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UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MASSACHUSETTSEASTERN DIVISION
____________________________________
)
In re: ))
NEW ENGLAND COMPOUNDING ) CHAPTER 11PHARMACY, INC., ) CASE NO. 12-19882-HJB
)
Debtor. )____________________________________)
APPLICATION OF DEBTOR FOR AUTHORITY TO EMPLOY VERDOLINO &
LOWEY, P.C. AS ACCOUNTANTS AND FINANCIAL ADVISORS TO DEBTOR
Pursuant to 11 U.S.C. 327(a) and Bankruptcy Rule 2014(a), New England
Compounding Pharmacy, Inc., the debtor-in-possession in the above-captioned Chapter 11
bankruptcy case (the Company), respectfully requests that this Court enter an Order
authorizing the employment of Verdolino & Lowey, P.C. (V&L) as accountants and financial
advisors to the Debtor, including service by Keith D. Lowey as Chief Restructuring Officer
(CRO) as more specifically described below. In support of this Application, the Debtor
submits the Affidavit of Craig R. Jalbert in Support of Application for Employment Pursuant to
Bankruptcy Rule 2014(a) and Local Rule 2014-1 attached hereto as Exhibit A.
In further support of this Application, the Debtor states as follows:
1. On December 21, 2012, the Company filed a voluntary petition pursuant to
Chapter 11 of the Bankruptcy Code (the Petition Date).
2. The Company continues to own and manage its assets as a debtor-in-possession
pursuant to 1107(a) and 1108 of the Bankruptcy Code.
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Background
3. The Company is a compounding pharmacy which combines and mixes
ingredients to create specific formulations of pharmaceutical products.
4. Prior to the Petition Date, numerous individuals across the country were stricken
with fungal meningitis. Information available through the Centers For Disease Control and
Prevention (CDC) indicates that 39 people have died and over 600 individuals have been
sickened. Although the CDCs investigation is on-going, the CDC attributes the outbreak of
fungal meningitis to contaminated pharmaceuticals distributed by NECC. In early October,
NECC initiated a nationwide recall of thousands of vials of the substance at issue and, in
cooperation with regulatory authorities, ceased operation.
5. Approximately 130 lawsuits against NECC have been filed across the country in
connection with this tragic occurrence. In addition, NECC has received demands from over 270
additional claimants asserting injury from the contaminated pharmaceuticals. The number of
lawsuits and demands is rising on a daily basis. The sheer volume and wide geographic
distribution of cases bringing the prospect of chaotic, conflicting and value-destroying pretrial
orders and remedies has necessitated commencing this case at this time.
6. On December 12, 2012, the directors and shareholders of the Company appointed
Keith D. Lowey of Verdolino & Lowey, P.C. as an independent director and the chief
restructuring officer with plenary and exclusive authority over matters related to personal
injury and wrongful death claimants and other creditors. Mr. Lowey is also empowered with
plenary and exclusive authority over the Companys conduct of this Chapter 11 case.
7. Through this Chapter 11 case NECC seeks to address the claims of hundreds of
individuals in a single forum of national jurisdiction in a proceeding that minimizes costly
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litigation that drains assets from the estate. By facilitating a consensual resolution among the
major constituencies to develop a Compensation Fund for personal injury creditors as has been
accomplished in other cases, NECC hopes to provide a greater, quicker, fairer and less expensive
payout to its creditors than they could achieve through piecemeal litigation.
Verdolino & Lowey Services
8. The Company hereby requires the services of V&L as accountants and financial
advisors to:
a. to prepare cash forecasts, budgets and reports on behalf of the Company;
b.
to complete Monthly Operating Reports and any other financial reporting
that may be required in connection with this case;
c. to advise the Company concerning matters relating to the liquidation of
assets and the winding up of its affairs;
d. to have Keith D. Lowey serve as independent director and chief
restructuring officer pursuant to the Corporate Authorization filed with the
petition;
e. to prepare and file on behalf of the estate all necessary tax returns that may
be required by federal, state or local law;
f. to advise the Company regarding the tax implications of asset recovery;
g. to advise and assist the Company with respect to evaluating and objecting
to proofs of claim submitted by federal and state taxing authorities;
h. to assist the Company in reviewing and examining the books and records
of the Company with respect to potential preference and/or fraudulent conveyance
or transfer claims; and
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i. to assist the Company with other tasks that the Company may require and
reasonably request.
9. The full scope of services to be provided by V&L and the basis for their
compensation is further set forth in the Engagement Agreement between the Company and V&L,
attached hereto as Exhibit B.
10. V&L has requested and the Company has agreed to enter into an Indemnification
Agreement attached hereto as Exhibit C.
11. V&L has substantial experience in proceedings under the Bankruptcy Code, and
has the varied and substantial resources necessary to advise and assist the Company.
12. Subject to this Courts jurisdiction with respect to professional fees, the Company
has agreed to compensate V&L for its professional services described above at its usual hourly
rates in effect at the time services are rendered, subject to adjustment with the consent of the
Company and V&L. The Company has also agreed to reimburse V&L for its cash disbursements
and for such expenses as V&L customarily bills to its clients. V&L maintains detailed,
contemporaneous records of time and any actual and necessary expenses incurred in connection
with the rendering of the services described above, by category and nature of the service
rendered.
13. Except as set forth in the Lowey Affidavit, V&L does not represent any interest
adverse to the estate in matters upon which V&L is to be employed, and V&L, its principals and
its employees who provide professional services are otherwise disinterested persons with respect
to the Company and as that term is defined in 101(14) of the Bankruptcy Code as it applies to
327(a).
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14. The Company believes that the employment of V&L is in the best interest of the
estate.
WHEREFORE, the Company respectfully requests this Court enter an order pursuant to
the provisions of 327(a) of the Bankruptcy Code authorizing the Company to employ
Verdolino & Lowey, P.C. to act as accountants and financial advisors for the Company for
bankruptcy related matters and to perform the professional services specified herein, including
but not limited to any and all accounting services which may be required during the course of
this case and for such other and further relief as is just.
Respectfully submitted,
NEW ENGLAND COMPOUNDING PHARMACY,
INC.,
By its attorneys,
/s/ Daniel C. Cohn
Daniel C. Cohn, Esq. BBO #090780Keri L. Wintle, Esq. BBO #676508
Murtha Cullina LLP
99 High Street, 20th
FloorBoston, MA 02110
(617) 457-4000 Telephone
(617) 482-3868 [email protected]
Dated: December 21, 2012 [email protected]
Proposed Counsel to New England Compounding
Pharmacy, Inc.
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mailto:[email protected]:[email protected]:[email protected]:[email protected]