning set forth in Section 3.4(a)
herein.
(q) “Underfunded
Reserve” means any of the Reserves in which there are
insufficient funds to pay operating expenses or Allowed General
Unsecured Claims which should have been paid from such
Reserves.
ARTICLE
II
ACCEPTANCE OF
POSITIONS AND OBLIGATION TO PAY CLAIMS
Section 2.1
Acceptance . (a) Howard S. Cohen accepts employment as
the GUC Representative of the Debtors’ estates, for the
purposes more fully set forth in the Plan and herein below and
implementing the Plan; (b) Howard S. Cohen agrees to observe
and perform all duties and obligations imposed upon the GUC
Representative (as GUC Representative of the Debtors’
estates) under this Agreement, the Plan, orders of the Bankruptcy
Court and applicable law; and (c) Howard S. Cohen hereby discloses
that he is a principal of Parente Randolph, LLC, the financial
advisors of the Creditors’ Committee and may use Parente
Randolph, LLC to assist him in the discharge of his duties
hereunder.
Section 2.2
Payment of Claims . Howard S. Cohen, solely in his capacity
as the GUC Representative, agrees to pay from the GUC Distribution
Fund all Allowed General Unsecured Claims in accordance with the
terms and conditions of the Plan, and orders of the Bankruptcy
Court, including the Confirmation Order, and this Agreement. The
GUC Representative shall be the only authorized signatory and
disbursement agent in respect of the GUC Distribution Fund.
ARTICLE
III
ADMINISTRATION
Section 3.1
Establishment and Maintenance of Reserves and Escrows .
(a) Initial Establishment
of Accounts and Reserves . On the Effective Date or as soon
thereafter as practicable, the GUC Representative shall establish
the GUC Distribution Fund, (A) into which shall be deposited the
initial distribution of the $175,000.00 provided by the ERC Term
Loan, any portion of the proceeds from the Litigation Fund in
accordance with Section 5.2 of the Plan, and proceeds from the
GUC Subordinated Plan Note, in accordance with Section 5.4 of
the Plan, and (B) from which shall be made all distributions
(“Distributions”) (1) on the Initial Distribution
Date on account of General Unsecured Claims that were Allowed
Claims on or before the Effective Date, and (2) on each
subsequent Distribution Date. Further, the GUC Representative shall
establish the following reserves with the amounts in the GUC
Distribution Fund (the “Reserves”):
(i) Disputed Claims
Reserve . An allocation of an amount in the GUC Distribution
Fund, designated as a “disputed claims reserve,” as
described more fully in Section 3.2 below (the “Disputed
Claims Reserve”).
(ii) Administrative
Reserve . An allocation of an amount in the GUC Distribution
Fund, designated as an “Administrative Reserve,” as
described more fully in Section 3.3 below (the
“Administrative Reserve”).
(b) Subsequent
Establishment of Accounts. Reserves and Escrows . On or after
the Effective Date, the GUC Representative (i) shall establish
and maintain an Unclaimed Distributions Reserve as defined in
Section 3.4 of the Agreement and such additional accounts,
reserves and escrows as may be required by applicable law or by
order of the Bankruptcy Court and (ii) may establish and
maintain such additional accounts, reserves and escrows as it deems
necessary or desirable to carry out the provisions of the Plan and
the Agreement.
(c) Underfunding and
Overfunding of Reserves . To the extent that the provisions of
this Agreement require the GUC Representative to fund a Reserve or
to transfer Cash to any Underfunded Reserve and there does not
exist sufficient Cash to fully fund all Reserves, the GUC
Representative shall fund the Reserves and/or the Underfunded
Reserve as it deems appropriate and in the best interests of the
General Unsecured Creditors.
Section 3.2
Disputed Claims Reserve .
(a) On the Effective Date (or
as soon thereafter as is practicable) and from time to time
thereafter, including on each Distribution Date, the GUC
Representative shall allocate funds within the GUC Distribution
Fund to the Disputed Claims Reserve with an amount estimated by the
GUC Representative as necessary to satisfy the pro-rata share of
the Distributions to which holders of Disputed General Unsecured
Claims would be entitled under the Plan as of such date if such
Disputed General Unsecured Claims were Allowed Claims in their
Disputed Claim amount; provided, however, that the GUC
Representative on behalf of the Debtors’ estates may, at any
time, file motion(s) pursuant to section 502(c) of the Bankruptcy
Code for order(s) estimating and limiting the amount of Cash which
shall be deposited in the Disputed Claims Reserve in respect of any
Disputed General Unsecured Claims, with notice and an opportunity
to be heard to the affected holders of such Disputed General
Unsecured Claims.
(b) From time to time and in
any event on each Distribution Date, the GUC Representative shall
determine the amount of Cash required to adequately maintain the
Disputed Claims Reserve on and after such date and maintain a
reserve of Cash in such amount. If, and to the extent that, after
making and giving effect to the determination referred to in the
immediately preceding sentence and the distributions described
below, the GUC Representative determines that the Disputed Claims
Reserve: (i) contains Cash in an amount in excess of the
amount then required to adequately maintain the Disputed Claims
Reserve, then at any such time the GUC Representative shall
allocate such surplus Cash, first, to any Underfunded Reserve (but
only to the extent of any underfunding) and, next, to the GUC
Distribution Fund, or (ii) does not contain Cash in an amount
sufficient to adequately maintain the Disputed Claims Reserve, then
at any such time the GUC Representative shall allocate Cash from
any overfunded Reserve until the deficit in the Disputed Claims
Reserve is eliminated.
(c) After a final order has
been entered, or other final resolution has been reached, with
respect to any given Disputed General Unsecured Claim for which
Cash was reserved in the Disputed Claims Reserve, the balance, if
any, of Cash remaining in the Disputed Claims Reserve on account of
such Disputed General Unsecured Claim after making any Initial
Distribution or such later distribution to make such Claim holder
receive its pro rata share of amounts already distributed to other
General Unsecured Claim holders (a “Catch-Up
Distribution”) to which the holder of such Claim may have
become entitled by virtue of such final order or other final
resolution shall be transferred, first, to any Underfunded Reserve
(but only to the extent of any underfunding) and, next, to the GUC
Distribution Fund.
(d) Notwithstanding that the
Allowed amount of any Disputed General Unsecured Claim is
reconsidered under the applicable provisions of the Bankruptcy Code
and Bankruptcy Rules or is Allowed in an amount for which after
application of the payment priorities established by this Plan
there is insufficient value to provide a recovery equal to that
received by other holders of Allowed General Unsecured Claims, no
Claim holder shall have recourse against the GUC Representative or
any of his professional consultants, attorneys, advisors, or his
successors or assigns, or any of their respective property.
Section 3.3
Administrative Reserve .
(a) On the Effective Date, a
$5,000 reserve shall be established in the GUC Distribution Fund
for the GUC Representative’s distributional fees and expenses
and the GUC Representative may charge the GUC Distribution Fund for
any reasonable excess approved by the Post-Effective Date
Creditors’ Committee.
Section 3.4
Unclaimed Distributions Reserve .
(a) If any Distribution to any
holder of an Allowed General Unsecured Claim is returned to the GUC
Representative as undeliverable as provided in Section 6.3 of
the Plan (“Unclaimed Property”), such Distributions
shall be deposited in the GUC Distribution Fund and ear-marked and
designated as an “Unclaimed Property Reserve” (the
“Unclaimed Property Reserve”) and no further
Distributions shall be made to such holder unless and until the GUC
Representative has been notified of the then current address of
such holder. Once a Distribution to a General Unsecured Creditor
under the Plan becomes Unclaimed Property, the GUC Representative
shall, subject to the limitations set forth herein and in the Plan,
(i) hold such Unclaimed Property in the Unclaimed Property
Reserve solely for the benefit of such holder or holders which have
failed to claim such Unclaimed Property for the period of one year
from the later of (a) the Effective Date and (b) the date
such holder’s General Unsecured Claim is Allowed (the
“One-Year Period”); and (ii) release the Unclaimed
Property from the Unclaimed Property Reserve and deliver to the
holder entitled thereto upon presentation during such One-Year
Period of proper proof by such holder of its entitlement thereto.
If the Unclaimed Property remains in the Unclaimed Property Reserve
beyond the One-Year Period, such Unclaimed Property shall revert to
the GUC Distribution Fund for the benefit of all other General
Unsecured Claim holders. Such funds shall not be subject to escheat
laws of any state. GUC Representative shall have no obligation to
attempt to locate any holder of an Allowed General Unsecured Claim
other than reviewing the Debtors’ books and records
(including any proofs of claim filed against the Debtors).
Section 3.5
Distributions to Holders of Allowed General Unsecured Claims
.
(a) Initial
Distributions . The initial distribution of the $175,000.00
provided by the ERC Term Loan from the GUC Distribution Fund (less
reserves established for fees, costs and expenses and reserves for
Disputed General Unsecured Claims, if any) shall occur within
thirty (30) days of the Effective Date and distributions thereafter
shall occur within thirty (30) days of such time as the amount
in the GUC Distribution Fund exceeds $100,000.00.
(b) Additional
Distributions . The GUC Representative shall make additional
Distributions and Catch-Up Distributions from the GUC Distribution
Fund to holders of Allowed General Unsecured Claims when and as
required under the Plan, Confirmation Order, this Agreement and the
other Plan Documents.
Section 3.6
De Minimis Distributions . Notwithstanding any other
provision of the Plan, other Plan Documents, or this Agreement, the
GUC Representative shall not have an obligation to make
Distributions or payments of fractions of dollars, and whenever any
payment of a fraction of a dollar under the Plan would otherwise be
called for, the actual payment made shall reflect a rounding of
such fraction to the nearest whole dollar (up or down), with half
dollars being rounded down. No Cash payment of less than $15.00
shall be made to the holder of any Allowed General Unsecured
Claim.
Section 3.7
Investment of Cash . The GUC Representative shall invest the
GUC Distribution Fund’s Cash, including the Cash in the
Reserves, in: (a) direct obligations of the United States of
America or obligations of any agency or instrumentality thereof
that are backed by the full faith and credit of the United States
of America, including funds consisting solely or predominantly of
such securities; (b) money market deposit accounts, checking
accounts, savings accounts or certificates of deposit, or other
time deposit accounts that are issued by a commercial bank or
savings institution organized under the laws of the United States
of America or any state thereof; or (c) any other investments
that may be permissible under section 345 of the Bankruptcy Code.
Such investments shall mature in such amounts and at such times as
the GUC Representative, in the GUC Representative’s sole
discretion, shall deem appropriate to provide funds when needed to
transfer funds or make payments in accordance with the Plan and
this Agreement. The interest or other income earned on the
investments of the
