OBJECTIONS OF THE EQUITY COMMITTEE TO MOTION
OF DEBTORS FOR ORDER EXTENDING DEBTORS'
EXCLUSIVE PERIODS TO FILE CHAPTER 11 PLANS

UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE

IN RE:Coram Healthcare Corp. andCoram, Inc., Debtors. Chapter 11Case Nos. 00-3299 (MFW)(Jointly Administered)Hearing Date: April 25, 2001 at 4:00 p.m.

OBJECTIONS OF THE EQUITY COMMITTEE TO MOTION
OF DEBTORS FOR ORDER EXTENDING DEBTORS'
EXCLUSIVE PERIODS TO FILE CHAPTER 11 PLANS


The Official Equity Committee, by its attorneys, objects to Debtors' Motion that seeks yet another 120-day extension of the exclusive period.

INTRODUCTION
1. Debtors are now requesting a 120-day extension which, if granted, will result in more than one year of exclusivity. They argue that this extraordinary extension is needed to permit the parties to arrive at a consensual resolution.

2. The Equity Committee strongly disagrees. The Debtors, the Noteholders and the Creditors' Committee, acting in concert, are seeking to prevent the Equity Committee from gaining access to any information that would be needed to evaluate a potential settlement. Their unambiguous intent to block the due diligence that this Court ordered to help facilitate a consensual resolution is contained in the following statement made by Mr. Fortgang on behalf of the Creditors Committee in a court filing on April 12, 2001:
Given the Debtors' financial position and the absence of any value for the Equity Committee's constituents, it is clear that the Equity Committee has no real role to play in this case except perhaps to keep its constituents advised as to major case developments.

(Objections of Creditors Committee . . . filed April 12, 2001, at 4.) The Creditors' Committee went on to argue that:
[T]he only due diligence which should be undertaken by the Equity Committee is to monitor the work of the independent restructuring advisor retained by the Debtors - Goldin & Associates - in investigating the Equity Committee's claim that the relationship between Cerberus and Daniel Crowley . . . detrimentally affected the preconfirmtion hearing operations of the Debtors.

(Id. at 6 (emphasis added).) The Noteholders agreed with this no-due diligence position: they argued that it is premature for the Equity Committee to engage in the due diligence that has already been authorized by the Court. (Objection of Noteholders . . . filed April 16, 2001 at 10.)

3. Further, the Debtor-Noteholder-Creditors' Committee triumvirate continue to insist, in the face of Court rulings to the contrary, that Goldin and Associates has been granted the power to make a binding determination as to whether the Debtors were damaged by the conflict of interest between Crowley, Stephen Feinberg and the Noteholders. They argue that:
Absent a determination by Goldin that such allegations have merit, there is no need for any financial advisor to the Equity Committee to separately determine the extent of any hypothetical damage to the Debtors.


(Creditors Committee Objections at 6 (emphasis added).)
4. These concerted actions:
· Denying the Equity Committee the due diligence that the Court ordered;

· continued insistence that Goldin's investigation will determine the damage done to Coram by the conflict (and thus whether the proposed derivative complaint can be filed); and

· the extraordinary demand for four months of delay exclusivity

demonstrate that the Debtor-Noteholder-Creditors' Committee are not proceeding in good faith towards a consensual resolution, but instead are bent on simply coming up with new justifications for their old plan to wipe out equity. The three-headed enemy of Coram's equity holders has forsaken any meaningful attempt at consensual resolution; the true purpose of this Motion is to delay, in an attempt to allow the passage of time to obfuscate the consequences of the manifest conflict of interest between Crowley and Cerberus/Feinberg and to cloud any attempt at calculating the damages caused by such breaches of their duty of loyalty to the shareholders of Coram.

5. In addition, and worse, any further delay will be prejudicial to Coram, worsen its market position and cause further and significant damage to the Company.


BACKGROUND
6. Last fall, the Debtors, the Noteholders and the Creditors' Committee attempted to force through, on an expedited basis, a Plan of Reorganization that would have totally extinguished all of the rights of Coram's existing public shareholders. After extensive hearings, in which it was revealed that Daniel Crowley, Coram's CEO, had been a \$1 million per year (plus significant bonus opportunity) employee of Cerberus throughout his tenure with Coram, and had actively and successfully concealed that relationship, this Court denied confirmation, because it could not determine that the Plan had been proposed in good faith. The Court acknowledged the very real potential that damage had been done by the conflict and other acts of the Debtors, but determined that there should be a cooling off period during which the parties would work towards a consensual resolution. The Equity Committee immediately recognized and embraced that objective. See, e.g., January 4, 2001, letter from representatives of the Equity Committee to the Debtor, Noteholders and Creditors' Committee outlining a forward looking framework and strategy for reaching agreement, attached hereto as Exhibit "A."

7. When those overtures were rebuffed and ignored, the Equity Committee prepared and sought leave to file a derivative complaint on behalf of Coram to address the issues left open by the Court concerning the actual damage caused to Coram by the conflict of interest. The Court denied the motion for leave to file the complaint on February 26, 2001, but did so without prejudice, preferring instead to continue the attempts at a consensual resolution by granting Debtors' Motion to retain Goldin & Associates. Goldin Associates had been identified as a candidate by Chaim Fortgang, attorney for the Creditors' Committee, and his retention was strongly supported by both the Creditors' Committee and the Noteholders.

8. The Debtor-Noteholders-Creditor Committee triumvirate originally proposed Goldin as an independent advisor, who would advise the Court in a disinterested way as to the damage caused to Coram by the conflict of interest. But that proposal failed when the U.S. Trustee objected to such appointment as equivalent to the role of an examiner:
Mr. Schepacarter: [T]hey wouldn't be coming in as some third party independent, like a trustee or examiner would be coming into the case, and reporting to anybody along those lines. They are professionals for the debtor. They are the debtors' professionals and they need to be treated as such.

(2/26/01 Tr. at 17 (emphasis added).)

9. At the same time, perhaps recognizing that the Debtor had Goldin as their own professional to advise on the issues that could form the basis of a consensual resolution, the Court agreed with the suggestion that the Equity Committee be afforded the type of due diligence about Coram that would be generally offered to a prospective buyer. (2/26/01 Tr. at 32-36.) The obvious and stated purpose for these rulings by the Court was to create a framework by which a consensual resolution might be reached. The Court granted us due diligence on a forward looking basis, but denied, for the time being, any opportunity for discovery in order to enhance settlement possibilities by avoiding putting the Equity Committee into an adversarial posture vis-a-vis the Debtor-Noteholders-Creditors Committee. The Court plainly hoped that the parties would reach an accord that would fairly divide the assets of Coram, and bypass the need to debate the past wrongdoing. Unfortunately, our three opponents continue to ignore past rulings and wrongdoings in an effort to force conclusions already rejected.


ARGUMENT

The Legal Standard
10. The 120-day exclusive period provided by Section 1121(b) of the Bankruptcy Code may be extended in the sound discretion of the Bankruptcy Court, but only if the Debtor meets its burden of establishing cause for such an extension. 11 U.S.C. § 1121(d). In re Sharon Steel Corp., 78 B.R. 762, 763-64 (Bankr. W.D. Pa. 1987), In re All Seasons Indust., Inc., 121 B.R. 206, 207 (Bankr. N.D. Ind. 1990). The Debtor must meet this burden not merely by allegations, but must adduce evidence sufficient to support the allegations that cause exists. In re Nicolet, Inc., 80 B.R. 733, 742 (Bankr. E.D. Pa. 1988), In re Parker Street Florist and Garden Center, Inc., 31 B.R. 206, 207 (Bankr. D. Mass. 1983). It has been stated that:
Courts that have considered this question have not favored extensions of the 120 day period. This attitude is supported by the legislative history which indicates that the purpose of the 120 day period was to remedy the bargaining power a bankrupt had under Chapter 11 . . . through its continually exclusive right to propose a plan.

Parker Street Florist, 31 B.R. at 207.
The Debtor Has Not Met its Burden to Establish Cause


11. The only justification offered by Debtors in support of their motion is that such an extension is likely to lead to a consensual resolution. No support is offered for this assertion and none can be given.

12. Goldin will prepare a draft report of its findings within a few weeks, according to a recent Court filing by the Noteholders. (Noteholders Objections . . . filed 4/16/01 at 4.) That fact alone undercuts any need for extension of the exclusive period.

13. Moreover, and more fundamentally, the work of Goldin & Associates - whenever it is completed - will not in any way advance the cause of consensual resolution. Under the present arrangement, so long as exclusivity is retained and Goldin continues to investigate, unilaterally, the unfair process that led to the refusal to confirm Debtors proposed plan of arrangement, the Equity Committee is effectively precluded from doing its own investigation of these facts: discovery has been precluded and the Debtors-Noteholders-Creditors' Committee have thus far made the due diligence process unworkable.

14. At the end of the four month period, the parties and the Court can expect a report from Goldin Associates, who are professionals for the debtor, supporting the Debtors-Noteholders-Creditors' Committee position on all issues. This is not a criticism of Goldin, nor an adverse reflection on his integrity.

15. On the contrary it is a reflection of the fact that Goldin, as a non-independent, non-disinterested professional for the Debtors' will serve well and properly the interests of the Equity's three-headed adversary. The Debtors-Noteholders-Creditors Committee have plainly stated that their interest is a finding by Goldin that the unfair process and the undisclosed actual conflict and the \$1 million secret payment to Crowley by Cerberus and Feinberg did not damage Coram, conclusions long ago reached and announced by Coram's "independent" board.

16. Thus, there is no reason to continue the exclusivity period. Denying a further extension of exclusivity will not interfere with whatever value Goldin's conclusions will have on any party to these proceedings.

Further Delay Will be Prejudicial to Coram and its Shareholders

17. Because of the Equity Committee's very limited access to information, admissible facts are difficult to find, but it is apparent from even the limited statements of Dan Crowley that Coram is heading towards a management crisis. According to Mr. Crowley's statements to Deloitte and CSFB on March 22, 2001 (which we have been able to generally confirm from outside sources), Coram is suffering a drain of its critical management resources.

18. This is not surprising, given Dan Crowley's apparent indifference to the fate of the company: on March 22, 2001, Crowley candidly told Deloitte and CSFB during their one meeting that he -- Crowley -- would have left Coram but for the litigation and that he was staying on now only because he feels his personal interests are better served by being an insider as opposed to a former executive. It was also reported that at that meeting Crowley was extremely negative about the future of Coram. When asked whether Coram had any strengths, Crowley told Deloitte and CSFB that it was up to them to figure that out.

19. Nor has the Equity Committee been able to determine from any source what is going on at Coram. Debtors have not filed operating reports as required by the Bankruptcy Rules and have misstated the facts relating to that failure to file. The Bankruptcy Rules require the Debtor to file monthly operating statements. Despite the representation to the Court to the contrary, the Debtors in these Estates have filed no such reports since October 2000. (See 2/26/01 Tr. at 30-31 in which Mr. Friedman erroneously represents that these reports have been timely filed on a regular basis.) Nor has this failure to file timely reports been excused by the United States Trustee, as suggested in a letter from Mr. Friedman dated March 29, 2001. These reports are long overdue and Debtor's failure to file them is only compounded by its lack of candor about the status of them.

20. Further, while Debtor filed its annual report (10-K) with the SEC on April 16, 2001, that report speaks only as of December 31, 2000, and gives no information concerning operations during the nearly four months since that date.

21. Debtors' counsel confirmed that due diligence meetings would be without any lawyers present, yet it is reported by Deloitte that in the few meetings they have had, Coram's in house counsel has insisted on being present, even though no legal representatives of the Equity Committee were present or invited.

22. All of the foregoing is simply a continuation of the strategy of stonewalling and evasion that the Debtor-Noteholders-Creditors' Committee engaged in during the confirmation process late last year. Together, they have rebuffed every effort at settlement and every effort at gaining information from which a settlement could be evaluated. The Equity Committee simply does not believe that these constituencies have any desire to settle the issues, but rather are only paying lip service to the Court' rulings and the Equity Committee until they can present a renewed plan of reorganization to wipe out equity.

The Alliance -- and Continuing Conflict -- Between Debtor,
the Noteholders and the Creditors Committee

23. All of the problems in this case stem from the bad acts of Dan Crowley, Stephen Feinberg, Cerberus - and perhaps other Noteholders. It was a serious breach by all parties involved. It was deliberately concealed. The victim was Coram's equity. One might have hoped, once the "actual conflict" became a judicially found fact, that the parties would have taken steps to end the conflict. So far as the Equity Committee has been able to determine, that has not happened. Discovery is precluded, and informal inquiries as to whether, for example, Dan Crowley still gets \$1 million a year from Cerberus (while staying on at Coram only because of the litigation) have produced no response. It must therefore be assumed that the impermissible conflict continues.

24. So it is not surprising that the Debtors -- who ought to be neutral in a dispute between equity, the Noteholders and one member of management -- have so actively labored in the cause of avoiding a determination of just what damage was done by the actual conflict. The so-called "independent" directors have demonstrated no independence. Long before Goldin was hired, and without the benefit of any investigation, they made up their minds that the lawsuit proposed by the Equity Committee lacked merit. This rush to judgment is no surprise. It demonstrates that these directors, either out of loyalty to Crowley and Cerberus or fear that they themselves will be found derelict for not uncovering the pervasive conflict of interest, are not truly "independent" and have not acted in the best interests of the shareholders.

25. And any hope that the Creditors Committee -- nominally a fiduciary -- would work to learn the facts about the damage, or work towards a consensual resolution -- is in vain, when one considers that the Creditors' Committee is simply a clone of the Noteholders.



CONCLUSION
The Debtor is seeking a delay in the proceedings precisely when aggressive action may be necessary to preserve the value of Coram. Their conduct demonstrates that the Debtor-Noteholders-Creditors' Committee have no genuine desire for settlement here, but are simply engaged in a repeat of their delay and evade strategy of 2000. We urge the Court to deny Debtors' motion to extend exclusivity.