Orckit noteholders propose arrangement including issue of new notes

By Marisa Wong

Madison, Wis., Jan. 30 - The trustees of Orckit Communications Ltd.'s series A notes and series B notes published on Thursday a proposed arrangement between the company and the noteholders, according to a 6-K filing with the Securities and Exchange Commission.

In a meeting held the same day, the company's board of directors discussed the proposal and instructed the company's management to provide comments and counter-proposals in advance of a noteholder meeting scheduled for Feb. 4.

Arrangement details

Under the latest proposed arrangement,

• The series A and B noteholders would be issued ordinary shares constituting 100% of the company's share capital on a fully diluted basis;

• The notes would be exchanged for a new series of notes. The new notes would be secured, on a non-recourse basis, by the accounts receivable, intellectual property, license fees and litigation proceeds of the company.

The new notes would accrue interest at 9.5% per year and would mature on Dec. 31, 2017.

The new notes would be entitled to early redemption payments on a quarterly basis out of the funds generated by the secured assets and 40% of any debt or equity proceeds raised by the company;

• Any cash of the company in excess of $1 million at the closing of the proposed arrangement would be paid to the series A and B noteholders;

• All the company's directors and officers would be replaced with directors and officers designated by the noteholders;

• A mechanism would be established to ensure the continued support of the existing customers of the company;

• Noteholders would waive any claims against the company, its directors and employees and the trustees and representatives of the noteholders for actions and omissions since the company's July 2012 arrangement;

• The waiver for the benefit the company, its directors and managers would be contingent upon the following, among other things: (i) Izhak Tamir's acting as a consultant to the company for no compensation and using his best efforts to maximize the proceeds to the company from the secured assets and ensure a smooth transition to the new management and (ii) the waiver by each beneficiary of the waiver of all amounts owing to him by the company as result of the termination of his employment or otherwise and his pledge not to compete with the company's business;

• The company and its directors and employees would waive any claims against the noteholders and their trustees, representatives and advisors, and the company's directors and employees would waive any claims against the company; and

• The organizational documents of the company would be amended to require shareholder approval by a super majority to change the company's scope of activity.

In addition to the company's acceptance, the arrangement is subject to shareholder approval, as well as the approval of the Tel Aviv Stock Exchange and the Tel Aviv District Court.

Orckit is a Tel-Aviv-based maker of broadband telecommunications equipment.

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