UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF PENNSYLVANIA
In re: :
:
NATIONAL HEALTH & SAFETY : Case No. 99-18339DWS
CORPORATION, : Chapter 11
a Utah corporation, :
:
Debtor. :
Fourth Amended Joint Plan of
Reorganization
Dated: August 21, 2000
Philadelphia, Pennsylvania
Kevin J. Carey, Esq.
Michael G. Menkowitz, Esq.
FOX, ROTHSCHILD, O'BRIEN & FRANKEL, LLP
2000 Market Street, 10th Floor
Philadelphia, PA 19103-3291
Telephone: 215-299-2000
Facsimile: 215-299-2150
ATTORNEYS FOR DEBTOR
Richard G. Grant
Texas Bar No. 08302650
LAW OFFICES OF RICHARD G. GRANT
3102 Oak Lawn Ave., Suite 700
Dallas, Texas 75219
Telephone: 214-777-5081
Facsimile: 214-777-5082
Michael P. Massad
Texas Bar No. 13164000
SHEINFELD, MALEY & KAY, P.C.
1700 Pacific, Suite 4400
Dallas, Texas 75201-4618
Telephone: 214-953-0700
Facsimile: 214-953-1189
ATTORNEYS FOR CO-PROPONENTS
<PAGE>
TABLE OF CONTENTS
TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . i
DEBTOR'S PLAN OF REORGANZIATION . . . . . . . . . . . . . . . . . 1
ARTICLE 1 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Interpretation . . . . . . . . . . . . . . . . . . . . . 6
1.3 Reorganized Debtor . . . . . . . . . . . . . . . . . . . 7
1.4 Application of Definitions and Rules of
Construction Contained in the Bankruptcy Code. . . . . . 7
ARTICLE 2 CLASSIFICATION OF CLAIMS . . . . . . . . . . . . . . . 7
2.1 Claims Classifed . . . . . . . . . . . . . . . . . . . . 7
2.2 Administrative Claims and Priority Tax Claims. . . . . . 7
2.3 Claims . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 3 IDENTIFICATION OF IMPAIRED CLASSES OF CLAIMS . . . . . 8
ARTICLE 4 PROVISIONS FOR TREATMENT OF CLAIMS UNDER
TIIE PLAN . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Treatment of Claims. . . . . . . . . . . . . . . . . . . 8
ARTICLE 5 PROVISIONS FOR TREATMENT OF UNCLASSIFIED CLAIMS UNDER THE PLAN . . .
. . . . . . . . . . . . . . . . . . 11
5.1 Treatment of Administrative Claims . . . . . . . . . . . 11
52 Treatment of Priority Tax Claims . . . . . . . . . . . . 11
ARTICLE 6 ACCEPTANCE OR REJECTION OF THE PLAN;
EFFECT OF REJECTION BY ONE OR MORE
CLASSES OF CLAIMS . . . . . . . . . . . . . . . . . . . 12
6.1 Classes Entitled to Vote . . . . . . . . . . . . . . . . 12
6.2 Class Acceptance Requirement . . . . . . . . . . . . . . 12
6.3 Cramdown . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 7 MEANS FOR IMPLEMENTATION OF THE PLAN . . . . . . . . . 12
7.1 Corporate Restructure. . . . . . . . . . . . . . . . . . 12
7.2 Infusion of New Capital. . . . . . . . . . . . . . . . . 13
7.3 Boards of Directors. . . . . . . . . . . . . . . . . . . 13
7.4 Officers . . . . . . . . . . . . . . . . . . . . . . . . 14
7.5 Charter and Bylaws . . . . . . . . . . . . . . . . . . . 14
7.6 Vesting of Assets. . . . . . . . . . . . . . . . . . . . 14
7.7 Corporate Authority. . . . . . . . . . . . . . . . . . . 14
7.8 Assumption of Liabilities. . . . . . . . . . . . . . . . 15
7.9 Securities Law Matters . . . . . . . . . . . . . . . . . 15
7.10 Claims on File; No Allowance of Untimely Claims. . . . . 15
7.11 Integration Clause . . . . . . . . . . . . . . . . . . . 15
ARTICLE 8 PROVISIONS GOVERNING DISTRIBUTIONS . . . . . . . . . . 15
8.1 Date of Distributions. . . . . . . . . . . . . . . . . . 15
8.2 Disbursing Agent . . . . . . . . . . . . . . . . . . . . 15
8.3 Means of Cash Payment. . . . . . . . . . . . . . . . . . 15
8.4 Delivery of Distribution . . . . . . . . . . . . . . . . 15
8.5 Time Rar to Cash Payments . . . . . . . . . . . . . . . 16
ARTICLE 9 PROCEDURES FOR RESOLVING AND TREATING CONTESTED
AND DISPUTED CLAIMS UNDER THE PLAN. . . . . . . . . . . 16
9.1 Objection Deadline . . . . . . . . . . . . . . . . . . . 16
9.2 Prosecution of Objections. . . . . . . . . . . . . . . . 16
9.3 No Distributions Pending Allowance . . . . . . . . . . . 16
9.4 Withholding of Distributions on Account of
Contested Claims . . . . . . . . . . . . . . . . . . . . 16
9.5 Distributions After Allowance . . . . . . . . . . . . . 16
9.6 Distributions After Disallowance . . . . . . . . . . . . 17
ARTICLE 10 RIGHTS AND OBLIGATIONS OF THE DISBURSING
AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.1 Exculpation. . . . . . . . . . . . . . . . . . . . . . . 17
10.2 Powers of the Disbursing Agent . . . . . . . . . . . . . 17
10.3 Duties of Disbursing Agent . . . . . . . . . . . . . . . l7
ARTICLE 11 PROVISIONS GOVERNING EXECUTORY CONTRACTS AND
UNEXPIRED LEASES UNDER THE PLAN. . . . . . . . . . . . . 17
11.1 Assumption of Certain Contracts and Leases . . . . . . . 17
11.2 Rejected if Not Assumed. . . . . . . . . . . . . . . . . 18
11.3 Bar to Rejection Damages . . . . . . . . . . . . . . . . 18
11.4 Insurance Policies . . . . . . . . . . . . . . . . . . . l8
ARTICLE 12 RETENTION OF JURISDICTION . . . . . . . . . . . . . . 18
12.1 Scope of Jurisdiction. . . . . . . . . . . . . . . . . . 18
12.2 Failure of the Bankruptcy Court to Exercise
Jurisdiction . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 13 MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . 19
13.1 Setter Rights. . . . . . . . . . . . . . . . . . . . . . l9
13.2 Discharge. . . . . . . . . . . . . . . . . . . . . . . . 19
13.3 Injunctions. . . . . . . . . . . . . . . . . . . . . . . 20
13.4 Responsible Party Injunction . . . . . . . . . . . . . . 20
13.5 Pre-Petition Date Lawsuits/Insurance . . . . . . . . . . 20
13.6 Exculpations . . . . . . . . . . . . . . . . . . . . . . 20
13.7 De Minimis Distributions . . . . . . . . . . . . . . . . 21
13.8 Payment of Statutory Fees. . . . . . . . . . . . . . . . 21
13.9 Post-Effective Date Fees and Expenses of
Professional Persons . . . . . . . . . . . . . . . . . . 21
13.10Bankruptcy Restrictions. . . . . . . . . . . . . . . . . 21
13.11Disallowance and Subordination of Subordinated
Claims and Penalty Claims. . . . . . . . . . . . . . . . 21
13.12Binding Effect . . . . . . . . . . . . . . . . . . . . . 22
13.13Governing Law. . . . . . . . . . . . . . . . . . . . . . 22
13.14Modification of Plan . . . . . . . . . . . . . . . . . . 22
13.15Creditor Defaults. . . . . . . . . . . . . . . . . . . . 23
13.16Headings and Table of Contents . . . . . . . . . . . . . 23
13.17Severability . . . . . . . . . . . . . . . . . . . . . . 23
13.18Substantial Consummation/Closing the Case. . . . . . . . 24
<PAGE>
DEBTOR'S PLAN OF REORGANZIATION
The Debtor, as Debtor-in-possession in the above-referenced Chapter 11 Case,
proposes the following Plan of Reorganization for the Debtor under chapter 11 of
the Bankruptcy Code.
Article 1
Definitions And Interpretation
1.1 Definitions
The capitalized terms used herein shall have the respective meanings set forth
below:
(a) "Administrative Claim" shall mean a Claim entitled to priority under
sections 503(b) and 507(a)(1) of the Bankruptcy Code in the Chapter 11 Case
of the Debtor, including, without limitation, Fee Claims, Cure Payments,
any actual and necessary expenses of preserving the Debtor's estate, any
fees or charges assessed against the Debtor's estate under section 1930,
chapter 123 of title 28 of the United States Code and such other Claims as
ordered by the Bankruptcy Court.
(b) "Affiliate" shall have the meaning assigned to such term in section
101(2) of the Bankruptcy Code.
(c) "Allowed," when used with respect to any Claim, except for a Claim that
is an Administrative Claim, shall mean (1) such Claim to the extent it is
not a Contested Claim; (2) such Claim to the extent it may be set forth
pursuant to any stipulation or agreement that has been approved by Final
Order; or (3) a Contested Claim, proof of which was filed timely with the
Bankruptcy Court and (A) as to which no objection was filed by the
Objection Deadline, unless such Claim is to be determined in a forum other
than the Bankruptcy Court, in which case such Claim shall not become
Allowed until determined by Final Order of such other forum and Allowed by
Final Order of the Bankruptcy Court; or (B) as to which an objection was
filed by the Objection Deadline, to the extent Allowed by Final Order.
(d) "Allowed Administrative Claim" shall mean an Administrative Claim that
has become "Allowed" pursuant to the procedures set forth in Article 5 of
the Plan.
(e) "Assumed Contracts" shall mean any Executory Contract which the Debtor
has designated for assumption by a written pleading filed prior to the
Confirmation Hearing or presented at the Confirmation Hearing.
(f) "Ballot" shall mean the Ballot to be used by creditors to cast their
votes to accept or reject the Plan.
(g) "Balloting Agent" shall mean the Debtor.
(h) "Bankruptcy Code" shall mean the Bankruptcy Reform Act of 1978, as
amended, and codified at title 11 of the United States Code.
(i) "Bankruptcy Court" shall mean the Bankruptcy Court unit of the United
States District Court for the Eastern District of Pennsylvania or such
other court having jurisdiction over the Chapter 11 Case.
(j) "Bankruptcy Rules" shall mean the Federal Rules of Bankruptcy
Procedure, as prescribed by the United States Supreme Court pursuant to
section 2075 of title 28 of the United States Code.
(k) "Bar Date" shall mean the final date for the filing of proofs of Claims
set by the Bankruptcy Court as August 31, 1999, or such other date as may
apply to a particular Claim pursuant to a duly entered order of the
Bankruptcy Court.
(l) "Business Day" shall mean any day on which commercial banks are open
for business in Philadelphia, Pennsylvania.
(m) "Cash" shall mean legal tender of the United States of America or Cash
Equivalents, except in Section 4.1(b)(iii)(5) herein, where it shall solely
mean legal tender of the United States of America.
(n) "Cash Equivalents" shall mean short-term liquid investments that are
readily convertible to known amounts of legal tender of the United States
of America and which present an insignificant risk of changes in value.
(o) "Chapter 11 Case" shall mean the case commenced under chapter 11 of the
Bankruptcy Code by the Debtor on the Petition Date.
(p) "Claim" shall mean (1) any right to payment from the Debtor, whether or
not such right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured; (2) any right to an equitable remedy for breach of
performance if such breach gives rise to a right of payment from the
Debtor, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed,
secured or unsecured; or (3) any right under section 502(h) of the
Bankruptcy Code.
(q) "Class A Warrants" shall mean equity securities of the Reorganized
Debtor which shall have the respective rights and obligations set forth to
Class A Warrants in Section 7.1 hereof.
(r) "Class B Warrants" shall mean equity securities of the Reorganized
Debtor which shall have the respective rights and obligations set forth to
Class B Warrants in Section 7.1 hereof.
(s) "Collateral" shall mean any property of the Debtor subject to a valid,
enforceable and non-avoidable Lien to secure the payment of a Claim.
(t) "Confirmation Date" shall mean the date on which the Clerk of the
Bankruptcy Court enters the Confirmation Order.
(u) "Confirmation Hearing" shall mean the hearing held by the Bankruptcy
Court pursuant to Bankruptcy Code section 1128.
(v) "Confirmation Order" shall mean the order of the
Bankruptcy Court confirming the Plan.
(w) "Contested," when used with respect to a Claim, shall mean a Claim
against any of the Debtor (1) that is listed in the Debtor's Schedules as
disputed, contingent or unliquidated; (2) that is listed in the Debtor's
Schedules as undisputed, liquidated and not contingent and as to which a
proof of Claim has been filed with the Bankruptcy Court, to the extent the
proof of Claim amount exceeds the scheduled amount; (3) that is not listed
in the Debtor's Schedules, but as to which a proof of Claim has been filed
with the Bankruptcy Court; or (4) as to which an objection has been filed.
Notwithstanding the foregoing, after the Objection Deadline, only Claims to
which an Objection has been filed shall be deemed Contested Claims.
(x) "Contested Claims Escrow" shall mean the escrow for the segregation,
safekeeping and ultimate disposition of the Withheld Distribution Amount on
account of Contested Claims.
(y) "Contracts" shall mean all executory contracts and unexpired leases as
such terms are used within Bankruptcy Code section 365 to which the Debtor
was a party as of the Petition Date.
(z) "Committee" shall mean any Official Committee of Unsecured Creditors
appointed in the Chapter 11 Case.
(aa) "Common Stock" or "Common Shares" shall mean common equity interests
in the Debtor and Reorganized Debtor defined as "Common Stock" or "Common
Shares" in the Articles of Incorporation of the Debtor.
(bb) "Common Options" shall mean any outstanding rights to purchase Common
Shares created by the Stock Option agreements with R. Dennis Bowers,
Patrica S. Bathurst and Roger H. Folts dated June 6, 1995, April 30, 1996,
and February 20, 1998.
(cc) "Common Warrant" shall mean any outstanding rights to purchase
Common Shares created by the following Warrant Certificates:
Cert. No. Date Issued No. Shares Issued To: Expiration Date
ZUB01 9/1/98 150,000 Robert Zubatsky 9/1/2000
ZUB02 9/1/98 150,000 Eugene Zubatsky 9/1/2000
WA001 -- 125,000 Avonwood Capital
Corporation 12/31/2000
WB001 -- 100,000 Bridgewater
Capital Corporation 12/31/2000
N/A 3/29/96 250,000 Cameron Capital
Management, Ltd. 4/1/2001
(dd) "Convenience Claim" shall mean any General Unsecured Claim of $750 or
less, and any such Claim in excess of $750 that, by written election of the
holder made on the Ballot prior to the Voting Deadline, is reduced to $750.
(ee) "Co-Proponents" shall mean, collectively, MedSmart
and KJE.
(ff) "Court" shall mean the Bankruptcy Court.
(gg) "Cure Payment" shall mean the monetary payments required pursuant to
Bankruptcy Code section 365(b)(1)(A) to cure defaults under Contracts to
which the Debtor is a party and which will be assumed pursuant to the Plan.
(hh) "Debtor" shall mean National Health & Safety Corporation, a Utah
corporation. In the case of actions and obligations required of or to be
performed on or after the Effective Date, the term "Debtor" shall also
include the Reorganized Debtor, unless otherwise required by context.
(ii) "Deficiency Amount" shall mean, with respect to a Secured Claim, the
amount by which the Allowed Claim exceeds the sum of (1) any set-off rights
of the holder of such Claim against the Debtor under sections 506 and 553
of the Bankruptcy Code and (2) the net proceeds realized from the
disposition of the Collateral securing such Claim or, if such Collateral is
not liquidated to Cash, the value of the interest of the holder of the
Claim in the Debtor's interest in the Collateral securing such Claim, as
determined by the Bankruptcy Court under section 506 of the Bankruptcy
Code; provided, however, that if the holder of such Claim makes the
Election, there shall be no Deficiency Amount in respect of such Claim.
(jj) "Disallowed," when used with respect to a Claim, shall mean a Claim
that has been disallowed by Final Order.
(kk) "Disbursing Agent" shall mean the Reorganized
Debtor.
(ll) "Disclosure Statement" shall mean the Disclosure Statement that has
been approved by order of the Bankruptcy Court in connection with this Plan
pursuant to section 1125 of the Bankruptcy Code.
(mm) "Distribution Date" shall mean, for any Claim that is an Allowed Claim
on the Effective Date, a date selected by the Reorganized Debtor to occur
as soon as practical after the Effective Date, but no later than 30 days
after the Effective Date, and, for any Contested Claim, shall mean the date
as soon as practicable, but within 30 days, after the date upon which such
Claim becomes an Allowed Claim.
(nn) "Effective Date" shall mean a Business Day occurring upon a Business
Day selected by the Co-Proponents, occurring within ten (10) days of the
first Business Day which is 10 days after the Confirmation Date on which
the Confirmation Order is not stayed.
(oo) "Election" shall mean the election available to certain secured
creditors, under certain circumstances, to have their Claims treated as
fully secured, as provided in Bankruptcy Code section 1111(b), but only if
such Election is timely made pursuant to the Bankruptcy Rules.
(pp) "Series A Equity Unit" shall consist of one share of Series A
Preferred Stock and one Class A Warrant, and the right to receive one Class
B Warrant upon the exercise of the Class A Warrant, all as described in
Section 7.1 hereof.
(qq) "Series B Equity Unit" shall consist of one share of Series B
Preferred Stock and one Class A Warrant, and the right to receive one Class
B Warrant upon the exercise of the Class A Warrant, all as described in
Section 7.1 hereof.
(rr) "Fee Application" shall mean an application of a Professional Person
under section 330 or 503 of the Bankruptcy Code for allowance of
compensation and reimbursement of expenses in the Chapter 11 Case.
(ss) "Fee Claim" shall mean a Claim under section 330 or 503 of the
Bankruptcy Code for allowance of compensation and reimbursement of expenses
in the Chapter 11 Case.
(tt) "Final Order" shall mean (1) an order which has been entered and as to
which the time to appeal, petition for certiorari or move for reargument or
rehearing has expired and as to which no appeal, petition for certiorari or
other proceedings for reargument or rehearing shall then be pending or (2)
in the event that an appeal, writ of certiorari, reargument or rehearing
thereof has been sought, such Order shall have been affirmed by the highest
court to which such order was appealed, or certiorari has been denied or
from which reargument or rehearing was sought, and the time to take any
further appeal, petition for certiorari or move for reargument or rehearing
shall have expired; provided, however, that no order shall fail to be a
Final Order solely because of the possibility that a motion pursuant to
Rule 60 of the Federal Rules of Civil Procedure may be filed with respect
to such order.
(uu) "General Unsecured Claim" shall mean any Claim against the Debtor that
is not a Secured Claim, an Administrative Claim, a Priority Tax Claim, a
Priority Non-tax Claim, or a Subordinated Claim.
(vv) "IRS" shall mean the Department of the Treasury Internal Revenue
Service and its successors and assigns.
(ww) "Healthmed" shall mean Healthmed, Inc. and its
successors and assigns.
(xx) "KJE" shall mean KJE I, Ltd., a Texas limited
partnership, or its designee, and their respective successors
and assigns.
(yy) "Lien" shall have the meaning set forth in section 101(37) of the
Bankruptcy Code.
(zz) "Lienholder" shall mean the holder of a Lien.
(aaa) "Loan Documents" shall mean, with respect to the Debtor and any
creditor of the Debtor, such documents as may evidence the claim made by
the creditor, including, without limitation, any promissory notes, loan
agreements, deeds of trust, security agreements, financing statements, and
other collateral documents.
(bbb) "Management" shall collectively R. Dennis Bowers,
Roger H. Folts and Patricia S. Bathurst, and their
respective successors and assigns.
(ccc) "MedSmart" shall mean MedSmart Healthcare Network,
Inc., a Nevada corporation, or its designee, and their
respective successors and assigns.
(eee) "New Common Stock" or "New Common Shares" shall mean common stock of
the Reorganized Debtor which shall have the respective rights and
obligations set forth in Section 7.1 hereof.
(fff) "Objection Deadline" shall mean the date by which objections to
Claims shall be filed with the Bankruptcy Court and served upon the
respective holders of each of the Claims as provided in Section 9.1 of the
Plan.
(ggg) "Operating Expenses" shall mean expenses incurred in the day-to-day
operations or in the ordinary course of business of the Reorganized Debtor.
(hhh) "Penalty Claims" shall mean Claims for penalties or punitive damages,
including Claims denominated as "interest" which the Bankruptcy Court
determines to be punitive in nature.
(iii) "Person" shall mean an individual, corporation, partnership, joint
venture, trust, estate, unincorporated association, unincorporated
organization, governmental entity or political subdivision thereof or any
other entity.
(jjj) "Petition Date" shall mean July 1, 1999.
(kkk) "Plan" or "Plan of Reorganization" shall mean this Fourth Amended
Joint Plan of Reorganization, dated August 21, 2000, either in its present
form or as it may hereafter be altered, amended or modified from time to
time.
(lll) "Plan Secured Note" shall have the meaning afforded such term under
the treatment of Class 1B herein.
(mmm) "Preferred Shares" shall mean equity interests in the Debtor
authorized by Article IV of the Amendment to Articles of Incorporation of
National Health & Safety Corporation dated April 5, 1993, as the same may
have been amended from time to time prior to the Petition Date.
(nnn) "Policy-insured Tort Claims" shall mean all Tort Claims for which the
Debtor or any one of them are or were insured in whole or in part for
losses in connection with such Tort Claim.
(ooo) "Post-confirmation Interest Rate" shall have the meaning afforded
such term under the treatment of Class 1B herein.
(ppp) "Priority Non-tax Claim" shall mean any Claim accorded priority in
right of payment under section 507(a)(3), (4), (5), (6), (7) or (9) of the
Bankruptcy Code.
(qqq) "Priority Tax Claim" shall mean a Claim of a governmental unit of the
kind specified in section 507(a)(8) of the Bankruptcy Code; in all events,
Priority Tax Claims shall include all unsecured 1998 taxes and all unpaid
unsecured taxes for years prior to 1998.
(rrr) "Professional Person" shall mean a person retained or to be
compensated pursuant to section 327, 328, 330, 503(b) or 1103 of the
Bankruptcy Code.
(sss) "Proponent" shall mean the Debtor.
(ttt) "Proponents" shall collectively mean the Proponent
and the Co-Proponents.
(uuu) "Reorganization Expenses" shall mean, collectively, all fees and
expenses incurred by the Debtor in preparing for, commencing, continuing,
litigating, consummating, and emerging from this Chapter 11 Case,
including, without limitation, all counsel fees and expenses of the Debtor,
the Committee, and all other professionals of the Debtor retained during
the pendency of the Chapter 11 Case.
(vvv) "Reorganized Debtor" shall mean the Debtor, as
reorganized, on and after the Effective Date.
(www) "Schedules" shall mean the Schedules of assets and liabilities and
the statements of financial affairs filed by the Debtor as required by
section 521 of the Bankruptcy Code and Bankruptcy Rule 1007, as such
Schedules and statements have been or may be supplemented or amended.
(xxx) "Secured Claim" shall mean a Claim secured by a Lien on property of
the Debtor, which Lien is valid, perfected and enforceable under applicable
law, is not subject to avoidance under the Bankruptcy Code or other
applicable non-bankruptcy law and which is duly established in the Chapter
11 Case, but only to the extent of the value of the Collateral that secures
payment of such Claim.
(yyy) "Securities Laws Claim" shall mean a Claim against the Debtor (1)
arising from rescission of a purchase or sale of a security of the Debtor;
(2) for damages arising from the purchase or sale (or offer for purchase or
sale) of such a security; or (3) for reimbursement, indemnification or
contribution allowed under section 502 of the Bankruptcy Code on account of
a Claim for damages or rescission arising out of a purchase or sale of a
security of the Debtor.
(zzz) "Series A Preferred Stock" shall mean equity securities of the
Reorganized Debtor which shall have the respective rights and obligations
set forth to Series A Preferred Stock in Section 7.1 hereof.
(aaaa) "Series B Preferred Stock" shall mean equity securities of the
Reorganized Debtor which shall have the respective rights and obligations
set forth to Series B Preferred Stock in Section 7.1 hereof.
(bbbb) "Subordinated Claim" shall mean any Claim (1) subordinated by
contract or by order of the Bankruptcy Court to the right of payment of
General Unsecured Claims or (2) which would be paid pursuant to Bankruptcy
Code section 726(a)(2)(c), (a)(3), (a)(4) or (a)(5) if this Chapter 11 Case
had originally been filed as a case under chapter 7 of the Bankruptcy Code.
(cccc) "Tort Claims" shall mean (i) all Claims for personal injury and
wrongful death, without regard to whether such Claim is alleged to have
occurred by a negligent or intentional act; (ii) all Claims which may arise
pursuant to any legal theory described in the most recent edition and any
subsequent editions of Handbook of the Law of Torts (Hornbook Series),
originally authored by Professor William S. Prosser and published by West
Publishing Company, St. Paul, Minnesota; and (iii) any Claim based upon
allegation(s) of discrimination of any type on any basis or based upon
allegations of sexual harassment.
(dddd) "Utilities" shall have the same meaning as when such term is used in
Bankruptcy Code section 366.
(eeee) "Voting Deadline" shall mean the date set by the Bankruptcy Court by
which Ballots for accepting or rejecting the Plan must be received by the
Balloting Agent.
(ffff) "Voting Record Date" shall mean the date set by the Bankruptcy Court
for determining the holders of the Claims and interests entitled to vote to
accept or reject the Plan.
(gggg) "Withheld Distribution Amount" shall mean plan distributions that
the Reorganized Debtor may withhold and place in the Contested Claims
Escrow pursuant to Section 9.4 of the Plan on account of a Contested Claim
pending allowance or disallowance of such Claim.
Other capitalized terms not defined herein shall have the same meaning as
in the Disclosure Statement.
1.2 Interpretation
Unless otherwise specified, all section, article and exhibit references in
the Plan are to the respective section in, article of or exhibit to the Plan, as
the same may be amended, waived or modified from time to time. The headings in
the Plan are for convenience of reference only and shall not limit or otherwise
affect the provisions of the Plan. Words denoting the singular number shall
include the plural number and vice versa, and words denoting one gender shall
include the other gender. All exhibits and schedules attached to the Plan are
incorporated herein by such attachment.
1.3 Reorganized Debtor
The Plan shall be liberally construed for the benefit of the Debtor and
Reorganized Debtor regarding the interchangeableness of the term "Debtor" with
the term "Reorganized Debtor" and other instances of the use "Reorganized."
1.4 Application of Definitions and Rules of Construction
Contained in the Bankruptcy Code
Words and terms defined in section 101 of the Bankruptcy Code shall have the
same meaning when used in the Plan, unless a different definition is given in
the Plan. The rules of construction contained in section 102 of the Bankruptcy
Code shall apply to the construction of the Plan.
1.5 Other Terms
The words "herein," "hereof," "hereto," "hereunder" and others of similar import
refer to the Plan as a whole and not to any particular section, subsection or
clause contained in the Plan. A term used herein that is not defined herein
shall have the meaning ascribed to that term, if any, in the Bankruptcy Code.
Article 2
Classification of Claims
2.1 Claims Classified
For purposes of organization, voting and all confirmation matters, except as
otherwise provided herein, all Claims (except for Administrative Claims and
Priority Tax Claims) shall be classified as set forth in this Article 2 of the
Plan.
2.2 Administrative Claims and Priority Tax Claims
As provided in section 1123(a)(1) of the Bankruptcy Code, Administrative Claims
and Priority Tax Claims against the Debtor shall not be classified for purposes
of voting or receiving distributions under the Plan. Rather, all such Claims
shall be treated separately as unclassified Claims on the terms set forth in
Article 5 of the Plan.
2.3 Claims
The Plan classifies the Claims against the Debtor as follows:
Secured Claims
(a) Class 1A: Any Allowed Secured Claims of Management.
(d) Class 1B: Any Allowed Secured Claims not otherwise
classified.
Unsecured Claims
(e) Class 2: Any Allowed Priority Non-tax Claims.
(f) Class 3A: Any Allowed Convenience Claims.
(g) Class 3B: Any Allowed General Unsecured Claims not
otherwise classified.
(g) Class 3C: Any Allowed Unsecured Claims of Management
Interests
(h) Class 4: Any Allowed Interests of Holders of
Preferred Stock.
(i) Class 5A: Any Allowed Interests of Holders of Common
Stock.
(j) Class 5B: Any Allowed Interests of Holders of
Common Warrants.
(k) Class 5C: Any Allowed Interests of Holders of
Common Options.
(l) Class 6: Any Allowed Interests not otherwise
classified.
Others
(m) Class 7: Subordinated Claims, Penalty
Claims, Securities Laws Claims and
Disallowed Claims.
Article 3
Identification of Impaired Classes of Claims
Classes 2 and 3A are unimpaired under the Plan. All other classes
of Claims are impaired under the Plan. If a controversy arises as
to whether any Claim or any class of Claims is impaired under the
Plan, the Bankruptcy Court shall, upon notice and a hearing,
determine such controversy.
Article 4
Provisions for Treatment of Claims under the Plan
4.1 Treatment of Claims
The classes of Claims against the Debtor shall be treated under
the Plan as follows:
Secured Claims
(a) Class 1A -- Any Allowed Secured Claims of Management. On the Effective
Date of the Plan, each member of Management holding an Allowed Secured
Claim shall be deemed to have released all collateral securing the Secured
Claim; each member shall execute and deliver such documents as may be
necessary to reflect a release of such collateral; and each such Allowed
Secured Claim shall be subordinated to Classes 1A, 1B, 2, 3A and 3B and
shall be treated in Class 3C of the Plan.
(d) Class 1B -- Any Allowed Secured Claims not otherwise classified. Each
holder of an Allowed Secured Claim against the Debtor which is not
otherwise classified will be treated as though in a separate class as
follows:
(i) General Treatment. Each holder of an Allowed Secured Claim against
the Debtor shall, at the sole option of the Debtor, receive on the
Distribution Date on account of its Allowed Secured Claim: (a) a Plan
Secured Note; (b) treatment as provided under section 1124(2) or (3)
of the Bankruptcy Code, with the Cash payments required by section
1124(2)(A) and (C) of the Bankruptcy Code being made on the
Distribution Date; or (c) such holder's Collateral. If the holder of
an Allowed Secured Claim against the Debtor receives treatment as
provided in (a) or (b) above, such holder shall retain any Liens
securing the Allowed Secured Claim until paid in full. Any Deficiency
Amount related to a Secured Claim shall be treated as a Class 3B
General Unsecured Claim. A "Plan Secured Note" shall mean a promissory
note made payable by the Reorganized Debtor to a holders of an Allowed
Secured Claims in form and substance as may be reasonably satisfactory
to the Debtor. Each such Plan Secured Note shall be in an amount equal
to the amount of such Allowed Secured Claim, bear simple interest at
the Post-confirmation Interest Rate and provide for full amortization
of all principal and interest in equal annual payments over seven
years from the Distribution Date. The "Post-confirmation Interest
Rate" shall mean simple interest at the rate equal to the yield upon
United States Treasury Bonds having a maturity as near to, but greater
than, seven years after the date that the Confirmation Hearing
commences, as such yield is published in the Wall Street Journal on
the day that the Confirmation Hearing commences, or such other rate as
the Bankruptcy Court may determine at the Confirmation Hearing is
appropriate.
(ii) Negotiated Treatment. Notwithstanding the immediately preceding
paragraph, the Debtor and any holder of a Class 1B Allowed Secured
Claim may agree to any alternate treatment of such Secured Claim,
which treatment shall include preservation of such holder's Lien until
paid in full; provided, however, that such treatment shall not provide
a return to such holder of an amount having a present value in excess
of the amount of such holder's Allowed Secured Claim, which may
include, without limitation, payment in full of the Allowed Secured
Claim on the Distribution Date. Such agreement shall not materially
and adversely impact the treatment of any other creditor under the
Plan unless the Court approves such agreement after notice and
hearing.
Unsecured Claims
(e) Class 2 -- Any Allowed Priority Non-Tax Claims. Each holder of an
Allowed Priority Non-tax Claim against the Debtor shall receive on the
Distribution Date cash in the amount of such holder's Allowed Priority
Non-tax Claim. Any Allowed Priority Non-Tax Claims of Management shall be
treated in Class 3C.
(f) Class 3A -- Any Allowed Convenience Claims. In lieu of treatment as any
other class of claimant under the Plan, and in full satisfaction of any and
all Claims against the Debtor, a holder of an Allowed Convenience Claim
against the Debtor shall receive, within 30 days of the Distribution Date,
Cash equal to the amount of 100% of such Allowed Convenience Claim.
(g) Class 3B -- Any Allowed General Unsecured Claims Not Otherwise
Classified. Holders of Allowed General Unsecured Claims not otherwise
classified shall receive on account of such Claims and in full satisfaction
of such Claims one (1) Series A Equity Unit for each $1.00 in Allowed
Unsecured Claim held by such holder.
(h) Class 3C -- Any Allowed Claims of Management. Holders of Allowed Claims
of Management, regardless of the nature of any such claim, shall all be
unsecured and shall receive on account of such Claims and in full
satisfaction of all Claims held by such holders, the following:
a. R. Dennis Bowers. The Debtor shall issue to R.
Dennis Bowers 875,000 Series A Equity Units on
the Effective Date. KJE shall issue to R. Dennis
Bowers options to purchase, at an exercise price
of $0.0175 per share for a period ending on the
first anniversary of the Effective Date, 241,920
shares of the New Common Shares to be issued to
KJE under the Plan.
b. Roger H. Folts. The Debtor shall issue to Roger
H. Folts 24,268 Series A Equity Units on the
Effective Date. KJE shall issue to Roger H.
Folts options to purchase at an exercise price of
$0.0175 per share for a period ending on the
first anniversary of the Effective Date, 166,320
shares of the New Common Shares to be issued to
KJE under the Plan.
c. Patricia S. Bathurst. The Debtor shall issue to
Patricia S. Bathurst 12,572 Series A Equity Units
on the Effective Date. KJE shall issue to
Patricia S. Bathurst options to purchase at an
exercise price of $0.0175 per share for a period
ending on the first anniversary of the Effective
Date, 131,760 shares of the New Common Shares to
be issued to KJE under the Plan.
The options to be issued by KJE to Class 3C would be subject to price
adjustment in the event of a stock split prior to exercise, however, the
number of shares subject to purchase would not be increased.
Interests
(i) Class 4 -- Any Allowed Interests of Holders of Preferred Stock. Each
holder of an Allowed Interest evidenced by Preferred Stock shall receive,
in full and final satisfaction of its Allowed Interest, one (1) Series B
Equity Unit for every $1.00 in liquidation preference of Preferred Shares
held by such holder; provided, however, that the total number of Series B
Equity Units issued to Class 4 shall not exceed 600,000.
Holders of Allowed Interests of Preferred Stock which are parties to those
certain antidilution agreements by and between or among the Debtor and John
DiCaprio, James Kennard, Chuck Vinson and Patricia Bathurst shall receive
from the Debtor additional shares of Common Shares of the Debtor to honor
the terms of such agreements. Specifically, Patricia Bathurst would receive
83,778 common shares; John DiCaprio, 869,719 common shares; James Kennard,
1,046,404 common shares; and Chuck Vinson, 1,046,404 common shares.
(j) Class 5A --Any Allowed Interests of Holders of Common Stock. Each
holder of an Allowed Interest evidenced by Common Stock shall retain such
Common Stock. On the Effective Date, the Debtor shall amend its Articles of
Incorporation as set forth in Section 7.1 hereof.
(k) Class 5B -- Any Allowed Interests of Holders of Common Warrants. Each
holder of an Allowed Interest evidenced by Common Warrants shall receive,
in full and final satisfaction of its Allowed Interest, nothing. Such
Allowed Interest shall be cancelled and of no further effect as of the
Effective Date.
(l) Class 5C -- Any Allowed Interests of Holders of Common Options. Each
holder of an Allowed Interest evidenced by Common Options shall receive
from the Debtor, in full and final satisfaction of its Allowed Interest,
nothing. Such Allowed Interest shall be cancelled and of no further effect
as of the Effective Date; provided, however, KJE will issue, to the holders
of Allowed Interest evidenced by Common Options, options to purchase New
Common Stock received by KJE under the Plan as follows: (1) the holder of
every ten (10) Common Options to purchase one (1) share of Common Stock
with an exercise price of $0.07 per share will receive the option to
purchase one New Common Share for an exercise price of $0.07 per share,
which option shall expire on the second anniversary of the Confirmation
Date; and (2) the holder of every ten (10) Common Options to purchase one
(1) share of Common Stock with an exercise price of $0.17 per share will
receive the option to purchase one New Common Share for an exercise price
of $0.17 per share, which option shall expire on the third anniversary of
the Confirmation Date. The New Common Stock to be issued pursuant to such
options would be Section 144 Stock. Notwithstanding anything in this
paragraph to the contrary, KJE shall not be required to issue more than
1,080,000 options to the Holders of Common Options. Moreover, the options
to be issued under this paragraph would be subject to price adjustment in
the event of a stock split prior to exercise, however, the number of shares
subject to purchase would not be increased.
(m) Class 6 -- Any Allowed Interests not otherwise classified. Each holder
of an Allowed Interest not otherwise classified shall receive, in full and
final satisfaction of its Allowed Interest, nothing. Such Allowed Interest
shall be canceled and of no further effect as of the Effective Date.
Others
(n) Class 7 -- Disallowed Claims, Subordinated Claims, Securities Laws
Claims and Penalty Claims. The holders of Disallowed Claims, Subordinated
Claims, Securities Laws Claims, Penalty Claims and any other Claims against
the Debtor not otherwise expressly provided for in this Plan shall receive
no distributions under the Plan on account of such Claims.
Article 5
Provisions for Treatment of Unclassified
Claims under the Plan
5.1 Treatment of Administrative Claims
All Administrative Claims against the Debtor shall be treated as follows:
(a) Time for Filing Administrative Claims. The holder of an Administrative
Claim, other than (1) a Fee Claim, and (2) a liability incurred and paid in
the ordinary course of business by the Debtor after the Petition Date, must
file with the Bankruptcy Court and serve on the Debtor, the Committee and
their counsel notice of such Administrative Claim within 30 days after the
Confirmation Date. Such notice must include at a minimum: (1) the name of
the holder of the Claim; (2) the amount of the Claim; and (3) the basis of
the Claim. Failure to file and serve this notice timely and properly shall
result in the Administrative Claim being forever barred and discharged.
(b) Time for Filing Fee Claims. Each Professional Person or other entity
that holds or asserts an Administrative Claim that is a Fee Claim incurred
before the Effective Date shall be required to file with the Bankruptcy
Court, and serve on all parties required to receive notice, a Fee
Application within 30 days after the Effective Date. The failure to file
the Fee Application timely shall result in the Fee Claim being forever
barred and discharged. To the extent necessary, entry of the Confirmation
Order amends and supersedes any previously entered order of the Bankruptcy
Court regarding procedures for the payment of Fee Claims.
(c) Allowance of Administrative Claims. An Administrative Claim with
respect to which notice has been properly filed pursuant to Section 5.1(a)
of the Plan shall become an Allowed Administrative Claim if no objection is
filed within 30 days after the later of the Confirmation Date or the filing
and service of notice of such Administrative Claim. If an objection is
filed within such thirty-day period, the Administrative Claim shall become
an Allowed Administrative Claim only to the extent allowed by Final Order.
An Administrative Claim that is a Fee Claim, and with respect to which a
Fee Application has been properly filed pursuant to Section 5.1(b) of the
Plan, shall become an Allowed Administrative Claim only to the extent
allowed by Final Order.
(d) Payment of Allowed Administrative Claims. Each holder of an Allowed
Administrative Claim (including, without limitation, Fee Claims) against
the Debtor shall receive on the Distribution Date (1) the amount of such
holder's Allowed Claim in one Cash payment or (2) such other treatment as
may be agreed upon in writing by the Debtor and such holder; provided,
however, that an Administrative Claim representing a liability incurred in
the ordinary course of business of the Debtor may be paid in the ordinary
course of business by the Debtor; and provided further that the payment of
an Allowed Administrative Claim which is a Cure Payment shall be paid in
six equal monthly installments without interest, due on the tenth day of
the month, with the first such installment being due and payable on the
first tenth day of the month to occur after the later of the Effective Date
or the date of allowance of such Claim by Final Order.
5.2 Treatment of Priority Tax Claims
Each holder of an Allowed Priority Tax Claim shall receive in full satisfaction
of such holder's Allowed Priority Tax Claim (1) the amount of such holder's
Allowed Claim, with interest accruing after the Effective Date at the
Post-confirmation Interest Rate, in equal annual Cash payments on each
anniversary of the Distribution Date until the sixth such anniversary of the
date of assessment of such Claim; (2) a lesser amount in one Cash payment as may
be agreed upon in writing; or (3) such other treatment as may be agreed upon in
writing. The Debtor may prepay all or any part of an Allowed Priority Tax Claim
on or after the Effective Date without penalty or interest accruing after the
payment date on such prepaid amount.
Article 6
Acceptance or Rejection of the Plan; Effect of Rejection by
One or More Classes of Claims
6.1 Classes Entitled to Vote
Each impaired class of Claims shall be entitled to vote separately to accept or
reject the Plan as provided in the order entered by the Bankruptcy Court
governing the voting and balloting procedures applicable to the Plan. Any
unimpaired class of Claims shall be deemed to have accepted the Plan. Any class
of Claims that will not receive or retain any property on account of such Claims
shall be deemed to have rejected the Plan.
6.2 Class Acceptance Requirement
A class of Claims shall have accepted the Plan if it is accepted by at least
two-thirds in dollar amount and more than one- half in number of the Allowed
Claims in such class that have voted on the Plan.
6.3 Cramdown
If any class of Claims shall fail to accept the Plan in accordance with section
1126(c) of the Bankruptcy Code, the Bankruptcy Court may still confirm the Plan
in accordance with section 1129(b) of the Bankruptcy Code. In the event that
confirmation is requested under section 1129(b) of the Bankruptcy Code, the
Debtor reserves the right to amend or otherwise modify the Plan to eliminate
distributions to holders of any Claims junior to any class of Claims that is
impaired under and has not accepted the Plan in accordance with section
1129(b)(2) of the Bankruptcy Code.
Article 7
Means for Implementation of the Plan
7.1 Corporate Restructure.
On the Effective Date, the Reorganized Debtor shall adopt corporate resolutions
to accomplish the following:
1. Amendment to Articles of Incorporation. Resolutions
authorizing the issuance of a total of 500,000,000 common shares,
$0.001 par value. The Articles of Incorporation shall also
authorize the issuance of 50,000,000 shares of preferred stock,
which may consist of one or more series. Cumulative voting of any
shares of stock, whether common or preferred, shall be
prohibited.
2. Series "A" Preferred Stock. Resolutions adopting a Certificate
of Designation of Series "A" Preferred Stock and authorizing the
issuance of 4,000,000 shares of Series "A" Preferred Stock (which
may consist of one or more subseries) that: (1) has a liquidation
preference of $1.00 per share; (2) is convertible into 5 shares
of New Common Stock on or after 60 days from issuance at the rate
of 20,000 Series "A" Preferred Shares per month; (3) shall be
callable at the option of the Reorganized Debtor at $1.00 per
share but the holder shall not have the option to mandate
redemption of the shares; (4) shall not be entitled to dividends,
whether cumulative or periodic, unless subsequently approved by
the Board of Directors of the Reorganized Debtor; and (5) shall
have full voting rights in a vote of the common shareholders of
the Reorganized equal to the number of shares of stock into which
such preferred shares would be entitled to be converted.
3. Series "B" Preferred Stock. Resolutions adopting a Certificate
of Designation of Series "B" Preferred Stock and authorizing the
issuance of 600,000 shares of Series "B" Preferred Stock (which
may consist of one or more subseries) that: (1) has a liquidation
preference of $1.00 per share; (2) is convertible into 5 shares
of New Common Stock on or after 60 days from issuance at the rate
of 20,000 Series "B" Preferred Shares per month; (3) shall be
callable at the option of the Reorganized Debtor at $1.00 per
share but the holder shall not have the option to mandate
redemption of the shares; (4) shall not be entitled to dividends,
whether cumulative or periodic, unless subsequently approved by
the Board of Directors of the Reorganized Debtor; and (5) shall
have full voting rights in a vote of the common shareholders of
the Reorganized equal to the number of shares of stock into which
such preferred shares would be entitled to be converted.
3. Warrant Resolution. Resolutions authorizing the issuance of
4,000,000 Class A Warrants entitling the holder thereof to
purchase, for an exercise price of $1.00 and for a period
expiring on the second (2nd) anniversary of the Effective Date,
(a) one (1) share of New Common Stock plus (b) one (1) Class B
Warrant. Resolutions authorizing the issuance of 4,000,000 Class
B Warrants entitling the holder thereof to purchase, for an
exercise price of $1.50 and for a period expiring on the third
(3rd) anniversary of the Effective Date, one (1) share of New
Common Stock.
Issuance of Additional Shares. In the event that the Corporation, for a
period of two (2) years following the Effective Date, issues any additional
Common Stock or Options to Purchase Stock during such period for less than then
market value of the issued and outstanding Common Stock, as represented by the
then current bid price of the Common Stock, the Corporation shall adjust the
conversion rate of the outstanding Preferred Shares as necessary to prevent a
dilution of the ownership percentage represented by such outstanding Preferred
Shares. All shares of stock, warrants and other Interests in the Debtor other
than the common stock of the Debtor shall be cancelled as of the Effective Date.
Interest holders holding such cancelled shares shall be treated as set forth in
this Plan. The Reorganized Debtor, with the approval of the Co-Proponents, may
include such other terms and conditions with respect to the stock and warrants
to be issued pursuant to this Plan as may be reasonable necessary to implement
the purposes and intent of this Plan so long as such additional terms and
conditions are not inconsistent with the terms of the Plan.
7.2 Infusion of New Capital.
(a) Contribution by KJE. On the Effective Date, the Debtor shall issue to KJE
45,000,000 shares of New Common Stock. In consideration thereof, on the
Effective Date, KJE, or its successors or assigns, which are hereby permitted,
shall contribute to the Reorganized Debtor $600,000 in cash or other immediately
available funds. The obligations of KJE under the Plan shall be contingent upon
KJE holding, as of the Effective Date, at least 17.5% of the Common Stock of
Reorganized Debtor issued or subject to issuance pursuant to any outstanding
warrant or option to purchase New Common Stock of Reorganized Debtor.
(b) MedSmart Stock Exchange. On the Effective Date, the holders (the "MedSmart
Shareholders") of all of the issued and outstanding shares of Common Stock of
MedSmart shall exchange such shares for newly issued New Common Shares of the
Debtor so that the Debtor shall become the sole common shareholder of MedSmart
and the MedSmart Shareholders shall collectively hold 130,000,000 shares of New
Common Stock of the Reorganized Debtor. The obligations of MedSmart under the
Plan shall be contingent upon (i) the MedSmart Shareholders holding, as of the
Effective Date, at least 51.5% of the Common Stock of Reorganized Debtor issued
or subject to issuance pursuant to any outstanding warrant or option to purchase
New Common Stock of Reorganized Debtor and (ii) KJE's approval, in its sole
discretion, of the stock exchange documents and of the release documents.
7.3 Boards of Directors
The Bylaws of the Reorganized Debtor shall be modified as of the Effective Date
to incorporate the following terms: (a) upon Confirmation of the Plan, the
members of the initial board of directors (the "Initial Board") of the
Reorganized Debtor shall be James R. Kennard, Eugene Rothchild and Jimmy E. Nix;
(b) as of the Effective Date, the number of directors constituting the board of
directors of the Reorganized Debtor shall be increased to either five (5) or
seven (7) directors, as determined by the shareholders of the Reorganized
Debtor; and (c) as soon after the Effective Date as is practicable, the
President of the Reorganized Debtor shall call a special meeting of the
shareholders of the Reorganized Debtor to elect the members of the board of
directors of the Reorganized Debtor. The board of directors of the Reorganized
Debtor is authorized to take such actions as may be necessary to fully
consummate the Plan. The subsequent tenure and manner of selection of directors
shall be as provided in the charter and bylaws of Reorganized Debtor, as
modified by the Plan.
7.4 Officers
The respective corporate officers of the Debtor shall serve as the initial
officers of the Reorganized Debtor on the Effective Date. The selection of
officers of the Reorganized Debtor after the Effective Date shall be as provided
in the Reorganized Debtor's charter and bylaws.
7.5 Charter and Bylaws
The charter and bylaws of the Reorganized Debtor shall contain such provisions
as are necessary to satisfy the provisions of the Plan, including, without
limitation, to provide for (a) the issuance of the Series A Preferred Stock, the
Series B Preferred Stock, the Common Stock in Reorganized Debtor, the Class A
Warrants, the Class B Warrants and the New Common Options and (b) the surrender
and cancellation of any equity securities of the Debtor authorized (whether
issued or otherwise) prior to the Petition Date, and, to the extent necessary,
subject to further amendment of the charter and bylaws as permitted by
applicable law. Such charter and bylaws shall contain indemnification and
limitation of liability provisions applicable to the officers, directors and
employees of the Reorganized Debtor and such other Persons as may, in the
discretion of the board of directors of the Debtor be appropriate.
7.6 Vesting of Assets
On the Effective Date, the property of the estate of the Debtor, including but
not limited to any rights or causes of action, whether under the Bankruptcy Code
or other applicable law, shall vest in the Reorganized Debtor, subject to the
following sentence. Upon any subsequent conversion to a case under chapter 7,
all assets vesting in the Reorganized Debtor shall pass to the chapter 7 trustee
as property of the chapter 7 estate. Provided, such property and other assets
shall remain subject to those Claims, Liens, and encumbrances as Allowed and
restructured in this Plan and as specified herein.
7.7 Corporate Authority
(a) All actions and transactions contemplated under the Plan,
including, but not limited to, the resizing and reconstituting of the
Reorganized Debtor's board of directors and the issuance of debt
instruments, promissory notes and related securitization documents, the
issuance of securities and other recapitalization contemplated by the Plan
shall be authorized upon Confirmation of the Plan without the need of
further board of shareholder resolutions, approval, notice or meetings,
other than the notice provided by serving this Plan on all known creditors
and parties in interest of the Debtor, and all current directors of the
Debtor. The Confirmation Order may include provisions dispensing with the
need of further board or Shareholder resolutions, approval, notice or
meetings and authorizing and directing the Chief Executive Officer, Chief
Financial Officer and/or Secretary of the Debtor to execute such documents
as may be necessary to effectuate the Plan, which documents shall be
binding on the Debtor and the Debtor's creditors and shareholders.
(b) The Debtor shall also have authority, subject to approval of its
board of directors and the applicable Bankruptcy Code provision, before and
after Confirmation of the Plan, to sell, lease, license or otherwise
dispose of its assets. After confirmation of the Plan, the Debtor may sell,
lease, license or otherwise dispose of its assets in a manner not
inconsistent with its obligations hereunder.
7.8 Assumption of Liabilities
The liability for and obligations under the Plan shall be assumed by and become
obligations of the Reorganized Debtor.
7.9 Securities Law Matters
The Confirmation Order may a finding and conclusion, binding upon all parties to
the Chapter 11 Case, any subsequent trustee, the Securities and Exchange
Commission and all state regulatory or enforcement agencies, to the effect that
all offerings and issuances of securities under the Plan (including, without
limitation, New Common Stock; Series A Preferred Stock; Series B Preferred
Stock; Class A Warrants; New Common Stock received upon conversion of Series A
or B Preferred Shares; Class B Warrants and New Common Stock received upon
execution of Class A Warrants and New Common Stock received upon execution of
Class B Warrants) fall within the section 1145 exemption, other than New Common
Stock issued to KJE and the shareholders of MedSmart under Section 7.2 of the
Plan.
7.10 Claims on File; No Allowance of Untimely Claims
The Debtor is relying on the formal proofs of Claims on file and the Debtor's
Schedules currently on file in seeking confirmation of the Plan. No informal
proof of Claim shall be deemed to have been filed in this Chapter 11 Case; no
informal amendment, modification, or supplementation shall be deemed filed in
this Chapter 11 Case. No proof of Claim may be filed, amended, modi-
fied, or supplemented after the Confirmation Date without the consent of the
Debtor. Any filing prohibited by this paragraph shall be void.
7.11 Integration Clause
This Plan is a complete, whole, and integrated statement of the binding
agreement between the Debtor, creditors, and the parties-in-interest upon the
matters herein. Parol evidence, including previously proposed but unconfirmed
plans or drafts thereof, shall not be admissible in an action regarding this
Plan or any of its provisions.
Article 8
Provisions Governing Distributions
8.1 Date of Distributions
Any distributions and deliveries to be made under the Plan shall be made on the
Distribution Dates, as otherwise provided for herein, or as the Bankruptcy Court
may order.
8.2 Disbursing Agent
The Disbursing Agent shall make all distributions required under the Plan.
8.3 Means of Cash Payment
Cash payments made pursuant to the Plan shall be in U.S. funds, by check drawn
on a domestic bank, or, at Reorganized Debtor's option, by wire transfer from a
domestic bank, except that payments made to foreign creditors holding Allowed
Claims may at the Debtors election, be in such funds and paid by such means as
are customary or as may be necessary in a particular foreign jurisdiction.
8.4 Delivery of Distribution
Subject to Bankruptcy Rule 9010, distributions to holders of Allowed Claims
shall be made 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 a 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 is returned as undeliverable,
no further distributions to such holder shall be made unless and until the
Disbursing Agent is notified in writing of such holder's then current address,
at which time all missed distributions shall be made to such holder without
interest. Amounts in respect of undeliverable distributions made through the
Disbursing Agent shall be returned to the Disbursing Agent until such
distributions are claimed. All claims for undeliverable distributions shall be
made on or before the first anniversary of the Effective Date. After such date,
all unclaimed property shall revert to the Reorganized Debtor or any successor
thereto, and the claim of any holder with respect to such property shall be
discharged and forever barred.
8.5 Time Bar to Cash Payments
Checks issued by Reorganized Debtor in respect of Allowed Claims shall be null
and void if not negotiated within six months after the date of issuance thereof.
Requests for reissuance of any check shall be made directly to the Reorganized
Debtor by the holder of the Allowed Claim with respect to which such check
originally was issued. Any claim in respect of such a voided check shall be made
on or before the later of (1) the first anniversary of the Effective Date or (2)
90 days after the date of reissuance of such check. After such date, all claims
in respect of voided checks shall be discharged and forever barred.
Article 9
Procedures for Resolving and Treating Contested and
Disputed Claims under the Plan
9.1 Objection Deadline
As soon as practicable, but in no event later than ninety (90) days after the
Effective Date, unless otherwise ordered by the Bankruptcy Court, objections to
Claims shall be filed with the Bankruptcy Court and served upon the holders of
each of the Claims to which objections are made.
9.2 Prosecution of Objections
On and after the Effective Date, except as the Bankruptcy Court may otherwise
order, the filing, litigation, settlement or withdrawal of all objections may be
made by the Reorganized Debtor.
9.3 No Distributions Pending Allowance
Notwithstanding any other provision of the Plan, no payment or distribution
shall be made with respect to any Claim to the extent it is a Contested Claim
unless and until such Contested Claim becomes an Allowed Claim.
9.4 Withholding of Distributions on Account of Contested Claims
The Disbursing Agent shall withhold from the Series A Preferred Stock, the
Series B Preferred Stock, the Class A Warrants, the Class B Warrants, the New
Common Stock, and all other consideration to be distributed on the Distribution
Date or thereafter under the Plan the Withheld Distribution Amount, which shall
be in an amount sufficient to be distributed on account of Claims that are not
Allowed Claims.
9.5 Distributions After Allowance
Payments and distributions to each holder of a Contested Claim, to the extent
that such Claim ultimately becomes an Allowed Claim, shall be made in accordance
with the provisions of the Plan governing the class of Claims to which the
respective holder belongs. With respect to any Claim that is a Contested Claim
on the Effective Date, as soon as practicable after the date that the order or
judgment of the Bankruptcy Court allowing any Contested Claim becomes a Final
Order or a Contested Claim otherwise becomes an Allowed Claim, (i) the
Disbursing Agent shall distribute to the holders of such Claim from the
Contested Claims Escrow any distributable Series A Preferred Stock, Series B
Preferred Stock, Class A Warrants, Class B Warrants, the New Common Options,
and/or New Common Stock that would have been distributed to such holder if the
Claim had been Allowed on the Effective Date, without interest on such Claim,
and shall distribute any dividends which have been paid on account of any such
interests; and/or, (ii) the Reorganized Debtor shall distribute to the holders
of such Claim from the Contested Claims Escrow any payment, without interest,
that would have been distributed to such holder if the Claim had been Allowed on
the Effective Date.
9.6 Distributions After Disallowance
If any Withheld Distribution Amount remains in the Contested Claims Escrow after
all objections to Contested Claims of all classes have been resolved, any
remainder of the Withheld Distribution Amount attributable to the Disallowed
Claims shall be distributed as soon as practicable, without interest, in
accordance with the provisions of the Plan. Notwithstanding the foregoing,
neither the Reorganized Debtor nor the Disbursing Agent shall be required to
distribute any remainder of the Withheld Distribution Amount that would result
in a de minimis dividend to Allowed Claims, as provided in Section 13.8, and
such undistributed remainder shall revest in the Reorganized Debtor.
Article 10
Rights and Obligations of the
Disbursing Agent
10.1 Exculpation
The Reorganized Debtor, MedSmart and KJE, from and after the Effective Date, are
hereby exculpated by all Persons, holders of Claims, entities and parties in
interest receiving distributions under the Plan from any and all claims, causes
of action and other assertions of liability arising out of the Reorganized
Debtor's discharge of the powers and duties conferred upon it by the Plan or any
order of the Bankruptcy Court entered pursuant to or in furtherance of the Plan
or applicable law, except solely for actions or omissions arising out of the
Reorganized Debtor's gross negligence or willful misconduct. No current holder
of a Claim, or representative thereof, shall have or pursue any claim or cause
of action (1) against the Reorganized Debtor for making payments or taking
actions in accordance with the Plan or for implementing the provisions of the
Plan or (2) against any holder of a Claim for receiving or retaining payments or
other distributions as provided for by the Plan to the maximum extent permitted
by applicable law.
10.2 Powers of the Disbursing Agent
The Reorganized Debtor shall be empowered to: (a) take all steps and execute
all instruments and documents necessary to effectuate the Plan; (b) make
distributions contemplated by the Plan; (c) comply with the Plan and its
obligations thereunder; (d) employ, retain or replace Professional Persons to
represent it with respect to its responsibilities; and (e) exercise such other
powers as may be vested in the Reorganized Debtor pursuant to order of the Court
or pursuant to the Plan or as the Reorganized Debtor deems to be necessary and
proper to carry out the provisions of the Plan.
10.3 Duties of the Disbursing Agent
The Reorganized Debtor shall have the duties of carrying out the provisions of
the Plan, which shall include taking or not taking any action which the
Reorganized Debtor deems to be in furtherance of the Plan, including, from the
date of the Reorganized Debtor's appointment, making payments and conveyances
and effecting other transfers necessary in furtherance of the Plan.
Article 11
Provisions Governing Executory Contracts and
Unexpired Leases under the Plan
11.1 Assumption of Certain Contracts and Leases
The Plan constitutes and incorporates a motion by the Debtor to assume, as of
the Confirmation Date, those executory contracts and unexpired leases which may
be the subject of a separate Motion filed prior to hearing on confirmation of
the Plan. The Debtor presently has no intention of assuming any additional
executory contracts or unexpired leases. Confirmation of this Plan shall be
deemed (i) adequate assurance of prompt cure of any default under such Contracts
solely based upon the Debtor's obligations in the Plan to make the Cure Payments
and (ii) adequate assurance of future performance under such Contracts.
11.2 Rejected if Not Assumed
All pre-Petition Date Contracts to which the Debtor is a party are rejected,
except for any Contract that has been assumed or rejected pursuant to order of
the Bankruptcy Court prior to the Confirmation.
11.3 Bar to Rejection Damages
If the rejection of a Contract by the Debtor results in damages to the other
party or parties to such Contract, a Claim for such damages, if not heretofore
evidenced by a filed proof of Claim, shall be forever barred and shall not be
enforceable against the Debtor, the Reorganized Debtor or its respective
properties or its agents, successors or assigns, unless a proof of Claim is
filed with the Bankruptcy Court and served upon counsel for the Debtor on or
before 30 days after the Confirmation Date.
11.4 Insurance Policies
Notwithstanding anything in the Plan or Sections 11.1 and 11.2 of the Plan, and
except for any "key-man" life insurance policies, all insurance policies under
which the Debtor is the insured party shall be deemed assumed as of the
Confirmation Date. All payments upon such policies are current; no Cure Payments
are necessary.
Article 12
Retention of Jurisdiction
12.1 Scope of Jurisdiction
Pursuant to sections 1334 and 157 of title 28 of the United States Code, the
Bankruptcy Court shall retain and have jurisdiction over all matters arising in,
arising under and related to the Chapter 11 Case and the Plan pursuant to, and
for the purposes of sections 105(a) and 1142 of the Bankruptcy Code and for,
among other things, the following purposes:
(a) To hear and determine pending applications for the
assumption or rejection of Contracts and the allowance of
Claims resulting therefrom;
(b) To hear and determine any and all adversary
proceedings, applications and contested matters, including
any remands of appeals;
(c) To ensure that distributions to holders of Allowed
Claims are accomplished as provided herein;
(d) To hear and determine any timely objections to or applications
concerning Claims or the allowance, classification, priority, compromise,
estimation or payment of any Claim;
(e) To enter and implement such orders as may be appropriate in the event
the Confirmation Order is for any reason stayed, revoked, modified,
reversed or vacated;
(f) To enter and implement such orders as may be necessary or appropriate
to execute, interpret, implement, consummate or enforce the Plan and the
transactions contemplated thereunder;
(g) To consider any modification of the Plan pursuant to section 1127 of
the Bankruptcy Code, to cure any defect or omission or to reconcile any
inconsistency in any order of the Bankruptcy Court, including, without
limitation, the Confirmation Order;
(h) To hear and determine all Fee Applications and Fee
Claims;
(i) To hear and determine disputes arising in connection
with the execution, interpretation, implementation,
consummation or enforcement of the Plan;
(j) To enter and implement orders or take such other actions as may be
necessary or appropriate to restrain interference by any entity with the
consummation or implementation of the Plan, including, without limitation,
to issue, administer and enforce injunctions provided for in the Plan and
the Confirmation Order;
(k) To hear and determine motions seeking a compromise
and settlement of any Contested Claim;
(l) To recover all assets of the Debtor and property of
the estates, wherever located;
(m) To hear and determine matters concerning state, local and federal
taxes in accordance with sections 346, 505 and 1146 of the Bankruptcy
Code;
(n) To enforce the releases described, set forth, and granted in Section
13.16 of this Plan; (o) To hear and determine any other matter not
inconsistent with the Bankruptcy Code and title 28 of the United States
Code that may arise in connection with or related to the Plan; and
(p) To enter a final decree closing the Chapter 11 Case.
12.2 Failure of the Bankruptcy Court to Exercise Jurisdiction
If the Bankruptcy Court abstains from exercising, or declines to exercise,
jurisdiction or is otherwise without jurisdiction over any matter arising in,
arising under or related to this Case, including the matters set forth in
Section 12.1 of the Plan, this Article 12 shall have no effect upon and shall
not control, prohibit or limit the exercise of jurisdiction by any other court
having jurisdiction with respect to such matter.
Article 13
Miscellaneous Provisions
13.1 Setoff Rights
In the event that the Debtor has a claim of any nature whatsoever against the
holder of a Claim, the Debtor may, but is not required to, setoff against the
Claim (and any payments or other distributions to be made in respect of such
Claim hereunder), subject to the provisions of section 553 of the Bankruptcy
Code. Neither the failure to setoff nor the allowance of any Claim under the
Plan shall constitute a waiver or release by the Debtor of any claim that the
Debtor may have against the holder of a Claim.
13.2 Discharge
The rights afforded in the Plan and the payments and distributions to be made
hereunder shall discharge all existing debts and Claims of any kind, nature or
description whatsoever against the Debtor or any of its assets or properties to
the fullest extent permitted by section 1141 of the Bankruptcy Code; upon the
Effective Date, all existing Claims against the Debtor shall be, and shall be
deemed to be, discharged; and all holders of Claims shall be precluded from
asserting against the Debtor, or any of its assets or properties, any other or
further Claim based upon any act or omission, transaction or other activity of
any kind or nature that occurred prior to the Effective Date, whether or not
such holder filed a proof of Claim. Confirmation of the Plan and the obligations
imposed on the Debtor therein shall be in complete satisfaction, discharge and
release of all Claims of any nature whatsoever against the Debtor or any of its
assets or properties; and, upon the Effective Date, the Debtor shall be deemed
discharged and released from any and all Claims, including but not limited to
demands and liabilities that arose before the Effective Date, and all debts of
the kind specified in sections 502(g), 502(h) or 502(i) of the Bankruptcy Code,
whether or not (a) a proof of Claim based upon such debt is filed or deemed
filed under section 501 of the Bankruptcy Code; (b) a Claim based upon such debt
is allowed under section 502 of the Bankruptcy Code; or (c) the holder of a
Claim based upon such debt has accepted the Plan. Except as provided herein, the
Confirmation Order shall be a judicial determination of discharge of all
liabilities of the Debtor. As provided in section 524 of the Bankruptcy Code,
such discharge shall void any judgment against the Debtor at any time obtained
to the extent it relates to a Claim discharged and operates as an injunction
against the prosecution of any action against the Debtor or any of its assets or
property, to the extent it relates to a Claim discharged.
13.3 Injunctions
The Confirmation Order may contain such injunctions as may be necessary and
helpful to effectuate the discharge of the Debtor provided herein. Without
limiting the generality of the foregoing, such injunction shall include an
absolute prohibition from collecting Claims in any manner other than as provided
for in the Plan.
13.4 Responsible Party Injunction
The Confirmation Order may constitute and provide for an injunction by the
Bankruptcy Court as of the Effective Date against any holder of a Priority Tax
Claim from commencing or continuing any action or proceeding against any
responsible Person or officer or director of any Debtor that otherwise would be
liable to such holder for payment of a Priority Tax Claim so long as the
Reorganized Debtor is not in default of the payment terms of such Priority Tax
Claim. All amounts paid by the Reorganized Debtor on account of any Allowed
Claim held by a governmental entity shall be applied first to any "trust fund"
amounts owing, then to any other balances due.
13.5 Pre-Petition Date Lawsuits/Insurance
On the Effective Date, all pre-Petition Date lawsuits, litigations,
administrative actions or other proceedings, judicial or administrative, in
connection with the assertion of a Claim shall be dismissed as to the
Reorganized Debtor. Such dismissal shall be with prejudice to the assertion of
such Claim in any manner other than as prescribed by the Plan. All parties to
any such action shall be enjoined by the Bankruptcy Court in the Confirmation
Order from taking any action to impede the immediate and unconditional dismissal
of such actions. Confirmation and consummation of the Plan shall have no effect
on insurance policies of the Debtor in which the Debtor is or was the insured
party; the Reorganized Debtor shall become the insured party under any such
policies. Each insurance company is prohibited from, and the Confirmation Order
may include an injunction against, denying, refusing, altering or delaying
coverage on any basis regarding or related to the Debtor's bankruptcy, the Plan
or any provision within the Plan.
13.6 Exculpations
(a) To the maximum extent permitted by applicable law and except for the
responsibilities of the Reorganized Debtor hereunder, the Debtor, Reorganized
Debtor and their officers, agents, employees, directors, attorneys, financial
advisors, personal representatives or successors, from and after the Effective
Date, are hereby exculpated by all Persons, holders of Claims, entities and
parties-in-interest from any and all claims, causes of action and other
assertions of liability.
(b) To the maximum extent permitted by applicable law and except for the
responsibilities of the Reorganized Debtor hereunder, the Debtor, Reorganized
Debtor and their officers, agents, employees, directors, attorneys, financial
advisors, personal representatives, or successors shall not have, nor shall they
incur, any liability to any Person, holders of claims, holders of equity
interests, entities and parties-in-interest for any act or omission in
connection with or arising out of the Chapter 11 case or out of their
administration of the Plan or the amounts to be distributed under the Plan
except for their own willful misconduct.
(c) To the maximum extent permitted by applicable law and except as
otherwise provided herein (with respect to the Reorganized Debtor only),
pursuant to Sections 105 and 1141 of the Bankruptcy Code, all Persons, holders
of all Claims, holders of equity interests, entities and parties-in-interest are
permanently stayed, restrained, and enjoined from taking one or more of the
following actions for the purpose of, directly or indirectly, collecting or
receiving payment on or with respect to any Claim or equity interest or from
seeking contribution, indemnity, or any recovery or remedy (whether relating to
any Claim or equity interest or not) from or against the Debtors or any property
of the Debtors, Reorganized Debtor, their officers, agents, employees,
directors, attorneys, financial advisors, personal representatives or successors
of any of the foregoing or any property of the foregoing, including without
limitation;
(i) the commencement or continuation in any manner, directly or
indirectly, of any suit, action or other proceeding (including,
without limitation, any and all proceedings in a judicial, arbitral,
administrative, or other forum) against or affecting any of the above
persons or entities;
(ii) the enforcement, levy, or attachment (including,
without limitation, any pre-judgment attachment), collection or other
recovery by any means or in any manner, whether directly or indirectly
on any judgment, award, decree, or other order against any of the
above persons or entities; and
(iii) the set-off, right to seek reimbursement,
indemnification, contribution from or subrogation against or otherwise
recouping in any manner, directly or indirectly, any amount against
any of the above persons or entities.
13.7 De Minimis Distributions
No distribution of less than $25.00 shall be made to any holder of an Allowed
Claim. The Debtor shall retain such undistributed amount.
13.8 Payment of Statutory Fees
All fees payable pursuant to section 1930 of title 28 of the United States Code
shall be paid through the entry of a final decree in the Chapter 11 Case.
Because all assets of the estate shall have revested in the Reorganized Debtor
as of the Effective Date, for each calendar quarter after the Effective Date, no
distributions will be deemed to have been made from the estate for purposes of
calculating such fee. Accordingly, the minimum fee shall be paid for each
calendar quarter after the Effective Date until the entry of the final decree.
13.9 Post-Effective Date Fees and Expenses of Professional
Persons
Except as provided in Section 13.1 of the Plan, after the Effective Date, the
Reorganized Debtor shall, in the ordinary course of business and without the
necessity for any approval by the Bankruptcy Court, pay the reasonable fees and
expenses of the Professional Persons employed by the Reorganized Debtor, related
to the implementation and consummation of the Plan, provided, however, that no
such fees and expenses shall be paid except upon receipt by Reorganized Debtor
of a written invoice, which invoice shall also be served upon counsel for the
Debtor and the United States Trustee, by the Professional Person seeking fees
and expense reimbursement and provided, further, however, that the Reorganized
Debtor may, within 10 days after receipt of an invoice for fees and expenses,
request the Bankruptcy Court to determine any such request and the Bankruptcy
Court shall have jurisdiction to do so.
13.10 Bankruptcy Restrictions
From and after the Effective Date, the Reorganized Debtor shall no longer be
subject to the restrictions and controls provided by the Bankruptcy Code (e.g.,
section 363 or 364); provided, however, the Reorganized Debtor shall provide
such financial reports as required by local rule until the entry of a final
decree. The Reorganized Debtor may operate its business in such manner as is
consistent with companies not in bankruptcy without the need of seeking
Bankruptcy Court approval with regard to any aspect of the Reorganized Debtor's
business.
13.11 Disallowance and Subordination of Subordinated Claims
and Penalty Claims
The filing of this Plan and its submission to the holders of Subordinated
Claims and Penalty Claims shall constitute an action seeking to subordinate all
Subordinated Claims and Penalty Claims pursuant to section 510 of the Bankruptcy
Code. The Confirmation Order, except as otherwise provided herein, shall
constitute an order subordinating such Claims to all other Claims pursuant to
section 510 of the Bankruptcy Code.
13.12 Binding Effect
The Plan shall be binding upon and inure to the benefit of the Debtor, the
co-Proponents, the holders of Claims and their respective successors and
assigns; provided, however, that if the Plan is not confirmed, the Plan shall be
deemed null and void and nothing contained herein shall be deemed (i) to
constitute a waiver or release of any Claims by the Debtor, the Committee or any
other Person, (ii) to prejudice in any manner the rights of the Debtor, the
Committee or any other Person or (iii) to constitute any admission by the
Debtor, the Committee or any other Person; until confirmation, neither the
Debtor nor the co-Proponents are bound hereby.
13.13 Governing Law
Unless a rule of law or procedure is supplied by federal law (including the
Bankruptcy Code and Bankruptcy Rules), the internal laws of the State of Texas
shall govern the construction and implementation of the Plan and any agreements,
documents and instruments executed in connection with the Plan or the Chapter 11
Case, except as may otherwise be provided in such agreements, documents and
instruments.
13.14 Modification of Plan
The Proponents may propose modifications of the Plan in writing at any time
before the Confirmation Date, provided that (a) the Plan, as modified, meets the
requirements of sections 1122 and 1123 of the Bankruptcy Code and (b) the
Proponent shall have complied with section 1125 of the Bankruptcy Code. The Plan
may be modified at any time after the Confirmation Date and before substantial
consummation by the Proponent, provided that (i) the Plan, as modified, meets
the requirements of sections 1122 and 1123 of the Bankruptcy Code, (ii) the
Bankruptcy Court, after notice and a hearing, confirms the Plan as modified,
under section 1129 of the Bankruptcy Code and (iii) the circumstances warrant
such modifications. A holder of a Claim that has accepted or rejected the Plan
shall be deemed to have accepted or rejected, as the case may be, such Plan as
modified, unless, within the time fixed by the Bankruptcy Court, such holder
changes its previous acceptance or rejection.
Any of the Proponents may withdraw this Plan at any time prior to its
Confirmation by the Bankruptcy Court. The Co-Proponents may withdraw this Plan
at or after Confirmation, but prior to the Confirmation Order becoming a Final
Order in the event that the Confirmation Order does not (a) authorize the board
of directors of the Reorganized Debtor to take such actions as may be necessary
to fully consummate the Plan; (b) include a finding and conclusion, binding upon
all parties to the Chapter 11 Case, any subsequent trustee, the Securities and
Exchange Commission and all state regulatory or enforcement agencies, to the
effect that all offerings and issuances of securities under the Plan (including,
without limitation, New Common Stock; Series A Preferred Stock; Series B
Preferred Stock; Class A Warrants; New Common Stock received upon conversion of
Series A or B Preferred Shares; Class B Warrants and New Common Stock received
upon execution of Class A Warrants and New Common Stock received upon execution
of Class B Warrants) fall within the section 1145 exemption, other than New
Common Stock issued to KJE and the shareholders of MedSmart under Section 7.2 of
the Plan; (c) provide for a discharge of the Debtor under 1141 and include an
injunction which contains an absolute prohibition from collecting Claims in any
manner other than as provided for in the Plan; or (d) include provisions
dispensing with the need of further board or Shareholder resolutions, approval,
notice or meetings and authorizing and directing the Chief Executive Officer,
Chief Financial Officer and/or Secretary of the Debtor to execute such documents
as may be necessary to effectuate the Plan, which documents shall be binding on
the Debtor and the Debtor's creditors and shareholders.
13.15 Creditor Defaults
Any act or omission by a creditor in contravention of a provi-
sion within this Plan shall be deemed an event of default under this Plan. Upon
an event of default, the Reorganized Debtor may seek to hold the defaulting
party in contempt of the Confirmation Order. If such creditor is found to be in
default under the Plan, such party shall pay the reasonable attorneys' fees and
costs of the Reorganized Debtor in pursuing such matter. Furthermore, upon the
finding of such a default by a creditor, the Bankruptcy Court may (a) designate
a party to appear, sign and/or accept the documents required under the Plan on
behalf of the defaulting party, in accordance with Federal Rule of Civil
Procedure 70 or (b) make such other order as may be equitable which does not
materially alter the terms of the Plan as confirmed. Upon the payment in full of
an Allowed Secured Claim, the Claimant shall execute, deliver and file a release
of all liens and security interests securing its Allowed Secured Claim within
twenty (20) days of such payment and in the event it fails to do so, shall, as
liquidated damages, pay to the Debtor a sum in cash equal to the greater of
$3,000 or the Debtor's actual costs of enforcing this provision.
13.16 Headings and Table of Contents
The Table of Contents and headings herein are for ease of reference only, and
are not intended to modify in any way the provisions of this Plan. Moreover, the
Table of Contents is included herein as a finding aid only and is not intended
to limit the effectiveness of this Plan. Claimants must review each and all of
the provisions of the entire Plan and are not entitled to rely upon the Table of
Contents as summarizing the contents of the Plan.
13.17 Severability
Should the Bankruptcy Court determine that any provision of the Plan is
unenforceable either on its face or as applied to any Claim or transaction, the
Proponent may modify the Plan in accordance with Section 13.15 of the Plan so
that such provision shall not be applicable to the holder of any Claim. Such a
determination of unenforceability shall not (1) limit or affect the
enforceability and operative effect of any other provision of the Plan or (2)
require the resolicitation of any acceptance or rejection of the Plan.
13.18 Substantial Consummation/Closing the Case
Upon the Distribution Date, the Plan shall be deemed substantially consummated
and, upon motion by the Reorganized Debtor, the Bankruptcy Court may issue a
final decree containing such provisions as may be equitable.
NATIONAL HEALTH & SAFETY
CORPORATION
By:
James R. Kennard,
Chief Executive Officer
DATED: August 21, 2000
Philadelphia, Pennsylvania
(Signatures continued on next page)
<PAGE>
KJE I, LTD., a Texas limited partnership
By: KJE, Inc., its general partner
By:
Jimmy E. Nix, President
MEDSMART HEALTHCARE NETWORK, INC., a Nevada corporation
By:
Jimmy E. Nix, President
DATED: August 21, 2000
Philadelphia, Pennsylvania
<PAGE>
<TABLE>
<CAPTION>
National Health and Safety Corporation
Pro Forma Balance Sheets
(SPLIT TABLE)
As of Petition Date As of July 19, 2000
------------------------------------------------------
Book Value Book Value Book Value Book Value
Assuming Assuming Assuming Assuming
Low Value of High Value of Low Value of High Value of
POWERx POWERX No. of Shares POWERx POWERx No. of Shares
Assets
<S> <C> <C> <C> <C> <C> <C>
Cash $15,722 $15,722 $54,049 $54,049
POWERx Network (on Petition Date $300,000 $3,738,743 $0 $0
MedSmart POWERx Receivable $0 $0 $300,000 $3,738,743
MedSmart Stock $0 $0 $0 $0
Other $81,077 $81,077 $144,472 $144,472
--------------------------------- --------- ----------- ----------- ----------- ------------------------
TOTAL ASSETS $396,799 $3,835,542 $498,521 $3,937,264
================================= ========= =========== =========== =========== ========================
Secured Claims - Mngmt $971,928 $971,928 $971,928 $971,928
Secured Claims - Royal $0 $0 $0 $0
Administrative Claims $0 $0 $400,000 $400,000
Priority Claims $13,808 $13,808 $13,808 $13,808
Convenience Claims $5,308 $5,308 $5,308 $5,308
General Unsecured Claims $1,440,29 2$1,440,292 $1,440,292 $1,440,292
Other Management Claims $492,246 $492,246 $492,246 $492,246
--------------------------------- --------- ----------- ----------- ----------- ------------------------
Total Debt $2,431,335 $2,431,335 $2,831,335 $2,831,335
--------------------------------- --------- ----------- ----------- ----------- ------------------------
Total Assets less Debt ($2,034,536) $1,404,207 ($2,332,814) $1,105,929
--------------------------------- --------- ----------- ----------- ----------- ------------------------
Series A Preferred (total) $0 $0 - $0 $0 -
to General Unsecured Claims $0 $0 - $0 $0 -
to Management $0 $0 - $0 $0 -
Preferred Shareholders $0 $600,000 14,000 $0 $600,000 14,000
Series B Prefered $0 $0 - $0 $0 -
Common Shareholders ($2,034,536) $804,207 58,803,710 ($2,332,814) $505,929 61,850,000
KJE/MedSmart Common Shares $0 $0 $0 $0
KJE Common Shares $0 $0 - $0 $0 -
MedSmart Common Shares $0 $0 $0 $0
Common Warrants $0 $0 775,000 $0 $0 775,000
Common Options $0 $0 10,800,000 $0 $0 10,800,000
--------- ----------- ---------- -----------
Total Equity ($2,034,536) $1,404,207 ($2,332,814) $1,105,929
--------------------------------- --------- ----------- ----------- ----------- ------------------------
TOTAL DEBT + EQUITY $396,799 $3,835,542 $498,521 $3,937,264
================================= ========= =========== =========== =========== ========================
Book Value per common share ($0.035) $0.024 ($0.038) $0.018
--------------------------------- --------- ----------- ----------- ----------- ------------------------
TOTALS
================================= ========= =========== =========== =========== ========================
</TABLE>
<TABLE>
<CAPTION>
As of Effective Date (Showing Effect of Plan)
------------------------------------------------------------------
Book Value Book Value
Assuming Assuming
Amount of Low Value of High Value of Absolute No Common %
Claims Treated POWERx POWERx Shares Conversion Ownership
Assets
<S> <C> <C> <C> <C> <C> <C>
Cash $600,000 $600,000
POWERx Network (on Petition $0 $0
MedSmart POWERx Receivable $300,000 $3,738,743
MedSmart Stock $3,000,000 $31,590,000
Other $144,472 $144,472
--------------------------------- ---------- ---------- ------------- ---------- ------------- ----------
TOTAL ASSETS $4,044,472 $36,073,215
================================= ========== ========== ============= ========== ============= ==========
Secured Claims - Mngmt $971,928 $0 $0
Secured Claims - Royal $0 $0 $0
Administrative Claims $500,000 $500,000 $500,000
Priority Claims $13,808 $13,808 $13,808
Convenience Claims $5,308 $5,308 $5,308
General Unsecured Claims $1,440,292 $0 $0
Other Management Claims $492,246 $0 $0
--------------------------------- ---------- ---------- ------------- ---------- ------------- ----------
Total Debt $519,116 $519,116
--------------------------------- ---------- ---------- ------------- ---------- ------------- ----------
Total Assets less Debt $3,525,356 $35,554,099
--------------------------------- ---------- ---------- ------------- ---------- ------------- ----------
Series A Preferred (total) $2,352,132 $2,352,132 2,352,132 11,760,658 4.67%
to General Unsecured Claims $1,440,292 $1,440,292 $1,440,292 1,440,292 7,201,458 2.86%
to Management $1,464,173 $911,840 $911,840 911,840 4,559,200 1.81%
Preferred Shareholders $0 $0 - -
Series B Prefered $600,000 $600,000 600,000 3,000,000 1.19%
Common Shareholders $149,689 $8,513,539 61,850,000 61,850,000 24.58%
KJE/MedSmart Common Shares $423,535 $24,088,429 175,000,000 175,000,000 69.55%
KJE Common Shares $108,909 $6,194,167 45,000,000 45,000,000 51.67%
MedSmart Common Shares $314,626 $17,894,261 130,000,000 130,000,000 18%
Common Warrants $0 $0 - - -
Common Options $0 $0 - -
---------- ---------- -------------
Total Equity $3,525,356 $35,554,099
--------------------------------- ---------- ---------- ------------- ---------- ------------- ----------
TOTAL DEBT + EQUITY $4,044,472 $36,073,215
================================= ========== ========== ============= ========== ============= ==========
Book Value per common share $0.057 $0.575
--------------------------------- ---------- ---------- ------------- ---------- ------------- ----------
TOTALS 251,610,658 100%
================================= ========== ========== ============= ========== ============= ==========
</TABLE>
Notes: The top portion of these balance sheets reflect a calculation of
the net asset value of the Debtor as of each of the three points
in time. The bottom portion reflects a calculation of the book
value of the shares reflected assuming preferred shares are not
converted.
