mamtek bankruptcy filing

8/3/2019 Mamtek Bankruptcy Filing

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IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF MISSOURI

CENTRAL DIVISION

)

In re: )

MAMTEK U.S., INC.,

Debtor.

)

)

)

)

)

Case No. 11-22092-7

INVOLUNTARY CHA

PROCEEDING

MOTION AND SUGGESTIONS IN SUPPORT OF ORDER FOR APPOIN

OF INTERIM TRUSTEE PURSUANT TO 11 U.S.C. 303(G)

UMB Bank, N.A., solely in its capacity as Trustee under the Indentu

Documents described herein (the Bond Trustee or UMB); Frost Electric Supp

Shick USA; Septagon Construction Company, Incorporated Columbia

Technologies, Inc. (collectively, the Petitioning Creditors), all creditors whic

alleged debtor Mamtek U.S., Inc. (Mamtek or the Alleged Debtor) in various w

not been paid, and all holders of claims against the Alleged Debtor, which total in

million, submit their Motion and Suggestions in Support of Order for Appointme

Trustee Pursuant to 11 U.S.C. 303(g) in the captioned involuntary Chapter 7 case.

Since at least July 2010, the Alleged Debtor has operated to the detriment of

resulting in (1) a $36,820,000 default under the Bond Documents (as defined

millions of dollars owed to vendors, which has resulted in the filing of mechanics

and lawsuits relating to, the Project (as defined below); (3) threatened remov

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the Project; and (5) the instigation of an assignment for the benefit of creditors und

law pursuant to which a liquidation company which replaced corporate governance

Alleged Debtors assets to Development Specialists, Inc. (DSI), another liquidat

to liquidate assets in a non-judicial proceeding, away from the scrutiny of the Alle

creditors and/or any court, which is opposed by all of the Petitioning Creditors a

other creditors and parties-in-interest related to this case, including, on informatio

the State of Missouri and the Randolph County Prosecuting Attorney.

The appointment of an interim Chapter 7 trustee is needed to provide

coordination with the Bond Trustee, City and governmental authorities, including

and preserve any assets for the benefit of creditors, including any assets under the c

(b) control and safeguard the Alleged Debtors books and records; (c) defend

Debtors estate with respect to creditors seeking to take action which would be a

interests of the creditor body as a whole; (d) investigate financial and oth

transactions engaged in by the Alleged Debtor at the direction of its princip

investigate and commence, if appropriate, claims and causes of action on behalf of c

I. JURISDICTION AND VENUE1. This Court has jurisdiction over this matter pursuant to 28 U.S.C

1334(b). Venue is proper in this district pursuant to 28 U.S.C. 1408 and 1409.

2. The statutory bases for the relief requested herein are 11 U.S 105(a), 303(g), and 701 and Federal Rule of Bankruptcy Procedure (Rule) 200



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II. BACKGROUND EVENTS LEADING TO DEFAULT13. Mamtek International (Mamtek International) is a company ba

Kong which purportedly operated a manufacturing facility producing sucralose, br

O, in the Fujian Province of China. With Bruce Cole acting as chairm

International formed the Alleged Debtor as its United States affiliate for th

expanding sucralose development within the United States (at times, both

collectively be referred to as Mamtek). In early 2010, Mamtek began explo

within the United States for development of a manufacturing facility. Mamtek

endeavor by promising substantial investment into local economies and the creatio

jobs. The endeavor was marketed as fulfilling a niche as the only source of this

substitute in the United States with the ability to meet worldwide demand.

4. On or about March 17, 2010, the Missouri Department of Economic (DED) began soliciting proposals for the Project and contacted the City of Mobe

(the City). On April 6, 2010, Thomas Smith, a representative of Mamtek, in

DED that Mamtek would like to focus on the cities of Mexico, Moberly, Sedalia

Missouri as possible sites for its facility.

5. On April 13, 2010, Edward Li of Armstrong Teasdale LLPs Chinarole as a consultant for DED, sent an e-mail to DED stating that Mamtek did

operating plant in China. He indicated the facility cited by Mamtek never began m

because of protests from local conservation groups. On April 27, 2010, Thomas Sm



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December of 2009, and further stating that contracts existed to cover the next fiv

Project information also indicated that trade secrets were shared with Ramwell In

company run exclusively by shareholders of Mamtek. Ramwell International wa

responsible for intellectual property-related activities for Mamtek. On April 30, 2

was selected by Mamtek as the site for its facility.

6. On June 3, 2010, various representatives of the City were told bMamtek that he had visited the Mamtek facility in China on several occasions and

production lines which had been in operation for several years, and in 2009 o

larger commercial production lines in operation.

7. On July 9, 2010, officials formally announced that a project would bin Moberly, Missouri, including the acquisition and improvement of real prop

construction and equipping of a facility for manufacturing and processing s

Project). The Project was to be owned by the City, but operated by Mamtek.

8. In order to finance the Project, including construction of the mfacility, Mamtek relied heavily on state tax incentives and bonds issued by the Ci

of Missouri awarded Mamtek $7.6 million in Missouri Quality Jobs Program ta

$6.8 million in Missouri BUILD program tax credits. Missouri also provided

Community Development Block Grant Industrial Infrastructure Program grant fun

in funding for job training; and $368,000 for employment recruitment and referral

9. Additional funding was supported by bonds issued by the Industrial



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Keegan & Company, Inc. (Morgan Keegan) was the underwriter for the Bo

Keegan, by its own admission at hearings held before the Missouri Legislature inv

Project, performed very little independent due diligence with respect to Mamtek, in

on the investigation done by the City. Morgan Keegan testified that its counsel

concern regarding Mamtek and its operations. Morgan Keegan claims that it was n

the e-mail stating that Mamteks plant in China had never opened for commerc

Rather, the official statement in the bond offering memo recited that Mamtek

functional sucralose plant operating in China at the time of the offering.

10. On or about July 1, 2010, among other documents, the follodocuments relating to Mamteks obligations were entered into:

a. Trust Indenture by and between UMB, as Indenture Trustee,the Authority;

b. Financing Agreement by and between the City and the Authoc. Management, Operating, and Purchase Agreement by and

City and Mamtek (the Management Agreement);

d. Guaranty Agreement by and among the City, on one hand, and Mamtek International, on the other hand, as guarantors;

e. Escrow Trust Agreement by and among the City, Mamtek, Escrow Agent; and

f. Security Assignment by and between the City and UMB (coBond Documents).

The Bond Documents are certain of the operative documents to establish the liabili

to the Bond Trustee.



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security interest in all property obtained or to be obtained as a result of the

proceeds. Pursuant to the Management Agreement, all such property immediatel

absolute property of the City, subject to the security interest of the Bond Truste

intellectual property needed to operate the Project, it was generally licensed f

International to Mamtek, and then all rights under such license were assigned

Trustee as security for, and to be used until, the bond debt was paid in full.

12. On or about July 24, 2010, construction with respect to the Projaccordance with the Bond Documents. Over the course of the following 13 mon

continued construction, furnishing, and equipping of the Project.

13. Beginning on or about July 28, 2010, a series of draws were madfrom the bond proceeds to facilitate the Project in accordance with the Bond D

these draws, it now appears that millions of dollars were paid to Mamtek insiders,

of Mamtek, and an entity named Ramwell Industrial, Inc. (Ramwell). Over $6

paid to Ramwell during this time period. Despite representations to the contr

appears to be owned by insiders of Mamtek.

III. THE DEFAULT14. On or about August 1, 2011, Mamtek failed to pay its $3.2 million b

to the City due under the Management Agreement. As a result, the City faile

corresponding bond payment to the Bond Trustee.

15. On September 1, 2011, the Bond Trustee filed a notice stating that



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16. On September 2, 2011, the City provided written notice to Mamtek under the Bond Documents. Shortly after the default, Mamtek terminated it

Mamtek has been closed since that time and has abandoned the Project to the Au

and Bond Trustee.

17. On September 8, 2011, the Bond Trustee was notified by the SExchange Commission (the SEC) that it would receive a subpoena regarding the

subpoena was received on September 9, 2011, requesting, among other things

relating to Project requisitions. The Bond Trustee was subsequently informed by

the SEC investigation had been ongoing for several months and that subpoen

received by the City and Mamtek.

18. On September 14, 2011, Mamteks acting plant manager for the Projcompletion of the Project could cost up to an additional $44.5 million. Mamteks p

believed that the Project had been badly mismanaged before he arrived at Mamte

claimed that although he believed the Project was viable, in his view, the escrowe

property of Mamtek was of little value.

19. On September 23, 2011, Missouri Attorney General Chris Koster anthe Attorney Generals office would begin an investigation of Mamtek, includi

assistance to Prosecuting Attorney Mike Fusselman of the Randolph County

Attorneys Office.

20. On or about September 26, 2011, the Missouri Senate announced an



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indicated its intent to terminate the Management Agreement on October 27,

Mamtek cured existing defaults before that date.

22. On or about October 27, 2011, the Missouri House of Representativthat the House Interim Committee on Government Oversight and Accountability

an investigation of Mamtek and the Project.

23. On October 27, 2011, the Management Agreement was terminated b24. On November 4, 2011, shortly after the Bond Trustee was in a po

action against Mamtek and Mamtek International based upon assignment of rights

and Authority, the Bond Trustee filed its Verified Complaint against Mamtek i

States District Court for the Eastern District of Missouri, Case No. 4:11-cv-01925

was the venue for filing suit provided for in the documents) stating the following c

I Breach of Contract by Mamtek; Count II Breach of Guaranty Agreement by

Parties; and Count III Appointment of Receiver (the Verified Complaint). A

Verified Complaint (without exhibits) is attached as Exhibit A. Simultaneously w

Verified Complaint, the Bond Trustee filed its Emergency Motion for Orde

Receiver and Memorandum in Support thereof (the Receiver Motion). A

Receiver Motion (without exhibits) is attached as Exhibit B.

25. Neither Mamtek nor Mamtek International filed an answer responded to the Verified Complaint and default judgments are appropriate.

District Court has so informed the Bond Trustee. The Bond Trustee intends to



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bankruptcy case is appropriate and necessary to protect the rights and interests of a

to maximize potential recoveries for all creditors.

IV. CORPORATE GOVERNANCE FOLLOWING DEFAULT/D26. On or about September 1, 2011, Peter Kravitz (Kravitz) was hire

as its President. On information and belief, Kravitz had never before been i

Mamtek or any sucralose business, is an attorney based in Los Angeles sp

liquidation of financially-distressed companies and is associated with a com

Solution Trust. It is unclear to the Petitioning Creditors how or why Kravitz becam

27. On or about September 9, 2011, Kravitz told representatives of the and others that he believed an additional $30 million would be needed to comple

and this was after spending the $39 million which was to have completed the Pro

also claimed that the Project was viable and that Mamtek possessed signifi

resources and intellectual property. There were then discussions concerning a fore

no forebearance was ever agreed upon.

28. On or about September 26, 2011, Mamtek through Kravitz execuassignment for the benefit of creditors, assigning its assets to DSI, another c

appears to specialize in liquidation services, with the assets to be liquidated and

creditors in accordance with California assignment for benefit of creditors law. A

General Assignment for the Benefit of Creditors (the Assignment) is attached as

29. Since that time, counsel for the Petitioning Creditors has had dis



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forth herein, an assignee in California cannot provide the relief needed to deal with

situation taking place in mid-Missouri.

30. Pending further action before this Court, the Petitioning Creditregarding the propriety of DSI or the Assignment continues. There is no need for,

have, an assignee in this case. While the Petitioning Creditors question the motive

shareholders for attempting to institute such a proceeding to begin with, th

Creditors at this time seek merely to have an interim trustee appointed followed by

trustee and to remove the assignee from further involvement in this case.

V. FACTS DISCOVERED SINCE THE VERIFIED COMPLAINT WA31. The Petitioning Creditors, through investigation, have determined

the Project is secure for the moment, the consultant that was overseeing the Projec

the Bond Trustee and for the benefit of the City will be leaving shortly for a new jo

32. There are millions of dollars of valuable, specialized equipment at thsome of which is being threatened with removal by vendors, and millions

specialized equipment in various stages of completion, the contracts for whi

terminated, and the property being sold or threatened to be sold in the near future

removal of the specialized equipment and/or termination of the contracts with re

will make it difficult, if not impossible, to complete the Project, and may affect it

alternate user.

33. The books and records relating to the Project, electronic and docume



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34. There are numerous creditors, which include the Petitioning Creditcreditors, which have been in contact with counsel, some of which may claim me

rights and some of which may not. As of the filing of this Motion, there are at leas

that have filed mechanics liens: Faith Technologies, Inc. and Septagon Constructi

Incorporated Columbia (Septagon) (two of the Petitioning Creditors) and Sys-

the amount of $155,679.50). In addition, Septagon also filed suit shortly before th

petition was filed solely to protect whatever rights it might have as a mechanics

Virtually all of these creditors dealt with, or entered into contracts with Mamtek, f

of the City, subject to the rights of the Bond Trustee. The situation is now comp

by the insertion of DSI.

35. The Bond Trustee, City, Authority and governmental entities ofMissouri, including the DED, recently met and are currently cooperating to try to

value of the Project, and it is anticipated that they will continue to do so. Wh

however, is for consolidation of all matters in one court; the removal of DSI as

Code 362 automatic stay to prevent efforts to dismantle the Project; and the appo

interim trustee to consolidate all of these efforts with the above parties to maximiz

the Project and to investigate and pursue appropriate claims against Mamtek insid

to benefit all creditors.

VI. AN INTERIM TRUSTEE IS APPROPRIATE36. The Code 362 automatic stay is necessary to preserve and prote



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specialized equipment. Not only is the automatic stay necessary, an interim truste

to work with the Petitioning Creditors and other parties to preserve the value of th

for which millions have been paid, pending decisions on the future of the Projec

Bond Trustee asserts rights in the contracts as collateral of the City, the contracts w

between the vendors and Mamtek. A centralized court proceeding before a c

experienced with dealing with such matters, and an interim trustee to coordinate su

needed immediately to maximize recovery for all creditors. All of these matters

quickly. The sooner an interim trustee is appointed, the more quickly progress can

stability maintained. If vendors exercise rights outside of bankruptcy, or in ban

stay relief periods have expired, any hope for a successor to the Project havi

valuable contract rights will be lost.

37. As set forth above, not only are there vendors that have been paid mare or may take actions harmful to a successor intending to complete the Project,

mechanics liens and lawsuits relating to the same which have been filed and w

resolution in one forum. A centralized court proceeding which can resolve claim

liens, interests, and ownership issues is necessary, based on the complexity

Mamtek contracted for all materials, work, and equipment, but title passed to the

Bond Trustee asserts a security interest in all of the Citys property relating to the

Bankruptcy Court is in the best position to deal with, and resolves issues rel

complexities. The sooner an interim trustee is appointed, the more quickly


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38. The Petitioning Creditors goal is for all parties to resolve coopcomplicated issues relating to this situation as quickly as possible, which woul

hiring by the Bond Trustee (in consultation with other parties and the interim

professional investment banker to engage in a professional marketing effort to o

and determine if a successor, alternate user or liquidation is in the best interests

The longer the Project sits without any action, the less valuable will it become

problems will occur attempting to piece the Project back together (if it can be do

cannot be determined until a professional has been hired, estimates of an approp

range from at least 90 to 120 days. An interim trustee is needed immediately

become, a part of that process. In addition, the ability to use the Code 363 sale p

any successor, alternate user, or liquidation purchaser knows that the assets will be

and clear of liens, is important, and may be critical given the conflicting claims a

An interim trustee is needed to accomplish the same.

39. Finally, a centralized court proceeding is necessary to investigatclaims that are general to creditors for wrong-doing, or avoidance claims which m

by an interim trustee. Because of the far-reaching relationships in this case that g

to California to the Midwest, it is important that an interim trustee and creditors ha

which discovery and the assertion of such claims can occur quickly. The Bankru

well-equipped to deal with such issues, and an interim trustee is necessary im

pursue any such claims.


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(appointing interim trustee where alleged bankrupt closed his place of business

himself from his place of business and from his residence and has given neithe

customers any indication of when, if ever, he would resume operations.) M

appointment of an interim trustee for the Alleged Debtor would not be an abuse

because an order for relief is appropriate in the captioned Chapter 7 case.

41. Code 303(g) provides that during the gap period between thinvoluntary cases commencement and the date for any order for relief the court,

a party in interest, after notice to the debtor and a hearing, and if necessary to

property of the estate or to prevent loss to the estate, may order the United Sta

appoint an interim trustee under section 701 of this title to take possession of the p

estate and to operate any business of the debtor. See also Rule 2001 Appointm

Trustee Before Order for Relief in a Chapter 7 Liquidation Case, su

Appointment: At any time following the commencement of an involuntary liq

and before an order for relief, the court on written motion of a party in interest m

appointment of an interim trustee under 303(g) of the Code. The motion shall

necessity for the appointment and may be granted only after hearing on notice to t

petitioning creditors, the United States trustee, and other parties in interest as t

designate.

42. Interim trustees have been appointed where courts have found tprotect and preserve property of the estate, In re DiLorenzo, 161 B.R. 752,


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(Bankr. N.D. Ala. 1980); or prevent irreparable harm which would likely result

time of the filing of the petition and the scheduled hearing, Reed, 11 B.R. at 757

COLLIER ON BANKRUPTCY, 303.28, at 303-88-89 (16th ed. 2011) (court may ap

trustees to preserve property of the estate or prevent loss, concealment, or conversi

In the first instance, this Court must determine that there is a reasonable

probability that the Alleged Debtor will eventually be found to be a proper invol

under Code 303. See In re Professional Accountants, 142 B.R. 424, 429 (Ba

1992).

A. There is a Likelihood that an Order for Relief will be Issued43. Under Code 303(b)(1), an involuntary petition may be commence

more entities, each of which is either a holder of a claim against such perso

contingent as to liability or the subject of a bona fide dispute as to liability or am

such noncontingent, undisputed claims aggregate at least $14,425 more than the

lien on property of the debtor securing such claims held by the holders of such cl

U.S.C. 303(b). Under Code 303(a), [a]n involuntary case may be comm

chapter 7 , and only against a person, except a farmer, family farmer, or a corp

not a moneyed, business, or commercial corporation, that may be a debtor unde

under which such case is commenced.

44. There is a reasonable likelihood that an order for relief will be issue 303.


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c. Code 303(h)(2) DSI is a custodian within the mean 101(11)(A) (an assignee under a general assignment for t

the debtors creditors), and the captioned involuntary petition120-day window of the Alleged Debtors execution of the As

d. Code 303(h)(1) The Alleged Debtor admits that it is paying its debts as such debts become due by its execAssignment.

B. An Interim Trustee is Necessary to Protect Estate Assets45. An interim trustee may be appointed only if such appointment is

preserve property of the estate or prevent loss to the estate Code 303(g). See

Plaza Jt. Venture, 62 B.R. 959, 961 (Bankr. S.D. Tex. 1986); Alpine Lumber, 13

Professional Accountants, 142 B.R. 424.

46. The Bond Trustee filed the Verified Complaint and the Receiver Mof concerns relating to, among other things, the removal or destruction of Mamtek

records. The Bond Trustee has since secured the books and records, but has now

host of reasons why a receivership will not provide the relief necessary to protec

and the appointment of an interim trustee is also necessary for those same reasons.

47. Colliers notes that [o]ne theme emphasized throughout the case the potentially devastating consequences flowing from the displacement of the de

property prior to a finding that bankruptcy relief is appropriate. 9 COLLIER ON B

2001.02[2], at 2001-4-5 (16th ed. 2011). That concern does not exist here, bec

Assignment, the Alleged Debtor already displaced itself from its property, and D

position to preser e or ma imi e the Alleged Debtors assets for the benefit o




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a. On October 28, 2011, after the Assignment, the United Stateof Homeland Security, Citizenship and Immigration Ser

Notice of Intent to Terminate Mamtek Regional Centers I92for Regional Center under Immigrant Investor Pilot PrograTermination Notice). Upon information and belief, MamCenter is a d/b/a of the Alleged Debtor, and although the Aexecuted the Assignment, the Alleged Debtors former preCole, not DSI, responded to the I924 Termination Notice, wauthority to do so. This may be a valuable asset of the Allegwhich immediate action is needed.

b. Holloway America manufactured specialized stainless steelProject (the Holloway America Tanks), for which $193,706.27 (on knowledge and belief the Alleged $2,020,200 from Bond proceeds for the Holloway America balance due of $193,706.27). On December 16, 2011, Hollois conducting a UCC sale of the Holloway America Tanks thHolloway Americas possession to satisfy the debt.

c. On December 1, 2010, the Alleged Debtor and Air Liquide eAPSA Product Supply Agreement (the Air Liquide Conwhich Air Liquide was to supply nitrogen to the Project, plusSupply System regarding the same. This was a valuable respect to the Projects operations. After the Assignment, o2011, Air Liquide sent its Notice of Contract TerminatiLiquide Termination) to DSI, not only terminating the

Contract, but also demanding removal of the Supply Syrelated equipment. Air Liquide is now demanding removal oit claims it owns.

d. As discussed above, there are mechanics liens on the December 9, 2011, Septagon filed its Petition to foremechanics lien in the Circuit Court of Randolph County, Mi

e. Mamtek engaged DCI to manufacture stainless steel tankTanks), for which DCI was paid, from Bond proceeds$2,967,715, with a balance due of $2,142,828. DCI happroximately 14 DCI Tanks worth $720,000, but refuses information on the status of the remaining order with the Bdue to a confidentiality agreement with the Alleged Debt

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After learning of the Assignment, Andritz cancelled the purelated to the Andritz Equipment even though it had been p

of the $1,468,500 owed. Further, Andritz sold the used conic

These are but examples of real issues facing the Project which must be dealt with im

48. Code 543 provides, in relevant part, as follows:(a) A custodian with knowledge of the commencement of a case unconcerning the debtor may not make any disbursement from, or take any

administration of, property of the debtor, proceeds, product, offspring, rentssuch property, or property of the estate, in the possession, custody, or cocustodian, except such action as is necessary to preserve such property.

(b) A custodian shall(1) deliver to the trustee any property of the debttransferred to such custodian, or proceeds, product, offspring, rents, or prproperty, that is in such custodian's possession, custody, or control on the dcustodian acquires knowledge of the commencement of the case.

49. An interim trustee is essential to address all of the complex and tissues facing the Project due to the Alleged Debtors abandonment of the Projec

trustee is further necessary so that there may be a Court-sanctioned trustee to wh

deliver the estates property under Code 543(b)(1). It is clear under Code 54

cannot disburse any assets of the estate or take any action in the administrat

property. It may only deliver estate property in its possession, custody, or cont

appointed trustee, as required under Code 543(b)(1).

VIII. THE INTERIM TRUSTEE AND BOND REQUIREMENT61. Rule 2001(b) provides that [a]n interim trustee may not be appoint

rule unless the movant furnishes a bond in an amount approved by the court, c

indemnif the debtor for costs attorne s fee e penses and damages allo able

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aware, Mr. Strauss is a panel Chapter 7 Trustee and is well-qualified and fully pr

pursuant to the Order of this Court. The Bond Trustee had previously proposed th

be the receiver in the Federal District Court action. Mr. Strauss is already familiar

the facts relating to this matter and is prepared to become engaged imme

Petitioning Creditors are prepared to furnish a bond pursuant to Rule 2001(b) in an

set by the Court.

IX. CONCLUSIONWHEREFORE, the Petitioning Creditors respectfully request that the C

order directing the United States Trustee to appoint immediately Bruce E. Str

interim trustee under 11 U.S.C. 105(a), 303(g) and 701 and Rule 2001, and gra

and further relief as this Court deems fair and just.

December 15, 2011Respectfully Submitted,

SPENCER FANE BRITT & BROW

/s/ Scott J. GoldsteinScott J. Goldstein MO #28Douglas M. Weems MO #41Lisa Epps Dade MO #48Heather M. Morris MO #[email protected]@spencerfane.com

[email protected]@spencerfane.com1000 Walnut Street, Suite 1400Kansas City, MO 64106(816) 474-8100(816) 474-3216 Fax

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FOR THE EASTERN DISTRICT OF MISSOURI

)

UMB BANK, N.A., as Trustee, )

Plaintiff,

)

)

)

v. ) Case No.

)

Mamtek U.S., Inc., and )Mamtek International, )

)

Defendants. )

VERIFIED COMPLAINT

Plaintiff, UMB Bank, N.A. (UMB or Plaintiff), a national banking assoc

in its capacity as Trustee under the Bond Documents described herein, and for i

against Defendants Mamtek U.S., Inc., (Mamtek) and Mamtek International, (I

(at times, collectively the Mamtek Parties) states and alleges as follows:

Preliminary Statement

1. This action arises from the Mamtek Parties conduct regarding asspledged to bondholders and due other creditors; the Mamtek Parties defaul

abandonment of the Project which has negatively impacted the City of Mo

community; and the creation by Mamtek of a non-judicial proceeding in California

removal of documents and evidence necessary to understand how the Project, whic

approximately $33 million to complete, was abandoned by Mamtek after using up


4:11-c

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President Bruce Cole, Mamtek was formed as a Delaware corporation and soug

facility in Moberly, Missouri (the City). In order to finance the construction o

Mamtek relied on bonds issued by the City. The City was induced into such bond

promise of a substantial investment into the local economy and the prospect of o

Pursuant to the Bond Documents (hereinafter defined), UMB was to act as Indentur

Mamtek was to make biannual payments to the City. The facility was never com

two payments were made, one of only interest, and the second from a debt service

held by the Trustee.

2. Instead, Mamtek defaulted on its payment and other obligations ceased operations. Mamtek subsequently obtained a liquidation company to

corporate governance and thereafter executed an assignment for the benefit

assigning its assets to Development Specialists, Inc., under California law where it

liquidate any remaining assets and remove Mamteks electronic information in a

proceeding away from the scrutiny of the multimillions of dollars of creditors tha

left high and dry in Mid-Missouri. In conjunction with the assignment, demand h

for all of Mamteks electronic information, including various computer and ne

Such demand may be an attempt to shelter Mamtek and its officials from

wrongdoing. Mismanagement and distrust now exist regarding Mamtek, and

needed to control and preserve any remaining assets for the benefit of UMB a

creditor under the Bond Documents under which UMB serves as Indenture Tru


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The Parties

3. Plaintiff UMB Bank, N.A. is a duly organized national banking orgaits principal place of business in Missouri. UMB is acting herein in its capacity as

the Bond Documents identified herein.

4. Defendant Mamtek is a Delaware corporation with its principal placin California.

5. Defendant International is a Hong Kong corporation.Jurisdiction and Venue

6. UMB is a citizen and resident of Missouri.7.

Mamtek is a citizen of Delaware and a resident of California.

authorized to do business in Missouri and can be served through its registered ag

Registered Agents, Inc., in Jefferson City, Missouri.

8. International is a citizen and resident of Hong Kong. Internationainto contracts within the state of Missouri which are the subject of this Compla

International is not authorized to do business in Missouri, International designated

of State of the State of Missouri to serve as its registered agent.

9. The parties are of diverse citizenship.10. The amount or value of the property in controversy exceeds

$75,000.00, exclusive of interest and costs.

11. Jurisdiction is proper in this Court pursuant to 28 U.S.C. 1332(a).




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Background

14. International is a company based in Hong Kong which at the time thissued, operated a manufacturing facility producing sugar substitute, branded Sw

Fujian Province of China.

15. International formed Mamtek as its United States affiliate solely foof expanding sugar substitute development within the United States.

16. In early 2010, International began exploring locations within the Undevelopment of a manufacturing facility.

17. Mamtek marketed the endeavor by promising substantial investmeconomies and the creation of over 600 jobs. The endeavor was marketed as fulfilli

the only source of this type of sugar substitute in the United States with the ab

worldwide demand.

18. On July 9, 2010, officials formally announced that a project would bin the City including the acquisition and improvement of real property and the con

equipping of a facility for manufacturing and processing sugar substitute (the Proje

19. The Project was to be owned by the City, but operated by Mamtek.20. In order to finance the Project, including construction of the m

facility, Mamtek relied heavily on Bonds issued by the City.

21. The State of Missouri awarded Mamtek $7.6 million in Missouri Program tax credits and $6.8 million in Missouri BUILD program tax credits. T




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22. Additional funding was supported by bonds issued by the Industrial Authority of the City of Moberly (the Authority) acting under Chapter 349 of

Statues of Missouri with respect to the financing of the Project.

23. Ultimately, three series of bonds in the total amount of $39 millionby the Authority:

a. Series 2010-A Taxable Annual Appropriation Capital Projthe amount of $8,440,000;b. Series 2010-B Tax-Exempt Annual Appropriation Capital P

in the amount of $3,025,000; and

c. Series 2010-C Tax-Exempt Annual Appropriation Recovery Bonds in the amount of $27,535,000 (collectively, the Bond

24. On or about July 1, 2010, among other documents, the follodocuments relating to the Mamtek Parties obligations were entered into:


b.

Financing Agreement by and between the City and the Autho

c. Management, Operating, and Purchase Agreement by andCity and Mamtek;

d. Guaranty Agreement by and among the City, on one hand,and International, on the other hand, as guarantors;


f. Security Assignment by and between the City and UMB (coBond Documents).

Th B d D t th ti d t t t bli h th li bilit f th M




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Agreement and the Security (hereinafter defined) to UMB, as Indenture Tru

bondholders. Pursuant to the Trust Indenture, the Authority assigned its enfor

under the Financing Agreement to UMB. Trust Indenture 807.

26. Pursuant to the Financing Agreement, a copy of which is attached athe City agreed to make payments on account of the Bonds to UMB, as Trustee, for

the Authority. Such payments were due fifteen days prior to each Interest Paymen

Bonds, which are specified as March 1 and September 1. Under the Financing A

Authority again reiterated that it assigned all rights under the Financing Agreemen

the Trust Indenture to UMB and further specified that UMB had the power to exer

granted to the Authority under the Financing Agreement. Financing Agreement

Further, the City assigned to UMB all rights it may have in enforcement of the

Agreement or Guaranty, including the right to bring all such actions as may be

UMBs judgment. Financing Agreement 5.3(b).

27. The Management Agreement, a copy of which is attached as Exhibithat the City would make available to Mamtek the funds raised pursuant to the Bon

grant Mamtek the exclusive right to manage and operate the Project, in exchange f

obligation to manage and operate the facility, including the provision of funds to th

repayment of the Bonds as payments are due. Management Agreement Article 3.

such payments were due on the first day of each month preceding the Interest Paym

February 1 and August 1.




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a. Default in the punctual payment of any payment due which 10 days after the City or the Trustee has given written ndefault;

b. Mamteks execution of an assignment for the benefit of credic. Mamteks abandonment of the Project and the filing of lien

Project.

Management Agreement Article 12.

29. Upon an event of default, under the Management Agreement, the Cacting as Trustee pursuant to Section 5.3(b) of the Financing Agreement, may elec

outstanding amounts to be immediately due and payable, give Mamtek written

intent to terminate the Management Agreement at a specified date, or reenter th

thereafter elect to terminate the Management Agreement upon notice no less

following reentry. Management Agreement Article 12.

30. Under the Guaranty Agreement, a copy of which is attached as EMamtek Parties each guaranteed the timely and full payment of all payments d

Management Agreement. To secure such payment, the Mamtek Parties pledged t

right, title, and interest in patents, trade secrets, and other intellectual property

manufacturing process and operating information used in the Project as set forth m

Exhibit A to the Guaranty Agreement (the Security). Guaranty Agreement Exhib

31. In order to protect the Mamtek Parties confidentiality with respect tdescribed in the Guaranty Agreement, the Escrow Agreement, a copy of which i

Exhibit E was executed to name UMB as escrow agent of the Security UMB as

ag



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32. Pursuant to the Security Assignment, a copy of which is attached the City transferred and assigned to UMB all of the Citys right, title, and interest in

under the Guaranty Agreement and Escrow Agreement.

33. Upon default by Mamtek under the Bond Documents, the City, UMB as assignee under the Security Agreement, is authorized to give notice and e

with respect to the Security, including demanding release of the Security from

escrow agent. Guaranty Agreement 6.2 and Escrow Agreement 2.2.

34. On or about July 15, 2010, the Authority adopted Resolution 2010-the bond issues and the Bond Documents.

35. On or about July 15, 2010, the City Council of Moberly, MissOrdinance No. 8485 approving the Bond Documents.

36. On or about July 24, 2010, construction with respect to the Projaccordance with the Bond Documents.

37. On information and belief, over the course of the following thirMamtek continued construction, furnishing, and equipping of the Project and

operated the Project under the Management Agreement.

38. Beginning on or about July 28, 2010, a series of draws were madfrom the bond proceeds held by UMB to facilitate the Project in accordance w

Documents.

39. On or about August 1, 2011, Mamtek failed to pay its $3.2 million b

g



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40. On September 1, 2011, UMB filed a notice stating that the required bwas not made in accordance with the Bond Documents. A copy of the Notice i

Exhibit G. UMB drew the payment to the bondholders from the debt service r

pursuant to the Bond Documents.

41. The current outstanding balances are as follows:a.

Series 2010-A Taxable Annual Appropriation Capital Projectamount of $6,260,000;

b. Series 2010-B Tax-Exempt Annual Appropriation Capital Pin the original issuance amount of $3,025,000; and

c. Series 2010-C Tax-Exempt Annual Appropriation Recovery Bonds in the original issuance amount of $27,535,000.

42. On or about September 1, 2011, Peter Kravitz (Kravitz) was hireas President. Kravtiz is an attorney based in Los Angeles specializing in l

financially distressed companies.

43. On September 2, 2011, the City provided written notice to International of the default under the Bond Documents.

44. Shortly after the default and change in management, Mamtek temployees. On September 6, 2011, Mamtek provided a written request to the

Trustee seeking a forbearance period. The City and the Trustee required va

assurances prior to entering into a forbearance agreement.

45. On September 8, 2011, UMB was notified by the Securities aCommission (the SEC) that UMB would receive a subpoena regarding the



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SEC investigation had been ongoing for several months and that subpoenas had bee

the City and Mamtek.

46. On September 9, 2011, Kravitz opined that an additional $30 millneeded to complete the Project and this was after already spending the appro

million which was to have completed the Project. Kravitz also claimed that th

viable and that Mamtek possessed significant valuable resources and intellectual pro

47. On September 14, 2011, Mamteks acting plant manager for the Projcompletion of the Project would cost an additional $44.5 million. Mamteks p

admitted that the Project had been badly mismanaged at the outset. He further

although the Project is viable, relevant manufacturing patents had expired recent

view, the escrowed intellectual property of Mamtek was of little value.

48. On September 16, 2011, the City received notice that the requesterequired for forbearance would not be provided by Mamtek. In response, the

Authority took action to secure the Project and began exploring successors to the Pr

49. On September 23, 2011, Missouri Attorney General Chris Koster anthe Attorney Generals office would begin an investigation of the Mamtek Parti

providing assistance to Prosecuting Attorney Mike Fusselman and the Rand

Prosecuting Attorneys Office.

50. On September 26, 2011 Mamtek executed a general assignment for creditors, purportedly assigning its assets to Development Specialists, Inc. (



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51. On or about September 26, 2011, the Missouri Senate announced anof the Mamtek Parties and the Project by the Senate Committee on Government Acc

52. On October 5, 2011, City provided written notice of its intent tProject pursuant to the Management Agreement. The City also expressed its inten

the Management Agreement on October 27, 2011, unless Mamtek cured existing d

that date. A copy of the notice is attached as Exhibit I.

53. On October 26, 2011, counsel for DSI attempted to remove assetfrom Missouri, including laptops and e-mail. See Letter from John D. Fiero date

2011, attached as Exhibit J.

54. On or about October 27, 2011, the Missouri House of Representativthat the House Interim Committee on Government Oversight and Accountability w

investigation of the Mamtek Parties and the Project.

55. On October 27, 2011, the Management Agreement terminated in accthe terms thereof and the notice provided on October 5. See Exhibit I.

56. UMB is in the process of notifying the relevant parties of its intent trights as assignee under the Security Assignment with respect to the Security under

Agreement and Escrow Agreement.

COUNT I

Breach of Contract

57. Plaintiff restates the allegations set forth in paragraphs 1 through 57 a



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including, without limitation, the obligation to provide the City funds to repay the

and as due.

59. Mamtek materially breached its obligations under the Bond Doknowledge and belief, in addition to the breaches described herein, Mamte

wrongfully diverted funds that were paid to Mamtek with the understanding, kn

belief these funds would be paid to creditors. As a result, numerous liens have

unpaid contractors and/or subcontractors.

60. The actions of Mamtek constitute numerous material breaches ocovenants and representations under the Bond Documents.

61. Plaintiff has been damaged in an amount in excess of the remainingon the Bonds, in the amount of at least $36,820,000.

COUNT II

Breach of Guaranty Agreement

62. Plaintiff restates the allegations set forth in paragraphs 1 through 62 a63. The Mamtek Parties, pursuant to the Bond Documents and in p

Guaranty Agreement, unconditionally guaranteed the obligations of Mamte

Management Agreement as set forth more fully in paragraph 59.

64. Pursuant to the Guaranty Agreement, the City was obligated to notifyParties of a default by Mamtek under the Bond Documents. The Mamtek Parties w

to remit payment by 2:00 p.m. the day following such notice. Guaranty Agreement



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Agreement. The Mamtek Parties designated and appointed the Secretary of State o

Missouri as their agent for service of process. Guaranty Agreement 5.6.

66. Plaintiff has been damaged in an amount of at least $36,820,0International is obligated to Plaintiff under the Guaranty Agreement.

COUNT III

Appointment of Receiver1

67. Plaintiff restates the allegations set forth in paragraphs 1 through 66 a68. The appointment of a receiver in a case is a procedural matter govern

law and federal equitable principles.

69. Factors typically warranting appointment the appointment of a recthe:

a. existence of a valid claim by the party seeking the appointmeb. probability that fraudulent conduct has occurred or will occu

that claim;

c. imminent danger that property will be concealed, lost, or dvalue;

d. inadequacy of legal remedies;e. lack of a less drastic equitable remedy; andf. likelihood that appointing the receiver will do more good than

70. As a result of the foregoing defaults, Plaintiff is in danger of irrepand is entitled to the appointment of a receiver forthwith to preserve and prote



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to maintain its value including but not limited to any assets or property pre

possession (actual or constructive) of DSI pursuant to, among other reasons, 28 U.S

71. Plaintiff satisfies each of these criteria, in that:a. Plaintiff has valid claims;b. It is probable that fraudulent conduct may have occurred and

of the potential fraud may be removed, concealed, destroyefrustrate the claims;

c. Imminent danger exists that property will be concealed, lost, in value, particularly in light of the Assignment;

d. The legal remedies available are inadequate to protect tinterests;

e. No less drastic equitable remedy is available; andf. It is likely that the appointment of the receiver will do mo

harm.

72. Plaintiff proposes that Bruce E. Strauss, Esq. be appointed asMamtek. Mr. Strauss is well-qualified and fully prepared to act as receiver for

pursuant to the Order of this Court. The receiver will file with the Clerk of this Co

an amount determined by the Court to assure his conscientious performance of th

responsibilities imposed by the Order. Further, the cost of the receiver should be

taxed as part of the costs of this action, and added to the amounts owed by D

Plaintiff.

WHEREFORE, Plaintiff prays for an order and judgment as follows:

A. On Count I of the Complaint, for judgment in favor of Plaintif



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described herein, and that UMB, as Indenture Trustee under each Indenture, is ent

all remedies available thereunder.

B. On Count II of the Complaint, for judgment in favor of PlaintifInternational in an amount of at least $36,820,000, plus prejudgment interest.

C. On Count III of the Complaint, for an Order appointing Bruce E. Streceiver for Mamtek, to take possession of all assets of the business, including but

those in the current possession of DSI and for such other relief as the Court may d

proper.

D. For Plaintiffs reasonable attorneys fees and costs incurred in this mE. For Plaintiffs costs and disbursements herein.F. For such other and further relief as the Court deems equitable and jus

November 4, 2011

Respectfully Submitted,


/s/ Douglas M. WeemsDouglas M. Weems EDMO #Scott J. Goldstein EDMO #Lisa Epps Dade EDMO #Heather M. Morris MO #[email protected]@[email protected]@spencerfane.com1000 Walnut Street, Suite 1400Kansas City, MO 64106



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1 North Brentwood BoulevardSuite 1000St. Louis, MO 63105-3925

ATTORNEYS FOR PLAINTIFFUMB BANK, N.A., SOLELY IN ICAPACITY AS TRUSTEE

Case: 4:11-cv-01925-CEJ Doc. #: 1 Filed: 11/04/11 Page: 17 of 17 PageID #: 17Case 11-22092-7 Doc 3 Filed 12/15/11 Entered 12/15/11 11:16:44 Desc MainDocument Page 36 of 64


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EXHIBIT A

Page 17 of 17

Case: 4:11-cv-01925-CEJ Doc. #: 2 Filed: 11/04/11 Page: 1 of 4 PagCase 11-22092-7 Doc 3 Filed 12/15/11 Entered 12/15/11 11:16:44 Document Page 37 of 64


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)UMB BANK, N.A., as Trustee, )

Plaintiff,

)

)

)

v. ) Case No.

)

Mamtek U.S., Inc., and

Mamtek International,

)

)

)

Defendants. )

EMERGENCY MOTION FOR ORDER APPOINTING RECEIVE

Because of Defendants Mamtek U.S., Inc.s, (Mamtek) and Mamtek I

(International and, collectively with Mamtek, Defendants or the Mamtek Part

regarding assets and funds pledged to bondholders and due other creditors; defau

abandonment of the Project which has negatively impacted the City of Mo

community; and the creation by Mamtek of a non-judicial proceeding in California

removal of documents and evidence necessary to understand how the Project (whic

approximately $33 million to complete) was abandoned by Mamtek after using up

all available funds, and with estimates (by Mamtek itself) that another $30 to $44.5

be needed to complete the Project, Plaintiff UMB Bank, N.A., solely in its capaci

(UMB or Plaintiff), filed its Verified Complaint seeking, among other relief, ap

a receiver for Mamtek. Plaintiff, under the Indenture and related document

4:11-cv-



38/64

of third parties, including but not limited to Development Specialists, Inc.; to co

rents and profits; to pay taxes, wages, salaries, and other operating expenses of

including the repair and maintenance thereof; to pursue causes of action against th

any; and otherwise to protect, preserve, maintain, repair and manage the business;

other relief as the Court may deem just and proper.

The captioned Motion is based on all of the files, records and procee

including but not limited to the Verified Complaint and the Memorandum of Law

the captioned Motion.

Mamtek is a company which proposed to open a sugar substitute manufact

in Moberly, Missouri, to bring over 600 jobs to the area, along with a substantial in

the local economy. In order to construct the facility, Mamtek relied on a $39 milli

from the City of Moberly, Missouri. Pursuant to the Indenture, the bonds were sold

One year after the initial bond issue, Mamtek defaulted under the Indenture and

documents by failing to make a required bond payment. In addition to the cap

brought by Plaintiff, the Securities and Exchange Commission and the Misso

General are currently investigating Mamtek. Shortly after its default, and p

response to the financial difficulties it was facing, Mamtek executed a general assig

benefit of creditors pursuant to California law, assigning its assets to Developmen

Inc. Such assignment for the benefit of creditors in California is an inadequate rem

it would occur without Court supervision and the creditors, key bondholders, Cit



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Accordingly, justice demands that proceedings with respect to Mamtek occur

supervision in Missouri.

It is well settled in the Eighth Circuit that appointment of a receiver with br

warranted under these circumstances. Aviation Supply Corp. v. R.S.B.I. Aerosp

F.2d 314, 316 (8th Cir. 1993). As the Eight Circuit stated inAviation Supply:

Although there is no precise formula for determining when a receiver mappointed, factors typically warranting appointment are a valid claim by theseeking the appointment; the probability that fraudulent conduct has occurwill occur to frustrate that claim; imminent danger that property wconcealed, lost, or diminish in value; inadequacy of legal remedies; lack ofdrastic equitable remedy; and likelihood that appointing that receiver will dogood than harm. See Consolidated Rail Corp. v. Fore River Ry., 861 F.2326-27 (1st Cir. 1988); Mintzer v. Arthur L. Wright & Co., 263 F. 2d. 82

(3d Cir. 1959); Bookout v. Atlas Fin. Corp., 395 F. Supp. 1338, 1342 (N1974), affd514 F.2d 757 (5th Cir. 1975).

Here, and as will be more fully set forth in the Memorandum in Support of

Motion, the assets of Mamtek have already and continue to be dissipated, and the ap

a receiver is warranted.



/s/ Douglas M. WeemsDouglas M. Weems EDMO #Scott J. Goldstein EDMO #Lisa Epps Dade EDMO #Heather M. Morris MO #[email protected]@[email protected]@spencerfane.com



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1 North Brentwood Boulevard

Suite 1000St. Louis, MO 63105-3925

ATTORNEYS FOR PLAINTIFFUMB BANK, N.A., SOLELY IN ICAPACITY AS TRUSTEE



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)UMB BANK, N.A., as Trustee, )

Plaintiff,

)

)

)

v. ) Case No.

)

Mamtek U.S., Inc., and

Mamtek International,

)

)

)

Defendants. )

MEMORANDUM IN SUPPORT OF PLAINTIFFS

EMERGENCY MOTION FOR ORDER APPOINTING RECEIVE

Plaintiff UMB Bank, N.A., solely in its capacity as Trustee under the Indent

Documents described herein (the Trustee or Plaintiff or UMB), submits this M

in Support of its Emergency Motion for Order Appointing Receiver.

I. INTRODUCTIONThis action arises from Defendants Mamtek U.S., Inc.s, (Mamtek)

Internationals (International) (at times, collectively, Defendants or the Mam

conduct regarding assets and funds pledged to bondholders and due other cred

thereunder; abandonment of the Project which has negatively impacted the City of

its community; and Mamteks instigation of a non-judicial proceeding in California

removal of documents and evidence necessary to understand how the Project (whic

approximately $33 million to complete) was abandoned by Mamtek after using up

4:11-cv-



42/64

Generally, International operated a sugar substitute manufacturing facility

2010, International attempted to expand into the United States. Under the di

president, Bruce Cole, Mamtek was formed as a Delaware corporation and soug

facility (the Project or the Facility) in Moberly, Missouri (the City). In ord

the construction of the Project, Mamtek relied on Bonds issued by the City. T

induced into such bond issue by the promise of a substantial investment into the lo

and the prospect of over 600 jobs. Pursuant to the Bond Documents (hereinafter

Trustee was to act as Indenture Trustee and Mamtek was to make biannual paymen

The Facility was never completed, and only two of the promised payments were ev

out of the Debt Service Reserve Fund.

Instead, Mamtek defaulted on its payment and other obligations and has

operations. Mamtek subsequently engaged a liquidation company to take over

governance and thereafter executed an assignment for the benefit of creditors und

law (the Assignment), assigning its assets to Development Specialists, Inc. (DS

seeks to liquidate any remaining assets in a non-judicial proceeding away from th

the multimillions of dollars of creditors that Mamtek has left high and dry in mid-M

has also demanded all of Mamteks electronic information, including various c

network assets. Such demand may be an attempt to shelter Mamtek and its o

liability for wrongdoing. Distrust and concerns of mismanagement now exist regar

A receiver is needed to control and preserve any remaining assets for the benefit o



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The Trustee incorporates by reference all of the statements and allegation

Verified Complaint.

II. BACKGROUND1. International is a company based in Hong Kong which operates a m

facility producing sugar substitute, branded "Sweet O," in the Fujian Province of C

2. International formed Mamtek as its United States affiliate solely foof expanding sugar substitute development within the United States.

3. In early 2010, International began exploring locations within the Undevelopment of a manufacturing facility.

4. Mamtek marketed the endeavor by promising substantial investmeconomies and the creation of over 600 jobs. The endeavor was marketed as fulfill

the only source of this type of sugar substitute in the United States with the ab

worldwide demand.

5.

On July 9, 2010, officials formally announced that a project would b

in the City including the acquisition and improvement of real property and the con

equipping of a facility for manufacturing and processing sugar substitute (the "Proj

6. The Project was to be owned by the City, but operated by Mamtek.7. In order to finance the Project, including construction of the m

facility, Mamtek relied heavily on state tax incentives and bonds issued by the City

8. The State of Missouri awarded Mamtek $7.6 million in Missouri



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9. Additional funding was supported by bonds issued by the Industrial Authority of the City of Moberly (the "Authority") acting under Chapter 349 o

Statues of Missouri with respect to the financing of the Project.

10. Ultimately, three series of bonds in the total amount of $39 millionby the Authority:

a. Series 2010-A Taxable Annual Appropriation Capital Projectamount of $8,440,000;

b. Series 2010-B Tax-Exempt Annual Appropriation Capital Pin the amount of $3,025,000; and

c. Series 2010-C Tax-Exempt Annual Appropriation Recovery Bonds in the amount of $27,535,000 (collectively, the "Bond

11. On or about July 1, 2010, among other documents, the follodocuments relating to the Mamtek Parties' obligations were entered into:


b. Financing Agreement by and between the City and the Authoc. Management, Operating, and Purchase Agreement by and

City and Mamtek;

d. Guaranty Agreement by and among the City, on one hand,and International, on the other hand, as guarantors;


f. Security Assignment by and between the City and UMB (co"Bond Documents").

Th B d D t th ti d t t t bli h th li bilit f th M



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Agreement and the Security (hereinafter defined) to UMB, as Indenture Tr

bondholders. Pursuant to the Trust Indenture, the Authority assigned its enfor

under the Financing Agreement to UMB. Trust Indenture 807.

13. Pursuant to the Financing Agreement, a copy of which is attached athe City agreed to make payments on account of the Bonds to UMB, as Trustee, f

of the Authority. Such payments were due fifteen days prior to each Interest Paym

the Bonds, which are specified as March 1 and September 1. Under the Financin

the Authority again reiterated that it assigned all rights under the Financing Agreem

to the Trust Indenture to UMB and further specified that UMB had the power t

rights granted to the Authority under the Financing Agreement. Financing Agre

and 7.6. Further, the City assigned to UMB all rights it may have in enforc

Management Agreement or Guaranty, including the right to bring all such actio

necessary in UMB's judgment. Financing Agreement 5.3(b).

14. The Management Agreement, a copy of which is attached as Exhibithat the City would make available to Mamtek the funds raised pursuant to the Bon

grant Mamtek the exclusive right to manage and operate the Project, in exchange

obligation to manage and operate the facility, including the provision of funds to th

repayment of the Bonds as payments are due. Management Agreement Article 3.

such payments were due on the first day of each month preceding the Interest Pay

February 1 and August 1.



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a. Default in the punctual payment of any payment due which 10 days after the City or the Trustee has given written ndefault;

b. Mamtek's execution of an assignment for the benefit of creditc. Mamtek's abandonment of the Project, and the filing of lien

Project.

Management Agreement 8.4 and Article 12.

16. Upon an event of default, under the Management Agreement, the Cacting as Trustee pursuant to Section 5.3(b) of the Financing Agreement, may elec

outstanding amounts to be immediately due and payable, give Mamtek written

intent to terminate the Management Agreement at a specified date, or reenter th

thereafter elect to terminate the Management Agreement upon notice no less

following reentry. Management Agreement Article 12.

17. Under the Guaranty Agreement, a copy of which is attached as EMamtek Parties each guaranteed the timely and full payment of all payments d

Management Agreement. To secure such payment, the Mamtek Parties pledged

right, title, and interest in patents, trade secrets, and other intellectual property

manufacturing process and operating information used in the Project as set forth

Exhibit A to the Guaranty Agreement (the "Security"). Guaranty Agreement Exhib

18. In order to protect the Mamtek Parties' confidentiality with respect todescribed in the Guaranty Agreement, the Escrow Agreement, a copy of which

Exhibit E was executed to name UMB as escrow agent of the Security UM



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19. Pursuant to the Security Assignment, a copy of which is attached the City transferred and assigned to UMB all of the City's right, title, and interest in

under the Guaranty Agreement and Escrow Agreement.

20. Upon default by Mamtek under the Bond Documents, the City, UMB as assignee under the Security Agreement, is authorized to give notice and e

with respect to the Security, including demanding release of the Security from

escrow agent. Guaranty Agreement 6.2 and Escrow Agreement 2.2.

21. On or about July 15, 2010, the Authority adopted Resolution 2010-the bond issues and the Bond Documents.

22. On or about July 15, 2010, the City Council of Moberly, MissOrdinance No. 8485 approving the Bond Documents.

23. Prior to the Closing Date, Mamtek allegedly engaged Ramwell In(Ramwell) to perform substantial services with respect to the Project, includin

acquisition and installation of five production lines (the Alleged Ramwell Service

24. Despite Mr. Coles denial, upon information and belief, Ramwell mowned or partially-owned by Mr. Cole. It is unclear whether Ramwell is a

corporation or incorporated and/or registered to do business in the State of Mi

United States.

25. On July 21, 2011, prior to the Closing Date, Ramwell issued aMamtek in the amount of $4,062,500 representing a deposit for the Alleged Ram



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27. On July 27, 2010, the Bond Issue closed (the "Closing Date").28. On July 28, 2011, one day after the Closing Date, the July Ramwel

paid from the Bond Proceeds in the amount of $4,012,500 (it is unknown at this

July Ramwell Invoice was reduced by $50,000).

29. Between November 2010 - July 29, 2011 (which date was immedMamteks deadline to pay its $3.2 million bond payment to the City due under the

Agreement), Ramwell was paid an additional $2,590,173 from the Bond Proceeds

$6,602,673 (the Ramwell Payments).

30. Despite receiving millions in Bond Proceeds that Mamtek was vendors and reimburse expenses, it is unclear whether Ramwell performed the Alle

Services, or ever performed any actual work on the Project or at the Facility.

31. Other vendors performed substantial work on the Project, for whichunpaid and for which mechanics liens have been filed against the Project (all, co

Mechanics Lien Claimants):

a. Faith Technologies, Inc. $154,520.43b. Air Liquide Industrial US LP $ unknownc. Sys-Tek, P.A. $155,679.50d. Septagon Construction Company $1,389,283.03

32. In addition to the Trustee and the Mechanics Lien Claimants, CTrust Company of Moberly, Missouri (the Bank) has sued Mamtek and the



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33. On or about August 1, 2011, Mamtek failed to pay its $3.2 million bto the City due under the Management Agreement. As a result, the City faile

corresponding bond payment to UMB, as Indenture Trustee for the Authorit

Financing Agreement on or about August 15, 2011.

34. On September 1, 2011, UMB filed a notice stating that the required bwas not made in accordance with the Bond Documents. A copy of the Notice i

Exhibit G. UMB drew the payment to the bondholders from the debt service r

pursuant to the Bond Documents.

35. Because no payments have been received with respect to theoutstanding balances are as follows:

a. Series 2010-A Taxable Annual Appropriation Capital Projectamount of $6,260,000;

b. Series 2010-B Tax-Exempt Annual Appropriation Capital Pin the original issuance amount of $3,025,000; and

c. Series 2010-C Tax-Exempt Annual Appropriation Recovery Bonds in the original issuance amount of $27,535,000.

36. On or about September 1, 2011, Peter Kravitz ("Kravitz") was hireas President. Kravtiz is an attorney based in Los Angeles specializing in l

financially distressed companies.

37. On September 2, 2011, the City provided written notice to International of the default under the Bond Documents.

38 Shortly after the default and change in management Mamtek t



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subpoena was received by UMB on September 9, 2011, requesting, among

information relating to Project requisitions. UMB was subsequently informed by

the SEC investigation had been ongoing for several months and that subpoen

received by the City and Mamtek.

40. On September 9, 2011, Kravitz opined that an additional $30 millneeded to complete the Project and this was after already spending the $39 million

have completed the Project. Kravitz also claimed that the Project was viable and

possessed significant valuable resources and intellectual property.

41. On September 14, 2011, Mamtek's acting plant manager for the Projcompletion of the Project would cost an additional $44.5 million. Mamtek's p

admitted that the Project had been badly mismanaged before he arrived at Mamte

claimed that, although the Project is viable, relevant manufacturing patents had exp

and, in his view, the escrowed intellectual property of Mamtek was of little value.

42.

On September 16, 2011, the City received notice that the requeste

required for forbearance would not be provided by Mamtek. In response, the

Authority took action to secure the Project and began exploring successors to the P

43. On September 23, 2011, Missouri Attorney General Chris Koster anthe Attorney General's office would begin an investigation of the Mamtek Part

providing assistance to Prosecuting Attorney Mike Fusselman and the Rand

Prosecuting Attorney's Office.

li id d d di ib d di i d i h C lif i l A



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liquidated and distributed to creditors in accordance with California law. A copy o

Assignment for the Benefit of Creditors (the "Assignment") is attached as Exhibit

45. On or about September 26, 2011, the Missouri Senate announced anof the Mamtek Parties and the Project by the Senate Committee on Government Ac

46. On October 5, 2011, City provided written notice of its intent tProject pursuant to the Management Agreement. The City also expressed its inten

the Management Agreement on October 27, 2011, unless Mamtek cured existing d

that date. A copy of the notice is attached as Exhibit I.

47. On October 26, 2011, counsel for DSI attempted to remove assetfrom Missouri, including laptops and e-mail. See Letter from John D. Fiero date

2011, attached as Exhibit J.

48. On or about October 27, 2011, the Missouri House of Representativthat the House Interim Committee on Government Oversight and Accountability

an investigation of the Mamtek Parties and the Project.

49. On October 27, 2011, the Management Agreement terminated in accthe terms thereof and the notice provided on October 5. See Exhibit I.

50. In addition to amounts due to the Trustee, Mechanics Lien Claimathe Bank, discovery may bear out additional creditors that remain unpaid. D

further bear out that additional improper payments were made to Ramwell or

owned or controlled by Mr. Cole.

Th V ifi d C l i t i th ti d di tt t t th f ll



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The Verified Complaint in the captioned proceeding matter states the follo

Count I Breach of Contract by Mamtek; Count II Breach of Guaranty Agree

Mamtek Parties; and Count III Appointment of Receiver. The captioned M

immediate, emergency relief regarding Count III.

ARGUMENT

The appointment of a receiver in a diversity case is a procedural matter

federal law and federal equitable principles. Aviation Supply Corp. v. R.S.B.I. Ae

999 F.2d 314, 316 (8th Cir. 1993).1

Although there is no precise formula for determining when a receiver mappointed, factors typically warranting appointment are a valid claim by theseeking the appointment; the probability that fraudulent conduct has occurwill occur to frustrate that claim; imminent danger that property wconcealed, lost, or diminished in value; inadequacy of legal remedies; lacless drastic equitable remedy; and likelihood that appointing the receiver wmore good than harm. Id. at 316-17. Although it is clear that a receivernot an end in itself, there is no doubt that a court of equity has the powappoint a receiver when the appointment is ancillary to some form of finalwhich is appropriate for equity[ ]. Gordon v. Washington, 295 U.S. 3

(1935).

Under theAviation factors, the appointment of a receiver is warranted.

Valid claims by the party seeking the appointment. The Trustee ind

valid claims.

The probability that fraudulent conduct has occurred or will occur

those claims. Based on past actions as set forth herein, including but not limited

under the Bond Documents; the potentially improper payments to related

Assignment entered into on September 26 2011;2 ongoing investigations by the S



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Assignment entered into on September 26, 2011; ongoing investigations by the S

Attorney General, and Missouri House of Representatives; and DSIs insistence

Mamteks books and records from Missouri, it is probable that fraudulent condu

occurred, and that evidence of the fraud may be removed, concealed, or destroye

that claim.

Imminent danger that property will be concealed, lost, or diminish

Again, based on Defendants past actions, including the timing of the Assignme

current efforts to move Mamteks books and records out of Missouri and away from

the Mechanics Lien Claimants, the Bank, and various law enforcement officia

weighs heavily in favor of the appointment of a receiver.

Inadequacy of legal remedies. Mamteks suspicious conduct has irreparab

City, the Trustee and the bondholders, the Mechanics Lien Claimants, the Ban

others.

Lack of a less drastic equitable remedy. No remedy other than a

including the Assignment, can protect the Trustees interest from further harm. T

the Assignment is an indication of fraud. The Assignment was also a unilatera

Mamtek, without the benefit of any input from the Trustee, the largest creditor by

the Assignment is a non-judicial proceeding occurring in California. The matters a

Mamtek described herein demand Court oversight in Missouri, which will only ha

appointment of a receiver.

harms not only the Trustee and the bondholders but Mamteks other creditors all



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harms not only the Trustee and the bondholders, but Mamtek s other creditors, all

either located in or have a presence in Missouri. Justice must occur in Missouri, w

has acknowledged in the past under various provisions of the Bond Documents. F

is allowed to remove Mamteks books and records from Missouri, this would fru

and ongoing investigations into the Mamtek Parties by the SEC, the Missouri Atto

and the Missouri House of Representatives.

* * * * *

Plaintiff proposes that Bruce E. Strauss, Esq. be appointed as receiver for M

Strauss is well-qualified and fully prepared to act as receiver for the business pu

Order of this Court. The receiver shall file with the Clerk of this Court a bond

determined by the Court to assure his conscientious performance of the

responsibilities imposed by the Order. Further, the cost of the receiver should be

taxed as part of the costs of this action, and added to the amounts owed by D

Plaintiff.

CONCLUSION

For the reasons stated herein and based on all of the files, records, and

herein, the Plaintiff respectfully requests the appointment of a receiver.

November 4, 2011



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November 4, 2011



/s/ Douglas M. WeemsDouglas M. Weems EDMO #Scott J. Goldstein EDMO #Lisa Epps Dade EDMO #Heather M. Morris MO #[email protected]

[email protected]@[email protected] Walnut Street, Suite 1400Kansas City, MO 64106(816) 474-8100(816) 474-3216 Fax

And

1 North Brentwood BoulevardSuite 1000St. Louis, MO 63105-3925

ATTORNEYS FOR PLAINTIFF

UMB BANK, N.A., SOLELY IN ICAPACITY AS TRUSTEE

Case 11-22092-7 Doc 3 Filed 12/15/11 Entered 12/15/11 11:16:44 Desc MainDocument Page 56 of 64


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