EXHIBIT 10.3
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
NORTHERN DIVISION
In re ) Chapter 11
)
VERILINK CORPORATION, ) Jointly Administered
a Delaware Corporation, )
Tax ID No. 94-2857548, ) Case Nos. 06-80566 and 06-80567
and affiliates, )
) Judge Caddell
Debtors. )
)
ORDER CONFIRMING SECOND AMENDED JOINT PLAN
OF REORGANIZATION FILED BY THE DEBTORS ON DECEMBER 7, 2006
IT APPEARING to the Court that the Second Amended Joint Plan Filed by the
Debtors on December 7, 2006 (the "Plan") was duly served upon all creditors and
other parties in interest; that a hearing to confirm the Plan was properly
noticed and held on January 29, 2007; and that all objections to the Plan have
been either withdrawn or overruled;
NOW THEREFORE, based upon representations of counsel and an offer of proof
made by the Proponents, and upon the record in these cases, the Court makes the
following findings of fact and conclusions of law[[[1]]:
I.The Court has jurisdiction over the Debtors' Chapter 11 cases pursuant
to sections 157 and 1334 of title 28 of the United States Code.
Confirmation of the Plan is a core proceeding pursuant to 28 U.S.C.
{section} 157(b)(2)(L).
II. The Court takes judicial notice of the docket of the Debtors'
Chapter 11 cases maintained by the Clerk of the Court, including without
limitation all pleadings and other documents filed, all orders entered,
and all evidence and argument made, proffered or adduced at hearings
held before the Court during the pendency of the Debtors' Chapter 11
cases.
III. The transmittal and service of the Plan (in the form so transmitted
and served) and the Disclosure Statement related thereto, and of all
other materials transmitted and served in solicitation of votes to
accept or reject the Plan, were adequate and sufficient and performed in
accordance with the Court's order approving the Disclosure Statement
dated December 8, 2006 [Docket No. 714], and no other or further notice
of such documents is required.
IV. The solicitation and tabulation of votes to accept or reject the
Plan was conducted in good faith and in a thorough manner, was made of
all impaired creditors and equity security holders as of the Record
Date, gave all such creditors and equity security holders a fair and
adequate opportunity to accept or reject the Plan, and was in compliance
with section 1126(b) of Title 11 of the United States Bankruptcy Code,
11 U.S.C. {section}{section} 101-1532 (the "Bankruptcy Code") and all
other provisions of the Bankruptcy Code, the Bankruptcy Rules and the
orders of the Court. The Ballot Report submitted by the Debtors is
approved.
V. The Plan complies with all applicable provisions of the Bankruptcy
Code, thereby satisfying section 1129(a)(1) of the Bankruptcy Code.
VI. The Plan properly classifies claims and interests, and the claims
and interests in each class are substantially similar to the other
claims and interests in that class. Valid business, factual and legal
reasons exist for separately classifying the various classes of claims
and interests, and such classes do not unfairly discriminate between or
among holders of claims and interests. The Plan satisfies sections 1122
and 1123(a)(1) of the Bankruptcy Code.
VII. The Plan specifies the impaired classes of claims and interests
under the Plan and specifies the treatment of such claims and interests,
thereby satisfying sections 1123(a)(2) and (a)(3) of the Bankruptcy
Code. The Plan provides for the same treatment for each claim and
interest in each class, unless the holder of a claim or interest has
agreed to less favorable treatment, thereby satisfying section
1123(a)(4) of the Bankruptcy Code. The Plan provides adequate and
proper means for its implementation, thereby satisfying section
1123(a)(5) of the Bankruptcy Code.
VIII. The Plan provides that the Reorganized Verilink's bylaws will
include a provision prohibiting the issuance of non-voting equity
securities and providing, as to any different classes of securities
possessing voting power, an appropriate distribution of such power among
such classes, thereby satisfying section 1123(a)(6) of the Bankruptcy
Code. Moreover, the Plan provides for the appointment of new officers
and new directors which are consistent with the interests of creditors
and equity security holders and public policy, thereby satisfying
section 1123(a)(7) of the Bankruptcy Code.
IX. The Plan is dated and identifies the Plan Proponents, thereby
satisfying Bankruptcy Rule 3016(a). Solicitation of votes to accept or
reject the Plan satisfies Bankruptcy Rule 3018.
X. The Proponents have complied and will continue to comply with all
applicable provisions of the Bankruptcy Code, thereby satisfying section
1129(a)(2) of the Bankruptcy Code.
XI. The Plan has been proposed in good faith and not by any means
forbidden by law, thereby satisfying section 1129(a)(3) of the
Bankruptcy Code.
XII. All payments made or promised by the Debtors for services or for
costs and expenses in, or in connection with, the Plan and incident to
the case are subject to approval by the Court as reasonable, thereby
satisfying section 1129(a)(4) of the Bankruptcy Code.
XIII. The Plan and Disclosure Statement disclose the identity and
affiliation of the officer(s) and director(s) of the Reorganized
Verilink and the appointment of such individual is consistent with the
interests of the creditors and equity security holders. Consequently,
section 1129(a)(5) of the Bankruptcy Code has been satisfied.
XIV. There is no governmental regulation of any rates of the Debtors,
thereby rendering section 1129(a)(6) of the Bankruptcy Code inapplicable
to the Plan.
XV. Each holder of an impaired claim or interest either has accepted the
Plan or will receive or retain, as of the Effective Date of the Plan,
property having a present value not less than the present value that
each such holder would receive if the Debtors' assets were liquidated
under Chapter 7 of the Bankruptcy Code, thereby satisfying section
1129(a)(7) of the Bankruptcy Code.
XVI. Each class of claims and interests has either accepted the Plan (in
accordance with sections 1126(c) and (d) of the Bankruptcy Code) as
evidenced by the Ballot Tabulation filed with the Court on January 26,
2007, and representations made at the hearing, or is not impaired; the
Plan satisfies section 1129(a)(8) of the Bankruptcy Code.
XVII. The Plan provides that, except to the extent a holder of a
particular claim has agreed otherwise, (which consent is determined in
accordance with the Court's Order Granting Motion for the Entry of an
Order (i) Approving the Disclosure Statement, (ii) Establishing a
Deadline for Filing of Objections to the Joint Plan, for Objecting to
Confirmation, and for Filing Motions to Allow Disputed Claims for
Purposes of Voting and Objecting to Confirmation, (iii) Setting a
Record Date for the Ownership of Equity Interests for Voting Purposes,
(iv) Approving the Form of the Election Form Ballots and Corresponding
Instructions, (v) Approving the Service of the Joint Plan,
the Disclosure Statement, and Ballots along with Corresponding
Instructions, and (vi) Approving the Procedure for Filing and Counting
Ballots entered on December 8, 2006) as of the Effective Date of the
Plan, all allowed claims of a kind specified in sections 507(a)(2) and
507(a)(3) of the Bankruptcy Code, will be paid in full, thereby
satisfying section 1129(a)(9)(A) of the Bankruptcy Code.
XVIII.The Plan provides as to Class 3 (priority employee claims) for
deferred cash payments of a value as of the Effective Date equal to the
allowed amount of the claims entitled to priority under section
507(a)(4) of the Bankruptcy Code. Class 3 has accepted the Plan,
thereby satisfying section 1129(a)(9)(B) of the Bankruptcy Code.
XIX. The Plan provides as to Class 2 (priority tax claims) for either
payment in full on the Effective Date or installment payments in cash of
a total value as of the Effective Date equal to the allowed amount of
the claim over a five (5) year period and in a manner not less favorable
than the most favored non-priority unsecured claims, thereby satisfying
section 1129(a)(9)(C) of the Bankruptcy Code.
XX. The Internal Revenue Service has filed a proof of claim for a
priority claim to which the Debtors have objected. The parties have
agreed that any allowed priority tax claim of the Internal Revenue
Service shall, at the sole discretion of the Liquidating Trustee, (a) be
paid in full on the Effective Date; or (b) equal quarterly installments
with interest at the annual percentage rate of 8.00% and be paid within
sixty (60) months from the Filing Date. The first quarterly payment
shall begin sixty (60) days after the entry of an order allowing a
priority claim on behalf of the Internal Revenue Service. The foregoing
notwithstanding, no distributions shall be made to Class 6 or Class 7
creditors unless and until (i) the priority claim of the Internal
Revenue Service has been paid in full, (ii) such priority claim is
disallowed, or (iii) an adequate reserve is made for the payment of such
priority claim.
XXI. The Massachusetts Department of Revenue has filed priority claims
which have not yet been allowed. The parties have agreed that any
allowed priority tax claim of the Massachusetts Department of Revenue
shall, at the sole discretion of the Liquidating Trustee, (a) be paid
in full on the Effective Date; or (b) receive on account of such claim
regular cash installments, over a period determined by the Liquidating
Trustee, but in no event exceeding five (5) years after the Filing Date,
of a value, as of the Effective Date of the Plan, equal to the allowed
amount of such claim, including interest at the rate of nine percent
(9%).
XXII. Classes 1, 3, 6 and 7 are impaired classes of claims under the Plan,
each of which has accepted the Plan, thereby satisfying section
1129(a)(10) of the Bankruptcy Code.
XXIII.The Plan provides for a Liquidating Trust to complete the
liquidation of the Debtors' assets and confirmation of the Plan is not
likely to be followed by the liquidation or further financial
reorganization of the Reorganized Verilink and therefore complies with
section 1129(a)(11) of the Bankruptcy Code.
XXIV. All fees currently due under 28 U.S.C. {section} 1930 have been
paid, thereby satisfying section 1129(a)(12) of the Bankruptcy Code.
XXV. There are no continuing retiree benefits, as that term is defined in
section 1114 of the Bankruptcy Code, all such benefits having previously
been terminated pursuant to this Courts Order on Debtors' Motion for
Authority to Amend and Terminate 401(k) Plans [Docket No. 466], thereby
satisfying section 1129(a)(13) of the Bankruptcy Code.
XXVI. As authorized by section 1123(b)(3)(B) of the Bankruptcy Code, the
Plan provides for the creation of a Liquidating Trust to which shall be
transferred all remaining Assets for liquidation, administration, and
distribution in accordance with the Plan. All such Assets shall vest in
the Liquidating Trust free and clear of all liens, claims, encumbrances
and interests of creditors and interest holders, including without
limitation any right of setoff, except as otherwise provided in the Plan
or herein. Nothing herein shall relieve the Liquidating Trust from any
obligation that the Debtors had prior to the Effective Date to file any
tax returns and nothing herein shall be construed to obligate the
Liquidating Trust to file tax returns not otherwise required by
applicable law.
XXVII. The Assets transferred to the Liquidating Trust include
without limitation all Causes of Action that the Debtors had or had
power to assert immediately prior to the Confirmation Date. The
Liquidating Trustee is hereby appointed as the estate representative to
pursue all such claims pursuant to section 1123(b)(3)(B) of the
Bankruptcy Code.
XXVIII. The initial Liquidating Trustee shall be Darryl S. Laddin,
Esq. The appointment of the Liquidating Trustee is consistent with the
interests of creditors and equity security holders and with public
policy and satisfies section 1123(a)(7) of the Bankruptcy Code.
XXIX. The provisions of the Plan governing the assumption and rejection of
executory contracts and unexpired leases satisfy the requirements of
section 365(b) of the Bankruptcy Code.
XXX. That certain Settlement Agreement and Mutual Release ("Agreement"),
made and entered into as of the 26[th] day of January, 2007, by and
between Verilink Corporation ("Verilink") and its affiliate Larscom
Incorporated ("Larscom")(collectively with Verilink, the "Debtors"), and
the Official Committee of Unsecured Creditors, (the "Committee")
appointed in this case on the one hand, and John Major, John McGuire,
Howard Oringer and Desmond Wilson (collectively, the "Outside
Directors") is hereby approved and the parties thereto are authorized
and directed to comply with the terms of the Agreement.
XXXI. Effective upon the date this Order becomes final and non-appealable,
the Outside Directors on the one hand, and the Committee (for itself and
on behalf of the Debtors' estates) and the Debtors, on the other hand,
shall be deemed to forever relieve, release and discharge each other,
their respective agents, representatives, estates, employees,
predecessors, parent corporations, subsidiaries (whether or not wholly-
owned), affiliates, officers, principals, guarantors, directors,
attorneys, investigators, successors, and assigns and each of them, in
any and all capacities, from any and all claims, debts, liabilities,
demands, obligations, liens, promises, acts, agreements, costs and
expenses (including, but not limited to attorneys' fees), damages,
actions and causes of action, of whatever kind or nature, whether known
or unknown, choate or inchoate, fixed or contingent, whether in tort,
contract, law, or equity, arising out of or in any way related to or
connected with Verilink, Larscom, the Threatened Action (as defined in
the Agreement), the Outside Directors' Administrative Expense Claims (as
defined in the Agreement), the Outside Directors' Unsecured Claims (as
defined in the Agreement), and any other business relationship or
dealings by and between the parties to the Agreement from and after the
beginning of time through and including confirmation of the Plan by the
Bankruptcy Court, except for the obligations of the parties under the
Agreement. This mutual release includes, but is not limited to, any and
all claims, disputes and potential claims relating to the actions of the
Outside Directors prior to the Petition Date and after the Petition
Date. Notwithstanding the foregoing release and to further ensure
clarity, the Parties agree that the mutual release set forth herein and
in the Agreement applies with full force and effect to any and all
claims, debts, liabilities, demands, obligations, liens, promises, acts,
agreements, costs and expenses (including, but not limited to attorneys'
fees), damages, actions and causes of action, of whatever kind or
nature, whether known or unknown, choate or inchoate, fixed or
contingent, whether in tort, contract, law, or equity, arising out of or
in any way related to or connected with Desmond Wilson's service as
director of Larscom. Nothing contained in this paragraph or the
Agreement shall be deemed to release any other current or former officer
or director of the Debtors or any insurance company from any claims,
debts, liabilities, demands, obligations, liens, promises, acts,
agreements, costs and expenses (including, but not limited to attorneys'
fees), damages, actions and causes of action, of whatever kind or
nature, whether known or unknown, choate or inchoate, fixed or
contingent, whether in tort, contract, law, or equity. Notwithstanding
anything else contained in this paragraph or in the Agreement, the
releases by the Committee and the Debtors under this paragraph and in
the Agreement are contingent upon the Outside Directors' compliance with
paragraphs 1(a) and 1(b) of the Agreement; in the event that the Outside
Directors fail to comply with either paragraph 1(a) or 1(b) of the
Agreement, the releases by the Committee and the Debtors under this
paragraph and the Agreement shall not take effect.
XXXII. The pre-confirmation Debtors, the post-confirmation Debtors,
all creditors and equity security holders and all other parties in
interest are bound by the Plan within the meaning of section 1141 of the
Bankruptcy Code.
XXXIII. Under the circumstances in these Chapter 11 cases,
confirmation is in the best interests of creditors and equity security
holders and other parties in interest, and all conditions to
confirmation contained in the Plan, the Bankruptcy Code and the
Bankruptcy Rules have been satisfied.
XXXIV. This Order and the Plan it confirms supersede all prior Orders
of this Court as to matters covered herein.
NOW, THEREFORE, based on the foregoing, IT IS HEREBY ORDERED AND ADJUDGED
as follows:
1. The Debtors have met their burdens of proving the elements of
section 1129 of the Bankruptcy Code by a preponderance of the
evidence.
2. The Plan is hereby CONFIRMED in its entirety.
3. All objections to the Plan that have not been withdrawn are
overruled on their merits.
4. Upon entry of this Order and the occurrence of the Effective
Date, the terms of the Plan shall be binding upon the Debtors,
their successors and assigns, the Liquidating Trustee, the
Contributor, the Investor, any entity acquiring or receiving
property or a distribution under the Plan, any holder of an
administrative expense claim, or other claim or equity
interest against or in the Debtors including all federal,
state and local governmental entities and all parties given
notice of the Plan whether or not (i) the administrative
expense claim, claim or equity interest of such holder is
impaired under the Plan, (ii) such holder or entity has
accepted the Plan, and (iii) a proof of claim, demand for
payment of administrative expense or appearance has been made
in these chapter 11 cases.
5. This Order does not act to vest any property of the Debtors or
the Debtors' estates in the Debtors, and the provisions of
section 1141(b) of the Bankruptcy Code shall not apply in
these cases; rather, upon the occurrence of the Effective
Date, all Assets of the Debtors and the Debtors' estates shall
vest in the Liquidating Trust free and clear of all liens,
claims, encumbrances and interests, including without
limitation setoff rights, of creditors, equity security
holders and other parties in interest, in accordance with
section 1141(c) of the Bankruptcy Code, except as otherwise
provided in the Plan.
6. All executory contracts and unexpired leases of the Debtors
not assumed or rejected prior to the Effective Date are
rejected as of the Confirmation Date. ANY CLAIM ARISING OUT
OF THE REJECTION OF AN EXECUTORY CONTRACT SHALL BE FILED
WITHIN THIRTY (30) DAYS FOLLOWING THE DATE OF THIS ORDER OR
SUCH CLAIM SHALL BE FOREVER BARRED AND SHALL NOT BE
ENFORCEABLE AGAINST THE DEBTOR OR ITS PROPERTY.
7. The Plan Proponents and their representatives, including
Debtors' president, Lee N. Katz, are authorized to execute,
deliver, file or record such contracts, instruments, releases,
and other agreements or documents and take such actions as may
be necessary or appropriate to effectuate, implement, and
further evidence the terms and conditions of the Plan. The
Plan Proponents are authorized to take all necessary steps to
implement and consummate the Plan. This Order may be recorded
in any court or court records and any clerk is authorized and
directed to receive and record a certified copy of this Order.
8. Except as otherwise provided in the Plan, this Order shall
constitute all approvals and consents required, if any, by the
laws, rules or regulations of any state or any other
governmental authority or governmental unit with respect to
the implementation or consummation of the Plan and any
documents, instruments or agreements referred to in or
contemplated by the Plan and any amendments or modifications
thereto, and any other acts referred to in or contemplated by
the Plan, the Disclosure Statement, and any documents,
instruments or agreements and any amendments or modifications
thereto.
9. The exculpation provision contained in section 9.2 of the Plan
is fair and equitable, is given for valuable consideration
given the ongoing services of the individuals identified
therein, were properly noticed to holders of claims and equity
interests and other interested parties in accordance with the
requirements of due process and the applicable provisions of
the Bankruptcy Code and Bankruptcy Rules, and are in the best
interests of the Debtors and their estates and such provisions
shall be effective and binding upon all persons and entities,
including without limitation the Liquidating Trustee, to the
full extent provided in the Plan.
10.In the event the Effective Date does not occur upon the terms
set forth in the Plan, then this Order shall be vacated, no
distributions under the Plan shall be made, and the Plan, the
assumption or rejection of executory contracts or unexpired
leases pursuant to the Plan, any document or agreement
executed pursuant to the Plan, and any actions, releases,
waivers or injunctions authorized by this Order or any order
in aid of consummation of the Plan shall be deemed null and
void in all respects without any further action of the Court
or any party.
11.The DIP Note executed by Debtor Verilink in favor of Venture
Fund I, Inc. is, as of the Effective Date, deemed satisfied by
the terms and conditions contained in the Plan and Debtors are
not obligated under the DIP Note other than on the terms and
conditions set forth in the Plan.
Liquidating Trust
12.As of the Effective Date, the Debtors shall be deemed to have
appointed the Liquidating Trust as their true and lawful
attorney-in-fact with full power of substitution, which
appointment is coupled with an interest and is irrevocable and
the Liquidating Trust and its Trustee shall have full power to
act in the name of the Debtors for all purposes permitted
under the Plan and section 1123(b)(3)(B) of the Bankruptcy
Code including without limitation the authority to commence,
prosecute and settle all Causes of Action in the name of the
Debtors. The Debtors are enjoined from commencing,
prosecuting and settling any Causes of Action including
without limitation avoidance actions and D&O Actions.
13.Any and all claims and Causes of Action of the Debtors and
their estates and all other Assets of the Debtors and their
estates which are to be transferred to and enforced by the
Liquidating Trust and its Trustee shall be so transferred free
and clear of all liens, claims, encumbrances and interests,
including without limitation any right of setoff, unless
otherwise provided in the Plan, and shall survive confirmation
of the Plan, and upon entry of the Order and the occurrence of
the Effective Date, Darryl S. Laddin, Esq. is appointed as the
Liquidating Trustee and shall have and exercise all the
rights, powers and duties of the Liquidating Trustee as set
forth under the Plan. The Liquidating Trust may thereafter
commence or continue (or determine not to commence or
continue) in any appropriate court or tribunal, including in
the Bankruptcy Court, any suit or other proceeding for the
enforcement of such Causes of Action. Without limiting the
foregoing, the Liquidating Trust shall have the right to
commence Avoidance Actions and any D&O Actions or other Causes
of Action, including without limitation those described in the
Disclosure Statement or otherwise against the persons
identified in the Disclosure Statement or against any other
appropriate party.
14.Except to the extent such rights, claims, Causes of Action,
defenses and counterclaims are expressly and specifically
released in connection with the Plan or in any settlement
agreement approved during the chapter 11 cases (i) any and
all rights, claims, Causes of Action, defenses and
counterclaims accruing to the Debtors or the Estate (including
without limitation Avoidance Actions and D&O Actions) shall
remain assets of and vest in the Liquidating Trust, whether or
not litigation relating thereto is pending on the Effective
Date and whether or not any such rights, claims, Causes of
Action, defenses and counterclaims have been scheduled or
otherwise listed or referred to in the Plan, the Disclosure
Statement or any other document filed with the Bankruptcy
Court, and (ii) neither the Debtors nor the Liquidating Trust
waive, relinquish or abandon (nor shall they be estopped or
otherwise precluded from asserting) any right, claim, Cause of
Action, defense or counterclaim that constitutes property of
the Debtors' Estate; (a) whether or not such right, claim,
Cause of Action, defense or counterclaim has been listed or
referred to in the Schedules, the Plan, the Disclosure
Statement or any other document filed with the Bankruptcy
Court, (b) whether or not such right, claim, Cause of Action,
defense or counterclaim is currently known to the Debtors, the
Creditors' Committee or the proposed Liquidating Trustee, and
(c) whether or not a defendant in any litigation relating to
such right, claim, Cause of Action, defense or counterclaim
filed a proof of claim in the chapter 11 cases, filed a notice
of appearance or any other pleading or notice in the chapter
11 cases, voted for or against the Plan, or received or
retained any consideration under the Plan. Without in any
manner limiting the scope of the foregoing, notwithstanding
any otherwise applicable principle of law or equity, including
without limitation any principles of judicial estoppel, res
judicata, collateral estoppel, issue preclusion, claim
preclusion or any similar doctrine, the failure to list,
disclose, describe, identify or refer to a right, claim, Cause
of Action, defense or counterclaim or potential right, claim,
Cause of Action, defense or counterclaim in the Debtors'
Schedules, the Plan, the Disclosure Statement or any other
document filed with the Bankruptcy Court shall in no manner
waive, eliminate, modify, release or alter the Liquidating
Trust's and its Trustee's right to commence, prosecute, defend
against, settle and realize upon any rights, claims, Causes of
Action, defenses or counterclaims that any of the Debtors,
Creditors' Committee or Liquidating Trust have or may have as
of the Confirmation Date. The Liquidating Trustee may
commence, prosecute, defend against, recover on account, and
settle all rights, claims, Causes of Action, defenses and
counterclaims in its sole discretion in accordance with the
Plan and the best interests of and for the benefit of the
Liquidating Trust.
15.Upon the Effective Date of the Plan, all Creditors' Claims
Against Third Parties shall be deemed to have been transferred
and assigned to the Liquidating Trust without the need for any
party to execute any documents evidencing such assignments
except for any claims of the following creditors who
affirmatively opted out of conveying any such claims to the
Liquidating Trust: American Express Travel Related Services
Company, Inc., Digi-Key Corporation, Joseph T. McQuade, Floyd
Parsley and Delores A. Parsley Ttees, Powell Goldstein LLP,
Team Air Express, Inc., and Roxanne Tirone. The Liquidating
Trust is authorized to commence or continue (or determine not
to commence or continue) in any appropriate court or tribunal,
including in the Bankruptcy Court, any suit or other
proceedings for the enforcement of such Creditors' Claims
Against Third Parties.
16.On the Effective Date, the Creditors' Committee shall dissolve
and its members shall be released and discharged from all
rights and duties arising from or related to the Debtors'
Chapter 11 cases.
Restructuring Transaction
17.On the Effective Date, Reorganized Verilink shall (i)
implement a reverse stock split such that the total number of
issued and outstanding shares of the Reorganized Verilink
shall be no greater than 10,000, excluding shares held by or
issuable to the Investor or Contributor or equities issued to
any creditors pursuant to the Plan and excluding the shares of
any equity security holder who elected in their ballot to have
their shares cancelled; (ii) issue 25,000,000 restricted
shares of the New Common Stock to the Contributor which are
not subject to the reversal or reclassification of presently
issued common shares under the Plan; (iii) issue the
Liquidating Trustee's Stock to the Liquidating Trust to be
distributed in accordance with the provisions of the Plan; and
(iv) issue the Unsecured Creditors' Stock to be held as set
forth in the Plan. The Liquidating Trustee's Stock, the
Unsecured Creditors' Stock and the new equities issued by
Reorganized Verilink in satisfaction of the DIP Note to the
Investor shall be exempt from registration and the
requirements of federal and state securities laws in
accordance with section 1145 of the Bankruptcy Code. The New
Common Stock shall be exempt from registration and the
requirements of federal and state securities laws in
accordance with section 4(2) of the Securities Act. The
Contributor shall provide the Reorganized Verilink with all
necessary representations to qualify thereunder.
18.The New Directors of Reorganized Verilink may amend the
Reorganized Verilink's bylaws and amend the Reorganized
Verilink's fiscal years to a date established and set forth in
any exchange agreement without the need of shareholder
approval.
19.As of the Effective Date, the Current Directors and Current
Officers shall be deemed to have been removed and replaced by
the New Directors and New Officers. The New Directors and New
Officers have been identified in the Disclosure Statement.
Reorganized Verilink shall not be required to file a Form 14-F
with the SEC as a result of this change of officers and
directors.
20.As of the Effective Date, the New Directors of Reorganized
Verilink shall be authorized to change the name of Verilink to
a name selected by the New Directors without further
authorization from the shareholders.
21.Upon the Effective Date, the New Directors and New Officers
are authorized to execute an exchange agreement and other
documents necessary to consummate a Business Combination for
Reorganized Verilink with an appropriate candidate, provided
that such Business Combination must be consummated, including
all required and applicable SEC filings, within six (6) months
of the Effective Date of the Plan or up to one (1) year from
the Effective Date, if the Reorganized Verilink seeks and
obtains such an extension in accordance with the Plan. In
connection with any Business Combination, the Reorganized
Verilink and the New Directors shall comply with all SEC
requirements, including the filing of an 8-K. No further
shareholder approval shall be required to effect the Business
Combination as described herein, and this Order and the Plan
shall constitute full authority of the Reorganized Verilink
and the New Directors to take all actions and execute all
documents in furtherance of the Plan and hereof and the
transactions contemplated therein and hereby.
22.On the Effective Date, the issuance of securities as provided
in the Plan, the appointment of the New Directors and New
Officers as specified in the Plan, and all other corporate
actions called for by the Plan including changing the stock
transfer agent shall be deemed authorized and approved by
virtue of the entry of this Order in accordance with the
Bankruptcy Code and applicable state law (including but not
limited to section 303 of the Delaware General Corporations
Law, to the extent applicable) and without any requirement of
further action by the shareholders, directors or members of
the Debtors or Reorganized Verilink. Reorganized Verilink's
existence shall continue after the Effective Date and
Reorganized Verilink shall not be a "debtor" in this case.
Section 1146
23.Pursuant to section 1146(c) of the Bankruptcy Code, (i) the
issuance, transfer, or exchange of notes or issuance of debt
or equity securities under the Plan; (ii) the creation of any
mortgage, deed of trust, or other security interest, the
making or assignment of any lease or sublease, or the making
or delivery of any deed or other instrument of transfer under,
in furtherance of, or in connection with the Plan; and (iii)
any merger agreements or agreements of consolidation, deeds,
bills of sale, or assignments executed in connection with any
of the transactions contemplated under the Plan, shall not be
subject to any stamp, real estate transfer, mortgage
recording, sales, or other similar tax. All such transactions
consummated by the Debtors or the Liquidating Trust and
approved by the Bankruptcy Court on and after the Filing Date,
including, without limitation, the sales, if any, by the
Debtors or the Liquidating Trust of owned property or assets
pursuant to section 363(b) of the Bankruptcy Code or pursuant
to the Plan, shall be deemed to have been made under, in
furtherance of, or in connection with the Plan and, therefore,
shall not be subject to any stamp, real estate transfer,
mortgage recording, sales, or other similar tax.
Limited Substantive Consolidation
24.On the Effective Date, the Estate of each of the Debtors shall
be substantively consolidated with each other such that the
assets and liabilities of Verilink shall be deemed to be the
assets and liabilities of Larscom, and the assets and
liabilities of Larscom shall be deemed to be the assets and
liabilities of Verilink. As a consequence, any guaranties by
one of the Debtors of the obligations of the other or any
joint obligations shall be deemed liquidated so that the
holder of such claims shall have one Claim against the
consolidated Debtors and shall be deemed to be a single
obligation. Additionally, each and every proof of claim filed
or to be filed in either case shall be deemed filed against
the consolidated estates of the Debtors. Notwithstanding the
foregoing, the substantive consolidation of the estates shall
not affect the legal and organizational structure of the
Debtors, and Reorganized Verilink shall continue as a
separate, free-standing company after the Effective Date in
accordance with the terms of the Plan and the Restructuring
Transaction, and the assets and liabilities of Larscom shall
not be the assets and liabilities of the Reorganized Verilink.
Reorganized Verilink shall continue to exist after the
Effective Date as a separate legal entity, with all powers of
a corporation as applicable under the laws of the State of
Delaware and without prejudice to any right to alter or
terminate such existence (whether by Business Combination,
acquisition or otherwise) under such applicable state law.
Discharge and Injunction
25.Discharge. Upon consummation of the Business Combination,
provided it occurs within six (6) months of the Effective Date
or up to one (1) year after the Effective Date if an extension
has been obtained in accordance with the Plan, and without
further order of the Court, the rights accorded pursuant to
and in accordance with the applicable terms and conditions of
the Plan are in full and final satisfaction, settlement,
release and discharge as against the Debtors and Reorganized
Verilink, the Liquidating Trust and Liquidating Trustee, their
assets and liabilities of all Claims and Equity Interests and
any debt that arose before the Effective Date, and any debt of
a kind specified in section 502(g), 502(h) or 502(i) of the
Bankruptcy Code, and all Claims and Equity Interests of any
nature, including, without limitation, any interest, fees or
penalties accrued thereon from and after the Filing Date,
whether or not (i) a proof of claim or proof of interest based
on such Claim, debt, obligation or Equity Interest is filed or
deemed filed under section 501 of the Bankruptcy Code, (ii)
such Claim or Equity Interest is Allowed under section 502 of
the Bankruptcy Code, or (iii) the holder of such Claim or
Equity Interest has accepted the Plan, provided however that
nothing herein shall prohibit the exercise of police or
regulatory powers by a state or federal governmental agency.
Should a Business Combination not occur as set forth in the
Plan, this paragraph and the discharge provided shall be of no
force and effect.
26.Injunctions.
(a) Injunction Pending Business Combination. Except as otherwise
provided herein or in the Plan, as of the Effective Date and until the
expiration of any time period within which a Business Combination may be made
under the Plan, all entities that have held, currently hold or may hold a Claim
or other debtor liability against the Debtors or an Equity Interest or other
right of an equity security holder in the Debtors are enjoined from taking any
of the following actions on account of such Claims, debts, liabilities or Equity
Interests: (i) commencing or continuing, in any manner or
in any place, any action or other proceeding against the Debtors, Reorganized
Verilink, the Liquidating Trust and Liquidating Trustee, their successors or
property, (ii) enforcing, attaching, executing, collecting or recovering in any
manner any judgment, award, decree or order against the Debtors, Reorganized
Verilink, the Liquidating Trust and Liquidating Trustee, their successors or
property, (iii) creating, perfecting or enforcing any lien or encumbrance
against the Debtors, Reorganized Verilink, the Liquidating Trust and Liquidating
Trustee, their successors or property, (iv) asserting a setoff, or right of
subrogation, or right of recoupment of any kind against any Claim, debt,
liability or obligation against the Debtors, Reorganized Verilink, the
Liquidating Trust and Liquidating Trustee, their successors or property, and (v)
from commencing or continuing any action, in any manner or in any place where
the foregoing does not comply with or is inconsistent with the provisions of the
Plan, provided however that nothing herein shall prohibit the exercise of police
or regulatory powers by a state or federal governmental agency or the assertion
of affirmative defenses or cross claims against non-Debtor parties in any action
brought by the Debtors or the Liquidating Trustee.
(b) Injunction Related to Discharge. Upon consummation of the
Business Combination and the entitlement to a discharge set forth above and
subject to its occurrence, all Persons that have held, currently hold or may
have asserted, directly, indirectly, derivatively or otherwise, a Claim, a cause
of action or an Equity Interest or other right of a holder of an Equity Interest
that is discharged, released or terminated pursuant to the Plan, shall be deemed
permanently enjoined from (i) commencing or continuing, in any manner or in any
place, any action or other proceeding against the Debtors, Reorganized Verilink,
the Liquidating Trust and Liquidating Trustee, their successors or property,
(ii) enforcing, attaching, executing, collecting or recovering in any manner any
judgment, award, decree or order against the Debtors, Reorganized Verilink, the
Liquidating Trust and Liquidating Trustee, their successors or property, (iii)
creating, perfecting or enforcing any lien or encumbrance against the Debtors,
Reorganized Verilink, the Liquidating Trust and Liquidating Trustee, their
successors or property, (iv) asserting a setoff, or right of subrogation, or
right of recoupment of any kind against any Claim, debt, liability or obligation
against the Debtors, Reorganized Verilink, the Liquidating Trust and Liquidating
Trustee, their successors or property, and (v) from commencing or continuing any
action, in any manner or in any place where the foregoing does not comply with
or is inconsistent with the provisions of the Plan, provided however that
nothing herein shall prohibit the exercise of police or regulatory powers by a
state or federal governmental agency.
(c) Injunction Relating to Exculpation. As of the Effective Date,
except as otherwise provided in the Plan, all persons, entities or holders of a
Claim or Equity Interest, including without limitation, the Debtors, Reorganized
Verilink, the Liquidating Trust and Liquidating Trustee, are hereby permanently
enjoined from commencing or continuing, in any manner or in any place, any
action or other proceeding, whether directly, derivatively or otherwise against
any or all of the Exculpated Parties, on account of or respecting any Claims,
debts, rights, causes of action or liabilities exculpated pursuant to the Plan,
provided however that nothing herein shall prohibit the exercise of police or
regulatory powers by a state or federal governmental agency. For purposes of
clarification, the term Petition Date when used in the Plan or herein shall mean
Filing Date as defined in the Plan.
(d) Effect Upon Lack of Business Combination. If the Business
Combination shall not occur within the timeframe set forth in the Plan, the
discharge and injunction related thereto provided in this Order shall be deemed
dissolved, null and void without further order of the Bankruptcy Court. The
exculpation and injunction set forth in section 9.2 and 9.4(c) of the Plan
shall, however, remain in full force and effect.
27.On the Effective Date, except to the extent provided otherwise
herein, all notes, certificates, security agreements,
mortgages, pledges, indemnities, collateral assignments,
undertakings, guarantees, and other instruments and documents
creating a claim against or interest in the Debtors will no
longer be outstanding and will be cancelled, retired, and
deemed terminated, and will cease to exist, as permitted by
section 1123(a)(5)(F) of the Bankruptcy Code.
28.This Court will retain jurisdiction for the purposes set forth
in the Plan and the Bankruptcy Code. To the extent that this
Order conflicts with the Plan or any other document, this
Order shall govern.
29.In accordance with Federal Rule of Bankruptcy Procedure
3020(c), the Court will mail notice of entry of this Order to
the Debtors, all creditors, the United States Bankruptcy
Administrator and other parties in interest, and certify such
to the Court. Upon the occurrence of
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30.the Effective Date, counsel for the Debtors shall mail a
notice of the same to all such parties and shall certify such
to the Court.
Dated this the _____ day of ______________, 2007.
Jack Caddell, Judge
United States Bankruptcy Court
Prepared and presented by:
/s/ Wendy L. Hagenau
Wendy L. Hagenau (Ga. Bar No. 316688)
whagenau@pogolaw.com
Robert M.D. Mercer (Ala. Bar No. ASB-1204-E)
rmercer@pogolaw.com
POWELL GOLDSTEIN, LLP
One Atlantic Center, 14[th] Floor
1201 West Peachtree Street, N.W.
Atlanta, Georgia 30309
(404) 572-6600 Telephone
(404) 572-6999 Facsimile
- -and-
William J. Gibbons, Jr. (Ala. Bar No. ASB-5968-N43W)
gibbons@networktel.net
GIBBONS & FURMAN, P.C.
117 Jefferson Street, North
Huntsville, Alabama 35801
(256) 539-0021 Telephone
(256) 539-1254 Facsimile
Counsel to Debtors and Debtors-in-Possession
Footnotes
][1][] Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Plan.
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