Document:

fs12012ex10vii_healthrevenue.htm

Exhibit 10.7

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS NOTE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT, (II) UNLESS SOLD OR TRANSFERED TO AN "ACCREDITED INVESTOR" AS THAT TERM IS DEFINED IN RULE 501(A) OF REGULATION D OR (III) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.  ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE.

 

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

 

6% Convertible Note

 

	
Issuance Date:  May   , 2012

	
Original Principal Amount: $____

FOR VALUE RECEIVED, Health Revenue Assurance Holdings, Inc., a Nevada., a Nevada corporation (the “Company”), hereby promises to pay to the order of _________or registered assigns (the “Holder”) the amount set out above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption, conversion or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at the applicable Interest Rate (as defined below), from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon the Maturity Date, acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof).

 

(1) PAYMENTS OF PRINCIPAL.  Unless otherwise provided herein, on the Maturity Date, the Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges (as defined below), if any, on such Principal and Interest.  The “Maturity Date” shall be May __, 2013, which is the one year anniversary of the Issuance Date.  The Company may prepay any portion of the outstanding Principal, accrued and unpaid Interest, if any, without penalty.

 

(2) INTEREST; INTEREST RATE.  Interest on this Note shall commence accruing on the Issuance Date and shall be computed on the basis of a 360-day year comprised of twelve (12) thirty (30) day months and shall be payable on the Maturity Date. Interest shall be payable to the record holder of this Note in cash.  Prior to the payment of Interest, Interest on this Note shall accrue at the Interest Rate and be payable by way of inclusion of the Interest in the Conversion Amount in accordance with Section 3(b)(i).  Notwithstanding anything set forth herein, interest shall only be due and payable in the event that the Note is repaid in full in cash.  In the event that this Note is repaid partially or in full though the Conversion of the Note then no interest will be due and payable.

 

  

  

  

 

(3) CONVERSION OF NOTES.  This Note shall be convertible into shares of the Company's common stock, par value $0.001 per share (the "Common Stock"), on the terms and conditions set forth in this Section 3.

 

(a) Conversion Right.  Subject to the provisions of Section 3(d), at any time or times on or after thirty (30) days from the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below).  The Company shall not issue any fraction of a share of Common Stock upon any conversion.  If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share.  The Company shall pay any and all transfer, stamp and similar taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount.

 

(b) Conversion Price.  The Conversion Price to determine the number of shares of Common Stock issuable upon conversion of any Conversion Amount shall mean $0.10 per share (the "Conversion Rate").

 

(c) Mechanics of Conversion.

 

(i) Optional Conversion.  To convert any Conversion Amount into shares of Common Stock on any date (a "Conversion Date"), the Holder shall transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the "Conversion Notice") to the Company.  On or before the second (2nd) Business Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation (the “Conversion Confirmation”) of receipt of such Conversion Notice to the Holder and the Company's transfer agent (the "Transfer Agent").  On or before the (5th) fifth Business Day following the date of receipt of a Conversion Notice (the "Share Delivery Date"), the Company shall (X) provided that the Transfer Agent is participating in the Depository Trust Company's ("DTC") Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its Deposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled.  The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

 

  

  

  

 

(d) Limitations on Conversions.

 

(i) Beneficial Ownership.  The Company shall not effect any conversion of this Note, and the Holder of this Note shall not have the right to convert any portion of this Note pursuant to Section 3(a), to the extent that after giving effect to such conversion, the Holder (together with the Holder's affiliates) would beneficially own in excess of 4.99% (the "Maximum Percentage") of the number of shares of Common Stock outstanding immediately after giving effect to such conversion.  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any Other Notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act").  For purposes of this Section 3(d)(i), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company's most recent Form 10-K, Form 10-Q, Form 8-K or other public filing with the Securities Exchange Commission, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  By written notice to the Company, the Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not be effective until the sixty-first (61st) day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder and not to any other holder of Notes.

 

(4) VOTING RIGHTS.  The Holder shall have no voting rights as the holder of this Note.

 

(5) TRANSFER.  This Note and any shares of Common Stock issued upon conversion of this Note may only be offered, sold, assigned or transferred by the Holder with the express written consent of the Company.

 

(6) REISSUANCE OF THIS NOTE.

 

(a) Transfer.  If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note, registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Note to the Holder representing the outstanding Principal not being transferred.

 

  

  

  

 

(b) Lost, Stolen or Mutilated Note.  Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note representing the outstanding Principal.

 

(c) Issuance of New Notes.  Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued, the Principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid Interest, if any, on the Principal and Interest of this Note from the Issuance Date.

 

(7) CONSTRUCTION; HEADINGS.  This Note shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any person as the drafter hereof.  The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.

 

(8) NOTICES; PAYMENTS.

 

(a) Notices.  All notices, demands, consents, requests, instructions and other communications to be given or delivered or permitted under or by reason of the provisions of this Agreement or in connection with the transactions contemplated hereby shall be in writing and shall be deemed to be delivered and received by the intended recipient as follows: (i) if personally delivered, on the Business Day of such delivery (as evidenced by the receipt of the personal delivery service), (ii) if mailed certified or registered mail return receipt requested, two (2) Business Days after being mailed, (iii) if delivered by overnight courier (with all charges having been prepaid), on the Business Day of such delivery (as evidenced by the receipt of the overnight courier service of recognized standing), or (iv) if delivered by facsimile transmission or other electronic means, including email, on the Business Day of such delivery if sent by 6:00 p.m.  in the time zone of the recipient, or if sent after that time, on the next succeeding Business Day.  If any notice, demand, consent, request, instruction or other communication cannot be delivered because of a changed address of which no notice was given (in accordance with this Section 8), or the refusal to accept same, the notice, demand, consent, request, instruction or other communication shall be deemed received on the second business day the notice is sent (as evidenced by a sworn affidavit of the sender).  All such notices, demands, consents, requests, instructions and other communications will be sent to the following addresses or facsimile numbers as applicable:

 

  

  

  

 

If to the Company, to:

Health Revenue Assurance Associates, Inc.

8551 W. Sunrise Blvd., Suite 304

Plantation, FL 33322

Attn:  Robert Rubinowitz, President

Facsimile:  (954) 370-0157

With a copy by fax only to (which copy shall not constitute notice):

Anslow & Jaclin LLP

Attn: Gregg E. Jaclin, Esq.

195 Route 9 South, 2nd Floor

Manalapan, NJ 07726

Facsimile: (732) 577-1188

If to the Holder:

[PROVIDE]

(b) Payments.  Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Purchasers, shall initially be as set forth on the Schedule of Buyers attached to the Assets Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder's wire transfer instructions.  Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day.

 

(9) CANCELLATION.  After all Principal, accrued Interest and other amounts at any time owed on this Note have been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.

 

  

  

  

 

(10) GOVERNING LAW; JURISDICTION; SEVERABILITY; JURY TRIAL.  This Note shall be construed and enforced in accor­dance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Florida, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Florida or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Florida.  The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the state of Florida, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note.  Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company's obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.  THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

(11) REGISTRATION RIGHTS. The Company shall, within thirty (30) days of the date of this Note, file with the Securities and Exchange Commission a Registration Statement on Form S-1 (or, if such form is unavailable for such a registration, on such other form as is available for such registration), covering the resale of all of the shares underlying the Note, which Registration Statement shall state that, in accordance with Rule 416 promulgated under the 1933 Act, such Registration Statement also covers such indeterminate number of additional shares of Common Stock as may become issuable upon stock splits, stock dividends or similar transactions.

 

(12) CERTAIN DEFINITIONS.  For purposes of this Note, the following terms shall have the following meanings:

 

(a) "Business Day" shall mean any day other than a Saturday, Sunday or a day on which commercial banks in New York, New York are required or authorized to be closed.

 

(b) "Principal Market" means the Over the Counter Market, or similar quotation system, The New York Stock Exchange, Inc., the American Stock Exchange, The NASDAQ Global Select Market, The NASDAQ Global Market or The NASDAQ Capital Market, or any market that is a successor to any of the foregoing.

 

(c) "Interest Rate" means, six percent (6%) per annum, subject to adjustment as set forth in Section 2 hereof.

 

  

  

  

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance Date set out above.

 

 

	 	HEALTH REVENUE ASSURANCE HOLDHOLDINGS, INC.	 
	 	 	 	 
	 	
By: 

	 	 
	 	Name: Robert Rabinowitz	 
	 	Title:   President	 
	 	 	 	 

 

 

  

  

  

 

EXHIBIT I

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

CONVERSION NOTICE

 

Reference is made to the Convertible Note (the "Note") issued to the undersigned by Health Revenue Assurance Holdings, Inc. (the "Company").  In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock par value $0.001 per share (the "Common Stock") of the Company, as of the date specified below.

 

	
Date of Conversion:

	  
	
Aggregate Conversion Amount to be converted:

	  
	
Please confirm the following information:

	
Conversion Price:

	  
	
Number of shares of Common Stock to be issued:

	  
	
Please issue the Common Stock into which the Note is being converted in the following name and to the following address:

	
Issue to:

	  
	  	  
	  	  
	
Facsimile Number:

	  
	
Authorization:

	  
	
By:

	  
	
Title:

	  
	
Dated:

	  
	
Account Number:

	  
	
  (if electronic book entry transfer)

	  
	
Transaction Code Number:

	  
	
  (if electronic book entry transfer)ex10_1.htm

Exhibit 10.1

 

Eric Slocum Sparks

Arizona State Bar No. 11726

LAW OFFICES OF ERIC SLOCUM SPARKS, P.C. 

110 South Church Avenue, #2270

Tucson, Arizona 85701

Telephone (520) 623-8330

Facsimile (520) 623- 9157

law@ericslocumsparkspc.com

 

 

Attorney for Debtor

 

 

IN THE UNITED STATES BANKRUPTCY COURT

 

FOR THE DISTRICT OF ARIZONA

 

	In re:	 )	 	 
	 	 )	 	 
	
CDEX INC.,

	 )	 	 
	 	 )	 	
Case No. 4:12-bk-02402-JMM 

	 	 )	 	 
	 	 )	 	(Chapter 11)
	 	 )	 	 
	 	 )	 	
NON-MATERIAL AND

	 	 )	 	
NON-ADVERSE MODIFICATIONS 

	
Debtor.

	 )	 	DATED AUGUST 17, 2012 to
	 	 )	 	
DEBTOR’S SECOND AMENDED

	 	 )	 	
PLAN OF REORGANIZATION DATED JULY 27, 2012

	 	 )	 	 
	 	 )	 	 

 

The Debtor, CDEX Inc., (hereinafter “the Debtor”), debtor-in-possession in the above-captioned Chapter 11 case, hereby proposes the following Non-Material and Non-Adverse Modifications dated August 17, 2012  to Debtor’s Second Amended Plan of Reorganization pursuant to the provisions of Chapter 11 of the Bankruptcy Code.  All creditors and other parties in interest are encouraged to consult the Disclosure Statement prepared by the Debtor, as approved by the Bankruptcy Court, before voting to accept or reject this Plan of Reorganization.  The Disclosure Statement contains a discussion of the Debtor, its business operations and the disclosure of all other information material to the approval of this Plan of Reorganization.  No solicitation materials, other than the Disclosure Statement and related materials transmitted therewith as approved by the Bankruptcy Court, have been authorized by the Bankruptcy Court for use in soliciting acceptances or rejections of this Plan of Reorganization.

 

  

  

  

 

ARTICLE I

 

Definitions

 

For purposes of this Plan, except as expressly provided otherwise or unless the context otherwise required, all of the following defined terms will have the following meanings.  The terms defined below will be equally applicable to both singular and plural forms, and to the masculine, feminine, and neuter forms, of such defined terms.

 

1.1           “Administrative Claim” will refer to and  mean every cost or expense of administration of the reorganization case allowed under Bankruptcy Code §503(b) and referred to in Bankruptcy Code §507(a)(1), including without limitation: (a) any actual and necessary expense of preserving the estate as approved the Bankruptcy Court; (b) all allowances, including professional fees and costs approved by the Bankruptcy Court; © any actual and necessary expenses incurred in the operation of the Debtor's business; and (d) all fees and charges assessed against the Debtor's estate under Chapter 123 of Title 28, United Stated Code.

 

1.2           “Allowed Claim” shall mean (a) a claim of a person which has been scheduled by the Debtor as undisputed, and as to which claim no objection has been made by any other person within the time allowed for the making of objections; (b) a claim allowed by a final order; © a claim as to which a timely and proper proof of claim or application for payment has been filed, and as to which proof of claim or application for payment, no objection has been made within the time allowed for the making of objections; or (d) a claim allowed under the Plan, notwithstanding any objection filed thereto by an person.  Interest accrued after the filing date of the Debtor’s reorganization case shall not be a part of any allowed claim against such Debtor, except as required or permitted by law.

 

1.3           “Affiliate” shall mean any affiliate that is defined in Section 101(2) of the Bankruptcy Code.

 

1.4           “Allowed Amount” shall mean with respect to any allowed claim in a particular class under the Plan, the amount of such claims in such class.

 

  

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1.5           “Allowed Interest” or “Allowed Equity Interest” shall mean (a) an equity interest in the Debtor held by a person as of the Effective Date, and as to which interest no objection has been made by any other person within the time allowed for the making of objections; (b) an interest allowed by a final order; (c) an interest as to which a timely and proper proof of claim or application for payment no objection has been made within the time allowed for the making of objections or (d) an interest allowed under the Plan, notwithstanding any objection filed thereto by any person.

 

1.6           “Assets” shall mean, with respect to the Debtor, all rights, causes of action, all of the right, title and interest in and to property (real or personal, tangible or intangible) or whatsoever type or nature, owned by such Debtor as of the Effective Date, together with assets subsequently acquired by such Debtor, and including, but not limited to, property as defined in Section 541 of the Bankruptcy Code (each identified item of property being herein sometimes referred to as an asset).

 

1.7           “Ballot”  will refer to and mean the ballot for accepting or rejecting the Plan which will be distributed to holders of claims and classes that are impaired under this Plan are entitled to vote on this Plan.

 

1.8           “Bankruptcy Code” will refer to and mean Title 11 of the United States Code 11 U.S.C. §101, et seq., as the same may be amended from time to time.

 

1.9           “Bankruptcy Court or Court” will refer to and mean the United States Bankruptcy Court for the District of Arizona, or such other court that exercises jurisdiction over all or part of the reorganization case, including the United States District Court for the District of Arizona, to the extent the reference of all or part of this reorganization case is withdrawn.

 

1.10         “Bankruptcy Rules” will refer to and mean the Federal Rules of Bankruptcy Procedure, as amended, promulgated under 28 U.S.C. §2075 and the local rules of the Court, as applicable from time to time during the reorganization case.

 

1.11         “Business Day” will refer to and mean any day other than a Saturday, Sunday, or federal holiday recognized by the Federal Courts for the District of Arizona, and Arizona State holidays recognized by the Federal Courts for the District of Arizona.

 

1.12         “Case” shall mean the Chapter 11 case commenced by the filing with the Court of a voluntary petition for relief under Chapter 11 of the Code by the Debtor.

 

1.13         “Cash” will refer to and mean cash, cash equivalents, bank deposits, and negotiable instruments.

 

  

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1.14         “Chapter 11" shall mean Chapter 11 of the Code, 11 U.S.C. Section 1101-46.

 

1.15         “Claim” will refer to and mean every right and remedy encompassed within the statutory definition set forth in Bankruptcy Code §101(4), 11 U.S.C. §101(4), whether or not such claim is asserted.

 

1.16         “Class” will refer to and mean each of the categories of claims and interests described in Article III of this Plan.

 

1.17         “Confirmation Date” will refer to and mean the date on which the Bankruptcy Court enters the Confirmation Order confirming this Plan.

 

1.18         “Confirmation Hearing” will refer to and mean the hearing regarding the confirmation of this Plan conducted pursuant to Bankruptcy Code §1128, as adjourned or continued to from time to time.

 

1.19         “Confirmation Order” will refer to and mean the order confirming this Plan pursuant to Bankruptcy Code §1129.

 

1.20         “Court” shall mean the United States Bankruptcy Court for the District of Arizona, Tucson Division.

 

1.21         “Creditor” will refer to and mean every holder of a claim whether or not such claim is an allowed claim, encompassed within the statutory definition set forth in Bankruptcy Code §101(9), 11 U.S.C. §101(9).

 

1.22         “Debtor” will refer to and mean CDEX, Inc. in the capacity as the Debtor and Debtor-In-Possession in the Chapter 11 reorganization case with the status and rights conferred by U.S.C. Section 1107.

 

1.23         “Deficiency Claim” shall mean an allowed claim of a creditor, if any, equal to the amount by which the aggregate allowed claims of such creditor exceed the sum of (a) any setoff rights of the creditor permitted under Section 553 of the Bankruptcy Code rights of the creditor permitted under Section 553 of the Bankruptcy Code plus (b) the secured claim of such creditor; provided however, that if the holder of a secured claim of the class of which such claim is a member makes the election provided in Section 1111(b)(2) of the Bankruptcy Code, there shall be no deficiency claim in respect of such claim.

 

  

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1.24         “Disclosure Statement” will refer to and mean the written statement describing this Plan which is prepared by the Debtor and distributed in accordance with Bankruptcy Code §§1125, 1126(b), and 1145 and Bankruptcy Rule 3018, as amended, in its present form or as the same may be altered, amended, or modified by the Debtor.

 

1.25         “Disputed Claim or Disputed Interests” will refer to and mean every claim; (a) that is scheduled by the Debtor as disputed, contingent or unliquidated; or (b) proof of which has been filed with the Bankruptcy Court and an objection to the allowance thereof, in whole or in part, has been interposed prior to the final date provided under this Plan for the filing of such objections or such other time as provided by the Bankruptcy Court and which objection has not been withdrawn, settled or determined by the final order.

 

1.26         “Effective Date” shall mean the later of (a) the first business day following the 30thday after entry of the Court of an order confirming this Plan, or (b) the first business day after such order has become final and unappealable; provided however, no appeal of said order is pending; provided further, the Debtor may waive the condition that no appeal of the order of confirmation be pending by a writing duly executed by the Debtor and filed with the Court on or before the date which but for the pendency of appeal would become the effective date of the Plan, and in the event that said condition is timely waived by the Debtor, the Plan shall become effective as provided herein notwithstanding the pendency on said date of an appeal or appeals; in the event that said condition is not timely waived, the Plan shall become effective on the first business day after an appeal is no longer pending.

 

1.27         “Equity Contribution” means that money from an equity holder which needs to be contributed so as to allow them to retain their interest in the Debtor.

 

1.28         “Estate” will refer to and mean the bankruptcy estate of the Debtor created in the reorganization case under the Bankruptcy Code.

 

1.29          “Final Order” shall mean an order of judgment of the Bankruptcy Court which (a) shall not have been reversed, stayed, modified or amended and the time to appeal from, or to seek review or rehearing of, shall have expired and as to which no appeal or petition for review, or rehearing or certiorari is pending; or (b) if appealed from, shall have been affirmed and no further hearing, appeal or petition for certiorari can be taken or granted, or as to which no stay has been entered to affect the operative provisions of such order of judgment.

 

  

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1.30         “Insider” shall refer to and mean all persons who qualify as an "insider" pursuant to 11 U.S.C. §101(31).

 

1.31         “Interest” shall mean any equity interest in the Debtor as of the petition date.

 

1.33         “Interest Holder(s)” shall mean any person or persons owning an equity interest in the Debtor as of the Effective Date.

 

1.34         “Member” shall mean a person or entity who holds an equity interest in the Debtor.

 

1.35         “Minimum New Capital Contribution” refers to that sum of money that may be paid in cash into the escrow account prior to confirmation in order to proceed with confirmation of the Plan, if necessary.  The amounts necessary to be funded by such Effective Date are detailed in the Disclosure Statement.

 

1.36         “Participating Investors” shall mean those investors selected by the Debtor to make capital contributions to the Reorganized Debtor in exchange for an interest in the Debtor.

 

1.37         “Person” will refer to and mean any individual, corporation, limited or general partnership, joint venture, association, joint stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof.

 

1.38         “Petition Date” shall mean the date that the Debtor filed the voluntary petition under Chapter 11 of the Bankruptcy Code with this Court.

 

1.39         “Plan” shall mean this Plan of Reorganization as set forth herein, in its entirety, and all addenda, exhibits, schedules, releases, and other attachments thereto as may be amended or supplemented from time to time.

 

1.40         “Preference Recovery Amounts” shall mean all sums collected as preferences under §547 of the Code and as set-offs under §553 of the Code.

 

1.41         “Professional Persons” means persons retained or to be compensated pursuant to §§327, 328, 330 and 503(b) of the Code.

 

1.42         “The Property” shall mean the property owned by the Debtor which consists of personal property.

 

  

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1.43         “Proponent” shall mean the Debtor.

 

1.44         “Secured Claim” shall mean (a) a claim secured by a lien on property of the Debtor, which lien is valid, perfected and enforceable under applicable law and is not subject to avoidance under the Bankruptcy Code or other applicable non-bankruptcy law, and which is duly established in such Debtor’s reorganization case, but only to the extent that such claim does not exceed the value of such Debtor’s assets which the Bankruptcy Court finds are valid security for such claim (except, if the class of which such claim is a part makes the election provided in Section 1111(b)(2) of the Bankruptcy Code, the entire amount of the claim shall be a secured claim and (b) a claim allowed under the Plan as a secured claim.

 

1.45         “Secured Creditors” means persons holding allowed secured claims within the meaning of Section 506 of the Code.

 

1.46         “Tax Claims” shall mean the claims of any person for the payment of taxes (a) accorded a priority pursuant to Section 507(a)(1) and (8) of the Bankruptcy Code, but excluding all claims for post-petition interest and pre-petition and post-petition penalties, all of which interest and penalties shall be deemed disallowed and discharged on the Effective Date.

 

1.47         “Taxing Authorities” shall mean any legal entity with authority to levy and collect taxes pursuant to federal, state or local statutes or ordinances.

 

1.48         “Unsecured Claims” shall mean all claims held by creditors of the Debtor, including deficiency claims, dissolution claims and claims arising out of the rejection of executory contracts, other than secured claims, administrative claims and tax claims.

 

1.49         “Unsecured Creditors” shall mean persons holding allowed unsecured claims against the Debtor for which there are no assets of the Debtor serving as security (excluding undersecured mortgage deficiency creditors), but not including priority claims.

 

All terms not specifically defined by this Plan shall have the meaning designated in the Bankruptcy Code, or if not defined therein, their ordinary meanings.

 

  

- 7 -

  

 

ARTICLE II

 

General Terms and Conditions 

 

2.1           Class of Claims and Payment: Various classes of claims and interests are defined in this Plan.  This Plan is intended to deal with all claims against the Debtor of whatever character, whether or not contingent or liquidated, and whether or not allowed by the Court pursuant to Section 502(h) of the Code.  However, only those claims allowed pursuant to Section 502(a) of the Code will receive payment under this Plan.

 

2.2           Preserved Liens: To the extent required under Section 1124(2) of the Code, to preserve the rights of a creditor having a secured claim addressed pursuant to that Section, the lien or encumbrance of that creditor shall, to the extent valid, be preserved.

 

2.3           Time for Filing of Claims: The list of creditors filed in these proceedings by the Debtor shall constitute the filing of a claim by each creditor which is not listed as disputed, contingent or unliquidated as to amount.  The Debtor reserves the right to object to any such claim where it appears that the amount scheduled by the Debtor is improper or where there is some dispute with regard to that claim.  All other creditors, or creditors who disagree with the amounts as scheduled by the Debtor must file prior to the date set for the hearing on the Disclosure Statement, a proof of claim or proof of interest.  Failure to timely file a proof of claim or file a proof of interest, if not listed on the Debtor’s schedules as non-contingent, liquidated and undisputed, will result in a disallowance of the proof of claim or proof of interest.

 

ARTICLE III 

 

Classification and Treatment of Claims and Interests 

 

1.             Claim Amounts: Because certain claims against the Debtor  may be unknown or of undetermined amounts, the amounts of claims specified in this Disclosure Statement reflect only the Debtor’s best estimate at this time of the amount due.   In addition, the amounts of the claims specified in this Disclosure Statement do not include, for example, claims arising from the rejection of certain executory contracts and other contingent or unliquidated claims arising against the debtor.

 

2.             Effective Date of the Plan: The “Effective Date” of the Plan  is important in determining when performance of many of the Debtor’s obligations under the Plan is due.  The Effective Date is defined in the Plan as the first business day following the later of the following day;

 

(i) the date on which the Order confirming the Plan (the “Confirmation Order”) becomes final and non-appealable with no appeal then pending; or

 

  

- 8 -

  

 

(ii) 60 days after the date of the Confirmation Order for unsecured claims; and  

 

(iii) 30 days after the date of the Confirmation Order for secured claims, if any.

 

3.             Classification: The Plan divides claims against the Debtor  into multiple separate classes that the Debtor asserts are in accordance with the Bankruptcy Code.  Unless otherwise expressly stated in the Plan, distributions to holders of allowed claims are in full satisfaction of their allowed claims.  All claims against the Debtor arising prior to confirmation will be discharged by performance of the Plan on the Effective Date to the extent that such claims are dischargeable under the Bankruptcy Code Section 1141(d).  For the purposes of the Plan, claims are classified and treated as follows:

 

3.1           Class One - Administrative Claims.

 

A.          Classification: Class One consists of all claims for the cost of administration of the Debtor’s bankruptcy estate.  Included in this class are all claims for administrative expenses entitled to priority under Bankruptcy Code §507(A)(1), such as professional fees and costs, as approved by the Bankruptcy Court of the attorneys, accountants, and other professional persons employed by the Debtor, and all actual and necessary expenses of operating the Debtor’s business pursuant to Bankruptcy Code §503(b), including without limitation, all fees charged against the Debtor’s business pursuant to Chapter 123 of Title 28, United States Code. Debtor believes claims in this class may exceed $150,000.00.

 

B.          Impairment: Not impaired.

 

C.          Treatment: The Plan provides for the payment in cash, in full, of all allowed Administrative Claims on the later of the Effective Date or the date upon which such Claims become Allowed Claims, or as otherwise ordered by the Bankruptcy Court.  Class One claims will be paid from assets of the estate.  The Debtor currently estimates that the Class One claims will total approximately $150,000.00 and may include post-petition administrative expenses not paid by Debtor.

 

  

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3.2           Class Two - Claims of Governmental Units

 

A.         Classification: Class Two claims consist of all allowed claims of the United States Internal Revenue Service (“IRS”) and/or State of Arizona, Department of Revenue (“DOR”) and/or the Department of Economic Security (“DES”), City of Tucson or other government agency which are entitled to priority pursuant to Section 507(a)(8) of the Bankruptcy Code except ad valorem taxes.  Debtor is aware of a proof of claim filed by Internal Revenue in this class in the amount of $594.72.

 

B.          Impairment: Class Two is impaired.

 

C.          Treatment: Each holder of a Class Two allowed claim shall retain its lien or claim, in accordance with Section 1129 of the Bankruptcy Code.  The claim shall bear simple interest at a fixed rate equal to that rate which would be required to be paid as of the Effective Date under Section 6621 and/or 6622 of the Internal Revenue Code, or such other interest rate as the Bankruptcy Court determines is sufficient to confer upon the tax claim a value as of the Effective Date equal to the principal amount of such claim.  The allowed claim shall be payable in two equal monthly installments of principal, along with accrued interest.   The first payment shall commence on the first day of the month immediately following the month of the Effective Date.  The claim is subject to prepayment at any time without penalty or premium and shall have such other terms as required by law.

 

3.3           Class Three - Employee Priority Claims

 

A.          Classification: Class Three consists of allowed claims arising under Bankruptcy Code Section 507(a)(3) and (4) including claims for accrued vacation, sick days, holidays and wages earned by employees of the Debtor within 90 days before the filing of the bankruptcy petition. Debtor estimates claims in this class at $22,907.31

 

B.          Impairment: Impaired.

 

C.          Treatment: The Plan provides that each and every holder of a Class Three Allowed Claim shall receive shares of stock on account of its claim.  Each allowed claim will be divided by .05 in order to obtain a share value exchange of its claim and the claimant will receive that amount of shares of stock plus an equal number of warrants for future purchase at an exercise price of $0 .10 effective for five years after the date of issuance. Any liens held by the Class Three creditors shall be null and void and removed as of the Effective Date.

 

  

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3.4           Class Four - Unsecured Claims of Senior 10% Noteholders

 

                                A.           Classification:  Class Four consists of allowed unsecured claims of the holders of 10% Senior Convertible Notes.  Debtor estimates claims in this class at $2,772,629.47.

 

B.                  Impairment: Class Four is impaired.

 

C.            Treatment: The Plan provides that each and every holder of a Class Four Allowed Claim shall receive shares of stock on account of its claim.  Each allowed claim will be divided by .15 in order to obtain a share value exchange of the claim and the claimant will receive that amount of shares of stock plus an equal number of warrants for future purchase at an exercise price of $0.30 effective for five years after the date of issuance. Any liens held by the Class Four creditors shall be null and void and removed as of the Effective Date.

 

3.5           Class Five - Unsecured Claims of Non-Interest Noteholders

 

                                A.           Classification:  Class Five consists of allowed unsecured claims of the holders of Non-Interest Notes.  Debtor estimates claims in this class at $14,651.00.

 

B.            Impairment: Class Five is impaired.

 

C.            Treatment: The Plan provides that each and every holder of a Class Five Allowed Claim shall receive shares of stock on account of its claim.   Each allowed claim will be divided by .25 in order to obtain a share value exchange of the claim.  Any liens held by the Class Five creditors shall be null and void and removed as of the Effective Date.

 

3.6           Class Six - Unsecured Deferred Compensation Claims

 

                                A.           Classification:  Class  Six  consists  of  allowed  unsecured  deferred compensation claims.  Debtor estimates claims in this class at $258,371.71.

 

B.            Impairment: Class Six is impaired.

 

C.            Treatment: The Plan provides that each and every holder of a Class Six Allowed Claim shall receive shares of stock on account of its claim.   Each allowed claim will be divided by .05 in order to obtain a share value exchange of the claim and the claimant will receive that amount of shares of stock plus an equal number of warrants for future purchase at an exercise price of $0.10 effective for five years after the date of issuance. Any liens held by the Class Six creditors shall be null and void and removed as of the Effective Date.

 

  

- 11 -

  

 

3.7           Class Seven - Unsecured Claims of George Cohen

 

                                A.           Classification:  Class Seven consists of the allowed unsecured claims of George Cohen for past due convertible notes.  Debtor estimates claims in this class at $45,994.25.

 

B.             Impairment: Class Seven is impaired.

 

C.            Treatment: The Plan provides that each and every holder of a Class Seven Allowed Claim shall receive shares on account of its claim.   Each allowed claim will be divided by .15 in order to obtain a share value exchange of the claim and the claimant will receive that amount of shares of stock plus an equal number of warrants for future purchase at an exercise price of $0.30 effective for five years after the date of issuance. Any liens held by the Class Seven creditor shall be null and void and removed as of the Effective Date.

 

3.8           Class Eight - Unsecured Trade Claims

 

                                A.           Classification:  Class Eight consists of the allowed unsecured claims of trade creditors.  Debtor estimates claims in this class at $200,000.00.

 

B.            Impairment: Class Eight is impaired.

 

C.            Treatment: The Plan provides that each and every holder of a Class Eight Allowed Claim shall receive shares on account of their claim.   Each allowed claim will be divided by .25 in order to obtain a share value exchange of the claim.  Any liens held by the Class Eight creditors shall be null and void and removed as of the Effective Date.

 

3.9           Class Nine - Client Deposits

 

                                A.           Classification:  Class Nine consists of the allowed unsecured claims of Dr. Jason Terrell and Governor Juan F. Louis Hospital & Medical Center for deposits for the purchase of company products.  Debtor estimates claims in this class at $57,000.00.

 

B.             Impairment: Class Nine is impaired.

 

C.             Treatment: The Plan provides that each and every holder of a Class NineAllowed Claim shall receive shares on account of its claim.   Each allowed claim will be divided by .05 in order to obtain a share value exchange of the claim and the claimant will receive that amount of shares of stock plus an equal number of warrants for future purchase at an exercise price of $0.10 effective for five years after the date of issuance. Any liens held by the Class Nine creditor shall be null and void and removed as of the Effective Date.

 

  

- 12 -

  

 

3.10          Class Ten - Contingent, Unliquidated and Disputed Claims.

 

                                A.           Classification:  Class Ten consists of  all contingent, unliquidated and disputed claims.

 

B.             Impairment: Class Ten is impaired.

 

C.             Treatment: Class Ten creditors shall receive no distribution under the Plan.

 

3.11         Class Eleven - Interest of Equity Holders.

 

                                A.           Classification:  Class Eleven consists of the equity interest holders of the debtor.

 

B.             Impairment: Class Eleven is not impaired.

 

C.             Treatment: The equity holders in Debtor shall be allowed to retain their current percentage of interest or a percentage thereof subject to the Reverse Stock Split as set forth in the Plan.

 

3.12         Class Twelve - Claims of Participating Investors.

 

                                A.           Classification:  Class Twelve consists of the claims of participating investors.

 

B.             Impairment: Class Twelve is impaired.

 

C.            Treatment:   Unless participating investors contribute substantial capital required to fund this Plan they will receive no percentage of the equity interest of the debtor and no distribution under the Plan.  Participating investors will receive common stock at the rate of one share for every $0.05 invested and one warrant for every share of stock purchased.  Each warrant will have a $0.10 exercise price and be effective for five years after the date of issuance.

 

ARTICLE IV

 

General Provisions 

 

4.1.          Notwithstanding any other provision of this Plan, each claim shall be paid only after it has been allowed in accordance with the Code.

 

  

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4.2           At the option of the Debtor, this Plan may be withdrawn at any time prior to the Effective Date of the Plan.  Such option shall be exercised by the filing in the case of a notice of withdrawal and mailing a copy of such notice to all creditors, equity security holders and persons specially requesting all notices in this case.  If such option is timely and properly exercised, the case shall continue and be administered as if the Plan has been withdrawn prior to the confirmation.

 

4.3           Pursuant to Section 1123(b)(3)(B) of the Code, the Debtor shall retain each and every claim, demand or cause of action whatsoever, which the Debtor had or had power to assert immediately prior to confirmation of the Plan, including without limitation, actions for the avoidance and recovery pursuant to Section 550 of the Code or transfers avoidable by reason of Sections 544, 545, 548, 549 or 553(b) of the Code, and may commence or continue in any appropriate court or tribunal and suit or other proceeding for the enforcement of same.

 

ARTICLE V

 

Means for Execution of the Plan

 

5.1           Continuation of the Debtor’s Business: The Debtor, as reorganized, will retain all property of the estate, excepting property which is to be sold or otherwise disposed of as provided for herein (if applicable), executory contracts which are rejected pursuant to this Plan, and property transferred to creditors of the Debtor pursuant to the express terms hereof.  The retained property shall be used and employed by the Debtor in the continuance of its business. (Further details concerning the nature and scope of the Debtor’s future business operations may be found in the Disclosure Statement which accompanies the Plan.)

 

5.2           Raising Additional Capital: The Plan may be implemented by current management and/or new Participating Investors making capital contributions in the Reorganized Debtor if required.

 

5.3           Implementation on the Effective Date: The Plan shall be implemented on the Effective Date.  The funds necessary to implement the Plan shall derive from the Debtor’s Cash and the proceeds of Financing.

 

5.4           Post-Effective Business of Reorganized Debtor: Following the Effective Date, Reorganized Debtor will engage in any business appropriate under its organizational documents.

 

  

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5.5           Reverse Stock Split: At the time of filing, outstanding shares in the Debtor total approximately 110,000,000.  Current outstanding shares in the Debtor will undergo a 1 for 10 Reverse Stock Split, which will bring the amount of outstanding shares to approximately 11,000,000. As part of the Plan, CDEX will implement the 1 for 10 Reverse Stock Split of the Old CDEX Common Stock, such that each 10 shares shall, following the Reverse Stock Split (and subject to adjustment for fractional entitlements), be consolidated into one (1) share of New Common Stock.The aggregate fractional share interests of each holder of Old CDEX Common Stock shall be rounded up to the nearest whole number. On the Effective Date or as soon as practicable thereafter, the Reorganized Debtor expects to apply to have the New Common Stock listed on the Over the Counter Stock Exchange (“OTC”) or, if Reorganized Debtor is unable to have the New Common Stock listed on the OTC, other national securities exchange.  All existing warrants to purchase shares of Old CDEX Common Stock will be extinguished upon consummation of the Plan.  This action will allow Debtor to raise new capital to complete product development and consummate sales to hospitals and other interested prospective clients.

 

5.6           Cancellation of Existing Securities and Agreements: On the Effective Date, (I) all 10% Convertible Notes, and any other notes, bonds, indentures or other instruments or documents evidencing or creating any indebtedness or obligations of the Debtor shall be cancelled, and (ii) the obligations of the Debtor under any agreements, indentures, or certificates of designation governing the Old Common Stock and the 10% Convertible Notes, and any other notes, bonds, indentures or other instruments or documents evidencing or creating any indebtedness or obligations of, or Old Common Stock in, the Debtors, shall be discharged.  This provision does not apply to any notes or other instruments evidencing indebtedness or obligations of the Debtor that are unimpaired, reinstated, or amended and restated under this Plan.

 

5.7           Issuance of New Common Stock: On or as soon as reasonably practicable after the Effective Date, the Reorganized Debtor will issue and deliver, in accordance with the provisions hereof, approximately 51,000,000 shares of New Common Stock to those Entities entitled to receive it under this Plan.  The Debtor believes it is an integral and essential element of the Plan that the issuance of the New Common Stock pursuant to the Plan shall be exempt from registration under the Securities Act, pursuant to Section 4(2) as it is not in connection with a public offering.  The Order will include a finding and conclusion, binding all parties to the Case, the Debtor, and the Reorganized Debtor, but expressly excluding the Securities and Exchange Commission and all federal, state, and local regulatory agencies, to the effect that such offer and issuance fall within the exemption(s) from registration under the Securities Act and any state or local law pursuant to said section.  To date, the DIP Lenders and Pre-Petition Lenders have not entered into any agreements or reached any understandings with any party other than the Agent, DIP Lender and/or Pre-Petition Lender with regard to the transfer or other disposition of the New Common Stock that they will receive under this Plan.

 

  

- 15 -

  

 

5.8           Authorized Share Capital: Upon consummation of the Plan, Debtor shall, without the need for any further corporate act or other action under any applicable law, regulation, order or rule, have 300,000,000 shares of authorized New Common Stock, of which approximately 11,000,000 shall be issued on or as soon as reasonably practicable after the Effective Date.  Debtor reserves the right to increase or amend the foregoing post-Effective Date.

 

5.9           Issuance of New Warrants: On or as soon as reasonably practicable after the Effective Date, the Reorganized Debtor will issue and deliver, in accordance with the provisions hereof, approximately 40,000,000 New Warrants and other agreements and instruments contemplated thereby.

 

5.10         Applicability of Section 4(2) to Certain Creditors: Some smaller trade creditors, employees, and shareholders not contributing additional monies may not be covered by Section 4(2) of the Securities Act, but may be covered by 11 U.S.C. §1145.  Those creditors should contact their own legal counsel on the transferability of their shares.

 

ARTICLE VI

 

Provisions for the Assumption or Rejection of 

Executory Contracts and Unexpired Leases

 

The Debtor assumes all executory contracts or unexpired leases to which it is a party, except any specifically provided for prior to the hearing on the Disclosure Statement.

 

  

- 16 -

  

 

ARTICLE VII

 

Retention of Jurisdiction

 

The Bankruptcy Court will retain jurisdiction over this case for purposes of determining the allowance of claims or interests or obligations thereto and for any other purpose which is contemplated in the Plan or which will otherwise assist in the consummation of the Plan.  The Court also will retain jurisdiction for purposes of determining the allowance of any payment of any other claims or administrative expenses.  The Court shall retain jurisdiction for purposes of determining any dispute arising from the interpretation, implementation or consummation of the Plan.  In addition, the Court shall retain jurisdiction for the following purposes:

 

a)             the classification of any claim or interest, the determination of such objections as may be filed to claims, or interest, and the re-examination of the allowance of any claim or interest;

 

b)            the correction of any defect, the curing of any omission, or the reconciliation of any inconsistency in the Plan or the order of confirmation as may be necessary to carry out the purposes and intent of this Plan;

 

c)             to enforce and interpret the terms and conditions of this Plan;

 

d)            entry of any order, including injunctions, necessary to enforce the title, rights and powers of the Debtor and to impose  such limitations and terms of such title, rights and powers as the Court may deem necessary;

 

e)            determination of any claims asserted by the Debtor against any other person or entity, including but not limited to any right of the Debtor to recover assets pursuant to the provisions of Title 11, if such claim is pursued in the Court prior to the closing of the case;

f)             determination of all questions and disputes concerning the sale, lease, encumbering or other transfer of the property of the Debtor; and

 

g)             entry of a final decree closing this case.

 

Notwithstanding anything to the contrary contained herein, the Debtor shall not be bound by estoppel, the principal of res judicata or collateral estoppel with respect to any term or provisions contained herein in the event the plan is not confirmed as set forth herein.

 

  

- 17 -

  

 

ARTICLE VIII

 

Modification of the Plan

 

This Plan may be modified in accordance with the provisions of the Bankruptcy Code and Chapter 11.  In this regard:

 

a)              in accordance with Section 1127(a) of the Bankruptcy Code and Chapter 11, 11 U.S.C. Section 1127(a), modification(s) of the Plan may be proposed in writing by the Debtor at any time before its confirmation, provided that the Plan, as thus modified meets the requirements of Sections 1122 and 1123 of the Bankruptcy Code and Chapter 11, 11 U.S.C. Section 1122 and 1123; and provided further that the circumstances then existing justify such modification(s), and the Bankruptcy Court confirms the Plan as thus modified, under Section 1129 of the Bankruptcy Code and Chapter 11, 11 U.S.C. Section 1129;

 

b)             any holder(s) of a claim or equity interest(s) that has accepted or rejected the Plan will be deemed to have accepted or rejected, as the case may be, the Plan as modified unless, within the time fixed by the Bankruptcy Court for doing so, such holder(s) changes its previous acceptance or rejection; and

 

c)             every modification of the Plan will supersede the previous version(s) of the Plan as and whenever each such modification is effective provided in this Article.  When superseded, the previous version(s) of the Plans will be in the nature of a withdrawn or rejected settlement proposal(s), and will be null, void and unusable by the Debtor or any other party for any purpose(s) whatsoever with respect to any of the contents of such version(s) of the Plan.

 

ARTICLE IX

 

Miscellaneous Provisions

 

9.1           Securities Law: Any satisfaction or exchange provided to any creditor pursuant to this Plan which may be deemed to be a security is exempt from registration under certain state and federal securities laws pursuant to Section 4(2) of the Securities Act.  Absent registration or another exemption from the requirements of registration pursuant to the Securities Act of 1933, as amended, and any applicable state securities laws, the subsequent transfer of any such securities is not so exempt.

 

  

- 18 -

  

 

9.2           Title to Property: Upon confirmation, all assets of the Debtor will be reinvested in the Debtor.

 

9.3           Curing of Defaults: The confirmation of a Plan shall result in the curing of any default to the holder of a claim or interest according to the terms and conditions of the Plan.

 

9.4           Discharge of the Debtor and of Claims and Termination of the Equity Interests: Upon the Effective Date and in consideration of the rights afforded in the Plan and the payments and distributions to be made hereunder, except as otherwise provided herein or in the Confirmation Order, each holder, or any affiliate or representative of such holder, of a Claim or Interest, will be deemed to have forever waived, released, and discharged the Debtor, to the fullest extent permitted by 11 U.S.C. §1141, of and from any and all rights and liabilities that arose prior to the Effective Date of any kind, nature, or description whatsoever.  Each such holder of a Claim or Interest, and any affiliate or representative of such holder, will be deemed to have granted, and will grant to the Debtor the waiver, release and discharge described in this Section.  Except as otherwise provided herein, upon the Effective Date, all such holders of Claims and Interests and their affiliates or representatives, will be forever precluded and enjoined, pursuant to 11 U.S.C. §§105, 524 & 1141, from prosecuting or asserting any such discharged Claim against, or terminated Interest in, the Debtor or the Reorganized Debtor, or against any of its assets or properties, any other or further Claim or Interest 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 has filed a Proof of Claim.

 

9.5           Injunction Against Interference with Plan: Upon the entry of the Confirmation Order, all holders of Claims and the Equity Interests and other parties in interest, along with their respective present or former affiliates, employees, agents, officers, directors, or principals, will be enjoined from taking any actions to interfere with the implementation or consummation of the Plan.

 

9.6           Plan Consummation: Plan consummation will not occur absent full funding by those participating investors who have agreed to provide financing post-confirmation.

 

  

- 19 -

  

 

ARTICLE X

 

Disputed Claims

 

Debtor reserves the right to verify and object to any proof of claim.  Payment of disputed claims shall be made only after agreement has been reached between the Debtor and the Creditor or upon the order of the Court.  Any and all objections to proofs of claim will be filed within sixty (60) days of the Effective Date of this Plan or will be waived.

 

ARTICLE XI

 

Quarterly Fees and Reports

 

Debtor shall continue to pay quarterly fees to the U.S. Trustee System until such time as a Final Decree has been entered in this matter by the Court, closing this Chapter 11 proceeding. Debtor shall continue to file monthly operating reports until such time as the Court enters an Order confirming this Chapter 11 Plan of Reorganization and/or the end of the calendar quarter in which the Plan was confirmed.  At such time, Debtor shall cease filing monthly operating reports and shall begin filing quarterly post confirmation reports.  These quarterly reports shall be filed until such time as a Final Decree has been entered in this matter by the Court, closing this Chapter 11 proceeding.

 

ARTICLE XII 

 

Closing of the Case 

 

At such time as the case has been fully administered, that is, when all things requiring action by the Court have been done, and the Plan has been substantially consummated, this case shall be closed.  To close the case the Debtor shall file an application for final decree showing that the case has been fully administered and that he Plan has been substantially consummated.  The Court shall conduct a hearing (or as otherwise allowed by the Court) upon the application after notice to all creditors, equity security holders and persons specially requesting notice, after which an order approving the Debtor’s report and closing the case (final decree) may be entered.

 

In the period after confirmation but before closing of the case, the Debtor may continue to avail itself of the services of professional persons whose employment was approved at or prior to confirmation in completing administration of the case and in the consummation and performance of the Plan, and, if necessary, with approval of the Court employ additional professional persons to render services in and in connection with this case.  With respect to services rendered and expenses incurred in or in connection with the case by any professional person during such period, the professional person may render periodic billings therefore to the Debtor which shall promptly pay the same, but each such payment shall be subject to review and approval by the Court as to reasonableness thereof, as set forth herein below.

 

  

- 20 -

  

 

In its application for final decree, the Debtor shall detail all amounts paid during such period to professional persons as compensation for services rendered or reimbursement of expenses incurred, and with respect to which no prior allowance thereof has been made by the Court.  At the hearing on the Debtor’s application for final decree the Court shall consider and determine whether or not such payments shall be approved as reasonable.

 

Confirmation of this Plan shall constitute a discharge of any debt that arose prior to confirmation and any debt of any kind specified in Bankruptcy Code Section 502(g), (h) and (I), other than those liabilities expressly to be assumed hereby by the Reorganized Debtor.

 

CONCLUSION 

 

The materials provided in the Disclosure Statement and Plan are intended to assist you in voting on the Plan in an informed fashion.  If the Plan is confirmed, you will be bound by its terms; therefore, you are urged to review this material and to make such informed vote on the Plan.

 

	 	
DATED August 17, 2012.

	 	 
	 	 	
LAW OFFICES OF

	 
	 	 	
ERIC SLOCUM SPARKS, P.C. 

	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	

/s/ Sparks AZBAR #11726 

	 
	 	 	Eric Slocum Sparks	 
	 	 	 	 
	 	 	

Attorney for Debtor

	 

 

 

 

 

 

Copies of the foregoing

mailed/faxed/delivered August 17, 2012 to:

 

United States Trustee

230 N. First Ave. #204

Phoenix, AZ 85003

 

Elizabeth C. Amorosi, Esq. 

Asst. U. S. Trustee

United States Trustee

230 N. First Ave. #204

Phoenix, AZ 85003

Elizabeth.C.Amorosi@usdoj.gov

 

  

- 21 -

  

 

Robert M. Charles, Jr., Esq. 

Lewis and Roca, LLP

One South Church Ave., Suite 700 

Tucson, AZ 85701

Attorney for Gemini Master Fund, Ltd.

Rcharles@LRLaw.com

 

Brian A. Laird, Esq.

Heurlin Sherlock Laird

1636 N. Swan Rd.  Suite 200 

Tucson, AZ 85712

Attorney for James Ryles

blaird@HSLazlaw.com

 

U.S. Securities and Exchange Commission 

Attn: Sarah D. Moyed

5670 Wilshire Boulevard, Suite 1100 

Los Angeles, CA 90036-3648

moyeds@sec.gov

 

U.S. Securities and Exchange Commission 

Attn: Sandra W. Lavigna

5670 Wilshire Boulevard, Suite 1100 

Los Angeles, CA 90036-3648

lavignas@sec.gov

 

U.S. Securities and Exchange Commission 

Attn: Michael A. Berman

Station Place

100 F Street, N.E.

Washington, DC 20549

 

Nevada Secretary of State 

Securities Division

555 East Washington Ave., Suite 5200 

Las Vegas, NV 89101

 

Nevada Secretary of State

Commercial Recordings Division 

202 N. Carson Street

Carson City, NV 89701

 

Catherine Cortez Masto

Attorney General, State of Nevada 

110 N. Carson Street

Carson City, NV 89701-4717

 

U.S. Department of Justice

Office of the Attorney General 

Eric H. Holder, Jr.

950 Pennsylvania Avenue, N.W. 

Washington, DC 20530-0001

 

  

- 22 -

  

 

Financial Industry Regulatory Authority 

OTC Compliance Unit

9509 Key West Avenue 

Rockville, MD 20850

 

 

OFFICIAL COMMITTEE OF 

UNSECURED CREDITORS

 

Cynthia Samson  - Sampson.Cynthia@gmail.com

P. O. Box 5729

Scottsdale, AZ 85261

 

Daniel Groff   -   ggroff55@cox.net 

8002 E. Rosewood St.

Tucson, AZ 85710

IAM Investment Group, LP  -   MK4316@gmail.com

Attn: Malcolm Philips

20221 Middletown Rd. Cornelius, NC 28031

 

Lucas Baer  - Lucas.baer@gmail.com

9050 N. Shadow Rock Dr.

Tucson, AZ 85743

 

 

 

/s/ L. Anderson              

 

 

 - 23 -

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