IN THE UNITED STATES BANKRUPTCY COURT
IN AND FOR THE DISTRICT OF ARIZONA
In Re Chapter 11
DIAGNOSTIC INTERNATIONAL, INC., Case No. B-97-12293-PHX-CGC
Debtor
DEBTOR'S MODIFIED PLAN OF REORGANIZATION
DATED MAY 21, 1997
DIAGNOSTIC INTERNATIONAL, INC., Debtor and Debtor-in-
Possession in the above-captioned case, Great Southwest
Chile Farm, Inc., XXYY Corp., AABB Corp., DII Sub., and
Reeves Corp., (collectively referred to as the
"Coproponents"), propose the following Modified Plan of
Reorganization (the "Plan") incorporating the terms of that
certain Global Settlement Agreement dated May 20, 1999 which
has resolved the Objections to confirmation of the Debtor's
Plan of Reorganization dated October 13, 1997, filed by
certain creditors and holders of equity security interest.
ARTICLE I
DEFINITIONS
A. Comments Concerning Defined And Undefined Terms.
For the purpose of this Modified Plan of Reorganization
(hereinafter, the "Modified Plan"), except as expressly
provided or unless the context otherwise requires, all
capitalized terms not otherwise defined shall have the
meanings assigned to them in this Article I of the Modified
Plan. Whenever the context requires, such terms shall
include the plural and the singular number. The masculine
gender as used in the Modified Plan shall, unless the
context otherwise requires, include the feminine gender, and
the feminine gender shall likewise include the masculine.
All other legal terms shall have the meanings ascribed
to them by the Bankruptcy Code, title 11 U.S.C. 102, et
seq., (hereinafter, the "Code") and the Federal Rules of
Bankruptcy Procedure promulgated pursuant to 28 U.S.C.
2075 and the amendments thereto made applicable to this Case
by Law.
B. Defined Terms.
Subject to the qualifications contained in the
foregoing paragraph, the following terms are defined as
follows whenever used in this Plan:
1. "Allowed Administrative Claim" shall mean an
Allowed Claim for payment of an administrative expense of a
kind described in Section 503(b) of the Code, including,
without limitation, the actual, necessary costs and expenses
of preserving the estate and operating the business of the
Debtors. Such sums include wages, salaries or commissions
due employees for services rendered after the commencement
of the Case, compensation for legal and other professional
services and reimbursement of expenses awarded under
330(a) or 331 of the Code and all lawful fees and charges
assessed against the estate under title 28 of the United
States Code.
2. "Allowed Claim or Allowed Interest" shall mean a
Claim or Interest having the following characteristics:
a. Either such Claim or Interest was listed in
the Chapter 11 schedules the Debtors filed with the United
States Bankruptcy Court for the District of Arizona
(hereafter, the "Court") pursuant to 521 of the Code and
such Claim or Interest was not identified in those schedules
as "disputed", "contingent" or Unliquidated", or proof such
Claim or Interest has been filed with the Court in the time
and in the manner prescribed by the Court and the Federal
Rules of Bankruptcy Procedure; and
b. No objection to the allowance of such Claim
or Interest has been interposed within the periods of
limitation fixed by the Court, the Code or the Federal Rules
of Bankruptcy Procedure or any order resolving any objection
to the allowance of such Claim or Interest has become a
Final Order;
3. "Allowed Secured Claim" shall mean all or that
portion of a Claim which both constitutes an Allowed Claim
and which has been specifically allowed as a "secured claim"
pursuant to 506(a) of the Code.
4. "Allowed Unsecured Claim" shall mean an Allowed
Claim which is not an Allowed Administrative Claim, an
Allowed Secured Claim or an Allowed Claim entitled to
priority pursuant to 507 of the code.
5. "Bankruptcy Code" shall mean the federal statutes
known as the "Bankruptcy Code", which are set forth in Title
11 of the United States Code, 11 U.S.C. 101, et seq.
6. "Bankruptcy Court" shall mean the United States
Bankruptcy Court for the District of Arizona or the United
States District Court of Arizona when a district judge is
acting as a trial judge and not an appellate judge in the
Case.
7. "Federal Rules of Bankruptcy Procedure" shall mean
those rules of procedure governing bankruptcy and contested
matters and adversary proceedings in the cases which have
been promulgated pursuant to 28 U.S.C. 2075, and any
amendments to those rules applicable to this Case by law.
8. "Case" shall mean the Chapter 11 case of
DIAGNOSTIC INTERNATIONAL, INC., pending in the United States
Bankruptcy Court for the District of Arizona and currently
assigned Case No. B-97-12293-PHX-CGC.
9. "Claim" shall mean a "claim", as defined by
101(5) of the Code, against the Debtors, against property of
the Debtors or against property of the estate.
10. "Class" shall mean any class into which Allowed
Claims or Allowed Interests are classified pursuant to this
Plan.
11. "Code" shall mean the "Bankruptcy Code", defined
in this section of the Modified Plan.
12. "Confirmation" shall mean the signing, by a United
States Bankruptcy Judge or by a United States District Judge
acting as a trial judge and not as an appellate judge, of
all orders need to confirm the Modified Plan.
13. "Confirmation Order" shall mean the order (or
orders) confirming the Modified Plan, signed by a United
States Bankruptcy Judge or a United States District Judge,
acting as a trial judge and not as an appellate judge, after
entry of that order (or those orders) on the court's docket.
14. "Confirmation of the Modified Plan" shall mean
entry on court's docket of all orders necessary to confirm
the Modified Plan.
15. "Consummation of the Modified Plan" shall mean the
accomplishment of all things contained or provided for in
the Modified Plan and the entry of an order closing the Case
Pursuant to Rule 3022 of the Federal Rules of Bankruptcy
Procedure.
16. "Court" shall mean Bankruptcy Court as defined in
this section of the Modified Plan. When not capitalized,
the word "court" shall mean such court exercising proper
jurisdiction in the case as the context of the Modified Plan
makes appropriate. For example, as used in the phrase
"entry of an order on the docket of the court", the term
"court" can refer to the United States Bankruptcy Court for
the District of Arizona, the United States District Circuit
or the United States Supreme Court, depending upon which
court has issued the order in the Case.
17. "Creditor" shall mean any entity holding a Claim.
18. "Debtor" shall mean DIAGNOSTIC INTERNATIONAL,
INC., the entity named as Debtor in the petition commencing
this Case.
19. "Disclosure Statement" shall mean the written
disclosure statement the Debtor filed in this Case and
approved by the Court pursuant to Section 1125 of the Case.
20. "Disputed Claim" or "Disputed Interest" shall mean
either (a) a Claim or an Interest listed in the Chapter 11
schedules filed by the Debtor pursuant to 521 of the Code
and designated as "disputed", "contingent" or unliquidated"
or (b) a Claim or an Interest to which an objection has been
filed by a party in interest and which objection has not
been resolved by an order which has become a Final Order on
or before the Effective Date.
21. "Effective Date" shall mean that date which is
eleven (11) days after the Order Confirming Modified Plan is
executed by the Bankruptcy Court; that is, the date all
orders necessary to confirmation of the Modified Plan become
Final Orders.
22. "Final Order" shall mean an order or judgment
having the following characteristics: (a) it has sufficient
finalit y under applicable law to be appealable as of right,
(b) the filing of any motion to alter or amend it or to
reconsider it, except such a motion brought pursuant to Rule
9024 of the Federal Rules of Bankruptcy Procedure and Rule
60 of the Federal Rules of Civil Procedure, is subject to
being denied as untimely, (c) it has been entered on the
court's docket for a sufficient period of time such that the
filing of any notice of appeal from it is subject to being
dismissed as commencing an untimely appeal, (d) it has not
been reversed, (e) it is not stayed, (f) it is not the
subject of a pending motion seeking relief from it,
reconsideration of it, or to alter or amend it, and (g) it
is not the subject of a pending appeal or a pending motion
for review or rehearing on appeal.
23, "Interest" shall mean equity interest in the
Debtor represented by issued and outstanding stock in the
Debtor.
24. "Legal Rate" shall mean the rate of interest as
defined by 28 U.S.C. 1961 as of the Effective Date.
25. "New Common Stock" shall mean common stock of the
Reorganized Debtor which may be issued under the Modified
Plan and distributed in the manner provided by the Modified
Plan.
26. "Petition" shall mean the Petition commencing this
Case, filed by Debtor on September 9, 1997, and all
amendments to that Petition.
27. "Petition Date" shall mean this Chapter 11 Plan of
Reorganization, including all exhibits to this Plan, either
in their present form or as they may be altered, amended or
modified from time to time in accordance with the provisions
of this Plan, the Code and the Federal Rules of Bankruptcy
Procedure.
28. "Plan" shall mean this Chapter 11 Plan of
Reorganization, including all exhibits to this Plan, either
in their present form or as they may be altered, amended or
modified from time to time in accordance with the provisions
of this Plan, the Code and the Federal Rules of Bankruptcy
Procedure.
29. "Redeemable Convertible Preferred Stock" shall
mean preferred shares of the Reorganized Debtor which may be
issued under the Modified Plan in the manner provided in the
Modified Plan.
30. "Old Common Stock" shall mean any validly issued
and fully paid common stock of the Debtor issued and
outstanding on the Petition Date.
31. "Reorganized Debtor" shall mean the entity
succeeding to the property interests of the Debtor on the
Effective Date and having the rights, powers, duties and
interests granted the "Reorganized Debtor" set forth in the
Modified Plan and granted entities having plans of
reorganization confirmed under Chapter 11 of the Bankruptcy
Code.
32. "Secured Creditor" shall mean any Creditor holding
a lien, security interest, or other encumbrance which has
been properly perfected as required by law with respect to
the property owned by the Debtor on the Petition Date and
which is neither subject to a pending proceeding seeking to
vacate or disallow it nor vacated or disallowed by court
order or operation of law.
33. "Great Southwest Chile Farm" shall refer to an
Arizona corporation, Great Southwest Child Farm ("GSWCF"),
that has _______ authorized shares of common stock, no par
value, and _____ outstanding shares of stock. The Debtor
owns 100% of the outstanding shares of stock of GSWCF.
GSWCF is an affiliate of Debtor participating in this joint
plan with Debtor.
34. "XXYY Corp." shall refer to an Arizona
corporation, XXYY Corp., that has 100,000,000 authorized
shares of common stock, no par value, and 1,000,000
outstanding shares of stock. The Debtor owns 100% of the
outstanding shares of XXYY Corp. XXYY Corp., is an
affiliate of Debtor participating in this joint plan with
Debtor.
35. "AABB Corp." shall refer to an Arizona
corporation, AABB Corp., that has 100,000,000 authorized
shares of common stock, no par value, and 1,000,000
outstanding shares of stock. The Debtor owns 100% of the
outstanding shares of stock of AABB Corp. AABB is an
affiliate of Debtor participating in this joint plan with
Debtor.
36. "DII Sub" shall refer to an Arizona corporation,
DII Sub, that has 100,000,000 authorized shares of common
stock, no par value, and 1,000,000 outstanding shares of
stock. The Debtor owns 100% of the outstanding shares of
DII Sub. DII Sub, is an affiliate of Debtor participating
in this joint plan with Debtor.
37. "Reeves Corp," shall refer to an Arizona
corporation, Reeves Corp., that has 100,000,000 authorized
shares of common stock, no par value, and 5,000,000
outstanding shares of stock. The Debtor owns 100% of the
outstanding shares of Reeves Corp. Reeves Corp., is an
affiliate of Debtor participating in this joint plan with
Debtor.
38. "Diagnostic Unit" shall mean the unit to be
created by the Debtor consisting of the following: one
share of New Common Stock of the Reorganized Debtor; one
warrant to purchase one share of New Common Stock of the
Reorganized Debtor at a price of fifty percent (50%) of the
preceding thirty (30) days average bid which will expire two
years from the Effective Date (an "A Warrant"); one warrant
to purchase one share of New Common Stock of the Reorganized
Debtor at a price of sixty percent (60%) of the preceding
thirty (30) days average bid, which will expire three years
from the Effective Date; one warrant to purchase one (1)
share of New Common Stock of the Reorganized Debtor at a
price of seventy-five percent (75%) of the preceding thirty
(30) days average bid, which will expire four years from the
Effective Date. Each Diagnostic A Warrant, B Warrant and C
Warrant shall be callable by Diagnostic at anytime. Each
share or warrant comprising part of a Diagnostic Unit may be
traded independently.
39. "GSWCF Unit" shall mean the unit to be created by
the Debtor consisting of the following: one share of common
stock of GSWCF; one warrant to purchase one share of common
stock of GSWCF at a price of fifty (50%) of the preceding
thirty (30) days average bid which will expire two years
from the Effective Date (an "A Warrant") ; one warrant to
purchase one share of common stock of GSWCF at a price of
sixty percent (60%) of the preceding thirty (30) days
average bid, which will expire three years from the
Effective Date; one warrant to purchase one share of common
stock of GSWCF at a price of seventy-five (75%) of the
preceding thirty (30) days average bid, which will expire
four years from the Effective Date. Each such A Warrant, B
Warrant and C Warrant shall be callable by GSWCF at anytime.
Each share or warrant comprising part of a GSWCF Unit may be
traded independently.
40. "XXYY Unit" shall mean the unit to be created by
the Debtor consisting of the following: one share of common
stock of XXYY Corp.; one warrant to purchase one share of
common stock of XXYY Corp., at a price of fifty percent
(50%) of the preceding thirty (30) days average bid which
will expire two years from the Effective Date (an "A
Warrant"); one warrant to purchase one share of common stock
of XXYY Corp., at a price of sixty percent (60%) of the
preceding thirty (30) days average bid, which will expire
three years from the Effective Date; one warrant to purchase
one share of common stock of XXYY Corp., at a price of
seventy-five (75%) of the preceding thirty (30) days average
bid, which will expire four years from the Effective Date.
Each such A Warrant, B Warrant and C Warrant shall be
callable by XXYY Corp., at anytime. Each share or warrant
comprising part of an XXYY Unit may be traded independently.
41. "AABB Unit" shall mean the unit to be created by
the Debtor consisting of the following: one share of common
stock of AABB Corp.; one warrant to purchase one share of
common stock of AABB Corp., at a price of fifty percent (50)
of the preceding thirty (30) days average bid which will
expire two years from the Effective Date (an "A Warrant");
one warrant to purchase one share of common stock of AABB
Corp., at a price of sixty percent (60%) of the preceding
thirty (30) days average bid, which will expire three years
from the Effective Date; one warrant to purchase one share
of common stock of AABB Corp., at a price of seventy-five
percent (75%) of the preceding thirty (30) days average bid,
which will expire four years from the Effective Date. Each
such A Warrant, B Warrant and C Warrant shall be callable by
AABB Corp. at anytime. Each share or warrant comprising
part of an AABB Unit may be traded independently.
42. "DII Sub Unit" shall mean the unit to be created
by the Debtor consisting of the following: one share of
common stock of DII Sub; one warrant to purchase one share
of common stock of DII Sub, at a price of fifty percent
(50%) of the preceding thirty (30) days average bid which
will expire two years from the Effective Date (an "A
Warrant"); one warrant to purchase one share of common stock
of DII Sub, at a price of sixty percent (60%) of the
preceding thirty (30) days average bid, which will expire
three years from the Effective Date; one warrant to purchase
one share of common stock of DII Sub, at a price of seventy-
five (75%) of the preceding thirty (30) days average bid,
which will expire four years from the Effective Date. Each
such warrant shall be callable by DII Sub at any time. Each
share or warrant comprising part of a DII Sub Unit may be
traded independently.
43, "Reeves Corp Unit" shall mean the unit to be
created by the Debtor consisting of the following: one
share of common stock of Reeves Corp; one warrant to
purchase one share of common stock of Reeves Corp, at a
price of fifty percent (50%) of the preceding thirty (30)
days average bid which will expire two years from the
Effective Date (an "A Warrant"); one warrant to purchase one
share of common stock of Reeves Corp, at a price of sixty
percent (60%) of the preceding thirty (30) days average bid,
which will expire three years from the Effective Date; one
warrant to purchase one share of common stock of Reeves
Corp, at a price of seventy-five (75%) of the preceding
thirty (30) days average bid, which will expire four years
from the Effective Date. Each warrant shall be callable by
Reeves Corp at any time. Each share or warrant comprising
part of a Reeves Corp Unit may be traded independently.
44, "Unsecured Creditor" shall mean any holder of an
Allowed Unsecured Claim.
ARTICLE II
OBJECTIVE OF THE REORGANIZATION
This Plan provides for the reorganization of Debtor as
a going concern and the creation of additional subsidiaries
that Debtor contemplates will acquire other assets and/or
existing business operations with the objective of creating
substantial value for its secured and unsecured creditors
and its shareholders. Diagnostic Units, GSWCF Units, XXYY
Units, AABB Units, DII Sub Units, Reeves Corp Units, and/or
Preferred Stock will be issued to creditors in differing
amounts depending upon classification in full satisfaction
of their Allowed Claims and to it current Equity Interest
Holders. All of Debtor's Old Common Stock shall be canceled
pursuant to this Plan.
The Debtor is authorized to issue New Common and stock
of its affiliates and C-Proponents, GSWCF, XXYY Corp., AABB
Corp., DII Sub and Reeves Corp., to its creditors in
satisfaction of their allowed claims and to its equity
interest holders.
As set forth more fully below and in Debtor's
Disclosure Statement, if Debtor's assets were liquidated in
a case under Chapter 7, the creditors holding general
unsecured claims would receive nothing for their claims
since all of Debtor's assets are fully encumbered by the
secured claims of Marathon Investments, Inc., and Quantum,
Inc. Debtor and its Co-Proponents believe that by
continuing Debtor's existing business through the
reorganized structure created by operation of this Plan, the
creditors and equity security holders will receive a far
greater return than through a liquidation.
ARTICLE III.
POSTCONFIRMATION MANAGEMENT
OF THE REORGANIZED DEBTOR.
A. The Board of Directors and Corporate Officers.
Notwithstanding the issuance of securities pursuant to
this Plan, some or all of which may give full voting rights
to holders of those securities, the initial board of
directors of the Reorganized Debtor shall consist of those
persons designated below. If a director designated as a
member of the initial board of directors is unable to
complete his or her tenure, the remaining director shall
elect a new director.
The initial board of directors for the Reorganized
Debtor shall be comprised of the following persons:
Name
Jason Pratte
Dave Nichols
Bob Nicholson
The individuals identified below will serve as
officers of the Reorganized Debtor:
Name Offices to Be Held
Jason Pratte Chairman of the Board, CEO and
President
Dan Sadowsky Vice President, Treasurer
Annamarie Collins Vice President Operations,
Corporate Secretary
B, Qualifications of Directors and Officers.
The qualifications of the individuals who will
constitute the initial Board of Directors and serve as
Officers of the Reorganized Debtor are as set forth in the
Disclosure Statement.
C. Compensation of Directors and Officers
The following table shows the initial proposed
annual salaries of those individuals who will be the
directors and officers of the Reorganized Debtor immediately
following confirmation of the Modified Plan:
Name Positions to Be Held
Remuneration
Jason Pratte Chairman, CEO and President
$65,000.00
Dan Sadowsky Vice President, Treasurer
$26,000.00
Annamarie Collins Secretary
$38,000.00
It is also contemplated that certain stock options will
at some time in the future be granted by the Reorganized
Debtor to certain officers, directors and key employees,
although no specifics have as of the date of this Modified
Plan been determined.
The directors of the Reorganized Debtor will be
authorized to approve reimbursement to directors for actual
expenses incurred, compensation to directors for attendance
at meetings of the board of directors, and salaries for
corporate officers following confirmation. Nevertheless,
the Reorganized Debtor's initial corporate board has no
plans to approve any such reimbursement or compensation for
directors or officers, other than as described in the
Disclosure Statement and this Modified Plan.
D. Meetings of Directors and Selection of New
Directors.
Following the Effective Date of this Modified Plan, the
board of directors of the Reorganized Debtor shall meet
monthly or more frequently. The initial board of directors
shall serve until the next annual meeting of shareholders
held pursuant to the Articles of Incorporation and/or Bylaws
of the Reorganized Debtor.
ARTICLE IV.
ANTICIPATED POSTCONFIRMATION LITIGATION
Litigation between the Debtor and the Reeves Group,
including the Reeves Group's objections to confirmation of
the Debtor's Plan of Reorganization, dated October 13, 1997,
and Adversary Case No. 98-77, have been resolved through
that certain Global Settlement Agreement, dated May 20,
1999. Accordingly, there will be no postconfirmation
litigation between said parties. However, the Debtor does
anticipate possible postconfirmation litigation as to a
former insider named Anita Goodloe and her associate Joe
Niederquel, alleged creditors of the Debtor, as to their
apparent use of the Debtor's trade secrets and trademark
infringement either before the Bankruptcy Court or in State
Court.
ARTICLE V
ACCEPTANCE AND REJECTION OF EXECUTORY CONTRACTS.
In accordance with U.S.C. 365, the Debtor hereby
assumes all executory contracts and unexpired leases
identified in Exhibit "1".
Pursuant to 11 U.S.C. 365, the Debtor has rejected or
hereby rejects the executory contracts and leases identified
in Exhibit "2".
Any person or entity injured by such rejection shall be
deemed to hold an unsecured claim against the Debtor to the
extent allowed, and, within ten (10) days before the initial
hearing on confirmation of the Modified Plan, must file a
proof of claim for any damages resulting therefrom or be
forever barred from asserting any claim.
The Debtor reserves the right to apply to the
Bankruptcy Court at any time prior to confirmation of the
Modified Plan to reject any and all other contracts which
are executory.
ARTICLE VI
DESCRIPTIONS OF SECURITIES TO BE ISSUED
IN SATISFACTION OF CLAIMS AND INTERESTS.
A. Identification of Securities
1. New Common Stock.
Debtor shall issue shares of New Common Stock
in Reorganized Debtor and issue a portion of the securities
of Debtor's Co-Proponents/affiliates GSWCF, XXYY Corp., AABB
Corp., DII Sub and Reeves Corp., in different ratios to each
Class of Claims and Interests. Upon the issuance of such
shares, they will be deemed fully paid and non-assessable
and shall be entitled to one vote each.
Debtor will distribute the certificates
comprising the Diagnostic Units, GSWCF Units, XXYY Corp
Units, AABB Corp Units and DII Sub Units. The Reeves Group
will distribute the certificates comprising the Reeves Corp
Units. Debtor is authorized to distribute the common stock
and warrants of the other Co-Proponents and the Reeves Group
is authorized to distribute the certificates relating to the
Reeves Corp Units.
Debtor's best estimates on the number and
percentages of units to be distributed to each Class are
based upon the dollar amounts of claims the Debtor believes
to be in those classes, the aggregate amount of stock in
Diagnostic at the time of filing of the Modified Plan and
the Global Settlement Agreement. The Debtor estimates the
distribution to the different classes in the following
ratios:
a. Diagnostic Units: 1,000,000 total units.
1) Marathon Investments, Inc., shall receive
440,000 units.
2) Quantum Incorporated shall receive 70,000
units.
3) The Class of Unsecured Creditors shall
receive 140,000 units.
4) The Class of Allowed Equity Interest
Holders shall receive
250,000 units.
5) Don Bankston shall receive 100,000 units.
b. GSWCF Units: 1,000,000 total units.
1) Marathon Investments, Inc., shall receive
580,000 GSWCF
Units.
2) Quantum Incorporated shall receive 200,000
GSWCF Units.
3) The class of Unsecured Creditors shall
receive 120,000 GSWCF
Units.
4) The Class of Allowed Equity Interest
Holders shall receive
100,000 GSWCF Units.
c. XXYY Units: 1,000,000 total units.
1) Marathon Investments Inc., shall receive
300,000 XXYY
Units.
2) Quantum Incorporated shall receive 480,000
XXYY Units.
3) The Class of Unsecured Creditors shall
receive 90,000
XXYY Units.
4) Allowed Interest Equity Holders shall
receive 130,000
XXYY Units.
d. AABB Units: 1,000,000 total units.
1) Marathon Investments Inc., shall receive
300,000 AABB Units.
2) Quantum Incorporated shall receive 480,000
AABB Units.
3) The Class of Unsecured Claims shall
receive 100,000 AABB
Units.
4) The Class of Allowed Equity Interest
Holders shall receive
120,000 AABB units.
e. DII Sub Units: 1,000,000 total units.
1) The Class of Unsecured Creditors shall
receive 50,000 DII Sub
Units.
2) The Class of Allowed Equity Interest
Holders shall receive
200,000 DII Sub Units.
3) 750,000 DII Sub Units shall be issued into
the name of the
Reorganized Debtor.
f. Reeves Corp. Units: 5,000,000 total units.
1) The Class of the Reeves Group shall
receive 2,550,000 Reeves
Corp. Units.
2) The Class of Allowed Equity Interest
Holders, with the
exception of Don Bankston, Marathon
Investments, Inc.,
Quantum Incorporated, Bankston Electric
Company and
Monarch Investments, Inc., shall receive
2,450,000 Reeves
Corp Units.
2. Redeemable Convertible Preferred Stock.
The Modified plan calls for the issuance of shares of
Redeemable Convertible Preferred Shares ("Preferred Stock")
to Marathon and Quantum in different amounts. Upon the
issuance of such shares in cancellation of indebtedness, all
of the shares will be duly issued, fully paid and non-
assessable and shall be subject to the following:
a. The value of each share shall be One Dollar
($1.00) and the payment of indebtedness shall be based
thereon.
b. Holders shall receive five percent (5%) annually
of the aggregate face value of all such shares held by
Holders of Preferred Stock.
c. The shares are redeemable by Diagnostic for a
period of five (5) years at one hundred Twenty-Five percent
(125%) of face value. Any interest earned and not paid will
also be paid at the time of redemption.
d. Holders have the option of converting shares of
Preferred Stock on a basis of one share of New Common Stock
for each share of Preferred Stock.
e. Holders of Preferred Stock shall have the right to
have one (1) vote for each share of Preferred Stock.
3. Warrants.
The Reorganized Debtor shall issue Class A, Class B and
Class C Warrants in Reorganized Debtor, GSWCF, XXYY Corp.,
AABB Corp., DII Sub and Reeves Corp., to creditors and
equity interest holders, as hereinafter defined:
a. Class A - Common Stock Warrants.
Each Class A Warrant issued as part of a Diagnostic
Unit, GSWCF Unit, XXYY Unit, AABB Unit, Reeves Corp Unit or
DII Sub Unit entitles the holder to purchase one (1) share
of the company related to that unit at a price of fifty
percent (50%) of the preceding thirty (30) days average bid,
and will expire two years from the Effective Date.
Each such A Warrant shall be callable by the
Reorganized Debtor, GSWCF, XXYY Corp., AABB Corp., Reeves
Corp., or DII Sub at anytime.
b. Class B - Common Stock Warrants.
Each Class B Warrant issued as part of a Diagnostic
Unit, GSWCF Unit, XXYY Unit, AABB Unit, Reeves Corp Unit, or
DII Sub Unit entitles the holder to purchase one (1) share
of the company related to that unit at a price of seventy-
five percent (60%) of the preceding thirty (30) days'
average bid, and will expire three years from the Effective
Date.
Each such B Warrant shall be callable by the
Reorganized Debtor, GSWCF, XXYY Corp., AABB Corp., Reeves
Corp., or DII Sub at anytime.
c. Class C - Common Stock Warrants.
Each Class C Warrant issued as a part of a Diagnostic
Unit, GSWCF Unit, XXYY Unit, AABB Unit, Reeves Corp Unit or
DII Sub Unit entitles the holder to purchase one (1) share
of the company related to that unit at a price of seventy-
five percent (75%) of the preceding thirty (30) days'
average bid, and will expire four years from the Effective
Date.
Each such C Warrant shall be callable by Reorganized
Debtor, GSWCF, XXYY Corp., AABB Corp, Reeves Corp., or DII
Sub at anytime.
4. Dividends.
No dividends have been paid by the Debtor. The
declaration of any future cash or stock dividends will be
made at the discretion of the Reorganized Debtor's board of
directors.
It is anticipated that any income received will be
devoted to the Reorganized Debtor's future operations. The
Debtor does not anticipate the payment of cash dividends on
the Reorganized Debtor's common stock in the foreseeable
future, and any decision to pay dividends will depend on the
Reorganized Debtor's profitability, funds legally available
therefor and other factors.
5. Transfer Agent.
The registrar and transfer agent for the stock and
rights as issued pursuant to the Modified Plan will be
__________, Phoenix, Arizona.
6. Reporting.
Diagnostic is not subject to the reporting requirements
of the Security Exchange Act of 1934 (the "1934 Act") at
this time.
7. Resale of Common Stock.
a. Resales in General.
In general, securities issued in a Chapter 11
reorganization by a debtor to a creditor on account of a
claim may be resold by a holder without registration under
the 1933 Act or other laws, in reliance on the exemption
from registration provided by the Bankruptcy Code, unless
the holder is an "underwriter" with respect to such
securities, as the term "underwriter" is defined in the
Bankruptcy Code. Securities issued under a plan of
reorganization to new investors do not benefit from a
bankruptcy law exemption from registration.
Section 1145(b)(1) of the Bankruptcy Code provides
that "except with respect to ordinary trading transactions,"
an entity is an "underwriter" if such entity: (A) purchases
a claim against or interest in a debtor with a view to
distribution of any security received in exchange for such
claim or interest; (B) offers to sell securities offered or
sold under the Modified Plan for the holders of such
securities (except certain offers to sell fractional
interests); (C) offers to buy securities offered or sold
under the Modified Plan from the holders of such securities
if the offer to buy is made with a view to distributing such
securities and the offer to buy if made under an agreement
made in connection with the Modified Plan, with the
consummation of the Modified Plan, or with the offer or sale
of securities under the Modified Plan of reorganization; or
(D) is an issuer with respect to a reorganized debtor's
securities, as the term "issuer" is used in 2(11) of the
1933 Act". In the context of the Modified Plan, an "issuer"
under 2(11) of the 1933 Act includes any person directly
or indirectly controlling or controlled by the Debtor or any
person under direct or indirect control with the Debtor.
Whether a person is an "issuer" and, therefore, an
"underwriter" for purposes of 1145(b) of the Bankruptcy
Code depends upon a number of factors, including the
relative size of the shareholder's equity interest in the
Debtor; the distribution and concentration of other equity
interests in the Debtor; whether the person, either alone or
acting in concert with others, has a contractual or other
relationship giving that person power over management
policies and decisions; and whether the person actually has
such power notwithstanding the absence of formal indicia of
control.
Because of complex and subjective issues involved in
determining issuer and underwriter status, creditors and
equity interest holders are urged to consult with their
attorneys concerning whether they will be able to trade
freely any securities they are to receive under the Modified
Plan. NEITHER THE DEBTOR NOR ANY OF ITS REPRESENTATIVES
MAKE ANY REPRESENTATIONS AS TO WHETHER ANY SECURITIES ISSUED
PURSUANT TO The Modified Plan, ONCE PLACED IN THE HANDS OF
RECIPIENTS UNDER The Modified Plan, MAY BE FREELY TRADED.
Persons who may be underwriters must either register the
securities under the 1933 Act in connection with a resale or
use an applicable exemption from registration.
The Reorganized Debtor is not obligated to register
securities issue pursuant to the Modified Plan or to assist
holders of such securities in establishing an exemption from
registration. Accordingly, any entity becoming a holder of
such securities who is determined to be an underwriter may
be able to dispose of the securities only in limited
circumstances.
If the Reorganized Debtor has reason to believe that a
recipient of its securities pursuant to the Modified Plan
may be an underwriter, the Reorganized Debtor may require
from such recipient a statement that the recipient is aware
of Section 1145 of the Bankruptcy Code and the requirements
of the 1933 Act regarding resale of those securities and
that those securities held by such recipient will be sold in
compliance with the 1933 Act.
b. State "Blue Sky" Laws.
State laws affecting resales of securities issued
in connection with bankruptcy reorganizations may vary.
Those who become holders of securities issued pursuant to
the Modified Plan should consult with their attorneys
concerning the applicability of any state law affecting
resales of such securities. This is particularly important
since, upon information and belief, the Debtor understands
that the Trustee has allowed the Debtor's listing in
Moody's, Standard and Poors and Walkers to lapse, thereby
invalidating the ability for the Stock to trade under the
Blue Sky laws of at least a majority of the states.
c. Listing and Trading.
IT IS ADVISABLE FOR EACH RECIPIENT OF SECURITIES
ISSUED PURSUANT TO The Modified Plan TO CONSULT INDEPENDENT
COUNSEL PRIOR TO SELLING THOSE SECURITIES. ALL CREDITORS
AND EQUITY INTEREST HOLDERS ARE ALSO URGED TO CONSULT
COUNSEL REGARDING TAX CONSEQUENCES OF The Modified Plan AND,
IN PARTICULAR, ANY TAX CONSEQUENCES OF RECEIVING SECURITIES
UNDER The Modified Plan.
ARTICLE VII.
CLASSES DEFINED
A. Unclassified Claims.
Unclassified claims include claims for
administrative expenses entitled to priority under 11 U.S.C.
507(a)(1) & (a)(8) of the Bankruptcy Code. The holder of
each such claim is entitled to receive specific treatment
under the Debtor's Plan (i.e., payment cash of the allowed
amount of the claim), regardless of whether holders of
claims having similar priority choose to accept different
treatment (e.g., deferred cash payments over time).
The unclassified claims include all claims for
allowed administrative expenses, which include the fees and
costs incurred by Debtor's counsel in representing the
Debtor in this case. The unclassified claims also include
allowed claims for certain taxes entitled to property in
payment under the Bankruptcy Code.
The Debtor estimates that unclassified claims will
not exceed, at the time of confirmation, One Hundred Twenty
Thousand Dollars ($120,000.00).
The holders of unclassified claims, excluding
claims entitled to priority under Section 507(a)(8), must be
paid the allowed amounts of their claims in cash on the
Effective Date of the Modified Plan, unless the claim
holders agree to different treatment. Most claims and
equity interests may be classified or aggregated for
purposes of voting and treatment under the Modified Plan,
based upon a substantial similarity among the claims or
interests in the class. If a class of claims or interests
votes to accept the Modified Plan, a rejection of the
Modified Plan by some of the holders of the claims or
interests in the class will not, by itself, prevent
confirmation of the Modified Plan.
B. Classified Claims:
Class 1: The allowed secured claim of Marathon
Investments, Inc.,
Class 2: The allowed secured claim of Quantum
Corporation.
Class 3: The disputed claims of Mark Stetler and
William Doran.
Class 4: The claims and equity security interests
of the Reeves Group.
Class 5: The General Unsecured Creditors of the
Debtor
Class 6: The Debtor's Equity Security Holders.
Class 7: The claims and equity security interest
of Don Bankston
obtained by him pursuant to the terms of
the Global Settlement
Agreement.
C. IDENTIFICATION OF CLASSES IMPAIRED BY The Modified
Plan.
All classes of claims and interests created by the
Modified Plan are considered "impaired" pursuant to 11
U.S.C. 1124. This means, in part, that the Modified Plan
modifies the contractual rights of all holders of claims and
interests, that holders of classified claims will not
receive the allowed amounts of their claims in cash on the
Effective Date of the Modified Plan, and that holders of
allowed interests will not retain any fixed liquidation
preference or be paid any fixed redemption amount for equity
securities held.
D. TREATMENT OF UNCLASSIFIED CLAIMS.
(Administrative Expenses and Priority Claims).
1. Unsecured, Allowed Priority Claims (Except
507(a)(8)).
The holders of unsecured priority claims against the
Debtor existing on the filing date (excluding claims
described in 11 U.S.C. 507(a)(8)) and all claims for
administrative expenses, including without limitation the
actual necessary expenses of preserving the estate such as
attorneys', accounting and management fees, will be paid in
cash, in full, on the Effective Date or upon the expiration
of the appeal period of the order allowing the claim,
whichever is later, or at such other times as may be
mutually agreed upon by the Debtor and such claimants.
All trade and service debts and obligations incurred in
the normal course of the Debtor's business during the
Chapter 11 case shall be paid when due in the ordinary
course of business.
2. Unsecured Allowed 507(a)(8) Priority Claims.
Each holder of an Allowed Priority Claim as specified
in 507(a)(8) of the Code shall receive on account of such
claim, based on the sole discretion of the Debtor, either
(a) cash in the full amount of the allowed claim on the
Effective Date or upon the expiration of the appeal period
of the order allowing the claim, whichever is later, or (b)
deferred equal cash payments, payable quarterly beginning
ninety (90) days after the Effective Date or upon the
expiration of the appeal period of the order allowing the
claim, whichever is later, and made during a period not
exceeding six (6) years after the date of assessment of such
claim, of value, as of the Effective Date of the Modified
Plan, equal to the allowed amount of such claim, which
payments shall include interest on the allowed claim at the
appropriate statutory rate.
E. TREATMENT OF CLASSIFIED CLAIMS AND INTERESTS.
1. Claim Amounts.
Because certain of the claims against the Debtor
are in unknown or undetermined amounts, the amounts of
claims specified in this Modified Plan reflect only the
Debtor's best estimate as of the date hereof. A list of
creditors and claim amounts are included in the Schedules
and Statement of Affairs filed by the Debtor in this case on
the 9th day of September 1997. The Debtor reserves the
right to object to any claim and equity security interests
noted in the Schedules and Statement of Affairs, or any
other claim asserted against the Debtor, either prior to or
following Confirmation, with the exception of the claims and
equity security interests noted in the Schedules and
Statement of Affairs, or any other claim asserted against
the Debtor, either prior to or following Confirmation, with
the exception of the claims and equity security interests of
the Reeves Group, Marathon Investments, Inc., Quantum
Incorporated, William Doran and Dale Ulrich, the Chapter 7
Trustee in the William N. Reeves Bankruptcy Case which are
the subject of the Global Settlement Agreement. Under the
Modified Plan, objections to claims must be filed within
sixty (60) days following the Effective Date of the Modified
Plan.
The Debtor shall distribute all securities to
Holders of Allowed Claims and Holders of Allowed Interests,
pursuant to the terms of this Plan, on the Effective Date.
In calculating the number of units to be distributed
pursuant to the formulae set forth below, the number of such
units to be distributed to each Holder of an Allowed Claim
or Allowed Interest shall be rounded down to the next whole
number.
Class 1: Marathon is the holder of a claim in the
amount of $159,325.00 secured by a first position lien on
all of the Debtor's personal property. On the Effective
Date, Marathon shall receive in full consideration of its
claim: 440,000 Diagnostic units, 580,000 GSWCF units,
300,000 XXYY units and 300,000 AABB units. In addition,
Marathon shall receive 40,000 shares of Redeemable
Convertible Preferred Stock in the Reorganized Debtor.
Marathon shall not retain its first position lien
on all of the Debtor's equipment, accounts receivable and
other personal property and such lien shall be released and
extinguished by operation of the Order Confirming Modified
Plan and the distribution of securities as provided herein.
Class 2: Quantum is the holder of a claim in the
amount of $30,000.00 secured by a lien in second position on
all of the Debtor's personal property. On the Effective
Date, Quantum shall receive in full consideration of its
claim: 70,000 Diagnostic units, 200,000 GSWCF units,
480,000 XXYY units and 480,000 AABB units. In addition,
Quantum shall receive 6,000 shares of Redeemable Convertible
Preferred Stock in the Reorganized Debtor.
Quantum shall not retain its second position lien on
all of the Debtor's equipment, accounts receivable and other
personal property and such lien shall be released and
extinguished by operation of the Order Confirming Plan and
the distributions of securities as provided herein.
Class 3: The holders of the disputed claims in
Class 3, Mark Stetler and William Doran, received the
consideration that forms the basis of their claims through
Mr. Stetler's status as an insider of Debtor (former Vice-
President and Assistant CEO) and subordination of this claim
is required for purposes of distribution, pursuant to 11
U.S.C. 510(b). These claims were also disputed by the
Debtor and Mr. Doran filed an Objection to the Debtor's
original Plan of Reorganization. Mr. Doran's Objection was
resolved through the Global Settlement Agreement and,
pursuant to same, he has withdrawn that Objection.
The holders of the disputed claims in Class 3 shall,
pursuant to Section 510(b), be treated as Class 6 equity
interest holders and receive the pro rata portion of the
aggregate amount of securities to be distributed to the
Class 6 equity interest holders.
To the extent that Mr. Stetler and Mr. Doran hold a
judgement or a judgement lien that encumbers any property of
Debtor, they shall not retain such lien and any such
judgement or judgment lien shall be released and
extinguished by operation of the Order Confirming Plan.
Class 4: The holders of the disputed claims and
equity security interests in Class 4, the Reeves Group,
shall receive from the Debtor, in exchange for their
performance on all of their obligations under the terms of
the Global Settlement Agreement, 2,550,000 Reeves Corp Units
on the Effective Date.
In addition, Dale Ulrich, as the duly appointed Chapter
7 Trustee in the William N. Reeves Bankruptcy Case, shall
receive the sum of $230,000.00 from the Debtor on the
Effective Date, in exchange for and in full satisfaction of
all of the claims and equity security interests of William
Reeves and the Reeves Trust to be obtained by Mr. Ulrich
pursuant to the terms of the Global Settlement Agreement and
in exchange for Mr. Ulrich's performance of all of his
obligations under the terms of the Global Settlement
Agreement.
Following performance by the Debtor, Don Bankston, Dale
Ulrich, William Reeves and P.E. Roberts, as the Trustee of
the Reeves Trust, of all of their respective obligations
under the terms of the Global Settlement Agreement, all of
the alleged claims previously owned by William Reeves and
the Reeves Trust will be deemed satisfied and all of the
equity security interests previously alleged to have been
owned by the William Reeves and the Reeves Trust will be
canceled by the Debtor.
Class 5: Each holder of an allowed Class 5 claim
against the Debtor, the general unsecured creditors of the
Debtor, shall receive, on the Effective Date and in full
satisfaction of that claim, the following: approximately 26
Diagnostic Units per $100 of claim, 23 GSWCF Units per $100
of claim, 17 XXYY Units per $100 of claim, 19 AABB Units per
$100 of claim and 9 DII Sub Units per $100 of claim.
Class 6: Class 6 shall consist of all holders of
Allowed Equity Interests in the Debtor. All of the Old
Common Stock of Debtor shall be canceled by operation of
this Plan and the Equity Interest Holders shall retain none
of their Old Common Stock or other interests in Debtor.
However, the Reorganized Debtor shall distribute to the
Equity Interest Holders, on the Effective Date, the
following: 250,000 Diagnostic Units to be shared pro rata
amongst all holders of Allowed Equity Interests, 100,000
GSWCF Units to be shared pro rata amongst all holders of
Allowed Equity Interests, 130,000 XXYY Units to be shared
pro rata amongst all holders of Allowed Equity Interests,
120,000 AABB Units to be shared pro rata amongst all holders
of Allowed Equity Interests, 200,000 DII Sub Units to be
shared pro rata amongst all holders of Allowed Equity
Interests and 2,450,000 Reeves Corp Units to be shared pro
rata amongst all holders of Allowed Equity Interests.
However, pursuant to the Global Settlement Agreement, Don
Bankston, Marathon Investments, Inc., Quantum Incorporated,
Bankston Electric Company and Monarch Investments, Inc., are
not entitled to and shall not receive any Reeves Corp Units.
Accordingly, following the distribution contemplated by
this Modified Plan, the current equity holders will own
approximately 25% of the Reorganized Debtor, 10% of Great
Southwest Chili Farm, 13% of XXYY Corp., 12% of AABB Corp.,
20% of DII Sub and 49% of Reeves Corp.
Class 7: By virtue of the Global Settlement
Agreement, Don Bankston will obtain and become the holder of
all of the disputed claims and equity security interests
allegedly held by Pamela Reeves, Midas Corporation and Black
Diamond Mining Corporation and all of the stock owned by
Midas in GSWCF and Great Southwest Chile Company, Inc., a
Nevada corporation ("GSWCCI"). On the Effective Date, Mr.
Bankson shall receive in exchange for and in full
satisfaction of all such disputed claims and equity security
interests, including the GSWCF and the GSWCCI stock owned by
Midas, 100,000 Diagnostic Units.
Following performance by the Debtor, Don Bankston, Dale
Ulrich, the Chapter 7 Trustee in the William N. Reeves
Bankruptcy Case, Pamela Reeves, Midas Corporation and Black
Diamond Mining Corporation of all of their respective
obligations under the terms of the Global Settlement
Agreement, all of the alleged claims previously owned by
Pamela Reeves, Midas Corporation and Black Diamond Mining
Corporation will be deemed satisfied and all of the equity
security interests previously alleged to have been owned by
Pamela Reeves, Midas Corporation and Black Diamond Mining
Corporation will be canceled by the Debtor. In addition, at
such time and prior to distribution of the GSWCF Units,
GSWCF and GSWCCI will be wholly owned subsidiaries of the
Debtor.
2. Disputed Claims: The Debtor or the Reorganized
Debtor and its attorneys may file on or before sixty (60)
days from the Effective Date of the Modified Plan (a) an
objection to any claim, (b) a motion to determine the
extent, priority, or amount of any secured or other claim,
or (c) a complaint to determine the validity, priority or
extent of any lien or other interest in property of the
Debtor's estate.
Copies of responsive pleadings to all such
objections, motions, or complaints must be served upon
Debtor's attorneys, Christopher R. Kaup, Esq. of Peskind
Hymson & Goldstein, P.C., 14595 North Scottsdale Road,
Scottsdale, Arizona, 85254.
Where objections are made to any claim or to any
motions or proceedings filed in regard to any lien, claim,
or privilege, any payments or distributions of securities
that are due in accordance with the Modified Plan shall be
held in trust by the Reorganized Debtor, subject to the
Bankruptcy Court's jurisdiction, in an interest-bearing or
escrow account or accounts in Phoenix, Arizona, which
account or accounts shall be federally insured (in the event
of a distribution of a cash payment) and segregated unless
otherwise stated herein or, in the alternative, one or more
of the following will be provided:
(i) a letter of credit or other bond; or
(ii) certificates of deposit or other security satisfactory
to the Court to assure the payment of the claim.
Within thirty (30) days after entry of a final, non-
appealable order resolving any disputed claim, lien or
privilege, payment, including accrued interest, or
securities shall be distributed to the claimant (subject to
the terms of the Modified Plan) or any other entity entitled
to distribution in accordance with the Bankruptcy Court's
order.
3. Penalty Claims: No creditor, whether secured,
unsecured, priority, or nonpriority, shall be entitled to
any fine, penalty, exemplary or punitive damages, late
charges, default interest, or any other monetary charge
relating to or arising from any act or omission by the
Debtor, and any claim for such sums shall be deemed
disallowed, whether or not a specific objection to the
allowance of such sums is filed. Creditors with allowed,
secured claims shall be entitled to reasonable attorneys'
fees and interest at a non-default rate, subject to the
limitations of Section 506 of the Bankruptcy Code.
4. Unclaimed Distributions.
All distributions of money or securities under the
Modified Plan which are returned by the Post Office
undelivered or which cannot be delivered due to the
distributee's failure to provide the Reorganized Debtor with
a current address will be retained by the Reorganized Debtor
in trust in a federally insured bank (in the event of a
distribution of cash payment) or in an escrow account (in
the event of a distribution of securities) for the
distributee. After the expiration of six (6) months from
the date of the first attempted distribution, any unclaimed
monies, securities and all future distributions will vest in
the Reorganized Debtor, free of any claim of the
distributee.
ARTICLE VIII.
POSTCONFIRMATION BUSINESS OPERATIONS.
After the Effective Date, the Reorganized Debtor will
continue its business and manage its affairs without
supervision by the Bankruptcy Court, and it may enter into
agreements to transfer, convey, encumber, use and lease any
and all of its assets.
ARTICLE IX.
OWNERSHIP OF THE DEBTOR'S ASSETS
As of the Effective Date of the Modified Plan, the
Reorganized Debtor shall retain and be vested with ownership
of all property of the Debtor's Chapter 11 estate, as
defined in 11 U.S.C. 541, and the Reorganized Debtor shall
own all such property free and clear of all liens, claims
and interests of any person or entity, except as
specifically provided in the Modified Plan or the order
confirming the Modified Plan.
ARTICLE X.
CONTINUATION AND TERMINATION OF SECURITY INTERESTS.
Unless otherwise provided in the Modified Plan or in
the order confirming the Modified Plan, all creditors
possessing allowed, secured claims shall retain their liens
on any of their collateral the Reorganized Debtor acquires
to secure payment of all cash or other property to be
distributed to them pursuant to the terms of the Modified
Plan. Such liens on the Reorganized Debtor's property shall
be deemed relinquished and reconveyed to the Reorganized
Debtor upon the payment to the holders of such liens of all
money, property or securities due them in satisfaction of
their allowed, secured claims pursuant to the terms of the
Modified Plan.
Moreover, once any lien is deemed relinquished and
reconveyed to the Reorganized Debtor pursuant to the terms
of the Modified Plan, the creditor who had claimed such lien
shall immediately deliver to the Reorganized Debtor all
documents, properly signed and notarized, needed to document
the release of the lien according to any applicable state or
federal law. If the required documentation is not supplied
within one (1) week after demand therefor has been made, the
Reorganized Debtor may seek an order from the Bankruptcy
Court enforcing the lien release provisions of this Plan or
entry of an order declaring the lien to be released or void.
Except as stated previously in this subsection, all
security interests and liens of any kind in any property the
Reorganized Debtor acquires under the Modified Plan shall
terminate and shall be deemed to have terminated upon the
Effective Date of the Modified Plan.
ARTICLE XI.
INSURANCE.
The Reorganized Debtor shall maintain insurance on all
of its and its subsidiaries' tangible personal and real
property in an amount not less than the fair market value of
that property and shall keep its and its subsidiaries'
property in good repair, reasonable wear and tear excepted.
ARTICLE XII
SATISFACTION OF CLAIMS AND INTERESTS.
All classes of allowed claims and allowed interests
shall receive the distributions set forth herein on account
of and in complete satisfaction of those allowed claims and
interests. Without limiting the foregoing, upon the
Effective Date of the Modified Plan, each holder (and each
successor of a holder) of an allowed claim or an allowed
interest shall be deemed to have waived, relinquished and
released any and all of its rights and claims against the
Debtor and the Reorganized Debtor, except as provided in
the Modified Plan or the Order Confirming the Modified Plan.
ARTICLE XIII
BINDING NATURE OF THE MODIFIED PLAN.
Upon the entry of the Order Confirming the Modified
Plan, the Modified Plan shall bind the Debtor, the
Reorganized Debtor, all entities that are to acquire any
property under the Modified Plan, all creditors, and all
equity security holders, whether or not their claims and
interests are impaired under the Modified Plan and whether
or not they have accepted the Modified Plan, as determined
by 1141(a) of the Bankruptcy Code.
This means, in part, that, except as provided by an
express order of the Bankruptcy Court or pursuant to the
terms of the Modified Plan or the Order Confirming the
Modified Plan, all judicial, administrative or other actions
or proceedings pending against the Debtor or arising out of
claims accrued prior to the confirmation of the Modified
Plan shall be permanently enjoined.
ARTICLE XIV.
TERMINATION OF THE AUTOMATIC STAY AND DISCHARGE
The automatic stay imposed by 11 U.S.C. 362(a) shall
terminate when the Order Confirming the Modified Plan
becomes nonappealable. Pursuant to Section 1141(a) of the
Bankruptcy Code, the entry of the Order Confirming the
Modified Plan shall permanently bar the filing and asserting
of any claims against the Debtor and the Reorganized Debtor
which arose or relate to the period of time prior to the
date of entry of that order, except as provided in the
Modified Plan or the Order Confirming the Modified Plan.
ARTICLE XV.
IMPLEMENTATION OF The Modified Plan.
The Modified Plan will be implemented, in part, as
follows:
1. The board of directors and officers of the
Reorganized Debtor shall oversee implementation hereof.
2. The Articles of Incorporation and the Bylaws of
the Reorganized Debtor shall be deemed to be amended in
every way necessary to comply with and effectuate the terms
and conditions of the Modified Plan.
3. The board of directors shall have all of the
powers granted any board of directors by the Nevada and
Arizona statutes and any other applicable state or federal
laws.
4. The board of directors of the Reorganized Debtor
shall have the power to amend the Articles of Incorporation
and the Bylaws in any manner necessary to carry out the
provisions of the Modified Plan. The board of directors
shall be entitled to use and exercise all pertinent
provisions of state and federal law.
5. To implement the issuance of the securities
provided for in the Modified Plan, the board of directors
shall take all necessary steps required by the Code, Federal
and state laws.
6. The board of directors shall have the authority to
make provision for payment of cash and/or distribution of
securities to creditors as required hereby on the Effective
Date of the Modified Plan or as otherwise provided herein.
ARTICLE XVI.
MODIFICATION OF AND AMENDMENTS TO THIS PLAN.
Prior to the entry of the Order Confirming this Plan,
the Debtor may propose amendments or modifications in
accordance with 11 U.S.C. 1127(a). After confirmation, the
Reorganized Debtor may amend this Plan in the manner
provided by Section 1127(b) of the Bankruptcy Code.
The Bankruptcy Court may, at any time, so long as it
does not materially or adversely affect the interests of
creditors and equity interest holders, remedy defects and
omissions or reconcile any inconsistencies herein or in the
Order Confirming the Modified Plan as may be appropriate to
effectuate this Plan.
ARTICLE XVII.
REMEDIES FOR DEFAULTS BY THE REORGANIZED DEBTOR.
If the Reorganized Debtor fails to comply with the
terms hereof, the holders of unsecured claims or equity
interests in any class materially harmed thereby may proceed
against the Reorganized Debtor and its property to enforce
this Plan, taking any action permissible under federal or
state law, in any court of competent jurisdiction.
With respect to holders of liens on the Reorganized
Debtor's property, such creditors may act in accordance with
any applicable and existing mortgage, deed of trust,
security agreement, or other instrument evidencing a lien or
encumbrance on their collateral.
ARTICLE XVIII.
RETENTION OF BANKRUPTCY COURT JURISDICTION.
Following confirmation of this Plan, the Bankruptcy
Court shall retain, without limitation, jurisdiction for the
following purposes and to provide any relief the Reorganized
Debtor may require to effectuate the Modified Plan or any
modification of the Modified Plan:
1. Deciding the proper classification of any claim,
determining the proper allowance for purposes of
distribution of claims estimated for purposes of voting, and
resolving objections to claims;
2. Resolving all disputes regarding title to assets
of the Reorganized Debtor and all disputes arising under the
Bankruptcy Code;
3. Hearing all matters and deciding all issues
regarding the prosecution by the Reorganized Debtor of any
Complaints or causes of action against Anita Goodloe, Joe
Niederquell and any associates or companies of same for
theft and use of trade secrets and infringement of
trademarks belonging to the Debtor and the Reorganized
Debtor.
4. Correcting of any defect, curing any omission, or
reconciling any inconsistency between this Plan and the
Order Confirming the Modified Plan as may be appropriate to
effectuate the purposes and intent of this Plan;
5. Modifying this Plan after confirmation;
6. Enforcing and interpreting the terms and
conditions of this Plan, any securities issued under this
Plan, or any other documentation effectuating this Plan;
7. Entering any order required to enforce the rights
and powers of the Reorganized Debtor;
8. Determining any claim entitled to priority under
Section 507 of the Bankruptcy Code; and
9. Entering any order required to close the Debtor's
case.
ARTICLE XIX.
REQUEST FOR CONFIRMATION.
The Debtor requests entry of an Order confirming the
Modified Plan pursuant to Section 1129 of the Bankruptcy
Code.
DATED this ____ day of May, 1999.
PESKIND HYMSON & GOLDSTEIN, P.C.
____________________________________
Christopher R. Kaup, Esq.
14595 North Scottdale Road, Suite 14
Scottsdale, AZ 85254
DIAGNOSTIC INTERNATIONAL INC.
By:_________________________________
Jason Pratte,
President
Diagnostic International, Inc.
Phoenix, AZ 85017