IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. WEALTH INTERNATIONAL NETWORK, DISCOVERY FINANCIAL, INVESTMENTS, ANDRE BRADY, BRADY INTERNATIONAL, INC., STERLING CONSORTIUM HOLDINGS, INC., COMMONWEALTH CAPITAL L.C., MPAK SECURITY, INC., SEA FINANCIAL SERVICES CORP., MICHAEL G. FRAINA, JR., REUBEN A. SPIVEY, Defendants. CIVIL ACTION FILE NO. 1:95-CV-1722-CAM PLAN OF DISTRIBUTION COMES NOW, William G. Hays, Jr., the duly appointed and acting Distribution Agent (the "Distribution Agent") for Wealth International Network ("WIN"), Discovery Financial Investments ("DFI"), Sterling Consortium Holdings ("Sterling"), Brady International ("Brady"), and Leadership Development Institute ("LDI"), and, in accordance with the Orders Appointing Distribution Agent, as that term is defined below, herewith files his Plan of Distribution (hereinafter "Plan"). Article 1. Introduction and Definitions 1. Preliminary Statement. This Plan essentially provides for the consolidation of all of the assets of WIN, DFI, Sterling, Brady International and LDI. Trade creditors, investors in DFI and those persons who paid mortgage fees to Sterling will be treated equally and will receive distributions on a pro-rata basis from a single Disgorgement Fund to be established herein. Contemporaneously herewith, the Distribution Agent has filed his "Report in Connection With Plan of Distribution" (the "Report") wherein he provides an analysis of the assets and liabilities of the respective entities. Although certain creditors and investors, depending on the particulars of their claims, might receive more or less if these assets were not consolidated and investors and creditors were not treated equally, the Distribution Agent believes that a consolidation will result in fairest treatment for the investor and creditor bodies as a whole and will further reduce the cost of administering the assets. At present, the Distribution Agent anticipates that creditors and investors will ultimately be paid approximately 60% to 70% of their claims. The Plan also excludes certain insiders from receiving any distribution. 2. Definitions. The following defined terms shall be used herein: 1. "Administrative Expense Claims" shall consist of all costs, expenses and fees incurred by the Distribution Agent in connection with his administration of the Distribution Fund including, but not limited to consultant fees, auctioneer fees, legal fees and expenses, and all other expenses normally associated with court-supervised administration of assets and receiverships in general. Administrative Expense Claims shall also include a fee for services rendered by the Distribution Agent. Administrative Expense Claims for professional fees must be approved by the Court. 2. "DA Entities" shall collectively refer to WIN, DFI, Sterling, Brady International and LDI and their affiliates. 3. "Allowed Claim" shall mean a claim as to which a proof of claim has been filed with the Distribution Agent by the Bar Date and to which no objection to the allowance of which has been made, or, if an objection has been filed to all or part of a claim contemporaneously herewith, as to which any such objection has been determined by a final non-appealable order. 4. "Approval Order" shall refer to an order entered by the Court approving the Plan. 5. "Bar Date" shall mean the date by which a claim must be filed in order to receive a distribution from the Distribution Fund. The Bar Date will be the date on which the Court schedules a hearing on the approval of the instant Plan. 6. "Case" shall mean SEC v. Wealth International Network, et al., United States District Court for the Northern District of Georgia, Civil Action Number: 1:95-CV-1722-CAM. 7. "Claim" shall mean any right to payment whether or not such right to payment is reduced to judgment, liquidated, unliquidated, fixed or contingent, asserted or unassented, matured, disputed, undisputed, legal, secured or unsecured. 8. "Class" shall mean a group of claims which are substantially similar to each other as classified pursuant to the Plan. 9. "Closing Date" shall mean the date on which the Court enters an Order closing the Case and discharging the Distribution Agent from his obligations under the Orders Appointing Distribution Agent. 10. "Court" shall mean the United States District Court for the Northern District of Georgia, Atlanta Division. 11. "Disgorgement Fund" shall mean the fund established in accordance with Article IV(A) of the Plan. 12. "Distribution Agent" shall mean William G. Hays, Jr., the duly appointed and serving Distribution Agent for WIN, DFI, Sterling, and Brady, or any successor in interest. 13. "Insider Claims" shall refer to claims of the following individuals and their immediate family members together with anyone acting in their stead or on their behalf: Tom Begley, Kevin Bonds, Andre Brady, Dr. Norma Brady, Al Calloway, Charles Dobbins, Tracey Graveley, Denise Holland, Reginald Jennings, Hector Prieto, David Yandow and any other individual who the Court determines to be an insider. 14. "Investor Claims" shall mean a claim for monies tendered to WIN/DFI for investment purposes. This term shall be limited to a claim for the principal balance tendered for investment and will not include any claim for WIN Membership Fees, interest on the principal sum or any promised returns on the amount invested. 15. "Orders Appointing Distribution Agent" shall refer collectively to the Order Appointing Distribution Agent entered by this Court on November 6, 1995, which is attached hereto as Exhibit "A" and the Amended Order Appointing Distribution Agent entered by the Court on April 25, 1996, which is attached hereto as Exhibit "B". 16. "Separate Funds" shall collectively refer to the segregated cash accounts established by the Distribution Agent which represent the proceeds of assets of the respective DA Entities. The accounts, together with their respective balances as of September 6, 1996, are listed in Exhibit "C" which is attached hereto and incorporated herein by Reference. 17. "Sterling Claims" shall refer to claim for monies invested in and/or paid to Sterling in connection with the purchase of a mortgage. 18. "Tax Claims" shall refer to a claim of a government authority for the payment of a tax of any kind, including, without limitation, income taxes, withholding taxes (including FICA and Medicare), personal property or intangible taxes and sales taxes. 19. "Trade Claims" shall refer to claims for goods provided and/or services rendered for any of the DA Entities. 20. "WIN Membership Fee Claims" shall mean claims for the $72.95 or similar amount paid as an annual fee for membership in Wealth International Network. Article 2. Classification of Claims and Interests 1. For the purposes of this Plan, the claims against the Defendants and the property of the Defendants are classified as set forth in this Article. The rights of all claimants, and the responsibilities of the Distribution Agent with respect to said claimants, shall be based upon their classification herein. 2. Class 1 shall consist of Administrative Expense Claims. 3. Class 2 shall consist of Tax Claims. 4. Class 3 shall consist of Investor Claims, Trade Claims, and Sterling Claims. 5. Class 4 shall consist of Investor Claims, Trade Claims and Sterling Claims filed after the Bar Date. 6. Class 5 shall consist of Insider Claims. Article 3. Treatment of Claims 1. Class 1. Allowed Class 1 Claims will be paid as allowed by the Court and will be accorded priority over all other claims. 2. Class 2. The Distribution Agent is in the process of preparing and filing state and federal tax returns. Once this process is completed, the Distribution Agent will pay all taxes due. In the interim,the Distribution Agent will reserve such sum of money he deems necessary to pay taxes. In the event a Tax Claim is allowed by the Distribution Agent or the Court, it will be accorded priority over all other claims, except Class 1 Claims and it will be paid upon allowance by either the Distribution Agent or by a final, non-appealable order of the Court. 3. Class 3. 1. As soon as practicable after the Approval Order, the Distribution Agent will make a distribution to the holders of Allowed Class 3 Claims. The amount to be disbursed to holders of Allowed Class 3 Claims will be determined by the Distribution Agent taking into account any factors he deems relevant including the establishment of a sufficient reserve to pay current and estimated Class 1 and Class 2 Claims and to pay disputed claims which have not yet been resolved by the Court. To the extent any holder of an Allowed Class 3 Claim did not participate in the distribution authorized by this Court on July 11, 1996, such creditors shall receive the amount necessary to ensure pro-rata treatment with other Class 3 Creditors. 2. In the event that there are additional funds to distribute to holders of Allowed Class 3 Claims, the Distribution Agent shall make a final distribution (the "Final Distribution") to holders of Allowed Class 3 Claims on or before the Closing Date. The timing and manner of the final distribution will be determined by the Distribution Agent and subject to approval of the Court. 3. The Distribution Agent shall have the discretion and authority to make one or more interim distribution(s) to holders of Allowed Class 3 Claims prior to the Final Distribution; provided, however, that the timing and amount of any such distribution shall be left to the discretion of the Distribution Agent. 4. The Distribution Agent currently anticipates that there will not be sufficient funds to pay Allowed Class 3 Claims in full and that holders of Allowed Class 3 Claims will receive between 60% and 70% of their allowed claims. No distributions will be made to Class 4 or Class 5 unless all Allowed Class 3 Claims have been paid in full. 4. Class 4. In the event, and only in the event, that all Allowed Claims in Classes 1, 2 and 3 are paid in full, a pro-rata distribution will be made to holders of Allowed Claims in Class 4. Allowed Claims in this class shall consist of claims which would be allowed as Class 3 Claims if they had been filed prior to the Bar Date. The Distribution Agent does not anticipate that there will be funds available to distribute to holders of Allowed Class 4 Claims. 5. Class 5. Insider Claims will be subordinated to all other claims. Since the Distribution Agent believes it is highly unlikely that there will ever be sufficient monies available for this Class, holders of Allowed Class 5 Claims shall only receive a distribution if expressly authorized by further order of the Court and on such terms and conditions which may be set by the Court. Article 4. Implementation of the Plan 1. The Distribution Agent shall file the Plan and Report and request a hearing date from the Court at which time the Court shall consider the Plan. Notice of the filing of the Plan, of the hearing and of the Bar Date will be given to all investors, creditors and parties in interest. In addition, those persons identified as insiders in Article I(B)(4) above will be specifically notified of their inclusion in this Class. 2. If the Plan is approved, the Distribution Agent shall consolidate the Separate Funds and establish a single Disgorgement Fund. The Distribution Agent shall continue to liquidate those assets of the DA Entities capable of liquidation with proceeds of all such assets, regardless of ownership of the asset, deposited into the Disgorgement Fund. At present the only known non-cash assets of the DA Entities consist of promissory notes, mortgages, stock, and fraudulent conveyance claims. The Distribution Agent shall pay Allowed Claims in accordance with the priorities established in Article III above from the Disgorgement Fund. 3. If any asset of a DA Entity or claim or cause of action is deemed by the Distribution Agent to be burdensome or of inconsequential value and benefit, the Distribution Agent may abandon such property after notice to the Court and the SEC. 4. The Distribution Agent submits that the treatment of each class is fair and equitable and does not discriminate unfairly. Article 5. Retention of Jurisdiction 1. The Orders Appointing Distribution Agent shall remain in full force and effect except as may be modified in the Approval Order or subsequent order entered by the Court. 2. The Distribution Agent will retain all powers provided in the Orders Appointing Distribution Agent until the Closing Date. 3. The stay established in Article III of this Court's Amended Order Appointing Distribution Agent entered April 25, 1996 shall remain in effect until the Closing Date. 4. The Court shall retain jurisdiction over the case for all purposes allowed by law including, but not limited to, the following: 1. the interpretation, implementation, enforcement and consummation of the Plan; 2. the allowance or disallowance of any claim; 3. the determination of validity and priority of any claim; 4. the modification of this Plan as may be necessary to carry out its purposes and intent; 5. the resolution of any litigation that has been or may be filed by the Distribution Agent; and 6. the entry of an order concluding this case and discharging the Defendants and the Distribution Agent. Article 6. Miscellaneous Provisions 1. Upon application of the Distribution Agent or any party in interest, the Court may issue an Order directing any necessary party to execute, deliver, or join in the execution or delivery of any instrument or document and perform any other act necessary for the consummation of the Plan. 2. The Distribution Agent shall be authorized, empowered and permitted to enter into an agreement or agreements with any creditor, subsequent to the Approval Order, which provides for payment or treatment of such creditor's claim; provided, however, that no such agreement or agreements shall provide for payment or treatment of such creditor's claim upon terms more favorable to such creditor than the payment or treatment provided to creditors in the same Class. 3. The provisions of the Plan, upon Confirmation, shall be binding upon all creditors and parties in interest. 4. No claims may be enforced against any of the assets and claims which are to be administered by the Distribution Agent and the proceeds of same except as set forth herein. 5. This Plan may be modified both before and after confirmation, on such notice and hearing as the Court deems appropriate. 6. Distributions under this Plan shall be made by sending a check in the name of the claimants holding Allowed Claims to the addresses shown in the proof of claims filed by said claimants. Claimants are required to advise the Distribution Agent of any change of address and the Distribution Agent is only responsible to send notices, checks and other documents to the last known address furnished by the claimant. 7. Upon entry of the Approval Order, the Distribution Agent will only be required to provide notice of any proposed action or relief requested from the Court to the SEC, those parties in interest who have already filed a notice of appearance in the case and those parties in interest who file a request with the Court to receive all notices. This provision shall not apply to any litigation filed by the Distribution Agent with the this Court which need only be served on any defendant(s) named therein. 8. In the event that a creditor fails to negotiate a distribution check(s) which was mailed to the last known address for said creditor prior to the final distribution, such claim shall be considered abandoned and disallowed in its entirety. The funds which would otherwise be distributed to such creditor shall be made available for the final distribution to creditors in this case. This provision is intended to permit the distribution of any unclaimed funds to those creditors who discharge their responsibilities to keep the Court advised as to their current addresses. In the event that any creditor fails to negotiate a final distribution check mailed to a creditor's last known address within six months after the date of the check, such claim shall be considered abandoned and the funds which would otherwise be distributed to such creditor shall be turned over to the Clerk of the Court. 9. The Distribution Agent may abandon and/or destroy all unnecessary books and records of WIN, DFI, Sterling, Brady, LDI and any related entities. The Distribution Agent will maintain all relevant books and records of the Defendants that are required in the discharge of his duties. 10. When the Distribution Agent determines that further efforts to liquidate the assets of the DA Entities are not required or would not be economical, he shall file a motion with the Court to Close the Case wherein he may request such relief as he deems necessary for the final resolution of this case, including provisions which may modify portions of the Plan. Such motion will be subject to approval by the Court. Dated: October __ , 1996. Respectfully submitted, HICKS, MALOOF & CAMPBELL a Professional Corporation By: Henry F. Sewell, Jr. Georgia Bar No. 636265 Attorneys for William G. Hays, Distribution Agent Suite 2200 - Marquis Two Tower 285 Peachtree Center Avenue, N.E. Atlanta, Georgia 30303-1234 (404)588-1100 k:\29320.wgh\96337\pleading\plan1.doc