Case 4-2545-CSS Doc 332 Filed 03/06/5 Page of 7 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Baxano Surgical, Inc., Debtor. Chapter Case No. 4-2545 (CSS) Objection Deadline: March 23, 205 by 4:00 p.m. Hearing Date: March 30, 205 at 0:00 a.m. MOTION TO MODIFY ORDER AUTHORIZING THE ENGAGEMENT OF TAMARACK ASSOCIATES, INC. AND DESIGNATING JOHN L. PALMER AS CHIEF RESTRUCTURING OFFICER NUNC PRO TUNC TO THE PETITION DATE The above-captioned debtor and debtor-in-possession (the Debtor ), by its undersigned counsel, hereby submits this Motion (the Motion ) for entry of an Order, in substantially the form submitted herewith, modifying the Order Granting Motion of Debtor Pursuant To Section 363 of the Bankruptcy Code for an Order Authorizing the Engagement of Tamarack Associates, Inc. and Designating John L. Palmer as Chief Restructuring Officer for the Debtor Nunc Pro Tunc to the Petition Date (the Tamarack Order )[D.I. 46] to enable John L. Palmer to serve as chief executive officer in addition to his existing duties as chief restructuring officer. The Debtor seeks this relief pursuant to Section 363 of Title of United States Bankruptcy Code (as amended, the Bankruptcy Code ), Rule 204 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ) and Rule 204- of the Local Rules of Bankruptcy Procedure for the District of Delaware (the Local Rules ). In further support of this Motion, the Debtor respectfully represents as follows: The last four digits of the Debtor s tax identification number are 9022. The address of the Debtor s corporate headquarters is 0 Horizon Drive, Suite 230, Raleigh, North Carolina 2765. SL 353880v 0988.0000
Case 4-2545-CSS Doc 332 Filed 03/06/5 Page 2 of 7 Jurisdiction, Venue and Predicates for Relief. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 334(b). Venue is proper pursuant to 28 U.S.C. 408 and 409. This matter is a core proceeding within the meaning of 28 U.S.C. 57 (b)(2). 2. The statutory predicates for the relief requested herein are sections 05(a) and 365(a) of the Bankruptcy Code. Background 3. On November 2, 204 (the Petition Date ), the Debtor filed a voluntary petition for relief under chapter the Bankruptcy Code. The Debtor is operating its business and managing its property as a debtor-in-possession pursuant to sections 07(a) and 08 of the Bankruptcy Code. 4. No request for the appointment of a trustee or examiner has been made in this chapter case (the Chapter Case ). 5. On November 25, 204, the Office of the United States Trustee appointed a committee of unsecured creditors. [D.I. 80]. 6. The factual background relating to the Debtor s commencement of this Chapter Case is set forth in detail in the Declaration of John L. Palmer [D.I. 0] (the Palmer Declaration ), which is incorporated herein by reference. 7. On November 7, 204, the Debtor filed the Motion of the Debtor Pursuant to Section 363 of the Bankruptcy Code for an Order Authorizing the Engagement of Tamarack Associates, Inc. and Designating John L. Palmer as Chief Restructuring Officer for the Debtor Nunc Pro Tunc to the Petition Date (the Tamarack Motion ). [D.I. 25]. SL 353880v 0988.0000 2
Case 4-2545-CSS Doc 332 Filed 03/06/5 Page 3 of 7 8. Pursuant to the Tamarack Motion, the Debtor sought authorization to engage Tamarack Associates, Inc. ( Tamarack ) and designate John L. Palmer as chief restructuring officer ( CRO ) nunc pro tunc to the Petition Date. 9. The terms of the engagement were set forth in that certain engagement letter (the Engagement Letter ) between Tamarack and the Debtor dated as of November 2, 204 that was attached to the Tamarack Motion as Exhibit B. 0. On December 2, 204, the Court entered the Tamarack Order which granted the Tamarack Motion and approved the relief requested therein.. The Tamarack Order stated that in the event that the Debtor seeks to have Tamarack personnel assume executive officer positions that are different than the positions disclosed in the Tamarack Motion, or otherwise modify or expand the scope of the engagement, a motion to modify the retention must be filed. Tamarack Order, 2(a). 2. On January 22, 205, the Debtor conducted an auction during which it secured bids for all of its product lines. 3. By Order dated January 29, 205, the Court entered Orders authorizing the sale of those product lines and the sales were consummated shortly thereafter. The sale of those product lines yielded gross proceeds of $7,760,000. 4. In light of the consummation of the asset sales, the Debtor has ceased substantially all of its business operations. 5. As a result of the cessation of operations and the wind down of the Debtor s business, the Debtor s Chief Executive Officer, Ken Reali, resigned effective as of February 3, 205. The other officers of the Debtor resigned prior to Mr. Reali s resignation. SL 353880v 0988.0000 3
Case 4-2545-CSS Doc 332 Filed 03/06/5 Page 4 of 7 6. The bylaws of the Debtor explicitly provide for a Chief Executive Officer ( CEO ), and certain other inferior officers, but do not explicitly provide for a CRO. Due to the fact that the individuals holding all of the officer positions that are explicitly recognized under the bylaws of the Debtor have resigned, the Debtor believes that, while possibly unnecessary, a new CEO should be appointed. As the currently serving CRO, Mr. Palmer is the obvious choice to now serve as CEO. Toward that end, the Debtor seeks to modify the Tamarack Order to authorize Mr. Palmer to serve as CEO in addition to his existing capacity as CRO. 7. On February 27, 205, the Debtor passed a board resolution appointing Mr. Palmer as CEO, effective upon approval by the Court of this Motion. 8. Mr. Palmer would not receive any additional compensation for his services as CEO; his compensation would remain the same as it existed under the Tamarack Order and Engagement Letter. 9. The terms of the engagement of Tamarack and Mr. Palmer shall remain in full force and effect as set forth in the Engagement Letter except that: (i) in addition to providing Mr. Palmer as CRO, Tamarack will provide Mr. Palmer as CEO; (ii) all references in the Engagement Letter to Mr. Palmer as CRO shall be deemed as references to him as both CEO and CRO; and (iii) the following provision of the Engagement Letter, at paragraph, shall be deleted: Any proposal by the CRO to have or terminate any employees shall be made only after consultation with Ken Reali, the president and CEO, and such decision shall be of mutual agreement. In addition, the statement of disinterestedness and limitation of engagement provisions set forth in the Tamarack Motion at paragraphs 9 through and 4 through 23, respectively, remains in full force and effect. SL 353880v 0988.0000 4
Case 4-2545-CSS Doc 332 Filed 03/06/5 Page 5 of 7 SL 353880v 0988.0000 Basis for Relief Requested A. The Retention of John L. Palmer as CEO Under the Terms and Conditions Asserted Herein is Appropriate Under Section 363 of the Bankruptcy Code 20. Retention of Mr. Palmer as CEO is appropriate under section 363 of the Bankruptcy Code. Section 363(b) provides, in relevant part, that the trustee or debtor in possession after notice and a hearing, may use, sell or lease, other than in the ordinary course of business, property of the estate. U.S.C. 363 (b)(). Case law from this and other districts makes clear that if a debtor s proposed use of assets under section 363 represents a reasonable business judgment on the part of the debtor, such use should be approved. In re Martin, 9 F.3d 389, 395 (3d Cir. 996); In re Lionel Corp., 722 F.2d 063, 07 (2d Cir. 983). 2. Now that Mr. Reali and the other officers of the Debtor have resigned, it is in the best interests of the Debtor that the Tamarack Order be modified to authorize the Debtor to engage Mr. Palmer as CEO. As stated above, the Debtor s bylaws do not explicitly recognize the position of CRO. As such, as a matter of corporate formality, to ensure that Mr. Palmer is duly authorized to act for the Debtor, the terms of his retention should be modified to reflect that he will serve as both CEO and CRO. Other than as specified above, all other terms and conditions of his retention, including, without limitation, his compensation, will remain the same and will be governed by the Engagement Letter and Tamarack Order. Court. No Prior Request 22. No previous Motion for the relief sought herein has been made to this or any other Notice 23. The Debtor has provided notice of this Motion to: (a) the Office of the United States Trustee for the District of Delaware; (b) the entities listed on the Consolidated List of Creditors 5
Case 4-2545-CSS Doc 332 Filed 03/06/5 Page 6 of 7 Holding the 20 Largest Unsecured Claims filed by the Debtor pursuant to Bankruptcy Rule 007(d); (c) Hercules Technology Growth Capital, Inc., the Debtor s secured pre-petition lender and proposed post-petition lender, Legal Department, Attn: Chief Legal Officer and Bryan Jadov, 00 Hamilton Avenue, Suite 30, Palo Alto, CA 9430; (d) Cole Shotz, 25 Main Street Hackensack, NJ, 0760, Attn: Stuart Komrower and Ilana Volkov, counsel to Hercules Technology Growth Capital, Inc.; (d) Internal Revenue Service; (e) Securities and Exchange Commission; and (f) Delaware Department of Justice Division of Securities. 24. In light of the nature of the relief requested, the Debtor respectfully submits that no further notice is necessary. SL 353880v 0988.0000 6
Case 4-2545-CSS Doc 332 Filed 03/06/5 Page 7 of 7 WHEREFORE, for the foregoing reasons, the Debtor respectfully requests that the Court enter the proposed Order modifying the Tamarack Order to provide for the engagement of John L. Palmer as CEO pursuant to Section 363 of the Bankruptcy Code and grant the Debtor such other and further relief as this Court deems necessary and just. Dated: March 6, 205 STEVENS & LEE, P.C. By: /s/ John D. Demmy John D. Demmy (DE Bar. No. 2802) 05 N. Market Street, Suite 700 Wilmington, Delaware 980 Tel. (302) 425-3308 Email: jdd@stevenslee.com and Robert Lapowsky John C. Kilgannon 88 Market Street 29th Floor Philadelphia, Pennsylvania 903 Telephone: (25) 575-000 Email: rl@stevenslee.com Email: jck@stevenslee.com Counsel for the Debtor and Debtor-in-Possession 7 SL 353880v 0988.0000
Case 4-2545-CSS Doc 332- Filed 03/06/5 Page of 2 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Baxano Surgical, Inc., Debtor. Chapter Case No. 4-2545 (CSS) Objection Deadline: March 23, 205 by 4:00 p.m. Hearing Date: March 30, 205 at 0:00 a.m. NOTICE OF MOTION PLEASE TAKE NOTICE that the above-captioned debtor and debtor-in-possession (the Debtor ) filed the Motion to Modify Order Authorizing the Engagement of Tamarack Associates, Inc. and Designating John L. Palmer as Chief Restructuring Officer Nunc Pro Tunc to the Petition Date (the Motion ) with the United States Bankruptcy Court for the District of Delaware (the Court ). PLEASE TAKE FURTHER NOTICE that objections, if any, to the entry of an order granting the relief sought by the Motion must be (a) in writing; (b) filed with the Clerk of the United States Bankruptcy Court for the District of Delaware, 824 Market Street, 3 rd Floor, Wilmington, Delaware 980 by March 23, 205 at 4:00 p.m. (prevailing Eastern Standard Time) (the Objection Deadline ); and (c) served as to be received on or before the Objection Deadline by the undersigned attorneys for the Debtor. PLEASE TAKE FURTHER NOTICE that a hearing to consider the relief sought in the motion will be held on March 30, 205 at 0:00 a.m., Prevailing Eastern Time before the Honorable Christopher S. Sontchi at The United States Bankruptcy Court for the District of Delaware, 824 Market Street, 5th Floor, Courtroom No. 6, Wilmington, Delaware 980. The last four digits of the Debtor s tax identification number are 9022. The address of the Debtor s corporate headquarters is 0 Horizon Drive, Suite 230, Raleigh, North Carolina 2765. SL 353880v 0988.0000
Case 4-2545-CSS Doc 332- Filed 03/06/5 Page 2 of 2 PLEASE TAKE FURTHER NOTICE THAT IF YOU FAIL TO RESPOND IN ACCORDANCE WITH THIS NOTICE, THE COURT MAY GRANT THE RELIEF REQUESTED IN THE MOTION WITHOUT FURTHER NOTICE OR HEARING. Dated: March 6, 205 STEVENS & LEE, P.C. By: /s/ John D. Demmy John D. Demmy (DE Bar. No. 2802) 05 N. Market Street, Suite 700 Wilmington, Delaware 980 Telephone: (302) 425-3308 Email: jdd@stevenslee.com and Robert Lapowsky John C. Kilgannon 88 Market Street, 29th Floor Philadelphia, Pennsylvania 903 Telephone:(25) 575-000 Email: rl@stevenslee.com jck@stevenslee.com Attorneys for Debtor and Debtor in Possession 2 SL 353880v 0988.0000
Case 4-2545-CSS Doc 332-2 Filed 03/06/5 Page of 2 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Baxano Surgical, Inc., Chapter Case No. 4-2545 (CSS) Debtor. ORDER GRANTING MOTION TO MODIFY ORDER AUTHORIZING THE ENGAGEMENT OF TAMARACK ASSOCIATES, INC. AND DESIGNATING JOHN L. PALMER AS CHIEF RESTRUCTURING OFFICER Upon the Debtor s Motion (the Motion ) to modify Order Authorizing the Engagement of Tamarack Associates, Inc. and Designating John L. Palmer as Chief Restructuring Officer Nunc Pro Tunc to the Petition Date, the Court having jurisdiction to consider the Motion pursuant to Sections 57(a) and 334 of Title 28 of the United States Code; and the Motion being a core proceeding pursuant to Section 57(b)(2) of Title 28 of the United States Code; and venue being proper in this Court pursuant to Sections 408 and 409 of Title 28 of the United States Code; and due and proper notice of the Motion having been provided, and it appearing that no other further notice need be provided; and the Court having determined that the relief sought in the Motion is necessary and in the best interest of the Debtor, its estate, its creditors, and all parties of interest; and the Court having determined that legal and factual basis set forth in the Motion established just cause for the relief granted herein, and after due deliberation sufficient cause appearing therefore, it is hereby ORDERED that the Motion is granted as set forth herein; and it is further ORDERED that in accordance with Section 363 of the Bankruptcy Code, Bankruptcy Rule 204 and Local Rule 204-, the Debtor is authorized to engage John L. Palmer as Chief The last four digits of the Debtor s tax identification number are 9022. The address of the Debtor s corporate headquarters is 0 Horizon Drive, Suite 230, Raleigh, North Carolina 2765. SL 353880v 0988.0000
Case 4-2545-CSS Doc 332-2 Filed 03/06/5 Page 2 of 2 Executive Officer in addition to his current position as Chief Restructuring Officer on the terms and condition set forth in the Engagement Letter and this Order. ORDERED that that the Court retains jurisdiction to hear and determine all matters related to the implementation of this Order. CHRISTOPHER S. SONTCHI UNITED STATES BANKRUPTCY COURT SL 353880v 0988.0000 2