Settlement in works for NanoMech filing

Executives cleared in bankruptcy

A settlement is in the works allowing the bankruptcy of Springdale-based NanoMech to move forward and absolving the company’s executives and directors, including former Chief Executive Officer Jim Phillips, of wrongdoing.

Phillips retired weeks before NanoMech filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court for the District of Delaware in April. NanoMech claimed $7.2 million in assets and owed nearly $19 million to its creditors, according to initial bankruptcy filings.

Bankruptcy Judge John Dorsey must still approve the settlement deal.

According to court documents filed Wednesday, the proposed settlement provides a general release to the directors and officers of the company and in consideration the directors and officers’ insurer will pay NanoMech $1.7 million, of which $1.68 million will go to NanoMech’s largest creditor, Michaelson Capital of New York’s secured claim and $20,000 will go to the NanoMech’s estate.

After the payment, Michaelson will release NanoMech of all claims and the company’s directors and officers will release Michaelson and others of all claims.

The resolution of the claims sets the stage for quick closure and dismissal of the bankruptcy case, according to the court documents. The settlement also resolves and eliminates disputes concerning the cause of the company’s bankruptcy.

According to a release by NanoMech on Wednesday, third party review of Nano

Mech’s business activities and financials which included the eight-year period Phillips led the company was performed. The post-bankruptcy board of directors’ review determined Phillips acted appropriately and there was no wrongdoing on his part, or by the pre-bankruptcy directors

and officers. This included Phillips’ retirement from the company shortly before its bankruptcy filing,

In the release, NanoMech’s current CEO, Ben Waisbren, said “during his tenure, Mr. Phillips made significant headway with many key milestones in diligently building the company towards maturity in the early stage nanotechnology manufacturing era.”

Phillips is now chairman

and CEO of The Covenant Business Group LLC, an internationally focused firm involved in taking new companies and innovations to market in a variety of emerging technology platforms.

Recently NanoMech asked the court for permission to claw back more than $576,000 paid to Phillips as part of a severance agreement. In August, Dorsey gave the go-ahead for NanoMech to reject its separation agreement

with Phillips.

NanoMech said in earlier court filings that certain stakeholders had raised questions about Phillips’ leadership and actions as CEO. NanoMech said its investigations show Phillips spent company funds on personal expenses, including lavish trips, and also awarded himself a compensation package the company could not afford.

Phillips contended

through court filings that the trips were all for legitimate business reasons and that NanoMech’s allegations are gross mischaracterizations of the truth or outright fabrications.

NanoMech, founded in 2002, develops nanotechnology for use in machining and manufacturing, lubrication and packaging, and coatings, and it also develops specialty chemicals. Nanotechnology is the manipulation of matter

at the atomic and molecular scale.

In late July, the court approved the sale of NanoMech’s assets free of liens and other legal encumbrances to P&S Holdings for $8 million. The sale closed in early August. P&S is a subsidiary of Houston’s Vinmar International Ltd., a global marketing, distribution and project-development company serving the petrochemical industry.