Case MFW Doc 317 Filed 05/17/16 Page 1 of 8 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ) ) ) ) ) ) ) ) ) ) ) )

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1 Case MFW Doc 317 Filed 05/17/16 Page 1 of 8 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re: ASPECT SOFTWARE PARENT, INC. et al., 1 Debtors x Chapter 11 Case No (MFW Jointly Administered Hearing Date: 2 p.m. Objection Deadline: 4 p.m. Re: D.I. 243 PROTECTIVE OBJECTION OF CANON U.S.A. INC. AND CANON INFORMATION TECHNOLOGY SERVICES, INC. TO CONFIRMATION OF CHAPTER 11 PLAN OF REORGANIZATION Canon U.S.A., Inc. and Canon Information Technology Services, Inc. (singularly and/or collectively, Canon hereby submit this protective objection to confirmation of the Amended Joint Plan of Reorganization of Aspect Software Parent, Inc. and its Debtor Affiliates filed on April 26, 2016 [D.I. 243] (the Plan. In support thereof, Canon respectfully states as follows: PRELIMINARY STATEMENT 1. Canon and Aspect Software, Inc. ( Aspect are parties to several pre-petition unexpired executory contracts (the Aspect/Canon Executory Contracts pursuant to which Aspect provides essential maintenance and support services for Canon s call-in centers. Representatives of Aspect have advised Canon that it is Aspect s intention to assume these 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, include: Aspect Software Parent, Inc. (3231; Aspect Software, Inc. (4368; VoiceObjects Holdings Inc. (0138; Voxeo Plaza Ten, LLC (7028; and Davox International Holdings, LLC (1081. The location of parent Debtor Aspect Software Parent, Inc. s corporate headquarters and the Debtors service address is: 2325 E. Camelback Road, Suite 700, Phoenix, Arizona,

2 Case MFW Doc 317 Filed 05/17/16 Page 2 of 8 executory contracts under the Plan and thus continue the nineteen (19 year relationship between the parties. Except as otherwise set forth herein, Canon does not oppose Aspect s assumption of its executory contracts. 2. The Bankruptcy Code permits a debtor to decide whether to assume or reject an executory contract at any time before confirmation of a plan. Nothing in the Bankruptcy Code permits a debtor, after the plan has been confirmed, to decide to reject an unassumed executory contract or to revoke assumption of a previously assumed executory contract. But the Plan includes a provision that would permit Aspect to nullify its pre-confirmation decision to assume an executory contract, and to reject it instead on just three days notice, during the period after Plan confirmation but before the Plan s effective date. Any rejection of the Aspect/Canon Executory Contracts on such short notice would inflict significant harm upon Canon and would not comply with section 365(d(2 of the Bankruptcy Code. 3. Accordingly, Canon is filing this objection to Plan confirmation as a protective measure because it should not be exposed to the risk of Aspect improperly changing course and designating Canon s contracts for rejection on short notice after the Plan has been confirmed. RELEVANT BACKGROUND 4. On March 6, 2016 (the Petition Date, Aspect Software Parent, Inc. and its Debtor Affiliates, including Aspect, filed with this Court voluntary petitions for relief under chapter 11 of title 11 of the United States Code, 11 U.S.C. 101 et seq., as amended (the Bankruptcy Code. 5. As of the Petition Date, Canon and Aspect were parties to several unexpired executory contracts pursuant to which Aspect provides around the clock, mission critical support and maintenance services for Canon s call-in centers, which Canon uses for various 2

3 Case MFW Doc 317 Filed 05/17/16 Page 3 of 8 aspects of its businesses, including consumer technical support, customer service dispatch and sales. The Aspect/Canon Executory Contracts include, without limitation, the following: a. End User Equipment / Software / Services Agreement by and among Aspect Software, Inc., Canon U.S.A., Inc. and Canon Information Technology Services, Inc. effective as of October 5, 2007, as amended. b. Statement of Work #16762MV120314A dated August 29, 2012 between Canon Information Technology Services, Inc. and Aspect Software, Inc. entitled Aspect Call Center Migration to Unified IP Implementation together with any Change Orders. c. Statement of Work #18240MV130521A v 4 dated June 25, 2013, between Canon Information Technology Services, Inc. and Aspect Software, Inc. entitled Aspect Professional Services Aspect Quality Management (AQM with Payment Card Industry (PCI Compliance Rules for Start / Stop and Pause Recordings Aspect Speech Analytics Implementation, together with any Change Orders. d. Statement of Work #16636MV121226A dated March 21, 2013 between Canon Information Technology Services, Inc. and Aspect Software, Inc. entitled Aspect Unified IP 7.1 Profile 500 Implementation, together with any Change Orders. e. Seamless Customer Service Migration, Productive Workforce for WFM between Canon U.S.A., Inc. and Aspect Software Inc. dated August 29, f. Aspect Software, Inc. Statement of Work for Canon U.S.A., Inc. SOW Engagement Number between Aspect Software, Inc. and Canon U.S.A., Inc. executed February 5, g. Aspect Support Services agreement between Aspect Software, Inc. and Canon Information Technology Services, Inc. dated November 17, 2015, Quotation Number , for period January 1, 2016 through December 31, h. Statement of Work #25781BC160302A dated March 2, 2016 between Canon Information Technology Services, Inc. and Aspect Software, Inc. entitled Aspect Professional Services Integrated Research Prognosis Heartbeat Service Renewal, together with any Change Orders. 6. On April 26, 2016, the Debtors filed their proposed Plan [D.I. 243]. The Debtors are seeking confirmation of the Plan on an expedited basis, and have explained that the Plan 3

4 Case MFW Doc 317 Filed 05/17/16 Page 4 of 8 restructures the Debtors balance sheet while leaving claims of general unsecured creditors unimpaired. The Debtors have not expressed a need to shed any executory contract as burdensome through a rejection under section 365 of the Bankruptcy Code. 7. Generally speaking, the Plan provides for the Debtors assumption of their unexpired executory contracts except for those specifically designated for rejection. But the Plan also provides that, at any time preceding the Plan s effective date, on only three days notice, the Debtors may elect to reject an executory contract that was included on the list of assumed executory contracts as of the Plan confirmation date, thereby effectively rescinding the decision to assume the contract. 8. In particular, Article V, Section A of the Plan provides in pertinent part that: (emphasis in original On the Effective Date, except as otherwise provided herein, each of the Debtors Executory Contracts and Unexpired Leases not previously assumed or rejected pursuant to an order of the Bankruptcy Court will be deemed assumed as of the Effective Date in accordance with the provisions and requirements of sections 365 and 1123 of the Bankruptcy Code except any Executory Contract or Unexpired Lease (a identified on the Rejected Executory Contract/Unexpired Lease List (which shall be filed with the Bankruptcy Court on the Plan Supplement Filing Date as an Executory Contract or Unexpired Lease designated for rejection, (b which is the subject of a separate motion or notice to reject filed by the Debtors and pending as of the Confirmation Hearing, or (c that previously expired or terminated pursuant to its own terms..... Notwithstanding anything to the contrary in the Plan, the Debtors or Reorganized Debtors, as applicable, reserve the right to alter, amend, modify, or supplement the Executory Contract and Unexpired Leases identified on the Assumed Executory Contract/Unexpired Lease List in their discretion subject to the consent of the Requisite Lenders (such consent to be granted in their sole discretion and prior to the Effective Date on no less than three (3 days notice to the non-debtor Entity party thereto. 9. On May 6, 2016, the Debtors filed with this Court their Notice of (A Executory 4

5 Case MFW Doc 317 Filed 05/17/16 Page 5 of 8 Contracts and Unexpired Leases To Be Assumed By The Debtors Pursuant to the Plan, (B Cure Amounts, If Any, and (C Related Procedures In Connection Therewith [D.I. 287] (the Assumption List. Representatives of Aspect have confirmed to Canon that it is Aspect s intent to assume the Aspect/Canon Executory Contracts and that, though these contracts are not listed by name on the Assumption List, it is Aspect s intent to include the Aspect/Canon Executory Contracts on the Assumption List through the reference to All parties to Customer Products and Services Agreements with the Debtors contained on page 54 of the Assumption List [D.I. 287, p.54, Unique Id , Contract Type Revenue Agreements]. 10. Nevertheless, despite this assurance, the Plan leaves Canon vulnerable to a postconfirmation rejection of its contracts with Aspect on only three days notice even though the Bankruptcy Code requires a debtor to decide, no later than plan confirmation, whether to assume or reject its executory contracts. Such a rejection would cause a severe disruption to Canon s call-in centers and would, to the say the least, inflict significant harm upon Canon. 11. By Order dated April 25, 2016, this Court scheduled a hearing to consider confirmation of the Plan for May 24, 2016 at 2:00 p.m., and ordered that any objections to confirmation of the Plan must be filed no later than May 17, OBJECTION 12. Section 1129 of the Bankruptcy Code governs confirmation of a plan of reorganization and sets forth the requirements that the plan proponent must satisfy in order for a plan to be confirmed. The plan proponent bears the burden of establishing that each of the requirements for plan confirmation has been satisfied. In re Tribune Co., 464 B.R. 126, 151 (Bankr. D. Del. 2011; In re Lernout & Hauspie Speech Prods., N.V., 301 B.R. 651, 656 (Bankr. D.Del Section 1129(a(1 of the Bankruptcy Code requires that the Plan comply with all 5

6 Case MFW Doc 317 Filed 05/17/16 Page 6 of 8 applicable provisions of title 11 of the United States Code. See 11 U.S.C. 1129(a(1; In re NII Holdings, 288 B.R. 356, (Bankr. D.Del Section 1123(b(2 provides that a chapter 11 plan of reorganization may subject to section 365 of this title, provide for the assumption, rejection or assignment of any executory contract or unexpired lease of the debtor not previously rejected under such section. (emphasis added. 14. Section 365(d(2 provides in pertinent part that: 11 U.S.C. 365(d(2 (emphasis added. In a case under chapter 9, 11, 12, or 13 of this title, the trustee may assume or reject an executory contract or unexpired lease of residential real property or of personal property of the debtor at any time before the confirmation of a plan but the court, on the request of any party to such contract or lease, may order the trustee to determine within a specified period of time whether to assume or reject such contract or lease. 15. Nothing in the Bankruptcy Code permits a debtor to reject an unassumed executory contract after a chapter 11 plan has been confirmed, or to revoke after plan confirmation its decision, announced before plan confirmation, to assume the contract. Section 365(g(2 of the Bankruptcy Code permits post-confirmation rejection of a previously assumed executory contract. But by its plain terms, section 365(d(2 creates a temporal limitation: A debtor has until confirmation of a plan to decide, in the first instance, whether to assume or reject an executory contract. 16. Courts have read section 365(d(2 plainly and in accordance with its clear text. For example, [i]n a Chapter 11 reorganization, a debtor-in-possession has until a reorganization plan is confirmed to decide whether to accept or reject an executory contract, although a creditor may request the Bankruptcy Court to make such a determination within a particular time. 6

7 Case MFW Doc 317 Filed 05/17/16 Page 7 of 8 NLRB v. Bildisco & Bildisco, 465 U.S. 513, 529 (1984 (citing 11 U.S.C. 365(d(2; In re Kroh Bros. Dev. Co., 100 B.R. 480, 484 (W.D.Ohio 1989 (section 365(d(2 sets forth the time limitation in which the trustee must move to assume or reject an executory contract. In re Wheeling-Pittsburgh Steel Corp., 54 B.R. 385, 388 (Bankr. W.D.Pa ( As this language [of section 365(d(2] clearly states, the debtor may wait until the plan confirmation date to make a decision to assume or reject an unexpired lease The Debtors may argue that section 365(d(2 should be interpreted as requiring assumption or rejection of an executory contract at any time prior the effective date of a confirmed plan, as opposed to the earlier plan confirmation date. But in enacting the Bankruptcy Code, Congress clearly noted a distinction between these two events: Compare Code section 1114(e(2, which provides that a payment for retiree benefits required to be made before a plan confirmed under section 1129 of this title is effective is accorded allowed administrative expense status under Code section 503, with the text of Code section 365(d(2, which allows the decision on assumption or rejection to be made at any time before the confirmation of a plan. 18. It is well-established that a statute s plain meaning should be conclusive, except in the rare cases in which a literal translation will produce a result demonstrably at odds with the intention of its drafters. U.S. v. Ron Pair Enters., Inc., 489 U.S. 235, 243 (1989. When the statute s language is plain, the sole function of the courts at least where the disposition required by the text is not absurd is to enforce it according to its terms. Lamie v. U.S. Trustee, 540 U.S. 526, 534 (2004(quotations omitted. The language of section 365(d(2 is clear and provides that a debtor may reject an executory contract at any time before the plan is confirmed. There is no statutory authority for a debtor to decide to reject an unassumed executory contract after the plan has been confirmed. 7

8 Case MFW Doc 317 Filed 05/17/16 Page 8 of Accordingly, the Plan does not comply with Code section 365(d(2 because it seeks to permit Aspect, following Plan confirmation but before the Plan becomes effective, to choose to revoke its assumption of the Aspect/Canon Executory Contracts and to reject them instead. For the same reason, it would be improper for the Plan to provide for this Court s retention of jurisdiction in this case, after Plan confirmation, so as to permit Aspect to reject unassumed executory contracts after Plan confirmation. 20. Canon respectfully requests that any order entered by the Court confirming the Plan provide that any statement contained in the Plan that purports to permit the Debtors, after confirmation of the Plan, to revoke its assumption of the Aspect/Canon Executory Contracts and to reject them instead will not apply to any of the Aspect/Canon Executory Contracts and that the Court also grant Canon such other and further relief as the Court deems to be just and proper. Dated: May 17, 2016 Wilmington, Delaware THE ROSNER LAW GROUP LLC /s/ Scott J. Leonhardt Frederick B. Rosner (DE #3995 Scott J. Leonhardt (DE # Market Street, Suite 810 Wilmington, DE ( rosner@teamrosner.com leonhardt@teamrosner.com -and- RUBIN LLC Paul Rubin 345 Seventh Avenue, 21 st Floor New York, NY ( prubin@rubinlawllc.com Counsel to Canon U.S.A., Inc. 8