Eagle Decides to Liquidate, Pay Off Debts

Eagle Computer said Wednesday that it has ended its two-year struggle for survival and will liquidate its assets to pay off debts totaling about $7.2 million. The decision came after Bank of America, Eagle’s largest creditor, refused to approve a proposed reorganization plan.

Last month, Eagle filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code. The decision to liquidate under Chapter 7 of the code followed what Gary Kappenman, Eagle’s president and chief executive, called a fruitless series of offers and counteroffers between Eagle and Bank of America, to which Eagle owed $4.8 million.

Under the reorganization proposal, the bank would have accepted 22% of the company as payment of the debt. An investment group was prepared to provide Eagle with as much as $500,000 in return for a 40% interest in the company--but only if the bank approved the plan.

Kappenman said that the bank last week offered to forgive Eagle’s debt in exchange for a $600,000 note and guarantees of protection against dilution of its holdings in the company. Eagle in turn offered stock and a $177,000 note--equal to the company’s book value. That offer was turned down late Tuesday.

Bank of America officials could not be reached for comment Wednesday.

Founded in 1978, Eagle quickly became a darling of the personal computer industry. Its troubles began in 1981, when International Business Machines filed a patent infringement suit alleging that Eagle used an operating system identical to IBM’s. Eagle had to pull its products from the stores until it designed a new system. During that period, sales fell and the losses began.

Until the bankruptcy filing last month, Eagle managed to stay afloat by giving creditors stock and selling off assets. At its peak in 1983, Eagle had 330 employees. By Wednesday, its work force totaled only 13, Kappenman said.