Exhibit 2.2
UNITED STATE BANKRUPTCY COURT
NORTHERN DISTRICT OF TEXAS
NORTHERN DISTRICT OF TEXAS
ENTERED
TAWANA C. MARSHALL, CLERK
THE DATE OF ENTRY IS
ON THE COURT'S DOCKET
The following constitutes the ruling of the court and has the force and effect
therein described.
Signed August 1, 2007 /s/ Harlin DeWayne Hale
------------------------
United States Bankruptcy Judge
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
ss.
In re: ss. Chapter 11
ss.
SENIOR MANAGEMENT SERVICES ss. Case No. 07-30230-HDH-11
OF TREEMONT, INC., et al.(1) ss. Jointly Administered
ss.
Debtors. ss.
ORDER CONFIRMING FIRST AMENDED, MODIFIED
CHAPTER 11 PLAN PROPOSED BY THE DEBTORS
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(1) The "Debtors" comprise Senior Management Services of Treemont, Inc., Senior
Management Services of El Paso Coronado, Inc., Senior Management Services of
Gainesville, Inc., Senior Management Services of Palestine, Inc., Senior
Management Services of Tyler, Inc., Senior Management Services of El Paso
Sunset, Inc., Senior Management Services of Katy, Inc., Senior Management
Services of Humble, Inc., Senior Management Services of Doctors at Dallas, Inc.,
Senior Management Services of Estates at Fort Worth, Inc., Senior Management
Services of Normandy at San Antonio, Inc., Senior Management Services of
Heritage Oaks at Ballinger, Inc., Senior Management Services of Crane, Inc.,
Senior Management Services of Kerrville, Inc., Senior Management Services of
America Houston, Inc., Senior Management Services of America North Texas, Inc.,
Senior Management Services of America IV, Inc., Senior Management Services of
America III, Inc., Senior Management Services of America II, Inc., Senior
Management Services of America, Inc., Serenity Management Services, Inc., Senior
Management Services of Shreveport, LLC, Cora Properties of Crane, LP, and Cora
Properties of Kerrville, LP.
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The Debtors and Debtors in possession have Filed(2) and requested to be
confirmed the First Amended, Modified Chapter 11 Plan Proposed by the Debtors,
dated August 1, 2007 (the "Modified Plan"), which reflects certain modifications
to the First Amended Chapter 11 Plan Proposed by the Debtors, dated June 17,
2007 (the "First Amended Plan"), pursuant to ss. 1127,(3) as well as those
modifications announced on the record at the August 1, 2007 Confirmation Hearing
(collectively, the "Modifications"). The Modifications are technical and/or do
not adversely change the treatment of the Claim of any Creditor or the Interest
of any equity security holder that has not accepted and agreed to the
Modifications. Accordingly, the Modified Plan is deemed accepted by all
Creditors and Interest holders who have previously accepted the First Amended
Plan pursuant to Bankruptcy Rule 3019. Given that the changes to the First
Amended Plan are technical and/or do not materially and adversely affect the
treatment of Claims or Interests, the First Amended Disclosure Statement in
Support of Chapter 11 Plan Proposed by the Debtors, dated June 17, 2007 (the
"Disclosure Statement"), contains adequate information for such Modifications
pursuant to ss. 1125, and the Debtors need not resolicit acceptances of the
Modifications by holders of such Claims or Interests.
On June 18, 2007, the Debtors Filed the Disclosure Statement. The
Bankruptcy Court entered an order approving the Disclosure Statement and finding
that it contained adequate information under ss. 1125 (the "Disclosure Statement
Order") on June 22, 2007. The Disclosure Statement Order provided for copies of
(i) the Plan, (ii) the Disclosure Statement, (iii) a ballot, (iv) the
court-approved solicitation letter from the Creditors Committee letter and (v) a
copy of
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(2) Each term that is capitalized herein and not otherwise defined herein shall
have the meaning ascribed to such term in the Modified Plan and, if such term is
not defined in the Modified Plan, the Disclosure Statement.
(3) Unless otherwise stated, section references herein are to 11 U.S.C. ss.
101-1532 (2005) (the "Bankruptcy Code").
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the order approving the Disclosure Statement (collectively, the "Solicitation
Materials") to be sent out by June 26, 2007; (ii) voting on the First Amended
Plan by return of ballots to the Debtors by July 25, 2007; (iii) objections to
Confirmation of the First Amended Plan to be Filed by July 25, 2007; and (iv)
the hearing on Confirmation of the First Amended Plan (the "Confirmation
Hearing") to commence on August 1, 2007.
The Bankruptcy Court commenced the Confirmation Hearing on August 1, 2007.
Timely objections to Confirmation of the First Amended Plan were Filed by July
25, 2007. Having reviewed, among other things, (i) the First Amended Plan, (ii)
the Modified Plan, (iii) the Disclosure Statement, (iv) the Plan Documents, (v)
all objections to Confirmation of the Modified Plan not previously withdrawn,
(vi) the Certification of Michael S. Haynes with Respect to the Tabulation of
Votes in Classes 3, 4 and 5 on the First Amended Chapter 11 Plan Proposed by
Debtors, dated July 31, 2007 (the "Ballot Certification") Filed by the Debtors
certifying voting results and the mailing of the Solicitation Materials, (vii)
the Operations Transfer Agreement between certain of the SMSA II Debtors and the
Purchaser, and (viii) the Schedule of Assumed Contracts, as supplemented; and
having considered the evidence and record of the Confirmation Hearing, including
the testimony of the Chief Restructuring Officer and the arguments of counsel;
and after due deliberation thereon, the Bankruptcy Court hereby makes the
following findings of fact and conclusions of law.(3)
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(3)The following paragraphs shall constitute this Court's findings of fact and
conclusions of law made at the Confirmation Hearing pursuant to Bankruptcy Rule
7052, which is made applicable to this proceeding by Bankruptcy Rule 9014. To
the extent any finding of fact shall be determined to be a conclusion of law, it
shall be so deemed, and vice versa.
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FINDINGS OF FACT AND CONCLUSIONS OF LAW:
1. Jurisdiction. This Court has jurisdiction over the Debtors and the
subject matter of the Confirmation Hearing pursuant to 28 U.S.C. ss.ss. 157(b)
and 1334(a). The Confirmation Hearing is a core proceeding pursuant to 28 U.S.C.
ss. 157(b)(1) and (2)(L). Venue of the Chapter 11 Cases in this district is
proper pursuant to 28 U.S.C. ss.ss. 1408 and 1409.
2. Solicitation. In accordance with the Disclosure Statement Order and as
evidenced by the Ballot Certification, the Debtors caused (i) the Solicitation
Materials and (ii) notice of the Confirmation Hearing and the deadlines for
voting on, and Filing objections to, the First Amended Plan to be distributed to
all known holders of Claims against and Interests in the Debtors. In addition,
the Solicitation Materials were distributed timely to former patients and
residents who -- though likely not Creditors or Interest holders -- had through
prior inadvertence not received earlier notice of the filing of the Chapter 11
Cases. The Debtors also provided notice by publication in several newspapers of
the filing of the Chapter 11 Cases, the Debtors' intent to sell substantially
all their assets and the date of the Confirmation Hearing and deadline for
objections to the Modified Plan. Such actions constitute due, sufficient and
adequate notice to all known holders of Claims and Interests of the Modified
Plan, the Confirmation Hearing and the deadlines for submitting votes on, and
Filing objections to the Confirmation of, the Modified Plan and no other or
further notice is required.
3. Modifications to Plan. The Modifications to the First Amended Plan,
including those (i) set forth in the Debtors' Notice of Modifications to First
Amended Chapter 11 Plan Proposed by the Debtors and (ii) presented on the record
at the Confirmation Hearing, comply in all respects with ss. 1127(a) and, in
accordance with Bankruptcy Rule 3019, do not adversely
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change the treatment of the Claim of any Creditor or the Interest of any equity
security holder who has not accepted in writing such amendments, in that no
Creditor who accepted the First Amended Plan, if it knew of the Modifications,
would be likely to reconsider its acceptance of the First Amended Plan. The
notice of such Modifications was due and adequate under the circumstances of the
Chapter 11 Cases and no further notice is required. The Modifications do not
require additional disclosure under ss. 1125 or Bankruptcy Rule 9019 or the
resolicitation of acceptances or rejections under ss. 1126, nor do they require
that the holders of Claims or Interests be afforded an opportunity to change
previously cast acceptances or rejections of the Modified Plan.
4. Separate Plans. The Modified Plan constitutes a separate plan Filed by
and on behalf of each Debtor pursuant to ss. 1122(a) and Bankruptcy Rule
3016(a).
5. Procedures for Voting. As evidenced by the Ballot Certification, the
procedures by which ballots for voting on the Modified Plan were received and
tabulated were fair, properly conducted and in accordance with the Bankruptcy
Code, the Bankruptcy Rules, the local rules of this Court and the Disclosure
Statement Order.
6. Satisfaction of Confirmation Requirements. As to each Debtor, ss.
1129(a)(1) is satisfied because the Modified Plan complies with all the
applicable provisions of the Bankruptcy Code, including, without limitation, the
provisions of ss.ss. 1122 and 1123.
(a) Proper Classification of Claims and Interests. As to each Debtor,
ss.ss. 1122(a) and 1123(a)(1) are satisfied because the Modified Plan
properly designates separate Classes of Claims and Interests, each of
which contains only Claims or Interests that are substantially similar
to the other Claims or Interests within that Class.
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(b) Specification of Unimpaired Classes. As to each Debtor, ss. 1123(a)(2)
is satisfied because the Modified Plan properly designates Classes of
Claims and Interests as impaired or unimpaired.
(c) Specification of Treatment of Impaired Classes. As to each Debtor, ss.
1123(a)(3) is satisfied because the Modified Plan specifies the
treatment of each Class of Claims and Interests that is impaired under
the Modified Plan, to the extent that the Claims or Interests within
such Class are Allowed Claims or Allowed Interests, respectively.
(d) Equal Treatment Within Classes. As to each Debtor, ss. 1123(a)(4) is
satisfied because the Modified Plan provides the same treatment for
each Allowed Claim or Allowed Interest within a particular Class
unless the holder of a particular Allowed Claim or Allowed Interest
has agreed to a less favorable treatment of such Claim or Interest.
(e) Implementation of Plan. As to each Debtor, ss. 1123(a)(5) is satisfied
because the Modified Plan provides adequate means for its
implementation, including the sale of the Acquired Assets to the
Purchaser.
(f) Charter Provisions. As to each Debtor, ss. 1123(a)(6) is not
applicable here because there are no equity securities being issued
pursuant to the Modified Plan.
(g) Selection of Officers and Directors. As to each Debtor, ss. 1123(a)(7)
is satisfied because the Modified Plan contains only provisions that
are consistent with the interests of holders of Claims and Interests
and with public policy with respect to the manner of selection of the
Plan Agent and the Trustee. Furthermore, based on the statements of
counsel, the Disclosure Statement and First Amended Plan are deemed
amended to reflect that William Zimmerman was no longer an officer or
director of any of the Debtors, effective May 1, 2007.
(h) Bankruptcy Rule 3016(a). Rule 3016(a) of the Bankruptcy Rules is
satisfied because the Modified Plan is dated and identifies the
Entities submitting it.
7. Debtors' Compliance with the Applicable Provisions of the Bankruptcy
Code. As to each Debtor, ss. 1129(a)(2) is satisfied because the Debtors have
complied with all applicable provisions of the Bankruptcy Code.
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8. Plan Proposed in Good Faith. As to each Debtor, ss. 1129(a)(3) is
satisfied because the Modified Plan was proposed in good faith and not by any
means forbidden by law. In determining that the Modified Plan has been proposed
in good faith, the Bankruptcy Court has examined the totality of circumstances
surrounding the filing of the Chapter 11 Cases and the formulation of the
Modified Plan. The Chapter 11 Cases was Filed and the Modified Plan was proposed
with the legitimate and honest purposes of liquidating the Debtors and providing
a fair and equitable Distribution of the Debtors' assets among their various
Creditors and Interest holders. Further, the Modified Plan is the product of
extensive, good faith, arms' length negotiations among the Debtors, the
Creditors Committee and their respective counsel and financial advisors, as well
as other parties in interest in the Chapter 11 Cases. The Debtors, the Creditors
Committee, the DIP Lender, the Post Confirmation Credit Facility Lender, the
Purchaser and the Omega Lessor and their respective counsel and financial
advisors acted in good faith in connection with the foregoing.
9. Resolution of Objections. All objections to Confirmation, to the extent
not otherwise withdrawn or resolved as set forth herein, are overruled.
10. Payment for Services and Expenses. As to each Debtor, ss. 1129(a)(4) is
satisfied because, to the extent required by that section, any payment made or
to be made by the Debtors for services or for costs and expenses in, or in
connection with, the Chapter 11 Cases, or in connection with the Modified Plan
and incident to the Chapter 11 Cases, has been approved by, or is subject to the
approval of, the Bankruptcy Court as reasonable.
11. Directors, Officers and Insiders. As to each Debtor, ss. 1129(a)(5) is
satisfied, to the extent applicable, because the Debtors have disclosed the
identity of the Entity that shall
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serve as Plan Agent and Trustee on and after the Confirmation Date and the
Creditors Committee has disclosed the identity of the Entities that shall
compose the Executive Committee on and after the Confirmation Date.
12. No Rate Changes. As to each Debtor, ss. 1129(a)(6) is not applicable
because there is no governmental regulatory commission with jurisdiction, after
confirmation of the Modified Plan, over rates of the Debtors.
13. Best Interests of Creditors Test. As to each Debtor, ss. 1129(a)(7) is
satisfied. The liquidation analysis contained in Appendix 2 of the Disclosure
Statement and other evidence proffered or adduced at the Confirmation Hearing
(i) are persuasive and credible, (ii) have not been controverted by other
evidence, and (iii) established that each holder of an impaired Claim or
Interest either (x) has accepted the Modified Plan or (y) will receive or retain
under the Modified Plan, on account of such Claim or Interest, property of a
value, as of the Effective Date, that is not less than the amount that such
holder would so receive or retain if the corresponding Debtor were liquidated
under Chapter 7 of the Bankruptcy Code.
14. Acceptance by Certain Classes. As set forth in the Ballot
Certification, ss. 1129(a)(8)(A) is satisfied as to each Debtor with respect to
one or more of Classes 3, 4 and 5, which are Classes of Claims Impaired by the
Modified Plan, because such Classes have either accepted the First Amended Plan
pursuant to ss. 1126(c), or have no Impaired Creditors, and are deemed to have
accepted the Modified Plan pursuant to Bankruptcy Rule 3019. As to each Debtor,
ss. 1129(a)(8)(B) is satisfied with respect to Classes 1 and 2 because such
Classes are not impaired by the Modified Plan and are therefore conclusively
deemed to have accepted the Modified Plan under ss. 1126(f) and Bankruptcy Rule
3019.
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15. Best Interests of Non-Accepting Classes. Section 1129(a)(8) has not
been satisfied with respect to Classes 6, 7 and 8 for any Debtor and Class 5 for
Senior Management Services of El Paso Sunset, Inc. ("SMS Sunset") because these
Classes either are deemed not to have accepted the Modified Plan pursuant to ss.
1126(g) or voted to reject the Modified Plan in the case of Class 5 Claims
against SMS Sunset. Under the Modified Plan, no holder of a Claim or Interest
that is junior to the Claims in Classes 5, 6 or 7 will receive or retain any
property under the Modified Plan on account of such junior Claim or Interest,
and no holder of an Interest that is junior to the Interests in Class 8 will
receive or retain any property under the Modified Plan on account of such junior
Interest. As to each Debtor, the Modified Plan therefore satisfies the
requirements of ss. 1129(b)(2)(B) with respect to Classes 6 and 7 and ss.
1129(b)(2)(C) with respect to Class 8, and as to SMS Sunset, the Modified Plan
further satisfies the requirements of ss. 1129(b)(2)(B) with respect to Class 5.
Thus, the Modified Plan may be confirmed as to each Debtor without compliance
with ss. 1129(a)(8) with respect to Classes 6, 7 and 8 and as to SMS Sunset
without compliance with ss.1129(a)(8) with respect to Class 5; that is, the
Modified Plan (i) does not discriminate unfairly against these Classes and (ii)
is fair and equitable with respect to these Classes within the meaning of ss.
1129(b). No Creditors in Classes senior to Classes 5, 6, 7 and 8 are receiving
more than 100% of the Allowed amount of their respective Claims.
16. Treatment of Administrative Expenses. As to each Debtor, ss.
1129(a)(9)(A) is satisfied because the Modified Plan provides that (i) there are
no Claims of a kind specified in ss. 507(a)(3) and (ii) (a) Allowed
Administrative Expenses arising from liabilities incurred in the ordinary course
of the Debtors' businesses shall be paid in full or performed by the Debtors, in
accordance with their terms and conditions in the ordinary course of business
consistent with
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such past practices and (b) Allowed Administrative Expenses of Professionals
arising on or prior to the Effective Date shall be paid upon the Filing of
applications for compensation and reimbursement of expenses and allowance by the
Bankruptcy Court of the amounts sought in such applications. Applications for
allowance and payment of Administrative Expenses that have not been paid,
released or otherwise settled, including Administrative Expenses for
reimbursement of expenses of the members of the Creditors Committee and
Administrative Expenses for compensation or reimbursement of expenses incurred
in making a substantial contribution in the Bankruptcy Case pursuant to ss.ss.
503(b)(3) or (4), but excluding (i) Administrative Expenses that are
postpetition trade payables not payable in the ordinary course of business until
after the Effective Date and (ii) Administrative Expenses for fees and expenses
of Professionals, must be filed on or before the thirtieth (30th) day following
the Effective Date or forever be barred from doing so.
17. Treatment of Other Priority Claims. As to each Debtor, ss.
1129(a)(9)(B) is satisfied because the Modified Plan provides that each holder
of an Allowed Priority Claim shall be entitled to receive the Allowed amount of
such Claim in full in Cash on or as soon as practicable after the later of (i)
the Effective Date and (ii) the date that such Claim becomes an Allowed Priority
Claim.
18. Treatment of Priority Tax Claims. As to each Debtor, ss. 1129(a)(9)(C)
is satisfied because the Modified Plan provides that, unless otherwise agreed by
the holder of an Allowed Priority Tax Claim and the Plan Agent, each holder of
an Allowed Priority Tax Claim shall receive on account of such Allowed Priority
Tax Claim either (i) payment in full in Cash of such Allowed Priority Tax Claim
on or as soon as practicable after the later of (a) the Effective Date
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DALLAS 1815727v5
and (b) the date on which such Priority Tax Claim becomes an Allowed Priority
Tax Claim; (ii) regular installment payments in Cash, over a period ending not
later than five (5) years after the Petition Date, of a total value, as of the
Effective Date, equal to the Allowed amount of such Priority Tax Claim; or (iii)
such other treatment agreed to by the holder of such Allowed Priority Tax Claim
and the Plan Agent, as applicable; provided, such treatment is on more favorable
terms to the Debtors than the treatment set forth in clause (ii). Based on the
statements of counsel at the Confirmation Hearing, it is anticipated that
Allowed Priority Tax Claims will be paid in full in cash on or as soon as
practicable after the later of (a) the Effective Date, (b) the date on which
such Priority Tax Claim becomes an Allowed Priority Tax Claim and (c) the date
such Priority Tax Claim comes due in the ordinary course pursuant to the terms
of the Operations Transfer Agreement or by operation of law.
19. Acceptance of at Least One Impaired Class. As to each Debtor, ss.
1129(a)(10) is satisfied because at least one Class of Claims that is impaired
under the Modified Plan has accepted the Modified Plan, determined without
including any acceptance by an insider. For each Debtor, at least one Impaired
Class has accepted the First Amended Plan and, pursuant to Bankruptcy Rule 3019
and this Confirmation Order, are deemed to have accepted the Modified Plan.
20. Feasibility. As to each Debtor, ss. 1129(a)(11) is satisfied because
confirmation of the Modified Plan is not likely to be followed by the need for
further financial reorganization or liquidation of any of the Debtors. The
evidence proffered or adduced at the Confirmation Hearing (i) was persuasive and
credible, (ii) was not controverted by other evidence, and (iii) established
that the Debtors have the ability to meet their obligations under the Modified
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Plan. The Bankruptcy Court further finds that the Purchaser will be able to make
the payments contemplated under the Modified Plan.
21. Compromises and Settlement. The Modified Plan contains a compromise and
settlement of certain existing and potential disputes regarding Intercompany
Claims and related matters (the "Settlement"), the terms of which are set forth
more fully in Article II of the Modified Plan. The evidence proffered or adduced
at the Confirmation Hearing in support of the proposed Settlement (i) was
persuasive and credible, (ii) has not been controverted by other evidence, and
(iii) established that the Settlement is the product of good faith, arms' length
negotiation between and among the respective Debtors, in close consultation with
the Creditors Committee, represents a reasonable compromise and settlement
between and among the various Debtors and is in the best interest of the
Debtors' estates and creditors. In support of the proposed Settlement, the Court
makes the following findings:
(a) The Debtors' estimate total Allowed General Unsecured Claims of
approximately $9,035,345 against the SMSA II Debtors, and
approximately $6,992,138 against the Liquidating Debtors.
(b) As of the Petition Date, approximately $14,138,558 of the total
outstanding indebtedness under the Debtors' prepetition secured credit
facility was owed by Liquidating Debtors, versus only approximately
$2,125,093 owed by SMSA II Debtors.
(c) The Debtors' schedules indicate that, based on an analysis of accounts
receivable and accounts payable owed between Debtor entities, the
Liquidating Debtors owe a net intercompany payable to the SMSA II
Debtors in excess of $2,400,000.00.
(d) Although all Debtors were jointly and severally liable on the
prepetition secured credit facility, a significant portion of that
indebtedness was satisfied effectively from the cash proceeds of asset
belonging solely to two Liquidating Debtors: Cora Properties of Crane,
LP and Cora Properties of Kerrville, LP. The balance of that
indebtedness -- comprising the outstanding DIP Facility -- will be
satisfied through the
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proceeds from the sale of the Omega Lease by the SMSA II Debtors to
the Purchaser.
(e) Certain Debtors may be able to assert claims and Causes of Action
against one another under various theories, including claims for right
of contribution, Chapter 5 Causes of Action, substantive consolidation
and claims for recovery under the theory of "single business
enterprise."
(f) Taken individually, the Liquidating Debtors are generally
administratively insolvent, as demonstrated in the Liquidation
Analysis contained as Appendix 2 to the Disclosure Statement.
(g) The Debtors derive some benefit, whether tangible or intangible, in
confirming a Plan for all twenty four Debtors, rather than risking the
prospect of a "partial" Confirmation that splits the otherwise
integrated family of Debtors such that some proceed under Chapter 11
while others convert to Chapter 7.
Moreover, having considered (i) the probability of success in litigation with
due consideration for uncertainty in fact and law; (ii) the complexity and
likely duration of the litigation, and the expense, inconvenience and delay
necessarily attending it; and (iii) all other factors bearing on the wisdom of
the Settlement, the Bankruptcy Court finds that the Modified Plan satisfies the
requirements of Bankruptcy Rule 9019 and ss. 1123(b)(3) with respect to the
Settlement. In addition, the Creditors Committee, by and through its counsel,
has reviewed and commented upon the Settlement. Furthermore, the Creditors of
the Estate, through their overwhelming support of the Modified Plan, have
evidenced their support of the Settlement.
22. Auction. The Debtors have identified the Qualifying Bid of Diversicare
Texas I, LLC, Diversicare Treemont, LLC, Diversicare Doctors, LLC, Diversicare
Estates, LLC, Diversicare Katy, LLC, Diversicare Humble, LLC, Diversicare
Normandy Terrace, LLC, and Diversicare Ballinger, LLC (collectively, the
"Diversicare Parties") as the higher or better offer for the Acquired Assets of
the SMSA II Debtors. The terms of this transaction are set forth in the
Operations Transfer Agreement. Based on the evidence proffered or adduced at the
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Confirmation Hearing, the Diversicare Parties' Qualifying Bid comprises the
higher or better offer for the purchase of the Acquired Assets. In addition, the
Bankruptcy Court makes the following findings of fact and conclusions of law
pertaining to the auction and proposed sale of the Acquired Assets to the
Purchaser:
(a) On July 24, 2007, the Debtors conducted an auction for the sale of the
Acquired Assets. The submission of bids and the subsequent auction
conducted by the Debtors pursuant to the Bid Procedures, was fair,
reasonable and conducted in good faith. A reasonable opportunity was
afforded to each bidder in attendance to improve its bid to become a
Qualifying Bid.
(b) The Debtors have complied with all of the Bid Procedures, and
requested designation of the Diversicare Parties as the "Successful
Bidder" and "Purchaser" for all purposes in the Modified Plan and this
Confirmation Order. Accordingly, the Diversicare Parties are hereby
determined to be the "Purchaser" for all purposes in the Modified Plan
and this Confirmation Order.
(c) Notice of the auction was provided in conformity with Bankruptcy Rules
2002, 6004, 6006 and this Court's prior orders directing the form and
manner of notice to be provided. Sufficient notice of the auction was
provided, and such notice was properly served on all required
entities, including without limitation all persons claiming any
interest in the Assets. No other or further notice of the auction is
necessary.
(d) A reasonable opportunity to object or be heard regarding the auction
and proposed sale has been afforded to all interested parties and
entities.
(e) The proposed sale has been duly and validly authorized by all
necessary action of the respective Debtors and, subject to the entry
of this Confirmation Order, the Debtors have all organizational power
and authority necessary to consummate the transactions contemplated by
the Successful Bid and the Operations Transfer Agreement. No consents
or approvals, other than those expressly contemplated by the
Successful Bid, are required for the Debtors to consummate the
proposed sale.
(f) Neither the execution and delivery of the Operations Transfer
Agreement, nor the consummation by the Debtors of the transactions
contemplated thereby will constitute any violation or breach of or
conflict with the organizational or formation documents of the
respective Debtors or applicable law.
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(g) Pursuant to ss.ss. 105(a) and 363, sufficient business justification
exists for the Sale of the Acquired Assets, and the transactions
contemplated by the Successful Bid and the Operations Transfer
Agreement are properly authorized under ss.ss. 105 and 363.
(h) The execution of the Operations Transfer Agreement and any other
transaction documents in connection with the Successful Bid and the
corresponding proposed sale is in the best interests of the Debtors,
their estates and creditors. A copy of the Operations Transfer
Agreement executed in connection with the Successful Bid was admitted
into evidence at the Confirmation Hearing.
(i) The Successful Bid and the Operations Transfer Agreement were
negotiated, proposed and accepted in good faith from arms' length
bargaining positions, and the consideration to be paid pursuant to the
terms of Successful Bid constitutes adequate and fair value for the
Acquired Assets.
(j) The applicable Debtors may sell the Acquired Assets free and clear of
any and all liens, security interests or encumbrances (except for any
lien, security interest or encumbrance permitted or required in the
Successful Bid to remain attached to the applicable asset) because
either (1) applicable non-bankruptcy law permits such a sale free and
clear; (2) the applicable creditors consented to the sale; (3) the
aggregate value to be received in consideration of the sale of the
applicable asset and assumption, if any, of liabilities by the
Purchaser exceeds the value of the liens upon and security interests
in the applicable asset; (4) such security interests or liens are the
subject of a bona fide dispute; or (5) applicable creditors could be
compelled, in a legal or equitable proceeding, to accept a money
satisfaction of such security interests or liens.
(k) The transactions contemplated in the Successful Bid are undertaken by
the Debtors and the Purchaser at arms' length and in good faith within
the meaning of ss.ss. 363(m) and 364(e). The Purchaser is a good faith
purchaser under ss. 363(m) in connection with the proposed and the
transactions contemplated and authorized by this Confirmation Order,
and shall be entitled to the protections afforded to a good faith
purchaser thereunder.
23. Issuance of Plan Shares; Reverse Merger.
(a) On July 26, 2007, Halter Financial Group, Inc. ("HFG") Filed notice
with the Bankruptcy Court of its election to receive Plan Shares in
satisfaction of its Allowed Administrative Expense, thereby triggering
the provisions of Sections 6.1 through 6.7 of the Modified Plan.
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(b) In light of the sale of the Acquired Assets, all Debtors (excluding
Serenity) will be Target Debtors for all purposes under the Modified
Plan.
(c) The Plan Shares issued to HFG and Class 4 General Unsecured Creditors
are issued on account of their respective Allowed Claims, and satisfy
the criteria of ss. 1145(a), and any recipient of any securities
pursuant thereto is not an "underwriter" as defined in ss. 1145(b).
(d) The Debtors, together with HFG and the Committee, have demonstrated a
reasonable probability that reverse mergers or acquisitions which are
provided for in the Modified Plan to be secured by the Target Debtors
will take place prior to the Consummation of the Plan Date for each
entity by demonstrating previous success with such transactions in
other bankruptcy and non-bankruptcy contexts.
(e) For purposes of ss. 1125(c), the proponents of the Modified Plan and
HFG, as applicable, have solicited acceptances and rejections of the
Modified Plan and otherwise participated in the offering and issuance
of securities of the Target Debtors under the Modified Plan in good
faith and in compliance with the applicable provisions of the
Bankruptcy Code and are entitled to the protections of ss. 1125(e).
(f) Each Target Debtor shall be deemed to have received a discharge
pursuant to ss. 1141(d)(1)(A) upon meeting the conditions set forth in
the Modified Plan prior to that Debtor's Consummation of the Plan
Date.
24. Payment of Certain Fees. As to each Debtor, ss. 1129(a)(12) is
satisfied because, pursuant to Section 5.14 of the Modified Plan, all fees
payable under 28 U.S.C. ss. 1930 have been paid or shall be paid on or before
the Effective Date.
25. Continuation of Retirement Benefits. As to each Debtor, ss. 1129(a)(13)
is inapplicable because the Debtors have no retirees.
26. Only One Plan. For each Debtor, the Modified Plan is the only plan of
reorganization of the Debtors pending before this Bankruptcy Court or any other
court.
27. No Tax Avoidance. The primary purpose of the Modified Plan is not the
avoidance of taxes or the application of Section 5 of the Securities Act of
1933, as amended.
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28. Assumed Executory Contracts and Unexpired Leases; Cure Amounts. Each
executory contract and unexpired lease of the Debtors that is listed on the
Schedule of Assumed Contracts is being assumed by the Debtors and assigned to
the Purchaser pursuant to Section 9.1 of the Modified Plan. For each such
contract and lease identified on the Schedule of Assumed Contracts and in the
Operations Transfer Agreement, either (i) there have been no defaults under such
executory contract or unexpired lease, other than defaults of the nature set
forth in ss. 365(b)(2) or (ii) with respect to defaults other than those
specified in such Section, the Debtors (a) have cured, or provided adequate
assurance that the Debtors will cure, such defaults on or as soon as practicable
after the Effective Date, and (b) have compensated, or provided adequate
assurance that the Debtors will compensate, on or as soon as practicable after
the Effective Date, parties to such executory contracts or unexpired leases for
any actual pecuniary loss resulting from such default. The evidence proffered or
adduced at the Confirmation Hearing (i) was persuasive and credible, (ii) has
not been controverted by other evidence, and (iii) demonstrated that the
Purchaser (or its corresponding designees) will be able to perform its
obligations under each contract and lease identified on the Schedule of Assumed
Contracts and in the Operations Transfer Agreement on and after the Effective
Date. To the extent cure amounts remain owing in respect of any of the executory
contracts and unexpired leases assumed pursuant to the Modified Plan, such cure
amounts shall be those cure amounts previously approved by the Bankruptcy Court
There are no "cure" amounts required to be paid by the Debtors or other defaults
required to be cured by the Debtors in connection with the assumption of the
executory contracts and unexpired leases listed on the Schedule of Assumed
Contracts except for the amounts identified for "cure" in the Order Setting Cure
Amounts for Executory Contracts and
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DALLAS 1815727v5
Unexpired Leases, entered July 25, 2007. In the exercise of their reasonable
business judgment, the Debtors have determined to reject all executory contracts
and unexpired leases that are not (i) not listed on the Schedule of Assumed
Contracts or (ii) otherwise made the subject of a motion to assume and assign
such contracts or leases pursuant to ss.365 Filed on or before the Confirmation
Date shall be deemed rejected by the corresponding Debtors; provided, however,
that the foregoing shall not apply to the assumption and assignment of the Omega
Lease, which is dealt with in the following paragraph; and provided further,
that the Debtors shall remain in possession of their corporate headquarters at
800 West Arbrook, Arlington, Texas through August 31, 2007.
29. Rejection of Rosin Leases; Release. In consideration of the agreement
by El Paso/Coronado, Inc., Continental HC of Texville, LLC, Palestine Associates
Ltd. Co., Continental HC of Tyler, LLC (collectively, the "Rosin Lessors") to
waive any and all Claims for damages arising from the rejection of their
respective real property leases, on the Effective Date, the Debtors shall be
deemed to release unconditionally, and hereby are deemed to release
unconditionally on such date the Rosin Lessors from any and all claims,
obligations, suits, judgments, damages, rights, causes of action (including
Chapter 5 Causes of Action) and any liabilities whatsoever, whether known or
unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity
or otherwise, based in whole or in part upon or related to any act or omission,
transaction, event or other occurrence taking place on or at any time prior to
the Petition Date in any way relating to the Debtors.
30. Assumption and Assignment of Omega Lease. On the Effective Date, the
SMSA II Debtors shall assume and assign to the Purchaser (or its corresponding
designees) all of their
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DALLAS 1815727v5
respective rights and obligations in and to the Omega Lease. As to each
applicable Debtor, ss. 365 is satisfied because the proposed assumption and
assignment of the Omega Lease complies with all applicable provisions of ss.ss.
365.
(a) Cure. As to each applicable Debtor, ss. 365(b)(1)(A) is satisfied by
the payment of $409,623.04 to the Omega Lessor as set forth in the
following table. This amount includes the Omega Lessor's reasonable
fees and expenses, including legal fees, but specifically excludes any
amount relating to the payment of additional "insurance rent" pursuant
to Section 13.2 of the Omega Lease. Pursuant to this Court's rulings
in its Order, dated July 19, 2007 (the "Omega Order"), the Debtors are
not required to cure any default relating to the payment of such
"insurance rent."
- --------------------------------------------------------------------------------
Summary of Omega Cure Costs Amount
- --------------------------------------------------------------------------------
Late fees &interest on base rent as of the Petition Date 25,160.33
Late fees charged by Omega on overdue property taxes 15,106.83
Overdue 2006 property taxes (base amount) 592,492.51
Penalties & interest on 2006 property taxes - 112,573.58
Legal fees (includes DIP) 293,624.79
less application of security deposit (3) (437,399.00)
less refund of 2007 insurance penalty rent payments (191,936.00)
-----------
Total due $409,623.04
- --------------------------------------------------------------------------------
(b) Actual Pecuniary Losses. As to each applicable Debtor, ss.
365(b)(1)(B) is not applicable because, excluding the amounts paid
pursuant to the preceding paragraph, the Omega Lessor has incurred no
other actual pecuniary losses resulting from defaults under the Omega
Lease.
(c) Adequate Assurance of Future Performance. As to each applicable
Debtor, ss.ss. 365(b)(1)(C) and (f)(2)(b) are satisfied. The evidence
proffered or adduced at the Confirmation Hearing, (i) was persuasive
and credible, (ii) has not been controverted by other evidence, and
(iii) provided adequate assurance that the Purchaser will be able to
perform its obligations under the Omega Lease on and after the
Effective Date.
(d) Deposit or Other Security. As to each applicable Debtor, ss. 365(l) is
satisfied by the Purchaser's agreement with the Omega Lessor, as
evidenced in the Plan Documents, to provide the Omega Lessor with all
Transaction Documents as required under and defined in the Omega Lease
and a letter of credit in the amount required to fully fund the
deposit required under the Omega Lease. The Omega Lessor's letters of
credit securing the Debtors' obligations under the Omega Lease are not
property
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DALLAS 1815727v5
of the Estates, and the automatic stay shall not prevent the Omega
Lessor from drawing down on any such letter of credit.
31. Releases and Indemnifications. The provisions of the Modified Plan and
other provisions in the Confirmation Order dealing with releases, injunctions
and indemnification, including Articles X and XII and Section 7.9 of the
Modified Plan, are in the best interests of the Debtors and all Creditors and
Interest holders.
32. Good Faith Solicitation. Based upon the record before the Bankruptcy
Court, the Debtors, the Creditors Committee, the Executive Committee, and their
respective officers, directors, partners, employees, members, agents, advisors,
affiliates, underwriters or investment bankers, and any other professional
persons employed by any of them (the "Exculpated Persons") have acted in good
faith in connection with and relating to the formulation, negotiation,
solicitation, implementation, confirmation and consummation of the Modified
Plan, the Disclosure Statement and any Plan Documents, and have acted in
compliance with the applicable provisions of the Bankruptcy Code and are
entitled to the protections afforded by ss. 1125(e) and the exculpatory and
injunctive provisions of the Modified Plan (to the extent provided therein).
33. Retention of Jurisdiction. The Bankruptcy Court may properly retain
jurisdiction over the matters set forth in Section 13.1 of the Modified Plan.
34. Approval of Sale of Acquired Assets. The sale and issuance of the Acquired
Assets to the Diversicare Parties, as Purchaser, is hereby approved as being in
the best interests of the Debtors, their estates and Creditors. The Operations
Transfer Agreement is approved in all respects, and the Debtors are authorized
and directed to consummate the transactions contemplated by the Operations
Transfer Agreement.
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DALLAS 1815727v5
35. Approval of Terms of Post Confirmation Credit Facility. The terms of
the Post Confirmation Credit Facility have been provided to the Court, including
without limitation the $2,200,000 maximum principal amount of the facility, the
maturity date, the interest rate, the conditions to the facility, the security
interests and liens to be granted in connection with the facility, the uses of
proceeds of the facility, the covenants of the Debtors and the Plan
Agent/Trustee given in connection with the facility, and the collection
procedures related to accounts securing the facility. The evidence proffered or
adduced at the Confirmation Hearing (i) was persuasive and credible, (ii) was
not controverted by other evidence, and (iii) established that obtaining the
Post Confirmation Credit Facility was necessary in order to consummate the
Modified Plan, that the terms of the Post Confirmation Credit Facility were
negotiated at armslength, in good faith, and are reasonable under the
circumstances, that credit was not available to the Debtors or the Liquidating
Trust on an unsecured basis, that the terms of the Post Confirmation Credit
Facility are consistent with the terms of the Modified Plan, that all creditors
and parties in interest of the Debtors received adequate and appropriate notice
of the transactions contemplated by, and terms of, the Post Confirmation Credit
Facility, and that entry of the Post Petition Credit Facility is in the best
interests of all parties in interest. Diversicare Leasing Corp is hereby
determined to be the Post Confirmation Credit Facility Lender, and the Post
Confirmation Credit Facility is authorized under ss.ss. 1123 and 105. Any sums
advanced by the Post Confirmation Credit Facility Lender will be extensions of
credit in good faith, which should not be overturned regardless of the existence
of any appeal of this Confirmation Order.
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DALLAS 1815727v5
FINDING THAT THE MODIFIED PLAN IS CONFIRMABLE BASED UPON, AMONG OTHER THINGS,
ALL OF THE ABOVE-STATED FINDINGS OF FACT AND CONCLUSIONS OF LAW, AND GOOD CAUSE
APPEARING THEREFOR, THE BANKRUPTCY COURT HEREBY ORDERS THAT:
1. Confirmation. As to each Debtor, the Modified Plan and each of its
provisions are hereby confirmed pursuant to ss. 1129.
2. Provisions of Plan and Order are Nonseverable and Mutually Dependent.
The provisions of the Modified Plan and this Confirmation Order, including the
findings of facts and conclusions of law set forth herein, are nonseverable and
mutually dependent.
3. Objections Overruled. All objections and responses to, and statements
and comments in opposition to, the Modified Plan, other than those withdrawn
with prejudice in their entirety prior to, or on the record at, the Confirmation
Hearing, or resolved as set forth herein, are hereby expressly overruled in
their entirety.
4. Treatment of Certain Miscellaneous Secured Claims.
(a) Pursuant to Section 4.3 of the Modified Plan, in satisfaction of its
Miscellaneous Secured Claim, DaimlerChrysler Financial Services
Americas, L.L.C. shall either (i) be paid in full from the proceeds of
the sale of certain vehicles (VIN 1FBSS31L03HA34074, 2B5WB3-
5Z22K126450, 2B5W35Z21K554467, 2B5WB35Z32K119412, 2B5WB- 35ZX1K540722,
1FBSS31LX4HA21270, 1FBSS31L54HA16574, 1FBSS31L34HA21269,
1FBSS31L44HA28702, 1GD6KD57-987U150569) or (ii) shall receive the
vehicles (VIN 3D7MU4-8C54G140113, 134GW5- 8N84C276824,
1GNEK13Z85R269597) securing such Claim, which vehicles shall be, and
hereby is, abandoned by the Debtors pursuant to ss. 554(a), and the
automatic stay shall terminate as to such vehicles as of the earlier
of the Effective Date or August 10, 2007.
(b) Pursuant to Section 4.3 of the Modified Plan, in satisfaction of its
Miscellaneous Secured Claim, Ford Motor Credit Company LLC shall be
paid in full from the proceeds of the sale of certain vehicles (VIN
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DALLAS 1815727v5
1FBSS31L55HB14554, 1FBSS31L55HA91450). A third vehicle (VIN
1FBSS31LX5HA95659) shall not be abandoned, but shall be the subject of
a separate motion to terminate the automatic stay pursuant to ss. 362.
(c) Pursuant to Section 4.3 of the Modified Plan, in satisfaction of its
Miscellaneous Secured Claim, Land Rover Capital Group shall receive
the vehicle (VIN SALMF13416A228914) securing such Claim, which vehicle
shall be, and hereby is, abandoned by the Debtors pursuant to
ss.554(a), and the automatic stay shall terminate as to such vehicle
as of the earlier of the Effective Date or August 10, 2007.
(d) Pursuant to Section 4.3 of the Modified Plan, in satisfaction of its
Miscellaneous Secured Claim, PlainsCapital Bank shall be paid in full
from the proceeds of the sale of Acquired Assets.
5. Preservation of Certain Recoupment Rights. Notwithstanding anything
contained in the Modified Plan or this Confirmation Order to the contrary,
nothing herein shall affect the rights of Federal Centers for Medicare and
Medicaid Services (CMS) and Texas Medicaid authorities (including the Texas
Health & Human Services Commission (HHSC) and the Texas Dept of Aging and
Disability Services (DADS) from exercising their rights pursuant to applicable
laws, statutes and regulations to impose a "vendor hold" on any/all medicaid
funds payable to any/all of Debtor's facilities or former facilities to which a
change of ownership (CHOW) is being sought or has been sought and to further
exercise their respective rights of recoupment. The Debtors and Plan Agent shall
retain their rights to exhaust administrative remedies to contest the dollar
amount of any recoupment effectuated or to contest said amounts before the
Bankruptcy Court, if the Bankruptcy Court has jurisdiction thereof. HHSC and
DADS reserve the right to contest the exercise of the Bankruptcy Court's
jurisdiction over any disputed recoupment amount and to argue in favor of having
any such matter heard before the administrative tribunal that regularly
adjudicates such issues. Nothing in the Modified Plan or
CONFIRMATION ORDER Page 23
DALLAS 1815727v5
the Confirmation Order shall act as a waiver to compliance with all applicable
state laws and regulations regarding the administrative/regulatory change of
ownership process.
6. General Authorizations; Plan Modifications. The Debtors, Plan Agent, the
Trustee, the Liquidating Trust, the Creditors Committee, the Executive Committee
and their respective directors, officers, agents and attorneys are hereby
authorized, empowered and directed, subject to the conditions set forth in the
Modified Plan and the right to modify the Modified Plan in accordance with
Section 13.5 of the Modified Plan, to carry out the provisions of the Modified
Plan, and to enter into, execute, deliver, file and/or perform the terms of the
Plan Documents and any other agreements, instruments and documents related
thereto, and any amendments, supplements or modifications to such Plan Documents
as may be necessary or appropriate, and to take such other steps and perform
such other acts as may be necessary or appropriate to implement and effectuate
the Modified Plan, the Plan Documents or this Confirmation Order, and to satisfy
all other conditions precedent to the implementation and effectiveness of the
Modified Plan and to consummate the Modified Plan.
7. Plan Documents Approved. The Debtors, the Plan Agent and the Trustee are
hereby authorized and directed to take all actions necessary to execute and
deliver all Plan Documents issued or entered into pursuant to the Modified Plan,
including, without limitation, (i) the Post Confirmation Financing Documents,
(ii) Operations Transfer Agreement, (iii) Trust Agreement, and (iv) any
agreement entered into or instrument issued in connection with any of the
foregoing or any other Plan Document. Each of the Plan Documents shall
constitute legal, valid, binding and authorized obligations of the respective
parties thereto, enforceable in accordance with its terms.
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DALLAS 1815727v5
8. Discharge of Claims. Any Post Confirmation Debtor and corresponding
Debtor that completes a reverse merger of the type described in Article VI of
the Modified Plan and timely files its Certificate of Completion prior to the
corresponding Consummation of the Plan Date shall, upon Filing such Certificate
of Completion, be discharged from any debt that arose before the Confirmation
Date, and any debt of the kind specified in ss.ss. 502(g), 502(h) or 502(i) ,
whether or not a proof of Claim is Filed or is deemed Filed, whether or not such
Claim is an Allowed Claim, and whether or not the holder or such Claim has voted
on the Modified Plan.
9. Binding Effect. As of the Effective Date, the provisions of the Modified
Plan and this Confirmation Order shall be binding on, and enforceable by and
against, the Debtors, the Plan Agent, the Purchaser, the Creditors Committee,
the Executive Committee, the Post Confirmation Credit Facility Lender, the DIP
Lender, the Omega Lessor, and all Creditors and Interest holders, including
their successors and assigns, whether or not they voted to accept the Modified
Plan.
10. Vesting of Assets. Unless otherwise dealt with under the Modified Plan,
the property of each Debtors' Estates, including all property of the estate
under ss. 541 and all accounts receivable and Causes of Action belonging to any
Debtor, but excluding the Acquired Assets and the Transition Assets, shall vest
in the Trustee on the Effective Date for the benefit of the beneficiaries of the
Liquidating Trust (such property when vested in the Liquidating Trust, the
"Trust Property"). From and after the Effective Date, the Plan Agent and Trustee
may operate the Liquidating Trust pursuant to the terms of the Modified Plan and
the Trust Agreement, and may use, acquire, pledge and dispose of property free
of any restrictions imposed under the Bankruptcy Code. The Plan Agent and
Trustee are hereby granted all power
CONFIRMATION ORDER Page 25
DALLAS 1815727v5
and authority to convey, pledge, transfer and assign any and all Trust Property
and to take all actions necessary to effectuate same. As of the Effective Date,
all Trust Property shall be free and clear of all liens, claims and interests of
holders of Claims and Equity Interests, except as provided in the Modified Plan.
On the Effective Date, the Transition Assets of each Debtor's Estate shall vest
in the corresponding Target Debtor.
11. Authorization to Pay Obligations Under the DIP Facility. The Debtors
shall be, and hereby are, authorized and directed, on the Effective Date, to pay
in full in Cash to the DIP Lender, Cash in an amount equal to the sum of (i) the
principal amount owing under the DIP Facility on the Effective Date, (ii) all
interest accruing thereon in accordance with the DIP Facility and (iii) all fees
and other charges relating thereto and property due and owing in accordance with
the DIP Facility.
12. Authorization to Take Acts Necessary to Enter into the Post
Confirmation Credit Facility. As of the Confirmation Date, the Liquidating Trust
and the Plan Agent shall be, and hereby are, authorized and directed to enter
into the Post Confirmation Credit Facility, and to take such actions and to
perform such acts as may be necessary or appropriate to implement the Post
Confirmation Credit Facility, including a Loan and Security Agreement,
promissory note, UCC-1 financing statements and all documents, instruments and
agreements related thereto and annexes, exhibits and schedules appended thereto,
including one or more agreements governing the collection and application of
certain accounts and other collateral securing the Post Confirmation Credit
Facility (together with the Post Confirmation Credit Facility, the "Post
Confirmation Financing Documents"), pursuant to which Diversicare Leasing Corp.,
an affiliate of the Purchaser (the "Post Confirmation Credit Facility Lender"),
shall provide a secured line of
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DALLAS 1815727v5
credit to the Liquidating Trust in an amount not to exceed $2,200,000.00 on the
terms and conditions set forth in the Post Confirmation Financing Documents, and
the obligations thereunder shall constitute legal, valid, binding and authorized
obligations of the respective parties thereto, enforceable in accordance with
their terms, and shall create the security interests purported to be created
thereby. Each of the Debtors, the Liquidating Trust, the Trustee and the Plan
Agent shall be, and hereby are, authorized to do or perform all acts, to make,
execute and deliver all instruments and documents and to pay all fees, expenses
and other amounts required to be paid under the Post Confirmation Credit
Facility and that may be required or necessary for the Trustee's performance
under the Post Confirmation Financing Documents.
13. Implementation of Plan. Pursuant to ss. 1142(b), the parties to the
Plan Documents, subject to the satisfaction or due waiver of each of the
conditions precedent to each such Plan Document and except as otherwise
contemplated by Article XI of the Modified Plan, are hereby authorized and
directed to execute and deliver the Plan Documents and to take such other
actions as shall be necessary to permit the Modified Plan to take effect and be
consummated, including, without limitation, (i) the Post Confirmation Financing
Documents, (ii) Operations Transfer Agreement, (iii) Trust Agreement, and (iv)
any agreement entered into or instrument issued in connection with any of the
foregoing or any other Plan Document. The Debtors, the Plan Agent, the
Liquidating Trust, the Creditors Committee and the Executive Committee shall
have the right, to the fullest extent permitted under ss. 1142, to apply to this
Court for an order (a) modifying the effect of any otherwise applicable
non-bankruptcy law or (b) directing any Entity to execute and deliver any
instrument or to perform any other act necessary to effectuate the Modified
Plan, subject to, and as contemplated by, Article XI of the
CONFIRMATION ORDER Page 27
DALLAS 1815727v5
Modified Plan; provided, however, that (without the consent of the affected
party or parties) no such order shall modify or impair any right, title,
interest, privilege or remedy expressly provided or reserved for under the
Modified Plan or this Confirmation Order.
14. Compromise and Settlement Agreements. The Debtors, the Liquidating
Trust and the Plan Agent are hereby authorized and directed to do or perform all
acts, and to make, execute and deliver all instruments and documents that may be
required or necessary for their respective performance under the Settlement
described in Article II of the Modified Plan.
15. Approval of Sale of Acquired Assets.
(a) The sale of the Acquired Assets to the Purchaser is hereby approved on
the terms set forth in the Operations Transfer Agreement and the
documents to be executed in connection therewith.
(b) The Successful Bid of the Diversicare Parties is hereby approved as a
Qualifying Bid and designated the Successful Bid in all respects, and
the proposed sale of the Acquired Assets to the Diversicare Parties as
Purchaser under the Modified Plan is hereby approved and authorized
pursuant to ss. 363(b).
(c) The terms of the Successful Bid constitute the higher and better offer
for the purchase and sale of the Acquired Assets described therein.
(d) The applicable Debtors are authorized and empowered to execute,
deliver and perform the Operations Transfer Agreement and all other
agreements and documents contemplated therein, and to sell and deliver
all of their respective rights, title and interests in and to the
Acquired Assets to the Purchaser in accordance with the terms and
provisions of the Successful Bid.
(e) Pursuant to ss. 105(a) and 363(f), the sale of the Acquired Assets
shall be free and clear of all claims, interests, mortgages, security
interests, conditional sale or other title retention agreements,
pledges, liens, judgments, demands, encumbrances or charges of any
kind or nature (collectively, the "Liens"), with all such Liens to
attach to the proceeds of the sale of the Acquired Assets in the order
of their priority, and with the same validity, priority, force and
effect which they now have as against the Acquired Assets; provided,
however, that nothing contained herein shall be deemed to be an
acknowledgement or consent by the Debtors or
CONFIRMATION ORDER Page 28
DALLAS 1815727v5
the Committee as to the amount, priority or allowance of any claim or
the validity, force and effect, or immunity from avoidance, of any
Lien, except to the extent such matters have been previously
stipulated to by the Debtors or the Committee or otherwise ordered by
the Court.
(f) Notwithstanding the foregoing, outstanding and unpaid ad valorem
property taxes for the 2006 tax year and earlier on both real and
personal property being conveyed pursuant to the sale of Acquired
Assets will be paid on the Effective Date from the gross proceeds of
the sale along with prepetition penalties and interest, if any, as
well as postpetition interest if authorized by the Bankruptcy Code
(the "Property Taxes"). Notwithstanding any other provision herein,
the ad valorem property tax liens for the 2007 tax year are hereby
expressly preserved against the corresponding Acquired Assets and
shall remain attached to the corresponding Acquired Assets until
payment of the 2007 taxes by the Purchaser in the ordinary course.
(g) Except as set forth herein, upon and after the Effective Date, all
persons or entities holding Liens with respect to the Acquired Assets
shall be, and they hereby are, forever barred from asserting such
Liens against such Acquired Assets or the Purchaser, its successors
and assigns.
(h) The Debtors are authorized and empowered to execute and deliver such
documents, take or perform such acts, and do such other things as may
be necessary to effectuate the terms of the Successful Bid and the
Operations Transfer Agreement, all transactions described therein and
this Confirmation Order, including the assumption and assignment of
the Omega Lease to the Purchaser.
(i) This Confirmation Order is and shall be binding upon all filing
agents, filing officers, public and private registrars of URL's,
domain names and trademarks, administrative agencies, governmental
departments, secretaries of state, federal, state, and local
officials, and all other persons and entities who may be required by
operation of law, the duties of their office, or contract, to accept,
file, register or otherwise record or release any documents or
instruments related to the Acquired Assets.
(j) The failure specifically to include any particular provision of the
Successful Bid or the Operations Transfer Agreement in this
Confirmation Order shall not diminish or impair the efficacy of such
provision, it being the intent of the Bankruptcy Court that the
Successful Bid be approved in its entirety.
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DALLAS 1815727v5
(k) To the extent there is a conflict between the provisions of the
Successful Bid, on the one hand, and the Confirmation Order, on the
other hand, the provisions of the Confirmation Order shall control.
(l) None of the Diversicare Parties, nor any affiliate of the Diversicare
Parties, is or shall be deemed a successor in interest to any of the
Debtors. None of the Diversicare Parties, nor any affiliate of the
Diversicare Parties, shall be liable for any liabilities, torts, or
other debts of the Debtors, other than any liabilities expressly
assumed under the Operations Transfer Agreement. Without in any way
limiting the foregoing, none of the Diversicare Parties, nor any
affiliate of the Diversicare Parties, shall have any liability or
responsibility for any damages arising from any negligent act, tort or
act of malpractice occurring before the date of closing of the
Operations Transfer Agreement. All creditors and other parties in
interest of the Debtors, including residents in any of the facilities
operated by the Debtors, are hereby permanently enjoined from pursuing
any claim or action against any of the Diversicare Parties for any
liability not expressly assumed by the Diversicare Parties under the
Operations Transfer Agreement.
(m) The sale of the Acquired Assets to the Purchaser pursuant to the
Successful Bid shall constitute a transfer for reasonably equivalent
value and fair consideration under the Bankruptcy Code and the laws of
all applicable jurisdictions, including, without limitation, the laws
of the State of Texas.
(n) The Purchaser is hereby granted all of the protections provided to a
goodfaith purchaser under ss. 363(m) and a good-faith creditor under
ss. 364(e).
16. Post Confirmation Credit Facility. The Post Confirmation Credit
Facility is hereby authorized and approved in all respects. The security
interests and Liens granted to secure the obligations to the Post Confirmation
Credit Facility Lender under the Post Confirmation Financing Documents shall
constitute, as of the Effective Date, legal, valid and duly perfected
first-priority liens and security interests in and to the Collateral specified
therein (the "Post Confirmation Credit Facility Collateral"), subject only,
where applicable, to the permitted Liens and encumbrances specifically consented
to by the Post Confirmation Credit Facility Lender in the Post Confirmation
Financing Documents. The Post Confirmation Credit
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DALLAS 1815727v5
Facility Lender's security interest in the Post Confirmation Credit Facility
Collateral shall attached to the Collateral without the necessity of any further
action on the part of the lender, the Debtors, the Plan Agent or the Trustee of
the Liquidating Trust and shall be perfected by operation of law upon entry of
this Confirmation Order. Notwithstanding the foregoing, upon request of the Post
Confirmation Credit Facility Lender, the Debtors, the Plan Agent or the Trustee
of the Liquidating Trust shall execute and file with the appropriate authorities
financing statements to further evidence the lender's security interest in the
Post Confirmation Credit Facility Collateral.
17. Post Confirmation Credit Facility; Priority and Implementation.
Notwithstanding anything to the contrary set forth in any other provision of the
Modified Plan, the Confirmation Order or any Plan Document, any and all Liens
and security interests in the assets comprising the Post Confirmation Credit
Facility Collateral granted by the Liquidating Trust to any person or entity
other than the Post Confirmation Credit Facility Lender pursuant to the Modified
Plan and/or the Confirmation Order or at any time thereafter shall be subject
and subordinate in all respects to the Liens and/or security interests in the
Post Confirmation Credit Facility Collateral granted to the Post Confirmation
Credit Facility Lender pursuant to the Modified Plan, this Confirmation Order
and the Plan Documents. The intended parties to the Post Confirmation Financing
Documents are hereby authorized to take any such actions as shall be necessary
to carry out the intents and purposes of the Post Confirmation Credit Facility,
the Modified Plan, the Post Confirmation Financing Documents, this Confirmation
Order or any Plan Document. Consistent with the foregoing, each recorder of
deeds or similar official for any county, city or Governmental Unit in which any
instrument furthering an interest in the Post Confirmation
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Credit Facility Collateral is to be recorded, is hereby ordered and directed to
accept a copy of this Confirmation Order as evidence of the rights, interests
and priorities set forth herein.
18. The Debtors, the Post Confirmation Debtors and any other successors to
any of the Debtors, the Plan Agent and the Trustee of the Liquidating Trust are
herby authorized and directed to immediately deliver to the Post Confirmation
Credit Facility Lender any proceeds received from the Post Confirmation Credit
Facility Collateral and to take any and all further action reasonably required
to allow the Post Confirmation Credit Facility Lender to realize value on or
collect any of the Post Confirmation Credit Collateral, including without
limitation providing the Post Confirmation Credit Facility Lender with
reasonable access to all books and records related to the Post Confirmation
Credit Facility Collateral and conferring with the Post Confirmation Credit
Facility Lender prior to compromising or settling any claim of offset or
recoupment against any of the Post Confirmation Credit Facility Collateral.
19. So long as any amount remains due and owing to Post Confirmation Credit
Facility Lender on the Post Confirmation Credit Facility, then Trustee/Plan
Agent shall make no Distributions to Creditors under the Modified Plan other
than those expressly authorized by the Post Confirmation Financing Documents.
20. Plan Agent. Bridge Associates, LLC ("Bridge") shall be, and hereby is,
designated as the Plan Agent effective as of the Confirmation Date, and shall
serve as Trustee of the Liquidating Trust. All officers and directors of the
Debtors as of the Confirmation Date (except for the Chief Restructuring Officer)
shall be, and hereby are, deemed to have resigned as officers and directors of
each Debtor as of the Effective Date. The Plan Agent and the Trustee shall each
be entitled to reimbursement by the Liquidating Trust of their reasonable and
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necessary expenses, including legal fees and expenses, incurred in carrying out
their respective duties under the Modified Plan without further motion,
application, notice, hearing or other order of the Bankruptcy Court upon
approval by a majority of the Executive Committee members. The Trustee shall
have all powers enumerated in the Trust Agreement, including the authority to
borrow money in its capacity as Trustee for the benefit of the beneficiaries of
the Liquidating Trust. The Plan Agent shall make all Distributions as and when
provided for under the Modified Plan. The Plan Agent shall serve without bond
and shall receive no other fee for its services other than its fees earned as
Plan Agent. The Plan Agent and the Trustee have agreed that their respective
fees (excluding legal fees and other expenses) on a blended rate will not exceed
$250.00 per hour.
21. Claims Resolution Escrow Account. In lieu of the Claims Resolution
Escrow Account described in the First Amended Plan and the Modified Plan, all
payments and other Distributions otherwise to have been made from the Claims
Resolution Escrow Account shall be paid from the Trust Property.
22. Executive Committee. Thomas A. Cook, Julie Moore and Carol Scontras
shall be, and hereby are, designated as the Executive Committee effective as of
the Confirmation Date. The Executive Committee shall be entitled to
reimbursement of its reasonable and necessary expenses, including legal fees and
expenses, incurred in carrying out its duties under the Modified Plan without
further motion, application, notice, hearing or other order of the Bankruptcy
Court upon approval by the Plan Agent. Such compensation (including fees and
reasonable and necessary expenses) shall be reimbursed from the Liquidation
Trust. The Executive Committee shall serve without bond and shall receive no
other fee for its services.
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23. Creditors Committee. Except with respect of any appeal of an order in
the Chapter 11 Cases, and any matters related to any proposed modification of
the Modified Plan, the Creditors Committee shall be discharged on the Effective
Date and the members, employees, agents, affiliates, advisors, and
representatives shall thereupon be discharged and relieved of all duties and
obligations as more fully set forth in Section 10.3 of the Modified Plan.
24. Deposit Accounts. All accounts (and the contents thereof) shall be, and
hereby are, transferred to "Bridge Associates, LLC, as trustee for the SMSA
Creditors' Trust." From and after the Confirmation Date, the sole signatories on
such accounts shall be Louis E. Robichaux IV and such other persons as
designated by the Trustee of the Liquidating Trust.
25. Disbursements. On the Effective Date and at appropriate intervals
thereafter, the Plan Agent shall make the Distributions to holders of Allowed
Claims as provided under the terms of the Modified Plan and this Confirmation
Order.
26. Unexpired Leases and Executory Contracts. As provided in, and subject
to, Article IX of the Modified Plan, on the Effective Date, all executory
contracts and unexpired leases listed both on the Schedule of Assumed Contracts
and in the Operations Transfer Agreement shall be, and hereby are, assumed by
the corresponding Debtors and assigned to the Purchaser (or its corresponding
designee). On the Effective Date, all executory contracts and unexpired leases
that are not (i) listed both on the Schedule of Assumed Contracts and in the
Operations Transfer Agreement or (ii) otherwise made the subject of a motion to
assume and assign such contracts or leases pursuant to ss.365 Filed on or before
the Confirmation Date shall be deemed rejected by the corresponding Debtors;
provided, however, that the foregoing shall not apply to the assumption and
assignment of the Omega Lease, which is dealt with in the
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following paragraph; and provided further, that the Debtors shall remain in
possession of their corporate headquarters at 800 West Arbrook, Arlington, Texas
through August 31, 2007. All executory contracts between any Debtor and
PharMerica, Inc. shall be deemed terminated as of 12:01 am on the first day
following the Effective Date, unless previously terminated.
27. Assumption and Assignment of Omega Lease. On the Effective Date, the
Omega Lease shall be, and hereby is, assumed by the corresponding Debtors and
assigned to the Purchaser (or its corresponding designees). In connection with
the assumption and assignment of the Master Lease, the Debtors shall pay to the
Omega Lessor the sum of $409,623.04 as a cure of defaults pursuant to ss.
365(b)(1)(A). The assumption and assignment of the Omega Lease to the Purchaser
shall be valid and binding regardless of any appeal or reconsideration of the
Order entered on July 20, 2007 regarding the obligations of the Debtors under
the Omega Lease and irrespective of any other matter that may become before this
Court related to the obligations of the Debtors under the Omega Lease.
28. Issuance of Plan Shares; Reverse Merger.
(a) As provided in the Modified Plan, other than HFG, Class 4 Claims which
are entitled to receive Plan Shares of the Target Debtors issued
pursuant to the Modified Plan are hereby enjoined from selling or
otherwise trading their claims and are enjoined from selling or
otherwise trading the Plan Shares when received until the completion
of that Target Debtor's reverse merger or reverse acquisition, as
provided for in the Modified Plan. Provided, however, that if, upon
the passing of the Consummation of the Plan Date as to a Post
Confirmation Debtor, such Post Confirmation Debtor has not completed a
transaction which will constitute Consummation of its Plan, then the
Plan Shares issued in that Post Confirmation Debtor shall be deemed
void and canceled, the injunction issued herein with respect to
asserting the claims against that specific Post Confirmation Debtor
shall be deemed canceled and the discharge provided under ss.
1141(d)(1) the Modified Plan will not be granted or made effective
with respect to that specific Post Confirmation Debtor.
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(b) Timothy P. Halter, as the sole officer and director, or as applicable
its sole manager or general partner, of each of the Target Debtors, is
hereby authorized to execute any necessary documents to meet the
statutory requirements for filing the necessary papers with the states
of Texas, Nevada and Delaware to effectuate the terms of the Modified
Plan.
(c) If a Target Debtor, in meeting its requirement to file a certificate
of completion of a reverse merger or acquisition with in the time
frames required by its Consummation of the Plan Date, as set forth in
the Modified Plan, files such certificate after a final decree is
entered and this case is closed, then such filing of the required
certificate shall be deemed to be an allowed reopening of this case,
pursuant to ss. 350(b) and Bankruptcy Rule 5010 that is related to
that Target Debtor's discharge and as such no fee will be required for
filing the certificate of completion of a reverse merger or
acquisition under 28 U.S.C. 1930(b).
(d) Commencing on the Effective Date, and subject to the terms of the
Modified Plan and this Confirmation Order, the Trust and the Target
Debtors may deal with these assets and property and conduct their
business without any supervision by, or permission from, the Court or
the office of the United States Trustee, and free of any restriction
imposed on the Debtors by the Bankruptcy Code or by the Court during
the Cases.
29. Professional Compensation and Reimbursement Claims. All Professionals
and Creditors' Committee members requesting payment of fees or reimbursement of
expenses for services rendered before the Effective Date, including the Plan
Agent, shall File and serve on counsel for the Debtors, the Plan Agent, counsel
for the Creditors Committee or Executive Committee, as applicable, and the
United States Trustee an application for final allowance of compensation and
reimbursement of expenses no later than thirty (30) days after the Effective
Date. Any objection to the application of a Professional for payment of fees and
reimbursement of expenses must be Filed and served on counsel for the Debtors,
the Plan Agent, counsel for the Executive Committee, as applicable, the United
States Trustee and the Professional to whose fee application the objection is
addressed.
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30. Late-Filed Claims. Unless arising from a Chapter 5 Cause of Action, any
new or amended proof of claim Filed after the Confirmation Date shall be of no
further force and effect and, as of the Effective Date, shall be deemed
Disallowed in full and expunged without any action by the Debtors, the Plan
Agent, the Creditors Committee or the Executive Committee.
31. No Waiver. Neither the entry of this Confirmation Order, the execution
of any of the documents required or contemplated hereunder or by the Modified
Plan, nor any other action or inaction by the Debtors, the Plan Agent, any
Creditor or any other party in interest in the Chapter 11 Cases (including,
without limitation, the failure of the Debtors, the Plan Agent, the Creditors
Committee and/or the Executive Committee to object to any proof of Claim) shall
constitute a waiver, estoppel, res judicata, release, relinquishment,
abandonment or any other abrogation of any objection, defense, offset or
counterclaim with respect to any Disputed Claim asserted against the Debtors.
32. Cancellation of Debt Instruments and Securities. On the Effective Date,
the DIP Facility, the Old Equity Interests and any options, warrants, calls,
subscriptions, or other similar rights or other agreements or commitments,
contractual or otherwise, obligating any Debtor to issue, transfer, or sell any
shares of Old Equity Interests, shall be canceled and the holders thereof shall
have no rights by reason thereof, and such instruments shall evidence no rights,
except the right to receive the Distributions, if any, to be made to holders of
such instruments under the Modified Plan.
33. Release of Liens. Except as otherwise provided in the Modified Plan,
any Plan Document or the Confirmation Order: (a) each holder of a Miscellaneous
Secured Claim, a Secured Claim, or a judgment, including the Omega Lessor and
the DIP Lender, shall on the
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Effective Date (x) turn over and release to the Plan Agent any and all
Collateral that secures or purportedly secures such Claim, as they pertain to
the properties currently owned or leased by one or more Debtors or such Lien
shall automatically, and without further action by any Debtor or the Plan Agent,
be deemed released, and (y) execute such documents and instruments as the
Debtors or the Plan Agent may request to evidence such Claim holder's release of
such property or Lien; and (b) on the Effective Date, all right, title and
interest in any and all property of each SMSA II Debtor's Estate actually
acquired by the Purchaser or retained by the Reorganized Debtors shall revert or
be transferred to the Purchaser or the Reorganized Debtors, as applicable, in
each case free and clear of all Claims and Interests, including, without
limitation, Liens, escrows, charges, pledges, encumbrances and/or security
interests of any kind. No Distribution hereunder shall be made to or on behalf
of any Creditor asserting a Lien on property of a Debtor unless and until such
Creditor executes and delivers to applicable Debtor or the Plan Agent such
release of Liens or otherwise turns over and releases such Cash, pledge, or
other possessory Lien. Any such holder that fails to execute and deliver such
release of Liens within thirty (30) days of the Effective Date shall be deemed
to have no further Claim against the Debtors, the Reorganized Debtors or their
assets or property in respect of such Claim and shall not participate in any
Distribution hereunder. Notwithstanding the immediately preceding sentence, any
holder of a Disputed Claim shall not be required to execute and deliver such
release until such time as the holder's Claim is Allowed or Disallowed.
34. Causes of Action. Pursuant to ss. 1123(b)(3), as of the Effective Date,
the Plan Agent is the representative of each Debtor's Estate and shall retain
and have the exclusive right to enforce against any Entity any and all Claims
and Causes of Action (including Chapter 5
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Causes of Action) that otherwise belong to a Debtor and arose before the
Effective Date, including all Causes of Action of a trustee and
debtor-in-possession under the Bankruptcy Code, other than those expressly
released or compromised as part of or pursuant to the Modified Plan or by other
order of the Bankruptcy Court entered prior to the Effective Date, shall become
assets of the Liquidating Trust. The Plan Agent shall retain and have the
exclusive right to enforce, pursue, compromise, settle or waive, in its
discretion, all such Claims and Causes of Action. The Causes of Action retained
hereby include, without limitation, all Claims and Causes of Action listed on
Appendix 3 to the Disclosure Statement.
35. Counterclaims. The Liquidating Trust shall not be subject to any
counterclaims with respect to any Causes of Action constituting Trust Assets,
provided however, that Causes of Action constituting Trust Assets will be
subject to any set-off rights to the same extent as if the Debtors themselves
had pursued the Causes of Action.
36. Automatic Stay. The automatic stay in effect with respect to the
Chapter 11 Cases pursuant to ss. 362(a) shall continue to be in effect until the
Effective Date. Upon the occurrence of the Effective Date, the automatic stay
shall be dissolved and of no further force or effect, subject to the injunctions
provided herein, in the Modified Plan and in the Bankruptcy Code.
37. Releases. The following releases (which are set forth in Sections 10.1
and 10.2 of the Modified Plan) are approved in their entirety and shall be fully
enforceable on and after of the Effective Date.
(a) Except as otherwise specifically provided by the Modified Plan, the
Distributions and rights that are provided in the Modified Plan shall
be in complete satisfaction and release, effective as of the
Confirmation Date (but subject to the occurrence of the Effective
Date) of (i) all Claims and
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Causes of Action against, liabilities of, liens on, obligations of and
Interests in each Debtor and Reorganized Debtor and the assets and
properties of each Debtor and Reorganized Debtor, whether known or
unknown, and (ii) all Causes of Action (whether known or unknown,
either directly or derivatively through any Debtor or Reorganized
Debtor) against, Claims (as defined in ss. 101) against, liabilities
(as guarantor of a Claim or otherwise) of, Liens on the direct or
indirect assets and properties of, and obligations of successors and
assigns of, each Debtor and Reorganized Debtor and its successors and
assigns based on the same subject matter as any Claim or Interest or
based on any act or omission, transaction or other activity or
security, instrument or other agreement of any kind or nature
occurring, arising or existing prior to the Effective Date that was or
could have been the subject of any Claim or Interest, in each case
regardless of whether a proof of Claim or Interest was Filed, whether
or not Allowed and whether or not the holder of the Claim or Interest
has voted on the Modified Plan.
(b) Each Debtor and Reorganized Debtor, on behalf of itself, shall be
deemed to release unconditionally, and hereby is deemed to release
unconditionally on such date every other Debtor and Reorganized Debtor
from any and all Claims, obligations, suits, judgments, damages,
rights, causes of action and liabilities whatsoever, whether known or
unknown, foreseen or unforeseen, existing or hereafter arising, in
law, equity or otherwise, based in whole or in part upon or related to
any act or omission, transaction, event or other occurrence taking
place on or prior to the Effective Date in any way relating to any
Debtor, Reorganized Debtor, the Modified Plan or the Chapter 11 Cases,
including without limitation, all Intercompany Claims, any and all
claims for substantive consolidation with the SMSA II Debtors and any
and all claims that the Liquidating Debtors and SMSA II Debtors
compose a "single business enterprise."
(c) Each Debtor and Reorganized Debtor, on behalf of itself, shall be
deemed to release unconditionally, and hereby are deemed to release
unconditionally on such date (i) each present officer, director,
employee, consultant, financial advisor, attorney, accountant and
other representatives of the Debtors, (ii) the Entities serving on the
Creditors Committee and, solely in their capacity as members or
representatives of the Creditors Committee or the Executive Committee,
each consultant, attorney, accountant or other representative or
member of the Creditors Committee or Executive Committee, and (iii)
the DIP Lender and, solely in its capacity as representatives of the
DIP Lender, each of the DIP Lender's respective officers, directors,
shareholders, partners, agents, employees, consultants, attorneys,
accountants, advisors, affiliates and other representatives (the
Entities specified in clauses (i) through (iii) are
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DALLAS 1815727v5
referred to collectively as the "Released Parties"; provided, however,
that neither Troy Clanton nor William Zimmerman is a Released Party
for any purpose herein), from any and all claims, obligations, suits,
judgments, damages, rights, causes of action and liabilities
whatsoever, whether known or unknown, foreseen or unforeseen, existing
or hereafter arising, in law, equity or otherwise, based in whole or
in part upon or related to any act or omission, transaction, event or
other occurrence taking place on or at any time from the Petition Date
through and including the Effective Date in any way relating to any
Debtor, Reorganized Debtor, the Chapter 11 Cases or the Modified Plan,
except that no Released Party shall be released from acts or omissions
which are the result of willful misconduct or fraud.
(d) Each Debtor and Reorganized Debtor, on behalf of itself, shall be
deemed to release unconditionally, and hereby are deemed to release
unconditionally on such date Troy Clanton from any and all claims,
obligations, suits, judgments, damages, rights, causes of action and
liabilities whatsoever, whether known or unknown, foreseen or
unforeseen, existing or hereafter arising, in law, equity or
otherwise, based in whole or in part upon or related to any act or
omission, transaction, event or other occurrence on or at any time
from the Petition Date through and including the Effective Date in any
way relating to the Chapter 11 Cases or the Modified Plan, except that
Troy Clanton shall not be released from acts or omissions which are
the result of willful misconduct or fraud.
(e) Each Debtor and Reorganized Debtor, on behalf of itself, shall be
deemed to release unconditionally, and hereby are deemed to release
unconditionally on such date Troy Clanton from any and all claims,
obligations, suits, judgments, damages, rights, causes of action and
liabilities whatsoever, whether known or unknown, foreseen or
unforeseen, existing or hereafter arising, in law, equity or
otherwise, based in whole or in part upon or related to any act or
omission, transaction, event or other occurrence taking place on or at
any time prior to the Petition Date in any way relating to the Debtors
or the Reorganized Debtors, provided, however, that nothing contained
herein shall be deemed or construed to release Troy Clanton from his
obligations under the Bankruptcy Court's Order Granting Joint Motion
Pursuant to Bankruptcy Rule 9019(a) to Approve Compromise of
Controversy with Troy Clanton and Related Parties, entered August 1,
2007.
(f) Nothing contained in the Modified Plan or this Confirmation Order
shall be deemed or construed to release or waive any claim that any
third party may have against a non-Debtor as guarantor of a Claim
otherwise released, waived, compromised or discharged pursuant to the
Modified Plan or the Confirmation Order.
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38. Injunction. Except as otherwise provided in the Modified Plan or this
Confirmation Order, all Entities who have held, hold or may hold Claims against
or Interests in a Debtor are, with respect to any such Claims or Interests,
permanently enjoined from and after the Confirmation Date from: (a) commencing,
conducting or continuing in any manner, directly or indirectly, any suit, action
or other proceeding of any kind (including, without limitation, any proceeding
in a judicial, arbitral, administrative or other forum) against or affecting any
Debtor, Reorganized Debtor, Post Confirmation Debtor, the Creditors Committee,
the Executive Committee, any member of the Creditors Committee or Executive
Committee, any of their professionals, any of their property, or any direct or
indirect transferee of any property of, or direct or indirect successor in
interest to, any Debtor, or any property of any such transferee or successor;
(b) enforcing, levying, attaching (including, without limitation, any
pre-judgment attachment), collecting or otherwise recovering by any manner or
means, whether directly or indirectly, of any judgment, award, decree or order
against any Debtor, Reorganized Debtor, Post Confirmation Debtor, the Creditors
Committee, the Executive Committee, any member of the Creditors Committee or
Executive Committee, any of their professionals, any of their property, or any
direct or indirect transferee of any property of, or direct or indirect
successor in interest to, any Debtor, or any property of any such transferee or
successor; (c) creating, perfecting or otherwise enforcing in any manner,
directly or indirectly, any encumbrance of any kind against any Debtor,
Reorganized Debtor, Post Confirmation Debtor, the Creditors Committee, the
Executive Committee, any member of the Creditors Committee or Executive
Committee, any of their professionals, any of their property, or any direct or
indirect transferee of any property of, or successor in interest to, any of the
foregoing Entities; (d) asserting any right of setoff,
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DALLAS 1815727v5
subrogation, or recoupment of any kind, directly or indirectly, against any
obligation due to any Debtor, Reorganized Debtor, Post Confirmation Debtor, the
Creditors Committee, the Executive Committee, any member of the Creditors
Committee or Executive Committee, any of their professionals, any of their
property, or any direct or indirect transferee of any property of, or successor
in interest to, any Debtor; and (e) acting or proceeding in any manner, in any
place whatsoever, that does not conform to or comply with the provisions of the
Modified Plan. Furthermore, except as otherwise expressly provided in the
Modified Plan, for the consideration described in the Modified Plan, as of the
Effective Date, all Entities who have held, hold or may hold claims released
pursuant to Section 10.1 of the Modified Plan, whether known or unknown, and
their respective agents, attorneys and all others acting for or on their behalf,
shall be permanently enjoined on and after the Effective Date, with respect to
any claim released pursuant to Section 10.1 hereof, from (a) commencing or
continuing in any manner, any action or other proceeding of any kind with
respect to any claim against any Released Party or Troy Clanton, as applicable,
or the property of any of them; (b) seeking the enforcement, attachment,
collection or recovery by any manner or means of any judgment, award, decree, or
order against any Released Party or the property of any Released Party or Troy
Clanton, as applicable; (c) creating, perfecting or enforcing any encumbrance of
any kind against any Released Party; (d) asserting any setoff, right of
subrogation or recoupment of any kind against any obligation due to any Released
Party or Troy Clanton, as applicable; and (e) taking any act, in any manner and
in any place whatsoever, that does not conform to or comply with provisions of
the Modified Plan. In the event that any Entity takes any action that is
prohibited by, or is otherwise inconsistent with the provisions of Sections 10.1
or 12.3 of the Modified Plan, then, upon notice to the
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DALLAS 1815727v5
Bankruptcy Court, the action or proceeding in which the claim of such Entity is
asserted shall automatically be transferred to the Bankruptcy Court for
enforcement of the provisions of Sections 10.1 or 12.3 of the Modified Plan.
Nothing contained in the Modified Plan or this Confirmation Order shall be
deemed or construed to enjoin any claim that any third party may have against a
non-Debtor as guarantor of a Claim otherwise released, waived, compromised or
discharged pursuant to the Modified Plan or the Confirmation Order.
39. Trading Injunction. Except as otherwise provided in the Modified Plan
or this Confirmation Order, all Entities who have held, hold or may hold Claims
against or Interests in a Debtor are, with respect to any such Claims or
Interests, permanently enjoined from and after the Confirmation Date from: (a)
transferring any Allowed Class 4 General Unsecured Claim against a Target Debtor
from and after the Effective Date, until the Plan Shares as to the Post
Confirmation Debtors are issued to holders of Allowed Class 4 General Unsecured
Claims and, as applicable, Allowed Class 7 Subordinated Claims; and (b)
subsequently transferring any Plan Shares of a Post Confirmation Debtor until
such Post Confirmation Debtor has completed its reverse merger or acquisition.
Any transfer made in violation of this injunction shall be void and
unenforceable in all respects.
40. Remedy for Violation of Injunction. Should an party violate any of the
injunctions set forth in the preceding two paragraphs or in decretal paragraph
15(l), any Debtor or the Plan Agent (or the Purchaser, with respect to a
violation of the injunction contained in decretal paragraph 15(l)) may provide
written notice of such default to such violating party with copies of such
notice to counsel for the Plan Agent and the Executive Committee. If such
violation is not cured within ten (10) days from the date of such notice of
default, any Debtor or
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DALLAS 1815727v5
the Plan Agent (or the Purchaser, with respect to a violation of the injunction
contained in decretal paragraph 15(l)) may present an ex parte order to the
Bankruptcy Court setting a day and time when such party violating the relevant
injunction must appear before the Bankruptcy Court and show cause why it should
not be held in contempt of the Confirmation Order. If a party is found in
contempt of the Confirmation Order, the Court shall assess the cost of the party
proceeding on the show cause order against the defaulting party in an amount not
less than $7,500 or such higher amount as may have been actually incurred,
designate a party to appear and sign or accept the documents required under the
Modified Plan on behalf of the defaulting party, and enter such other order as
may be deemed necessary to compel such party's compliance with the Confirmation
Order.
41. Retention of Jurisdiction. Notwithstanding Confirmation of the Modified
Plan, this Court retains exclusive jurisdiction over the Chapter 11 Cases
pursuant to and for the purposes set forth in (a) ss.ss. 105(a) and 1127, (b)
Article 13.1 of the Modified Plan and (c) for such other purposes as may be
necessary or useful to aid in the Confirmation and consummation of the Modified
Plan and its implementation.
42. Binding Effect of Plan Documents. The Plan Documents shall constitute
legal, valid, binding and authorized obligations of the respective parties
thereto, enforceable in accordance with their terms and, to the extent
applicable, shall create, as of the Effective Date, the security interests
purported to be created thereby.
43. Plan Implementation. All actions contemplated by the Modified Plan are
hereby authorized and approved in all respects (subject to the provisions of the
Modified Plan and the occurrence of the Effective Date), including, without
limitation, all actions contemplated by
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Article VI of the Modified Plan. All such actions, and any other actions
described in the Modified Plan or this Confirmation Order that would otherwise
require the consent or approval of the directors or shareholders of the Debtors
shall be deemed to have been consented to or approved and shall be effective
under applicable state law and the Bankruptcy Code, without any requirement of
prior or further action by the shareholders or directors of the Debtors. The
Chief Restructuring Officer, the Plan Agent and the Trustee are authorized and
directed to execute and deliver and to perform the terms of the agreements,
documents and instruments contemplated by the Modified Plan and the Disclosure
Statement in the name of and on behalf of the Debtors and the Liquidating Trust,
as applicable.
44. Termination of Creditors Committee. Except with respect to any appeal
of an order in the Chapter 11 Cases, and any matters related to any proposed
modification of the Modified Plan, on the Effective Date, the Creditors
Committee shall be dissolved and the members, employees, agents, advisors,
affiliates and representatives (including, without limitation, attorneys,
financial advisors, and other Professionals) of each thereof shall thereupon be
released from and discharged of and from all further authority, duties,
responsibilities and obligations related to, arising from and in connection with
or related to the Chapter 11 Cases. Notwithstanding the foregoing, the Executive
Committee (and its counsel) shall continue for the purpose of monitoring the
implementation of the Modified Plan, administering the Claims objection and
resolution process, monitoring the Distribution process with respect to Class 4,
objecting to applications of Professionals for compensation and reimbursement
and the pursuit and settlement of Chapter 5 Causes of Action until such time as
the Executive Committee deems it appropriate by a majority vote to dissolve
itself or all members of the Executive Committee
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resign. All reasonable attorney's fees and costs incurred by counsel for the
Executive Committee in performing the duties contemplated by the Modified Plan
to be performed by the Executive Committee after the Effective Date shall be
paid out of the Trust Property.
45. Exemption from Certain Taxes. Pursuant to ss. 1146(c), (a) the
issuance, transfer or exchange of any securities, instruments or documents; (b)
the creation of any other Lien, mortgage, deed of trust or other security
interest; (c) the making or assignment of any lease or sublease or the making or
delivery of any deed or other instrument of transfer under, pursuant to, in
furtherance of, or in connection with, the Modified Plan, including, without
limitation, any deeds, bills of sale or assignments executed in connection with
any of the transactions contemplated under the Modified Plan or the revesting,
transfer or sale of any real or personal property of the Debtors pursuant to, in
implementation of, or as contemplated in the Modified Plan, (d) the consummation
of the transactions contemplated by the Operations Transfer Agreement, the Post
Confirmation Credit Facility and any other Plan Documents, and (e) the issuance,
renewal, modification or securing of indebtedness by such means, and the making,
delivery or recording of any deed or other instrument of transfer under, in
furtherance of, or in connection with, the Modified Plan, including, without
limitation, the Confirmation Order, shall not be subject to any document
recording tax, stamp tax, conveyance fee or other similar tax, mortgage tax,
real estate transfer tax, mortgage recording tax or other similar tax or
governmental assessment. Consistent with the foregoing, each recorder of deeds
or similar official for any county, city or governmental unit in which any
instrument hereunder is to be recorded shall, pursuant to the Confirmation
Order, be ordered and directed to accept such
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instrument, without requiring the payment of any filing fees, documentary stamp
tax, deed stamps, stamp tax, transfer tax, intangible tax or similar tax.
46. Modification of the Modified Plan. After the entry of the Confirmation
Order, the Debtors may upon order of the Bankruptcy Court, alter, amend or
modify the Modified Plan in accordance with ss. 1127(b), or remedy any defect or
omission or reconcile any inconsistency in the Modified Plan in such manner as
may be necessary to carry out the purpose and intent of the Modified Plan. After
entry of the Confirmation Order, if the Operations Transfer Agreement is
terminated by the SMSA II Debtors due to a breach thereof by the Purchaser, then
the SMSA II Debtors shall have the right to alter, amend or modify the Modified
Plan or remedy any defect or omission in the Modified Plan.
47. References to Plan Provisions. The failure to reference or discuss any
particular provision of the Modified Plan in this Confirmation Order shall have
no effect on the validity, binding effect or enforceability of such provision
and such provision shall have the same validity, binding effect and
enforceability as every other provision of the Modified Plan.
48. Reversal. If any or all of the provisions of this Confirmation Order
are hereafter reversed, modified or vacated by subsequent order of this Court or
any other court, such reversal, modification or vacatur shall not affect the
validity of the acts or obligations incurred or undertaken under or in
connection with the Modified Plan prior to the Debtors' receipt of written
notice of any such order, nor shall such reversal, modification or vacatur of
this Confirmation Order affect the validity or enforceability of such act or
obligation. Notwithstanding any such reversal, modification or vacatur of this
Confirmation Order, any such act or obligation incurred or undertaken pursuant
to, and in reliance on, this Confirmation Order prior to the effective date
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of such reversal, modification or vacatur shall be governed in all respects by
the provisions of this Confirmation Order and the Modified Plan and all
documents, instruments and agreements related thereto or any amendments or
modifications thereto.
49. Exculpation. The Exculpated Person shall neither have nor incur any
liability to any Entity for any act taken or omission made in good faith in
connection with or related to formulating, negotiating, implementing, confirming
or consummating the Modified Plan, the Disclosure Statement or any Plan
Document. The Exculpated Persons shall have no liability to any Debtor,
Reorganized Debtor, Creditor, Interest holder, any other party in interest in
the Chapter 11 Cases or any other Entity for actions taken or not taken under
the Modified Plan, in connection herewith or with respect thereto, or arising
out of their administration of the Modified Plan or the property to be
distributed under the Modified Plan, in good faith, including, without
limitation, failure to obtain Confirmation or to satisfy any condition or
conditions, or refusal to waive any condition or conditions, to the occurrence
of the Effective Date, and in all respects such Exculpated Persons shall be
entitled to rely upon the advice of counsel with respect to their duties and
responsibilities under the Modified Plan.
50. Enforceability. Pursuant to ss.ss. 1123(a) and 1142(a), the provisions
of this Confirmation Order, the Modified Plan and the Plan Documents shall apply
and be enforceable notwithstanding any otherwise applicable nonbankruptcy law.
51. Substantial Consummation. The Modified Plan shall be deemed to be
substantially consummated on the Effective Date. The findings of fact and
conclusions of law contained herein shall not be binding on any party until the
Effective Date. In the event the Effective Date does not occur, the Confirmation
Order shall be considered null and void.
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52. Notice of Entry of Confirmation Order. Pursuant to Bankruptcy Rule
3020(c), on or before ten (10) days after the occurrence of the Effective Date,
the Debtors shall serve notice of (i) entry of this Confirmation Order; (ii) the
occurrence of the Effective Date; (iii) the deadline established in the Modified
Plan for the Filing of Administrative Expenses, including those for
Professionals' fees and expenses; (iv) the deadline for Filing rejection damage
Claims; (v) the deadline for Filing objections to Claims; and (v) such other
matters that the Debtors deem appropriate as provided in Bankruptcy Rule 2002(f)
and pursuant to the Modified Plan to all Creditors, Interest holders and other
parties in interest, to be sent by first-class mail, postage prepaid, except to
such parties who may be served by hand or facsimile or overnight courier, which
service is hereby authorized. The foregoing notice shall constitute due and
adequate notice of this Confirmation Order within the meaning of such Bankruptcy
Rules.
53. Final Decree. As to each Debtor, as soon as practicable after the
Modified Plan has been fully administered pursuant to Bankruptcy Rule 3020, the
Plan Agent shall file either an application for a final decree or a
post-Confirmation report explaining why an application for final decree is not
appropriate. The Plan Agent may seek entry of a final decree as to a Debtor
notwithstanding the pendency of the Consummation of the Plan Date as to such
Debtor.
54. Appeal. This Confirmation Order is a final order and is subject to
immediate appeal. For good cause shown, neither this Confirmation Order nor the
transactions approved herein shall be stayed pursuant to Bankruptcy Rules
3020(e), 6004(g) or 6006(d), and the terms of the Modified Plan and Confirmation
Order may be consummated immediately upon entry of the Confirmation Order.
Without limiting the foregoing, the Bankruptcy Court expressly orders that the
consummation of the closing of the Operations Transfer Agreement and any
advances of
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money by the Post Confirmation Credit Facility Lender shall be valid and binding
regardless of the pendency of any appeal of this Confirmation Order.
55. Controlling Provisions. In the event and to the extent that any
provision of this Confirmation Order is determined to be inconsistent with any
provision of the Modified Plan or any Plan Document or the Disclosure Statement,
such provision of this Confirmation Order shall control and take precedence. In
the event and to the extent that any provision of any Plan Document is
determined to be inconsistent with any provision of the Modified Plan or the
Disclosure Statement, such provision of such Plan Document shall control and
take precedence.
# # # # # END OF ORDER # # # # #
Prepared and submitted by:
Deirdre B. Ruckman (# 21196500)
Michael P. Cooley (# 24034388)
GARDERE WYNNE SEWELL LLP
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201
Telephone: (214) 999-4250
Facsimile: (214) 999-3250
COUNSEL FOR THE DEBTORS
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