EXHIBIT 2(g)
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION
IN RE : ] CASE NO. 01-24607-DSK
]
RESPONSE ONCOLOGY, INC., ] CHAPTER 11
RESPONSE ONCOLOGY MANAGEMENT ]
OF SOUTH FLORIDA, INC., ]
RESPONSE ONCOLOGY OF FORT ]
LAUDERDALE, INC., AND ]
RESPONSE ONCOLOGY OF TAMARAC, ]
INC., ]
]
DEBTORS. ]
] (JOINTLY ADMINISTERED)
FIRST AMENDED JOINT PLAN
The Debtors (as defined herein), jointly with AmSouth Bank ("AmSouth"),
as lender and as agent on behalf of the Senior Secured Lenders, including
itself, Bank of America, N.A. and Union Planters Bank, N.A., (collectively the
"Lenders") hereby propose and file this First Amended Joint Plan (the "Plan")
pursuant to the provisions of Title 11, United States Code, Chapter 11, as
follows:
ARTICLE I
DEFINITIONS
For the purposes of this Plan, all capitalized terms shall have the
meanings ascribed to them in this Article I, except as expressly provided or
unless the context otherwise requires. Any term used in this Plan that is not
defined herein, but is defined in the Bankruptcy Code or the Bankruptcy Rules,
shall have the meaning ascribed to that term therein.
Administrative Claims Bar Date shall mean the thirtieth (30) day after
entry of the Confirmation Order.
Administrative Expense Claim shall mean a Claim for payment of an
administrative expense pursuant to 11 U.S.C. ss. 503(b).
Administrative Expenses Fund shall mean that certain account established
by the Lenders for the payment in full of all Allowed Administrative Expense
Claims and all Allowed Priority Claims. The Administrative Expenses Fund will be
funded with proceeds from the Assets. The Administrative Expenses Fund shall be
owned by the Lenders and established at AmSouth Bank, and monies from such
Administrative Expenses Fund shall be distributed to Allowed Administrative
Claims and Allowed Priority Claims. The Lenders shall retain all additional
monies that exist in the Administrative Expenses Fund after distribution to all
Allowed Administrative Claims and Allowed Priority Claims (whether such Claims
are Allowed on the Effective Date or subsequent thereto).
Allowed Claim shall mean a Claim or any portion thereof (a) that has
been allowed by Final Order, or (b) as to which, on or by the Effective Date,
(i) no proof of claim has been filed with the Bankruptcy Court and (ii) the
liquidated and noncontingent amount of which is listed by any of the Debtors on
its schedules and remaining unpaid, other than a Claim that is scheduled at
zero, in an unknown amount, or as disputed, (c) for which a proof of claim in a
liquidated amount has been timely filed with the Bankruptcy Court pursuant to
the Bankruptcy Code, any Final Order of the Bankruptcy Court or other
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applicable bankruptcy law, and as to which either (i) no objection to its
allowance has been filed within the periods of limitation fixed by the Plan or
by any order of the Bankruptcy Court or (ii) any objection to its allowance has
been settled or withdrawn, or has been denied by a Final Order, or (d) that is
expressly allowed in a liquidated amount in this Plan.
Allowed means, when used in reference to a Claim or ROI Interest within
a particular Class, an Allowed Claim or Allowed ROI Interest of the type
described in such class.
Amended Charter and Bylaws shall mean the Amended Charter and By-Laws
attached hereto as Exhibit A.
AmSouth shall mean AmSouth Bank, one of the Lenders and Agent for the
Lenders.
Assets shall mean all tangible and intangible property, and the proceeds
thereof or anything else of value, including but not limited to cash on hand or
in accounts, owned by the Debtors or the Estates, or in which the Debtors or the
Estates have rights, and including without limitation Litigation Matters.
Avoidance Claims shall mean those claims, and the recoveries from those
claims, arising under Chapter 5 of the Bankruptcy Code, including but not
limited to amounts recovered from certain physician practice management groups
in settlement of claims the Debtors had pursuant to Chapter 5 of the Bankruptcy
Code.
Bankruptcy Cases shall mean In re Response Oncology, Inc., Case No.
01-24607-K, In re: Response Oncology Management of South Florida, Inc., Case No.
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01-24608-K, Response Oncology of Fort Lauderdale, Inc., Case No. 01-24609-K, and
Response Oncology of Tamarac, Inc., Case No. 01-246010-K, administratively
consolidated, pending in the United States Bankruptcy Court for the Western
District of Tennessee.
Bankruptcy Code shall mean Title 11 U.S.C. ss. 101, et seq.
Bankruptcy Court shall mean the United States Bankruptcy Court for the
Western District of Tennessee and any court having jurisdiction to hear appeals
therefrom, or such other court as may have jurisdiction over the Chapter 11
case.
Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure, as
amended, and the Local Rules of the Bankruptcy Court for the Western District of
Tennessee, as amended, as applicable to these Bankruptcy Cases.
Budget shall mean that certain document attached hereto as Exhibit B
that shows the amounts to be paid to particular classifications or groups of
Holders of Allowed Claims.
Cases shall mean the Debtors' cases under Chapter 11 of the Bankruptcy
Code.
Cash Collateral shall have the meaning ascribed to it in the Cash
Collateral Order.
Cash Collateral Order shall mean that certain Final Order Authorizing
Debtors to Use Cash Collateral entered by the Bankruptcy Court in the
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Debtors' cases on October 26, 2001, as it has or will be amended, extended
and/or modified through the Effective Date.
Claim shall have the meaning ascribed to it in 11 U.S.C.ss. 101(5).
Claimant shall mean the Holder of a Claim.
Class shall mean a category of Holders of Claims or ROI Interests, as
described in Article II of the Plan.
Collateral shall mean any property or interest in property of a Debtor's
Estate that serves as security for the repayment of a debt or the performance of
an obligation owed by a Debtor to the Holder of an Allowed Secured Claim.
Confirmation or Confirmation Date shall mean the date upon which the
Bankruptcy Court enters an order confirming this Plan.
Confirmation Order shall mean that certain Order entered by the Court
confirming this Plan.
Creditor shall mean any person or entity holding a Claim against any of
the Debtors.
Creditors Trust shall mean the trust established pursuant to this Plan
into which $250,000 for disbursement to Holders of certain Allowed Claims, as
identified in this Plan, are deposited. The Creditors Trust shall be
administered by the Creditors Trustee.
Creditors Trustee shall mean the law firm of Harris, Shelton, Dunlap,
Cobb & Ryder, PLLC ("Harris Shelton"), 2700 One Commerce Square, Memphis TN
38103, or such other firms as agreed to by the Lenders on the one hand
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and the Debtors or the Winddown Person on the other hand. Nothing herein,
however, shall preclude Harris Shelton from acting as counsel to the Debtors.
Debtors shall mean Response Oncology, Inc. and three of its direct
subsidiaries: Response Oncology Management of South Florida, Inc., Response
Oncology of Fort Lauderdale, Inc., and Response Oncology of Tamarac, Inc. For
purposes of this Plan, the Assets and Liabilities of each Debtor shall be
consolidated, and such Assets made available to Creditors of all Debtors on an
equal basis without regard to Debtor entity, subject however to the priorities
of each Creditor as set out in this Plan.
Disallowed shall mean a Claim to the extent it is not Allowed.
Debtors' Agents shall mean the Debtors' officers, directors, employees,
representatives, attorneys, accountants, agents, and other Debtors'
Professionals, serving at any time during these Cases.
Debtors' Boards of Directors shall mean the Boards of Directors of the
Debtors as they exist on the Confirmation Date.
Debtors' Professionals shall mean all professionals retained by the
Debtors to provide services during the Bankruptcy Cases, and whose retention was
approved by the Court, pursuant to 11 U.S.C. ss.ss. 327-331, whether or not such
professionals remain employed by the Debtors as of the Effective Date.
Disclosure Statement shall mean that certain disclosure statement
approved by the Bankruptcy Court pursuant to 11 U.S.C. ss. 1125 in connection
with this Plan.
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Disputed Claim shall mean a Claim against a Debtor as to which an
objection has been filed on or before the deadline for objecting to a Claim and
which objection has not been withdrawn or otherwise resolved by Final Order.
Disputed Claims Reserve shall mean a segregated account to be held in
trust for the benefit of Holders of Disputed Claims in accordance with the
provisions of the Plan.
Duplicate Claim shall mean a Claim arising out of the same alleged bases
of liability or alleged obligation asserted against the same Debtor or against
more than one Debtor whether on the basis of joint and several liability
otherwise.
Effective Date shall mean the eleventh day after Confirmation of this
Plan unless an appeal of the Confirmation Order shall have occurred, in which
event, the Effective Date shall be, at the election of the Parties, the eleventh
day after Confirmation of the Plan, or the date upon which any such judicial
decree sustaining the Confirmation Order is final and non-appealable.
Employee Retention Plan and Executive Contracts shall mean the Employee
Retention Plan approved by the Court on July 23, 2001, as amended on January 25,
2002, and the employment contracts of Anthony LaMacchia and Peter A. Stark,
approved by the Court by Final Order entered on July 31, 2001.
ERP Funds shall mean those amounts of cash carved out from the Lenders'
Cash Collateral which amounts were deposited into escrow for employees pursuant
to the Cash Collateral Order and the Employee Retention
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Plan and Executive Contracts. Any ERP Funds not exhausted in paying Allowed
Post-Petition Employee Claims shall be paid to the Lenders.
Estate(s) shall mean, individually, the estate of each Debtor in the
Bankruptcy Cases, and collectively, the estates of all Debtors in the Bankruptcy
Cases, created pursuant to 11 U.S.C. ss. 541.
Executory Contract shall mean any contract or unexpired lease to which
the Debtors are a party and which is executory within the meaning of section 365
of the Bankruptcy Code.
Expense Payment shall mean the sum of $25,000 to be paid to the
Creditors Trustee on the Effective Date for the performance of its duties under
this Plan.
File, Filed or Filing shall mean file, filed or filing with the
Bankruptcy Court in the Cases.
Final Order shall mean an order or judgment (or any revision,
modification, or amendment thereof) of the Bankruptcy Court, or other court of
competent jurisdiction, as entered on the docket in the Bankruptcy Cases, the
operation or effect of which has not been stayed, reversed, or amended and as to
which the time to appeal or seek review or rehearing has expired without such
appeal or petition for review or rehearing being filed or, if filed, remains
pending.
Funds shall mean the Administrative Expenses Fund, the Expense Payment,
the Unsecured Distribution, and the Winddown Fund.
Holder shall mean a Person who holds a Claim or Interest.
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Impaired shall have the meaning associated to it in Section 1124 of the
Bankruptcy Code.
Lenders shall mean AmSouth Bank, Bank of America, N.A. and Union
Planters Bank, N.A., and their individual successors and assigns, as Lenders,
and AmSouth Bank, and its individual successors and assigns, as Agent, pursuant
to the Loan Agreements.
Lenders' Agents shall mean the Lenders' officers, directors, employees,
representatives, attorneys, accountants, agents, and other Lenders'
Professionals, serving at any time during the Cases.
Lenders' Professionals shall mean the firms of Casas Benjamin & White,
LLC and Waller Lansden Dortch & Davis, PLLC, and the individuals of such firms
participating on behalf of Lenders in these Cases.
Lien shall mean a charge against or interest in property to secure
payment of a debt or performance of an obligation.
Litigation Matters shall mean those lawsuits or claims, identified on
Exhibit C, belonging to the Debtors or the Debtors' Estates, other than
Avoidance Actions. The Litigation Matters shall be retained and preserved, and
shall vest in the Debtors following Confirmation.
Loan Agreements shall mean those certain promissory notes, credit
agreement, loan agreements, guaranties, security agreements, financing
statements, mortgages and other documents or agreements among the Lenders and
the Debtors, as more specifically identified on the proof of claim filed by the
Lenders in this case.
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Parties shall mean the Debtors and the Lenders, the proponents of this
Plan.
Petition Date shall mean March 29, 2001.
Post-Petition shall mean the period beginning on the Petition Date at
the time these Bankruptcy Cases were commenced, and continuing through the
Effective Date.
Post-Petition Employee Claims shall mean a claim of an officer, director
or employee of any of the Debtors pursuant to 11 U.S.C. ss. 503(b), including
but not limited to severance and stay amounts arising under the Employee
Retention Plan and Executive Contract.
Priority Claims shall mean those claims identified in 11 U.S.C. ss. 507.
Pro Rata Share shall mean a percentage determined by the numerator being
the amount of the Allowed Claim of such creditor and the denominator being the
total amount of Allowed Claims against all the Debtors.
Released Parties shall mean those persons or entities identified in
Article X of this Plan.
ROI shall mean Response Oncology, Inc.
ROI Interests shall mean, collectively, all shares of stock in any of
the Debtors, together with any other options, warrants, conversion rights,
rights of first refusal or other rights, contractual or otherwise, to acquire or
receive any stock or other ownership interests in Debtors, and any contracts
subscriptions, commitments or agreements pursuant to which the non-debtor party
was or
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could have been entitled to receive shares, securities, or other ownership
interests in Debtors.
RO-Fort Lauderdale shall mean Response Oncology of Fort Lauderdale, Inc.
RO-S. Florida shall mean Response Oncology Management of South Florida,
Inc.
RO-Tamarac shall mean Response Oncology of Tamarac, Inc.
Secured Claim shall mean any Claim that is secured by a lien on property
in which an Estate has an interest or that is subject to setoff under Section
553 of the Bankruptcy Code, to the extent of the value of the Holder of such
Claim's interest in the Estate's interest in such property or to the extent of
the amount subject to setoff, as applicable, as determined pursuant to 506(a) or
Section 1111(b) of the Bankruptcy Code.
Subordinated Claimants shall mean those persons or entities identified
on Exhibit D hereto, each of whom has contractually subordinated its Claim to
the Lenders. To the extent that such Claims have not previously been released
pursuant to Final Order of the Bankruptcy Court, or paid in full prior to the
Bankruptcy, such Claims shall constitute Allowed Claims.
Termination Date shall mean the later of September 30, 2002 or the date
upon which the Winddown Person and Lenders determine that no further operations
of the Debtors are needed or necessary, and is the date upon which all
operations of the Debtors shall cease.
Unimpaired shall mean with respect to any Claimant such Claim is not
Impaired.
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Unsecured Distribution shall mean the sum of $250,000.00.
Winddown Fund shall mean the amounts shown on the Budget necessary to
continue winding down the Debtors' businesses during the Winddown Period for the
budgeted period, or as mutually agreed between Lenders and the Winddown Person.
Winddown Period shall mean the period between the Effective Date and the
Termination Date.
Winddown Person shall mean such person appointed by the Debtors and the
Lenders, to act as the sole Director, and Chief Executive Officer and President,
of the Debtors to supervise the liquidation of the Assets and the winding down
of the Debtors' operations and business existence during the Winddown Period.
ARTICLE II
CLASSIFICATION AND TREATMENT OF CLAIMS
The classification and treatment of Claims is made for the purpose of
voting on the Plan, making distributions thereunder and for administration
thereof. For purposes of the Plan, those parties holding Claims against the
Debtors are grouped and shall be treated as follows:
Class 1 Administrative Claims
CLASS 1A
PROFESSIONAL FEES AND EXPENSES
All Allowed Administrative Expense Claims for fees and expenses owed to
any of the Debtors' Professionals shall be paid in full in cash from the
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Administrative Expenses Fund on the later of (a) the date that such Claim is
Allowed or (b) within (30) thirty days of the Effective Date, unless otherwise
agreed to by the Lenders and the Holder of any such allowed Administrative
Expense Claim. The Debtors' Professionals shall be required to apply to the
Court for approval of the fees, costs, and disbursements in the manner
prescribed by the Bankruptcy Code no later than the thirtieth (30) day following
Confirmation. The Parties have attached a Budget showing the total
Administrative Expense Claims they believe are payable under the Plan to the
Debtors' Professionals. The Lenders' Professionals shall not seek or receive
compensation under the Plan but will be paid by the Lenders either from proceeds
the Lenders receive under the Plan or from their own funds.
This subclass is Unimpaired, and pursuant to 11 U.S.C. ss. 1126(f) is
conclusively presumed to have accepted the Plan. Accordingly, the votes of this
subclass will not be solicited.
CLASS 1B
U.S. TRUSTEE FEES.
To the extent not already paid, the Chapter 11 Fees required pursuant to
28 U.S.C. ss. 1930 shall be paid in full from the Administrative Expenses Fund
on or before the Effective Date of Confirmation. These fees will continue to be
paid quarterly until the case is closed. United States Trustee fees are included
on the Budget attached hereto as a part of bankruptcy costs. The Lenders and the
Winddown Person shall work with the United States Trustee to provide whatever
accounting the United States Trustee may require indicating the cash
disbursements for the relevant period the fees are due. This
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subclass is Unimpaired, and pursuant to 11 U.S.C. ss. 1126(f) is conclusively
presumed to have accepted the Plan. Accordingly, the votes of this subclass will
not be solicited.
CLASS 1C
POST-PETITION PAYABLES/EMPLOYEE CLAIMS.
All trade payables and other Administrative Expense Claims (including
Post-Petition Employee Claims) which constitute Allowed Claims and are incurred
by the Debtors Post-Petition for normal, reasonable and necessary operating
expenses (other than Claims under Classes 1A and 1B, or as otherwise provided in
the Plan) shall be paid in full on the later of (a) the date such Claim is
Allowed, or (b) the thirtieth (30) day following the Effective Date. All Allowed
Post-Petition Employee Claims shall be paid at the times set out in the Employee
Retention Plan and Executive Contract, first from the ERP Funds, with any
remaining amounts satisfied from the Administrative Expenses Fund.
This subclass is Unimpaired, and pursuant to 11 U.S.C. ss. 1126(f) is
conclusively presumed to have accepted the Plan. Accordingly, the votes of this
subclass will not be solicited.
CLASS 1D
PRIORITY CLAIMS.
All Priority Claims which constitute Allowed Claims shall be paid in
full in cash from the Administrative Expenses Fund on the later of (a) the date
that such Claim is Allowed or (b) within (30) thirty days of the Effective Date,
unless otherwise agreed to by the Lenders and the Holder of any such Allowed
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Administrative Expense Claim. This subclass is Unimpaired, and pursuant to 11
U.S.C. ss. 1126(f) is conclusively presumed to have accepted the Plan.
Accordingly, the votes of this subclass will not be solicited.
Class 2 Secured Claim Of Lenders
The Claims of the Lenders have been Allowed, pursuant to the Cash
Collateral Order, the terms and conditions of which are incorporated herein by
reference. In full and final satisfaction of the Lender's Claims, AmSouth, as
agent for the Lenders, shall receive and retain the total of (1) on the
Effective Date, all amounts collected through that date through the liquidation
of all the Assets, except for those amounts deposited into (a) the
Administrative Expenses Fund, which shall be segregated by AmSouth; (b) the
Unsecured Distribution paid to the Creditors Trust; (c) the Expense Payment, (d)
the Winddown Fund, plus (2) all amounts collected after the Effective Date from
the liquidation of all the Assets or collected by the Debtors (except to the
extent such amounts are needed to be deposited into a Fund to meet the
obligations of the Plan). Monthly, beginning on the last day of the month in
which the Effective Date occurs, the Winddown Person shall remit to AmSouth, all
amounts collected through that date (less any amounts required to fund the
Funds). Except as provided in the Plan, all sums remitted to AmSouth pursuant to
this Plan shall be paid to the Lenders and applied to the Lenders' Claims in
accordance with the Loan Agreements.
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Further, pursuant to the subordination provisions, the Subordinated
Claimants' Claims have been assigned to the Lenders. Accordingly, this Plan will
give effect to all such subordination provisions and any recovery which would
otherwise go to the Subordinated Claimants shall be received by the Lenders.
This Class is Impaired, and the votes of this Class will be solicited.
Class 3 Claims of Other Secured Creditors
The Parties do not believe there are any holders of Secured Claims
against the Debtors other than the Lenders. To the extent there are such
Creditors whose Secured Claims against the Assets are not junior in priority to
the Claims of the Lenders, and which Claims have not been otherwise paid or
released, then upon the allowance of any such Secured Claim, such Allowed Claim
shall be satisfied, at the Lender's election, by the Winddown Person tendering
the Collateral for such secured Claim in full satisfaction of such secured
Claim, or by paying from the Assets the value of such collateral to any such
secured Claimant.
This Class is Unimpaired, and pursuant to 11 U.S.C. ss. 1126(f) is
conclusively presumed to have accepted the Plan. Accordingly, the votes of this
Class will not be solicited.
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Class 4 Unsecured Non-Priority Claims
This Class consists of all Allowed unsecured non-priority Claims. The
total of all unsecured non-priority Claims scheduled (without regard to
allowance and subject to objections) is approximately $17.4 million dollars. In
full satisfaction of all Allowed Claims of unsecured, non-priority Creditors,
this Class shall receive, pro rata, a distribution from the Creditors Trust, on
the Effective Date, in the amount of the Unsecured Distribution. Upon
distribution of the Unsecured Distribution, no further property shall be payable
or distributable to the Claimants in this Class.
The Claims of Subordinated Claimants fall within this Class. Any
recovery on account of the Allowed Claims of the Subordinated Claimants shall be
paid to the Lenders and the Subordinated Claimants shall receive nothing on
account of their Claims.
This Class is Impaired, and the votes of this Class will be solicited.
Class 5 Claims of Shareholders
This Class consists of all Holders of ROI Interests. Because Holders of
Class 2, 3, and 4 Claims are not being paid in full, this Class shall receive
nothing under this Plan. All shares of stock ever issued by the Debtors, along
with all other ROI Interests, shall be deemed cancelled and shall have no
further claim against any of the Debtors' Assets upon the Effective Date.
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This Class is Impaired, and pursuant to 11 U.S.C. ss. 1126(g), Class 5
Creditors or ROI Interests are deemed to have rejected the Plan, and the votes
of this Class will not be solicited.
ARTICLE III
CONSOLIDATION OF ESTATES, TREATMENT OF DUPLICATE CLAIMS
1. Substantive Consolidation. On the Effective Date, the Estates, and
all assets and liabilities, of RO-S. Florida, Ro-Fort Lauderdale and Ro-Tamarac
shall be deemed substantively consolidated with and into the Estate of ROI. All
claims by any of the Debtors against another Debtor shall not be entitled to any
distribution under this Plan.
2 Treatment of Duplicate Claims. Upon the Effective Date, any Duplicate
Claim shall be treated as a single Claim against the Estate of ROI. To the
extent any Holder holds Duplicate Claims that become Allowed Claims, they shall
be treated as a single Allowed Claim only against the ROI Estate, and all other
Duplicate Claims shall not be Allowed.
ARTICLE IV
DUTIES, POWERS AND ADMINISTRATION OF THE WINDDOWN PERSON AND
WINDDOWN OF DEBTORS' ESTATES
Between the Confirmation Date and the Effective Date, the Lenders and
the Debtors' Boards of Directors shall select the Winddown Person. In order to
effectuate the winddown of the Debtors' operations during the Winddown Period,
on the Effective Date, the Debtors' Boards of Directors shall be deemed
disbanded and relieved of all duties without the need for any vote or other
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action. Further, as of the Effective Date, RO-Fort Lauderdale, RO-S. Florida,
and RO-Tamarac shall be deemed merged into ROI, and ROI shall be the only
entity. Pursuant to the Amended Charter and Bylaws, which shall become effective
on the Effective Date without any act by the Debtors' Boards of Directors, the
Winddown Person shall then become the sole Director and the Chief Executive
Officer and President of ROI, which shall issue a single share to AmSouth or, at
AmSouth's direction, a subsidiary, affiliate or trust, as agent on behalf of the
Lenders, which shall constitute the only existing ownership interest in ROI.
Pursuant to the Budget, the Winddown Person shall retain or employ only
those persons whom the Winddown Person determines, in his discretion and within
the constraints of the Budget, are necessary to allow him to perform the duties
required under this Plan, including the collection and liquidation of the
Assets, and the payment of the collected Assets to the Lenders. On or before
September 30, 2002, the Winddown Person and the Lenders shall determine at what
point the operations of the Debtors and duties of the Winddown Person shall
cease. Once the Termination Date is determined, the Lenders and Winddown Person
shall file with the Court a notice (to be served upon the Debtors and their
counsel, the United States Trustee's Office, and all parties requesting notices
in this case) as to the Termination Date. On the Termination Date, the Winddown
Person shall terminate all remaining employees, independent contractors, and/or
agents, and turn over all books and records of the Debtors to the Lenders. Any
medical records or related
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documents requiring storage and retention under law shall be stored by the
Winddown Person for any period provided by law, by obtaining an appropriate
storage facility at reasonable cost, such cost to be paid from the Winddown
Fund.
To the extent permitted by law, on the Termination Date, the Debtors'
corporate existences shall cease and the Debtors shall be deemed, under
applicable governing corporate law, to have been dissolved and no longer
operational or functioning, and the single ownership share issued to AmSouth
shall be deemed cancelled. On or at a time to coincide with the Termination
Date, the Winddown Person shall file a motion to close the Bankruptcy Case. To
the extent necessary, the Winddown Person shall file articles of dissolution and
take such actions as necessary to effect fully the dissolution of the Debtors.
The term of the Winddown Person shall be deemed to be terminated as of the
Termination Date, unless otherwise extended by Agreement of the Lenders and
Winddown Person. In the event of a vacancy in the position of Winddown Person,
the Lenders shall have sole discretion to choose a replacement, and shall have
no liability in connection with such choosing.
The Winddown Person, on behalf of the Debtors, is vested with the
maximum authority permitted by law in order to dispose of any remaining Assets,
execute documents, pursue litigation and the Litigation Matters, file and pay
taxes and to conduct all other duties assigned to it under this Plan. The
Winddown Person shall be compensated from the Winddown Funds in an amount to be
agreed upon by the Lenders and the Winddown Person.
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ARTICLE V
MEANS OF EXECUTION OF THE PLAN
This is a liquidating plan. Because the Lenders' Allowed Secured Claim
exceeds the total amount of any recovery from the sale of all Assets of the
Debtors', the Plan shall be funded through the liquidation of the Debtors'
Assets, the payment from the Assets, in full, of all Allowed Administrative and
Priority Claims, the remittance to Allowed unsecured, non-priority Creditors of
the Unsecured Distribution as set forth in this Plan (to which such Creditors
would not otherwise be entitled), and the remittance of any balance to the
Lenders. Presently, and continuing until the Effective Date, the Debtors shall
liquidate all Assets and remit all such collections, in accordance with the
Budget, to the Lenders.
On the Effective Date, the Winddown Person shall deposit from cash on
hand, or if cash on hand is insufficient then from the Lenders, the amounts
shown on the Budget as necessary to fund the Funds. After the Effective Date,
the Winddown Person will continue to sell all the Debtors' Assets, terminate
employment agreements, and pay to the Lenders all proceeds of the liquidation of
the Debtors' and Estates' Assets in accordance with this Plan. All proceeds of
the Assets existing on the Effective Date or from the liquidation of any of the
Assets, other than the Funds, shall be remitted to the Lenders, and Lenders
shall retain all liens against such Assets until their liquidation and
remittance to Lenders, subject to the distribution under the Plan.
In the event, on the Termination Date, Assets remain in the Debtors'
possession over and above the amounts contemplated by the Budget and other
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payments required pursuant to this Plan, all Assets shall be remitted to the
Lenders (or the Lenders' designee) within one (1) business day after the
Termination Date. After all distributions required in the Plan are made, if
amounts remain in any Funds (except the Expense Fund), such amounts shall be
paid to the Lenders.
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ARTICLE VI
UNEXPIRED LEASES AND EXECUTORY CONTRACTS
1. Rejection. All unexpired Executory Contracts of the Debtors are
hereby rejected pursuant to 11 U.S.C. ss. 365 as of the Effective Date, except
those which shall on the Confirmation have been assumed or are the subject of
pending motions to assume pursuant to 11 U.S.C. ss. 365.
2. Rejection Damages Bar Date. If the rejection by any Debtor of an
unexpired lease or Executory Contract results in a Claim, then such Claim shall
be forever barred and shall not be enforceable against any Debtor or the
properties of any of them unless a proof of claim is filed with the clerk of the
Bankruptcy Court and served upon counsel to the Lenders within thirty (30) days
after service of the earlier of (a) notice of the Confirmation Order, or (b)
other notice that the Executory Contract or unexpired lease has been rejected.
3. Possession of Rejected Property. If an Executory Contract pursuant to
which the Debtors' leased equipment is rejected, the owner of such equipment
shall take physical possession of the equipment within ten Business Days after
the Effective Date. Any previously leased equipment of which the owner does not
take possession within ten Business Days after the Effective Date may be
disposed of by the Winddown Person. The owner of such equipment shall reimburse
the Debtors for full cost of such disposal. If any leased equipment is not in
possession of the Debtors, the Winddown Person shall cooperate with the owner's
efforts to take possession of the equipment, but the Winddown Person shall not
be required to turnover possession of the equipment.
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ARTICLE VII
MODIFICATION OF THE PLAN
The right is reserved in accordance with the Bankruptcy Code and the
Bankruptcy Rules to amend or modify this Plan prior to Confirmation or as soon
as practical thereafter. Before or after Confirmation, the Bankruptcy Court may,
upon application, remedy any defect or omission or reconcile any inconsistencies
in the Plan in such manner as may be necessary to carry out the purpose and
intent of the Plan.
ARTICLE VIII
WITHDRAWAL OF THIS PLAN
If, for any reason, this Plan is not confirmed on or before July 15,
2002, this Plan shall be deemed withdrawn, without prejudice, unless the Debtors
and the Lenders file a notice with the Bankruptcy Court further extending that
date. If the Plan is withdrawn, the Lenders may petition the Court to dismiss
the Bankruptcy Case.
ARTICLE IX
RETENTION OF JURISDICTION BY THIS COURT
The Bankruptcy Court shall retain jurisdiction of this Chapter 11 case
pursuant to and for the purposes set forth in 1127(b) of the Bankruptcy Code and
to:
1. Allow, disallow, determine, liquidate, classify, estimate or
establish the priority or unsecured status of any Claim, including the
resolution of any request for payment of any Administrative Expense Claim and
the resolution of any and all objections to the allowance of, or priority of,
24
Claims. Objections to Claims shall be filed on or before 90 days after the entry
of the Confirmation Order.
2. To hear and determine pending motions for the assumption or rejection
of Executory Contracts and the allowance of Claims resulting therefrom.
3. Grant or deny any applications for Allowance of administrative
compensation or reimbursement of expenses authorized pursuant to the Bankruptcy
Code or the Plan extending beyond the Effective Date.
4. Ensure the distributions to Holders of Allowed Claims are
accomplished pursuant the provisions of the Plan.
5. Enter such Orders as may be necessary or appropriate to implement or
consummate the provision of the Plan and all instruments, releases and other
agreements or documents created in connection with the Plan or the Disclosure
Statement or the Confirmation Order.
6. Resolve any cases, controversies, suits or disputes that may arise in
connection with the consummation, interpretation or enforcement of the Plan or
any entity's obligations incurred in connection with the Plan, or the
distribution of Funds under the Plan.
7. Permit the Debtors or Lenders to modify the Plan before or after the
Effective Date pursuant to Section 1127 of the Bankruptcy Code, the Confirmation
Order, instrument, or other agreement or document created in connection with the
Plan, the Disclosure Statement or the Confirmation Order;
25
or remedy any defect or omission or reconcile any inconsistency in any
Bankruptcy Court Order, the Plan, the Disclosure Statement or the Confirmation
Order or any instrument or other agreement or document created in connection
with the Plan, the Disclosure Statement or the Confirmation Order, in such
manner as may be necessary or appropriate to consummate the Plan, to the extent
authorized by the Bankruptcy Code.
8. Issue injunctions and enter and implement other Orders to take such
other actions as may be necessary or appropriate to restrain interference by any
person or entity with the consummation, implementation or enforcement of the
Plan.
9. Determine any other matters that may arise in connection with or
relate to the Plan, the Disclosure Statement, the Confirmation Order, the
Creditors Trust or any contract, instrument or other agreement or document
created in connection with the Plan or the Disclosure Statement.
10. To hear and determine all controversies arising in connection with
the implementation of the Plan, including any controversies relating to the
Winddown Person's obligations in connection with the implementation of the Plan;
and
11. Enter an Order concluding the Bankruptcy Case.
ARTICLE X
RELEASES
Upon entry of the Confirmation Order, the Debtors, the Debtors' Agents,
the Lenders, and the Lenders' Agents, shall be deemed released and forever
26
discharged from any and all claims or interests that were or could have been
asserted against any such parties through the date of Confirmation by any
Creditor, ROI Interest Holder, or other party in interest in this case, whether
known or unknown at the time of Confirmation. This Plan enjoins any and all
suits or other proceedings which could be brought on account of any such Claims
or ROI Interests that are released and discharged by operation of this
paragraph.
Moreover, except as expressly provided in this Plan, from and after the
Confirmation Date, Holders of Claims or ROI Interests are permanently restrained
and enjoined (i) from commencing or continuing in any manner, any action or
other proceeding of any kind based upon, arising or deriving from such Claim or
ROI Interest, against the Debtors, the Debtors' Agents, the Lenders, or Lenders'
Agents, (ii) from enforcing, attaching, collecting or recovering by any manner
or means, any judgment, award, decree or order against the Debtors, the Debtors'
Agents, the Lenders, or the Lenders' Agents based upon, arising or deriving from
such Claim or ROI Interest, (iii) from creating, perfecting or enforcing any
encumbrance of any kind against the Debtors, the Debtors' Agents, the Lenders,
or the Lenders' Agents based upon, arising or deriving from such Claim or ROI
Interest, (iv) from asserting against the Debtors, the Debtors' Agents, the
Lenders, or the Lenders' Agents any setoff, right of subrogation, or recoupment
against any obligation due to the Debtors based upon, arising or deriving from
such Claim or ROI Interest (v) from performing any act based upon, arising or
deriving from such Claim, in
27
any manner, in any place whatsoever, that does not conform to or comply with
the provisions of the Plan; and (vi) from commencing any action, collecting or
recovering by any manner or means any judgment, award, decree or order against
the immediate or any mediate transferee of any property distributed pursuant to
this Plan based upon a claim that the transferor's receipt of such property
constituted a fraudulent conveyance, preference or violation of a bulk sales law
or based upon any other claim that receipt and or distribution of property by
transfer pursuant to the Plan is wrongful based upon, arising or deriving from
such Claim. Notwithstanding anything to the contrary, this provision does not
limit or refrain any action against any person for violating the terms of this
Plan.
Nothing herein, however, shall be construed to release or discharge
Lenders' Liens or Claims against the Assets, and the right of Lenders to payment
upon the liquidation or application of those Assets, as set out in this Plan.
ARTICLE XI
CLAIM OBJECTIONS, DISPUTED CLAIMS, AND AVOIDANCE ACTIONS
1. Allowance of Claims. The Creditors Trustee shall have the exclusive
right to object to Claims which are classified in Class 4, except for the Claims
of the Subordinated Claimants. Any such objections shall be filed within sixty
(60) days after Confirmation. For purposes of administrative convenience, Class
4 Claims for which the pro rata share of the Unsecured Distribution is less
28
than $2,500.00 shall not be subject to objection, and as of the Effective Date
shall be deemed Allowed. Further, the Creditors Trustee shall have no duty to
object to any Claim except to the extent that the Creditors Trustee, in its
reasonable discretion, believes that disallowance of the Claim will
substantially affect distributions, and will preserve for the Creditors Trust an
amount which is significantly greater than the costs to be incurred in
connection with the objection.
The Lenders and/or their agent shall have the exclusive right to object
to all other Claims, except those in Class 4. Any such objections shall be filed
within ninety (90) days after Confirmation, except for objections to claims paid
in the ordinary course of business during the case pursuant to 11 U.S.C. ss.
363(c)(1), for which objections (or other actions) must be taken within any
applicable state law statutes of limitation.
The Creditors Trustee or the Lenders may file an omnibus objection to
all Claims as to which they have the right to object, and Claimants shall have
thirty (30) days from the service of such objection (or omnibus objection) to
respond. If a response is filed, the Court shall fix a hearing date on such
Claims objection. If no response is filed within thirty days after the service
of such objection, then such objection shall be deemed upheld and such Claim
shall be Disallowed and treated in the manner provided for in the objection or
omnibus objection.
2. Setoffs and Defenses. Subject to the limitations provided in 11
U.S.C. ss. 553, the Lenders and Creditors Trustee, as applicable, shall be
29
allowed, but not required, to assert any right of setoff against any Claim which
the Debtors may have in connection with the allowance of any such Claim,
including without limitation the payments or other distributions to be made
pursuant to this Plan in respect to such Claim. Unless otherwise provided
herein, neither the failure to do so nor the disallowance of any Claim hereunder
shall constitute a waiver or release of any claim that the Debtors may have
against such Claimant. Further, and unless otherwise provided herein, Lenders
and Creditors Trustee, as applicable, shall be allowed, but not required, to
assert any rights and defenses, both legal and equitable, of the Debtors with
respect to any Claims, which are hereby retained and preserved.
3. Disputed Claims Reserves. The following Disputed Claims Reserves
shall be established: (1) A Disputed Claims Reserve established and maintained
by the Creditors Trustee for the treatment of Disputed Claims in Class 4, (2) A
Disputed Claims Reserve established and maintained by the Lenders for the
treatment of all Disputed Administrative Claims and Disputed Priority Claims
(with amounts from the Administrative Expenses Fund); and (3) A Disputed Claims
Reserve established and maintained by the Winddown Person for the Debtors for
any Disputed Secured Claims or any Disputed expenses associated with the
Debtors' operations during the Winddown Period (to the extent any latter such
dispute is brought to the attention of the Winddown Person). The Creditors
Trustee, Lenders and the Winddown Person, as appropriate, shall deposit into a
Disputed Claims Reserve an amount equal to the Pro Rata Share of the
distribution allocable to such
30
Disputed Claims, as if such Claims were Allowed Claims, from Funds otherwise
payable to the respective Funds. The respective Disputed Claims Reserve shall be
held in trust by the Creditors Trustee, Lenders and the Winddown Person, for the
benefit of the Holders of Allowed Claims whose Distributions are unclaimed and
the Holders of Disputed Claims pending a determination of their entitlement
thereto under the terms of the Plan.
4. Distributions to Holders of Disputed Claims. At the time a Disputed
Claim becomes an Allowed Claim, any Distributions reserved for such Allowed
Claim shall be released from the Disputed Claims Reserve and be delivered to
such Holder of such Allowed Claim in an amount proportionate to the Allowed
Amount of any such Claim. In the event that such Disputed Claim is Disallowed in
its entirety, the Distributions provided for any Claims in the Disputed Claims
Reserve shall be returned to the Creditors Trust.
5. Delivery of Distributions and Notices. Except as otherwise provided
in the Plan and except as may otherwise be agreed to by the Holder of a
particular Claim and the Creditors Trustee (as to Claims to be paid from the
Creditors Trust) or the Lenders (as to all other Claims), any property or notice
to which such Claimant shall become entitled under the provisions of this Plan,
shall be delivered to such Claimant by regular mail, postage prepaid, in an
envelope addressed to such Claimant at the address of each such Holder as set
forth on the proofs of claim filed by such Holders, or at the last known address
of such Holder if no proof of claim is filed or if the Debtor has been notified
in writing of a change of address. If any Holder's distribution or notice is
31
returned as undeliverable, no further distributions to such Holder will be made
unless and until the Creditors Trustee, or the Lenders, as appropriate, are
notified in writing of such Holder's then current address.
6. Unclaimed Distributions and Uncashed Checks. In the event (1)
distributions determined distributable on any Allowed Claim of a Creditor are
returned as undeliverable and one year passes without such Creditor making known
to the Creditors Trustee or the Lenders, as appropriate, a corrected mailing
address (an "unclaimed distribution"); or (2) Assets are located after the
Termination Date, then, in such event, all such unclaimed distributions shall be
payable to Lenders, and all such Assets shall be liquidated by the Lenders and
applied to the outstanding Claim of the Lenders. The Claim of any Holder with
respect to the treatment of any unclaimed distribution hereunder will be
discharged and forever barred. Checks issued as distributions to Claims, other
than Claims of the Lenders or Subordinated Claimants, will be null and void if
not negotiated within six (6) months after the date of issuance thereof.
7. De Minimus Distributions. Any Claims entitled to a distribution of
less than $10.00 will not be paid.
8. Avoidance Actions. The Debtors' management, after review of their
books and records has reported to the Lenders that with the exception of some
Avoidance Actions asserted during the course of this Bankruptcy Case, that to
the best of their knowledge there are no Avoidance Actions (maintained pursuant
to state or federal law) which should be pursued. The Debtors' management have
examined their books and records and considered the likely
32
success of pursing Avoidance Actions and have determined that the likely cost of
pursuing such Avoidance Actions (other than those already pursued and settled)
outweigh any potential recovery. As such, all such Avoidance Claims (otherwise
not recovered upon or settled) shall be released on the Effective Date.
ARTICLE XII
MISCELLANEOUS PROVISIONS
1. Discharge Injunction. The entry of the Confirmation Order will act as
a full and complete discharge of all Claims and ROI Interests against the
Debtors and the Debtors Agents, the Lenders and the Lenders Agents, and all
Assets of any nature whatsoever, including without limitation, any liability of
a kind specified in 11 U.S.C. ss.ss. 502(g), 502(h) or 502(i), that arose, or
has been asserted against, the Debtors, the Debtors' Agents, the Lenders, or the
Lenders' Agents, at any time before the entry of the Confirmation Order or that
arises from any pre-confirmation conduct of the Debtors, the Debtors' Agents,
the Lenders, or the Lenders' Agents, whether or not the Claim is known to or
knowable by the Claimant. The discharge of the Debtors will become effective as
to each Claim, whether or not the claim or interest constitute an allowed Claim
and whether or not the Claimant voted to accept this Plan. In addition, the
entry of the Confirmation Order will operate as a general resolution with
prejudice as of the Confirmation of all pending legal proceedings against the
Debtors and their respective Assets (except for the Litigation Matters retained
by the Debtors) as well as any proceedings not yet instituted against the
33
Debtors and their Assets. This discharge operates as an injunction against the
prosecution of any Claim so discharged.
2. Pre-Confirmation Amendment. The Parties may modify the Plan at any
time prior to the entry of the Confirmation Order as provided under Section
1127(a) of the Bankruptcy Code, provided that the Plan, as modified, and the
Disclosure Statement meet applicable Bankruptcy Code requirements.
3. Post-Confirmation/Pre-Consummation Amendment Requiring
Resolicitation. After the Confirmation Date, the Lenders may modify the Plan as
provided in Section 1127(b) of the Bankruptcy Code.
4. Reservation of Cramdown Right/Withdrawal of the Plan. To the extent
that any Class which is impaired rejects the Plan or is deemed to have rejected
the Plan, the Parties may request confirmation of the Plan, as it may be
modified from time to time, under 11 U.S.C. ss. 1129(b). The Parties reserve the
right to alter, amend, modify, revoke, or withdraw the Plan or any exhibit or
schedule hereto at any time before the Effective Date. In addition, if the Plan
is not confirmed on or before July 15, 2002, the Plan shall be deemed withdrawn,
unless the Lenders give written notice of their intent to extend such deadline.
5. Confirmation Order and Plan Control. To the extent the Confirmation
Order and/or the Plan is inconsistent with the Disclosure Statement, any other
agreement entered into between or among the Lenders and any party, this Plan
controls the Disclosure Statement and any such agreements, and the Confirmation
Order (and any other orders of the Bankruptcy Court) controls the Plan.
34
6. Administrative Claims Bar Date. Any Creditor or party in interest
alleging it is entitled to payment of an Administrative Expense Claim, which is
not an Allowed Claim, or which has not already been incurred and paid in the
ordinary course of business during the case pursuant to 11 U.S.C. ss. 363(c)(1)
without objection, shall file a motion seeking the allowance and payment of such
Administrative Expense Claim within thirty (30) days after the entry of the
Confirmation Order. Any party failing to file such motion seeking the allowance
and payment of such Administrative Expense Claim shall be forever barred from
asserting its right to any recovery under the Plan or from the Assets, the
Debtors, the Debtors' Agents, the Lenders, or Lenders' Agents, and such claim
shall be discharged.
7. Post-Confirmation Matters. The Debtors shall be required to continue
filing operating reports and to pay any appropriate quarterly fees until a Final
Order closing the Bankruptcy Case is entered. The following requirements will
need to have been satisfied before the Debtors can file an application for a
final decree pursuant to Fed. R. Bank. P. 3022:
a. The Confirmation Order has become final.
b. Deposits required by the Plan have been distributed.
c. Payments under the Plan have commenced (but prior to making all
payments allowed under the Plan).
d. There are no pending motions, contested matters or adversary
proceedings.
e. All U.S. Trustee's quarterly fees have been paid.
35
f. The U.S. Trustee has consented to such final decree.
8. Automatic Stay. The stay under 11 U.S.C. ss. 362 shall be lifted upon
the Effective Date.
9. Title to Property. Title to all Assets of the Debtors shall vest in
the Debtors on the Effective Date, and shall be subject to liquidation and
distribution as provided for in this Plan. As of the Effective Date, all
property of the Debtors and the Estates shall be free and clear of all Claims
and Interests, except as specifically provided in the Plan or the Confirmation
Order. Upon the Termination Date, title to all Assets of the Debtors not
previously administered shall be deemed transferred to AmSouth, as agent for the
Lenders.
10. Entire Agreement. This Plan, as described herein and the Disclosure
Statement and the Exhibits hereto and thereto, sets forth the entire agreement
and understanding among the Debtors, Lenders and all Creditors relating to the
subject matter hereof and supersedes all prior discussions and documents. No
party shall be bound by any terms, conditions, definitions, warranties,
understandings or representations with respect to the subject matter hereof,
other than is expressly provided for herein or as may hereafter be agreed to by
the Lenders and the Debtors in a writing signed by the Lenders.
11. Preservation of Claims. Except as expressly released herein, the
Debtors' causes of action and claims which make up the Litigation Matters are
hereby retained and preserved, and shall vest in the Debtors. The Winddown
36
Person, on behalf of the Debtors, may pursue, settle, or transfer such retained
Litigation Matters, as appropriate.
12. Claims of Lenders Under Section 507(b) of the Bankruptcy Code. To
the extent the Avoidance Claims are not used by the Debtors, in the ordinary
course of business, to pay operating expenses as provided herein, such funds
constituting the Avoidance Claims shall be deemed subject to the Secured Claim
by virtue of 11 U.S.C. ss. 507(b).
13. Exemption From Certain Transfer Taxes. Pursuant to Section 1146(c)
of the Bankruptcy Code, any transfers from a Debtor to a Debtor or any other
Person or entity pursuant to the Plan in the United States shall not be subject
to any document recording tax, stamp tax, conveyance fee, intangibles or similar
tax, mortgage tax, stamp act, real estate transfer tax, mortgage recording tax,
or other similar tax or governmental assessment, and the Plan hereby directs all
appropriate state or local government officials or agents to forego the
collection of any such tax or governmental assessment and to accept for filing
and recordation any of the foregoing instruments or other documents without
payment of any such tax or governmental assessment.
14. Continuation of Anti-Discrimination Provisions of Bankruptcy Code A
governmental unit may not deny, revoke, suspend, or refuse to renew a license,
permit, charter, franchise, or other similar grant to, condition such a grant
to, or discriminate with respect to such a grant against, the Debtors or another
Person with whom the Debtor has been or is associated or affiliated, solely
because of the commencement, continuation, or termination of the case
37
or because of any provision of the Plan or the legal effect of the Plan, and the
Plan will constitute an express injunction against any such discriminatory
treatment by a governmental unit.
15. Effectuating Documents and Necessary Authorizations. Following
Confirmation, Lenders will seek such orders, judgments, injunctions, regulatory
approvals, and rulings that may be required to carry out and further the
intentions and purposes, and give full effect to the provisions, of the Plan.
16. Legally Binding Effect. The provisions of this Plan shall bind all
Creditors and ROI Interest Holders, whether or not they accept this Plan. On and
after the Effective Date, all Holders of Claims shall be precluded and enjoined
from asserting any Claim against the Debtors or their Assets or properties based
on any transaction or other activity of any kind that occurred prior to the
Confirmation Date except as permitted under the Plan.
17. Governing Law. Unless a rule of law or procedure is supplied by
federal law (including the Bankruptcy Code and Bankruptcy Rules), the laws of
the State of Tennessee shall govern the construction and implementation of the
Plan and any agreements, documents, or instruments executed in connection with
the Plan, without giving effect to the principles of conflicts of law thereof.
38
18. Time. In computing any period of time prescribed or allowed by this
Plan, the provisions of Bankruptcy Rule 9006(a) shall apply.
RESPECTFULLY SUBMITTED this ____ day of April, 2002.
HARRIS, SHELTON, DUNLAP, COBB & RYDER, PLLC
By:
------------------------------------
Steven N. Douglass (Bar No. 9770)
Jonathan E. Scharff (Bar No. 16890)
One Commerce Square, Suite 2700
Memphis, Tennessee 38103-2555
(901) 525-1455
Co-Counsel to the Debtors and Debtors in Possession
AMSOUTH BANK
BANK OF AMERICA, N.A.
UNION PLANTERS BANK, N.A.
By Counsel
By:
------------------------------------
John C. Tishler (Bar. No. 13441)
Robert A. Guy (Bar No. 16715)
WALLER LANSDEN DORTCH & DAVIS
A Professional Limited Liability Corporation
511 Union Street, Suite 2100
Nashville, TN 37219
Phone: (615) 244-6380
Fax: (615) 244-6804
Attorneys for AmSouth Bank, as Agent
39
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION
IN RE : ] CASE NO. 01-24607-DSK
]
RESPONSE ONCOLOGY, INC., ] CHAPTER 11
RESPONSE ONCOLOGY MANAGEMENT ]
OF SOUTH FLORIDA, INC., ]
RESPONSE ONCOLOGY OF FORT ]
LAUDERDALE, INC., AND ]
RESPONSE ONCOLOGY OF TAMARAC, ]
INC., ]
]
DEBTORS. ]
] (JOINTLY ADMINISTERED)
FIRST AMENDED JOINT DISCLOSURE STATEMENT
I. INTRODUCTION
On March 29, 2001, Response Oncology, Inc., along with three of its
wholly-owned subsidiaries, Response Oncology Management of South Florida, Inc.,
Response Oncology of Fort Lauderdale, Inc., and Response Oncology of Tamarac,
Inc., having its principal place of business in Memphis, Tennessee (hereinafter
referred to collectively as "ROI," the "Debtors" and the
"Debtors-in-Possession") filed with the United States Bankruptcy Court for the
Western District of Tennessee, a voluntary petition for relief under Chapter 11
of Title 11 of the United States Code. The Court determined that the four cases
would be jointly administered under Case No. 01-24607-DSK. After the filing of
the petition, ROI remained in possession of its property and continued the
operation of its property as Debtors-in-Possession pursuant to Sections 1107 and
1108 of the Bankruptcy Code.
On April 12, 2002, the Debtors, jointly with AmSouth Bank, as lender and
as agent for Union Planters Bank, N.A. and Bank of America, N.A. (collectively
the "Lenders"), filed a Joint Plan (the "Plan"). The Plan contemplates the
liquidation of all of the Debtors' assets and distribution of those assets
pursuant to the terms of the Plan.
II. PRELIMINARY STATEMENTS
THIS DISCLOSURE STATEMENT (THIS "DISCLOSURE STATEMENT") IS SUBMITTED
PURSUANT TO SS. 1125 OF THE BANKRUPTCY CODE IN CONNECTION WITH THE PLAN, A COPY
OF SUCH PLAN IS ATTACHED HERETO AS EXHIBIT 1. ANY TERM USED IN AN INITIALLY
CAPITALIZED FORM IN THIS DISCLOSURE STATEMENT, AND NOT OTHERWISE SEPARATELY
DEFINED HEREIN, SHALL HAVE THE DEFINED MEANING ASCRIBED TO IT IN THE PLAN.
ON MAY 3, 2002, AFTER NOTICE AND A HEARING, THE BANKRUPTCY COURT
APPROVED THIS DISCLOSURE STATEMENT AS CONTAINING INFORMATION OF A KIND AND IN
SUFFICIENT DETAIL, ADEQUATE TO ENABLE A HYPOTHETICAL, REASONABLE INVESTOR
TYPICAL OF THE CLASSES OF CLAIMANTS ENTITLED TO VOTE PURSUANT TO THE PLAN TO
MAKE AN INFORMED JUDGMENT WHETHER TO ACCEPT OR REJECT THE PLAN. APPROVAL OF THIS
DISCLOSURE STATEMENT DOES NOT, HOWEVER, CONSTITUTE A DETERMINATION BY THE
BANKRUPTCY COURT AS TO THE FAIRNESS OR MERITS OF THE PLAN.
NO STATEMENT OR INFORMATION CONCERNING THE DEBTORS (PARTICULARLY AS TO
FUTURE CASH FLOW PROJECTIONS, OPERATION PROJECTIONS, OR FINANCIAL CONDITION OR
WITH RESPECT TO DISTRIBUTIONS TO BE MADE UNDER THE PLAN) OR
2
ANY OF THE RESPECTIVE ASSETS, PROPERTIES OR BUSINESSES OF THE DEBTORS, THAT IS
GIVEN FOR THE PURPOSES OF SOLICITING ACCEPTANCES OR REJECTION OF THE PLAN, IS
AUTHORIZED OTHER THAN AS SET FORTH IN THIS DISCLOSURE STATEMENT. THE STATEMENTS
AND INFORMATION ABOUT THE DEBTORS, INCLUDING ALL PROJECTIONS AND INFORMATION
REGARDING CLAIMS CONTAINED HEREIN, HAVE BEEN PREPARED FROM DOCUMENTS AND
INFORMATION PREPARED BY THE DEBTORS, THEIR PROFESSIONALS, CLAIMS FILED WITH THE
COURT AND/OR INFORMATION PROVIDED TO THE DEBTORS OR DEBTORS' PROFESSIONALS.
THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT HAS BEEN DERIVED
FROM SOURCES THAT THE DEBTORS AND LENDERS BELIEVE TO BE RELIABLE, BUT HAS NOT
BEEN INDEPENDENTLY VERIFIED AND HAS NOT BEEN SUBJECTED TO A CERTIFIED AUDIT.
EVERY REASONABLE EFFORT HAS BEEN MADE TO PRESENT ACCURATE INFORMATION; HOWEVER,
DUE TO THE COMPLEXITY OF THE DEBTORS' AFFAIRS, THE ACCURACY OF THE INFORMATION
CONTAINED HEREIN CANNOT BE GUARANTEED. ALL SUCH INFORMATION WHICH IS DESCRIBED
OR CONTAINED IN THE DISCLOSURE STATEMENT, PLAN AND EXHIBITS ATTACHED TO THEM IS
QUALIFIED BY REFERENCE TO THOSE DOCUMENTS UPON WHICH THE DEBTORS, LENDERS AND
THEIR ADVISORS HAVE RELIED UPON IN PREPARING THE DISCLOSURE STATEMENT AND PLAN.
THE DEBTORS AND LENDERS MAKE NO REPRESENTATION OR WARRANTY AS TO THE ACCURACY OR
COMPLETENESS OF ANY SUCH INFORMATION PREPARED BY THE DEBTORS, LENDERS AND/OR
THEIR PROFESSIONALS OR OTHER ADVISORS. THE COURT HAS NOT PASSED UPON THE
ACCURACY, COMPLETENESS OR ADEQUACY OF ANY SUCH DOCUMENTS AND THE FACT THAT SUCH
DOCUMENTS HAVE BEEN FILED WITH THE
3
COURT SHOULD NOT BE TAKEN AS ANY ASSURANCE THAT SUCH DOCUMENTS ARE ACCURATE,
COMPLETE OR ADEQUATE.
NO REPRESENTATIONS ARE MADE CONCERNING THE DEBTORS, THEIR BUSINESS
OPERATIONS, THE VALUE OF THEIR PROPERTY, OR THE VALUE OF ANY BENEFITS OFFERED TO
CREDITORS IN CONNECTION WITH THE PLAN OR AUTHORIZED BY THE LENDERS OTHER THAN AS
SET FORTH IN THIS DISCLOSURE STATEMENT. ANY REPRESENTATIONS OR INDUCEMENTS MADE
TO SECURE YOUR ACCEPTANCES WHICH ARE CONTRARY TO THE INFORMATION CONTAINED IN
THIS DISCLOSURE STATEMENT SHOULD NOT BE RELIED UPON BY YOU IN ARRIVING AT YOUR
DECISION. ATTACHED HERETO AS EXHIBIT 2 IS THE MOST RECENT FORM 10K FILED BY THE
DEBTORS WITH THE SECURITIES AND EXCHANGE COMMISSION.
THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE AS OF THE
DATE HEREOF UNLESS ANOTHER TIME IS SPECIFIED HEREIN. DELIVERY OF THIS DISCLOSURE
STATEMENT SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN SINCE THE DATE THE
DISCLOSURE STATEMENT AND THE MATERIALS RELIED UPON IN PREPARATION OF THE
DISCLOSURE STATEMENT WERE COMPILED.
THIS DISCLOSURE STATEMENT MAY NOT BE RELIED UPON FOR ANY PURPOSE OTHER
THAN TO DETERMINE WHETHER TO VOTE IN FAVOR OF OR AGAINST THE PLAN, AND NOTHING
CONTAINED HEREIN SHALL CONSTITUTE AN ADMISSION OF ANY FACT OR LIABILITY OF ANY
PARTY OR BE ADMISSIBLE IN ANY PROCEEDINGS INVOLVING THE DEBTORS OR ANY PARTY, OR
BE DEEMED CONCLUSIVE EVIDENCE OF THE FACTS OR OTHER LEGAL EFFECTS OF THE
REORGANIZATION ON CLAIMANTS HOLDING CLAIMS.
4
CERTAIN OF THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT, BY ITS
NATURE, IS FORWARD LOOKING, CONTAINS ESTIMATES AND ASSUMPTIONS THAT MAY PROVE TO
BE WRONG, AND CONTAINS PROJECTIONS THAT MAY PROVE TO BE WRONG, OR THAT MAY BE
MATERIALLY DIFFERENT FROM ACTUAL OR FUTURE RESULTS.
EACH CLAIMANT, INCLUDING ANY EQUITY SECURITY HOLDER, SHOULD CONSULT ITS
INDIVIDUAL ATTORNEY AND ACCOUNTANT AS TO THE TAX, ECONOMIC AND BUSINESS EFFECT
OF THE PLAN ON SUCH INDIVIDUAL CLAIMANT OR EQUITY SECURITY HOLDER.
THIS IS A JOINTLY-PREPARED AND NEGOTIATED PLAN BETWEEN THE DEBTORS AND
THE LENDERS. IT IS THE OPINION OF THE DEBTORS AND THE LENDERS THAT THIS PLAN IS
IN THE BEST INTEREST OF ALL THE DEBTORS' CREDITORS AND THAT THE RECOVERY UNDER
THIS PLAN IS GREATER THAN ANY RECOVERY THAT THE CREDITORS COULD ACHIEVE IN
LIQUIDATION. IT IS ALSO THE OPINION OF THE LENDERS THAT THE CREDITORS, OTHER
THAN THE LENDERS, WOULD NOT RETAIN ANY INTEREST IN A REORGANIZED DEBTORS
PURSUANT TO ANY PLAN BEING CONFIRMED OTHER THAN THIS PLAN.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN.
A. Purpose of this Disclosure Statement.
The Debtors and Lenders submit this Disclosure Statement, pursuant to
Section 1125 of the Bankruptcy Code, to all known Claimants holding Claims
5
against the Debtors for the purpose of disclosing that information, which the
Bankruptcy Court has determined is material, important and necessary for
Claimants, including equity security holders, of the Debtors to arrive at a
reasonably informed decision about exercising their right to vote for acceptance
or rejection of the Plan, as presently on file with the Bankruptcy Court.
B. Explanation of the Purpose of the Plan.
1. PURPOSE OF CHAPTER 11.
Chapter 11 of the Bankruptcy Code is often called "Commercial
Bankruptcy." Chapter 11 deals with the formulation of a Plan of Reorganization
and outlines how a Debtors' debts will be paid. Unlike cases under Chapters 7,
12 and 13 of the Bankruptcy Code, a trustee is not automatically appointed in a
Chapter 11 case. Instead, the Debtors remain in control of the Estate as the
"Debtors-in-Possession" with most of the powers and duties of a trustee. In
addition to statutory requirements relating to plan formulation, confirmation
and post-confirmation matters, a Chapter 11 Bankruptcy case is also shaped by
statutory prohibitions against collection efforts or enforcement efforts by
creditors (the automatic stay) in order to allow the Debtors breathing space in
which to reorganize. The Bankruptcy Code contains a number of other significant
provisions applicable to Chapter 11 cases, such as those relating to
pre-petition executory contracts, which confer powers on the
Debtors-in-Possession and also provide Creditors with certain rights and
remedies.
6
2. FILING OF THE CASE.
On the Petition Date, the Debtors filed the Case pursuant to Chapter 11
of the Bankruptcy Code. Since the filing of the Case, the Debtors have operated
as Debtors and Debtors-in-Possession in accordance with the provisions of
Sections 1107 and 1108 of the Bankruptcy Code.
3. FORMULATION OF THE PLAN.
Formulation of the Plan is the principal purpose of a Chapter 11 case. A
Plan sets forth the means for satisfying Claims. After the Plan has been filed,
it must be accepted by holders of Claims against the Debtors. Section 1125 of
the Bankruptcy Code requires full disclosure before solicitation of acceptances
of the Plan of Reorganization. This Disclosure Statement is presented to
Claimants to satisfy the requirements of Section 1125 of the Bankruptcy Code.
4. VOTING REQUIREMENTS.
Chapter 11 does not require that each Claimant, including any equity
security holder, holding a Claim against the Debtors vote in favor of the Plan
for it to be confirmed by the Bankruptcy Court. For any class of "impaired"
Claims to accept the Plan, Section 1126(c) of the Bankruptcy Code requires that
Claimants that hold a majority in number and two-thirds (2/3) in amount of the
Allowed Claims in such Class that actually vote on the Plan must vote to accept
the Plan. Holders of unimpaired Claims are not entitled to vote on the Plan.
Once the requisites for acceptance of any class of Claims are met, all Claimants
assigned to such Class shall be bound by the decision of the majority of the
votes. Thus, voting against the Plan does not assure any holder
7
of a Claim treatment differently than that proposed by the Plan, especially if
the holder of such Claim's class votes in favor of the Plan and the Court
approves its confirmation.
5. DEFINITION OF IMPAIRMENT.
Under Section 1124 of the Bankruptcy Code, a Class of Claims is
"impaired" under a Plan unless, with respect to each claim, the plan in
question: (i) leaves unaltered the legal, equitable and contractual rights of
the holder of such claim or interest; or (ii) notwithstanding any contractual
provision or applicable law that entitled the holder of a claim or interest to
receive accelerated payment of Claimant's claim or interest after the occurrence
of a default, (A) cures any such default that occurred before or after the
commencement of the case under the Bankruptcy Code, other than a default of a
kind specified in Section 365(b)(2) of the Bankruptcy Code, (B) reinstates the
maturity of such claim or interest as it existed before the default, (C)
compensates the holder of such claim or interest for damages incurred as a
result of reasonable reliance on such contractual provision or applicable law,
and (D) does not otherwise alter the legal, equitable or contractual rights to
which the holder of such claim or interest is entitled by virtue of such claim
or interest; or (iii) provides that on the Effective Date of the Plan in
question, the holder of such claim or interest receives, on account of such
claim or interest, cash equal to (A) with respect to a claim, the Allowed Amount
of such claim, or (B) with respect to an interest, if applicable, the greater of
(1) an applicable fixed liquidation preference, or (2) any fixed price at which
the Debtors, under
8
the terms of the security, may redeem the security.
6. CONFIRMATION REQUIREMENTS.
Even if all Classes of Claims against the Debtors accept the Plan,
confirmation may be refused by the Bankruptcy Court. Section 1129 of the
Bankruptcy Code sets forth the requirements for Confirmation and, among other
things, requires that the Plan be in the best interest of Claimants and Interest
Holders. It generally requires that the value to be distributed to Claimants and
Interest Holders may not be less than such parties would receive if the Debtors
were to be liquidated under Chapter 7 of the Bankruptcy Code.
7. CRAMDOWN.
Pursuant to Section 1129(b) of the Bankruptcy Code, the Bankruptcy
Court may confirm the Plan even though less than all of the Classes of Claims
have accepted. Confirmation of the Plan over the objection of one or more
impaired Classes of Claims is generally referred to as a "cramdown." For the
Plan to be confirmed over the objection of an impaired Class of Claims, the
proponents of the Plan must show that the Plan does not discriminate unfairly
and is fair and equitable with respect to each Class of Claims that is impaired
under, and has not accepted, the Plan.
8. EFFECT OF CONFIRMATION.
Confirmation makes the Plan binding upon the Debtors, all Claimants
(including the holders of any contingent Claims), and other parties-in-interest
regardless of whether it has been accepted by them. If property is transferred
9
to a third party free and clear of liens, claims and encumbrances pursuant to
the Plan, then such liens, claims and encumbrances shall attach only to the
proceeds of the sale and shall not attach to or be a claim against the
transferee or the property transferred.
C. Procedure for Filing Proofs of Claim.
1. BAR DATE.
(a) General Bar Date for Claims. By order entered on or about April 5,
2001, the Bankruptcy Court required that all Proofs of Claim must have been
filed on behalf of Claimants in the Case by July 26, 2001. If a Claimant is
listed in the Debtors' Statements and Schedules as noncontingent, liquidated and
undisputed and the Claimant agrees with the scheduled claim amount, a Proof of
Claim need not be filed. The Schedules are on file at the Bankruptcy Court and
are open for inspection during regular Bankruptcy Court hours. Similarly, if
during the course of the Case a Bankruptcy Court order is entered allowing a
specific Claim, a Proof of Claim need not be filed.
(b) Administrative Claims Bar Date. Unless otherwise ordered by the
Bankruptcy Court, the Confirmation Order will operate to set a Bar Date for
Administrative Claims, which Bar Date will be thirty (30) calendar days after
entry of the Confirmation Order. Claimants holding Administrative Claims not
paid on the Effective Date may submit Proofs of Claim on or before such Bar
Date. The Notice of Confirmation to be delivered pursuant to Bankruptcy Rules
3020(c) and 2002(f) will set forth such date and constitute notice of the
Administrative Claims Bar Date. The Lenders and/or their agent will have
10
ninety (90) calendar days after the entry of the Confirmation Order to review
and object to such Claims before a hearing for determination of such
Administrative Claims is held by the Bankruptcy Court. Funds to pay all Allowed
Administrative Claims shall be deposited by the Lenders and/or Debtors from the
proceeds of liquidation of the Debtors' Assets into the Administrative Expenses
Fund, a Fund established at AmSouth Bank and owned by the Lenders. Allowed
Administrative (and Allowed Priority) Claims will be paid from funds in the
Administrative Expenses Fund.
2. EXECUTORY CONTRACTS.
Parties to executory contracts or unexpired leases that are rejected
under the Plan or otherwise must file a Claim (unless such Claim appears on the
Schedules of the Debtors as an undisputed, liquidated and noncontingent claim
and is thereby deemed to be filed under Section 1111(a) of the Bankruptcy Code)
resulting from such rejection. Claims arising from damages as a result of the
rejection of executory contracts or unexpired leases through operation of this
Plan shall have thirty (30) days from entry of the Confirmation Order to submit
a proof of claim for such damages or such Claim shall forever be barred. Claims
for rejection damages of executory contracts or unexpired leases rejected prior
to Confirmation were required to have filed Proofs of Claim pursuant to the
various Orders entered by the Court in connection with such rejection. Failure
to file a Proof of Claim for rejection damages by the various bar dates in this
Case shall result in such claim being forever discharged and forever barred from
collection.
11
D. Voting Procedures and Requirements.
1. PERSONS ENTITLED TO VOTE.
Pursuant to the provisions of the Bankruptcy Code, only Classes of
Claims which are impaired under the terms and provisions of the Plan are
required to vote to accept or reject the Plan. Furthermore, a Class of Claimants
which is not entitled to receive distributions under the Plan is deemed to have
rejected the Plan pursuant to ss. 1126(f) of the Bankruptcy Code. Claimants
holding Disputed Claims are not entitled to vote on thE Plan unless the
Bankruptcy Court, upon motion of the Claimant whose Claim is disputed,
temporarily allows the Claimant an amount which it deems proper for purposes of
voting to accept or reject the Plan. Any such motion must be heard and
determined before the date established by the Bankruptcy Court as the final date
for voting on the Plan. Additionally, the Bankruptcy Court may disregard the
vote of any Claimant if his vote was not solicited or procured in good faith or
in accordance with the Bankruptcy Code.
2. VOTING INSTRUCTIONS.
(a) Ballots. In voting for or against the Plan, please use only the
ballot sent to you with this Disclosure Statement. If you receive more than one
ballot, you should assume that each ballot is for a separate claim and should
complete and return all of them.
If you are a member of a Class and did not receive a ballot for such
Class, or if your ballot is damaged or lost or if you have any questions
concerning voting procedures, contact Christine Cronk at (615) 244-6380.
12
(b) Returning Ballots. You should complete and sign each enclosed
ballot and return it in the enclosed envelope to
CHRISTINE CRONK
WALLER LANSDEN DORTCH & DAVIS, PLLC
511 UNION STREET, SUITE 2100
NASHVILLE, TN 37219
(the "Solicitation Agent").
In order to be counted, ballots must be actually received by the
Solicitation Agent on or before JUNE 4, 2002, by 5:00 p.m., Central Daylight
Time, at the applicable address set forth above. Alternatively, you may fax your
ballot to Ms. Cronk at 615-244-6804, but such faxes must be received by 5:00
p.m., Central Daylight Time, on June 4, 2002. If the ballot is faxed as set
forth above, the actual signed ballot must be received by the Solicitation Agent
at the address set forth above by 5:00 p.m., Central Daylight Time, on June 5,
2002, or such faxed ballot shall not be counted.
IT IS OF THE UTMOST IMPORTANCE TO THE DEBTORS THAT YOU VOTE PROMPTLY TO ACCEPT
THE PLAN. BALLOTS NOT RECEIVED BY THE DATE AND TIME SET FORTH HEREIN SHALL NOT
BE COUNTED.
3. INCOMPLETE OR IRREGULAR BALLOTS.
Ballots which fail to designate the Class to which they apply shall be
counted, subject only to contrary determinations by the Bankruptcy Court, in the
Class determined by the Debtors and Lenders. Ballots that are signed and
returned, but not expressly voted either for acceptance or rejection of the
Plan, will NOT be counted.
13
4. BALLOT RETENTION.
The original ballots of the Claimants shall be maintained by the
Solicitation Agent for six (6) months after entry of the Confirmation Order and
then shall be destroyed, unless otherwise ordered by the Court.
5. APPROVAL OF DISCLOSURE STATEMENT.
On May 3, 2002, the Bankruptcy Court approved this Disclosure Statement
and on May 3, 2002 issued an Order evidencing the Bankruptcy Court's approval of
this Disclosure Statement.
6. CONFIRMATION HEARING.
The Bankruptcy Court has set a hearing to determine whether to confirm
the Plan (the "Confirmation Hearing") for JUNE 14, 2002 at 11:00 a.m.(CDT) in
the courtroom of the Honorable David S. Kennedy, Chief United States Bankruptcy
Judge for the Western District of Tennessee, Western Division, on the Ninth
Floor, 200 Jefferson Street, Memphis, Tennessee. The Confirmation Hearing may be
adjourned, from time to time, by the Bankruptcy Court with no further notice,
except for an announcement made at the Confirmation Hearing or any adjournment
thereof.
7. OBJECTIONS.
Any objections to the Confirmation of the Plan must be in writing and
filed with the Bankruptcy Court and served upon the following parties, on or
before 5:00 p.m., Central Daylight Time, on JUNE 4, 2002:
JONATHAN E. SCHARFF, ESQ.
HARRIS, SHELTON, DUNLAP COBB & RYDER, PLLC
2700 ONE COMMERCE SQ.
MEMPHIS TN 38103
14
JOHN C. TISHLER, ESQ.
WALLER LANSDEN DORTCH & DAVIS
A PROFESSIONAL LIMITED LIABILITY COMPANY
NASHVILLE CITY CENTER
511 UNION STREET, SUITE 2100
NASHVILLE, TN 37219-1760
SEAN M. HAYNES, ESQ.
UNITED STATES TRUSTEE'S OFFICE
200 JEFFERSON AVE STE 400
MEMPHIS, TN 38103
III. DEBTORS' BUSINESS OPERATIONS AND HISTORY
The Debtors, until recently, were a leading comprehensive cancer
management company that provided high dose chemotherapy on an outpatient basis,
owned assets and managed non-medical aspects of oncology practices, compounded
and dispensed cancer pharmaceuticals and conducted clinical trials for
pharmaceutical companies. Through the services it provided, until recently, the
Debtors were affiliated with more than 300 oncologists nationwide. Publicly
traded for several years, ROI (Nasdaq: ROIX) was delisted by Nasdaq early in
2001, prior to the filing of this Case.
The Debtors, until recently, owned the assets and managed the business
aspects of five oncology practices in eleven (11) locations ("Physician Practice
Management" or "PPM"). Through the PPM system, the Debtors were responsible for
providing facilities, equipment, supplies, support personnel and management and
financial advisory services.
Also, at least early in this Case, the Debtors owned and/or operated a
national network of 23 advanced cancer treatment centers ("IMPACT Centers")
15
operating in 13 states. The IMPACT Centers provided vital, sophisticated
treatment to advanced stage cancer patients. During the 1999 fiscal year, the
IMPACT Centers provided life-enhancing services to more than 470 cancer
patients. During the 2000 fiscal year, the IMPACT Centers treated approximately
240 additional patients.
The Debtors also, until recently, operated five institutional
pharmacies for certain affiliated oncologists. From these pharmacies, the
Debtors provided pharmacy management services to medical oncology practices.
Prior to the Petition Date, Debtors entered into a Credit Agreement
(the "Credit Agreement") with AmSouth Bank (individually, "AmSouth," and in its
role as agent as defined in the Credit Agreement, "Agent"), Union Planters Bank,
National Association ("Union Planters"), and Bank of America, N.A., f/k/a
NationsBank, N.A. ("Bank of America"). Collectively, AmSouth, Union Planters and
Bank of America are referred to herein as the "Lenders."
The Credit Agreement, including all amendments, documents, instruments,
and agreements executed in connection therewith may be referred to as the "Loan
Documents." Pursuant to the Loan Documents, Debtors incurred Obligations in
favor of the Lenders (the "Obligations"), which Obligations the Court found,
pursuant to the Cash Collateral Order, were in default as of the Petition Date.
As of the Petition Date, the Obligations owed to the Lenders totaled
$29,545,087.31 (the "Lenders' Claim"), which includes principal and unpaid
interest.
16
By Order entered October 26, 2001, the Court allowed the Lenders' Claim
and found that it was not subject to any defense or counterclaim. The repayment
of the Lenders' Claim is secured by substantially all, if not all, of their
assets and properties, including the Debtors' Cash Collateral, and its contract
rights with the PPMs. A full description of the extent of the Lenders' liens
against the Debtors' property is attached as Exhibit A to the Cash Collateral
Order entered by the Court on October 26, 2001.
Because of numerous factors, including the on-going litigation with the
physicians and physician practices that formed the most valuable aspects of the
Debtors' operations, the Debtors did not believe that a reorganization of their
business would be feasible. From the Petition Date to the end of 2001, the
Debtors attempted to market and sell most of their Assets to third-party
purchasers. To this end, the Debtors' officers and the professionals engaged by
the Debtors to assist them in this process, contacted and solicited bids for
their businesses. Simultaneously, the Debtors approached the physicians who
operated the various clinics at which the Debtors' PPM services were provided
about buying its PPM and/or pharmacy businesses. In November 2001, the Debtors
received offers to purchase substantially all of the Debtors' assets for amounts
substantially less than the Allowed amount of the Lenders' Claim. The terms of
such offers did not provide certainty of the amount to be received. Due to
increasingly poor economic conditions throughout the country (especially for
companies managing physician practices), the market for a third-party purchaser
of substantially all of the Debtors' Assets for a price approximating
17
fair market value became unlikely. Further, the Debtors recognized that it would
be difficult to sell most of their assets for so long as litigation with the
physicians who operated the various clinics at which the Debtors' PPM services
were offered, was ongoing. Accordingly, the Debtors, with the Lenders' consent,
decided to seek a sale of the PPM assets to the physicians, a settlement of
outstanding litigation among the parties, and to liquidate the remaining assets
of the Debtors.
As of the day this Disclosure Statement was approved, substantially all
of the Debtors' Assets have been liquidated. Sales have been approved by the
Court and have closed or are expected to close shortly. All PPM operations have
been sold to the physicians who operated the clinics at which the PPM operations
were conducted. Substantially all of the IMPACT Centers have been closed or
sold. The pharmacy management business is in the process of being sold to
third-parties, or will be closed and the accounts collected. It is anticipated
that most of the day-to-day functions (other than the collection of accounts and
proceeds from the sales of Assets) will cease within the next few weeks and the
Debtors' headquarters will be closed by the end of May, 2002.
On April 22, 2002, a "Consent Order Extending and Modifying Order
Entered October 26, 2002 Authorizing Debtors to Use Cash Collateral," became
final. Pursuant to that Order, the Court has approved the resignation of the
current members of the Boards of Directors of the Debtors (the "Boards") and
their replacement with new members who are mutually acceptable to the Lenders,
the Debtors and the outgoing members of the Boards. In addition,
18
Anthony LaMacchia, as chief executive officer and member of the Boards of the
Debtors, has been terminated and replaced by Charles Sweet, a person recommended
by the Lenders, who will supervise the liquidation of the Debtors' Assets and
final winddown of the Debtors' operations. Mr. LaMacchia also has received
$859,258 in satisfaction of the claims he may have against the Debtors pursuant
to his employment contracts and orders entered by the Court during the course of
the Case.
IV. SUMMARY OF THE JOINT PLAN
1. OVERVIEW.
The Plan, filed April 12, 2002, provides that the Lenders, from their
collateral,(1) will fund the payment in full of all Allowed Administrative and
Priority Claims (estimated to be $3,500,000), plus $250,000 to general unsecured
Creditors. The remaining funds from the liquidation of the Debtors' Assets will
be paid to the Lenders as they are collected and, once the liquidation of all or
most of the Assets is completed, the Debtors will be dissolved.
The following summary is qualified by the exact terms and provisions of
the Plan. Amendments beneficial to one or more classes without further
impairment of other classes may be made in the Plan. Such amendments may
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(1) Pre-petition, the Debtors granted the Lenders a first-priority lien in
substantially all of their Assets. Post-petition, pursuant to the Cash
Collateral Order, the Lenders' liens were recognized as valid, unavoidable and
fully enforceable, and the Lenders' secured claim, in the amount of
$29,545,087.31 was allowed. Pursuant to the terms of the Cash Collateral Order,
all proceeds of the liquidation of the Assets are subject to the lien of the
Lenders.
19
be approved by the Bankruptcy Court at the Confirmation Hearing without
resolicitation of creditors' and interest holders' votes.
The Plan separates claims and interests into five (5) classes. The
following is a summary description of the treatments of each class of Claims.
Claimants are urged to consult the Plan for more detailed treatment of their
Claims.
2. CLASS 1--ADMINISTRATIVE CLAIMS.
Administrative claims include the claims incurred by the Debtors in the
administration of their bankruptcy cases, as well as claims allowed by the Court
as priority claims. The Debtors estimates that they may have administrative
claims on the Effective Date equal to approximately $3,500,000. These
Administrative Claims include all Allowed Claims of trade vendors, fees and
charges assessed against the Debtors' estate by professionals hired by the
Debtors as approved by the Court, all fees and charges assessed against the
estate pursuant to 28 U.S.C. Section 1930, employee Claims, and Priority Claims.
The Allowed Administrative Expenses will be paid in full on the Effective Date
unless some other treatment is agreed to by these creditors. Administrative
Claims not allowed by the Effective Date will be paid as they are Allowed. The
payment to Allowed Administrative Claimants will come from the Administrative
Expenses Fund. This Class is unimpaired and not entitled to vote on the Plan.
20
3. CLASS 2--SECURED CLAIM OF LENDERS.
The Lenders' Claim has been allowed by the Cash Collateral Order in the
total amount of $29,545,087.31. According to the Debtors' records, as of April
1, 2002, that Claim had been reduced to $25,042,295.15. In full satisfaction of
the Lenders' Claim, AmSouth, as agent for the Lenders, shall receive all amounts
collected from the liquidation of the Debtors' Assets (both as of the Effective
Date, and thereafter), except for (1) amounts necessary to fund the
Administrative Expenses Fund; (2) $250,000 to be paid into the Creditors' Trust
for distribution on account of all Allowed Class 4 Claims; (3) $25,000, to be
paid to reimburse fees and expenses of the Creditors' Trustee; and (4) the
Winddown Fund. AmSouth shall then distribute all such Assets it receives
pursuant to the terms of the Loan Documents. The Claims of certain Creditors,
shown on Exhibit B of the Plan, have agreed to subordinate their Claims to the
Claim of the Lenders and any distribution otherwise payable to them under the
Plan shall also be paid to the Lenders. Pursuant to Exhibit 3 hereto, the
Lenders are projected to receive an additional $15.5 million to $18.7 million on
their Claim from the liquidation of the Debtors' remaining Assets after April 1,
2002, thus leaving a deficiency of at least $6,000,000. This Class is impaired
and is entitled to vote on the Plan.
4. CLASS 3--OTHER SECURED CREDITORS.
The Debtors do not believe there are any Creditors in this Class, which
consist of any Creditor with a secured Claim other than that of the Lenders. To
the extent there are such Creditors, and their Claims are not junior to the
21
Lenders' Claims, upon the allowance of such Claim, such Allowed Claim may be
satisfied, at Lender's option, by tendering the collateral which secures such
Claim, or by paying the value of such collateral. To the extent such Claim is
junior to the Claim of the Lenders, then such Claim shall be treated in the
manner provided in Class 4. This Class is unimpaired and is not entitled to vote
on the Plan.
5. CLASS 4--UNSECURED NON-PRIORITY CLAIMS.
Class 4 consists of all Allowed unsecured, non-priority Claims in the
approximate amount of $17.4 million.(2) In full satisfaction of all Claims in
this Class, each such Allowed Claim shall receive, pro rata, a distribution from
the Creditors' Trust, funded with $250,000 from the Lenders' collateral. Upon
the Allowance of Claims in this Class, such Claimant shall receive an amount
determined by multiplying $250,000 by a fraction, the numerator of which is the
Allowed amount of its Claim, and the denominator of which shall be all Allowed
Claims of this Class. This Class is impaired and is entitled to vote on the
Plan.
6. CLASS 5--CLAIMS OF SHAREHOLDERS.
This Class consists of all shareholders of the Debtors, including those
holders of options, warrants, conversion rights, rights of first refusal or
other rights, contractual or otherwise, to acquire or receive any stock or other
ownership interest in the Debtors, and any contracts subscriptions,
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(2) The exact amount of Claims in Class 4 will not be known until the Claims
allowance process has been completed. It is estimated that the Claims against
this pool of funds could be as little as $5 million or as much as $18 million.
22
commitments or agreements, pursuant to which the non-Debtors party was or could
have be entitled to receive shares, securities or other ownership interests in
Debtors. Because Classes 2 and 4 are not being paid in full, the members of this
Class shall receive nothing on account of their Claims and their interests in
the Debtors shall be cancelled on the Effective Date. Pursuant to 11 U.S.C.
ss. 1126(g), Creditors in this Class shall be deemed to have rejected the Plan,
and the votes of this Class will not be solicited.
V. IMPLEMENTATION OF PLAN AND FEASIBILITY
The primary means for execution and implementation of the Plan is the
liquidation of all the Debtors' Assets and the distribution of those Assets
pursuant to the terms of the Plan. Attached hereto as Exhibit 3 is a description
of the amounts projected by the Debtors and Lenders to be received by the Estate
and the approximate date of such receipt. Pursuant to this description, it
appears that as of June 1, 2002, the Debtors will have cash on hand sufficient
to fund the Administrative Expenses Fund, the Expenses Fund and the Winddown
Fund in amounts as may be required pursuant to the Budget attached as Exhibit A
to the Plan. As such, the Plan appears feasible.
With respect to Allowed Class 1 Claims, the Debtors and/or the Winddown
Person shall distribute an amount equal to any Allowed Administrative Claim, on
the date provided for in the Plan to the holder of such Claim. With respect to
Allowed Class 2 Claims, the Debtors and/or the Winddown Person shall make
distributions to the Lenders on the thirtieth (30th) day of each month,
commencing in the month on which the Confirmation
23
occurs, of all cash, less the amount the Winddown Person shall determine needs
to be withheld to fund any shortfalls in the Funds, on hand. With respect to
Allowed Class 4 Claims, the Creditors' Trustee shall distribute the appropriate
amount to the holder of such Allowed Claims in such Class following the funding
of such Creditors' Trust. Such distribution shall be made periodically, on dates
determined in the sole discretion of the Creditors' Trustee.
In addition to the funding of the Funds, on the Effective Date Response
Oncology, Inc. (the "Parent") and its subsidiaries (the "Subsidiaries") will be
deemed substantively consolidated into the estate of Response Oncology, Inc.
Thus, all Claims of all Creditors of any Debtors shall be treated similarly, all
in the manner provided in this Plan, without regard for the separate assets of
any subsidiary of the Debtors or any Claim being assertable against only the
Parent or only the Subsidiaries.
Between the Confirmation and the Effective Date, the Lenders and the
Boards shall select a Winddown Person who shall undertake the final liquidation
of the Assets, application of proceeds of such Assets pursuant to the Plan and,
eventually, the cessation of the operations of the Debtors. On the Effective
Date, the separate Boards shall be deemed disbanded, and the Subsidiaries shall
be deemed merged into the Parent. The Winddown Person shall also become the sole
Board member and officer of the consolidated entities. A single share of stock
in the consolidated entity shall be issued to AmSouth, as agent. On or before
September 30, 2002, the Winddown Person
24
and the Lenders shall determine when the operations of the Debtors shall cease
and shall file with the Court a Notice of Termination Date, the date upon which
all operations will cease, the Debtors deemed dissolved, and all Assets then
remaining shall be transferred to the Lenders.
VI. LIQUIDATION ANALYSIS
The Bankruptcy Code requires as a condition to confirmation that the
Bankruptcy Court find that the Plan is in the "best interest" of the Debtors,
creditors, and interest holders. In that connection, the Bankruptcy Code
requires that creditors receive or retain property under the Plan which is of a
value not less than what such creditors or interest holders would receive in a
liquidation proceeding under Chapter 7 of the Bankruptcy Code. In a Chapter 7
proceeding, a trustee would be appointed to oversee the liquidation of the
Debtors' assets with proceeds distributed to creditors and interest holders
according to their respective interest and priorities. In a liquidation, a
company's assets are typically sold for significantly less than their
going-concern value. Return to creditors is, therefore, reduced. Further,
because the Lenders' Claim has been Allowed in an amount greater than the total
amount of Assets expected to be received by the estate, and all the Debtors'
Assets are subject to the satisfaction of the Lenders' Claim, holders of
Administrative, Priority and Unsecured Claims would receive nothing in a
liquidation of the Debtors. Although approximately $900,000 in Avoidance Actions
has been collected by the Debtors in this case, it is not anticipated that any
other recovery will come from avoidance actions. Further, to the extent the
Avoidance
25
Action recoveries have not been spent on operations, such amounts are subject to
the superpriority administrative claim pursuant to 11 U.S.C. ss. 507(b) granted
to the Lenders in paragraph 36 of the Cash Collateral Order resulting from the
decline in value of the Collateral during the term of this case. Thus, because
approximately $3.5 million in administrative expense claims are being paid in
full, plus $250,000 is being distributed to unsecured Creditors, this Plan
provides for a greater recovery than a liquidation of the Debtors and its Assets
would return.
VII. TAX CONSIDERATIONS
The Plan does not attempt to address the tax consequences of creditors.
To be able to accurately advise creditors regarding tax consequences, if any, of
the Plan, the Debtors and Lenders would have to be provided with detailed
financial information for each Creditor. The Plan may affect Creditors
differently, and Creditors are urged to consult with their own professionals
regarding these possible tax consequences.
VIII. RISK FACTORS OF THE PLAN
A. General.
The following is intended as a summary of certain risks associated with
the Plan. It is not exhaustive and must be supplemented by the analysis and
evaluation made by each Claimant and its own advisors of the Plan and this
Disclosure Statement as a whole.
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B. Bankruptcy Risks.
1. INSUFFICIENT ACCEPTANCES.
For the Plan to be confirmed, each impaired class of Claims is given
the opportunity to accept or reject the Plan, except for those classes which
receive no distribution under the Plan. With regard to such impaired classes
which vote on the Plan, the Plan is accepted by the Claimants of such class
actually voting on the plan which hold at least two-thirds in amount and more
than one-half the number of the total allowed claims of which the class voted.
Only those members of the class who vote to accept or reject the Plan will be
counted for voting purposes. If any class of Claims that is impaired under the
Plan fails to accept the Plan by the minimum percentage of votes, the Debtors
intend to request Confirmation pursuant to the cramdown provisions of Section
1129(b) of the Bankruptcy Code, which allow Confirmation of the Plan regardless
of the fact that particular class of Claimants has not accepted the Plan.
However, there can be no assurances that any impaired class of Claimants under
the Plan will accept the Plan; therefore, Debtors may not be able to use these
cramdown provisions of the Bankruptcy Code for Confirmation of the Plan.
2. CONFIRMATION RISKS.
The following specific risks exist with respect to Confirmation of the
Plan: (i) any objection to the Plan filed in the reorganization case by a member
of the class of Claims or interest could either prevent Confirmation of the Plan
or delay such Confirmation for a significant period of time; (ii) a certain
Claimant
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can prevent Confirmation by (a) contesting the Allowed amount of its Claim under
the Plan and successfully contend that such amount should be higher than the
amount reflected on the Debtors' schedules, or (b) successfully contend that the
Claim of such Claimant should be included in a different class under the Plan.
The Bankruptcy Court may deem that the Plan is not feasible and may deny
Confirmation based on certain of these Claimant's actions; (iii) if any impaired
class of Claims under the Plan fails to provide acceptance levels to meet the
minimum classified requirements, then Debtors may be forced to request a
cramdown and seek Confirmation over their objections.
In addition, the Plan provides that, if the Plan is not Confirmed by
July 15, 2002, then the Lenders shall seek a dismissal or conversion of this
Case, which could result in members of the Administrative, Priority and
Unsecured classes of Creditors receiving nothing on account of their Claims.
IX. EFFECT OF CONFIRMATION AND MISCELLANEOUS
A. Discharge of Claims.
The Plan provides that the entry of the Confirmation Order will act as
a full and complete discharge of all claims against the Debtors and all assets
of the Debtors of any nature including, without limitation, any liability of the
kind specified in Section 502(g), 502(h), or 502(i) of the Bankruptcy Code that
arose or has been asserted against the Debtors at any time after entry of the
Confirmation Order or that arises from any pre-Confirmation conduct of the
Debtors whether or not the Claim is known to or knowable by the Claimant. The
discharge of the Debtors will become effective as to each Claim, whether or
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not the Claim or interest constitute an allowed claim or interest and whether
or not the holder of the claim of interest has voted to accept the Plan as
provided in Section 524 of the Bankruptcy Code. A discharge herein provides and
operates as an injunction against the prosecution of any Claims so discharged.
B. Releases of Claims Against Debtors and Lenders.
Pursuant to Article X of the Plan, the Confirmation Order shall act as
a general, broad release of the Debtors, their agents, the Lenders and their
agents. Further, the Plan will release and permanently enjoin the claims of
creditors, shareholders and other holders of the ROI Interests from pursuing
Claims against the Debtors, their Agents, the Lenders or their Agents, including
the officers and directors of the Debtors.
C. Confirmation Injunction.
Except as otherwise specifically provided for in the Plan, upon
Confirmation, the Plan will provide that all persons who have held, hold, or may
hold any Claims against the Debtors (and other parties as outlined in the Plan)
are permanently enjoined on and after the Effective Date (a) from commencing or
continuing in any manner, action, or other proceeding with respect to any such
Claim against the Debtors, the Reorganized Debtors, or its officers or
directors; (b) from the enforcement, attachment, collection, or recovery by any
manner or means of any judgment award or decree ordered against the Debtors or
property of the Debtors with respect to any such claim; (c) from creating,
perfecting, or enforcing any encumbrance of any kind of the Debtors against
property of the Debtors with respect to any such Claim; and (d)
29
from asserting a set-off, any right of subrogation or recoupment of any kind
against any obligation due from the Debtors, the Reorganized Debtors, or against
the property of the Debtors with respect to any Claim.
D. Objections to Releases and Injunctive Relief.
Two parties (the "Objectors") have expressed concern about the
discharge and confirmation injunctions provided in the Plan, as well as the
releases. The Objectors claim that the Plan is unconfirmable with the releases
and injunctions as they are contained in the Plan attached hereto. Although the
Debtors and Lenders disagree with this assessment and have not changed the
nature or scope of the releases since the Plan was originally filed, nor have
they deleted the discharge or confirmation injunctions from the Plan, they
desire, if at all possible, a confirmable and consensual Plan. Accordingly,
creditors, when determining whether to vote in favor of the Plan, should assume
that the Plan will contain the releases, as described in the Plan attached to
this Disclosure Statement, as well as the discharge and confirmation
injunctions. However, based upon negotiations the Debtors and Lenders may have
with the Objectors, the scope or nature of the releases and the discharge and
confirmation injunction provisions currently found in the Plan may change, and
creditors should consider such possible changes to the Plan when determining
whether to vote in favor of the Plan.
E. Executory Contracts and Unexpired Leases.
The Plan provides that upon entry of the Confirmation Order, all
executory contracts and unexpired leases except those which shall, on the
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Confirmation Date, either have been assumed or the subject, are pending motions
by the Debtors to assume pursuant to Section 365 of the Bankruptcy Code or are
rejected.
F. Retention of Jurisdiction.
The Court shall retain jurisdiction of the Proceedings pursuant to the
provisions of the Bankruptcy Code until the Proceedings are closed and further
with respect to specific matters identified in the Plan.
G. Provisions for Modification of the Plan.
The Debtors and Lenders may propose amendments or modifications of this
Plan at any time prior to Confirmation. After Confirmation, the Debtors may,
with approval of the Court, and so long as it does not materially or adversely
affect the interests of creditors, remedy any defect or omission, or reconcile
any inconsistencies in the Plan, or in the order of Confirmation, in such manner
as may be necessary to carry out the purposes and effect of this Plan. The
foregoing provisions do not limit the ability of any party to modify the Plan
under 11 U.S.C. ss. 1127 and applicable rules.
H. Provisions for Revocation of the Plan.
The Debtors and Lenders reserve the right to withdraw this Plan before
the entry of the Confirmation Order. If the Debtors withdraw this Plan or the
Confirmation of this Plan does not occur, then this Plan shall be deemed null
and void and nothing contained herein shall be deemed to constitute a waiver or
release of any Claims by or against such Debtors, as the case may be, or any
other person or to prejudice in any manner the rights of the Debtors or any
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other person in further proceedings involving the Debtors. Further, if the Plan
is not Confirmed by July 15, 2002, the Lenders shall be deemed to have withdrawn
their consent to the Plan and have indicated that they will move to have the
Case converted or dismissed.
X. CONCLUSION
The Bankruptcy Court has determined that this Disclosure Statement is
adequate and contains information sufficient for holders of claims and interest
to make an informed judgment in exercising their rights to vote on the Plan.
The Plan is the result of extensive efforts by the Debtors and the Lenders to
provide creditors with a meaningful return on their Claims. An alternative to
the Plan is liquidation which will, in all likelihood, reduce significantly the
return to Creditors on the claims. The Debtors and Lenders believe the Plan is
clearly preferable to liquidation and urge Creditors to vote to accept this
Plan.
DATED: MAY 3, 2002.
HARRIS, SHELTON, DUNLAP, COBB & RYDER, PLLC
By:
------------------------------------
Steven N. Douglass (Bar No. 9770)
Jonathan E. Scharff (Bar No. 16890)
One Commerce Square, Suite 2700
Memphis, Tennessee 38103-2555
(901) 525-1455
Counsel to Debtors, Debtors in Possession
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WALLER LANSDEN DORTCH & DAVIS
By:
------------------------------------
John C. Tishler (Bar. No. 13441)
Robert A. Guy (Bar No. 16715)
511 Union Street, Suite 2100
Nashville, TN 37219
(615) 244-6380
Counsel to AmSouth Bank, as Agent
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