UNITED STATES DISTRICT COURT
1. On March 7, 2001, Plaintiff Securities and Exchange Commission ("Commission") filed its Complaint ("Complaint") seeking a permanent injunction and other relief against Defendant Lloyd E. Wollmershauser a/k/a the PennyStockMan ("Wollmershauser"). The Complaint alleged that Wollmershauser violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. §§ 77e(a), 77e(c), and 77q(a)], Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b-5] thereunder, and Sections 206(1) and (2) of the Investment Advisers Act of 1940 ("Advisers Act") [15 U.S.C. §§ 80b-6(1) and (2)] in connection with trading in the common stock of Thermotek International, Inc. ("TTKI").
2. The Complaint alleged that Wollmershauser, age 55, of Eastlake, Ohio, was the sole proprietor and operator of PennyStockMan, an Internet web site and newsletter service primarily devoted to microcap (penny) stock recommendations and trading techniques. Acting through his PennyStockMan web site, newsletters, and private e-mails, Wollmershauser provided investment advice from approximately April 1999 to July 2000.
3. The Complaint further alleged that TTKI is a Delaware corporation based in Burlington, Iowa claiming to have developed technology that takes organic substances from waste and converts them into useable products such as fuel, charcoal, and electricity. On June 28, 2000 TTKI began trading for the first time in the over-the-counter market with market makers published in the National Quotation Bureau pink sheets.
4. The Complaint alleged that between March and June 2000, Wollmershauser obtained 2,016,000 shares of TTKI stock from the issuer and, during the same period, touted TTKI stock to his advisory clients in his PennyStockMan web site, newsletters, and in private e-mails. The Complaint alleged that Wollmershauser falsely stated to his advisory clients that he had inside information allowing him to project TTKI's price; that the TTKI stock price would likely rise to $20 by the end of the first day of trading; and that he was "long on TTKI" and did not intend to sell shares of TTKI stock that he owned in the short term. The Complaint further alleged that Wollmershauser recommended that his advisory clients place limit buy orders for TTKI common stock up to a price of $5.05 per share but, failed to inform them that he held over two million shares of TTKI stock and that he had placed limit sell orders for over one million shares of TTKI stock that were calculated to take advantage of his advisory clients' limit buy orders.
5. The Complaint alleged that on June 28, 2000, TTKI opened at $4.75 per share and closed at $4.00 on volume of 175,376 shares and that most of the trading on June 28, 2000 was between $4.00 and $5.00 per share. The Complaint alleged that on June 29, 2000, TTKI rose to a high of $4.75 per share and closed at $1.50 on volume of 279,655 shares. The Complaint further alleged that on these same dates, while his advisory clients bought TTKI stock based upon his recommendation, Wollmershauser sold 97,750 shares of TTKI stock for proceeds of $436,660. The Complaint alleged that shortly after June 29, 2000 the price of TTKI stock fell to below $1.00 per share.
6. On December 18, 2000, without admitting or denying the allegations in the Complaint, Wollmershauser consented to the entry of a Final Judgment and Order Granting Permanent Injunction and Other Relief ("Final Order"). Among other things, Wollmershauser agreed to disgorge $436,660 plus prejudgment interest thereon, representing his illicit trading profits from his sale of 97,750 shares of TTKI common stock on June 28, 2000 and June 29, 2000. Based on Wollmershauser's demonstrated financial inability to pay the entire disgorgement, the disgorgement in excess of $205,000 was waived by the Commission staff. On March 14, 2001, the Court entered the Final Order against Wollmershauser, ordering him to disgorge $205,000. Wollmershauser satisfied his disgorgement obligation under the terms of the Final Order against him by paying $205,000 to the Office of the Comptroller, Securities and Exchange Commission, which has been forwarded to the United States Treasury.
7. The Final Order provides, in part, that:
8. Pursuant to the Final Order, the Commission staff respectfully submits this Proposed Plan for Distribution of Disgorged Profits ("Plan").
As used herein, the following definitions shall apply:
9. "Disgorgement Fund" shall mean the amount of money paid to the Commission consisting of the cash payment totaling $205,000 disgorged by Wollmershauser, less any reasonable costs incurred by the Commission staff in administering the Plan, including but not limited to notice costs. No interest or other earnings shall be added to the Disgorgement Fund.
10. "Available Distribution" shall mean the amount of money in the Disgorgement Fund.
11. "Trading Period" shall mean the opening of trading on June 28, 2000 until the close of trading on June 29, 2000.
12. "Eligible Claimants" shall mean persons who bought TTKI common stock during the Trading Period.
13. "Eligible Share" shall mean the net shares purchased by an Eligible Claimant during the Trading Period (in other words, the number of shares of TTKI common stock bought by an Eligible Claimant during the Trading Period reduced by the number of shares sold by such Eligible Claimant during the Trading Period).
14. "Total Eligible Shares" shall mean the aggregate of the Eligible Claimants' Eligible Shares.
C. DETERMINATION OF AMOUNT TO BE PAID TO ELIGIBLE CLAIMANTS
15. Only persons who purchased TTKI common stock during the Trading Period may recover under the Plan.
16. The Commission staff shall distribute the Available Distribution to the Eligible Claimants pro rata based upon the ratio of the Available Distribution to the Total Eligible Shares. Examples: (i) if the Available Distribution is $205,000, and the Total Eligible Shares is 150,000, then Eligible Claimants shall receive $1.36 per Eligible Share; (ii) if the Available Distribution is $205,000 and the Total Eligible Shares is 50,000, then Eligible Claimants shall receive $4.10 per Eligible Share; and (iii) if the Available Distribution is $205,000 and the Total Eligible Shares is 400,000, then Eligible Claimants shall receive $0.51 per Eligible Share. In no event, however, shall Eligible Claimants receive in excess of $5.05 per share.
17. If, after making all such distributions, there still remains available monies in the Disgorgement Fund, those monies shall be distributed to the United States Treasury.
D. NOTICE; THE CLAIMS PROCEDURE; AND FILING OBJECTIONS
18. The Commission staff shall oversee the administration of the claims, procedures, and distribution as provided in this Plan. Neither the Commission nor its staff shall be liable to defendant or to any other person or entity for its good faith compliance with distributing the disgorged funds under the Plan.
19. The Commission staff shall initiate the notice procedures set forth in the Plan within 30 days from the date the Plan is approved by the Court.
20. The Commission staff shall seek to identify individual Eligible Claimants by reviewing trading records available to the Commission. The Commission staff shall provide such Eligible Claimants who have been individually identified with written notice by first class mail of their right to submit a claim. The notice shall include a copy of the Plan, a verified claim form prepared by the Commission staff, and the deadline for the filing of claims.
21. Additionally, the Commission staff shall seek to give notice to claimants through the Commission's official website at www.sec.gov. The notice shall include a copy of the Plan, a verified claim form prepared by the Commission, and the deadline for the filing of claims.
22. Additionally, the Commission staff shall seek to give notice to claimants through the TTKI investors information "board" located at www.RagingBull.com. Notice shall be made at such location on one day for three consecutive weeks. The notice shall include contact information for the undersigned and a reference to the Commission's official website at www.sec.gov.
FILING OBJECTIONS TO THE PLAN
23. Any person wishing to comment on or object to the Plan must do so in writing by filing their comments with the Court within 60 days from the date the Plan is approved by the Court, with a copy to be served, by first-class mail, upon the Commission staff:
Katherine S. Addleman
24. Any comments or objections so filed shall be available for inspection upon reasonable notice by any interested person during normal business hours of the Commission's Denver, Colorado office.
25. The Commission staff may respond to any comments or objections so filed within 30 days from the last date a comment or objection may be filed by filing such response or responses with the Court, with copies of any such response to be served by first-class mail upon counsel for the defendant, and all persons who submitted timely comments or objections to the Plan. Any and all orders or rulings by the Court with respect to any comments or objections shall be final and non-appealable. Moreover, the filing of a comment or objection to the Plan has no effect on the deadline to file a claim.
THE CLAIMS PROCEDURE
26. Unless extended by the Court, the claims period shall be 90 days from the date of the first mailing or the first publication of notice. No claim shall be accepted after such date.
27. The Commission staff shall review the claims of the potential claimants and make determinations under the criteria established herein as to the eligibility of the claimants to recover monies and the amount to be distributed.
28. Any claim asserted shall be in writing and shall provide adequate documentary evidence to substantiate the claim, including all evidence that the Commission staff deems necessary or appropriate, including but not limited to brokerage account statements and trade confirmations.
29. All claims must be verified on the basis of a sworn affidavit or declaration executed by the claimant. Any claims not verified with a sworn affidavit or declaration will be rejected by the Commission staff.
30. All determinations of the Commission and its staff that are made in accordance with the provisions of this Plan shall be final and non-appealable.
31. Within 30 days from the close of the claims period, the Commission staff shall notify in writing all claimants who have filed claims and whose claims have been denied by the Commission staff under the criteria established under this Plan. The Commission staff shall advise each such claimant of the basis for the rejection of the claim. Any claimant who objects to the Commission staff's determination of eligibility, or wishes it to reconsider the denial, must so advise the Commission staff within 15 days from the date of the initial denial of the claim. The Commission staff shall promptly consider any such objection or request for reconsideration and shall notify the claimant in writing of its decision, which shall be final and non-appealable.
32. Within 60 days from the latter of the close of the claims period, final notification to claimants of denied claims, and the Court's order(s), if any, regarding any timely filed comments or objections, the Commission staff shall distribute from the United States Treasury the Available Distribution to Eligible Claimants as provided for in this Plan. Any check distributed by the Commission staff and not cashed within 180 days of distribution shall be void or voidable and those funds shall be returned to the United States Treasury.
33. Summary of Significant Dates and Deadlines:
a. 30 days from Plan approval: Notice procedures initiated.
b. 60 days from Plan approval: Deadline for filing comments or objections to the Plan.
c. 30 days from the last date comments or objections may be filed: Deadline for Commission staff response to any comments or objections filed.
d. 90 days from the date of the first mailing or the first publication of notice: Close of the claims period.
e. 30 days from the close of the claims period: Deadline for notification to all claimants who have filed claims and whose claims have been denied.
f. 15 days from the date of the Commission staff's initial denial of any claim: Deadline for objections to or requests for reconsideration.
g. 60 days from the latter of the close of the claims period, final notification to claimants of denied claims, and the Court's order(s), if any, regarding any timely filed comments or objections: Commission staff shall distribute the Available Distribution to Eligible Claimants as provided for in this Plan.
h. 180 days from the date any check is distributed by the Commission staff and not cashed: The check shall be void or voidable and those funds shall be returned to the United States Treasury.
34. If the Court deems it necessary or appropriate, it will hold a hearing on the Plan at ___ __.m. on ______________________, 2001, or as soon thereafter as counsel may be heard.
DATED this ________ day of _____________, 2001.
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing Plan for Distribution of Disgorged Profits and Memorandum in Support Thereof has been served by first-class U.S. mail to counsel for the Defendant at the following address:
Christopher M. Ernst, Esq.
On this ____ day of June, 2001.