IN THE UNITED STATES BANKRUPTCY COURT
IN AND FOR THE DISTRICT OF ARIZONA
In Re Case No. B-97-12293-PHX-CGC
DIAGNOSTIC INTERNATIONAL, INC., Chapter 11
Debtor ORDER CONFIRMING PLAN OF
REORGANIZATION
The Plan under Chapter 11 of the Bankruptcy Code filed by
Diagnostic International, Inc., the debtor and Debtor-in-Possession
in the above captioned Bankruptcy Case, on or about October 15,
1997, as modified, pursuant to the modifications contained in the
Modified Plan of Reorganization filed by the Debtor on May 24, 1999
(the "Modifications"), and a copy of said Plan and of the
Disclosure Statement approved by the Court having been transmitted
to the holders of all claims and equity security interests; and
It having been found and determined by this Court, after
notice and hearing, that:
1. All persons who are materially and adversely affected by the
Modifications are parties to that certain Global Settlement
Agreement dated May 20, 1999, pursuant to which all such creditors
and equity security interest holders agreed and consented to the
terms of said Modifications which materially and adversely affect
the treatment of their claims and equity security interests and
whom, by virtue of their execution of the Global Settlement
Agreement, have accepted in writing said Modifications;
2. The Plan as modified does not materially and adversely change
the treatment of the claims of any creditor or the interests of any
equity security holder who is not a party to the Global Settlement
Agreement and who has not accepted in writing the Modifications to
the Plan of Reorganization as filed by the Debtor on May 24, 1999;
3. The material and operative terms of the Global Settlement
Agreement have been incorporated into the terms of the
Modifications to the Plan of Reorganization, and said Global
Settlement Agreement resolves the Objections to the Plan of
Reorganization filed by the Reeves Group, as that term is defined
in the Global Settlement Agreement, and by William Doran, disputed
creditors and holders of equity security interests in the above
captioned case;
4. The Disclosure Statement approved by Order of the Court dated
December 16, 1997, contains adequate information regarding the
claims of the creditors and equity interests of the stockholders of
the Debtor and distributions of securities and payment of monies to
all creditors and holders of equity security interests of this
Bankruptcy Estate for the Modifications of the Plan proposed by the
Debtor;
5. The Plan, as modified, complies with the applicable provisions
of Chapter 11 of the Code;
6. The proponent of the Plan, Diagnostic International, Inc., and
the co-proponents, comply with the applicable provisions of the
Code;
7. The Plan, as modified, has been proposed in good faith and not
by any means forbidden by law;
8. Any payment made or to be made by the Debtor or by any person
issuing securities or acquiring property under the Plan, for
services or for costs and expenses in or in connection with the
case, or in connection with the Plan and incident to the case has
been approved by, or is subject to the approval of, the Court as
reasonable;
9. The Debtor has disclosed the entity and affiliations of any
individual proposed to serve, after Confirmation of the Plan, as a
director, officer or voting trustee of the Debtor, an affiliated of
the Debtor participating in a joint plan with the Debtor, or a
successor to the Debtor under the Plan; the appointment to or
continuance in, such office of such persons, is consistent with the
interest of creditors and equity security holders and with public
policy; and the Debtor has further disclosed the identity of all
insiders who will be employed by the Reorganized Debtor, and the
nature of any compensation for said insiders;
10. With respect to each impaired class of claims or interests,
each holder of a claim or interest of such class has accepted the
Plan or will receive or retain under the Plan on account of such
claim or interest property of a value, as of the Effective Date of
the Plan, that is not less than the amount that such holder would
receive or retain if the Debtor was liquidated under Chapter 7 of
the Bankruptcy Code;
11. With respect to each class of claims or interests, such class
has accepted the Plan, or such class is not impaired under the
Plan;
12. Except to the extent that the holder of a particular claim has
agreed to a different treatment of such claim, the Plan provides
that:
A. With respect to each claim of a kind specified in Sections
507(a)(1) or 507(a)(2) of the Code, on the Effective Date of the
Plan, the holder of each such claim will receive on account of such
claim cash equal to the allowed amount of such claim;
B. With respect to ta class of claims of a kind specified in
Section 507(a)(3), 507(a)(4), 507(a)(5) or 507(a)(6) of the Code,
each holder of a claim of such class will receive, if such class
has accepted the Plan, deferred cash payments of a value, as of the
Effective Date of the Plan deferred cash payments of a value, as of
the Effective Date of the Plan, equal to the allowed amount of such
claim; or, if such class has not accepted the Plan, cash on the
Effective Date of the Plan equal to the allowed amount of such
claim; and
C. With respect to a claim of akind specified in Section
507(a)(8) of the Code, the holder of such claim will receive on
account of such claim deferred cash payments, over a period not
exceeding six years following the date of assessment of such claim,
of a value, as of the Effective Date of the Plan, equal to the
allowed amount of such claim;
13. At least one class of claims has accepted the Plan, determines
without including any acceptance of the Plan by an insider holding
a claim of such class;
14. Confirmation of the Plan is not likely to be followed by the
liquidation, or the need for further financial reorganization, of
the Debtor or of any successor to the Debtor under the Plan, unless
such liquidation or reorganization is proposed in the Plan;
15. The Plan of Reorganization provides for the issuance and
distribution of New Common Stock of the reorganized Debtor and
stock of the Debtor's affiliates and co-proponents to the Debtor's
existing creditors and equity security holders and to persons who
will acquire claims and equity security interests and become
creditors and holders of equity security interests pursuant to and
by virtue of the Global Settlement Agreement.
16. Great Southwest Chili Company, Inc. (defined in the Plan by
the term "GSWCF"), Reeves Corp., XXYY Corp., AABB Corp., and DII
Sub., are affiliates of the Debtor and Co-proponents of the Plan of
Reorganization and the Modifications thereto filed by the Debtor on
May 24, 1999;
IT IS HEREBY OREDERED that the Modifications of the Plan or
Reorganization are deemed accepted by the parties who have
previously accepted the Plan;
IT IS FURHTER ORDERED that the Disclosure Statement approved
by Order of the Court dated December 17, 1997, contain adequate
information for the Modifications of the Plan proposed by the
Debtor
IT IS FURTHER ORDERED approving the Global Settlement
Agreement;
IT IS FURTHER ORDERED that, except with respect to any entity
which is an underwriter as defined by 11 U.S.C. 1145(B), section 5
of the securities Act of 1933 and any State or local laws requiring
registration for offer or sale of a security or registration or
licensing of an issuer of, underwriter of, or broker or dealer in a
security do not apply to (1) the issuance, sale and distribution
under the Plan, as modified, of any securities of the Debtor or of
any affiliate participating as a co-proponent of the Plan of
Reorganization in exchange for a claim against, an interest in, or
an administrative expense claim in the above captioned case
concerning the Debtor or any such affiliate; (2) the offer of a
security through any warrant that was issued, sold and distributed
in the manner provided for above or the sale of a security upon the
exercise of any such warrant; (3) a transaction by a stockbroker in
a security that is executed after a transaction of a kind specified
above in such security and before the expiration of forty days
after the first date on which such security was bonafide offered to
the public by the issuer or by or through an under writer, if such
stockbroker provides, at the time of or before such transaction by
such stockbroker, the Disclosure Statement approved by this Court
on December 17, 1997;
IT IS FURTHER ORDERED that the Plan of Reorganization filed by
the Debtor on October 15, 1997, as modified pursuant to the
Modifications filed by the Debtor on May 24, 1999, a copy of said
Plan and Modifications are attached hereto and incorporated herein
as Exhibit "1" and Exhibit "2" respectively, is confirmed; and
IT IS FURTHER ORDERED, pursuant to 11 U.S.C. 1142(b), that
all parties to the Global Settlement Agreement, attached hereto and
incorporated herein as Exhibit "3", including the Debtor and the
Reeves Group, shall execute and deliver all instruments necessary
to effect the transfers of property dealt with by the Plan, the
Modifications and Global Settlement Agreement, the Reeves Group
shall deliver all securities of Reeves Corp., to be issued to all
holders of Equity Security Interests, pursuant to the terms of the
Plan and Modifications and the Debtor shall deliver all other
securities to be issued to all other parties, pursuant to the terms
of the Plan and Modifications.
IT IS FURTHER ORDERED that the Notice Errata filed with the
Court on May 25, 1999, is attached hereto as Exhibit "4" and
incorporated herein.
IT IS FURTHER ORDERED that Section IV.A.2.d of the Modified
Plan is modified to add that the holders shall not convert their
shares of Preferred Stock for a two (2) Year Period after the date
of Confirmation.
IT IS FURTHER ORDERED Article VI.A.3.b of the Modified Plan is
hereby amended to correct a typographical error and to provide that
the price to purchase a share of the Company shall be Sixty Percent
(60%) and not Seventy Five Percent (75%) of the 30 days average
bid.
DATED this 25 day of May, 1999.
/s/ Charles G. Case II
HONORABLE CHARLES G. CASE II
UNITED STATES BANKRUPTCY JUDGE