Registration No. ___________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
LONE STAR LIQUIDATING TRUST
(Exact name of registrant as specified in its charter)
Texas 75-2691209
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3911 Turtle Creek Boulevard
300 Turtle Creek Centre
Dallas, Texas 75219
(214) 528-4834
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Securities to be registered pursuant to Section 12(g) of the Act:
Units of Beneficial Trust Interests.
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LONE STAR LIQUIDATING TRUST
FORM 10
Registration Statement
(Under the Securities Exchange Act of 1934)
(the "1934 Act")
* * *
PRELIMINARY NOTE
On February 19, 1997, (the "Effective Date") the Lone Star Liquidating
Trust (the "Trust") was established by ICH Corporation (including Care Financial
Corporation and SWL Holding Corporation) (the "Debtors") pursuant to the
Debtors' First Amended Joint Plan of Reorganization (the "Joint Plan") in the
Chapter 11 case styled In Re I.C.H. Corporation et al, Case No. 395-36351-RCM-11
(the "Case"). The Joint Plan was confirmed by order of the U.S. Bankruptcy Court
for the Northern District of Texas (the "Bankruptcy Court") on February 7, 1997.
A copy of the Joint Plan, which includes defined terms, is filed as Exhibit 2.1
to this Registration Statement. Capitalized terms used in this Registration
Statement without other definition are used as defined in the Joint Plan.
Statements contained in this Registration Statement as to the contents of
any contract or document are not necessarily complete, and in each instance such
statements are qualified in their entireties by reference to the copy of such
contract or other document filed as an exhibit to this Registration Statement.
This Registration Statement may contain statements relating to the Trust's
activities that are subject to risks and uncertainties. These statements include
the information concerning possible or assumed liquidation of assets and
resolution of claims and liabilities set forth under "Item 1, Business," " Item
2, Financial Information," "Item 8, Legal Proceedings," and those preceded by,
followed by or that include the words "believes," "expects," "anticipates" or
similar expressions. Trust Beneficiaries should understand that the following
important factors, in addition to those discussed elsewhere in the Registration
Statement, could affect the future activities of the Trust, the liquidation of
assets, the resolution of claims and liabilities, and the amount distributable
to Trust Beneficiaries and could cause those to differ materially from those
expressed in such statements: the outcome of claims and litigation pending
against the Trust and its subsidiaries, the assertion of claims against the
Trust and its subsidiaries in the future, as a successor to the Debtors or
otherwise, the unique nature of certain of the Trust's assets and, consequently,
the limited market for such assets, general market and economic conditions, and
other factors, many of which are beyond the control of the Trust.
* * *
Item 1. Business
I.C.H. Corporation ("ICH") was an insurance holding company that marketed
through its insurance subsidiaries a broad range of insurance and annuity
products to individuals and groups. In order to address a progressively
deteriorating financial condition, in 1995 ICH determined to sell its core
insurance subsidiaries. On October 9, 1995, the Debtors entered into a
definitive agreement to sell their principal insurance subsidiaries. The
transaction contained provisions for presenting the proposed sale to the
Bankruptcy Court in a Chapter 11 case to be commenced by the Debtors and for the
establishment of a competitive sale procedure to be conducted as part of such
Chapter 11 case. On October 10, 1995, the Debtors and Facilities Management
Installation, Inc. ("FMI"), a subsidiary of ICH that provided management, data
processing and other support services to ICH and its insurance subsidiaries,
filed voluntary petitions for relief under Chapter 11. Until confirmation of the
Joint Plan, the Debtors continued to operate their businesses as debtors in
possession as authorized by the Bankruptcy Code. In accordance with a
competitive procedure established by the Bankruptcy Court, ICH's principal
insurance subsidiaries and substantially all the assets of FMI were sold in
December 1995 to Southwestern Financial
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Corporation ("SFC"), a corporation newly formed by PennCorp Financial Group
("PennCorp") and Knightsbridge Capital Fund i, L.P. Philadelphia American Life
Insurance Company ("PALICO"), Modern American Life Insurance Company ("Modern")
and Western Pioneer Life Insurance Company ("Western"), three of four remaining
insurance subsidiaries held indirectly by ICH through its other remaining
insurance subsidiary, Bankers Multiple Line Insurance Company ("BML"), were sold
prior to confirmation of the Joint Plan. All of the outstanding stock of BML is
held in the registry of the Bankruptcy Court for the benefit of the Trust. FMI
remains under the protection of the Bankruptcy Court.
The Joint Plan was confirmed by the Bankruptcy Court on February 7, 1997,
and became effective on February 19, 1997. The Trust was formed on the Effective
Date under the Lone Star Liquidating Trust Agreement, dated as of February 19,
1997 (the "Trust Agreement"), a copy of which is filed as Exhibit 3.1 to this
Registration Statement.
Pursuant to the Joint Plan, all of the Debtors' assets, other than certain
specific assets retained by Reorganized ICH pursuant to the Joint Plan, were
transferred to the Trust on the Effective Date. Assets which were transferred to
the Trust on the Effective Date totaled approximately $372 million. Liabilities
assumed by the Trust on the Effective Date totaled approximately $18 million,
and included certain administrative, priority and other claims superior to Class
5 Claims. Additionally, the Trust assumed all the rights and obligations of BML,
including indemnification obligations, under the sales agreements with the
purchasers of PALICO, Modern and Western, all non-reinsured liabilities of BML
as of the Effective Date and certain other obligations. For a more detailed
description of the assets and liabilities of the Trust see "Item 2, Financial
Information".
The purpose of the Trust is the orderly disposition, liquidation and
distribution of Trust Assets, distributing Available Cash to holders of Allowed
ICH Class 5 Claims (General Unsecured Claims) (in accordance with the Joint
Plan, a "Trust Beneficiary") and making other distributions and payments called
for in the Joint Plan, with no objective to continue or engage in the conduct of
a trade or business. Under the terms of the Trust Agreement, the Trust is
permitted to engage only in those activities that are reasonably necessary to
the purpose for which it was formed and consistent with its objective not to
continue or engage in the conduct of a trade or business. The Trust has not
engaged in the conduct of a trade or business.
BML sold, through a reinsurance transaction effective as of March 31, 1996,
all of its remaining insurance business, and has ceased all insurance
underwriting activities. Bankers Life & Casualty Company, a former affiliate of
BML, issues and administers accident insurance to credit card holders on BML
policies and assumes 100% of the insurance liability. BML's activities are
primarily limited to maintaining its licenses in fifty states and resolving (i)
pre March 31, 1996 claims litigation, as well as claims litigation assumed in
connection with the sale of PALICO; (ii) potential indemnity obligations for an
environmental matter arising from the sale of Modern and one of its former
subsidiaries and (iii) potential indemnity obligations arising from the sale of
PALICO, Modern and Western.
All of the outstanding stock of FMI is held by the Trust. Since the sale by
ICH of its principal insurance subsidiaries and the assets of FMI to SFC, FMI
has not conducted any business. However, it has continued to meet its employee
benefit related obligations and settled certain claims filed against it in its
bankruptcy proceedings.
Termination. The Trust will terminate on the earlier to occur of the
fulfillment of the Trust's purpose by liquidation of all the Trust assets and
the distribution of the proceeds thereof, or three years after the Effective
Date. In order to terminate prior to three years after the Effective Date, the
Managing Trustee, after receiving the approval of the Supervisory Trustees, must
deliver a notice to all Trust Beneficiaries setting forth the date on which the
Trust will terminate. If no Trust Beneficiary files an objection with the
Bankruptcy Court within 45 days after the date of such notice, the Trust will
terminate on the date set forth in the notice. In addition, the Managing Trustee
may request, upon the approval of the Supervisory Trustees, an extension of the
term of the Trust if the Managing Trustee has been unable after continuing
reasonable efforts to sell or otherwise dispose of and realize upon the Trust
Assets in the initial three year term or if other circumstances require. Such an
application, if any, must be made to the Bankruptcy Court and approved within
six months of the beginning of what would be the extended term. Upon such
application, the Trust will continue until the date approved by the Bankruptcy
Court, or if the extension is disapproved by the Bankruptcy Court, the
expiration of the six month period. In no event will the termination of the
Trust occur later than the tenth anniversary of the Effective Date.
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Reports. The Managing Trustee is required pursuant to the Trust Agreement
to maintain books and records of account relating to the Trust assets, the
proceeds thereof, reserves and other matters concerning the Trust, as well as
the expenses incurred on behalf of the Trust, and such other matters as the
Supervisory Trustees may from time-to-time direct.
Pursuant to the Trust Agreement, the Managing Trustee is also required to
prepare the following reports:
Monthly. On a monthly basis, within two weeks after the end of each month,
a report of the receipts and disbursements of the Trust and the cash position of
the Trust; and
Quarterly. On a quarterly basis within forty-five days of the end of the
subject quarter, a report of the activities of the Trust detailing for the
preceding quarterly period the activities of the Trust including:
(i) an unaudited operating statement showing all revenues received by the
Trust and all expenses of operations of the Trust (including all
expenses associated with the sale of any Trust assets paid by the
Trust);
(ii) an unaudited written report and accounting showing (a) the assets and
liabilities of the Trust at the end of such period, (b) any changes in
the Trust assets, (c) the amount of any reserves or escrows of the
Trust, (d) any material action taken by the Managing Trustee or the
Supervisory Trustees; and
(iii) an overall status report for the next quarterly period.
Monthly reports for any month ending a quarterly period may be included in
the quarterly report for such period. Quarterly reports for the fourth quarter
of each calendar year may be included within the annual reports described below,
if such annual reports are prepared.
Annually. To the extent required by the Bankruptcy Court or applicable law
(or to gain an exemption from applicable law), within 90 days after the end of
each calendar year, beginning with the first year end occurring after the
Effective Date, a report for the prior year as described in clauses (i) and (ii)
above, except that such reports are for a full year (or portion thereof in which
the Trust has been in existence) and are audited.
The reports are distributed to each Supervisory Trustee and each Trust
Beneficiary who requests a copy in writing. The monthly, quarterly and, if
prepared, annual reports also are filed with the Bankruptcy Court and, if
required, with the Securities and Exchange Commission. In addition, the Managing
Trustee will furnish to Trust Beneficiaries such information and returns with
respect to any federal or state tax as may be required by law.
Certain Tax Provisions of Trust Agreement. The Trust is intended to be
treated as a liquidating trust pursuant to Treasury Regulations
ss.301.7701-4(d), and as a grantor trust subject to the provisions of Subchapter
J, Subpart E of the Tax Code, owned by the Trust Beneficiaries as grantors. Any
items of income, deduction, credit, or loss of the Trust shall be allocated for
federal income tax purposes among the Trust Beneficiaries pro-rata on the basis
of their beneficial interests. The Managing Trustee is authorized to take any
action that may be necessary or appropriate to minimize any potential tax
liability of the Trust Beneficiaries arising out of the operations of the Trust.
In accordance with Treasury Regulation ss.1.671-4(a), the Managing Trustee
shall cause to be prepared and filed, at the cost and expense of the Trust, an
annual information tax return (Form 1041) with the Internal Revenue Service,
with a schedule attached showing the item of income, deduction, and credit
attributable to the Trust and detailing the allocation of such items of income,
deduction, and credit among the Trust Beneficiaries as required pursuant to the
Form 1041 instructions for grantor trusts. Copies of such Form 1041 and attached
schedules will be delivered promptly to each Trust Beneficiary.
Each Trust Beneficiary is required to report on his federal income tax
return his allocable share of any income, loss, deduction or credit recognized
or incurred by the Trust, including, but not limited to, interest or dividend
income earned on bank accounts and other investments of the Trust.
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If a Trust asset is sold or otherwise disposed of by the Trust in a
transaction in which gain or loss is recognized for federal income tax purposes,
each Trust Beneficiary will be required to report on his tax return gain or loss
equal to the difference between (i) his pro rata share of the amount of cash
and/or fair market value of any property received in exchange for the asset so
sold or otherwise disposed of, minus (ii) his adjusted basis in his pro rate
share of such asset, as adjusted. The character and amount of any such gain or
loss will be determined by reference to the character of the asset sold or
otherwise disposed of and by reference to whether the transaction in which such
asset was disposed of constitutes a sale or exchange for federal income tax
purposes.
Each Trust Beneficiary's obligation to report his share of any Trust income
or gain upon an asset disposition is not dependent on the Trust distributing any
cash or other proceeds. Accordingly, a Trust Beneficiary may incur a tax
liability as a result of owning an interest in the Trust regardless of whether
the Trust makes a current distribution.
Certain Regulatory Matters. On the basis of a "no-action" position taken by
the Securities and Exchange Commission (the "SEC") at the request of the Trust,
the Trust has not registered as an investment company under the Investment
Company Act of 1940. The SEC's position was based upon the Trust's
representations to the SEC that the Trust: will exist solely to liquidate its
assets and distribute the proceeds; will not hold itself out as an investment
company, but rather as a trust in the process of liquidation; will not conduct a
trade or business and will be limited to making temporary investments in
short-term government securities, certain time deposits, certificates of
deposit, bankers' acceptances commercial paper and money market funds; and will
terminate on the earlier of the date on which all of the Trust assets have been
liquidated and the proceeds distributed to holders of interests in the Trust, or
three years after the effective date of the Joint Plan, unless the Bankruptcy
Court permits the Trust to continue in existence for an additional period
determined to be necessary for the Trust to complete the distribution of its
assets.
Item 2. Financial Information
Reference is made to the financial statements (the "Trust Financial
Statements") of the Trust as of and for the period from February 19, 1997 (the
inception of the Trust) through December 31, 1997 (therein referred to as 1997),
which are attached to this Registration Statement as Appendix A, for certain
financial information concerning the Trust and its activities for such period.
The following information concerning the Trust's financial performance and
condition should be read in conjunction with the Trust Financial Statements.
Effective Date Assets, Claims and Liabilities
On February 19, 1997, the Debtors contributed approximately $372 million of
assets to the Trust consisting principally of:
(i) Cash and short-term investments of $151 million;
(ii) Restricted cash and short-term investments of $110 million, relating
primarily to cash proceeds from the Debtors' sale of its principal
insurance subsidiaries that were placed in escrow to satisfy
obligations arising under certain tax, environmental, legal and other
indemnification agreements in favor of the purchasers (the "PennCorp
Escrow");
(iii) Accounts receivable of $2.4 million
(iv) Assets, net of liabilities, of BML of $32.0 million to which the Trust
was entitled under the Joint Plan;
(v) Capital stock of FMI. FMI's assets consisted principally of $5.9
million in cash and short-term investments and a $6.3 million
receivable from ICH (which was assumed by the Trust). Liabilities of
$3.0 million primarily related to retired employee benefit obligations
and severance obligations to former officers;
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(vi) Note from SFC in the principal amount of $40.0 million;
(vii)The right to participate in certain economic benefits derived from the
ownership of Bluebonnet Savings Bank FSB by CFSB Corporation (now
Stone Capital Inc.) (the "Stone Capital Interest") with an assigned
value of $18 million;
(viii) Common stock and bond portfolio of $3.4 million;
(ix) Income tax recoverable from SFC of $2.8 million; and
(x) Real estate valued at $2.6 million.
On the Effective Date, the Trust issued 370,622,669 Trust Interests in
exchange for ICH Class 5 Claims allowed on the Effective Date, each Trust
Interest representing $1 of the amount of the allowed claim. On the Effective
Date the Trust recognized superior claims and other liabilities of $17.6
million. This amount included $7.4 million for administrative and post petition
expenses primarily related to bonuses due under certain employment contracts,
including a compensation agreement with the Managing Trustee (see "Item 6,
Executive Compensation"), professional fee expense, $5.6 million for retiree
benefits which the Trust is obligated to continue for the period the Debtors
would have been obligated to provide such benefits, $3.3 million reserved with
respect to the contested Class 5 Claim of Victor Sayyah as provided in the Joint
Plan, $0.9 million for a claim against the PennCorp Escrow and $0.4 million for
certain other superior claims. Administrative and post petition expenses have
been paid as they come due. The $0.9 million claim against the PennCorp Escrow
was paid from the PennCorp Escrow account and the Trust paid the $0.4 million of
other claims.
Additionally, the Trust assumed all the rights and obligations of BML under
the sales agreements with the purchasers of PALICO, Modern and Western, all
non-reinsured liabilities of BML as of the Effective Date and certain other
obligations of the Debtors. Contested Class 5 claims pending on the Effective
Date were the claims of Victor Sayyah, Great Southern Life Insurance Company
("GSLIC") and the Jane Harlick Trust (the "Contested Claims"). As required by
the Joint Plan, on the Effective Date the Trust reserved $3.3 million for Victor
Sayyah's claim. No other claims reserves were established on the Effective Date
because the Managing Trustee determined in accordance with the provisions of the
Trust Agreement that no reserves were necessary.
Liquidation of Assets and Assets Remaining as of December 31, 1997
As described above, assets of the Trust on the Effective Date included $151
million of cash and short-term investments and $109.9 million of restricted cash
and short-term investments. Approximately $67 million of restricted cash and
short-term investments was released from the PennCorp Escrow on February 28,
1997, bringing unrestricted cash and short-term investments to approximately
$218 million. On March 3, 1997, the Trust made an initial distribution to
holders of Trust Interests aggregating approximately $199 million (53.72% of the
Class 5 Claims allowed as of the Effective Date).
Under the terms of the Joint Plan, Reorganized ICH retained the capital
stock of BML on the Effective Date, subject to the Trust's right to receive all
of the assets of BML other than the insurance licenses owned by BML, and the
Trust assumed all non-reinsured liabilities of BML as of the Effective Date. The
Trust made available to BML under the terms of the Joint Plan certain assets
required by BML to maintain capital and surplus as required by the Illinois
Department of Insurance and other insurance regulatory authorities in those
jurisdictions in which BML held insurance licenses.
On the Effective Date, in addition to the insurance licenses, the assets of
BML consisted of $2.8 million in cash and short-term investments, $4.2 million
in bonds and structured securities, substantially all of which were investment
grade and highly liquid, $11.8 million in limited partnership interests,
consisting of investments in H/M Connectors, L.P. ("Connectors") and H/M Neodata
DBMS, L.P. ("Neodata"), $11.4 million in real estate, and $8.7 million in
miscellaneous other assets including a $3.6 million receivable which was the
subject of litigation and a $3.8 million investment in a subsidiary. Liabilities
of BML consisted of insurance related claims and litigation and indemnification
obligations from the sale of PALICO, Modern and Western.
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At its option, for 90 days following the Effective Date, Reorganized ICH
could require the Trust to purchase the capital stock of BML for a payment of
$5.0 million or could transfer all remaining assets of BML to the Trust and
retain the BML corporate shell and insurance licenses. In April 1997 Reorganized
ICH exercised its option as granted in the Joint Plan to sell to the Trust the
stock of BML. As set forth in the Joint Plan, the Trust paid Reorganized ICH
$5.0 million in cash, the stock of BML was delivered into the registry of the
Bankruptcy Court for the benefit of the Trust and, after contributing to BML its
rights to the assets of BML, the Trust recognized a $37.0 million investment in
BML. Subsequently, the Trust settled litigation against Conseco, Inc., Conseco
Partnership Management, Inc. and Conseco Capital Partners II, L.P. ("Conseco
Entities") for the collection of approximately $3.6 million the Trust believed
was owed to it according to the terms of a certain partnership agreement for a
cash payment to BML of $3.2 million. BML made a transfer to the Trust consisting
of the Connectors limited partnership interest and cash of $10.4 million. The
cash was generated from the liquidation of Neodata, the sale of substantially
all of BML's real estate portfolio and the settlement of litigation against the
Conseco Entities. The Trust recognized a $4.4 million increase in the value of
BML in 1997 due to realized gains on the sale of assets of BML, settlement of
litigation and a reduction of contingent liabilities, bringing the net asset
value of BML to $20.6 million at December 31, 1997.
In August 1997, the Trust settled all outstanding issues with SFC and
PennCorp, the purchasers of the Debtor's principal insurance subsidiaries. Under
the terms of the settlement, PennCorp and SFC repurchased the $40.0 million SFC
Note at par plus accrued interest, released all indemnity obligations under the
1995 purchase agreement between ICH and the purchasers assumed by the Trust,
including any rights to $39.2 million of restricted funds remaining in the
PennCorp Escrow, paid a disputed tax related receivable to the Trust of $2.8
million and purchased various other assets for an aggregate of $1.6 million.
As of December 31, 1997, the Trust had net assets of $63.8 million,
consisting of $76.2 million in assets net of liabilities of $12.4 million. In
addition to cash and short-term investments of $11.1 million, the Trust's
principal remaining unliquidated assets as of December 31, 1997 are described
below:
(1) Investment in HM/Connectors, L.P.
The sole asset of Connectors was common stock of Berg Electronics
Corporation ("Berg"). Assuming a deemed liquidation of the limited
partnership at December 31, 1997, the Trust's interest would have been
worth approximately $18.7 million based on the reported closing price
of Berg common stock. Due to market risk and lack of liquidity in the
limited partnership, the Trust adjusted the carrying value of the
limited partnership at December 31, 1997 to $15.2 million.
On February 5, 1998, Connectors distributed all of its shares of Berg
common stock to its limited partners. The Trust sold all shares of
Berg stock distributed to it in a public, underwritten secondary
offering consummated on February 11, 1998 for net proceeds of $19.6
million.
(2) Bankers Multiple Line
The Trust's investment in BML was valued at $20.6 million at December
31, 1997. BML's assets are primarily cash and cash equivalents and its
liabilities are insurance related claims and litigation and indemnity
claims from the sales of PALICO, Modern and Western. Neither BML nor
the Trust believe BML's exposure for claims and indemnity obligations
will exceed the total amount reserved and escrowed in BML's financial
statements and therefore reflected in the Trust's investment in BML,
although there can be no assurance as to the actual amount of
liability, if any, and such liability may be material and may exceed
such escrows and reserves. Such claims and indemnification
obligations, as well as any other liability of BML assumed by the
Trust, if any, will be liabilities of the Trust and, to the extent of
such obligations and liabilities, the amount of cash available to the
Trust for distribution to the Trust Beneficiaries will be reduced. See
"Item 8, Legal Proceedings" and Note 13 to the Financial Statements of
the Trust attached to this Registration Statement as Appendix A for
information concerning various litigation matters involving BML.
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(3) Stone Capital Interest
The Stone Capital Interest arises from the agreement of Consolidated
National Corporation ("CNC") to share with ICH certain economic
benefits it received in relation to Stone Capital, Inc. ("Stone
Capital"), a holding company organized by James M. Fail ("Fail") to
organize and charter its wholly owned subsidiary, Bluebonnet Savings
Bank, FSB ("Bluebonnet"). Bluebonnet was formed in 1988 to acquire 15
insolvent Texas savings and loan associations as part of the Federal
Home Loan Bank Board government assisted "Southwest Plan."
Historically, ICH and CNC loaned monies to Fail, Stone Capital, or
Bluebonnet for the purpose of capitalizing Bluebonnet. In connection
with its loans, CNC negotiated for, and received, a 49% interest in
(i) dividends or other distributions to or for the benefit of Fail
from Stone Capital, excluding amounts used for (a) interest and
principal payments on certain debt, (b) amounts specified for certain
litigation settlements and (c) certain dividend payments from
Bluebonnet, (ii) certain proceeds from the sale or transfer of Stone
Capital common stock and (iii) benefits from Stone Capital's tax
attributes (collectively, the "Stone Capital Proceeds"). CNC agreed to
share the Stone Capital Proceeds with ICH based on the proportionate
amount of loans granted by ICH as compared to the total amount of the
loans by ICH and CNC. Based on such agreement, ICH is entitled to
receive 27.7% of the payments CNC receives under CNC's agreement with
Stone Capital and Fail. Therefore, ICH is entitled to 13.57% of the
Stone Capital Proceeds (such interests referred to herein as the
"Stone Capital Interest"). ICH's interest in Stone Capital was
transferred to the Trust according to the Joint Plan. The Stone
Capital Interest does not entitle the Trust to any voting rights or
any other rights of ownership with respect to Stone Capital and,
therefore, the Trust is unable to control or direct the timing or
amount of any distributions that may be declared or paid by Stone
Capital.
The value of the Stone Capital Interest is subject to considerable
uncertainty. The Trust has assigned a carrying value of $18.0 million
to the Stone Capital Interest based on (a) prior valuations by the
Debtors of the Stone Capital Interest, (b) consideration of the
financial condition of Stone Capital and (c) certain risk factors
associated with the Stone Capital Interest, which include the timing
and amount of dividends that may (or may not) be declared by Stone
Capital, and the outcome of certain litigation against Stone Capital
and Fail. The amount ultimately realized by the Trust for the Stone
Capital Interest may differ materially from the value assigned to such
interest and will depend, in part, on the effect of the risk factors
referred to above, which factors are (or will be) outside the control
of the Trust.
(4) Investment in FMI
At year end, FMI had net assets of $9.3 million, consisting of $11.1
million of cash and accounts receivable from the Trust less $1.8
million of retired employee related liabilities. Claims outstanding
against FMI include certain indemnity claims of former officers and
directors of FMI. See "Claims - Claims of Officers and Directors in
ICH and FMI Cases" below.
(5) Other Assets
Other assets at December 31, 1997 consisted of a $1.7 million
reinsurance receivable and miscellaneous other assets totaling $0.4
million.
Liabilities as of December 31, 1997 totaled $12.4 million, including
post-petition accrued liabilities of $3.5 million primarily related to employee
bonuses and professional fee expense, $5.6 million for retired employee
liabilities and $3.3 million reserved for the contested Class 5 Claim of Victor
Sayyah.
Claims
As of the Effective Date, the Trust assumed responsibility for the
resolution of all claims filed in connection with the Case which were unresolved
at the Effective Date or that were later filed.
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Jane Harlick Trust. The Jane Harlick Trust filed a proof of claim in the
Case in the amount of at least $4.8 million. The Trust settled the claim for a
one time cash payment of $413,520.
Sayyah Claim. Victor Sayyah filed a proof of claim in the Case arising from
a 1981 transaction in which American Commonwealth Financial Corp., a corporation
controlled by Victor Sayyah, sold the stock of HCA, Inc. to an ICH subsidiary
for $15 million in cash and a promissory note with a face amount of $30 million
(the "ICH Note"). The ICH Note was subsequently assigned to Sayyah. ICH
subsequently assumed the obligation under the ICH Note. In 1984, ICH and Sayyah
entered into a revolving credit loan agreement (the "Loan Agreement") under
which ICH agreed to loan Sayyah up to certain specified sums at Sayyah's
request, with a total borrowing cap of $29.5 million. Pursuant to the Loan
Agreement, Sayyah borrowed an aggregate principal amount of $27 million,
executing various promissory notes (the "Sayyah Notes") in the aggregate
principal amount. On the Effective Date, the outstanding principal balance of
the loan from ICH to Sayyah was $27 million.
The Trust filed an adversary proceeding objecting to the Sayyah claim and
seeking a judgment against Sayyah for amounts due under the loans to Sayyah
pursuant to the Loan Agreement and Sayyah Notes. Under the terms of the Joint
Plan and the order confirming the Joint Plan, the Bankruptcy Court will
determine the amount of Sayyah's secured claim and timing of the offset to which
Sayyah is entitled and the amount of Sayyah's unsecured claim, if any. The
unsecured portion of the Sayyah claim, if any, will be treated as a Class 5
Claim in the amount determined by the Bankruptcy Court. The Trust has objected
to Sayyah's proof of claim to the extent it sought recovery for unmatured
original issue discount in the ICH Note. Summary judgment motions were filed by
Sayyah and the Trust and the Bankruptcy Court has ruled in favor of Sayyah with
respect to the original issue discount issue. The Trust has reserved its right
to appeal such decision. A trial is scheduled in June of 1998 on the remaining
issues.
The amount Sayyah is seeking as an unsecured claim, as set forth in
discovery responses served in the adversary proceedings filed with the
Bankruptcy Court, is approximately $3.25 million, plus interest and attorney's
fees and other expenses. In accordance with the Bankruptcy Court order
confirming the Joint Plan, the Trust has reserved the amount of $3.3 million
with respect to the Class 5 Claim, if any, of Sayyah. The reserved amount is not
a limit to the amount, if any, of an allowed ICH Class 5 Claim of Sayyah. The
ultimate amount and outcome of the Sayyah claim, including appeals, if any, is
uncertain.
GSLIC Claim. GSLIC filed a proof of claim in the ICH and FMI bankruptcy
cases requesting that a claim be allowed in the amount of any judgment against
GSLIC in pending litigation in Louisiana, Texas and elsewhere regarding
"vanishing premium policies." GSLIC contends that ICH and FMI are co-liable with
GSLIC because these vanishing premium policies were issued by GSLIC when GSLIC
was an affiliate of ICH. The Trust filed an objection to GSLIC's claim in
February 1998. Among other objections, the Trust contended that the contingent
reimbursement claims asserted by GSLIC are not allowable under the Bankruptcy
Code. Pursuant to an order entered by the Bankruptcy Court related to the GSLIC
matter in November of 1997, GSLIC capped its potential claim at $3.0 million,
and the Trust reserved $3.0 million in non- cash assets to satisfy any potential
allowed claim. In late April 1998, the Trust and GSLIC tentatively agreed to a
settlement of GSLIC's claim whereby GSLIC has agreed to withdraw its claims in
exchange for a one-time cash payment of $125,000 from the Trust. The Trust, FMI
and GSLIC would also execute mutual releases. The settlement is subject to final
documentation satisfactory to the parties and approval by the Bankruptcy Court
upon submission of the appropriate motion, which the Trust anticipates will
occur shortly.
Claims of Officers and Directors in ICH and FMI Cases. A number of former
officers and directors filed proofs of claim for possible rights of
indemnification in the ICH and FMI bankruptcy cases. No dollar amount of claim
is specified. A defense fund for the payment of litigation expenses incurred by
the directors and officers, including in connection with certain securities
litigation brought by ICH stockholders, was established during the pendency of
the Case. Amounts remaining in the defense fund were transferred to the Trust on
the Effective Date and the Trust assumed ICH's indemnification obligations with
respect to ICH's directors and officers. The Trust has entered into a settlement
agreement whereby the Trust will receive releases from the officers and
directors, and the withdrawal of their claims against ICH and FMI, in exchange
for the conveyance by the Trust of a small ownership interest in Reorganized ICH
and the Trust's agreement to share certain rights in the defense fund
established for the officers and directors during the Case. The defense
9
<PAGE>
fund currently amounts to $114,000, which amount the Trust expects would be
fully depleted by the directors' and officers' litigation expenses. The
settlement agreement will be submitted to the Bankruptcy Court for approval, and
it is anticipated that such submission will be made shortly. The terms of the
agreement will not become effective until the Bankruptcy Court has approved the
agreement. If the settlement agreement becomes effective, the Trust anticipates
that it will request dismissal of the FMI bankruptcy case. If the Bankruptcy
Court does not approve the settlement, the Trust may pursue objections to the
claims of a number of the officers and directors. Such objections would include
that the directors' and officers' right to reimbursement is contingent and
therefore not allowable under the Bankruptcy Code. In such event, the allowed
amount, if any, of such claim and their priority relative to the rights of Trust
Beneficiaries is uncertain.
Additional Claims. The Kentucky Revenue Cabinet filed a proof of claim for
$1.2 million in January, 1998. On April 13, 1998, the Bankruptcy Court heard the
Trust's objection to the claim and subsequently ruled that the claim is
disallowed. Also, two insurance companies filed proofs of claims totaling
$263,000 and other sums not yet matured related to potential premiums due under
certain insurance policies. Although the Trust cannot predict the outcome of
such claim or the amount of such claim if allowed, the Trust believes that such
claim is not likely to result in any liability to the Trust.
Claims may from time to time be asserted against the Trust or its
subsidiaries, relating to the activities of the Debtors' or otherwise. If so
asserted, the resolution of any such claims will depend upon the particular
facts and circumstances of such claim and may reduce the amount distributable to
Trust Beneficiaries.
Distributions
Total distributions in 1997 were approximately $302 million or 81.41% of
the allowed Trust Interests as shown below. In addition, the Trust distributed
$18.5 million or 5.0% of allowed Trust Interests in 1998.
<TABLE>
<CAPTION>
Distributions to Holders of Interests
-------------------------------------
Distribution Amount
-------------------
As %
Distribution Date $ of Interest
----------------- -------------- -----------
<S> <C> <C>
March 3, 1997 $ 199,098,499 53.72%
May 27, 1997 11,118,680 3.00
September 10, 1997 91,506,737 24.69
-------------- -----
Total $ 301,723,916 81.41%
============== =====
February 27, 1998 $ 18,531,133 5.00%
</TABLE>
Item 3. Properties
The Trust has no material properties.
The Trust occupies approximately 1,500 square feet of office space at an
annual cost of $24,000.
Item 4. Security Ownership of Certain Beneficial Owners and Management
(a) Since the Trust has no outstanding "voting securities" within the
meaning of the 1934 Act and the regulations thereunder, the disclosure
requirements of Form 10 pertaining to 5% holders of voting securities are not
applicable.
(b) The Managing Trustee is not, and by the terms of the Trust Agreement
may not be, a Trust Beneficiary. Interests in the Trust owned by Supervisory
Trustees as of March 31, 1998 are shown in the following table:
10
<PAGE>
<TABLE>
<CAPTION>
Number of and % of
Interests Owned as of March 31, 1998
Owner Number Percent of Total
----- ------ ----------------
<S> <C> <C>
Gregory Lathrop............... 1,950,572 (1) *
Jeffrey Schultz............... -0- *
John M. Tobin................. -0- *
* Less than 1%.
</TABLE>
(1) Includes 26,008 Trust Interests held by Lathrop Investment Management
Corporation profit sharing plan, over which Mr. Lathrop has sole
investment discretion, and 1,924,564 Trust Interests held by Lathrop
Investment Management Corporation on behalf of its investment advisory
clients which Mr. Lathrop may be deemed to beneficially own by virtue
of his position as the president and sole stockholder of Lathrop
Investment Management Corporation.
(c) Because the Trust does not have any "voting securities" within the
meaning of the 1934 Act and the regulations thereunder, changes in ownership of
voting securities will not result in a change of control of the Trust. Pursuant
to the terms of the Trust Agreement, all of the management and executive
authority over the Trust resides in the Managing Trustee and three Supervisory
Trustees (together, the "Trustees"). Susan A. Brown, as Managing Trustee, and
Jeffrey Schultz, John M. Tobin, and Gregory Lathrop, as Supervisory Trustees,
were approved by order of the Bankruptcy Court and are expected to serve for the
duration of the Trust. In the event of any Trustee's earlier death, resignation
or removal, such Trustee shall be replaced pursuant to the terms of the Trust
Agreement as set forth in Item 5 hereof.
The Trust has no knowledge of any arrangements that may result in a change
of control of the Trust.
Item 5. Directors and Executive Officers
The Trust is managed by a Managing Trustee, Susan A. Brown, the former
Chairman and Co-Chief Executive Officer of ICH, who has the responsibility to
hold, manage and liquidate the Trust assets and to distribute Available Cash and
make other distributions and payments called for in the Joint Plan to be made by
the Trust. The Supervisory Trustees, each of whom served as members of the
Debtors' Official Committee of Unsecured Creditors (the "Creditors Committee"),
are Jeffrey Schultz, John M. Tobin, and Gregory Lathrop. Each Trustee was
appointed in accordance with the Joint Plan pursuant to the Trust Agreement and
approved by order of the Bankruptcy Court to serve until such Trustee's death,
resignation or removal in accordance with the terms of the Trust Agreement.
There have been no changes in the Trustees from the Effective Date through the
date of this Registration Statement. Background information and employment
histories of Ms. Brown and Messrs. Schultz, Tobin, and Lathrop are set forth
below.
Susan A. Brown, 43, has been Managing Trustee of the Trust since the
Effective Date. Ms. Brown served as Chairman of the Board, Chief Financial
Officer and Treasurer of ICH, which had filed a voluntary petition for relief
under Chapter 11 of the Bankruptcy Code on October 10, 1995, from January 1996
to the Effective Date when she resigned from ICH to become Managing Trustee.
Prior to joining ICH, Ms. Brown served as the Trustee of the FRBC Trust, the
liquidating trust for First RepublicBank Corporation, from September 1994. From
1991 to September 1994, Ms. Brown served as the Chief Executive Officer of First
RepublicBank Corporation.
Gregory Lathrop, 50, has been a Supervisory Trustee of the Trust since the
Effective Date. Prior to being appointed as a Supervisory Trustee, Mr. Lathrop
served as a member of the Creditors Committee. Mr. Lathrop has been the
President, Portfolio Manager and Analyst of Lathrop Investment Management
Corporation, a registered investment advisor, since 1981.
Dr. Jeffrey Schultz, 52, has been a Supervisory Trustee of the Trust since
the Effective Date. Prior to being appointed as a Supervisory Trustee, Dr.
Schultz served as a member of the Creditors Committee. Dr. Schultz has been a
Professor of Finance at Christian Brothers University in Memphis, Tennessee,
since 1987. Dr. Schultz also serves as a
11
<PAGE>
director of Cherokee Corporation, a company which licenses apparel for Target
stores, based in Van Nuys, California and as a trustee of Carolco Liquidating
Trust in West Hollywood, California.
John M. Tobin, 40, has been a Supervisory Trustee of the Trust since the
Effective Date. Prior to being appointed as a Supervisory Trustee, Mr. Tobin
served as a member of the Creditors Committee. Mr. Tobin has been a Senior Vice
President with BEA Associates, a registered investment advisor based in New York
City, since 1990.
Managing Trustee. The Managing Trustee has such powers as are necessary to
collect, liquidate or otherwise convert the Trust Assets into cash and to invest
cash pending distribution and to pay all expenses, taxes, and other payments.
Subject to the terms of the Trust Agreement and the supervision of the
Supervisory Trustees, the Managing Trustee may control and exercise authority
over the Trust Assets, the acquisition, management, and disposition thereof, and
the management and conduct of the activities of the Trust to the same extent as
if the Managing Trustee were the sole legal and beneficial owner thereof in her
own right.
The Managing Trustee may resign as such by executing and delivering an
instrument in writing to the Supervisory Trustees upon no less than thirty day's
advance notice.
The Managing Trustee may be removed from office (a) for fraud or willful
misconduct in connection with the affairs of the Trust upon the motion of the
Supervisory Trustees, and upon a finding by the Bankruptcy Court of fraud or
willful misconduct by such Managing Trustee after a hearing before the
Bankruptcy Court upon not less than 30 days' notice, (b) for such physical or
mental disability as substantially prevents the Managing Trustee from performing
her duties as Managing Trustee upon the motion of the Supervisory Trustees, and
upon a finding by the Bankruptcy Court of such physical or mental disability
after a hearing before the Bankruptcy Court on not less than 30 days' notice or
(c) for cause, which includes a breach of fiduciary duty or an unresolved
conflict of interest, (other than as specified in the foregoing clauses (a) and
(b)) upon the motion of the Supervisory Trustees, and upon finding by the
Bankruptcy Court that cause for such removal has been shown after a hearing
before the Bankruptcy Court on not less than 30 days' notice.
In the event of the death or incompetency, resignation, or removal of the
Managing Trustee, the Supervisory Trustees shall appoint a successor Managing
Trustee.
Supervisory Trustees. The Supervisory Trustees were appointed to supervise
the management and liquidation of the Trust Assets and distribution of Available
Cash. The following actions may be taken by the Managing Trustee only with the
approval of the Supervisory Trustees: (i) early termination of the Trust or its
further extension, (ii) entering into any agreements obligating the Trust to
expend funds in an amount greater than $50,000, or to enter into agreements with
an affiliate or employee or former employee of the Debtors, or with a term which
extends beyond one year, (iii) the borrowing of any funds, (iv) investment of
Trust assets other than in Permitted Investments as defined by the Trust
Agreement, (v) approving the establishment, increase or decrease of the
Operating Reserve as defined by the Trust Agreement, (vi) distributions from the
Trust other than distributions set forth in the Joint Plan to persons other than
Trust Beneficiaries and distributions to persons specifically ordered by the
Bankruptcy Court, (vii) the commencement or defense of any actions on behalf of
or against the Trust, (viii) any changes to the form of Trust Certificates the
effect of which may impede the transfer of the Trust Interest represented by the
Trust Certificate or the establishment of any additional requirements for
transfer of Trust Certificates, (ix) any material filing with or application to
any governmental agency, other than ordinary routine filings or applications
incidental to the activity of the Trust or expressly contemplated to be filed by
the Trust Agreement or the Joint Plan, and (x) the sale, assignment or transfer
of any Trust Assets, except as otherwise set forth in the Trust Agreement or
approved by order of the Bankruptcy Court, in an amount exceeding $500,000.
The approval of the Supervisory Trustees shall mean the affirmative consent
of at least two Supervisory Trustees, or, if only one Supervisory Trustee is
serving at any time, the consent of such Supervisory Trustee or, if no
Supervisory Trustees are serving at any time, upon Order of the Bankruptcy
Court. Affirmative consent of a Supervisory Trustee is by written confirmation
of a Supervisory Trustee upon the written request of the Managing Trustee to all
Supervisory Trustees.
12
<PAGE>
A Supervisory Trustee may resign as such by executing and delivering an
instrument in writing to the Managing Trustee and the remaining Supervisory
Trustees.
A Supervisory Trustee may be removed in the event physical or mental
disability prevents a Supervisory Trustee from substantially performing his
duties upon the unanimous consent of the other Supervisory Trustees. A majority
of the Trust Beneficiaries may at any time remove any Supervisory Trustee with
or without cause.
Upon the death, resignation or removal of a Supervisory Trustee, the
remaining Supervisory Trustees may (but shall not be required to) appoint a
Trust Beneficiary (or employee or member thereof) as a successor Supervisory
Trustee. If there are no remaining Supervisory Trustees, the Managing Trustee
may apply to the Bankruptcy Court for the appointment of a Supervisory Trustee
or Supervisory Trustees. In no event shall any insider or affiliate of the
Debtor serve as a Supervisory Trustee.
A Trustee may rely, and shall be fully protected personally in acting upon,
any resolution, statement, certificate, instrument, opinion, report, notice,
request, consent, order, or other instrument or document which such Trustee has
no reason to believe to be other than genuine and to have been signed or
presented other than by the proper party or parties or, in the case of facsimile
transmission, to have been sent other than by the proper party or parties, in
each case without obligation to satisfy himself or herself that the same was
given in good faith and without responsibility for errors in delivery,
transmission, or receipt. In the absence of fraud, willful misconduct or gross
negligence, a Trustee may rely as to the truth of statements and correctness of
the facts and opinions expressed therein and shall be fully protected personally
in acting thereon. The Trustees may consult with and rely on the advice of legal
counsel and such other experts, advisors, consultants or other professionals as
shall have been retained pursuant to the Trust Agreement and shall be fully
protected in respect of any action taken or suffered by them in accordance with
the written opinion of legal counsel.
The Trust does not have executive officers. Its affairs are managed by the
Managing Trustee under the supervision of the Supervisory Trustees as described
above.
Item 6. Executive Compensation
The Trust Agreement provides that the Managing Trustee will be compensated
in an amount and upon terms which are mutually acceptable to the proposed
Managing Trustee and the Supervisory Trustees, but that Ms. Brown, as the
initial Managing Trustee, will be compensated on terms substantially in
conformity with the compensation agreement between Ms. Brown, in her capacity as
co-chief executive officer, and the Debtors dated as of January 1, 1996. On the
Effective Date, such agreement was canceled and, pursuant to the foregoing
provisions of the Trust Agreement, Ms. Brown and the Trust entered into that
certain Compensation Agreement dated February 19, 1997 between the Trust and
Susan A. Brown ("Compensation Agreement"). The following description of the
Compensation Agreement is only a summary and is qualified by reference to the
Compensation Agreement, a copy of which is filed as Exhibit 10.1 to this
Registration Statement.
The compensation of the Managing Trustee is comprised of three components:
base salary, benefits and incentive compensation. The Managing Trustee is paid a
base salary of $250,000 per year and provided health and life insurance
benefits. In addition, the Managing Trustee is entitled to receive an incentive
bonus when and if distributions in excess of $260 million are paid to holders of
Trust Interests.
Under the terms of the Compensation Agreement, the Managing Trustee will
receive:
(1) 1.0% of any amount distributed in excess of $260 million and less than
or equal to $280 million;
(2) 2.0 % of any amount distributed in excess of $280 million and less
than or equal to $310 million;
(3) 2.5% of any amount distributed in excess of $310 million.
13
<PAGE>
For purposes of determining the amount distributed, cash distributed is
discounted at the rate of 4% per annum for the period from the date of
distribution back to January 1, 1997.
The Trust's expenses related to the Managing Trustee's bonus payments were
estimated and accrued prior to the Effective Date at $2.1 million. The Trust
paid a bonus of $553,920 in the aggregate to the Managing Trustee in 1997.
The former Co-CEO of the Debtors entered into a Compensation Agreement with
the Debtors as of January 1, 1996 on substantially the same terms as the
agreement with the Managing Trustee as described above. Bonus payments of
$553,920 were made by the Trust under such agreement in 1997.
Under the terms of the Trust Agreement, as compensation for services
rendered to the Trust, each Supervisory Trustee receives $2,000 per month.
The Managing Trustee and each Supervisory Trustee is also reimbursed for
reasonable expenses incurred in the performance of their respective duties under
the Trust Agreement.
Item 7. Certain Relationships and Related Transactions.
The Trust has entered into an agreement with Southwestern Financial
Services Corporation ("SFSC"), whereby SFSC supplies financial reporting, tax
services and administrative support to the Trust. The Trust paid SWFS $50,000 in
1997 for these services. SFSC is an affiliate of SFC which received the assets
formerly owned by FMI under the sale of ICH's principal insurance subsidiaries
to SFC.
The Trust has agreed to certain aspects of a settlement between Reorganized
ICH, certain former officers and directors of ICH and other parties. See "Item
2, Financial Information - Claims - Claims of Officers and Directors in ICH and
FMI Cases."
Item 8. Legal Proceedings
BML Litigation. On or about December 8, 1997, a petition was filed in the
District Court of Harris County, Texas styled New Era Life Insurance Co. v.
Bankers Multiple Line Insurance Company pursuant to which New Era Life Insurance
Company ("New Era") alleges breaches of certain representations, warranties and
covenants contained in the stock purchase agreement pursuant to which New Era
purchased PALICO. The petition seeks damages in the amount of at least
$2,500,000 and punitive damages in the amount of $5,000,000. The petition has
not yet been served on BML, and BML and the Trust are in the process of
evaluating the claims made by New Era in the petition. With the exception of
claims for indemnification for state taxes totaling approximately $175,000 which
were not submitted in accordance with the indemnity terms of the stock purchase
agreement, BML does not believe the claims of New Era are meritorious.
Thomas M. Bronson, Jr. and Deborah Bronson v. Bankers Multiple Line
Insurance Company and Phillip A. Lacefield, Cause No. 68463-7 TD, currently
pending in the Circuit Court of Tennessee for the Thirtieth District at Memphis
was filed in March 1995. The suit alleges causes of action against BML and one
of its agents on the basis of fraud and attempts to impose liability on BML
under the doctrine of vicarious liability and respondeat superior. The suit also
includes claims for deceptive trade and unfair practices under two Tennessee
consumer protection statutes. The plaintiffs are seeking both compensatory and
punitive damages of $5,500,000. BML's motion for summary judgment was denied in
the fall of 1997. If settlement negotiations are unsuccessful, the matter will
proceed to trial.
Additionally, BML is a party to litigation relating to claims under
policies it underwrote, all of which are ordinary and routine for the business
BML then conducted. Under the terms of the Joint Plan, the Trust may be liable
with respect to any liability of BML.
Reference is made to Notes 11 and 13 of the Trust Financial Statements for
additional information concerning these matters and various additional
litigation involving the Trust and its subsidiaries.
14
<PAGE>
As provided in the Joint Plan, the Bankruptcy Court has retained
jurisdiction over the Trust, Trustees and the Trust Assets, including, without
limitation, the determination of all controversies and disputes arising under or
in connection with the Trust.
For a description of claims litigation see "Item 2, Financial Information
Claims".
Item 9. Market Price of and Dividends on the Registrants Common Equity and
Related Stockholder Matters
(a) The Trust Interests are not listed on any securities exchange or quoted
on the National Association of Securities Dealers Inc. Automated Quotation
System. The Trust Interests trade infrequently and the trading volume is often
small. According to a market maker in the Trust Interests as of April 16, 1997,
the bid-ask range on the Trust Interests was $0.12 to $0.15 per interest. Such
quotations reflect inter-dealer prices, without retail markup, markdown, or
commission.
(b) As of April 16, 1998 there were 303 holders of record of Trust
Interests.
(c) The following table sets forth the distributions paid to holders of
Trust Interests in 1997.
<TABLE>
<CAPTION>
Distributions on Trust Interests
Date Per Interest Total $
---- ------------ -------
<S> <C> <C>
March 3, 1997......................... $ .5372 $ 199,098,499
May 27, 1997.......................... .0300 11,118,680
September 10, 1997.................... .2469 91,506,737
</TABLE>
In addition, a distribution of $0.05 per Trust Interest or $18,531,133 was
paid February 27, 1998.
Under the terms of the Trust Agreement, the date of record for determining
entitlement of any holder of a Trust Interest to any payments on a Distribution
Date is 15 Business Days prior to a Distribution Date. The Managing Trustee is
required to give notice of a Distribution Date to holders of Trust Interests and
the record date in connection therewith in the monthly report filed with the
Bankruptcy Court at least 10 Business Days prior to the corresponding record
date. Distribution Dates are such dates as the Managing Trustee and Supervisory
Trustees from time to time designate as a Distribution Date.
Item 10. Recent Sales of Unregistered Securities
The Trust Interests were issued to holders of Class 5 Claims pursuant to
the Joint Plan and their issuance was exempt from the registration requirements
of the Securities Act of 1933, as amended, pursuant to Section 1145 of the
Bankruptcy Code.
Item 11. Description of Registrant's Securities to be Registered
In exchange for and in full settlement of all ICH Class 5 Claims, the
holders of Allowed ICH Class 5 Claims received interests in the Trust
representing a percentage beneficial interest in all proceeds of all Trust
Assets following payment of or provisions for all other Claims and other
obligations as provided for in the Joint Plan and the Trust Agreement. Each ICH
Class 5 Claimant received a Trust Interest for each $1 of the Allowed Amount of
such Claimant's ICH Class 5 Claim of the Effective Date. On the Effective Date,
370,622,669 Trust Interests were issued. The entire amount represented the
determined amount of Allowed ICH Class 5 Claims on the Effective Date. As of
April 30, 1998, none of the Contested Claims as of the Effective Date had been
allowed. The Contested Claim of the Jane Harlick Trust has since been settled
for a one time cash payment of $413,520.
The ownership of a beneficial interest under the Trust Agreement does not
entitle any beneficiary to any title in or to the Trust Assets as such, or to
any right to call for a partition or division of the same, or to require an
accounting except as specifically required by the terms of the Trust Agreement.
Holders of Trust Interests are entitled to receive Pro Rata
15
<PAGE>
distributions of Available Cash as and when from time to time determined and
declared by the Managing Trustee, with the consent of the Supervisory Trustees,
in accordance with the provisions of the Trust Agreement. Generally, "Available
Cash" means, as of any date of calculation, the aggregate of all cash or cash
equivalents available for immediate distribution held by the Trust, as reflected
on the books and records of the Trust, less (i) until released from reserve or
paid, cash required to pay retiree benefit obligations, professional fee claims
and post petition liabilities of the Debtors, (ii) $3.3 million in cash for the
contested claim of Victor Sayyah and other amounts, cash, if any, required to
fund the Contested Claim Reserve as defined in the Trust Agreement, and (iii)
the Operating Reserve.
Under the terms of the Trust Agreement, the Managing Trustee is required to
distribute at least annually all Available Cash to holders of record of Trust
Interests and to other Claimants in accordance with the treatment of Claims
provided in the Joint Plan. In determining whether there is any Available Cash
available for distribution, the Managing Trustee may, in her discretion, give
due consideration to the possibility that there may exist unasserted Claims
against the Trust or asserted Claims which are not yet Allowed Claims or
otherwise not yet due and payable and may establish reserves therefor in
accordance with the Trust Agreement. Under the terms of the Trust Agreement,
Distribution Dates are such dates as the Managing Trustee and the Supervisory
Trustees from time to time designate as a Distribution Date. The date of record
for determining entitlement of any holder of a Trust Interest to any payments is
15 Business Days prior to a Distribution Date. The Managing Trustee is required
to give notice of a Distribution Date to holders of Trust Interests and the
record date in connection therewith in the monthly report prepared under the
Trust Agreement and filed with the Bankruptcy Court at least 10 Business Days
prior to the corresponding record date. The ultimate amounts distributed to
holders of Trust Interests will result from the cash proceeds actually realized
for the liquidation of the non-cash Trust Assets, resolution of claims against
and liabilities associated with the Trust Assets, and cost of administering the
Trust.
Holders of Trust Interests are not entitled to any voting rights under the
Trust Agreement, provided however, that a majority of the Trust Beneficiaries
voting pursuant to the Trust Agreement may at any time remove any Supervisory
Trustee with or without cause. The outcome of any vote of holders of Trust
Certificates shall be determined in favor of the majority of holders of Trust
Certificates actually voting, based upon the face amount of their Trust
Certificates.
Trust Interests are represented by certificates substantially in the form
attached to the Trust Agreement, with such changes as the Managing Trustee may
from time to time find necessary or desirable to conform to the provisions of
the Trust Agreement, the Joint Plan or any applicable laws or regulations. The
Managing Trustee may cause to be placed on any Trust Certificate such legends as
she deems on advice of counsel are required or appropriate under securities, tax
or other laws and regulations in connection with tax withholding or otherwise.
Any person to whom a Trust Certificate is issued or transferred, by virtue of
the acceptance thereof, shall assent to and be bound by the terms and conditions
of the Trust Agreement and the Joint Plan. Under the terms of the Trust
Agreement, no Trust Interest may be transferred unless such transfer is made (i)
pursuant to a registration statement effective under the Securities Act of 1933,
as amended, or pursuant to an available exemption from registration requirements
of the Securities Act and (ii) in accordance with all applicable state
securities laws.
The Managing Trustee has appointed Mid-America Bank of Louisville and Trust
Company for the purpose of registering and transferring Trust Interests as
provided in the Trust Agreement.
The Trust Agreement may be amended, modified or altered only upon (i) the
recommendation of the Managing Trustee to the Supervisory Trustees and the
approval of the Supervisory Trustees, and (ii) Order of the Bankruptcy Court.
The foregoing description is only a summary and is qualified by reference
to the Trust Agreement, a copy of which is filed as Exhibit 3.1 to this
Registration Statement.
Item 12. Indemnification of Directors and Officers
According to the Trust Agreement, no Trustee shall be personally liable in
connection with the affairs of the Trust or any other Trustee, any Trust
Beneficiary, or the Trust, or any other person, except for such of the Trustee's
acts or omissions as shall constitute fraud, willful misconduct or gross
negligence. Except in those situations in which a Trustee is
16
<PAGE>
not exonerated of personal liability as described above, a Trustee shall be
defended, held harmless and indemnified from time to time from the Trust Assets
against any and all losses, claims, costs, expenses and liabilities (including
legal fees and expenses) and any costs of defending any action to which a
Trustee may be subject in connection with any action, suit, proceeding or
investigation brought or threatened against such Trustee in such Trustee's
capacity as trustee or in any other capacity contemplated by the Trust
Agreement, the Joint Plan or in any matter arising out of or related to the
Trust Agreement or the affairs of the Trust. The Trust Agreement provides that
the Trustees shall be indemnified for their negligence.
The Trust has purchased a $10 million Trustee's Liability Insurance Policy
for an initial term of three years.
Under the Texas Trust Code, a trustee who incurs personal liability for a
tort committed in administration of the trust is entitled to exoneration from
the trust property if the trustee has not paid the claim or to reimbursement
from the trust property if the trustee has paid the claim, if (i) the trustee
was properly engaged in a business activity for the trust and the tort is a
common incident of such activity; (ii) the trustee was properly engaged in a
business activity for the trust and the trustee (or, if applicable, any officer
or employee of the trustee) is not guilty of actionable negligence or
intentional misconduct in incurring the liability; or (iii) the tort increased
the value of the trust property. A trustee who is entitled to exoneration or
reimbursement for a tort that increased the value of the trust property may only
be exonerated or reimbursed to the extent of the increase in such value.
Additionally, a court has discretion to award costs and reasonable attorney's
fees incurred by a trustee in defending such liability as the court finds
equitable and just.
The Texas Trust Code also provides that if a trustee or predecessor trustee
makes a contract that is within such person's power as trustee and a cause of
action arises on the contract, the trustee may be sued in such trustee's
representative capacity, and a judgment rendered in favor of the plaintiff may
be collected against the trust property.
Item 13. Financial Statements and Supplementary Data.
The financial statements and supplementary information of the Trust filed
with this Registration Statement are included as Appendix A hereto.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 15. Financial Statements and Exhibits.
(a) Financial Statements.
The financial statements and supplementary information of the Trust filed
with this Registration Statement are included in Appendix A hereto.
(b) Exhibits.
The following exhibits are filed with this Registration Statement:
Exhibit 2.1 First Amended Joint Plan of Reorganization Under Chapter 11
Exhibit 2.2 Order Confirming First Amended Joint Plan of Reorganization
Under Chapter 11
Exhibit 3.1 Lone Star Liquidating Trust Agreement dated as of February 19,
1997
Exhibit 3.2 Form of Trust Certificate
17
<PAGE>
Exhibit 10.1 Compensation Agreement between Lone Star Liquidating Trust and
Susan A. Brown
Exhibit 10.2 Employee Leasing Agreement, dated February 19, 1997, among
Lone Star Liquidating Trust, Facilities Management Installation, Inc.
and Southwestern Financial Services Corporation
Exhibit 10.3 Addendum No. 1, dated as of February 19, 1998 to Employee
Leasing Agreement.
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
LONE STAR LIQUIDATING TRUST
/s/ Susan A. Brown
------------------
Susan A. Brown
Managing Trustee
Dated: May 1, 1998
18
<PAGE>
TABLE OF CONTENTS
REPORT OF INDEPENDENT ACCOUNTANTS............................................A-2
STATEMENTS OF NET ASSETS IN LIQUIDATION......................................A-3
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION............................A-4
STATEMENT OF RECEIPTS AND DISBURSEMENTS......................................A-5
NOTES TO FINANCIAL STATEMENTS.........................................A-6 - A-14
A-1
<PAGE>
Report of Independent Accountants
To the Supervisory Trustees
Lone Star Liquidating Trust
We have audited the accompanying statements of net assets in liquidation of the
Lone Star Liquidating Trust (the "Trust") as of December 31, 1997 and February
19, 1997 (date of inception), and the related statement of changes in net assets
in liquidation and statement of receipts and disbursements for the period from
February 19, 1997 (date of inception) to December 31, 1997. These financial
statements are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures accompanying the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lone Star Liquidating Trust as
of December 31, 1997 and February 19, 1997 (date of inception), and the changes
in its net assets in liquidation and receipts and disbursements for the period
from February 19, 1997 (date of inception) to December 31, 1997, in conformity
with generally accepted accounting principles.
As more fully described in Note 7 and 8, the accompanying financial statements
include an investment interest in Stone Capital, Inc. and an investment in the
net assets of Bankers Multiple Line Insurance Company, which includes accruals
for contingent liabilities, which have been valued by the Trust in the absence
of readily ascertainable market values based on the latest available
information. These investments represent approximately 60% and 14% of net assets
in liquidation at December 31, 1997 and February 19, 1997 (date of inception),
respectively. Because of the inherent uncertainty of valuation, the estimated
realizable values of these investments may differ significantly from the values
that would have been used had either readily ascertainable markets or other
representative markets for the investments existed, and the differences could be
material.
/s/COOPERS & LYBRAND L.L.P.
Dallas, Texas
April 1, 1998
A-2
<PAGE>
LONE STAR LIQUIDATING TRUST
STATEMENTS OF NET ASSETS IN LIQUIDATION
as of December 31, 1997 and February 19, 1997 (date of inception)
<TABLE>
<CAPTION>
December 31, February 19,
1997 1997
-------------- --------------
<S> <C> <C>
Assets:
Cash and cash equivalents $ 672,980 $ 168,035
Restricted cash 1,710,008 3,593,916
Short-term and government investments 8,709,050 151,004,439
Restricted short-term investments -- 106,344,622
-------------- --------------
Total cash and short-term investments 11,092,038 261,111,012
Investment in bonds 67,822 41,476,300
Accrued investment income 31,193 --
Investment in common stocks 70,150 1,944,629
Investment in Limited Partnership 15,200,000 --
Accounts receivable 1,675,065 34,439,550
Investment in real estate 1,213 2,646,851
Investment in subsidiaries:
Bankers Multiple Line Insurance Company 20,600,000 --
Facilities Management Installation, Inc. 9,267,274 9,351,959
BML Agency 211,260 242,769
Income tax recoverable from SFC, net -- 2,832,275
Distribution and liquidation interest in Stone Capital, Inc.
(Formerly CFSB Corporation) 18,000,000 18,000,000
-------------- --------------
Total assets 76,216,015 372,045,345
-------------- --------------
Liabilities:
Postpetition accrued expenses 3,549,455 7,386,015
Retired employee liability 5,565,000 5,565,000
Class 1 claim--Ozark -- 371,152
Priority tax claim--Kentucky -- 69,569
Reserve for contested claims 3,300,000 3,300,000
Claim against SWF escrow -- 911,391
-------------- --------------
Total liabilities 12,414,455 17,603,127
-------------- --------------
Net assets available in liquidation to trust interests $ 63,801,560 $ 354,442,218
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-3
<PAGE>
LONE STAR LIQUIDATING TRUST
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
for the period from February 19, 1997 (date of inception)
to December 31, 1997
<TABLE>
<CAPTION>
February 19,
1997
--------------
<S> <C>
Net assets in liquidation, beginning of period $ 354,442,218
--------------
Increases realized from net assets:
Interest income 4,309,515
Other income 204,752
Income tax benefit 1,245,905
Net gain on sale of real estate 324,362
--------------
6,084,534
--------------
Increases in unrealized value of net assets:
Limited partnerships 4,800,000
Investments in subsidiaries 4,307,099
Short-term investments 57,065
--------------
9,164,164
--------------
Total increases in net assets 15,248,698
Decreases realized from net assets:
Bonds and common stocks 468,796
--------------
General and administrative costs:
Investment in real estate expenses 295,231
Litigation settlement 413,520
Professional fees 1,818,218
Retiree benefits 370,631
Salaries and trustee expenses 333,597
Other 465,447
Total general and administrative costs 3,696,644
--------------
Net increase in net assets in liquidation 11,083,258
Distributions to Trust Interests 301,723,916
--------------
Net assets in liquidation, end of period $ 63,801,560
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-4
<PAGE>
LONE STAR LIQUIDATING TRUST
STATEMENT OF RECEIPTS AND DISBURSEMENTS
for the period from February 19, 1997 (date of inception)
to December 31, 1997
<TABLE>
<CAPTION>
February 19,
1997
--------------
<S> <C>
Receipts:
Proceeds from sale of investments $ 294,524,374
Interest income 4,278,322
Transfers from subsidiaries 10,423,292
Collections and sales of other assets:
Tax refunds 4,078,181
Deposits on real estate/escrow account 1,928,908
Other accounts receivables 1,000,746
--------------
Total receipts 316,233,823
--------------
Disbursements:
Class 1 and priority claims payments (444,671)
Purchase of BML capital stock (5,000,000)
Payments of postpetition accrued expenses and general and
administrative costs (10,030,679)
Payment of litigation settlement (413,520)
--------------
Total disbursements (15,888,870)
--------------
Increase in cash and cash equivalents before distributions 300,344,953
Distributions (301,723,916)
--------------
Decrease in cash and cash equivalents (1,378,963)
Cash and cash equivalents at beginning of period (of which $3,593,916
was restricted) 3,761,951
--------------
Cash and cash equivalents at end of period (of which $1,710,008
was restricted) $ 2,382,988
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-5
<PAGE>
LONE STAR LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Description of Trust
On October 10, 1995, ICH Corporation ("ICH") and its wholly-owned
subsidiaries, Care Financial Corporation and SWL Holding Corporation
(collectively, with ICH, the "Debtors") and Facilities Management
Installation, Inc. ("FMI"), a subsidiary of ICH that provided
management, data processing and other support services to ICH's
insurance subsidiaries, filed voluntary petitions for relief under
Chapter 11 of Title 11 of the United States Bankruptcy Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division (the "Bankruptcy Court").
Under the Chapter 11 proceeding, the Debtors and FMI continued business
operations as "debtors in possession." In accordance with a competitive
procedure established by the Bankruptcy Court, ICH's principal
insurance subsidiaries and substantially all the assets of FMI were
sold in December 1995 to Southwestern Financial Corporation ("SFC"), a
corporation newly formed by PennCorp Financial Group ("PennCorp") and
Knightsbridge Capital Fund I, L.P. Three of four remaining insurance
subsidiaries held indirectly by ICH through its other remaining
insurance subsidiary, Bankers Multiple Line Insurance Company ("BML"),
were sold prior to confirmation of the Joint Plan of Reorganization
(the "Joint Plan"). All of the outstanding stock of BML is held in the
registry of the Bankruptcy Court for the benefit of the Trust. FMI, a
wholly owned subsidiary of the Trust, remains under the protection of
the Bankruptcy Court.
The Joint Plan was confirmed by the Bankruptcy Court on February 7,
1997, and became effective on February 19, 1997 (the "Effective Date"
or "Inception Date"). The Lone Star Liquidating Trust (the "Trust") was
formed on the effective date under the Lone Star Liquidating Trust
Agreement, dated as of February 19, 1997 (the "Trust Agreement").
The purpose of the Trust is the orderly disposition, liquidation and
distribution of trust assets, distributing available cash to the Trust
Beneficiaries (defined below) and making other distributions and
payments called for in the Joint Plan, with no objective to continue or
engage in the conduct of a trade or business. Under the terms of the
Trust Agreement, the Trust is permitted to engage only in those
activities that are reasonably necessary to the purpose for which it
was formed and consistent with its objective not to continue or engage
in the conduct of a trade or business. The Trust has not engaged in the
conduct of trade or business.
Pursuant to the Joint Plan, all of the Debtors' assets other than
certain specific assets retained by the ICH entity which emerged from
bankruptcy ("Reorganized ICH") pursuant to the Joint Plan (the
"Retained Assets"), were transferred to the Trust on the effective
date. Assets which were transferred to the Trust on the effective date
totaled approximately $372 million. Liabilities assumed by the Trust on
the effective date totaled approximately $18 million, and included
certain administrative, priority and other claims superior to Class 5
Claims. Additionally, the Trust assumed all the rights and obligations
of BML, including indemnification obligations, under the sales
agreements with the purchasers of three of BML's former insurance
subsidiaries sold during the course of the Debtors' bankruptcy case,
all non-reinsured liabilities of BML as of the effective date and
certain other obligations.
The Trust Beneficiaries are all holders of an Allowed ICH Class 5
Claim, general unsecured claims, including claims of holders of notes
issued by ICH (11 1/4% bonds due 1996 and 11 1/4% bonds due 2003). The
Trust Beneficiaries are being paid out on a pro-rata basis applied to
the liquidated value of the trust assets. The Trust additionally is
responsible for the disposition of the ICH Class 1, 2, 3, and 4 claims;
ICH postpetition liabilities, priority tax claims and retiree benefit
claims; SWL Holding Corporation Class 1 and 2 claims; and Care
A-6
<PAGE>
LONE STAR LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS
Financial Corporation Class 1 and 2 claims; all to be paid or reserved
in full on the later of the Initial Distribution Date of February 19,
1997 or the actual date such payment is due under applicable law.
Basis of Presentation
The accompanying financial statements reflect the transactions of the
Liquidating Trust utilizing liquidation accounting concepts as required
by generally accepted accounting principles. Under this method of
accounting, assets are recorded at estimated realizable values and
liabilities are presented at their estimated settlement amounts with
adjustments for changes in estimated realizable value and estimated
settlement amounts being recognized currently. Certain amounts in these
footnotes are rounded to the nearest thousand for ease of presentation.
Cash
Cash is maintained at financial institutions insured by the Federal
Deposit Insurance Corporation ("FDIC") to a maximum of $100,000. The
Trust maintained a cash balance in excess of the FDIC insured amount in
accounts at December 31, 1997 and February 19, 1997, respectively. The
Trust monitors the financial stability of the financial institutions
regularly, and management does not believe excessive risk of the
failure of any of the financial institutions exists at December 31,
1997.
Short-Term and Government Investments
Short-term and government investments, which consisted of U.S. Treasury
bills and notes at December 31, 1997 and February 19, 1997 (date of
inception), are carried at market value with unrealized gains and
losses recognized in the statement of changes in net assets in
liquidation.
Income Taxes
Management intends for the Trust to be treated as a liquidating trust
pursuant to Treasury Regulations Section 301.7701-4(d), and as a
grantor trust subject to the provisions of Subchapter J, Subpart E of
the Income Revenue Code of 1986, as amended, owned by the Trust
Beneficiaries as grantors. As such, the Trust will not be treated as a
separate taxable entity. Rather, the holders of an Allowed Class 5 ICH
Claims and other entities, if any, that own or acquire beneficial
interests in the Trust will be treated as the grantors and thus the
owners of the Trust's assets for federal income tax purposes.
Post-Retirement Benefits
The Trust has recorded certain post-retirement benefits related to
retired employees of the Debtors, as well as for certain retirees of
businesses of the Debtors which were previously sold. The liabilities
were determined in accordance with SFAS No. 106 "Employers Accounting
for Post-Retirement Benefits Other than Pensions."
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues
and expenses during the reporting period. Ultimate actual results may,
in some instances, differ from previously estimated amounts.
A-7
<PAGE>
LONE STAR LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS
Investments in Subsidiaries
Under liquidation basis of accounting, the wholly owned subsidiaries of
the Trust are recorded under the equity method.
Valuation of Assets
Assets of the Trust are recorded at their estimated net realizable
value. Generally, net realizable value is the amount which the Trust
reasonably expects to receive upon sale to a willing buyer. For those
assets which do not have a readily determinable market value, estimated
net realizable value is a good faith estimate determined by the
Managing Trustee based on the underlying characteristics of such
assets, including but not limited to the size of investment, credit
worthiness of the issuer, yield to maturity, status of any related
contingencies, and private bids. In addition, discount factors,
including those related to the time value of money and risk associated
with collection, have been applied to these assets to arrive at
estimated net realizable value. Estimated realizable value, determined
as described above, may differ from the eventual realized value of the
assets, which can fluctuate over time in light of business, legal and
economic conditions and the financial results of the obligor.
These differences may be significant.
2. Short-Term and Government Investments:
Investments at December 31, 1997 consisted of U.S. Treasury securities.
Investments at February 19, 1997 consisted of time deposits and U.S.
Treasury securities. All securities are carried at net realizable
value.
Investments at December 31, and February 19, consist of the following:
<TABLE>
<CAPTION>
December 31, February 19,
1997 1997
-------------- --------------
<S> <C> <C>
U.S. Treasuries maturing within one year $ 8,598,571 $ 25,742,736
U.S. Treasuries maturing after ten years 110,479 111,703
Time deposits -- 125,150,000
-------------- --------------
$ 8,709,050 $ 151,004,439
============== ==============
The gross unrealized gains on investments at December 31, and February
19, consist of the following:
December 31, February 19,
1997 1997
-------------- --------------
Gross unrealized gains $ 55,840 $ --
============== ==============
</TABLE>
3. Restricted Cash and Short-Term Investments:
At December 31, 1997 and February 19, 1997, restricted cash of
$1,710,000 and $3,594,000, respectively, and restricted short-term
investments (consisting primarily of U.S. treasury bills due within 90
days) of $0 and $106,345,000, respectively, represent funds held in
escrow related primarily to the Debtor's sale of its principal
insurance subsidiaries.
A-8
<PAGE>
LONE STAR LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS
4. Investments in Bonds and Common Stocks:
Investments in bonds at December 31, and February 19, are as follows:
<TABLE>
<CAPTION>
December 31, February 19,
1997 1997
-------------- --------------
<S> <C> <C>
Southwestern Financial Corp. (7.0% matures 12/15/05) $ -- $ 40,000,000
Mississippi Power & Light (8.5% matures 1/15/23) -- 1,067,500
Other investments in bonds 67,822 408,800
-------------- --------------
$ 67,822 $ 41,476,300
============== ==============
Investments in common stocks at December 31, and February 19, are as
follows:
December 31, February 19,
1997 1997
-------------- --------------
ICH Funding Corporation $ -- $ 1,485,955
Churchill Downs -- 375,000
Worthington Industries 60,506 75,632
Other common stock 9,644 8,042
-------------- --------------
$ 70,150 $ 1,944,629
============== ==============
</TABLE>
5. Investment in Limited Partnership:
The Trust held an investment in Hicks Muse/Connectors Limited
Partnership ("Connectors") at December 31, 1997. The sole asset of
Connectors was common stock of Berg Electronics Corporation ("Berg").
Assuming a deemed liquidation of the limited partnership at December
31, 1997, the Trust's interest would have been worth approximately
$18,700,000 based on the reported closing price of Berg common stock
($23 per share). Based on the volume of restricted stock held by
Connectors, market risk and lack of liquidity, the Trust reflected the
carrying value of the limited partnership at December 31, 1997 at
$15,200,000.
On February 5, 1998, the shares of stock in Berg were distributed to
Connectors' limited partners. On February 11, 1998, the Trust sold all
shares of Berg stock in a public, underwritten secondary offering for
net proceeds of $19,605,000 ($25 gross offering price per share less $
.75 commission), resulting in a realized gain of $4,405,000. Prior to
the secondary offering, on February 7, 1998, Berg's free trading stock
was valued at $28 per share.
6. Real Estate:
At February 19, 1997, the Trust owned four properties located in
Louisiana, Idaho, Florida and Texas. The Louisiana, Idaho and Texas
properties with carrying values of $325,000, $322,000, and $2,000,000,
respectively, were sold during the year for a net realized gain of
$324,000.
A-9
<PAGE>
LONE STAR LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS
7. Accounts Receivable and Investment in Subsidiaries:
At February 19, 1997, accounts receivable consisted of a $32,000,000
receivable from Reorganized ICH representing assets, net of
liabilities, of BML to which the Trust was entitled under the Joint
Plan; $2,375,000 of reinsurance receivables; and a $64,000 receivable
due from Southwestern Financial Service Corporation for prepayment of
accounting and administrative services.
In addition to the Trust's interest in BML's net assets, at February
19, 1997, the Trust held investments in FMI and BML Agency of
$9,352,000 and $243,000, respectively. During April 1997, Reorganized
ICH exercised its option as granted in the Joint Plan to sell to the
Trust the stock of BML for $5,000,000. Consequently, the Trust had a
total investment in BML of $37,000,000 including the $32,000,000
receivable.
Condensed financial information of BML as of December 31, 1997 and
February 19, 1997 (unaudited) is as follows.
<TABLE>
<CAPTION>
December 31, February 19,
1997 1997
-------------- --------------
<S> <C> <C>
Assets:
Cash and short-term investments $ 12,066,000 $ 2,819,000
Bonds and structured securities 4,017,000 4,204,000
Real estate 112,000 11,380,000
Limited partnership interests -- 11,817,000
Other miscellaneous assets 3,532,000 8,651,000
-------------- --------------
Total assets $ 19,727,000 $ 38,871,000
============== ==============
Liabilities:
Accrued liabilities, taxes and other payables $ 4,578,000 $ 6,871,000
-------------- --------------
Total liabilities 4,578,000 6,871,000
Total surplus (net assets) 15,149,000 32,000,000
-------------- --------------
Total liabilities and surplus $ 19,727,000 $ 38,871,000
============== ==============
</TABLE>
The investment in BML included in the statement of net assets in
liquidation at December 31, 1997 is valued at $20,600,000. This value
differs from statutory surplus due primarily to the $5,000,000 paid to
Reorganized ICH. See Note 13 for discussion of certain pending
litigation.
During the period ended December 31, 1997 BML transferred approximately
$20,800,000 to the Trust in cash and investments.
A-10
<PAGE>
LONE STAR LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS
Condensed financial information of FMI as of December 31, 1997 and
February 19, 1997 (unaudited) is as follows:
<TABLE>
<CAPTION>
December 31, February 19,
1997 1997
-------------- --------------
<S> <C> <C>
Assets:
Cash $ 9,858,590 $ 5,914,901
Accounts receivable and other 1,242,780 6,511,783
-------------- --------------
Total assets $ 11,101,370 $ 12,426,684
============== ==============
Liabilities:
Postpetition liabilities $ 10,275 $ 6,551
Retired employee liability 1,823,821 1,823,821
Other compensation accruals -- 1,244,353
-------------- --------------
Total liabilities 1,834,096 3,074,725
Total equity 9,267,274 9,351,959
-------------- --------------
Total liabilities and equity $ 11,101,370 $ 12,426,684
============== ==============
</TABLE>
8. Distribution and Liquidation Interest in Stone Capital, Inc. (formerly
CFSB Corporation):
The Stone Capital Interest arises from the agreement of Consolidated
National Corporation ("CNC") to share with ICH certain economic
benefits it received in relation to Stone Capital, Inc. ("Stone
Capital"), a holding company organized by James M. Fail ("Fail") to
organize and charter its wholly owned subsidiary, Bluebonnet Savings
Bank, FSB ("Bluebonnet"). Bluebonnet was formed in 1988 to acquire 15
insolvent Texas savings and loan associations as part of the Federal
Home Loan Bank Board government assisted "Southwest Plan."
Historically, ICH and CNC loaned monies to Fail, Stone Capital, or
Bluebonnet for the purpose of capitalizing Bluebonnet. In connection
with its loans, CNC negotiated for, and received, a 49% interest in (i)
dividends or other distributions to or for the benefit of Fail from
Stone Capital, excluding amounts used for (a) interest and principal
payments on certain debt, (b) amounts specified for certain litigation
settlements and (c) certain dividend payments from Bluebonnet, (ii)
certain proceeds from the sale or transfer of Stone Capital common
stock and (iii) benefits from Stone Capital's tax attributes
(collectively, the "Stone Capital Proceeds"). CNC agreed to share the
Stone Capital Proceeds with ICH based on the proportionate amount of
loans granted by ICH as compared to the total amount of the loans by
ICH and CNC. Based on such agreement, ICH is entitled to receive 27.7%
of the payments CNC receives under CNC's agreement with Stone Capital
and Fail. Therefore, ICH is entitled to 13.57% of the Stone Capital
Proceeds (such interests referred to herein as the "Stone Capital
Interest"). ICH's interest in Stone Capital was transferred to the
Trust according to the Joint Plan. The Stone Capital Interest does not
entitle the Trust to any voting rights or any other rights of ownership
with respect to Stone Capital and, therefore, the Trust is unable to
control or direct the timing or amount of any distributions that may be
declared or paid by Stone Capital.
The value of the Stone Capital Interest is subject to considerable
uncertainty. The Trust has assigned a carrying value of $18 million to
the Stone Capital Interest based on (a) prior valuations by the Debtors
of Stone Capital Interest, (b) consideration of the financial condition
of Stone Capital and (c) certain risk factors associated with
A-11
<PAGE>
LONE STAR LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS
the Stone Capital Interest, which include the timing and amount of
dividends that may (or may not) be declared by Stone Capital, and the
outcome of certain litigation against Stone Capital and Fail. The
amount ultimately realized by the Trust for the Stone Capital Interest
may differ materially from the value assigned to such interest and will
depend, in part, on the effect of the risk factors referred to above,
which factors are (or will be) outside the control of the Trust. The
value of the Stone Capital interest has not been adjusted for the
Trust's allocable share of Stone Capital's current year net income due
to the uncertainty surrounding the timing and amount of dividends and
the lack of any distributions received to date.
9. Postpetition Accrued Expenses:
The Trust has a compensation agreement with Susan A. Brown, Managing
Trustee, which provides incentive bonuses dependent upon the amount of
distributions in excess of $260,000,000 paid to non-priority unsecured
claimants of the Debtors. The former Co-CEO of the Debtors entered into
a compensation agreement with the Debtors on January 1, 1996 on
substantially the same terms as the agreement with the Managing
Trustee. As of December 31, 1997 and February 19, 1997, the accrued
bonus amounts were $3,092,160 and $4,200,000, respectively. During the
year, the Trust paid a bonus in the amount of $553,920 each to Ms.
Brown and the former Co-CEO of the Debtors.
The Trust does not accrue for future salaries and benefits as it
anticipates that future gains on the disposition of the remaining Trust
assets will offset these expenses.
10. Post-Retirement Benefits Other Than Pensions:
As of December 31, 1997 and February 19, 1997, the Trust has an
obligation of $5,565,000 recorded for post-retirement benefits relating
to certain retired employees, as well as certain retirees of businesses
of the Debtors which were previously sold. Included in the liabilities
of FMI as of December 31, 1997 and February 19, 1997 is a similar
obligation in the amount of $1,824,000. For measurement purposes, the
discount rate used in determining the accumulated post-retirement
benefit obligations was 6.75% at December 31, 1997 and February 19,
1997. The Trust and FMI are presently pursuing the sale of these
liabilities. Trust management believes that the liability they will pay
to the assuming company will approximate the current recorded
liability; as such, the expenses incurred relating to the
post-retirement benefits are being expensed as incurred.
11. Contested Claims:
Sayyah Claim. Victor Sayyah filed a proof of claim arising from a 1981
transaction in which American Commonwealth Financial Corp., a
corporation controlled by Victor Sayyah, sold the stock of HCA, Inc. to
an ICH subsidiary for $15 million in cash and a promissory note with a
face amount of $30 million (the "ICH Note"). The ICH Note was
subsequently assigned to Sayyah. ICH subsequently assumed the
obligation under the ICH Note. In 1984, ICH and Sayyah entered into a
revolving credit loan agreement (the "Loan Agreement") under which ICH
agreed to loan Sayyah up to certain specified sums at Sayyah's request,
with a total borrowing cap of $29.5 million. Pursuant to the Loan
Agreement, Sayyah borrowed an aggregate principal amount of $27
million, executing various promissory notes (the "Sayyah Notes") in the
aggregate principal amount. On the Effective Date, the outstanding
principal balance of the loan from ICH to Sayyah was $27 million.
The Trust filed an adversary proceeding objecting to the Sayyah claim
and seeking a judgment against Sayyah for amounts due under the loans
to Sayyah pursuant to the Loan Agreement and Sayyah Notes. Under the
terms of the Joint Plan and the order confirming the Joint Plan, the
Bankruptcy Court will determine the amount of Sayyah's secured claim
and timing of the offset to which Sayyah is entitled and the amount of
Sayyah's
A-12
<PAGE>
LONE STAR LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS
unsecured claim, if any. The unsecured portion of the Sayyah claim, if
any, will be treated as a Class 5 Claim in the amount determined by the
Bankruptcy Court. The Trust has objected to Sayyah's proof of claim to
the extent it sought recovery for unmatured original issue discount in
the ICH Note. Summary judgment motions were filed by Sayyah and the
Trust and the Bankruptcy Court has ruled in favor of Sayyah with
respect to the original issue discount matter. The Trust has reserved
its right to appeal such decision. A trial is scheduled in June of 1998
on the remaining issues.
The amount Sayyah is seeking as an unsecured claim, as set forth in
discovery responses served in the adversary proceedings filed with the
Bankruptcy Court, is approximately $3.25 million, plus interest and
attorney's fees and other expenses. In accordance with the Bankruptcy
Court order confirming the Joint Plan, the Trust has reserved the
amount of $3.3 million with respect to the Class 5 Claim, if any, of
Sayyah. The reserved amount is not a limit to the amount, if any, of an
allowed ICH Class 5 Claim of Sayyah. The ultimate amount and outcome of
the Sayyah claim, including appeals, if any, is uncertain.
GSLIC Claim. Great Southern Life Insurance Company ("GSLIC") filed a
proof of claim in the ICH and FMI bankruptcy cases requesting that a
claim be allowed in the amount of any judgment against GSLIC in certain
pending litigation in Louisiana, Texas and elsewhere regarding
"vanishing premium policies." GSLIC contends that ICH and FMI are
co-liable with GSLIC because these vanishing premium policies were
issued by GSLIC when GSLIC was a member of the ICH family of companies.
The Trust filed an objection to GSLIC's claim in February 1998. Among
other things, the Trust has argued that the contingent reimbursement
claim asserted by GSLIC is not allowable under the Bankruptcy Code.
Pursuant to a prior order entered by the court related to the GSLIC
matter in November of 1997, GSLIC capped its potential claim at $3
million and the Trust reserved $3 million in non-cash assets to satisfy
any potential allowed claim. If allowed, the GSLIC Claim will be
treated as a Class 5 Claim. Trust management does not expect to incur
significant cost with respect to this claim.
Claims of Officers and Directors in ICH and FMI Cases. A number of
former officers and directors have filed proofs of claim for
indemnification in the ICH and FMI bankruptcy cases. No dollar amount
of claim is specified. The Trust has entered into a settlement
agreement whereby the Trust will receive releases from the officers and
directors and the withdrawal of their claims against ICH and FMI, in
exchange for the conveyance by the Trust of a small ownership interest
in Reorganized ICH and the Trust's agreements to share certain rights
in a defense fund established for the officers and directors during the
Case, which currently amounts to $114,000. The settlement agreement
will be submitted to the Bankruptcy Court for approval, and it is
anticipated that such submission will be made shortly. The terms of the
agreement will not become effective until the Bankruptcy Court has
approved the agreement. If the settlement agreement becomes effective,
the Trust anticipates that it will request dismissal of the FMI
bankruptcy case. If the Bankruptcy Court does not approve the
settlement, the Trust may pursue objections to the claims of a number
of the officers and directors.
12. Distributions:
Total distributions in 1997 were approximately $302 million and 81.41%
of the allowed Trust Interests as shown below. In addition, the Trust
has distributed $18.5 million or 5.0% of allowed Trust Interests in
1998.
A-13
<PAGE>
LONE STAR LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS
Distributions to Holders of Interests
<TABLE>
<CAPTION>
Distribution Amount
-------------------
As %
Distribution Date $ of Interest
----------------- ------------- -----
<S> <C> <C>
March 3, 1997 $ 199,098,499 53.72%
May 27, 1997 11,118,680 3.00
September 10, 1997 91,506,737 24.69
------------- -----
Total $ 301,723,916 81.41%
============= =====
February 27, 1998 $ 18,531,133 5.0%
</TABLE>
13. Litigation and Contingencies:
On the Effective Date, the Trust assumed all the rights and obligations
of BML, including indemnification obligations under the sales
agreements with the purchasers of three of BML's former insurance
subsidiaries sold during the course of the Debtor's bankruptcy case. A
summary of pending litigation follows:
Thomas M. Bronson, Jr. and Deborah Bronson v. Bankers Multiple Line
Insurance Company and Phillip A. Lacefield--This matter is currently
pending in the Circuit Court of Tennessee for the Thirtieth District at
Memphis, filed March, 1995. This suit is against BML and one of its
agents which asserts causes of actions based on fraud and attempts to
impose liability on the Company under the doctrine of vicarious
liability and respondeat superior. The suit also includes claims for
deceptive trade and unfair practices under two Tennessee consumer
protection statutes. The plaintiffs in this case are seeking $500,000
compensatory and $5,000,000 punitive damages. Management believes it
has meritorious defenses in this matter.
World Insurance--BML is negotiating with World for a transfer of
additional reserves under the Reinsurance Agreement pursuant to which
BML sold its remaining health insurance business to World in March
1996. The additional reserve transfer would be in exchange for World's
agreement to unconditionally assume two major claims, one of which was
the subject of threatened litigation on the effective date of the
Reinsurance Agreement. World contends the second claim was incurred
prior to the effective date.
New Era Life Insurance Company--On December 8, 1997, New Era filed a
petition in the District Court of Harris County, Texas seeking
indemnification of claims they believe BML was aware of at the time of
the sale of Philadelphia American Life Insurance Company to New Era.
The petition seeks damages in the amount of at least $2,500,000 and
punitive damages in the amount of $5,000,000. BML management believes,
with the possible exception of the state tax assessments of $175,000,
the claims are all without merit and no settlement will be due.
Other Litigation--The remaining cases against the Trust and/or BML
aggregate total claims in excess of $6,000,000.
Management has provided reserves in the financial statements that they
believe are adequate to cover estimated settlement amounts for the
above contingencies. Although there can be no assurance as to the
ultimate disposition of these matters and the proceedings disclosed
above, it is the opinion of the Trust's management, based upon the
information currently available and the opinions of counsel, that the
expected outcome of these matters, individually or in the aggregate,
will not have a material adverse effect on the net assets in
liquidation at December 31, 1997.
A-14
<PAGE>
INDEX TO EXHIBITS
Exhibit 2.1 First Amended Joint Plan of Reorganization Under Chapter 11
Exhibit 2.2 Order Confirming First Amended Joint Plan of Reorganization Under
Chapter 11
Exhibit 3.1 Lone Star Liquidating Trust Agreement dated as of February 19, 1997
Exhibit 3.2 Form of Trust Certificate
Exhibit 10.1 Compensation Agreement between Lone Star Liquidating Trust and
Susan A. Brown
Exhibit 10.2 Employee Leasing Agreement, dated February 19, 1997, among Lone
Star Liquidating Trust, Facilities Management Installation, Inc.
and Southwestern Financial Services Corporation
Exhibit 10.3 Addendum No. 1, dated as of February 19, 1998 to Employee Leasing
Agreement
Daniel C. Stewart, SBT #19206500
Josiah M. Daniel, III, SBT #05358500
WINSTEAD SECHREST & MINICK P.C.
5400 Renaissance Tower, 1201 Elm Street
Dallas, Texas 75270
(214) 745-5400
ATTORNEYS FOR THE DEBTORS
Michael A. Rosenthal, SBT #17281490 I. Richard Levy, SBT #12265020 GIBSON, DUNN
& CRUTCHER 1717 Main Street, Suite 5400 Dallas, Texas 75201 (214) 698-3100
ATTORNEYS FOR THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS
Peter D. Wolfson
John A. Bicks
PRYOR, CASHMAN, SHERMAN & FLYNN 410 Park Avenue New York, New York 10022
(212) 421-4100
ATTORNEYS FOR THE OFFICIAL COMMITTEE
OF EQUITY SECURITY HOLDERS
IN THE
UNITED STATES BANKRUPTCY COURT
FOR THE
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
IN RE:
I.C.H. CORPORATION, CASE NO. 395-36351-RCM-11
A DELAWARE CORPORATION, F/K/A (CHAPTER 11)
SOUTHWESTERN LIFE CORPORATION,
F/K/A I.C.H. CORPORATION,
SWL HOLDING CORPORATION, CASE NO. 395-36352-RCM-11
A DELAWARE CORPORATION, (CHAPTER 11)
F/K/A LIFE INTERESTS
CORPORATION, AND
CARE FINANCIAL CORPORATION, CASE NO. 395-36354-RCM-11
A DELAWARE CORPORATION, (CHAPTER 11)
F/K/A HEALTH INTERESTS
CORPORATION,
DEBTORS. JOINTLY ADMINISTERED
CASE NO. 395-36351-RCM-11
FIRST AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11
(DATED: NOVEMBER 15, 1996)
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLES I
DEFINITIONS................................................................ 2
1.1 Administrative Expense or Administrative Claim................
1.2 Allowed Amount................................................ 2
1.3 Allowed Claim and Allowed Interest............................
1.4 Available Cash................................................ 2
1.5 Bankruptcy Code............................................... 2
1.6 Bankruptcy Court.............................................. 2
1.7 Bar Date...................................................... 2
1.8 Beneficial Holder............................................. 2
1.9 BML........................................................... 2
1.10 BML Certificates.............................................. 2
1.11 BML Final Reconciliation Date................................. 3
1.12 BML Holding Period............................................ 3
1.13 BML Initial Reconciliation Date............................... 3
1.14 BML Stock Power............................................... 3
1.15 BML Licenses.................................................. 3
1.16 Board of Directors............................................ 3
1.17 Business Day.................................................. 3
1.18 Capital and Surplus Retention Assets.......................... 3
1.19 Care.......................................................... 3
1.20 Carlisle...................................................... 3
1.21 CFSB Interest................................................. 3
1.22 Chapter 11 Case............................................... 3
1.23 Charter Amendments............................................ 3
1.24 Claim......................................................... 3
1.25 Claimant...................................................... 3
1.26 Class......................................................... 3
1.27 CNC........................................................... 3
1.28 Common Stock.................................................. 3
1.29 Confirmation.................................................. 3
1.30 Confirmation Date............................................. 3
1.31 Confirmation Hearing.......................................... 3
1.32 Confirmation Order............................................ 3
1.33 Contested..................................................... 3
1.34 Creditors Committee........................................... 4
1.35 Debtors....................................................... 4
1.36 Disallowed Claim or Disallowed Interest....................... 4
1.37 Disclosure Statement.......................................... 4
1.38 Distribution Agent............................................ 4
1.39 Distribution Date............................................. 4
1.40 Distribution Record Date...................................... 4
1.41 Effective Date................................................ 4
1.42 Entity........................................................ 4
1.43 Equity Committee.............................................. 4
1.44 Estates....................................................... 4
1.45 Fee Claim..................................................... 4
1.46 Filed......................................................... 4
1.47 Final Order................................................... 4
1.48 ICH........................................................... 4
1.49 Impaired...................................................... 4
1.50 Indenture..................................................... 5
1.51 Indenture Trustee............................................. 5
1.52 Interest...................................................... 5
1.53 Initial Distribution Date..................................... 5
1.54 Joint Plan.................................................... 5
i
<PAGE>
PAGE
----
1.55 Legal Rate.................................................... 5
1.56 Letters of Transmittal........................................ 5
1.57 Modern/Western Agreement...................................... 5
1.58 Notes......................................................... 5
1.59 Order......................................................... 5
1.60 Ozark......................................................... 5
1.61 PennCorp...................................................... 5
1.62 PennCorp Escrow............................................... 5
1.63 PennCorp Escrow Agreement..................................... 5
1.64 Perry Park.................................................... 6
1.65 Petition Date................................................. 6
1.66 Philadelphia American Agreement............................... 6
1.67 Plan Documents................................................ 6
1.68 Post-Petition Interest........................................ 6
1.69 Preferred Stock............................................... 6
1.70 Priority Claim................................................ 6
1.71 Priority Tax Claim............................................ 6
1.72 Pro Rata...................................................... 6
1.73 Record Holder................................................. 6
1.74 Released Entities............................................. 6
1.75 Released Officers............................................. 6
1.76 Reorganized ICH............................................... 6
1.77 Reorganized ICH Common Stock.................................. 6
1.78 Reserved Distribution Assets.................................. 6
1.79 Retained Assets............................................... 6
1.80 Retained Causes of Action..................................... 6
1.81 Rice.......................................................... 6
1.82 Sayyah........................................................ 7
1.83 Schedules..................................................... 7
1.84 Secured....................................................... 7
1.85 Securities.................................................... 7
1.86 Securities-Related Claims..................................... 7
1.87 Shaw.......................................................... 7
1.88 Shaw Group.................................................... 7
1.89 Stock Certificates............................................ 7
1.90 Substantial Consummation...................................... 7
1.91 SWL Holding................................................... 7
1.92 Tax Settlement................................................ 7
1.93 Tenneco....................................................... 7
1.94 Tenneco Equity Settlement Proceeds............................ 7
1.95 Tenneco Settlement............................................ 7
1.96 Tenneco Settlement Motion..................................... 7
1.97 Transfer Agent................................................ 7
1.98 Trust......................................................... 7
1.99 Trust Agreement............................................... 7
1.100 Trust Assets.................................................. 7
1.101 Trust Interest................................................ 7
1.102 Trustee....................................................... 8
1.103 Unsecured Claim............................................... 8
ARTICLE II
TREATMENT OF NON-CLASSIFIED CLAIMS......................................... 8
2.1 General Administrative Claims................................. 8
(a) In General............................................... 8
(b) Fee Claims............................................... 8
(c) Employment Agreements.................................... 8
(d) Other Administrative Claims.............................. 8
(e) Regarding Certain Indemnifications....................... 8
2.2 Administrative and Priority Tax Claims........................ 8
(a) Tax Settlement........................................... 9
ii
<PAGE>
PAGE
----
(b) Administrative Tax Claims................................ 9
(c) Priority Tax Claims...................................... 9
2.3 Other Priority Claims......................................... 9
2.4 Preservation of Retiree Benefits.............................. 9
2.5 U.S. Trustee Fees............................................. 9
ARTICLE III
DESIGNATION OF CLASSES OF CLAIMS AND INTERESTS............................. 9
3.1 Classification of Claims Against and Interests In ICH......... 9
(a) Secured Claims........................................... 9
(i) ICH Class 1--Secured Claim of Ozark............... 9
(ii) ICH Class 2--Secured Claim of Sayyah.............. 9
(iii) ICH Class 3--Tenneco.............................. 9
(iv) ICH Class 4--Other Secured Claims................. 9
(b) Unsecured Claims......................................... 9
(i) ICH Class 5--General Unsecured Claims............. 10
(c) Interests................................................ 10
(i) ICH Class 6--Preferred Stock...................... 10
(ii) ICH Class 7--Common Stock......................... 10
3.2 Classification of Claims Against and Interests In SWL Holding. 10
(a) SWL Holding Class 1--Secured Claims...................... 10
(b) SWL Holding Class 2--General Unsecured Claims............ 10
(c) SWL Holding Class 3--Common Stock........................ 10
3.3 Classification of Claims Against and Interests In Care........ 10
(a) Care Class 1--Secured Claims............................. 10
(b) Care Class 2 - General Unsecured Claims.................. 10
(c) Care Class 3 - Common Stock.............................. 10
ARTICLE IV
PROVISIONS FOR SATISFACTION OF CLAIMS AND INTERESTS........................ 10
4.1 Treatment of Classified Claims Against and Interests In ICH... 10
(a) Secured Claims........................................... 10
(i) ICH Class 1--Secured Claim of Ozark............... 10
(ii) ICH Class 2--Secured Claim of Sayyah.............. 10
(iii) ICH Class 3--Tenneco.............................. 10
(iv) ICH Class 4--Other Secured Claims................. 11
(b) Unsecured Claims......................................... 11
(i) ICH Class 5--General Unsecured Claims............. 11
(c) ICH Interests............................................ 11
(i) ICH Class 6--Preferred Stock...................... 11
(ii) ICH Class 7--Common Stock......................... 11
4.2 Treatment of Classified Claims Against and Interests In
SWL Holding................................................. 12
(a) SWL Holding Class 1--Secured Claims...................... 12
(b) SWL Holding Class 2--General Unsecured Claims............ 12
(c) SWL Holding Class 3--Common Stock........................ 12
4.3 Treatment of Classified Claims Against and Interests In Care.. 12
(a) Care Class 1--Secured Claims............................. 12
(b) Care Class 2--General Unsecured Claims................... 12
(c) Care Class 3--Common Stock............................... 12
ARTICLE V
DESIGNATION OF THE CLASSES OF CLAIMS IMPAIRED UNDER THIS JOINT PLAN........ 12
ARTICLE VI
SETTLEMENTS................................................................ 12
6.1 Tenneco Settlement............................................ 12
6.2 Shaw Group Settlement......................................... 12
(a) Cash Contribution........................................ 12
(b) Withdrawal of Proofs of Claims........................... 12
(c) Transferability of CFSB Interest......................... 13
(d) Performance of the Tax Settlement........................ 13
(e) Release of Shaw Group.................................... 13
6.3 Stipulation and Agreement with the Indenture Trustee.......... 13
iii
<PAGE>
PAGE
----
ARTICLE VII
MEANS FOR EXECUTION OF JOINT PLAN.......................................... 13
7.1 Effective Date Entities.................................. 13
7.2 Property of Estates........................................... 13
(a) SWL Holding and Care..................................... 13
(b) Retention of the Retained Assets by Reorganized ICH...... 13
(c) Transfer of the Trust Assets by ICH to the Trust......... 13
7.3 Provisions Relating to the Trust.............................. 14
(a) Creation of the Trust.................................... 14
(b) Term..................................................... 14
(c) Liquidation of the Trust Assets.......................... 14
(d) Reports.................................................. 14
(g) Provisions Regarding Trust Interests..................... 14
(i) Allocation of Trust Interests; Issuance of Trust
Certificates..................................... 14
(ii) Legended Certificates............................. 14
(iii) Trust Interest Register; Ownership of Interests... 14
(iv) Transfer of Trust Interests....................... 14
7.4 Reorganized ICH............................................... 14
(a) Charter Amendments....................................... 14
(b) Board of Directors....................................... 15
(c) Officers................................................. 15
7.5 Other Business Transactions to Occur on the Effective Date.... 15
(a) Provisions Regarding the Modern/Western Agreement and the
Philadelphia American Agreement....................... 15
(b) Provision Regarding Perry Park........................... 15
(c) Provisions Regarding BML................................. 15
(d) Sale Prior to Effective Date............................. 16
(e) Confirmation Order Provisions............................ 16
(f) Additional Provisions.................................... 16
7.6 Provisions Relating to Indentures............................. 16
(a) Termination of Indentures................................ 16
(b) Payment of Indenture Trustee's Fees and Expenses......... 17
7.7 Termination of the Committees................................. 17
7.8 Closing of Effective Date Transactions........................ 17
ARTICLE VIII
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED
LEASES..................................................................... 17
8.1 Executory Contracts and Unexpired Leases...................... 17
8.2 Claims for Rejected Executory Contracts and Unexpired Leases.. 17
ARTICLE IX
PROVISIONS REGARDING TENDER OF SECURITIES, DISTRIBUTIONS, DISTRIBUTION AGENT,
AND OBJECTIONS TO CLAIMS................................................... 17
9.1 Provisions Relating to Securities............................. 17
(a) Initial Distribution of Available Cash................... 17
(b) Distribution Record Date................................. 17
(c) Cancellation of Securities............................... 17
(d) Tender of Securities..................................... 17
(e) Unsurrendered Outstanding Securities..................... 18
(f) Treasury Securities...................................... 18
9.2 Delivery of Distributions..................................... 18
9.3 Distribution Agent............................................ 18
9.4 No Distributions Pending Allowance............................ 18
9.5 Reserve for Certain Distributions............................. 19
9.6 Distributions After Disallowance.............................. 19
9.7 Unclaimed Property............................................ 19
9.8 Treatment of Contingent or Unliquidated Claims................ 19
9.9 Form of Payments.............................................. 19
ARTICLE X
PROVISIONS FOR THE DISCHARGE, SETTLEMENT, AND ADJUSTMENT OF
CLAIMS..................................................................... 19
10.1 Legal Binding Effect; Discharge of Claims and Interests....... 19
iv
<PAGE>
PAGE
----
10.2 Retention and Enforcement of the Debtors' Causes of Action.... 19
(a) Retention of Causes of Action............................ 20
(b) Judgment Reduction and Hold Harmless..................... 20
(c) Right of Trust to Assert Offset Claims................... 20
10.3 Releases...................................................... 21
10.4 Provisions Regarding the Released Officers.................... 21
10.5 Futher Releases and Settlements............................... 21
10.6 Permanent Injunction.......................................... 21
10.7 Survival of the Debtors' Corporate Indemnities................ 21
ARTICLE XI
MISCELLANEOUS PROVISIONS................................................... 21
11.1 Request for Relief under Section 1129(b)...................... 21
11.2 Modification.................................................. 22
11.3 Headings...................................................... 22
11.4 Subordination................................................. 22
11.5 Securities-Related Claims Based on Common Stock............... 22
11.6 Due Authorization............................................. 22
11.7 De Minimis Distributions and Fractional Shares................ 22
11.8 Authorization of Corporate Action............................. 22
11.9 Further Assurances and Authorizations......................... 23
11.10 Right to Resolve Claims....................................... 23
11.11 Rights Regarding Books........................................ 23
ARTICLE XII
RETENTION OF JURISDICTION.................................................. 23
12.1 .............................................................. 23
v
<PAGE>
I.C.H. Corporation, Care Financial Corporation, and SWL Holding
Corporation, together with the Official Committee of Unsecured Creditors of
I.C.H. Corporation and the Official Committee of Equity Security Holders of
I.C.H. Corporation (collectively, the "Plan Proponents"), jointly propose the
following First Amended Joint Plan of Reorganization pursuant to the provisions
of Chapter 11 of the Bankruptcy Code.
ARTICLE I
DEFINITIONS
Unless the context otherwise requires, the following terms shall have the
following meanings when used in initially capitalized form in this Joint Plan.
Such meanings shall be equally applicable to both the singular and plural forms
of such terms. Any term used in initially capitalized form in this Joint Plan
that is not defined herein, but that is defined in the Bankruptcy Code, shall
have the meaning assigned to such term in the Bankruptcy Code.
1.1 ADMINISTRATIVE EXPENSE OR ADMINISTRATIVE CLAIM means an administrative
expense Claim under Section 503 of the Bankruptcy Code and the fees payable to
the United States Trustee under 28 U.S.C. Section 1930.
1.2 ALLOWED AMOUNT means the amount in lawful currency of the United States
of any Allowed Claim, or the number of shares representing any Allowed Interest.
1.3 ALLOWED CLAIM AND ALLOWED INTEREST shall mean, with reference to any
Claim or Interest (i) a Claim against or Interest in the Debtor, proof of which,
if required, was Filed on or before the Bar Date, which is not a Contested Claim
or Contested Interest, (ii) if no proof of claim or interest was so Filed, a
Claim against or Interest in the Debtor which has been or hereafter is listed by
the Debtor in its Schedules as liquidated in amount and not disputed or
contingent, or (iii) a Claim or Interest allowed hereunder or by Final Order. An
Allowed Claim or Allowed Interest does not include any Claim or Interest or
portion thereof which is a Disallowed Claim or Disallowed Interest or which has
been subsequently withdrawn, disallowed, released or waived by the holder
thereof or pursuant to a Final Order. Unless otherwise specifically provided in
this Joint Plan, an Allowed Claim or Allowed Interest shall not include any
amount for punitive damages or penalties.
1.4 AVAILABLE CASH means, as of any date of calculation, the aggregate of
all cash or cash equivalents available for immediate distribution held by the
Trust, as reflected on the books and records of the Trust less (i) cash required
to be placed in reserve or paid on the Effective Date as provided in Article II
of this Joint Plan, (ii) cash required to fund distributions with respect to
Secured Claims as provided in section 4.1(a)(i) of this Joint Plan, (iii) cash
required to fund reserves for Contested Claims as provided in section 9.5 of
this Joint Plan, (iv) an amount, not to exceed $2 million, reasonably determined
by the Trustee to be necessary to fund the expenses of the Trust including costs
of the Distribution Agent for distributions made pursuant to this Joint Plan,
(v) any such cash or cash equivalents deriving from SWL Holding or Care, or
their respective assets, and necessary to make the payments, if any, to the
Classes of Claimants in such Estates, and (vi) if, at such calculation date, the
capital stock of BML is owned by the Trust and the BML Licenses have not been
sold to Reorganized ICH, $5 million pursuant to section 7.5(c).
1.5 BANKRUPTCY CODE means Title 11 of the United States Code, as amended,
to the extent applicable to the Chapter 11 Case.
1.6 BANKRUPTCY COURT means the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division.
1.7 BAR DATE means the deadline by which a Claim must have been Filed. The
Bar Date was February 7, 1996, as to all prepetition Claims, excluding Claims of
governmental units for which the Bar Date was April 9, 1996, and further
excluding the Internal Revenue Service for which the Bar Date is October 31,
1996.
1.8 BENEFICIAL HOLDER means, with respect to any Interest or the Notes, as
of any particular date (i) a Record Holder to the extent that it is the Entity
ultimately entitled to the benefits of ownership of such Securities registered
in its name in the records of the appropriate Transfer Agent or the Indenture
Trustee, as applicable, regardless of whether such Record Holder has delegated
investment and/or voting power with respect to any such Securities to any other
Entity, or (ii) to the extent a Record Holder holds Securities of which an
Entity other than that Record Holder ultimately is entitled to the benefits of
ownership, the Entity listed in the transfer or other records of that Record
Holder as being the Entity ultimately entitled to the benefits of ownership of
those Securities.
1.9 BML means Bankers Multiple Line Insurance Company, an Illinois
corporation.
1.10 BML CERTIFICATES has the meaning ascribed to such term in Section
7.5(c)(iii) of this Joint Plan.
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-2
<PAGE>
1.11 BML FINAL RECONCILIATION DATE has the meaning ascribed to such term in
Section 7.5(c)(iii) of this Joint Plan.
1.12 BML HOLDING PERIOD has the meaning ascribed to such term in Section
7.5(c)(iii) of this Joint Plan.
1.13 BML INITIAL RECONCILIATION DATE has the meaning ascribed to such term
in Section 7.5(c)(iii) of this Joint Plan.
1.14 BML STOCK POWER has the meaning ascribed to such term in Section
7.5(c)(iii) of this Joint Plan.
1.15 BML LICENSES means the insurance licenses owned by BML which are in
effect on the Effective Date.
1.16 BOARD OF DIRECTORS means the board of directors of the applicable
Debtor as it exists immediately prior to the Effective Date.
1.17 BUSINESS DAY means any day, other than a Saturday, Sunday, or legal
holiday (as that term is defined in Bankruptcy Rule 9006(a)).
1.18 CAPITAL AND SURPLUS RETENTION ASSETS has the meaning ascribed to such
term in Section 7.5(c)(i) of this Joint Plan.
1.19 CARE means Care Financial Corporation, a Delaware corporation, f/k/a
Health Interests Corporation.
1.20 CARLISLE means Edward J. Carlisle.
1.21 CFSB INTEREST means those certain rights of ICH to participate in
certain economic benefits derived from the ownership of Bluebonnet Savings Bank
FSB by CFSB Corporation which were assigned to ICH by CNC in that certain letter
agreement dated March 29, 1993 and as such economic benefits have been described
and memorialized by the following agreements: the written agreement entered into
by CNC, James M. Fail, and CFSB on January 25, 1993; the Amended and Restated
Agreement dated as of January 31, 1995, by and between CNC, James M. Fail; and
CFSB Corporation, and the Amended and Restated Distribution Account Agreement
dated as of January 31, 1995, by and between CNC, James M. Fail, CFSB
Corporation, and Bank of Louisville and Trust Company.
1.22 CHAPTER 11 CASE means the above entitled and numbered jointly
administered cases Filed by the Debtors pursuant to the provisions of Chapter 11
of the Bankruptcy Code or any single case of a Debtor.
1.23 CHARTER AMENDMENTS means the amendments to the Certificate of
Incorporation and By-laws of ICH to be effected under this Joint Plan.
1.24 CLAIM means (i) right of payment, whether or not such right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured; or (ii) a right to
an equitable remedy for breach of performance if such breach gives rise to a
right of payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
1.25 CLAIMANT means a holder of a Claim.
1.26 CLASS means all of the holders of Claims against or Interests with
respect to the Debtors which have been designated as a class in Article III
hereof.
1.27 CNC means Consolidated National Corporation.
1.28 COMMON STOCK means the 48,644,112 outstanding shares of common stock,
$1.00 par value per share, of ICH.
1.29 CONFIRMATION means the entry by the Bankruptcy Court of the
Confirmation Order.
1.30 CONFIRMATION DATE means the date on which the Confirmation Order has
been entered on the docket maintained by the Clerk of the Bankruptcy Court.
1.31 CONFIRMATION HEARING means the hearing or hearings to be held before
the Bankruptcy Court in which the Joint Plan Proponents shall seek Confirmation
of this Joint Plan.
1.32 CONFIRMATION ORDER means the Order confirming this Joint Plan.
1.33 CONTESTED when used with respect to a Claim or Interest, means a Claim
against or Interest in the Debtors that is (i) listed in the Debtors' Schedules
as disputed, contingent, or unliquidated and as to which a proof of claim has
been timely
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-3
<PAGE>
Filed; (ii) listed in the Debtors' Schedules as undisputed, liquidated, and not
contingent and as to which a proof of Claim or Interest has been Filed with the
Bankruptcy Court, to the extent the proof of Claim or Interest amount exceeds
the amount provided for in the Debtors' Schedules; or (iii) the subject of an
objection which has been or may be timely Filed and which claim has not been
disallowed by Final Order. To the extent an objection relates to the allowance
of only a part of a Claim or Interest, such a Claim or Interest shall be a
Contested Claim or Contested Interest only to the extent of the objection.
1.34 CREDITORS COMMITTEE means the Official Committee of Unsecured
Creditors of I.C.H. Corporation.
1.35 DEBTORS means ICH, Care, and SWL Holding as debtors and as debtors in
possession of their respective Estates, or any single Debtor.
1.36 DISALLOWED CLAIM OR DISALLOWED INTEREST means a Claim against, or
Interest in, the Debtor, or any portion thereof, (i) that has been disallowed by
Final Order, (ii) proof of which has been untimely Filed and as to which no
order of allowance has been entered by the Court, or (iii) listed as disputed,
contingent, or unliquidated and as to which no proof of claim or proof of
interest has been timely Filed.
1.37 DISCLOSURE STATEMENT means the Disclosure Statement for this Joint
Plan of Reorganization under Chapter 11, together with any supplements,
amendments, or modifications thereto.
1.38 DISTRIBUTION AGENT means Bank of Louisville and Trust Company or such
other Entity as may be designated by the Joint Plan Proponents prior to the
Disclosure Statement hearing and approved by the Bankruptcy Court, which shall
be responsible for making payments or distributions to Record Holders of the
Notes, the Preferred Stock, and the Common Stock pursuant to this Joint Plan.
1.39 DISTRIBUTION DATE means a date set forth in this Joint Plan or the
Trust Agreement upon which distributions to Allowed Claims or Allowed Interests
shall be made.
1.40 DISTRIBUTION RECORD DATE means the close of business in New York, New
York on the Effective Date which shall be the date for determining the Record
Holders of Securities who are entitled to receive distributions pursuant to
Article IV of this Joint Plan.
1.41 EFFECTIVE DATE means the eleventh day following the Confirmation Date
or, if the Confirmation Order is stayed pending appeal, the Effective Date shall
be the eleventh day after such stay is dissolved by a Final Order.
1.42 ENTITY includes any individual, partnership, corporation, estate,
trust, governmental unit, and the United States Trustee.
1.43 EQUITY COMMITTEE means the Official Committee of Equity Security
Holders of I.C.H. Corporation.
1.44 ESTATES mean the respective bankruptcy estates created by Section 541
of the Bankruptcy Code upon the commencement of the Chapter 11 Case.
1.45 FEE CLAIM means a Claim under Sections 330 or 503(b)(2)-(5) of the
Bankruptcy Code.
1.46 FILED means filed with the Bankruptcy Court.
1.47 FINAL ORDER means (i) an order of the Bankruptcy Court as to which the
time to appeal, petition for certiorari, or move for reargument or rehearing has
expired and as to which no appeal, petition for certiorari, or other proceedings
for reargument or rehearing, shall then be pending or, (ii) in the event that an
appeal, writ of certiorari, reargument or rehearing thereof has been sought,
such order of the Bankruptcy Court shall have been affirmed by the highest court
to which such order may be appealed, or certiorari has been denied, and the time
to take any further appeal, petition for certiorari or move for reargument or
rehearing shall have expired; PROVIDED, HOWEVER, that no order shall fail to be
a Final Order solely because of the possibility that a motion pursuant to Rule
60 of the Federal Rules of Civil Procedure may be filed with respect to the
order.
1.48 ICH means I.C.H. Corporation, a Delaware corporation, whose principal
address is 500 North Akard Street, Dallas, Texas 75201.
1.49 IMPAIRED means the treatment of an Allowed Claim or Allowed Interest
under this Joint Plan UNLESS, with respect to such Claim or Interest, either (i)
this Joint Plan leaves unaltered the legal, equitable, and contractual rights to
which such Claim or Interest entitles the holder of such Claim or Interest, or
(ii) notwithstanding any contractual provision
FIRST AMENDED JOINT PLAN OF REORGANIZATION
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<PAGE>
or applicable law that entitles the holder of such Claim or Interest to demand
or receive accelerated payment of such Claim or Interest after occurrence of a
default, the Debtors (A) cure any default that occurred before or after the
commencement of the Chapter 11 Case other than default of the kind specified in
Section 365(b)(2) of the Bankruptcy Code; (B) reinstate the maturity of such
Claim or Interest as such maturity existed before such default; (C) compensate
the holder of such Claim or Interest for any damages incurred as a result of any
reasonable reliance by such holder on such contractual provision or such
applicable law; and (D) do not otherwise alter the legal, equitable or
contractual rights to which such Claim or Interest entitles the holder of such
Claim or Interest.
1.50 INDENTURE means any one or more of the trust indentures pursuant to
which the Notes were issued.
1.51 INDENTURE TRUSTEE means Bank of Louisville and Trust Company, and any
successor thereto.
1.52 INTEREST means the equity interests in ICH represented by duly
authorized, validly issued, and outstanding shares of the Preferred Stock and
Common Stock of ICH.
1.53 INITIAL DISTRIBUTION DATE means the first Distribution Date upon which
a distribution to a holder of an Allowed Claim or Allowed Interest shall be
made, which by reference to the respective distribution shall mean (i) for any
Claim or Interest that is an Allowed Claim or Allowed Interest on the Effective
Date, the first Business Day that is ten (10) days after the Effective Date or
as soon thereafter as practicable, but in no event later than twenty (20) days
after the Effective Date, and (ii) for any Clam or Interest that is a Contested
Claim or Contested interest on the Effective Date, the date as soon as
practicable, but in no event more than thirty (30) days, after the date on which
such Claim or Interest becomes an Allowed Claim or Allowed Interest, PROVIDED,
HOWEVER, that the Initial Distribution date with respect to an Allowed Claim or
an Allowed Interest arising from a Security shall occur no earlier than such
date that is as soon as practicable after tender of such Security in compliance
with Article IX of this Joint Plan.
1.54 JOINT PLAN means this Joint Plan of Reorganization under Chapter 11 of
the Bankruptcy Code, as it may be amended or modified from time to time as
permitted herein or in accordance with Section 1127 of the Bankruptcy Code.
1.55 LEGAL RATE means (a) with respect to a Claim arising from a written
document or instrument which expressly sets forth an interest rate, the rate of
interest set forth therein, or (b) with respect to any other Claim, the interest
rate accruing upon judgments as set forth in 28 U.S.C. Section 1961.
1.56 LETTERS OF TRANSMITTAL means such letters of transmittal as may be
distributed by the Trust or the Distribution Agent after the Effective Date to
Record Holders of Securities as of the Distribution Record Date for the purpose
of enabling such Entities to transmit Securities held of record by them as of
the Distribution Record Date to the Distribution Agent as contemplated by
Section 9.1(d) of this Joint Plan, which letters of transmittal shall be in form
and substance acceptable to Reorganized ICH in the case of letters of
transmittal from Record Holders of Interests or the Trust in the case of
transmittal letters from Record Holders of Notes.
1.57 MODERN/WESTERN AGREEMENT means that certain Stock Purchase Agreement
dated as of April 2, 1996, between BML, as seller, and Reassure America Life
Insurance Company, as purchaser, which was consummated on June 28, 1996.
1.58 NOTES means the 11 1/4% Senior Subordinated Notes due 1996 and the 11
1/4% Senior Subordinated Notes due 2003 issued by ICH.
1.59 ORDER means an order of the Bankruptcy Court.
1.60 OZARK means Ozark National Life Insurance Company.
1.61 PENNCORP means PennCorp Financial Group, Inc.
1.62 PENNCORP ESCROW means that certain escrow established under and
pursuant to the PennCorp Escrow Agreement. The funds deposited under the terms
and provisions of the PennCorp Escrow Agreement shall not be considered
Available Cash until released to the Trust in accordance with the terms and
provisions of the PennCorp Escrow Agreement or other agreements entered into by
the Debtors with respect thereto or as authorized by Final Order of the
Bankruptcy Court.
1.63 PENNCORP ESCROW AGREEMENT means the escrow agreement entered into
pursuant to Section 8.2(a) of the Purchase Agreement dated December 1, 1995,
among ICH, SWL Holding, Care, Facilities Management Installation, Inc.,
Southwestern Financial Corporation, Southwestern Financial Services Corporation,
and PennCorp.
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1.64 PERRY PARK means all real property of the Estates of ICH and Care
situated in and around the Glenwood Hall Resort and Country Club in Owen County,
Kentucky, and all improvements, fixtures, and personal property of the Estates
of ICH and Care situated in or on such real property, or related to such real
property, wherever located, together with all appurtenances thereto.
1.65 PETITION DATE means October 10, 1995.
1.66 PHILADELPHIA AMERICAN AGREEMENT means that certain Stock Purchase
Agreement dated as of April 2, 1996, between BML, as seller, and New Era
Enterprises, Inc., as purchaser, which was consummated on June 28, 1996.
1.67 PLAN DOCUMENTS means this Joint Plan, the Disclosure Statement, the
Trust Agreement and all exhibits and attachments to any of the foregoing.
1.68 POST-PETITION INTEREST means interest at the Legal Rate from the
Petition Date through the date of calculation.
1.69 PREFERRED STOCK means the 8,000,000 outstanding shares of $1.75
Convertible Exchangeable Preferred Stock, Series 1986-A, $25.00 stated value,
issued by ICH.
1.70 PRIORITY CLAIM means all Claims entitled to priority under section
507(a)(2)-(a)(7) and (a)(9) of the Bankruptcy Code.
1.71 PRIORITY TAX CLAIM means all Claims entitled to priority under section
507(a)(8) of the Bankruptcy Code.
1.72 PRO RATA means, with reference to any distribution on account of an
Allowed Claim or Allowed Interest, the proportion that an Allowed Claim or
Allowed Interest in a particular Class bears, respectively, to the aggregate
amount of all Claims or Interests in such Class, including Contested Claims or
Contested Interests which are not Disallowed Claims or Disallowed Interests as
of the date of such calculation, but excluding such Claims or Interests that are
subordinated pursuant to Bankruptcy Code Section 510, except that the Pro Rata
share of Allowed Securities-Related Claims based on Common Stock, if any, shall
be calculated as set forth in Section 11.5 of this Joint Plan.
1.73 RECORD HOLDER means, as of any specified date, the holder of a Note,
Preferred Stock, or Common Stock, as applicable, who is registered as holding
such Securities in the transfer or other such records of the appropriate
Transfer Agent or Indenture Trustee, as applicable.
1.74 RELEASED ENTITIES means the Trust, the Trustee, the Creditors
Committee, the Equity Committee, the Shaw Group and their respective present and
former officers, directors, members, employees, agents, attorneys, and such
other persons as the Equity Committee may designate prior to the conclusion of
the Confirmation Hearing.
1.75 RELEASED OFFICERS means W. Hubert Mathis, Steven R. Cartwright, Robert
J. Bruce, H. Don Rutherford, John T. Hull, Robert C. Greving, and Daniel B.
Gail, and such other persons as the Equity Committee may designate prior to the
conclusion of the Confirmation Hearing.
1.76 REORGANIZED ICH means ICH as of the completion of the transactions
contemplated in this Joint Plan to occur on the Effective Date.
1.77 REORGANIZED ICH COMMON STOCK means the shares of new common stock to
be issued by Reorganized ICH as provided in Article IX of this Joint Plan.
1.78 RESERVED DISTRIBUTION ASSETS has the meaning ascribed to such term in
Section 9.5 of this Joint Plan.
1.79 RETAINED ASSETS shall mean (i) the capital stock of BML (after the
Trust has assumed BML's non-reinsured liabilities, including indemnification
obligations to Reassure America Life Insurance Co. and to New Era Enterprises,
Inc. in exchange for, subject to Section 7.5(c), all of BML's capital and
surplus and other tangible property), together with all BML Licenses and all
books and records of BML, (ii) Perry Park, together with all books and records
of Perry Park, (iii) $2.5 million cash, (iv) the Retained Causes of Action, (v)
the Tenneco Equity Settlement Proceeds of $500,000, (vi) any tax attributes
remaining after the determination of the Debtors' tax liability through the
Effective Date, (vii) the common stock of SWL Holding and Care, and (viii) all
books and records of ICH.
1.80 RETAINED CAUSES OF ACTION means the causes of action as defined in
Section 10.2 of this Joint Plan.
1.81 RICE means C. Fred Rice.
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1.82 SAYYAH means Victor L. Sayyah.
1.83 SCHEDULES means those schedules and statements of financial affairs
Filed by the applicable Debtor under Federal Rule of Bankruptcy Procedure 1007,
as same may be amended from time to time.
1.84 SECURED means an Allowed Claim that is secured by a lien on property
in which an Estate has an interest, or that is subject to setoff under Section
553 of the Bankruptcy Code, to the extent of the value of Claimant's interest in
such Estate's interest in such property, or to the extent of the amount subject
to setoff, as the case may be.
1.85 SECURITIES means the Common Stock, the Preferred Stock and the Notes.
1.86 SECURITIES-RELATED CLAIMS means the Claims, if any, arising from
rescission of a purchase or sale of Securities of ICH or of any of its
affiliates, for damages arising from the purchase or sale of Securities, or for
reimbursement or contribution allowed under Section 502 of the Bankruptcy Code
on account of such a Claim, including but not limited to the Claims of the
plaintiffs in the suit styled IN RE SOUTHWESTERN LIFE CORPORATION SECURITIES
LITIGATION, Adversary Proceeding No. 395-3589, pending in the Bankruptcy Court.
1.87 SHAW means Robert T. Shaw.
1.88 SHAW GROUP means Shaw, Rice, and CNC.
1.89 STOCK CERTIFICATES means the certificates representing and evidencing
ownership of the Common Stock and the Preferred Stock.
1.90 SUBSTANTIAL CONSUMMATION means the accomplishment of the transactions
required under Sections 7.1 through 7.8 of this Joint Plan.
1.91 SWL HOLDING means SWL Holding Corporation, a Delaware corporation,
f/k/a Life Interests Corporation.
1.92 TAX SETTLEMENT means that certain settlement set forth in the Joint
Motion for Approval of Agreement for Compromise and Settlement of Tax Claims and
Certain Tax Related Liabilities of the Debtors' Filed on August 23, 1996 by the
Debtors, PennCorp and certain of its affiliates and the IRS, and joined in by
the Shaw Group, as approved by the Bankruptcy Court by order entered September
13, 1996.
1.93 TENNECO means Tenneco, Inc., a Delaware corporation.
1.94 TENNECO EQUITY SETTLEMENT PROCEEDS means the first $250,000 of
proceeds from the Tenneco Settlement in excess of $17,500,000, and fifty percent
(50%) of the proceeds from the Tenneco Settlement in excess of $17,750,000;
PROVIDED, HOWEVER, that in no event shall the aggregate amount of Tenneco Equity
Settlement Proceeds exceed the sum of $500,000.
1.95 TENNECO SETTLEMENT means that certain Settlement Agreement by and
between ICH and Tenneco, which shall be the subject of the Tenneco Settlement
Motion.
1.96 TENNECO SETTLEMENT MOTION means any Motion for Approval of Compromise
and Settlement with Tenneco Filed in the Chapter 11 Case by ICH.
1.97 TRANSFER AGENT means, with respect to the Common Stock, Bank of
Louisville and Trust Company and, with respect to the Preferred Stock, KeyCorp
Shareholders Services Inc.
1.98 TRUST means the Lone Star Asset Liquidating Trust, to be created on
the Effective Date pursuant to the Trust Agreement.
1.99 TRUST AGREEMENT means the agreement governing the Trust and any
exhibits, supplements or amendments thereto, the form of which shall be
acceptable to the Creditors' Committee, in its sole discretion, and Filed no
later than ten (10) Business Days prior to the Confirmation Hearing and which
shall become an exhibit to this Joint Plan.
1.100 TRUST ASSETS means all property of the Estate of the Debtors except
the Retained Assets.
1.101 TRUST INTEREST means a beneficial ownership interest in the Trust,
which represents the right to receive distributions from the Trust in accordance
with section 4.1(b) of this Joint Plan.
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1.102 TRUSTEE means Susan A. Brown and any other person(s) designated by
the Creditors' Committee prior to the Confirmation Hearing to serve as trustees
of the Trust pursuant to the Trust Agreement, and appointed in the Confirmation
Order to serve as Trustee(s) of the Trust, or any successor selected pursuant to
the terms of the Trust Agreement.
1.103 UNSECURED CLAIM means a Claim that is not an Administrative Claim, a
Priority Claim, a Priority Tax Claim, or a Secured Claim.
ARTICLE II
TREATMENT OF NON-CLASSIFIED CLAIMS
This Joint Plan does not classify Claims against the Debtors having
priority as specified in Section 507 of the Bankruptcy Code, which Claims shall
be treated as follows:
2.1 GENERAL ADMINISTRATIVE CLAIMS
(A) IN GENERAL. Each holder of an Administrative Claim except as otherwise
set forth in this Article II (and specifically excluding Administrative Tax
Claims as set forth in Section 2.2 below) shall receive from the Trust either
(i) with respect to Administrative Claims which are Allowed Claims on the
Effective Date, the amount of such holder's Allowed Claim in one cash payment on
the Initial Distribution Date, (ii) with respect to Administrative Claims which
become Allowed Claims after the Effective Date, the amount of such holder's
Allowed Claim in one cash payment on the applicable Distribution Date; or (iii)
such other treatment agreed upon in writing by the Debtors and such holder;
PROVIDED, HOWEVER, that any such Administrative Claim representing a liability
incurred in the ordinary course of business by any of the Debtors shall be paid
by the Trust in accordance with the terms and conditions of the particular
transaction giving rise to such liability and any agreements relating thereto.
In connection herewith, the estimated amounts of such Administrative Claims
shall on the Effective Date be reserved by the Trust with respect to payment of
such Allowed Administrative Claims and shall not be treated as Available Cash.
(B) FEE CLAIMS. Each professional person whose retention with respect to
the Debtors' cases has been approved by the Bankruptcy Court and who holds, or
asserts, an Administrative Claim that is a Fee Claim shall be required to file
with the Bankruptcy Court a final fee application within sixty days after the
Effective Date and to serve notice thereof on all parties entitled to such
notice pursuant to the Order Establishing Interim Procedures and Guidelines for
Compensation of Professional Persons. The failure to file timely the fee
application as required under this Section 2.1(b) of this Joint Plan shall
result in the Fee Claim being forever barred and discharged. A Fee Claim, with
respect to which a Fee Application has been properly Filed pursuant to this
Section 2.1(b) of this Joint Plan, shall become an Administrative Claim only to
the extent allowed by Final Order. Not later than five days prior to the
Effective Date, each such professional person shall file an estimate of such
final Fee Claim on all parties entitled to such notice pursuant to the Order
Establishing Interim Procedures and Guidelines for Compensation of Professional
Persons. The estimated amounts of such Fee Claims shall on the Effective Date be
reserved by the Trust for payment of such Fee Claims and shall not be treated as
Available Cash.
(C) EMPLOYMENT AGREEMENTS. All amounts due to Susan A. Brown and Rodney D.
Moore pursuant to their respective Employment Agreements entered into with ICH
as of January 1, 1996, shall be paid in cash in full by the Trust on the Initial
Distribution Date to the extent then due. Any additional amounts that become
payable under such Employment Agreements shall be paid in cash in full by the
Trust within thirty days after such amounts are determined.
(D) OTHER ADMINISTRATIVE CLAIMS. Any other person or Entity who claims to
hold any other Administrative Claim shall be required to file with the Court an
application within sixty days after the Effective Date and to serve notice
thereof on all parties entitled to such notice. The failure to file timely the
application as required under this Section 2.1(d) of this Joint Plan shall
result in the Claim being forever barred and discharged. An Administrative Claim
with respect to which an application has been properly Filed pursuant to this
Section 2.1(d) of this Joint Plan, shall become an Allowed Administrative Claim
to the extent such claim is allowed by Final Order.
(E) REGARDING CERTAIN INDEMNIFICATIONS The provisions of the Order
Regarding Indemnification of Officers and Directors of the Debtors entered on
February 14, 1996 are hereby ratified and confirmed as obligations of the Trust,
subject to any and all defenses thereto of the Debtors, the Estates or the
Trust, including that such claims are subordinated pursuant to the provisions of
the Bankruptcy Code PROVIDED, HOWEVER, that such obligations shall not be
obligations of Reorganized ICH. The balance of the $500,000 fund provided for in
such order (the "Indemnification Fund") shall be utilized as provided in such
order. Upon resolution of claims against the Indemnification Fund, any remaining
funds in the Indemnification Fund shall become Available Cash.
2.2 ADMINISTRATIVE AND PRIORITY TAX CLAIMS
FIRST AMENDED JOINT PLAN OF REORGANIZATION
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(A) TAX SETTLEMENT The Tax Settlement resolves and satisfies all
Administrative Claims and Priority Claims for federal income taxes for which the
Debtors are responsible for tax years 1990 through 1995.
(B) ADMINISTRATIVE TAX CLAIMS Each holder of an Allowed Administrative
Claim for (a) taxes shown on the Federal income tax returns in which the Debtors
are includible for the period from and after January 1, 1996, and ending on the
Effective Date, and (b) State income tax returns in which the Debtors are
includible for the period during which the Debtors' Chapter 11 cases are being
administered and any other taxes of the Debtors payable pursuant to Section
507(a)(1) of the Bankruptcy Code (collectively, the "Allowed Administrative Tax
Claims"), if any, shall be paid in cash in full from the Trust on the latest of
(i) the Initial Distribution Date, or (ii) the date such payment is due under
applicable law. Payment of Allowed Administrative Tax Claims shall be the
responsibility of the Trust, and the estimated amounts of such tax liabilities
as of the Effective Date shall be reserved and shall not be treated as Available
Cash. The amount of Allowed Administrative Tax Claims shall be determined after
giving effect to the terms of the Tax Settlement by a deemed closing of the
books of the Debtors as of the close of the Effective Date, and shall be
determined where appropriate on a consolidated or combined basis consistent with
the manner in which the Debtors have previously filed tax returns. If the
Effective Date occurs in a taxable year subsequent to the taxable year including
January 1, 1996, the amount of Allowed Administrative Tax Claims shall be
determined by carrying forward all available net operating losses, capital
losses, alternative minimum tax net operating losses, and other tax attributes
of the Debtors and members of their consolidated or combined groups, where
applicable, for full use in the period of such subsequent taxable year deemed
for these purposes to end on the Effective Date.
(C) PRIORITY TAX CLAIMS Each Allowed Claim for State taxes entitled to
priority in accordance with Section 507(a)(8) of the Bankruptcy Code, shall be
paid in cash in full by the Trust on the later of (i) the Initial Distribution
Date, or (ii) the date such payment is due under applicable law.
2.3 OTHER PRIORITY CLAIMS Each Priority Claim, if any, shall be paid in
cash in full by the Trust on the Initial Distribution Date, or such later date
as provided in any agreement or employment policy governing such Claims.
2.4 PRESERVATION OF RETIREE BENEFITS On the Effective Date, the Trust shall
provide for the continuation of the payment of any applicable retiree benefits,
as that term is defined in Section 1114 of the Bankruptcy Code, at the level
established by the Debtors prior to Confirmation pursuant to the terms of the
applicable retiree benefit documents in accordance with Section 1114 of the
Bankruptcy Code for the duration of the period the Debtors have obligated
themselves to provide such benefits.
2.5 U.S. TRUSTEE FEES All fees payable under 28 U.S.C. Section 1930 shall
be paid in cash in full by the Trust on the Effective Date and thereafter by the
Trust in accordance with such statute.
ARTICLE III
DESIGNATION OF CLASSES OF CLAIMS AND INTERESTS
Pursuant to Section 1123 of the Bankruptcy Code, the Debtors designate the
following Classes of Claims and Interests.
3.1 CLASSIFICATION OF CLAIMS AGAINST AND INTERESTS IN ICH All Claims
against and Interests in ICH, except Administrative and Priority Claims, are
classified as follows:
(A) SECURED CLAIMS
(I) ICH CLASS 1--SECURED CLAIM OF OZARK ICH designates as a Class the Claim
of Ozark against ICH secured by its lien on unplatted property of ICH situated
in Perry Park.
(II) ICH CLASS 2--SECURED CLAIM OF SAYYAH ICH designates as a Class the
Claim of Sayyah against ICH to the extent such Claim is subject, pursuant to
Sections 506(a) and 553 of the Bankruptcy Code, to offset against the debt owed
to ICH by Sayyah. The remaining balance of such Claim, if any, to the extent
such Claim is an Allowed Claim, is and shall be treated as an ICH Class 5 Claim.
(III) ICH CLASS 3--TENNECO ICH designates as a Class the Claims of Tenneco
against ICH, including its Claim represented by the 9% unsecured note due 1996
issued by ICH which is subject, pursuant to Sections 506(a) and 553 of the
Bankruptcy Code, to offset against the debt owed to ICH by Tenneco.
(IV) ICH CLASS 4--OTHER SECURED CLAIMS ICH designates as a Class all other
Secured Claims against ICH, if any.
(B) UNSECURED CLAIMS
FIRST AMENDED JOINT PLAN OF REORGANIZATION
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<PAGE>
(I) ICH CLASS 5--GENERAL UNSECURED CLAIMS ICH designates as a Class the
Unsecured Claims including, but not limited to, any Claims of the Record and
Beneficial Holders of Notes as of the Distribution Record Date and the
Securities-Related Claims, if any, to the extent related to the Notes.
(C) INTERESTS
(I) ICH CLASS 6--PREFERRED STOCK ICH designates a Class consisting of the
Interests of the Record and Beneficial Holders of Preferred Stock as of the
Distribution Record Date and the Securities-Related Claims against ICH, if any,
to the extent related to the Preferred Stock.
(II) ICH CLASS 7--COMMON STOCK ICH designates a Class consisting of the
Interests of the Record and Beneficial Holders of Common Stock as of the
Distribution Record Date and the Securities-Related Claims against ICH, if any,
to the extent related to the Common Stock.
3.2 CLASSIFICATION OF CLAIMS AGAINST AND INTERESTS IN SWL HOLDING All
Claims against and Interests in SWL Holding, except Administrative and Priority
Claims, are classified as follows:
(A) SWL HOLDING CLASS 1--SECURED CLAIMS SWL Holding designates as a Class
all Secured Claims against SWL Holding, if any.
(B) SWL HOLDING CLASS 2--GENERAL UNSECURED CLAIMS SWL Holding designates as
a Class all Unsecured Claims against SWL Holding, if any.
(C) SWL HOLDING CLASS 3--COMMON STOCK SWL Holding designates a Class
consisting of all Interests in SWL Holding arising from outstanding common stock
of SWL Holding as of the Effective Date.
3.3 CLASSIFICATION OF CLAIMS AGAINST AND INTERESTS IN CARE All Claims
against and Interests in Care, except Administrative and Priority Claims, are
classified as follows:
(A) CARE CLASS 1--SECURED CLAIMS Care designates as a Class all Secured
Claims against Care, if any.
(B) CARE CLASS 2--GENERAL UNSECURED CLAIMS Care designates as a Class all
Unsecured Claims against Care, if any.
(C) CARE CLASS 3--COMMON STOCK Care designates a Class consisting of all
Interests in Care arising from outstanding common stock of Care as of the
Effective Date.
ARTICLE IV
PROVISIONS FOR SATISFACTION OF CLAIMS AND INTERESTS
The Claims and Interests as classified in Article III hereof shall be
satisfied in the manner set forth in this Article IV. The treatment of, and the
consideration to be received by, Entities holding Allowed Claims against and/or
Allowed Interests in the Debtors pursuant to this Joint Plan shall be in full
settlement, release, and discharge of their respective Allowed Claims against
and Allowed Interests in the Debtors.
4.1 TREATMENT OF CLASSIFIED CLAIMS AGAINST AND INTERESTS IN ICH All
classified Claims against and Interests in ICH, except Administrative and
Priority Claims, shall be treated as follows:
(A) SECURED CLAIMS
(I) ICH CLASS 1--SECURED CLAIM OF OZARK The Allowed Amount of the Secured
Claim of Ozark shall be paid in cash in full by the Trust. The Allowed Amount of
such Claim is the sum of (a) the outstanding balance of the promissory note from
ICH to Ozark, which is $323,863.19, (b) accrued but unpaid prepetition interest
of $9,804.62, (c) postpetition interest from the Petition Date until such Claim
is paid in full, calculated at the contract rate set forth in such promissory
note, and (d) reasonable fees and expenses, if any, incurred by Ozark as
provided in Section 506(b) of the Bankruptcy Code. Ozark shall retain its lien
on the collateral securing such Claim until such Claim has been paid in full
hereunder, at which time Ozark shall deliver a release of its lien in recordable
form in accordance with the terms of its mortgage.
(II) ICH CLASS 2--SECURED CLAIM OF SAYYAH The Allowed Secured Claim of
Sayyah shall be satisfied by an offset of the Allowed Amount of Sayyah's Claim
against the amount of Sayyah's obligation to ICH.
(III) ICH CLASS 3--TENNECO The Tenneco Claims are the subject of the
Tenneco Settlement anticipated by the Debtors to be presented to the Bankruptcy
Court in the Tenneco Settlement Motion prior to the Confirmation Hearing. If the
Tenneco Settlement Motion has been granted by Order of the Bankruptcy Court on
or before the Confirmation Date, then this Class shall be moot and the Tenneco
Settlement shall be in exchange for and in full satisfaction of all Claims of
Tenneco. If the Tenneco Settlement has not been approved prior to Confirmation,
Confirmation of the Plan shall constitute
FIRST AMENDED JOINT PLAN OF REORGANIZATION
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the Bankruptcy Court's approval of the Tenneco Settlement, and the Confirmation
Order shall contain provisions to such effect. If the Tenneco Settlement has
been disapproved by the Bankruptcy Court prior to Confirmation, the Allowed
Secured Claim of Tenneco shall be satisfied by an offset of the Allowed Amount
of Tenneco's Claim against the amount of Tenneco's obligation to ICH, and the
Confirmation Order shall contain provisions to such effect.
(IV) ICH CLASS 4--OTHER SECURED CLAIMS Each ICH Class 4 Claim shall be
satisfied by payment in full in cash from the Trust in the Allowed Amount of
such Secured Claim or by delivery to the holder of an Allowed ICH Class 4 Claim
of the property securing such Claim, at the election of the Trustee, on the
later of (i) the Distribution Date or (ii) the date such payment is due under
applicable law.
(B) UNSECURED CLAIMS
(I) ICH CLASS 5--GENERAL UNSECURED CLAIMS In exchange for and in full
settlement of all ICH Class 5 Claims, the holders of Allowed ICH Class 5 Claims
shall receive all beneficial interest in and the proceeds of all Trust Assets,
which, following payment of or provision for all other Claims as provided in
Article II and Section 4.1(a) of this Joint Plan, shall be distributed to the
ICH Class 5 Claimants according to the following procedures:
(a) on the Initial Distribution Date, a Pro Rata distribution of Available
Cash determined as of the Effective Date;
(b) subsequent to the Initial Distribution Date, Pro Rata distributions of
Available Cash as and when from time to time determined and declared by the
Trustee in accordance with the provisions of the Trust Agreement.
(C) ICH INTERESTS
(I) ICH CLASS 6--PREFERRED STOCK In exchange for and in full satisfaction
of all Interests related to Preferred Stock, Record Holders of Allowed ICH Class
6 Interests shall be entitled to receive, on the Effective Date, for each share
of Preferred Stock held, 0.2 shares of Reorganized ICH Common Stock, rounded to
the nearest whole number of shares; PROVIDED, HOWEVER, that: (a) no distribution
of Reorganized ICH Common Stock shall be made with respect to any shares of
Preferred Stock held by any Beneficial Holder who holds less than 14 shares of
Preferred Stock and the ICH Class 6 Interest of such Beneficial Holders shall be
reduced to zero (and Record Holders who are nominee holders for more than one
Beneficial Holder shall not aggregate holdings of such Beneficial Holders for
purposes of determining the distribution to which such Record Holder may be
entitled pursuant to this Section 4.1(c)(i)); (b) any Beneficial Holder of an
Allowed ICH Class 6 Interest that holds, in the aggregate, between 14 and 650
shares of Preferred Stock (or that agrees to voluntarily reduce its Class 6
Interest to 650 shares of Preferred Stock), or any Record Holder specifically
authorized by that Beneficial Holder, may elect at the time it tenders its
Securities pursuant to a Letter of Transmittal to receive a single cash payment
of $.36 per share of Preferred Stock in lieu of receiving shares of Reorganized
ICH Common Stock; and (c) any Beneficial Holder of a Allowed ICH Class 6
Interest, or any Record Holder specifically authorized by that Beneficial
Holder, may agree in writing with the Equity Committee prior to the Effective
Date, or with Reorganized ICH on or after the Effective Date, to accept any
lesser amounts of cash or Reorganized ICH Common Stock in full satisfaction of
its ICH Class 6 Interest.
Holders of Allowed Securities-Related Claims related to Preferred Stock, if
any, shall receive no distributions except as provided in Section 11.4 of this
Joint Plan.
(II) ICH CLASS 7--COMMON STOCK In exchange for and in full satisfaction of
all Interests related to Common Stock, Record Holders of Allowed ICH Class 7
Interests shall be entitled to receive, on the Effective Date, for each share of
Common Stock held, 0.0269 shares of Reorganized ICH Common Stock, rounded to the
nearest whole number of shares; PROVIDED, HOWEVER, that: (a) no distribution of
Reorganized ICH Common Stock shall be made with respect to any shares of Common
Stock held by any Beneficial Holder who holds less than 101 shares of Common
Stock and the ICH Class 7 Interest of such Beneficial Holders shall be reduced
to zero (and Record Holders who are nominee holders for more than one Beneficial
Holder shall not aggregate holdings of such Beneficial Holders for purposes of
determining the distribution to which such Record Holder may be entitled
pursuant to this Section 4.1(c)(ii)); (b) any Beneficial Holder of an Allowed
ICH Class 7 Interest that holds, in the aggregate, between 101 and 5,000 shares
of Common Stock (or that agrees to voluntarily reduce its ICH Class 7 Interest
to 5,000 shares of Common Stock), or any Record Holder specifically authorized
by that Beneficial Holder, may elect at the time it tenders its Securities
pursuant to a Letter of Transmittal to receive a single cash payment of $.05 per
share of Common Stock in lieu of receiving shares of Reorganized ICH Common
Stock; and (c) any Beneficial Holder of an Allowed ICH Class 7 Interest, or any
Record Holder specifically authorized by that Beneficial Holder, may agree in
writing with the Equity Committee prior to the Effective Date, or with
Reorganized ICH on or after the Effective Date, to accept any lesser amounts of
cash or Reorganized ICH Common Stock in full satisfaction of its Class 7
Interest.
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-11
<PAGE>
Holders of Allowed Securities-Related Claims related to Common Stock, if
any, shall receive shares of Reorganized ICH Common Stock calculated in
accordance with Section 11.5 of this Joint Plan.
4.2 TREATMENT OF CLASSIFIED CLAIMS AGAINST AND INTERESTS IN SWL HOLDING All
classified Claims against and Interests in SWL Holding, except Administrative
and Priority Claims, shall be treated as follows:
(A) SWL HOLDING CLASS 1--SECURED CLAIMS Each SWL Holding Class 1 Claim
shall be satisfied by payment in full in cash by the Trust in the Allowed Amount
of such Secured Claim or by delivery to the holder of an Allowed SWL Holding
Class 1 Claim of the property securing such Claim, at the election of the
Trustee on the later of (i) the Initial Distribution Date or (ii) the date such
payment is due under applicable law.
(B) SWL HOLDING CLASS 2--GENERAL UNSECURED CLAIMS In exchange for and in
full settlement of all SWL Holding Class 2 Claims, the holders of SWL Holding
Class 2 Claims shall be paid in cash by the Trust from assets originating in the
Estate of SWL Holding the Allowed Amount of such Claim on the later of (i) the
Initial Distribution Date or (ii) the date such payment is due under applicable
law. If the Allowed Amount of such Claims cannot be paid in full from such
assets, then the Trust shall pay all such Claims Pro Rata among such Allowed SWL
Holding Class 2 Claims.
(C) SWL HOLDING CLASS 3--COMMON STOCK On the Effective Date, Reorganized
ICH shall retain the common stock of SWL Holding after the transfer of all SWL
Holding's assets to the Trust.
4.3 TREATMENT OF CLASSIFIED CLAIMS AGAINST AND INTERESTS IN CARE All
classified Claims against and Interests in Care, except Administrative and
Priority Claims, shall be treated as follows:
(A) CARE CLASS 1--SECURED CLAIMS Each Care Class 1 Claim shall be satisfied
by payment in full in cash by the Trust in the Allowed Amount of such Secured
Claim or by delivery to the holder of an Allowed Care Class 1 Claim of the
property securing such Claim, at the election of the Trustee on the later of (i)
the Initial Distribution Date or (ii) the date such payment is due under
applicable law.
(B) CARE CLASS 2--GENERAL UNSECURED CLAIMS In exchange for and in full
settlement of all Care Class 2 Claims, the holders of Care Class 2 Claims shall
be paid in cash by the Trust from assets originating in the Estate of Care the
Allowed Amount of such Claim on the later of (i) the Initial Distribution Date
or (ii) the date such payment is due under applicable law. If the Allowed Amount
of such Claims cannot be paid in full from such assets, then the Trust shall pay
all such Claims Pro Rata among such Allowed Care Class 2 Claims.
(C) CARE CLASS 3--COMMON STOCK On the Effective Date, Reorganized ICH shall
retain the common stock of Care, after the transfer of Care's non-Retained
Assets to the Trust.
ARTICLE V
DESIGNATION OF THE CLASSES OF CLAIMS
IMPAIRED UNDER THIS JOINT PLAN
5.1 For purposes of Joint Plan solicitation, all ICH Classes are deemed to
be Impaired and are, therefore, entitled to cast ballots on this Joint Plan;
PROVIDED, HOWEVER, that if the Bankruptcy Court has entered a Final Order
approving the Tenneco Settlement Motion prior to the balloting deadline, then
Tenneco shall not be entitled to cast a ballot on this Joint Plan. All SWL
Holding Classes of Claims and Care Classes of Claims are NOT Impaired and are,
therefore, NOT entitled to cast ballots on this Joint Plan.
ARTICLE VI
SETTLEMENTS
6.1 TENNECO SETTLEMENT Pursuant to the Tenneco Settlement, upon the earlier
of the granting by the Bankruptcy Court of the Tenneco Settlement Motion by
Final Order or the Effective Date of this Joint Plan, ICH and Tenneco shall
mutually release all Claims against each other as more fully set forth in the
Tenneco Settlement, and Tenneco shall pay to ICH or the Trust, as applicable,
the sum of $18.5 million and deliver to ICH the 9 1/2% unsecured note due 1996
of ICH marked "cancelled," and Proof of Claim No. 226 Filed by Tenneco shall be
deemed disallowed with prejudice to refiling.
6.2 SHAW GROUP SETTLEMENT
(A) CASH CONTRIBUTION On the Effective Date, the Shaw Group shall pay
$500,000 in cash to Reorganized ICH.
(B) WITHDRAWAL OF PROOFS OF CLAIMS On the Effective Date, the Shaw Group
shall withdraw the Claims that the Shaw Group, and the members thereof, Filed.
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-12
<PAGE>
(C) TRANSFERABILITY OF CFSB INTEREST Notwithstanding any provisions related
to the CFSB Interest to the contrary, the CFSB Interest shall not be subject to
any transferability or ownership restrictions; PROVIDED, HOWEVER, the following
conditions shall apply:
(i) The CFSB interest may not be transferred, sold, or assigned by the
Trust or any subsequent purchaser except in its entirety. In other words,
the CFSB Interest may not be subdivided and sold in parcels to multiple
entities and this restriction shall apply to subsequent purchasers.
Notwithstanding the foregoing, a transferee of the CFSB Interest may itself
be composed of, or owned by, any number of entities.
(ii) Pursuant to this Joint Plan, the CFSB Interest shall be
transferred to the Trust. Thereafter, the Trust shall conduct an initial
sale of the CFSB interest. In connection with such sale, CNC and Fail shall
be entitled to receive bidding materials and to participate in the bidding
process. The terms of the bidding process shall be determined in the sole
discretion of the Trust, after consultation with such advisors as it deems
appropriate.
(iii) Attendant to the sale of the CFSB Interest, the Shaw Group shall
prepare an index of prior written contracts and amendments related to the
CFSB Interest which, together with copies of the documents listed on the
index and such additional materials which the Trust may include
(collectively the "CFSB Documents"), shall be made available for review by
prospective purchasers. Prior to the conclusion of any sale of the CFSB
Interest by the Trust, the Entity to whom the CFSB Interest is to be
transferred must acknowledge in writing that it has had access to and an
opportunity it deems adequate to review the CFSB Documents and an
opportunity it deems adequate to consult with counsel of its choice
concerning the CFSB Documents.
(D) PERFORMANCE OF THE TAX SETTLEMENT The members of the Shaw Group and
Carlisle shall perform their respective obligations under the Tax Settlement.
(E) RELEASE OF SHAW GROUP On the Effective Date, the Debtors shall execute
a release in favor of the Shaw Group pursuant to Section 10.3 of this Joint
Plan.
6.3 STIPULATION AND AGREEMENT WITH THE INDENTURE TRUSTEE
The Debtors and the Indenture Trustee agree and stipulate that the
Indenture Trustee shall hold an Allowed Claim on behalf of holders of the 1996
Notes in the Amount of $266,425,072 and on behalf of the holders of 2003 Notes
in the amount of $94,835,928.
ARTICLE VII
MEANS FOR EXECUTION OF JOINT PLAN
7.1 EFFECTIVE DATE ENTITIES On the Effective Date, the Debtors shall cause
the execution and delivery of the Trust Agreement in order to create the Trust
and shall file the Charter Amendments for Reorganized ICH.
7.2 PROPERTY OF ESTATES
(A) SWL HOLDING AND CARE On the Effective Date:
(i) SWL Holding and Care shall distribute to Reorganized ICH, all of
their respective assets that constitute Retained Assets, free and clear of
all liens, claims and encumbrances;
(ii) Either SWL Holding and Care, or if distributed to ICH, ICH, shall
distribute to the Trust all assets of, or originating in the estate of, SWL
Holding and Care other than Retained Assets, free and clear of all liens,
claims and encumbrances; and
(iii) Reorganized ICH shall retain the common stock of SWL Holding and
Care free and clear of all liens, claims, and encumbrances.
(B) RETENTION OF THE RETAINED ASSETS BY REORGANIZED ICH On the Effective
Date, the Retained Assets shall revest in Reorganized ICH, together with their
respective bases for federal income tax purposes, free and clear of all liens,
claims, and encumbrances.
(C) TRANSFER OF THE TRUST ASSETS BY ICH TO THE TRUST On the Effective Date,
the Trust Assets owned by ICH shall be conveyed to the Trust by ICH, free and
clear of all liens, claims, and encumbrances except as provided in this Joint
Plan.
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-13
<PAGE>
7.3 PROVISIONS RELATING TO THE TRUST
(A) CREATION OF THE TRUST On the Effective Date, the Debtors shall
establish the Trust. The specific terms, conditions, and rules governing the
Trust are contained in the Trust Agreement. The Trustee shall, in accordance
with such Trust Agreement, pay or provide for the payments required by this
Joint Plan to be made to the Claimants in ICH Classes 1, 2, 3, and 4, SWL
Holding Classes 1 and 2, and Care Classes 1 and 2; thereafter the Trustee shall
distribute Available Cash from time to time, in such amounts as the Trustee
shall determine, to the ICH Class 5 Claimants.
(B) TERM The Trust shall have a term of three (3) years from the Effective
Date. The Trustee may apply to the Bankruptcy Court to terminate the Trust prior
to the expiration of the three (3) year term in the event all activities of the
Trust are completed or if all of the Trust Assets have been liquidated and the
proceeds therefrom have been distributed in accordance with this Joint Plan. The
Trustee may apply to the Bankruptcy Court to extend the term of the Trust if the
liquidation of the Trust Assets and distribution of proceeds therefrom has not
been completed, or if other circumstances require such extension.
(C) LIQUIDATION OF THE TRUST ASSETS The Trustee shall collect and reduce to
cash the Trust Assets as expeditiously as is compatible with the best interests
of the beneficiaries of the Trust in accordance with the Trust Agreement.
(D) REPORTS The Trustee shall prepare and file with the Bankruptcy Court
such reports as the Trust Agreement provides.
(G) PROVISIONS REGARDING TRUST INTERESTS
(I) ALLOCATION OF TRUST INTERESTS; ISSUANCE OF TRUST CERTIFICATES Each
holder of an Allowed ICH Class 5 Claim shall have a percentage of Trust
Interests equal to (A) the Allowed Amount of such Claimant's ICH Class 5 Claim
divided by (B) the sum of the total of the Allowed Amounts of all Allowed Class
5 Claims as of the Effective Date and the total amount of all Contested Claims
as of the Effective Date; PROVIDED THAT such percentage shall automatically be
adjusted in accordance with the above formula upon and as of the date of the
disallowance of any such Contested Claims or the allowance of any such Contested
Claim in an amount other than the amount of such Contested Claim as of the
Effective Date. Trust Certificates (or any other security or instrument
evidencing any Trust Interest) may be distributed only in accordance with the
Trust Agreement.
(II) LEGENDED CERTIFICATES The Trust Certificates, if distributed, shall
contain (i) such legend or legends as may be required under applicable federal
and state securities laws, (ii) such legend or legends as may be determined by
the Trustee, and (iii) the following legend:
The exercise of voting rights with respect to the interests represented by
the Trust Certificates and the transfer of the Trust Certificates are
subject to restrictions set forth in the Trust Agreement.
(III) TRUST INTEREST REGISTER; OWNERSHIP OF INTERESTS The Trustee or the
Registered Agent thereof shall keep for such purpose at its principal office a
register (the "Trust Interest Register") in which the Trustee shall provide for
the registration of Trust Interests and registration of transfer of Trust
Interests. The Trustee may treat the person or entity in whose name any Trust
Interest is registered on such register as the owner thereof for the purposes of
receiving distributions from Trust Assets and for all other reasons.
(IV) TRANSFER OF TRUST INTERESTS Prior to the distribution, if any, of
Trust Certificates, Trust Interests may not be transferred and no purported
transfer of any Trust Interest shall be registered on the Trust Interest
Register. After any such distribution of Trust Certificates, any Trust Interest
may be transferred upon the Trust Interest Register, upon presentation of the
Trust Certificate evidencing such Trust Interest at the designated office of the
Trustee and evidence satisfactory to the Trustee that such transfer is in
accordance with all applicable federal and state securities laws.
Notwithstanding the above, no Trust Interest may be transferred unless such
transfer is made (i) pursuant to a registration statement effective under the
Securities Act of 1933, as amended ("Securities Act"), or pursuant to an
available exemption from the registration requirements of the Securities Act and
(ii) in accordance with all applicable state securities laws.
7.4 REORGANIZED ICH
(A) CHARTER AMENDMENTS The Restated Certificate of Incorporation and the
By-laws of Reorganized ICH shall be adopted substantially in the form filed with
the Bankruptcy Court not less than ten (10) Business Days prior to Confirmation
and may be amended as necessary to satisfy any provisions of this Joint Plan and
Section 1123(a)(6) of the Bankruptcy Code. All amendments to the Certificate of
Incorporation of Reorganized ICH contemplated by this
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-14
<PAGE>
Section 7.4(a) shall be filed with the Delaware Secretary of State on the
Effective Date or as soon thereafter as is reasonably practicable and shall
become effective on the date so filed.
(B) BOARD OF DIRECTORS Upon the Effective Date, the By-laws of Reorganized
ICH shall provide that Reorganized ICH shall have a board of directors
consisting of between four (4) and nine (9) members. The initial board of
directors (the "Initial Board") shall be selected by the Equity Committee, and
shall consist of James R. Arabia, Michael D. Dunn, Kenneth P. Giddens and Carl
D. Robinson. The Equity Committee may identify additional directors to serve on
the Initial Board at least ten (10) days prior to the Confirmation Hearing. From
and after the Effective Date, Directors shall be selected in accordance with the
By-laws of Reorganized ICH.
(C) OFFICERS On the Effective Date, James R. Arabia shall serve as
president and Chief Executive Officer of Reorganized ICH, pursuant to the terms
of a two-year employment agreement, at the pleasure of the board of directors.
Pursuant to the terms of his anticipated employment agreement, Mr. Arabia shall
receive a salary of $90,000 per year, a bonus in an amount to be determined by
the board, reimbursement of his reasonable out-of-pocket expenses, and certain
benefits including health insurance and other typical employee benefits. Mr.
Arabia shall also receive options, priced at fair market value, for the purchase
of up to 176,000 shares of Reorganized ICH Common Stock. To the extent then
known, the Equity Committee may identify further officers of Reorganized ICH not
less than ten (10) days prior to the Confirmation Hearing.
7.5 OTHER BUSINESS TRANSACTIONS TO OCCUR ON THE EFFECTIVE DATE
(A) PROVISIONS REGARDING THE MODERN/WESTERN AGREEMENT AND THE PHILADELPHIA
AMERICAN AGREEMENT On or before the Effective Date, the Debtors shall execute
such documents as may be necessary or appropriate to effectuate the assumptions
by ICH, and ultimately the Trust, of the obligations of BML under the
Modern/Western Agreement as contemplated by Section 12.15 thereof and under the
Philadelphia American Agreement as contemplated by Section 12.18 thereof;
provided, however, that following the Effective Date, such obligations shall be
obligations of the Trust and shall not be obligations of Reorganized ICH.
(B) PROVISION REGARDING PERRY PARK On the Effective Date, BML shall
transfer to Reorganized ICH all of its right, title and interest in and to Perry
Park, free and clear of all liens, claims and encumbrances. As a portion of
Perry Park is currently owned solely by BML, with the other portion being owned
by ICH, this conveyance shall have the effect of consolidating the ownership of
Perry Park entirely within Reorganized ICH.
(C) PROVISIONS REGARDING BML
(I) TRANSFER OF ASSETS OF BML. On the Effective Date, and following the
transfer described Section in 7.5(b) above, (A) Care and/or ICH shall take such
action as may be necessary or appropriate to cause BML to transfer to the Trust
all assets of BML other than (1) the BML Licenses, (2) assets representing
capital and surplus as may be required by the Illinois Department of Insurance
and other insurance regulatory authorities in those jurisdictions in which BML
holds a BML License to maintain such insurance licenses (the "Capital and
Surplus Retention Assets"), which Capital and Surplus Retention Assets shall
consist of particular BML assets determined by the Trustee, and (3) the books
and records of BML and (B) the Trust shall assume all non-reinsured liabilities
of BML as of the Effective Date. The transfer of BML's assets to the Trust may
take the form of a distribution of such assets to ICH, followed by a transfer
from ICH to the Trust; a purchase by the Trust from BML; or an acquisition by
the Trust in exchange for the assumption by the Trust of certain BML liabilities
that the Trust is required to assume under this Section 7.5.
(II) BML STOCK. Reorganized ICH shall retain the capital stock of BML on
the Effective Date.
(III) BML RECONCILIATION. On the second Business Day after the earlier of
(A) 90 days after the Effective Date or (B) the date Reorganized ICH notifies
the Trust in writing that Reorganized ICH desires to accelerate such 90-day
period (the "BML Initial Reconciliation Date"), Reorganized ICH shall either (1)
cause BML to transfer to the Trust (or to Reorganized ICH, which shall then
transfer to the Trust) all of the Capital and Surplus Retention Assets (adjusted
to reflect any gains or losses incurred thereon) and retain the capital stock of
BML with no further obligation by Reorganized ICH or the Trust under this
Section 7.5(c)(iii) OR (2) transfer to the Trust (or a third party designated by
the Trust) all of the outstanding capital stock of BML (together with the
Capital and Surplus Retention Assets) in return for a payment by the Trust to
Reorganized ICH of $5 million; PROVIDED, HOWEVER, that in the event Reorganized
ICH elects to transfer to the Trust the stock of BML and any regulatory approval
required to be obtained by the Trust (or any third party designated by the
Trust) with respect to the transfer of the BML stock shall not have been
obtained as of the BML Initial Reconciliation Date, then (X) the Trust shall pay
to Reorganized ICH the $5 million purchase price set forth above and (Y)
Reorganized ICH shall deliver to the Bankruptcy Court, or such escrow agent as
the Trust may reasonably direct, the certificates representing all of the
outstanding capital stock of BML (the "BML Certificates") together with a stock
power duly executed in blank
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-15
<PAGE>
(the "BML Stock Power"), and the Bankruptcy Court, or such escrow agent as the
Trust may reasonably direct, shall hold the BML Certificates and the BML Stock
Power until directed by the Trust to deliver the BML Certificates to the Trust
or to a third party designated by the Trust, at which time the Bankruptcy Court,
or such escrow agent as the Trust may reasonably direct, shall deliver the BML
Certificates and the BML Stock Power to the Trust or its designee. The date such
transactions described herein (other than the delivery of the BML Certificates
and the BML Stock Power out of the Bankruptcy Court or an escrow agent, if
applicable) are consummated herein shall be referred to as the "BML Final
Reconciliation Date," and the period from the Effective Date until the BML Final
Reconciliation Date herein shall be referred to as the "BML Holding Period."
(IV) ACTIONS PENDING RECONCILIATION. During the BML Holding Period, (A)
Reorganized ICH shall use all commercially reasonable efforts to preserve and
protect the value of the BML corporate shell (which holds the BML Licenses),
including cooperating with the Trust in connection with any regulatory inquiries
or approvals but excluding any obligation to contribute assets to BML, and the
Trust shall reimburse Reorganized ICH for all reasonable out-of-pocket expenses
incurred in performing its obligations under this clause (A); (B) the Trust
shall maintain in BML additional assets necessary to maintain minimum capital
and surplus plus any other amounts as may be required by the Illinois Department
of Insurance, and all such additional assets shall constitute Capital and
Surplus Retention Assets; (C) Reorganized ICH shall not conduct any operations
of BML or otherwise cause BML to distribute or dispose of any assets; (D) no
change shall be made in the officers or directors of BML; and (E) the Trust
shall provide written instructions to direct the management and investment of
the Capital and Surplus Retention Assets and Reorganized ICH shall have no
liability for any investment loss incurred with respect to the Capital and
Surplus Retention Assets except to the extent arising as a result of Reorganized
ICH violating the provisions of this clause (E).
(D) SALE PRIOR TO EFFECTIVE DATE. BML may be sold prior to the Effective
Date only with the consent of the Equity Committee. If the capital stock of BML
is sold prior to the Effective Date, (A) the actions referred to in Section
7.5(a) and (b) shall occur prior to any such sale; (B) the proceeds of such sale
in excess of the fair market value of the capital and surplus of BML as assigned
for purposes of determining the sales price shall constitute Retained Assets and
shall become the property of Reorganized ICH and all other proceeds shall be
delivered to the Trust; and (C) the foregoing provisions of Section 7.5(c) shall
not apply and the actions referred to in Section 7.5(a) and (b) shall occur
prior to any such sale.
(E) CONFIRMATION ORDER PROVISIONS. The Confirmation Order shall contain
such additional or clarifying provisions as may be reasonably requested by the
Creditors Committee to implement the transaction considered by this Section 7.5.
(F) ADDITIONAL PROVISIONS. The retention of the capital stock of BML by
Reorganized ICH, the delivery of the BML Certificates to the Bankruptcy Court
and the treatment of BML otherwise provided for in this Section 7.5 that may
occur prior to the transfer of the BML Certificates to the Trust or to any
third-party designated by the Trust shall not constitute a change in control of
BML for the purpose of any applicable law governing or otherwise restricting the
ownership or change of control of BML as a property and casualty insurance
company. The foregoing shall not apply to any transfer of the BML Certificates
to the Trust or to any third party designated by the Trust.
7.6 PROVISIONS RELATING TO INDENTURES
(A) TERMINATION OF INDENTURES On the Effective Date, the Indentures shall,
except as provided in this Joint Plan, be deemed cancelled, terminated, and of
no further force or effect and this Joint Plan shall operate to cancel all
obligations of the Debtors, the Trust or Reorganized ICH under the Indentures;
PROVIDED, HOWEVER, that the Indentures shall continue in effect for the sole
purpose of allowing the Indenture Trustee to facilitate and assist in making
distributions to be made to Record Holders of Notes as of the Effective Date
under this Joint Plan and to maintain records as required under the Indentures.
Any actions taken by the Indenture Trustee that are not for the purposes
authorized herein shall be null and void, and the Debtors, the Trust, and
Reorganized ICH shall not have any obligation to the Indenture Trustee for any
fees, costs or expenses incurred in connection with such unauthorized actions.
Upon the completion of distributions required to be made under this Joint Plan
to Record Holders of Notes as of the Effective Date, the Debtors may terminate
the Indentures and the Indenture Trustee's authority to act thereunder by giving
ten (10) days written notice of termination to the Indenture Trustee identifying
the Indenture to be so terminated. Termination of the Indenture shall be without
prejudice to the rights of the Indenture Trustee effected by such termination
(i) to seek or enforce the allowance and payment of its reasonable and necessary
costs and fees under the Indenture, or (ii) to intervene or appear in this
Chapter 11 Case as a party in interest and to be heard concerning any
post-confirmation matter affecting the interests of the Record Holders of Notes
represented by such Indenture Trustee. Notwithstanding the foregoing, such
cancellation of the Indentures shall not impair the rights of holders of the
Notes to receive distributions on account of such Notes pursuant to this Joint
Plan, nor shall it impair the rights of the Indenture Trustee to enforce its
liens, if any, under the Indentures.
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-16
<PAGE>
(B) PAYMENT OF INDENTURE TRUSTEE'S FEES AND EXPENSES The Indenture Trustee
may apply to the Bankruptcy Court, pursuant to Section 503(b) of the Bankruptcy
Code, for reimbursement from the Debtors' estates of the Indenture Trustee's
reasonable fees and expenses incurred in performing its duties under the
Indenture (including those called for by the Joint Plan), including those of its
attorneys, PROVIDED, HOWEVER, that all fees and expenses, regardless of the
source of payment and regardless of whether paid pursuant to the Indenture
Trustee's charging lien or the Indenture, are subject to a determination of
reasonableness by the Bankruptcy Court pursuant to Section 1129(a)(4) of the
Bankruptcy Code.
7.7 TERMINATION OF THE COMMITTEES On the Initial Distribution Date, the
Creditors Committee and the Equity Committee shall cease to exist and have no
further status as parties in interest except for purposes of prosecuting any
applications for Fee Claims and of participating in any appeal of the
Confirmation Order, in which events such committees shall cease to exist
immediately after the resolution of such matters. Following the termination of
the Committees, any professional that was employed by the Creditors Committee
may be employed by the Trust and any professional that was employed by the
Equity Committee may be employed by Reorganized ICH.
7.8 CLOSING OF EFFECTIVE DATE TRANSACTIONS The proponents of this Joint
Plan shall File, on or before ten (10) Business Days prior to the Confirmation
Hearing, the agenda and order in which the transactions contemplated in this
Joint Plan shall be closed.
ARTICLE VIII
TREATMENT OF EXECUTORY
CONTRACTS AND UNEXPIRED LEASES
8.1 EXECUTORY CONTRACTS AND UNEXPIRED LEASES Unless the Debtors expressly
assume, as provided by Section 365(a) of the Bankruptcy Code, an executory
contract or an unexpired lease on or before the Confirmation Date, each
executory contract and unexpired lease shall be deemed rejected.
8.2 CLAIMS FOR REJECTED EXECUTORY CONTRACTS AND UNEXPIRED LEASES Any Claims
made on account of executory contracts or unexpired leases that are deemed
rejected pursuant to Section 8.1 must be Filed within 30 days after the
Confirmation Date or such Claim shall be forever barred and discharged. To the
extent all or a part of the damages asserted in such a rejection claim are
Allowed by Final Order, such Claim shall be treated as an ICH Class 5 Claim.
ARTICLE IX
PROVISIONS REGARDING TENDER OF SECURITIES, DISTRIBUTIONS,
DISTRIBUTION AGENT, AND OBJECTIONS TO CLAIMS
9.1 PROVISIONS RELATING TO SECURITIES
(A) INITIAL DISTRIBUTION OF AVAILABLE CASH As provided in Section 4.1(b) of
this Joint Plan, on the Initial Distribution Date, the Trustee shall make her
initial distribution of Available Cash to holders of Allowed ICH Class 5 Claims.
(B) DISTRIBUTION RECORD DATE The Effective Date shall be the date for
determining the Entities holding Securities who are entitled to receive
distributions pursuant to Article IV of this Joint Plan. As of the close of
business on the Effective Date, the transfer ledgers in respect of the
Securities shall be closed, and no transfer of Securities occurring after the
Effective Date shall be recognized. Reorganized ICH, the Trustee, the Transfer
Agent, the Distribution Agent, the Indenture Trustee and their respective agents
shall be entitled instead to recognize and deal for all purposes herein with
only those holders of record stated on the respective transfer ledgers for the
Securities as of the close of business on the Effective Date.
(C) CANCELLATION OF SECURITIES On the Effective Date, all outstanding
Securities (and the rights of the Claimants and Interest Holders therein)
together with any options, rights or warrants to purchase Securities from the
Debtors, shall be terminated, cancelled, and extinguished. Notwithstanding the
foregoing, cancellation of the Securities shall not impair the rights of Record
Holders of the Securities as of the Effective Date to receive distributions on
account of such Securities pursuant to this Joint Plan.
(D) TENDER OF SECURITIES
(i) Letters of Transmittal shall be required to be completed and duly
executed in accordance with the instructions accompanying such Letters of
Transmittal.
(ii) As a condition to the receipt by any holder of Securities of any
distribution under the Joint Plan to be made on account of such Securities,
such holder of the Securities must deliver to the Distribution Agent the
Securities giving rise to such holder's Allowed Claim or Interest, together
with the Letter of Transmittal, properly completed and
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<PAGE>
executed by such holder of the Securities, and any documents required by
the Letter of Transmittal, on or before the second anniversary of the
Effective Date. The method of delivery of the Securities to the
Distribution Agent is at the election and risk of the holder of the
Securities, but if such delivery is by mail, it is recommended that the
holder use properly insured, registered mail, return receipt requested. The
Letter of Transmittal and the Securities shall be sent to the Distribution
Agent and shall not be sent to the Trustee or to Reorganized ICH. Upon
receipt of Securities, the Distribution Agent shall mark the Securities as
"cancelled" or "paid." In the event of any lost or destroyed Securities,
the holder thereof must deliver an affidavit of loss or destruction to the
Distribution Agent (and, if required, the Transfer Agent or Indenture
Trustee, as applicable), as well as an agreement to indemnify Reorganized
ICH, the Distribution Agent, and the Trust (and, if required, the Transfer
Agent or Indenture Trustee, as applicable), in form and substance
reasonably acceptable to Reorganized ICH, the Distribution Agent, the Trust
and, if required, the Transfer Agent or Indenture Trustee, as applicable,
including, if requested, an appropriate bond, in order to receive any
distribution under the Joint Plan on account of such Securities.
(iii) All questions as to the validity, form, or eligibility of the
tendered Securities shall be resolved by the Bankruptcy Court. The
Distribution Agent shall be under no duty to give notification of defects
in such tenders, and shall not incur liabilities for failure to give
notification of such defects. Any Securities received by the Distribution
Agent that are not properly tendered and as to which the irregularities
have not been cured or waived, shall be returned by the Distribution Agent
to the appropriate tendering holder as soon as practicable.
(E) UNSURRENDERED OUTSTANDING SECURITIES Two (2) years after the Effective
Date, any holder of an Allowed Claim or Allowed Interest arising on account of
outstanding Securities who has not surrendered such holder's Securities as set
forth in Section 9.1(d) of this Joint Plan shall forfeit, to the extent
permitted by law, such holder's right to receive any distribution under this
Joint Plan with respect to such Allowed Claim or Allowed Interest, provided that
this Section 9.1(e) shall not apply to Securities-Related Claims.
(F) TREASURY SECURITIES All Securities held in treasury by ICH immediately
before the Effective Date shall be cancelled and extinguished as of the
Effective Date without any action on the part of ICH and no payment or
distribution shall be made with respect thereto.
9.2 DELIVERY OF DISTRIBUTIONS Distributions and deliveries called for by
this Joint Plan, other than distributions with respect to non-Classified Claims,
shall be made (i) to the holders of Allowed Claims in ICH Classes 1, 2, 3, 4 and
5 (except as provided in clause (ii) below), ICH Classes 6 and 7 (to the extent,
if any, related to Securities-Related Claims within those Classes), SWL Holding
Classes 1 and 2, and Care Classes 1 and 2, at the addresses set forth on the
proofs of claim Filed by such holders (or at the last known addresses of such
holders if no proof of claim is Filed or if the Debtors have been notified of a
change of address), (ii) to Record Holders of Notes on account of their Class 5
Claims, at the addresses contained in the records of the Indenture Trustee as of
the Effective Date and (iii) to the Record Holders of Preferred Stock and Common
Stock, at the addresses contained in the records of the appropriate Transfer
Agent as of the Effective Date. No distribution shall be mailed to any holder of
an Allowed Claim or Allowed Interest if any mailing to such holder's last known
address has been returned as undeliverable, unless and until the Debtors or the
Distribution Agent are notified of such holder's then-current address, at which
time all returned distributions then due shall be made to such holder without
interest. All claims for undeliverable distributions shall be made on or before
the later of (a) two years after the Effective Date or (b) 120 calendar days
after an order of the Bankruptcy Court allowing such holder's Claim or Interest
becomes a Final Order, after which period the Claim or Interest of any holder
with respect to such property or with respect to any undeliverable distribution
shall be deemed abandoned, discharged, and forever barred as of the second
anniversary of the Effective Date. Notwithstanding the above, if any Trust
Interest is transferred after the Effective Date, distributions to be made with
respect to any such Trust Interest shall be made to the record holder of such
Trust Interest on the applicable Distribution Date.
9.3 DISTRIBUTION AGENT The Distribution Agent shall make distributions of
Reorganized ICH Common Stock and cash as required in this Joint Plan to be
distributed to holders of Allowed ICH Class 6 and 7 Interests except for
distributions, if any, made pursuant to Section 11.1(b) of this Joint Plan,
which distributions shall be made by the Trust or such agent as the Trust may
employ, as provided in Section 11.1(b). The Trustee or such agent as the Trust
may employ in its sole discretion shall make all other distributions of cash as
are required to be made under this Joint Plan; provided that distributions to be
made to Record Holders of the Notes as of the Effective Date may be made by the
Trust, such other agent as the Trust may employ in its sole discretion, the
Distribution Agent, or the Indenture Trustee.
9.4 NO DISTRIBUTIONS PENDING ALLOWANCE No payments or distributions shall
be made with respect to all or any portion of a Contested Claim or Contested
Interest unless and until such Claim or Interest becomes an Allowed Claim or
Allowed Interest as determined by Final Order.
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9.5 RESERVE FOR CERTAIN DISTRIBUTIONS On and after the Effective Date, the
Trust shall withhold from the property to be distributed under this Joint Plan,
and shall reserve, an amount sufficient to be distributed on account of
Contested Claims as of the Initial Distribution Date. As to any Contested Claim,
upon a request for estimation by the party in interest, the Bankruptcy Court
shall determine what amount is sufficient to withhold as the reserved
distribution amount. In the event that no party in interest elects to request
such an estimation from the Bankruptcy Court with respect to a Contested Claim,
the Debtors or, after the Effective Date, the Trust shall withhold as the
reserved distribution amount (the "Reserved Distribution Amount") the amount
which, in the discretion of the Trustee, such Claimant would have received under
this Joint Plan, if any, if the proof of claim Filed by or on behalf of Claimant
were Allowed. Reorganized ICH shall reserve sufficient authorized but unissued
shares of Reorganized ICH Common Stock to allow for distributions to holders of
Allowed Securities-Related Claims, if any, related to the Common Stock or
Preferred Stock.
Payments and distributions to each holder of a Contested Claim or Contested
Interest to the extent that it ultimately becomes an Allowed Claim or Allowed
Interest, shall be made in accordance with the provisions of this Joint Plan
governing the respective Class of Claims or Interests of which such Contested
Claim or Contested Interest belongs. As soon as practicable after the date that
the order or judgment of the Bankruptcy Court allowing such Claim or Interest
becomes a Final Order, any Reserved Distribution Amount that would have been
distributed to the holder of such Claim or Interest had such Claim or Interest
been an Allowed Claim or Allowed Interest on the Effective Date, to the extent
of the Allowed Amount of such Claim or Interest, shall be distributed to the
holder of such Claim or Interest.
9.6 DISTRIBUTIONS AFTER DISALLOWANCE In the event that any Reserved
Distribution Amount remains after all objections to Contested Claims of a
particular Class have been resolved, such remaining property attributable to
such Contested Claims of that particular Class shall be returned to the Trust
for distribution pursuant to this Joint Plan.
9.7 UNCLAIMED PROPERTY Any assets and property to be distributed by the
Trust under this Joint Plan which remain unclaimed or otherwise not deliverable
to the person entitled thereto on the later of (a) two years after the Effective
Date or (b) 120 calendar days after an Order allowing such person's Claim or
Interest becomes a Final Order, shall become vested in, and shall be transferred
and delivered to, the Trust for distribution pursuant to this Joint Plan. In
such event, such person's Claim or Interest shall no longer be deemed to be
Allowed and such person shall be deemed to have no further Claim or Interest in
respect of such distribution and shall not participate in any further
distributions under this Joint Plan.
9.8 TREATMENT OF CONTINGENT OR UNLIQUIDATED CLAIMS Until such time as a
contingent Claim becomes fixed and Allowed, such Claim shall be treated as a
Contested Claim for purposes related to voting, allowance, and distributions
under this Joint Plan. The Bankruptcy Court upon request by the Debtors or,
after the Effective Date, by the Trust or Reorganized ICH, shall in a summary
proceeding on each such contingent Claim or unliquidated Claim, by estimation
determine the allowability of each such contingent or unliquidated Claim.
9.9 FORM OF PAYMENTS Payment to be made by the Trust pursuant to this Joint
Plan shall be made by check drawn on a domestic bank or by wire transfer from a
domestic bank.
ARTICLE X
PROVISIONS FOR THE DISCHARGE,
SETTLEMENT, AND ADJUSTMENT OF CLAIMS
10.1 LEGAL BINDING EFFECT; DISCHARGE OF CLAIMS AND INTERESTS The provisions
of this Joint Plan shall (i) bind all Claimants and Interest holders, whether or
not they accept this Joint Plan, and (ii) discharge the Debtors, jointly and
severally, from all debts that arose before the Petition Date, and from any
liability, including, without limitation, any liability of a kind specified in
Sections 502(g), 502(h) or 502(i) of the Bankruptcy Code, that arose, or has
been asserted against, the Debtors, jointly or severally, at any time before the
entry of the Confirmation Order or that arises from any pre- Confirmation
conduct of the Debtors, jointly or severally, whether or not the Claim is known
or knowable by the Claimant or Interest holder. In addition, the distributions
provided for under this Joint Plan shall be in exchange for and in complete
satisfaction, discharge, and release of all Claims against and Interests in the
Debtors or any of its assets or properties, including any Claim or Interest
accruing after the Petition Date and prior to the Effective Date. Without
limiting the generality of the foregoing, Confirmation discharges all Unsecured
Claims, all Securities-Related Claims, all Claims, if any, relating to ICH's
1986 retirement of its Class B preferred stock, and all Claims relating to the
escheat of Securities or funds attributable to Securities of ICH. On and after
the Effective Date, all holders of Claims or Interests shall be precluded from
asserting any Claim or Interest against the Trust or Reorganized ICH or their
assets or properties based on any transaction or other activity of any kind that
occurred prior to the Confirmation Date except as expressly provided in this
Joint Plan.
10.2 RETENTION AND ENFORCEMENT OF THE DEBTORS' CAUSES OF ACTION
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<PAGE>
(A) RETENTION OF CAUSES OF ACTION
(i) All claims recoverable against third parties on account of an
indebtedness, and all other claims held by or in favor of the Debtors or
their Estates pursuant to any federal or state statute, common law, or any
theory of action whatsoever including without limitation claims for
preferences and fraudulent transfers, to the extent not specifically
compromised and released pursuant to this Joint Plan or an agreement
referred to and incorporated herein, are hereby preserved and retained for
enforcement by Reorganized ICH (the "Retained Causes of Action");
(ii) Subject to the provisions of section 10.2(c) hereof, and except
as provided in sections 10.2(a)(i) and (iii), Reorganized ICH is the
successor and designated representative of the Debtors and their Estates
appointed for the purpose of retention and enforcement of all claims owned
or held by the Debtors or their Estates against third parties;
(iii) Subject to the provisions of section 10.2(c) hereof, and except
as provided in sections 10.2(a)(i) and (ii), the Trust is the appointed
successor and designated representative of the Debtors and their Estates
appointed for the purpose of retention and enforcement of claims
specifically relating to or arising from Trust Assets, but specifically
excluding all claims related to any asset which has been fully and finally
converted into cash which has been transferred to the Trust as of the
Effective Date;
(iv) Reorganized ICH or the Trust, as applicable, shall be the only
party authorized to pursue actions to recover such claims, and shall have
the sole right to waive or assert any attorney-client or other privilege of
the Debtors; and no other party shall have the right or obligation to
pursue any such actions or to waive, raise, or assert any claim or
privilege related thereto.
(B) JUDGMENT REDUCTION AND HOLD HARMLESS To the extent a claim, cause of
action, right or remedy, whether legal or equitable, including, but not limited
to, any claim, cause of action, right or remedy of apportionment, reimbursement,
contribution, indemnification or offset, is asserted or commenced against the
Trust that results directly from Reorganized ICH's pursuit of a Retained Cause
of Action or any other right or remedy against an Entity, (a "Contribution
Claim"), the following conditions shall apply:
(i) with respect to any judgment, settlement, payment or compromise in
favor of Reorganized ICH (an "Underlying Judgment") against an Entity which
gives rise to a Contribution Claim by that Entity, Reorganized ICH shall
reduce the amount of its Underlying Judgment against that Entity by the
full amount of that Entity's Contribution Claim, and Reorganized ICH shall
indemnify and hold the Trust harmless from any and all Contribution Claims
arising from the Underlying Judgment; PROVIDED, HOWEVER, that Reorganized
ICH shall have the right to contest the claim of entitlement of any Entity
to a Contribution Claim in which case: a) Reorganized ICH shall have no
obligations to reduce the amount of the Underlying Judgment unless and
until the entitlement of that Entity to the Contribution Claim has been
determined, either judicially or otherwise with the consent of Reorganized
ICH; and b) Reorganized ICH's obligation to hold harmless and indemnify the
Trust against such Contribution Claim shall be unaffected;
(ii) with respect to any present or former officer, director,
employee, agent or representative of the Debtors or the Estate who is named
as a defendant by Reorganized ICH in its pursuit of any Retained Cause of
Action, and who is entitled to a right of payment from the Trust for an
ongoing defense prior to any final judgment in that action, Reorganized ICH
shall, at its option, either (a) assume the obligation to pay for such
ongoing costs of defense or (b) discontinue the action against that
defendant, in which case Reorganized ICH shall have no further obligation
with respect to defense costs for that defendant; PROVIDED, HOWEVER, that
Reorganized ICH shall have the right to contest the claimed entitlement of
any Entity to receive ongoing costs of defense from the Trust, and PROVIDED
FURTHER that Reorganized ICH shall have no obligation to fund any such
defense costs or to discontinue such an action unless and until the
Indemnification Fund, as set forth in Section 2.1(e) of this Joint Plan, if
available therefore, has first been applied to such obligations.
(C) RIGHT OF TRUST TO ASSERT OFFSET CLAIMS Notwithstanding any other
provision in this Joint Plan regarding the Retained Causes of Action, the Trust
shall be entitled to assert as an offset, objection, or defense with respect to
any Claim Filed or asserted against the Estate, or against the Trust as
successor to the Estate, any Retained Cause of Action conveyed to Reorganized
ICH under this Joint Plan, PROVIDED, HOWEVER, that the obligations of
Reorganized ICH as set out in section 10.2(b) above shall not apply to any such
Retained Cause of Action so asserted by the Trust. This provision shall be
deemed to be an assignment of such Retained Cause of Action to the Trust solely
for the limited purpose, and only to the extent necessary, to permit the Trust
to fully assert such offset, objection or defense. Any recovery obtained through
such assertion of a Retained Cause of Action in excess of the amount of the
Claim asserted against the Estate or the Trust, as the case may be, shall be the
property of Reorganized ICH.
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<PAGE>
10.3 RELEASES Except with respect to claims, if any, pursuant to Chapter 5
of the Bankruptcy Code, this Joint Plan resolves all disputes between and among
the Debtors and the Released Entities. With respect to all claims that the
Debtors ever had, now have, or may claim to have or hereafter have, or which the
Debtors could have asserted or could assert, jointly or severally, including
without limitation claims held in its corporate capacity and claims that third
parties may assert derivatively on behalf of the Debtors absent bankruptcy, but
excluding claims, if any, arising in or under Chapter 5 of the Bankruptcy Code,
Confirmation of this Joint Plan releases each Released Entity from all such
claims, counterclaims, demands, controversies, costs, contracts, debts, sums of
money, accounts, reckonings, bonds, bills, damages, obligations, liabilities,
objections, actions and causes of action of any nature, type or description,
whether in law or in equity, in contract, tort, or otherwise, known or unknown,
suspected or unsuspected, including claims for negligence, gross negligence, or
otherwise. On the Effective Date, the Debtors shall be authorized to execute a
general release in favor of the Released Entities consistent with this Section
10.3.
10.4 PROVISIONS REGARDING THE RELEASED OFFICERS On the Effective Date, the
Debtors shall execute a release of the claims described in Section 10.3 of this
Joint Plan against the Released Officers.
10.5 FURTHER RELEASES AND SETTLEMENTS After the Effective Date, the
compromise and settlement by Reorganized ICH of any Retained Cause of Action may
be effected without necessity of Bankruptcy Court proceedings under Bankruptcy
Rule 9019 or otherwise. To the extent the Trust is entitled to assert a Retained
Cause of Action pursuant to Section 10.2(c) of this Joint Plan, the Trust may
compromise and settle any such Retained Cause of Action with the consent of
Reorganized ICH.
10.6 PERMANENT INJUNCTION Confirmation of this Joint Plan shall result in
the issuance of a permanent injunction against the: (i) commencement or
continuation of any judicial, administrative, or other action or proceeding
against the Debtors, the Trust, or Reorganized ICH on account of Claims against
or Interests in the Debtors, or on account of claims released pursuant to
Sections 10.3 and 10.4 of the Joint Plan against the Released Entities and
Released Officers; (ii) enforcement, attachment, collection or recovery by any
manner or means of any judgment, award, decree, or order against the Debtors,
the Trust or Reorganized ICH; or (iii) creation, perfection or enforcement of
any encumbrance of any kind against the Debtors, the Trust or Reorganized ICH
arising from a Claim.
10.7 SURVIVAL OF THE DEBTORS' CORPORATE INDEMNITIES Any obligations of the
Debtors, pursuant to the Order Regarding Indemnification of Officers and
Directors of Debtors entered February 14, 1996 shall not be discharged or
impaired by Confirmation or Consummation of this Joint Plan; accordingly, such
indemnification obligations shall survive unaffected by the reorganization
contemplated by this Joint Plan and shall be performed and honored by the Trust
regardless of the Confirmation of this Joint Plan PROVIDED, HOWEVER, that such
obligations shall not be obligations of Reorganized ICH. All other obligations
of the Debtors with respect to indemnification of officers and directors, or
agents, representatives, successors or assigns thereof, shall be treated as
executory contracts rejected under Section 8.1 of this Joint Plan, and all
Claims arising from or related thereto shall be treated and classified as
provided by Section 8.2 of this Joint Plan, subject to any and all defenses
thereto and subordination of such Claims under applicable provisions of the
Bankruptcy Code.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 REQUEST FOR RELIEF UNDER SECTION 1129(B)
(a) In the event any Impaired Class of Interests shall fail to accept this
Joint Plan in accordance with Section 1129(a) of the Bankruptcy Code, the
Proponents request the Bankruptcy Court to confirm this Joint Plan in accordance
with the provisions of Section 1129(b) of the Bankruptcy Code so that and
provided that the treatment afforded to ICH Classes 6 and 7, collectively, is
not adversely affected. By accepting this Joint Plan, ICH Class 5 relinquishes,
to any extent necessary, its entitlement to receive distributions in order to
assure that ICH Classes 6 and 7, collectively, receive the treatment provided in
Article IV of this Joint Plan.
(b) In the event that ICH Class 6 does not vote to accept this Joint Plan,
and this Joint Plan is confirmed pursuant to the cram-down provisions of
Bankruptcy Code Section 1129(b), the portion of Reorganized ICH Common Stock
allocated to ICH Class 7 in this Joint Plan, together with cash sufficient to
fund payments to Holders of Allowed ICH Class 7 Interests who elect the cash
payment option, shall be distributed to the Trust on the Effective Date, and the
Trust shall, in that event, distribute as soon as practicable after the
Effective Date, through the Distribution Agent, such Reorganized ICH Common
Stock and cash to the Holders of Allowed ICH Class 7 Interests in accordance
with the terms of this Joint Plan, with any such distribution to Holders of
Allowed ICH Class 7 Interests being made in exchange for the release by Holders
of such Allowed Class 7 Interests of any and all claims, if any, against the
Trust PROVIDED, HOWEVER, the Trust shall have no
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<PAGE>
obligations to distribute cash or stock to such holders of Allowed Class 7
Interests other than that which is received from the Estate and/or Reorganized
ICH expressly for that purpose.
11.2 MODIFICATION
(a) This Joint Plan shall not be modified except upon the agreement of all
Proponents, which consent shall not be unreasonably withheld, except that the
consent and agreement of the Debtors and Creditors Committee shall not be
required for any reallocation of the distribution of Reorganized ICH Common
Stock as between ICH Classes 6 and 7.
(b) Subject to Subsection 11.2(a) of this Joint Plan, the Proponents may
jointly propose amendments to or modifications of this Joint Plan as permitted
by Section 1127 of the Bankruptcy Code at any time prior to the Confirmation
Date. After substantial consummation, the Trust or Reorganized ICH may remedy
any defects or omissions or reconcile any inconsistencies in this Joint Plan or
in the Confirmation Order in such manner as may be necessary to carry out the
purposes and intent of this Joint Plan so long as the interests of Claimants and
Interest holders are not materially and adversely affected.
11.3 HEADINGS are utilized in this Joint Plan for convenience and reference
only, and shall not constitute a part of this Joint Plan for any other purpose.
11.4 SUBORDINATION Notwithstanding the provisions of Article IV of this
Joint Plan; (a) Allowed Claims, if any, of a particular class that are
subordinated to other Allowed Claims of such class pursuant to Section 510 of
the Bankruptcy Code shall be paid only after payment in full of all such
non-subordinated Claims of such class; and (b) Allowed Class 6 Interests, if
any, that are subordinated to other Allowed Class 6 Interests, pursuant to
Section 510 of the Bankruptcy Code shall not be entitled to receive any
distributions until after the distribution to holders of Allowed
non-subordinated Class 6 Interests equals the full amount of their liquidation
preference of $25.00 per share of Preferred Stock.
11.5 SECURITIES-RELATED CLAIMS BASED ON COMMON STOCK For purposes of
calculating the distribution of Reorganized ICH Common Stock to holders of
Allowed Securities-Related Claims based on Common Stock, if any, pursuant to the
provisions of Article IV of this Joint Plan, holders of Allowed
Securities-Related Claims, if any, based on Common Stock shall be entitled to
receive their Pro Rata portion of shares of Reorganized ICH Common Stock in an
amount equal to: (i) the total amount of all Allowed Securities-Related Claims
within ICH Class 7, DIVIDED BY (ii) $254 million, MULTIPLIED BY (iii) 1,309,524,
MULTIPLIED BY (iv) a fraction, the numerator of which is the Allowed Amount of
such holder's Allowed Securities-Related Claim within ICH Class 7, and the
denominator of which is the total amount of all Allowed Securities-Related
Claims within ICH Class 7.
11.6 DUE AUTHORIZATION Each and every Claimant and Interest holder who
elects to participate in the distributions provided for herein warrants that
such Claimant or Interest holder is authorized to accept in consideration of
such Claim against or Interest in the Debtors the distributions provided for in
this Joint Plan and that there are not outstanding commitments, agreements, or
understandings, expressed or implied, that may or can in any way defeat or
modify the rights conveyed or obligations undertaken by such Claimant or
Interest holder under this Joint Plan.
11.7 DE MINIMIS DISTRIBUTIONS AND FRACTIONAL SHARES
(a) The Trust shall disregard, and shall not make distributions in respect
of, Allowed Claims whose Pro Rata share of a proposed distribution would be less
than $5.00. In such case, the Allowed Amount of such Claims for purposes of such
distribution shall be reduced to zero.
(b) Distributions of Reorganized ICH Common Stock shall be made only in
whole share amounts, and no fractional shares of Reorganized ICH Common Stock
shall be distributed pursuant to this Joint Plan. Fractional shares of
Reorganized ICH Common Stock to which any Beneficial or Record Holder of
Preferred Stock or Common Stock as of the Effective Date may be entitled
pursuant to the provisions of Section 4.1(c) or to which any holder of an
Allowed Securities-Related Claim related to Common Stock or Preferred Stock may
be entitled pursuant to this Joint Plan, shall be rounded to the nearest whole
share. Beneficial holders of fewer than 14 shares of Preferred Stock and
Beneficial holders of fewer than 101 shares of Common Stock shall not be
entitled to any distribution of Reorganized ICH Common Stock on account of their
respective Interests, and in each such case, the Allowed Amount of such
Interests for purposes of such distribution shall be reduced to zero.
11.8 AUTHORIZATION OF CORPORATE ACTION All matters and actions provided for
under this Joint Plan involving the corporate structure of the Debtors or
corporate action to be taken by or required of the Debtors or Reorganized ICH
shall be deemed to have occurred and be effective as provided herein, and shall
be deemed to be authorized and approved in all respects without any requirement
for further action by the stockholders or directors of the Debtors.
Specifically, all amendments to the certificate of incorporation and By-laws of
ICH pursuant to Section 7.4(a) of this Joint Plan and all
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other corporate action on behalf of ICH, any other Debtor or Reorganized ICH as
may be necessary to put into effect or carry out the terms and intent of this
Joint Plan and the orders and decrees of the Bankruptcy Court entered in the
Chapter 11 Case may be effected, exercised and taken without further action by
the directors or stockholders of ICH, any other Debtor or Reorganized ICH, as
applicable, with like effect as if effected, exercised and taken by unanimous
action of the directors and stockholders of ICH, any other Debtor or Reorganized
ICH, as applicable, as contemplated by Section 303 of the Delaware General
Corporation Law.
11.9 FURTHER ASSURANCES AND AUTHORIZATIONS The Trust or Reorganized ICH, if
and to the extent necessary, shall seek such orders, judgments, injunctions, and
rulings that may be required to carry out further the intentions and purposes,
and to give full effect to the provisions, of this Joint Plan. Reorganized ICH
shall indemnify the Trust against any Claim asserted against the Trust which is
the obligation of Reorganized ICH, and the Trust shall indemnify Reorganized ICH
against any Claim asserted against Reorganized ICH which is an obligation of the
Trust.
11.10 RIGHT TO RESOLVE CLAIMS The Trust and Reorganized ICH shall each have
the right to resolve in their sole and absolute discretion each of the parties'
respective claims against third parties.
11.11 RIGHTS REGARDING BOOKS AND RECORDS In the event Reorganized ICH
wishes to dispose of any of the Debtors' books and records that are Retained
Assets, it shall first give reasonable notice to the Trust, which may elect to
take such books and records at its own expense; and if the Trust does not so
elect within a reasonable period of time, Reorganized ICH shall be free to
dispose of any such documents. Subject to the foregoing, the Trust shall have
reasonable access to and use of the books and records of the Debtors for the
purpose of administering the Trust Assets and otherwise discharging its duties
under this Joint Plan.
ARTICLE XII
RETENTION OF JURISDICTION
12.1 The Bankruptcy Court shall retain exclusive jurisdiction over these
Chapter 11 Cases after Confirmation, notwithstanding Consummation or substantial
consummation, for the following purposes:
(a) to consider and effect any modification of this Joint Plan under
Section 1127 of the Bankruptcy Code;
(b) to hear and determine all controversies, suits and disputes that
arise in connection with the interpretation or enforcement of this Joint
Plan;
(c) to hear and determine all requests for compensation and/or
reimbursement of expenses for the period commencing on the Petition Date
through the Confirmation Date;
(d) to hear and determine all objections to Claims and Interests, and
to determine the appropriate classification of any Claim or Interest, and
other controversies, suits and disputes that may be pending at or initiated
after the Confirmation Date, except as provided in the Confirmation Order;
(e) to hear and determine all claims that the Debtors, as debtors in
possession QUA trustee, or Reorganized ICH as the successor and designated
representative of the Debtors and the Estates could assert under the
Bankruptcy Code;
(f) to consider and act on such other matters consistent with this
Joint Plan as may be provided in the Confirmation Order;
(g) to make such orders as are necessary and appropriate to carry out
and implement the provisions of this Joint Plan; including to effect the
further assurances provided in Section 11.9;
(h) to approve the reasonableness of any payments made or to be made,
within the meaning of Section 1129(a)(4) of the Bankruptcy Code;
(i) to exercise the jurisdiction granted pursuant to Section 505(a)
and (b) of the Bankruptcy Code to determine any and all federal, state,
Commonwealth, local and foreign tax liabilities of, and any and all refunds
of such taxes paid by the Debtors; and
(j) to hear and determine any issues or matters in connection with any
property not timely claimed as provided in this Joint Plan.
Nothing contained in this Article XII shall be construed so as to limit the
rights of Reorganized ICH or the Trust to commence or prosecute any claim in any
court of competent jurisdiction.
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-23
<PAGE>
Respectfully Submitted,
WINSTEAD SECHREST & MINICK P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Tel. (214) 745-5400
By:/s/JOSIAH M. DANIEL, III
---------------------------
Daniel C. Stewart SBT #19206500
Josiah M. Daniel, III SBT #05358500
ATTORNEYS FOR THE DEBTORS
GIBSON DUNN & CRUTCHER
1717 Main St., Suite 5400
Dallas, Texas 75201
Tel. (214) 698-3100
By:/s/I. RICHARD LEVY
---------------------
Michael A. Rosenthal SBT #17281490
I. Richard Levy SBT #12265020
ATTORNEYS FOR THE OFFICIAL COMMITTEE OF
UNSECURED CREDITORS OF I.C.H.
CORPORATION
PRYOR, CASHMAN, SHERMAN & FLYNN
410 Park Avenue
New York, New York 10022
Tel. (212) 421-4100
By:/s/JOHN A. BICKS
-------------------
Peter D. Wolfson
John A. Bicks
ATTORNEYS FOR THE OFFICIAL COMMITTEE
OF EQUITY SECURITY HOLDERS OF I.C.H.
CORPORATION
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-24
<PAGE>
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
This Lone Star Asset Liquidating Trust Agreement (the "Agreement"), dated
as of ____________, 1996, is established by I.C.H. Corporation (the "Debtor")
pursuant to the Debtors' First Amended Joint Amended Plan of Reorganization (the
"Joint Plan") in the Chapter 11 case styled IN RE I.C.H. CORPORATION ET AL, Case
No. 395-36351-RCM-11 (the "Case"), in the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division (the "Court"), and is accepted by
the Managing Trustee (as defined in Section 1.2 of the Agreement) for the
benefit of the Trust Beneficiaries (as defined in Section 1.2 of the Agreement).
WHEREAS, on October 10, 1995, the Debtor filed its voluntary petition
pursuant to Chapter 11 of the Bankruptcy Code with the Court; WHEREAS, the Court
confirmed the Joint Plan by entering the Order Confirming Joint Plan on December
__, 1996;
WHEREAS, the Joint Plan provides for the creation of a trust to be composed
of all assets of the Debtors and of their Estates (except the Retained Assets)
to be administered and liquidated for the benefit of the holders of Allowed
Claims in ICH Class 5 as provided in the Joint Plan and is further to provide
for distributions of certain property or cash to other classes under the Joint
Plan;
WHEREAS, the Trust is intended to be treated as a liquidating trust
pursuant to Treasury Regulations Section 301.7701-4(d), and as a grantor trust
subject to the provisions of Subchapter J, Subpart E of the Internal Revenue
Code of 1986, as amended (the "Tax Code"), owned by the Trust Beneficiaries as
grantors.
WHEREAS, the Joint Plan provides for the orderly disposition and
liquidation of the Trust Assets during a period not to exceed three (3) years
from the formation of this Trust (unless extended as provided in Section 2.7 of
the Agreement), and further provides that the Trustee shall (a) deliver
Available Cash (as defined in Section 1.2 of the Agreement) in compliance with
the terms of the Joint Plan;
WHEREAS, this Trust shall be managed by the Managing Trustee, and
supervised by the Supervisory Trustees appointed in the Joint Plan and approved
by the Court, all pursuant to the terms of the Joint Plan;
WHEREAS, the Joint Plan provides for and requires the appointment of the
Managing Trustee for the purposes outlined herein and the Trustees have been
appointed and approved and have agreed to serve in such capacity under the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby covenant and agree as follows:
I. DEFINITIONS
1.1 GENERAL. All capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned thereto in the Joint Plan, or, if not
defined in the Joint Plan and defined in the Bankruptcy Code shall have the
meanings assigned thereto in the Bankruptcy Code unless the context clearly
requires otherwise.
1.2 CERTAIN DEFINITIONS. For all purposes of the Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the terms
defined in this Section 1.2 shall have the meaning assigned to them in this
Section 1.2, and shall include the plural as well as the singular. "AGREEMENT"
shall mean this Lone Star Asset Liquidating Trust Agreement dated as of
___________, 1996.
"AVAILABLE CASH" has the meaning set forth in the Joint Plan.
"CASE" shall have the meaning given to such term in the introductory
paragraph of the Agreement.
"CONTESTED CLAIMS RESERVE" shall have the meaning given to such term in
Section 3.8.1 hereof.
"COURT" shall have the meaning given to such term in the introductory
paragraph of the Agreement.
"DEBTORS" shall have the meaning given to such term in the introductory
paragraph of the Agreement.
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-a-1
<PAGE>
"DISTRIBUTION DATE" means the Initial Distribution Date, and thereafter the
first business day after a day set forth in the Agreement upon which a
distribution of Trust Assets, Reserves or Available Cash is to be made, or
if no other date is set forth in the Agreement, the first business day of
the calendar quarter immediately following the date upon which an action is
to occur or be taken, commencing with the first full calendar quarter
following the Initial Distribution Date.
"INITIAL DISTRIBUTION DATE" has the meaning set forth in the Joint Plan.
"MANAGING TRUSTEE" means Susan A. Brown, or any successor thereto appointed
pursuant to the terms of the Agreement. "OPERATING RESERVE" means
------------------------------------.
"PERMITTED INVESTMENTS" means those investments in which the Trust may
place Available and other cash and reserves listed on the attached Exhibit
"E".
"JOINT PLAN" shall have the meaning given to such term in the introductory
paragraph of the Agreement. "SUPERVISORY TRUSTEES" means ________________,
________________ and ________________ and any successors thereto appointed
pursuant to the terms of the Agreement.
"TAX CODE" shall mean the Internal Revenue Code of 1986, as amended.
"TERMINATION DATE" shall have the meaning given to such term in Section 2.7
hereof.
"TRUST" shall have the meaning given to such term in Section 2.1 hereof.
"TRUST ASSETS" shall have the meaning given to such term in Section 2.1
hereof.
"TRUST BENEFICIARIES" shall have the meaning given to such term in Section
2.1 hereof. "TRUST BENEFICIARY" shall have the meaning given to such term
in Section __ of the Agreement.
"TRUSTEES" means the Managing Trustee and the Supervisory Trustees, and
their respective successors appointed pursuant to the terms of the
Agreement.
II. CREATION OF THE TRUST
2.1 PURPOSE OF TRUST. The Debtor and the Managing Trustee, in compliance
with the Joint Plan, hereby constitute and create this Lone Star Asset
Liquidating Trust (the "Trust") for the primary purpose of effecting an orderly
disposition, liquidation and distribution of the assets transferred to it (the
"Trust Assets") and distributing the Available Cash of the Trust Assets to the
holders of Allowed Claims in ICH Class 5 in accordance with the Joint Plan
(collectively, the "Trust Beneficiaries") and to make the other distributions
and payments called for in the Joint Plan to be made by the Trust, and with no
objective to continue or engage in the conduct of a trade or business. The
activities of this Trust shall all be reasonably necessary to and consistent
with no objective to continue or engage in the conduct of a trade or business
with the accomplishment of that purpose, but shall not include the conduct of a
trade or business.
2.2 APPOINTMENT AND ACCEPTANCE OF MANAGING TRUSTEE. In accordance with the
provisions of the Joint Plan, the undersigned, Susan A. Brown, is hereby named,
constituted, and appointed as Managing Trustee, to act and serve as Managing
Trustee of the Trust and to hold, manage, liquidate, and distribute the Trust
Assets and Available Cash subject to the conditions set forth herein and in the
Joint Plan. The Managing Trustee is willing, and does hereby accept the
appointment, to act and serve as Managing Trustee of the Trust and to hold and
administer the Trust Assets and Available Cash pursuant to the terms of this
Trust and the Joint Plan.
2.3 APPOINTMENT AND ACCEPTANCE OF SUPERVISORY TRUSTEES. In accordance with
the provisions of the Joint Plan, the undersigned, ________________,
________________ and ________________ are hereby named, constituted, and
appointed as Supervisory Trustees, to act and serve as Supervisory Trustees of
the Trust and to supervise the management, liquidation and distribution of the
Trust Assets and Available Cash subject to the conditions set forth herein and
in the Joint Plan. The Supervisory Trustees are willing, and do hereby accept
the appointment, to act and serve as a Supervisory Trustee of the Trust and to
supervise the administration of the Trust Assets pursuant to the terms of this
Trust and the Joint Plan.
2.4 NAME OF TRUST. The Trust established hereby shall bear the name "Lone
Star Asset Liquidating Trust." In connection with the exercise of their powers
as Trustees hereunder, a Trustee may use this name or such variation thereon as
such Trustee sees fit, or may use her or his own name, as Trustee.
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-a-2
<PAGE>
2.5 TRANSFER OF TRUST ASSETS TO TRUST. In accordance with the provisions of
the Joint Plan, all right, title, and interests of the Debtors and their Estates
in and to all of the funds, assets and properties of the Debtors and their
Estates of any kind and character except the Retained Assets, as the same exist
as of the date hereof, are hereby vested in the Trust and preserved for the
benefit of the Trust Beneficiaries. From and after the Effective Date, all of
such funds, assets and properties, together with the Available Cash, shall be
administered by the Managing Trustee, subject to the supervision of the
Supervisory Trustees, on behalf of the Trust Beneficiaries. Prior to the
creation of the Trust, the Debtors shall have executed and delivered or caused
to be executed and delivered to, or upon the order of, the Trustee, any and all
documents and other instruments as may be necessary or useful to convey and to
confirm title to the Trust Assets to the Trust including those listed or
described on EXHIBIT A hereto. After the Effective Date, the Managing Trustee,
acting on behalf of the Debtors, shall execute all other documents necessary or
useful to convey and to confirm title to the Trust Assets to the Trust or, to
the extent requiring the action of Reorganized ICH, shall obtain Reorganized
ICH's execution on such documents pursuant to Section 11.9 of the Joint Plan.
2.6 CAUSES OF ACTION. As provided in the Joint Plan in Sections 10.2(a) and
10.2(c), all claims and causes of action against third parties on account of an
indebtedness or liability to the Debtors or to their Estates, and all other
claims owed to and all other causes of action in favor of the Debtors and the
Estate, which are not Retained Assets and to the extent not specifically
compromised or released pursuant to the Joint Plan or an agreement referred to
and incorporated in the Joint Plan, are hereby vested in the Trust and preserved
for enforcement by the Trustee for the benefit of the Trust Beneficiaries. To
the extent permitted by law, all rights under Section 363 (h) of the Bankruptcy
Code are also preserved for the benefit of the Debtors' estate, and the Trustee
shall have the right to exercise same subject to Court approval.
2.7 TERMINATION OF THE TRUST. The Trust shall terminate upon the earlier to
occur (the "Termination Date") of: (A) the fulfillment of the Trust's purpose by
the liquidation of all of the Trust Assets and the distribution of the Available
Cash thereof or (B) three (3) years after the Effective Date. In order to
terminate the Trust prior to three (3) years after the Effective Date, the
Managing Trustee, after receiving the approval of the Supervisory Trustees,
shall deliver a notice to all Trust Beneficiaries setting forth the date on
which the Trust will terminate, and if no Trust Beneficiary files an objection
with the Bankruptcy Court within forty-five (45) days after the date of such
notice the Trust shall terminate on the date set forth in the notice.
Notwithstanding the foregoing, in the event the Managing Trustee, after
receiving the approval of the Supervisory Trustees, shall have been unable after
continuing reasonable efforts to sell or otherwise dispose of and realize upon
the Trust Assets in the initial three (3) year term of the Trust or if other
circumstances require such extension, the Managing Trustee shall have the right
to apply to the Bankruptcy Court to extend the term of the Trust for additional
periods of time, provided that each such extension must be approved by the
Bankruptcy Court within six (6) months of the beginning of the extended term.
Upon such application the Trust shall continue until the date approved by the
Bankruptcy Court, provided that in no event shall the Termination Date occur
later than the tenth anniversary of the Effective Date.
III. RIGHTS, POWERS AND DUTIES OF MANAGING TRUSTEE
3.1 DECLARATION ACKNOWLEDGED IN BENEFICIAL INTEREST. The Managing Trustee
hereby acknowledges that, on and after the Effective Date, the Trust
Beneficiaries and their successors and assigns as permitted in Section 6 hereof,
as their interests may appear, will have a beneficial interest in all Trust
Assets. The Trustees will retain only such powers as are necessary to collect,
liquidate, or otherwise convert the Trust Assets into cash and to pay all
expenses, taxes, and other payments referred to in this Trust.
3.2 MANAGEMENT OF TRUST. Subject to the terms hereof and the Joint Plan,
including, without limitation, Section 5.5 hereof, the Managing Trustee shall
take charge of the Trust Assets and shall endeavor to collect, conserve,
protect, and liquidate, or otherwise convert into cash, all claims, causes of
action, and assets which constitute the Trust Assets and all such other property
incidental thereto as may hereafter be acquired from time to time under this
Trust. To this end and subject to the supervision of the Supervisory Trustees
and the provisions of Section 5.5, the Managing Trustee shall manage the affairs
of the Trust, negotiate and consummate sales of the Trust Assets, enter into
agreements binding the Trust, and execute, acknowledge, and deliver any and all
instruments which are necessary, required, or deemed by the Managing Trustee to
be advisable in connection with the performance of the Managing Trustee's duties
hereunder. Except as otherwise provided in this Agreement, and without prior or
further authorization of the Bankruptcy Court, but subject to Section 5.5 hereof
and the supervision of the Supervisory Trustees, the Managing Trustee may
control and exercise authority over the Trust Assets, the acquisition,
management, and disposition thereof; and the management and conduct of the
business of the Trust to the same extent as if the Managing Trustee were the
sole legal and beneficial owner thereof in her own right. No person dealing with
the Trust shall be obligated to inquire into the authority of the Managing
Trustee in
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-a-3
<PAGE>
connection with the acquisition, management, or disposition of Trust Assets. In
connection with the management and use of the Trust Assets, the Managing
Trustee, without limitation of her power and authority, may do the following:
(i) accept the assets transferred and provided to the Trust pursuant
to this Agreement and the Joint Plan;
(ii) distribute Available Cash to the Trust Beneficiaries in
accordance with the terms of this Trust and the Joint Plan;
(iii) endorse the payment of notes or other obligations of any person
or make contracts with respect thereto;
(iv) engage in all acts that would constitute ordinary course of
business in performing the obligations of a trustee under a trust of this
type;
(v) cause Trust Certificates to be issued to be issued to Trust
Beneficiaries in the number and manner provided in the Joint Plan.
3.3 MAY INCUR DEBT. The Trust may borrow such sums of money at any time and
from time to time for such periods of time upon such terms and conditions from
such persons or corporations for such purposes as the Trustees may deem
advisable, and secure such loans with any of the Trust Assets, provided that no
recourse shall be had to the Trustees or any Trust Beneficiary on any such debt.
3.4 RECOVERY ON CAUSES OF ACTION. The Managing Trustee shall investigate,
sue upon, mediate, arbitrate, and/or to compromise and settle all claims and
causes of action that are Trust Assets.
3.5 DISTRIBUTION OF AVAILABLE CASH. Pursuant to the terms of the Joint
Plan, on the dates provided for in the Joint Plan the Managing Trustee shall
distribute from the Trust Assets the amounts required in Articles II and IV of
the Joint Plan. The Managing Trustee shall distribute at least annually the net
income of the Trust and all Available Cash from the sale of Trust Assets during
such year to the Trust Beneficiaries and to other Claimants in accordance with
the treatment of Claims provided in the Joint Plan. In determining whether there
are any Available Cash available for distribution, the Managing Trustee may, in
her discretion, give due consideration to the possibility that there may exist
unasserted Claims against the Trust or asserted Claims which are not yet allowed
by the Bankruptcy Court or otherwise not yet due and payable. The Managing
Trustee shall make vigorous and continuing efforts to dispose of the Trust
Assets, to make prompt and timely distributions, and to avoid undue prolongation
of the duration of the Trust. The Trust shall not receive or retain cash or cash
equivalents in excess of a reasonable amount to meet claims and contingent
liabilities or to maintain the value of the Trust Assets.
3.6 ASSETS DISTRIBUTABLE TO UNLOCATED BENEFICIARIES. The Trustee shall hold
any unclaimed liquidating distributions or other payments to any Trust
Beneficiaries who cannot be located. The Trustee shall make disposition of any
such distributions or payments distributable to any such Trust Beneficiaries in
accordance with applicable law and Section of the Joint Plan.
3.7 INVESTMENTS. The Managing Trustee shall invest the Trust Assets in
Permitted Investments.
3.8 RESERVES.
3.8.1 DISPUTED CLAIMS RESERVES. On or as soon as practicable following the
Effective Date, the Managing Trustee shall establish a reserve for distributions
on account of Contested Claims as of the Initial Distribution Date (the
"Contested Claims Reserve"). Upon any distribution to holders of Allowed Claims
in Classes in which Contested Claims still exists, the Managing Trustee shall
withhold from such distributions and set aside in the Contested Claims Reserve
an amount of cash as provided in Section 9.5 of the Joint Plan, which amount may
be based on the amount of a claim, estimation by the Bankruptcy Court or any
other order (or as provided for by subsequent order of the Bankruptcy Court
concerning Contested Claims). At such time thereafter that any Contested Claim,
or portion thereof; becomes an Allowed Claim, the Managing Trustee shall
distribute to the holders such Allowed Claim from the Contested Claims Reserve,
cash in an amount equal to the amount such holder would have received through
such date had such holder's claim been Allowed as of the Effective Date. The
Contested Claims Reserve shall be terminated when all Contested Claims are
resolved; provided however, as a Contested Claim may be resolved, to the extent
that the amount reserved for the Contested Claim exceeds the amount due, if any,
under a distribution as such Contested Claim becomes an Allowed Claim, such
funds shall be transferred to the Trust and become Available Cash. Any funds
remaining in the Contested Claims Reserve upon its termination and after any
distributions pursuant to this section shall no longer be restricted and shall
be Available Cash.
3.8.2 OPERATING RESERVE. On or as soon as practicable following the
Effective Date, the Managing Trustee shall establish an operating reserve with
cash included in the initial amount not to exceed $2,000,000 as approved by the
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-a-4
<PAGE>
Supervisory Trustees reasonably determined to be necessary to fund the expenses
of the Trust, including costs of the Distribution Agent for distributions made
pursuant to the Joint Plan. The amount of the operating reserve may be increased
or decreased by the Managing Trustee with the consent of the Supervisory
Trustees if the Managing Trustee determines that a greater or lesser amount is
prudent and reasonably sufficient to satisfy the obligations and liabilities,
including tax liabilities (whether absolute, contingent, asserted, unasserted,
payable, not yet payable or otherwise) of, or assumed by, the Trust.
3.9 LIABILITY OF MANAGING TRUSTEE.
3.9.1 STANDARD OF CARE. Except in the case of willful misconduct or gross
negligence, the Managing Trustee shall not be liable for any loss or damage by
reason of any action taken or omitted by her pursuant to the discretion, power,
and authority conferred on her by this Trust.
3.9.2 NO LIABILITY FOR ACTS OF PREDECESSORS. No successor Managing Trustee
shall be in any way responsible for the acts or omissions of the Debtors, or
officers, directors, agents, predecessors or successors thereof; or of any
Trustee in office prior to the date on which such person becomes Managing
Trustee, unless a successor Managing Trustee expressly assumes such
responsibility.
3.9.3 NO IMPLIED OBLIGATIONS. The Managing Trustee shall not be liable
except for the performance of such duties and obligations as are specifically
set forth herein, and no implied covenants or obligations shall be read into
this Trust.
3.9.4 NO LIABILITY FOR GOOD FAITH ERROR OF JUDGMENT. The Managing Trustee
shall not be liable for any error of judgment made in good faith, unless it
shall be proved that she was grossly negligent in ascertaining the pertinent
facts.
3.9.5 RELIANCE BY TRUSTEE ON DOCUMENTS OR ADVICE OF COUNSEL OR OTHER
PERSONS. Except as otherwise provided herein, the Managing Trustee may rely and
shall be protected in acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, or other paper or
document believed by the Managing Trustee to be genuine and to have been signed
or presented by the proper party or parties. The Managing Trustee may also
engage and consult with legal counsel and shall not be liable for any action
taken or suffered by the Managing Trustee in reliance upon the advice of such
counsel.
3.10 SELECTION OF AGENTS. The Managing Trustee may select and employ
brokers, banks, custodians, investment advisors, attorneys, accountants,
auditors, and other agents on behalf of the Trust. Except as otherwise required
to fulfill the terms hereof, such agents may be so employed without regard to
prior employment of such agents by any Trust Beneficiary or by the Creditors'
Committee. The Trust may employ as a consultant of the Trust any person or
persons having particular knowledge of the Debtors' affairs (including, without
limitation, any officer or director or former officer or director of any Debtor
or any entity owned by a Debtor), and may place reliance upon the advice of any
such person. The Trust may pay the salaries, fees, and expenses of such agents
or consultants out of the Trust Assets. No Trustee shall be liable for any loss
to the Trust or any person interested therein by reason of any mistake or
default of any such agent or consultant as shall be selected and retained by the
Trustees in good faith and without gross negligence.
3.11 RECORDS AND REPORTING.
3.11.1 RECORDS. The Managing Trustee shall maintain good and sufficient
books and records of account relating to the Trust Assets, the Available Cash,
the management thereof, all transactions undertaken by the Managing Trustee, all
expenses incurred by or on behalf of the Trust, all distributions either
contemplated or effectuated under the Joint Plan or this Agreement. The Managing
Trustee shall also maintain such books and records as shall from time to time be
directed by the Supervisory Trustees.
3.11.2 PERIODIC REPORTS. The Managing Trustee shall prepare the following
reports under the supervision of the Supervisory Trustees and shall distribute
such reports to each Supervisory Trustee and any Trust Beneficiary who requests
a copy:
(A) on a monthly basis, within two (2) weeks after the end of each
month, a report of the receipts and disbursements of the Trust and the Cash
position of the Trust; and
(B) on a quarterly basis commencing with the first full calendar
quarter ending after the Effective Date, within forty-five (45) days after
the end of such calendar quarter, a report of the activities of the Trust
detailing for the preceding quarterly period the activities of the Trust
including:
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-a-5
<PAGE>
(i) an operating statement (prepared on a cash basis) showing all
revenues received by the Trust and all expenses of operations of the Trust
(including all expenses associated with the sale of any Trust Assets paid
by the Trust);
(ii) an unaudited written report and accounting showing (a) the assets
and liabilities of the Trust at the end of such period, (b) any changes in
the Trust Assets, (c) the amount of any reserves or escrows of the Trust,
(d) any material action taken by the Managing Trustee or the Supervisory
Trustees in the performance of their duties under the Joint Plan and this
Agreement; and
(iii) an overall status report of the Trust for the next quarterly
period.
Quarterly reports for the fourth quarter of each calendar year may be
included within the annual reports described below, if such annual reports are
prepared.
(C) to the extent required by the Bankruptcy Court or by applicable
law (or to gain an exemption from applicable law), within 90 days after the
end of each calendar year, beginning with the first year end occurring
after the Effective Date, the Trust will prepare reports for the prior year
as described in clause (i) and (ii) above, except that such reports shall
be for a full year (or portion thereof in which the Trust has been in
existence) and shall be audited.
The Managing Trustee shall prepare and furnish to the Trust such additional
reports and accounts as the Supervisory Trustees may from time to time request.
All quarterly and, if prepared, annual reports shall be filed with the
Bankruptcy Court on the date of distribution to the Supervisory Trustees after
the approval of the Supervisory Trustees. In addition, all quarterly and, if
prepared, annual reports may be filed with the Securities and Exchange
Commission to the extent the Managing Trustee deems such action to be in the
best interest of the Trust or to the extent required by applicable law or in
order to gain an exemption from compliance with applicable law.
3.11.3 TAX INFORMATION. The Managing Trustee shall furnish to the Trust
Beneficiaries such information and returns with respect to any federal or state
tax as shall be required by law.
3.11.4 ADDITIONAL REPORTS AND FILINGS. The Managing Trustee shall, under
the supervision of the Supervisory Trustees, (i) prepare, file and distribute
such additional reports as may be necessary to cause the Trustee and the
Trustees to be in compliance with applicable law and (ii) prepare and file with
the Court such reports as are required by the Joint Plan. Copies of any such
reports shall be distributed to the Supervisory Trustees.
3.11.5 The Managing Trustee shall provide to a Trust Beneficiary such
additional information concerning the Trust and the Trust Assets as may be
reasonably requested in writing and for a proper purpose by a Trust Beneficiary
and is in the possession of the Managing Trustee, at the expense of the
requesting Trust Beneficiary.
3.12 MANAGING TRUSTEE'S COMPENSATION, INDEMNIFICATION, AND REIMBURSEMENT.
As compensation for services rendered in the administration of this Trust, the
Managing Trustee shall be compensated in an amount and upon terms which are
mutually acceptable to the proposed Managing Trustee and the Supervisory
Trustees. The Managing Trustee shall further be reimbursed for all reasonable
out-of-pocket expenses incurred in the performance of her duties hereunder. In
addition, the Managing Trustee and the Supervisory Trustees shall be indemnified
by and receive reimbursement from the Trust Assets against and from any and all
loss, liability, expense, or damage which any of them may incur or sustain, in
good faith and without gross negligence, in the exercise and performance of any
of their powers and duties under this Trust. The amounts necessary for all such
compensation, indemnification and reimbursement and for all expenses of
administration, including counsel fees, shall be withdrawn by the Trustees out
of the Trust Assets. Notwithstanding the foregoing, the obligation of the Trust
to indemnify as set forth in this section shall either be limited until the
termination of the Trust, or shall be fulfilled by the purchase an insurance
policy which, in the judgment of the Trustees is sufficient in the size and
coverage to perform the Trust obligations undertaken in this section.
3.13 DISPOSITION OF ASSETS TO DEBTOR AND OTHER INTERESTED PARTIES. Subject
to Section 5.5, the Managing Trustee is specifically authorized and empowered to
negotiate at arms' length and enter into agreements with the Debtor's
affiliates, the Trust Beneficiaries and other interested parties for the sale of
any portion of the Trust Assets.
3.14 INDEPENDENT MANAGING TRUSTEE. The Managing Trustee may not be a Trust
Beneficiary except that Susan A. Brown, a former director and officer of the
Debtors and an administrative creditor of the Trust under a contract of
employment with the Debtors may serve notwithstanding.
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-a-6
<PAGE>
3.15 RESIGNATION. The Managing Trustee may resign as such by executing and
delivering an instrument in writing to the Supervisory Trustees; PROVIDED,
HOWEVER, that the Managing Trustee shall continue to serve as Managing Trustee
after resignation until the time when appointment of a successor Trustee shall
become effective in accordance with Section 3.17 hereof.
3.16 REMOVAL. The Managing Trustee may be removed from office (a) for fraud
or willful misconduct in connection with the affairs of the Trust upon the
motion of the Supervisory Trustees, and upon a finding by the Bankruptcy Court
of fraud or willful misconduct by such Managing Trustee after a hearing before
the Bankruptcy Court upon not less than 30 days' Notice, (b) for such physical
or mental disability as substantially prevents the Managing Trustee from
performing her duties as Managing Trustee hereunder upon the motion of the
Supervisory Trustees and upon a finding by the Bankruptcy Court of such physical
or mental disability after a hearing before the Bankruptcy Court on not less
than 30 days' Notice or (c) for cause, which shall include a breach of fiduciary
duty or an unresolved conflict of interest, (other than as specified in the
foregoing clauses (a) and (b)) upon the motion of the Supervisory Trustees, and
upon finding by the Bankruptcy Court that cause for such removal has been shown
after a hearing before the Bankruptcy Court on not less than 30 days' Notice.
3.17 APPOINTMENT OF SUCCESSOR MANAGING TRUSTEE. In the event of the death
or incompetency, resignation, or removal of the Managing Trustees, the
Supervisory Trustees shall appoint a successor Managing Trustee. Such
appointment shall specify the date on which such appointment shall be effective.
Every successor Managing Trustee appointed hereunder shall execute, acknowledge,
and deliver to the Supervisory Trustees and to the retiring Managing Trustee an
instrument accepting such appointment, and thereupon such successor Managing
Trustee, without any further act, deed, or conveyance, shall become vested with
all the rights, powers, trusts, and duties of the retiring Managing Trustee.
IV. SUPERVISORY TRUSTEES
4.1 RESIGNATION. A Supervisory Trustee may resign as such by executing an
and delivering an instrument in writing to the Managing Trustee and remaining
Supervisory Trustees.
4.2 REMOVAL. A Supervisory Trustee may be removed in the event of the
physical or mental disability as prevents a Supervisory Trustee from
substantially performing his duties hereunder upon the unanimous consent of the
other Supervisory Trustees. A majority of the Trust Beneficiaries voting
pursuant to this Agreement may at any time remove any Supervisory Trustee with
or without cause.
4.3 APPOINTMENT OF SUCCESSOR SUPERVISORY TRUSTEE. Upon the death,
resignation or removal of a Supervisory Trustee, the remaining Supervisory
Trustees shall appoint a Trust Beneficiary (or employee or member thereof) as a
successor Supervisory Trustee. In the event that the remaining Supervisory
Trustees are unable to reach agreement, such successor shall be appointed by a
vote of the Trust Beneficiaries. Such appointment shall specify the date on
which such appointment shall be effective. In no event shall any insider or
affiliate of the Debtor serve as a Supervisory Trustee.
4.4 COMPENSATION AND EXPENSES. A Supervisory Trustee shall serve in such
capacity with compensation, if any, as may be set in the Confirmation Order. The
Trust shall reimburse the reasonable expenses of the Supervisory Trustees
(including, but not limited to, attorneys fees) incurred in connection with
their service as Supervisory Trustees.
4.5 STANDARD OF CARE, EXCULPATION. No Supervisory Trustee, and no officer,
employee, agent or representative of such member, shall be personally liable to
any other Trustee, any other Trust Beneficiary, or the Trust, or any one of them
except for such of its own acts as shall constitute willful misconduct or gross
negligence. Except as aforesaid, a Supervisory Trustee shall be defended, held
harmless and indemnified from time to time from the Trust Assets against any and
all losses, claims, costs, expenses and liabilities (including legal fees and
expenses) and any costs of defending any action to which they may be subject by
reason of their execution in good faith of their duties under this Trust or by
reason of their reliance upon the matters addressed in Section 4.7 hereof. If
the Supervisory Trustees so desires, the Managing Trustee shall endeavor to
obtain for the benefit of the Supervisory Trustees at the expense of the Trust
insurance against claims of liability, damage awards, and settlement.
4.6 RELIANCE BY SUPERVISORY TRUSTEES. The Supervisory Trustees may rely,
and shall be fully protected personally in acting upon, any resolution,
statement, certificate, instrument, opinion, report, notice, request, consent,
order, or other instrument or document which such members have no reason to
believe to be other than genuine and to have been signed or presented other than
by the proper party or parties or, in the case of facsimile transmissions, to
have been sent other than by the proper party or parties, in each case without
obligation to satisfy itself that the same was given in good faith and without
responsibility for errors in delivery, transmission, or receipt. In the absence
of Its willful misconduct or gross
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negligence, the Supervisory Trustees may rely as to the truth of statements and
correctness of the facts and opinions expressed therein and shall be fully
protected personally in acting thereon. The Supervisory Trustees may consult
with and rely on the advice of legal counsel and such other experts, advisors,
consultants or other professionals as shall have been retained pursuant to this
Agreement and shall be fully protected in respect of any action taken or
suffered by it in accordance with the written opinion of legal counsel.
V. PROVISIONS RELATING TO TRUSTEES GENERALLY
5.1 NO PERSONAL OBLIGATION FOR TRUST LIABILITIES. Persons dealing with the
Trustees, or seeking to assert claims against the Debtor, shall look only to the
Trust Assets to satisfy any liability incurred by the Trustees to such person in
carrying out the terms of this Trust, and the Trustees shall have no personal,
individual obligation to satisfy any such liability.
5.2 BOND REQUIREMENT; EXERCISE OF POWERS. The Trustees shall not be
required to furnish a bond to secure the proper performance of their respective
duties hereunder. Except as other expressly provided in the Agreement, the
Trustees shall not be required to procure authorization by any court in the
exercise of any power conferred upon the Trustees by this Trust.
5.3 TRUST CONTINUANCE. The death or incompetency, resignation, or removal
of a Trustee shall not operate to terminate the Trust created by this Agreement
or to revoke any existing agency created pursuant to the terms of this Agreement
or invalidate any action previously taken by the Trustee. In the event of the
resignation or removal of the Trustee, such Trustee shall promptly (a) execute
and deliver such documents, instruments, and other writings as may be requested
by the remaining Trustees or reasonably requested by the successor Trustee to
effect the termination of the retiring Trustee's capacity under the Trust and
the conveyance of the Trust Assets then held by the retiring Trustee to her
successor Trustee; (b) deliver to the Supervisory Trustees or the successor
Trustee all documents, instruments, records, and other writings related to the
Trust as may be in the possession of the retiring Trustee; and (c) otherwise
assist and cooperate in effecting the assumption of its obligations and
functions by such successor Trustee.
5.4 EFFECT OF TRUST ON THIRD PARTIES. There is no obligation on the part of
any purchaser or purchasers from the Trustee or any agent of the Trustees, or on
the part of any other persons dealing with the Trustees or any agent of the
Trustees, to see to the application of the purchase money or other consideration
passing to the Trustees or any agent of the Trustees, or to inquire into the
validity, expediency, or propriety of any such transaction by the Trustees or
any agent of the Trustees.
5.5 ACTIONS REQUIRING THE CONSENT OF MANAGING TRUSTEE AND SUPERVISORY
TRUSTEES. The following actions may be taken by the Managing Trustee on behalf
of the Trust only with the consent of at least two Supervisory Trustees (or, if
only one Supervisory Trustee is appointed hereunder at any time, with the
consent of such Supervisory Trustee):
5.5.1 TERMINATION OF TRUST. The delivery of a notice seeking to terminate
the Trust prior to three years after the Effective Date or application to the
Bankruptcy Court to extend the Trust term as provided in Section 2.7;
5.5.2 AGREEMENTS, DOCUMENTS, INSTRUMENTS. The execution by the Managing
Trustee of any agreement, document or instrument binding the Trust, including
without limitation any agreements with any affiliate or former affiliate of any
Debtor or any or former employee thereof but excluding contracts or documents
related to sales of assets, or any Trust Beneficiary, provided however that the
Managing Trustee may enter into a contract obligating the Trust to expend funds
in an amount less than of $50,000 without further approval;
5.5.3 BORROWING. The borrowing of any sums of money;
5.5.4 INVESTMENT. The investment of Trust Assets and Available Cash in any
manner other than in Permitted Investments.
5.5.5 RESERVES. The establishment, maintenance, increase or decrease, or
disbursement of reserves, including without limitation the Contested Claims
Reserve and the Operating Reserve.;
5.5.6 AGENTS AND CONSULTANTS. The selection, retention and/or employment of
financial or investment advisors, attorneys, auditors, or the employment of any
consultants;
5.5.7 DISTRIBUTIONS FROM TRUST. The distribution of any amounts from the
Trust, provided that the Managing Trustee without further approval may make the
distributions as set forth in the Joint Plan and on Schedule 5.5.7 hereof;
5.5.8 ACTION AND PROCEEDINGS. The commencement or bringing of any
proceeding permitted hereunder, the defense of any action or proceeding against
the Trust and the expenditure by the Trust of amounts in respect thereof;
including legal fees;
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5.5.9 TRANSFERS OF TRUST CERTIFICATES. Any change to the form of Trust
Certificate or placement of a legend on a Trust Certificate as contemplated by
Section 6.1, appointment of a Registrar other than the Trust, or the
establishment of any additional requirements for transfer of Trust Certificates;
and
5.5.10 COMPLIANCE WITH APPLICABLE LAW. The filing of any registration
statement or report relating to the Trust, the Trust Assets or the Trust
Certificates with any governmental agency.
5.5.11 SALES OR TRANSFERS OF ASSETS. The sale, assignment or transfer of
any Trust Asset, except as otherwise set forth herein, in an amount exceeding
$500,000.
5.6 METHOD OF OBTAINING APPROVAL OF SUPERVISORY TRUSTEES. With respect to
any action requiring the approval of the Supervisory Trustees, approval (i)
shall be had by written confirmation upon the written request of the Managing
Trustee (ii) shall be implied if the Managing Trustee receives no response from
a Supervisory Trustee after four (4) business days from the date the written
request for approval by the Supervisory Trustee is delivered to the Supervisory
Trustee as set forth for delivery of notices in this Agreement.
VI. RIGHTS, POWERS AND DUTIES OF BENEFICIARIES
6.1 NATURE OF CERTIFICATES. Beneficial interests in the Trust ("Trust
Interests") shall be allocated in accordance with Section 7.3(e) of the Plan.
The Trust Interests may be represented by certificates substantially in the form
attached hereto as EXHIBIT B, with such changes as the Managing Trustee may from
time to time find necessary or desirable to conform to the provisions of this
Trust Agreement, the Joint Plan and any applicable laws or regulations. The
Managing Trustee may cause to be placed on any Trust Certificate such legends as
she deems are required or appropriate under tax laws or regulations in
connection with tax withholding pursuant to Section 6.9.3 or otherwise. Any
person to whom a Trust Certificate is issued or transferred, by virtue of the
acceptance thereof, shall assent to and be bound by the terms and conditions of
this Agreement and the Joint Plan. The principal amount of Trust Interests
represented by any single certificate shall be designated on the face of such
certificate. All certificates shall be executed by the manual or facsimile
signatures of the Managing Trustee. In case any Managing Trustee who has signed
or whose facsimile signatures have been placed upon a certificate shall have
ceased to be Managing Trustee before such certificate is issued by the Trust it
may be issued with the same effect as if any such Managing Trustee had not
ceased to be Managing Trustee. All Trust Certificates shall be legended as
provided in the forms for such certificates attached hereto as EXHIBIT B.
6.2 SECURITIES REGISTRATION. [RESERVED]
6.3 TRANSFER AND EXCHANGE.
6.3.1 APPOINTMENT OF REGISTRAR AND TRANSFER AGENT. The Managing Trustee
shall appoint a Registrar and Transfer Agent for the purpose of registering and
transferring Trust Interests as herein provided. The Registrar and Transfer
Agent may be a duly qualified institution or the Trust itself. For its services
hereunder, the Registrar and Transfer Agent, unless it is the Trust, shall be
entitled to receive reasonable compensation from the Trust.
6.3.2 REGISTRATION AND TRANSFER OF TRUST INTERESTS. The Managing Trustee
shall cause to be kept at the office of the Registrar and Transfer Agent, or at
such other place or places as shall be designated by her from time to time, the
Trust Register. Prior to the distribution, if any, of Trust Certificates, Trust
Interests may not be transferred and no purported transfer of any Trust Interest
will be registered on the Trust Register. After any such distribution of Trust
Certificates, any Trust Interest may be transferred by the registered holder of
any Trust Certificate or in or by the duly authorized attorney of the registered
holder of any Trust Certificate, upon presentation of the Trust Certificate to
the Registrar and Transfer Agent for cancellation, accompanied by delivery of a
duly executed written instrument of transfer in the form approved by the
Registrar and Transfer Agent and such other documents as may be reasonably
required by the Managing Trustee as well as evidence satisfactory to the
Managing Trustee that such transfer is in accordance with all applicable federal
and state securities laws. Any such transfer shall be registered in the Trust
Register. Such Person shall pay reasonable transfer charges established by the
Registrar and Transfer Agent for the purpose of reimbursing the Trust and the
Registrar and Transfer Agent for the expenses incident thereto, including any
tax or other governmental charge.
Notwithstanding the above, no Trust Interest may be transferred unless such
transfer is made (i) pursuant to a registration statement effective under the
Securities Act of 1933, as amended ("Securities Act"), or pursuant to an
available exemption from the registration requirements of the Securities Act and
(ii) in accordance with all applicable state securities laws. See "Securities
Law Considerations--Limited Restrictions on Transferability."
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6.3.3 ACCESS TO REGISTER BY TRUST BENEFICIARIES. Trust Beneficiaries and
their duly authorized representatives shall have the right, upon reasonable
prior written notice to the Registrar and Transfer Agent and the Managing
Trustee, and in accordance with reasonable regulations prescribed by the
Registrar and Transfer Agent and the Managing Trustee, to inspect and, at the
expense of the Trust Beneficiary, make copies of the Trust Register, in each
case for a purpose reasonably related to such Trust Beneficiary's beneficial
interest in the Trust.
6.4 ABSOLUTE OWNERS. The Trustees may deem and treat the Trust Beneficiary
of record as the absolute owner of such Trust Interests for the purpose of
receiving distributions and payment thereon or on account thereof and for all
other purposes whatsoever.
6.5 ISSUANCE OF CERTIFICATES UPON TRANSFER. Whenever any Trust Certificate
shall be presented for transfer or exchange as permitted by the provisions of
Section 6.1 and 6.3, the Managing Trustee shall cause the Registrar and Transfer
Agent to issue, authenticate and deliver in exchange therefor, the new Trust
Certificate(s) in respect to the Trust Interests which the transferee, and if
any Trust Interest is retained, the transferor, will be entitled to receive.
6.6 MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. If a Trust
Beneficiary claims that his Trust Certificate has been mutilated, defaced, lost,
stolen or destroyed, the Trust shall issue and the Registrar and Transfer Agent
shall authenticate a replacement Trust Certificate if the Managing Trustee's
requirements are met. Such Trust Beneficiary shall pay reasonable charges
established by the Trustee and the Registrar and Transfer Agent for the purpose
of reimbursing the Trust and the Registrar and Transfer Agent for the expenses
incident thereto, including any tax or other governmental charges. In the case
of lost, stolen or destroyed certificates, such Trust Beneficiary will
indemnify, and if required by the Managing Trustee or the Registrar and Transfer
Agent, provide a bond or other security sufficient in the judgment of the
Managing Trustee to protect the Trust, the Trustees, the Registrar and Transfer
Agent or any authenticating agent from any loss which any of them may suffer if
a Trust Certificate is replaced. The Trustees shall incur no liability to anyone
by reason of anything done or omitted to be done by them in good faith under the
provisions of this Section 6.6. All Trust Certificates shall be held and owned
upon the express condition that the provisions of this Section 6.6 are exclusive
in respect of the replacement or payment of mutilated, defaced, lost, stolen, or
destroyed certificates and shall, to the extent permitted by law, preclude any
and all other rights or remedies respecting such replacement or the payment in
respect thereto. Any duplicate certificate issued pursuant to this Section 6.6
shall constitute original interests in the Trust and shall be entitled in the
manner provided herein to equal and proportionate benefits with all other Trust
Interests issued hereunder in any moneys or property at any time held by the
Trustees for the benefit of the Trust Beneficiaries. The Trustees and the
Registrar and Transfer Agent shall not treat the original certificate as
outstanding.
6.7 RECORD DATE. The date of record for determining (a) entitlement to any
payments to holders of Trust Certificates, (b) entitlement of any holder of a
Trust Certificate to notice or (c) entitlement to vote shall be 15 Business Days
prior to a distribution date in the case of (a) above and, in all other cases,
may be fixed by the Managing Trustee but shall not be more than 30 days nor less
than 10 days before the date upon which any vote is to be taken or the date upon
which notice is to be given, as applicable, subject, in any such case, to any
terms of the Plan that provide otherwise.
6.8 INTEREST BENEFICIAL ONLY. The ownership of a beneficial interest
hereunder shall not entitle any beneficiary to any title in or to the Trust
Assets as such, or to any right to call for a partition or division of the same,
or to require an accounting except as specifically required by the terms hereof.
6.9 EXEMPTION FROM REGISTRATION. The parties hereto intend that the rights
of the Trust Beneficiaries arising under this Trust shall not be "securities"
under applicable laws, but none of the parties hereto represent or warrant that
such rights shall not be securities or shall be entitled to exemption from
registration under applicable securities laws. If such rights constitute
securities, the parties hereto intend for the exemption from registration
provided by Section 1145 of the Bankruptcy Code to apply to their issuance under
the Joint Plan.
6.10 VOTES BY BENEFICIARIES. In the event any vote of or consent from
holders of Trust Certificates is required to be taken under this Trust, the
Managing Trustee shall solicit the same by first class mail from registered
holders of Trust Certificates. The outcome of such vote shall be determined in
favor of the majority of holders of Trust Certificates actually voting, [based
upon the face amount of their Trust Certificates].
6.11 EFFECT OF DEATH, INCAPACITY, OR BANKRUPTCY OF BENEFICIARY. The death,
incapacity, bankruptcy or dissolution of a holder of a Trust Certificate during
the terms of this Trust shall not operate to terminate the Trust, nor shall it
entitle the representatives or creditors of a holder of a Trust Certificate to
an accounting, or to take any action in the courts or elsewhere for the
distribution of the Trust Assets or for a partition thereof; nor shall it
otherwise affect the rights and obligations of any holder of a Trust
Certificate.
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6.12 CONFLICTING CLAIMS. In the event the Managing Trustee becomes aware of
any disagreement or conflicting claims with respect to the Trust Assets, or if
the Trustee in good faith is in doubt as to any action which should be taken
under this Trust after consultation with the Supervisory Trustees, who, after a
vote are deadlocked, the Managing Trustee shall have the absolute right at her
election to do any or all of the following:
(i) To the extent of such disagreement or conflict, or to the extent
deemed by her necessary or appropriate in light of such disagreement or
conflict, withhold or stop all further performance under this Trust (save
and except the safekeeping of the Trust Assets) until the Managing Trustee
is satisfied that such disagreement or conflicting claims have been fully
and finally resolved; or
(ii) File a suit in interpleader or in the nature of interpleader in
the Bankruptcy Court and obtain an order requiring all persons and parties
involved to litigate in the Bankruptcy Court their respective claims
arising out of or in connection with this Trust; or
(iii) File any other appropriate motion for relief in the Bankruptcy
Court.
VII. MISCELLANEOUS
7.1 APPLICABLE LAW. The Trust created herein shall be construed, regulated,
and administered under the laws of the State of Texas and the United States of
America; provided that the Trust and any interpretation or enforcement of the
provisions of this Agreement shall be subject to the jurisdiction of the
Bankruptcy Court as contemplated by Section 8.1 hereof.
7.2 RELATIONSHIP CREATED. The only relationship created by this Trust is
the trustee-beneficiary relationship between the Trustee and the Trust
Beneficiaries. No other relationship or liability is created. Nothing contained
herein shall be construed so as to constitute the Trustees and the Trust
Beneficiaries or their successors in interest as creating any association,
partnership, or joint venture of any kind.
7.3 INTERPRETATION. The enumeration and headings contained in this Trust
are for convenience of reference only and are not intended to have any
substantive significance in interpreting the same. Unless the context otherwise
requires, whenever used in this Trust the singular shall include the plural and
the plural shall include the singular.
7.4 PARTIAL INVALIDITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term of this Agreement, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of this Agreement; and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid, or unenforceable provision or by
its severance from this Agreement. Furthermore, in lieu of such illegal, invalid
or unenforceable provision, there shall be added automatically as part of this
Agreement a provision as similar in its terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
7.5 ENTIRE AGREEMENT. This Agreement (including the recitals hereof) and
the Joint Plan constitute the entire agreement by and among the parties, and
there are no representations, warranties, covenants, or obligations except as
set forth herein and in the Joint Plan. This Agreement and the Joint Plan
supersede all prior and contemporaneous agreements, understandings negotiations,
and discussions, written or oral, if any, of the parties hereto relating to any
transaction contemplated hereunder. Except as otherwise specifically provided
herein or in the Joint Plan, nothing in this Agreement is intended or shall be
construed to confer upon or to give any person other than the parties hereto and
the Trust Beneficiaries any rights or remedies under or by reason of this
Agreement.
7.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original document, but all
of which counterparts shall together constitute one and the same instrument.
7.7 NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and delivered in person or by first class mail,
postage and fees prepaid and shall be addressed (i) if to the Managing Trustee,
to Susan A. Brown, Trustee, [address] , or such other address as such Managing
Trustee will have furnished to the Trust Beneficiaries in writing in accordance
with Sections 3.3 and 5.7, (ii) if to any Trust Beneficiary, to such address as
such Trust Beneficiary will have furnished to the Trustee, in writing in
accordance with this Section 5.7, (iii) if to the Supervisory Trustees, to , ,
and , or such other respective addresses as the Supervisory Trustees will have
furnished to the Trustee in writing in accordance with this Section 5.7, or (iv)
if to the Debtor, to , or such other address as the Debtor will have furnished
to the Trustee in writing in
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accordance with this Section 5.7. All such notices or communications will be
deemed given when actually delivered or, if mailed, three (3) business days
after deposit in the U.S. Mail.
7.8 EFFECTIVE DATE. This Trust, and the transfer of Trust Assets to the
Trustee, shall become effective on the Effective Date of the Joint Plan.
7.9 TAX PROVISIONS.
7.9.1 INCOME TAX STATUS. For all purposes of the Tax Code, the Debtor
shall be deemed to have transferred the Trust Assets to the Trust
Beneficiaries and thereupon the Trust Beneficiaries shall be deemed to have
transferred the Trust Assets to the Trust. The Trustee shall ensure that,
for all federal income tax purposes, consistent valuations are used by the
Trustee and the creditors for the transferred Trust Assets. The Trust is
intended to be treated as a liquidating trust pursuant to Treasury
Regulations Section 301.7701-4(d), and as a grantor trust subject to the
provisions of Subchapter J, Subpart E of the Tax Code, owned by the Trust
Beneficiaries as grantors. Any items of income, deduction, credit, or loss
of the Trust shall be allocated for federal income tax purposes among the
Trust Beneficiaries Pro-Rata on the basis of their beneficial interests.
The Trustee is authorized to take any action that may be necessary or
appropriate to minimize any potential tax liability of the Trust
Beneficiaries arising out of the operations of the Trust.
7.9.2 TAX RETURNS AND REPORTS. In accordance with Treasury Regulation
Section 1.671-4(a), the Trustee shall cause to be prepared and filed, at
the cost and expense of the Trust, an annual information tax return (Form
1041) with the IRS, with a schedule attached showing the item of income,
deduction, and credit attributable to the Trust and detailing the
allocation of such items of income, deduction, and credit among the Trust
Beneficiaries as required pursuant to the Form 1041 instructions for
grantor trusts. Copies of such Form 1041 and attached schedules will be
mailed promptly to each Trust Beneficiary. In addition, the Trustee shall
cause to be prepared and filed in a timely manner, such other state or
local tax returns as are required by applicable law by virtue of the
existence and operation of the Trust and shall pay any taxes shown as due
thereon. Within thirty (30) days after the end of each calendar year, the
Trustee shall cause to be prepared and mailed to a Trust Beneficiary such
other information as may be requested by such Trust Beneficiary in writing
to enable such Trust Beneficiary to complete and file his, her, or its
federal, state and local income and other tax returns.
7.9.3 WITHHOLDING. The Trustee may withhold from the amount
distributable from the Trust at any time to any Trust Beneficiary such sum
or sums as may be sufficient to pay any tax or taxes or other charge or
charges which have been or may be imposed on such Trust Beneficiary or upon
the Trust with respect to the amount distributable or to be distributed
under the income tax laws of the United States or of any state or political
subdivision or entity by reason of any distribution provided for any law,
regulation, rule, ruling, directive, or other governmental requirement.
7.9.4 TAX IDENTIFICATION NUMBERS. The Trustee may require any Trust
Beneficiary to furnish to the Trustee its Employer or Taxpayer
Identification Number as assigned by the Internal Revenue Service and the
Trustee may condition any distribution to any Trust Beneficiary upon
receipt of such identification number.
7.9.5 TAX YEAR. The taxable year of the Trust shall, unless otherwise
required by the Internal Revenue Code, be the calendar year.
7.10 AMENDMENT OF TRUST. This Trust may be amended, modified, terminated,
revoked, or altered only upon (i) the approval of the Supervisory Trustees and
(ii) Order of the Bankruptcy Court.
VIII. RETENTION OF JURISDICTION
8.1 As provided in the Joint Plan, the Bankruptcy Court has retained
jurisdiction over the Trust, the Trustee, and the Trust Assets, including,
without limitation, the determination of all controversies and disputes arising
under or in connection with this Trust. This provision shall not operate to
exclude other courts of competent jurisdiction from exercising jurisdiction over
the Trust, the Trust Assets, and the Trustee, to the extent not in conflict with
the jurisdiction of the Bankruptcy Court.
IN WITNESS WHEREOF, the undersigned have caused this instrument to be
executed as of the day and year first above written.
I.C.H. CORPORATION, a Delaware
corporation
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By: ___________________________________
Susan A Brown, Co-Chief Executive
Officer
and
By: ___________________________________
Rodney D. Moore, Co-Chief Executive
Officer
MANAGING TRUSTEE
---------------------------------------
Susan A. Brown, Trustee
SUPERVISORY TRUSTEES
---------------------------------------
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
IN RE: ss.
ss.
I.C.H. CORPORATION, ss. CASE NO. 395-36351
a Delaware corporation, f/k/a ss. (Chapter 11)
Southwestern Life Corporation, f/k/a ss.
I.C.H. Corporation, ss.
Fed. Tax No. 43-6069928, ss.
ss.
SWL HOLDING CORPORATION, ss. CASE No. 395-36352
a Delaware corporation, f/k/a ss. (Chapter 11)
Life Interests Corporation, ss.
Fed. Tax No. 51-0343581, ss.
ss.
CARE FINANCIAL CORPORATION, ss. CASE NO. 395-36354
a Delaware corporation, f/k/a ss. (Chapter 11)
Health Interests Corporation, ss.
Fed. Tax No. 51-0343580, and ss.
ss. JOINTLY ADMINISTERED
DEBTORS. ss. CASE NO. 395-36351-RCM-11
ss.
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11
On January 31, 1997, the Court conducted the hearing on confirmation (the
"Confirmation Hearing") of the First Amended Joint Plan of Reorganization under
Chapter 11 dated November 15, 1996, as modified by the First Nonmaterial
Modification of First Amended Joint Plan of Reorganization Under Chapter 11
filed on January 20, 1997, and as further modified by that certain letter
agreement filed with and accepted by the Court at the Confirmation Hearing as
the Second Nonmaterial Modification of the First Amended Joint Plan of
Reorganization Under Chapter 11 (as so modified, the "Joint Plan") filed by
I.C.H. Corporation ("ICH"), SWL Holding Corporation ("SWL"), and Care Financial
Corporation ("Care" and, together with ICH and SWL, the "Debtors"), the Official
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 1
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Committee of Unsecured Creditors (the "Creditors Committee") and, the Official
Committee of Equity Security Holders (the "Equity Committee" and, together with
the Debtors and the Creditors Committees, the "Plan Proponents"). At the
conclusion of the Confirmation Hearing, having reviewed and considered the Joint
Plan, the testimony proffered and adduced and the exhibits submitted into
evidence, the arguments of counsel presented at the Confirmation Hearing, and
all of the objections to confirmation of the Joint Plan, and the Court being
familiar with the Joint Plan and other relevant factors affecting the Debtors'
Chapter 11 cases (the "Chapter 11 Cases"), and having taken judicial notice of
the entire record of the Chapter 11 Cases since the Petition Date, the Court
made certain Findings of Fact and Conclusions of Law (the "Findings and
Conclusions") which are separately entered herewith. On the basis of the
Findings and Conclusions, which are incorporated herein by reference, and good
cause having been shown, it is:
ORDERED, ADJUDGED AND DECREED that:
1. This Order1 shall be effective according to its terms upon its entry.
Notwithstanding the foregoing, the Effective Date shall occur on the later of
(i) the eleventh (11) day following the date on which this Order has been
entered on the docket maintained by the Clerk of the Bankruptcy Court, (ii) if
this Order is stayed pending appeal, the day after such stay is dissolved by
final order, or (iii) the first date upon which this Order is subject to
execution or enforcement under Bankruptcy Rule 7062.
- --------
1 All capitalized terms used but not defined herein shall have the
respective meanings ascribed to such terms in the Joint Plan or, if not
defined in the Joint Plan, as defined in Title 11 of the United States Code
(the "Bankruptcy Code").
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OF REORGANIZATION UNDER CHAPTER 11 Page 2
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2. The Joint Plan complies with all applicable provisions of the Bankruptcy
Code and all applicable Bankruptcy Rules relating to confirmation and, thus, the
Joint Plan is hereby confirmed.
3. The record of the Confirmation Hearing is closed.
4. All motions to challenge, designate or in any way disqualify any votes
cast to accept or reject the Joint Plan, are hereby denied. The Shaw Group's
oral motion to change its rejecting votes with respect to the Joint Plan is
hereby granted, and such rejecting votes are hereby amended to be acceptances of
the Joint Plan.
5. All objections to confirmation of the Joint Plan, whether formally filed
in writing or not, including but not limited to: (i) the Objection of the Shaw
Group to Confirmation of the Joint Plan of Reorganization under Chapter 11 dated
November 15, 1996, and/or reservation of rights included therein; (ii)
Supplemental Objection of the Shaw Group; (iii) the Objection of the Shaw Group
to First Nonmaterial Modification of Joint Plan of Reorganization; (iv) the
Objection of Victor L. Sayyah to Confirmation of First Amended Joint Plan of
Reorganization, and (v) the oral objections of the Plaintiffs in Adversary No.
395-3985, and any other objections to confirmation that have not been withdrawn
prior to entry of this Order or are not cured by the relief granted herein, are
overruled in their entirety, and all withdrawn objections are deemed withdrawn.
6. Nothing in this Order shall be construed as modifying or contradicting
settlements previously approved by Order of this Court, including but not
limited to the Order Approving Agreement for Compromise and Settlement of Tax
Claims and Certain Tax Related Liabilities of the Debtors entered on September
13, 1997, the Order Granting Motion for Approval of Compromise Between ICH
Corporation and Tenneco, Inc. entered
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OF REORGANIZATION UNDER CHAPTER 11 Page 3
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on January 17, 1997, and the Order Granting Motion for Approval of Compromise
between ICH Corporation and Conseco, Inc. entered on January 31, 1997.
7. In accordance with Article 7 of the Joint Plan and pursuant to Sections
105(a) and 1123(a)(5)(B) of the Bankruptcy Code, the transfer of the Trust
Assets to the Trust is authorized and approved, and the Debtors are authorized,
empowered and ordered to convey to the Trust all of their rights, titles, and
interests in and to the Trust Assets in accordance with the terms and conditions
of the Joint Plan and the Trust Agreement and Joint Plan-related documents filed
with the Court. The Trust Assets include, without limitation, the Debtors'
right, title, and interest in and to the obligation of Sayyah to ICH evidenced
by the documents referred to, attached to, or related to the Proof of Claim
filed by Sayyah on February 7, 1996 (the "Sayyah Obligation"), and that certain
partnership interest owned by the Estate of ICH which is the subject of
Adversary No. 397-3038 in this Court (the "Conseco Partnership Interest").
8. In accordance with Article 7 of the Joint Plan and pursuant to Section
1141(c) of the Bankruptcy Code, the Trust Assets [including the Capital and
Surplus Retention Assets that may subsequently be transferred to the Trust
pursuant to Article 7.5(c)] shall be conveyed to the Trust (1) free and clear of
all liens, claims, interests, encumbrances, and charges of the Claimants and
holders of Interests of the Debtors to the full extent permitted by the
Bankruptcy Code, including: (A) those of the kind specified in Sections 502(g),
(h), and (i) of the Bankruptcy Code, and (B) preferential rights or rights of
first refusal of any kind or nature whatsoever, whether direct or indirect,
absolute or contingent, matured or unmatured, liquidated or unliquidated, of,
by, or against the Trust Assets; and (2) with respect to contracts or leases
assigned or transferred, notwithstanding a provision in any contract or lease or
any applicable law that prohibits, restricts or conditions the
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assignment or transfer of that contract or lease, including all preferential
rights or rights of first refusal of any kind or nature whatsoever, pursuant to
Section 365(f) of the Bankruptcy Code; provided that such prohibition,
restriction or condition of assignment or transfer shall be negated only with
respect to transfers and assignments effected pursuant to the Joint Plan, and
that such prohibitions, restrictions and conditions of assignment shall
otherwise remain in full force and effect and a part of the contract or lease so
assigned or transferred. Notwithstanding the foregoing provisions of this
paragraph, the transferability of the CFSB Interest is governed by Article 6.2
of the Joint Plan and Paragraph 26 below.
9. The transfers of the Trust Assets to the Trust are and will be legal,
valid and effective assignments and transfers of the Trust Assets pursuant to
the Joint Plan.
10. In accordance with Article 7 of the Joint Plan and pursuant to Sections
105(b) and 1123(a)(5)(A)(B) and (D) of the Bankruptcy Code, any retention of
Retained Assets by Reorganized ICH and the transfer of Retained Assets to
Reorganized ICH is authorized and approved, and the Debtors are authorized,
empowered and ordered to transfer to Reorganized ICH all of their rights,
titles, and interests in and to the Retained Assets in accordance with the terms
and conditions of the Joint Plan.
11. In accordance with and subject to Article 7 of the Joint Plan, and
pursuant to Section 1141(a)(5)(A) of the Bankruptcy Code, on the Effective Date,
the Retained Assets shall be transferred and vested in Reorganized ICH (1) free
and clear of all liens, claims, interests, encumbrances, and charges of
Claimants and holders of Interests of the Debtors in accordance with and to the
full extent permitted by Section 1141(c) of the Bankruptcy Code, including: (A)
those of the kind specified in Sections 502(g), (h), and (i) of the Bankruptcy
Code; and (B) preferential rights or rights of first refusal of any kind or
nature whatsoever, whether direct or indirect, absolute or contingent, matured
or
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 5
<PAGE>
unmatured, liquidated or unliquidated, of, by, or against the Retained Assets;
and (2) with respect to contracts or leases assigned or transferred,
notwithstanding a provision in any contract or lease or any applicable law that
prohibits, restricts or conditions the assignment or transfer of that contract
or lease, including all preferential rights or rights of first refusal of any
kind or nature whatsoever, pursuant to Section 365(f) of the Bankruptcy Code;
provided that such prohibition, restriction or condition of assignment or
transfer shall be negated only with respect to transfers and assignments
effected pursuant to the Joint Plan, and that such prohibitions, restrictions
and conditions of assignment shall otherwise remain in full force and effect and
a part of the contract or lease so assigned or transferred.
12. The Debtors, the Trust and Reorganized ICH are authorized and empowered
to take such actions and do all things and to incur all reasonable costs and
expenses as may be necessary and required to implement and effectuate the Joint
Plan, the transfer to the Trust of the Trust Assets and the transfer to and
retention by Reorganized ICH of the Retained Assets, and this Order.
13. Notwithstanding the foregoing, Ozark National Life Insurance Company
shall retain its lien upon certain real property of Perry Park until its Secured
Claim has been paid in full, which shall be on the Initial Distribution Date,
whereupon Ozark shall execute and deliver to Reorganized ICH a complete release
of its lien on such property.
14. The provisions of the Article 7.5 of the Joint Plan relating to BML are
authorized and approved, and the Debtors, the Trust and Reorganized ICH are
authorized to take such action as may be necessary to perform their respective
duties under the Joint Plan, including but not limited to:
a. The Debtors are authorized to take any action and to execute such
documents as may be necessary or appropriate to effectuate the assumption
by
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OF REORGANIZATION UNDER CHAPTER 11 Page 6
<PAGE>
ICH of the rights and obligations of BML under the Modern/Western Agreement
and the Philadelphia American Agreement (as such Agreements are defined in
the Joint Plan); and
b. ICH is authorized to take any action and to execute such documents
as may be necessary or appropriate to effectuate the assignment to the
Trust of all of ICH's rights and obligations under the Modern/Western
Agreement and the Philadelphia American Agreement (as such Agreements are
defined in the Joint Plan); and the Trust is authorized to take any action
and to execute such documents as may be necessary or appropriate to
effectuate the assumption by the Trust of the obligations of ICH and/or BML
under the Modern/Western Agreement and the Philadelphia American Agreement.
c. The assumption by the Trust of non-reinsured liabilities of BML, as
provided for by the Joint Plan, is approved and the Trust is authorized to
take any action and to execute such documents that may be necessary or
appropriate to effectuate the assumption by the Trust of the non-reinsured
liabilities of BML. Reorganized ICH shall not be responsible or liable for
any liabilities of the Debtors including, without limitation, the
non-reinsured liabilities, as provided for by the Joint Plan.
15. Subject to the provisions of the Joint Plan, after the Effective Date,
Reorganized ICH may operate its business and buy, sell, use, acquire, and
dispose of its property, free of any restrictions imposed by the Bankruptcy Code
or any requirement of obtaining further approvals of the Court.
16. The Plan Proponents, the Trust, the Trustees, Reorganized ICH, the Shaw
Group, and any other Entity having duties or responsibilities under the Joint
Plan or this
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 7
<PAGE>
Order, and their respective directors, officers, general partners, agents,
representatives, and attorneys, are authorized, empowered and ordered to carry
out all of the provisions of the Joint Plan, to issue, execute, deliver, file,
and record, as appropriate, any instrument, or perform any act necessary to
implement, effectuate, or consummate the Joint Plan or this Order, and to issue,
execute, deliver, file, and record, as appropriate, such other contracts,
instruments, releases, indentures, mortgages, deeds, bills of sale, assignments,
leases, or other agreements or documents, and to perform such other acts and
execute and deliver such other documents as are required by, consistent with and
necessary or appropriate to implement, effectuate, or consummate the Joint Plan
and this Order and the transactions contemplated thereby and hereby, all without
the requirement of further application to, or Order of, the Court or further
action by their respective directors, stockholders or beneficiaries, and with
like effect as if such actions had been taken by unanimous action of the
respective directors, stockholders or beneficiaries of such entities. The
Co-CEOs, any other officer of the Debtors; the Secretary, assistant secretary,
and any other officer of Reorganized ICH; and the Managing Trustee of the Trust
(as defined in the Trust Agreement) are authorized to certify or attest to any
of the foregoing actions taken by the Debtors, Reorganized ICH and/or the Trust,
respectively. The Managing Trustee is hereby irrevocably appointed as the
Debtors' attorney-in-fact (which appointment as attorney-in-fact shall be
coupled with an interest), with full authority in the place and stead of each
Debtor and in the name of each Debtor or otherwise, from time to time after the
Effective Date, in the Managing Trustee's discretion to take any action and to
execute any instrument that the Managing Trustee may deem to be necessary or
advisable to convey, transfer, vest, perfect, and confirm title of the Trust
Assets in the Trust as to, and/or to put the Trust in possession of, any and all
Trust Assets, including, without limitation, to issue,
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 8
<PAGE>
execute, deliver, file, and record such contracts, instruments, releases,
indentures, mortgages, deeds, bills of sale, assignments, leases, or other
agreements or documents, and to file any claims, to take any action, and to
institute any proceedings that the Managing Trustee may deem necessary or
desirable in furtherance thereof.
17. The Debtors, the Trust and Reorganized ICH are further authorized,
empowered and ordered to cause to be filed with the Secretary of State or other
applicable officials of any applicable governmental units any and all
certificates, agreements, or plans of merger, dissolution, liquidation, or
amendment necessary or appropriate to effectuate the transactions contemplated
by the Joint Plan and this Order, and amended and restated certificates or
articles of incorporation and by-laws or certifications or articles of amendment
and all such other actions, filings, or recordings as may be required under
appropriate provisions of the applicable laws of all applicable Governmental
Units. The execution of any such document or the taking of any such action shall
be, and hereby is, deemed conclusive evidence of the authority of such Entity to
so act. This Order shall constitute all approvals and consents, if any, required
by the General Corporation Law of the State of Delaware and all other applicable
business corporation, trust, and other laws of the applicable governmental units
with respect to the implementation and consummation of the Joint Plan.
18. The Plan Proponents, Reorganized ICH, and the Trust shall have the
right, to the full extent permitted by Section 1142 of the Bankruptcy Code, to
apply to this Court for an order, notwithstanding any otherwise applicable
nonbankruptcy law, directing any appropriate entity to execute and deliver any
instrument or perform any act necessary to implement the Joint Plan, as required
thereunder or under the provisions of this Order.
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 9
<PAGE>
19. Pursuant to Sections 1141(a) and (d) of the Bankruptcy Code, the
provisions of the Joint Plan shall (i) bind all Claimants and Interests Holders,
whether or not they voted to accept the Joint Plan, and (ii) discharge the
Debtors, jointly and severally, from all claims that arose before the Petition
Date, and from any liability, including, without limitation, any liability of a
kind specified in Sections 502(h) or 502(i) of the Bankruptcy Code, that arose,
or has been asserted against, the Debtors, jointly or severally, at any time
before the entry of the Confirmation Order or that arises from any
pre-Confirmation conduct of the Debtors, jointly or severally, whether or not
the Claim is known or knowable. In addition, the distributions provided for
under this Joint Plan shall be in exchange for and in complete satisfaction,
discharge, and release of all Claims against and Interests in the Debtors or any
of their assets or properties, including any Claim or Interest accruing after
the Petition Date and prior to the Effective Date. Without limiting the
generality of the foregoing, Confirmation discharges all Unsecured Claims, all
Claims, if any, relating to ICH's 1986 retirement of its Class B preferred
stock, and all Claims or Interests relating to the escheat of Securities or
funds attributable to Securities of ICH. On and after the Effective Date, all
holders of Claims or Interests shall be precluded from asserting any Claim or
Interest against the Trust or Reorganized ICH or their assets or properties
based on any transaction or other activity of any kind that occurred prior to
the Confirmation Date except as provided in the Joint Plan.
20. Confirmation of the Joint Plan shall result in the issuance of a
permanent injunction against the: (i) commencement or continuation of any
judicial, administrative, or other action or proceeding against the Debtors, the
Trust, or Reorganized ICH on account of Claims against or Interests in the
Debtors, or on account of claims released pursuant to Articles 10.3 and 10.4 of
the Joint Plan against the Released Entities or Released
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 10
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Officers; (ii) enforcement, attachment, collection or recovery by any manner or
means of any judgment, award, decree, or order against the Debtors, the Trust or
Reorganized ICH on account of or arising from pre-Confirmation conduct of the
Debtors; or (iii) creation, perfection or enforcement of any encumbrance of any
kind against the Debtors, the Trust, or Reorganized ICH, or their respective
assets, arising from a Claim against or Interest in the Debtors.
21. The compromise, settlement or release by the Debtors of claims, if any,
against the Released Entities, the Released Officers or the Shaw Group does not
operate as a release of the claims, if any, held individually and
non-derivatively by third parties against such Entities or any other non-Debtor
third party; and the rights of any non-Debtor third party to pursue his, her, or
its individual, non-derivative claims, if any, against non-Debtor third parties
shall not be precluded or impaired by this Order.
22. As provided in Article 10.2(a) of the Joint Plan and subject to
Paragraph 14 of this Order and Article 7.5 of the Joint Plan, Reorganized ICH is
the successor and designated representative of the Debtors and their Estates
appointed for the purpose of retention and enforcement of the Retained Causes of
Action. As provided in Article 10.2(a) of the Joint Plan, the Trust is the
appointed successor and designated representative of the Debtors and their
Estates appointed for the purpose of retention and enforcement of claims
specifically relating to or arising from Trust Assets, including but not limited
to all claims related to collection of the Sayyah Obligation and the Conseco
Partnership Interest, but specifically excluding all claims related to any asset
which has been fully and finally converted into cash which has been transferred
to the Trust as the Effective Date.
23. Notwithstanding the foregoing, but only to the extent set forth in the
Joint Plan, the Trust shall be entitled to assert as an offset, objection, or
defense with respect
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 11
<PAGE>
to any Claim filed or asserted against the Estates, or against the Trust as
successor to the Estates, any Retained Cause of Action retained by Reorganized
ICH under this Joint Plan, provided however, that the obligations of Reorganized
ICH set forth in Article 10.2(b) of the Joint Plan shall not apply to any such
Retained Cause of Action so asserted by the Trust. This provision shall be
deemed to be an assignment of such Retained Cause of Action to the Trust solely
for the limited purpose, and only to the extent necessary, to permit the Trust
to fully assert such offset, objection or defense. As provided in the Joint
Plan, any recovery obtained through such assertion of a Retained Cause of Action
by the Trust in excess of the amount of the claim asserted against the Estates
or the Trust, as the case may be, shall be the property of Reorganized ICH.
24. Consistent with the Joint Plan, Reorganized ICH or the Trust, as
applicable, shall be the only parties authorized to pursue the Retained Causes
of Action and any other claims or causes of action of the Debtors, and shall
have the sole right to waive or assert any attorney-client or other privilege of
the Debtors; and no other party shall have the right or obligation to pursue any
such actions or to waive, raise, or assert any claim or privilege related
thereto. Notwithstanding any applicable statutes of limitation, Reorganized ICH
and the Trust, as applicable, shall have the right to prosecute any claim or
cause of action, including the Retained Causes of Action within the time periods
provided for the prosecution of such actions by the Debtors, as set forth in
Section 546(a) of the Bankruptcy Code.
25. The "Judgment Reduction and Hold Harmless" provision set forth at
Article 10.2(b) of the Joint Plan is authorized and approved.
26. At the Confirmation Hearing, the Plan Proponents tendered to the Court
a letter agreement among the Debtors, the Equity Committee, and the Shaw Group
which
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 12
<PAGE>
constitutes the Second Nonmaterial Modification of the Joint Plan of
Reorganization which was agreed and consented to by the Creditors Committee, and
which provides as follows:
(a) The provisions of Article 10.4 of the Joint Plan respecting the
Released Officers shall remain in full force and effect with respect to W.
Hubert Mathis, Steven R. Cartwright, Robert J. Bruce, and H. Don
Rutherford, and the Shaw Group agrees to the releases of those officers as
part of the Confirmation of the Joint Plan.
(b) With respect to John T. Hull, Robert C. Greving, and Daniel B.
Gail, the releases contemplated by Article 10.4 of the Joint Plan shall not
be executed and delivered on the basis of this Order, but rather shall be
the subject of a separate, prompt hearing for compromise of controversies
under and in accordance with the procedures and standards of Bankruptcy
Rule 9019 and law applicable in the Fifth Circuit.
(c) The compromise hearing shall be held on an expedited basis on
February 20, 1997, at 9:00 A.M. Pending such compromise hearing, each of
Messrs. Hull, Greving and Gail shall make themselves available for up to
four hours each of deposition examination to be conducted by the Shaw
Group. Robert T. Shaw shall make himself available to the Plan Proponents
for up to four hours of deposition examination in advance of the compromise
hearing. The four (4) hours in each deposition shall be allocated to direct
examination only. Cross-examination (if any) and objections or statements
by counsel shall not reduce the four hours. If, for any reason, the Court,
at such compromise hearing, does not approve the contemplated release of
any of Messrs. Hull, Greving or Gail, the maximum financial risk or
exposure
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 13
<PAGE>
any of them shall ever have (regardless of any greater liability
established) for claims that otherwise (in accordance with Article 10.4 of
the Plan) would have been released under the Plan, shall be $100,000.
(d) Any and all additional proposed releases which the Equity
Committee or the Reorganized Debtor proposes to deliver with respect to
pre-petition acts shall be subject to determination by the Bankruptcy Court
and the Rule 9019 procedures and standards in the event the Shaw Group
objects to any such proposed releases.
(e) The Shaw Group, including Robert T. Shaw individually, shall
promptly reimburse each of Messrs. Hull, Greving and Gail up to $5,000 for
legal expense actually incurred by each of them beginning this date and
continuing through the compromise hearing in connection with the compromise
hearing and their preparation therefor.
(f) The Shaw Group shall deposit into escrow, 48 hours prior to the
Effective Date, the documents and funds required under Article 6.2 of the
Plan. The Plan Proponents shall similarly deposit the release of the Shaw
Group into escrow 48 hours prior to the Effective Date. The release of the
Shaw Group shall be executed by the Plan Proponents in the following form:
a general release as that term is used and commonly understood at law in
favor of the Shaw Group and thereby release all claims that the Debtors,
the Equity Committee, the Creditors Committee, or any of them or their
affiliates ever had, now have, or may claim to have or hereafter have, or
which the Debtors, the Equity Committee, the Creditors Committee or any of
them or their affiliates could have asserted or could assert on their own
behalf, or derivatively on behalf of the Debtors prior to or related to
this bankruptcy, including without limitation all claims, counterclaims,
demands, controversies, costs, contracts, debts, sums of money, accounts,
reckonings,
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 14
<PAGE>
bonds, bills, damages, obligations, liabilities, objections, actions and
causes of action, expenses, attorneys' fees of any character, nature, type
or description, whether in law or in equity, in contract, tort, or
otherwise, known or unknown, suspected or unsuspected, including claims for
negligence, gross negligence, fraud, intentional, misconduct or otherwise.
The releases to be executed shall bind the Debtors, the Equity Committee,
the Creditors Committee, and each of them, and each of their affiliates,
and their respective successors, assigns, or representatives, including,
but not limited to, the revested/reorganized Debtors, and each of them, and
any representative of any bankruptcy or other estate for such Debtors or
such revested/reorganized Debtors. This release shall not apply to the Shaw
Group's obligations under the Joint Plan or for acts occurring after the
Effective Date of the Joint Plan.
(g) Releases given to the Trust, the Trustee, the Creditors Committee,
the Equity Committee, and their respective present and former officers,
directors, members, employees, agents and attorneys pursuant to Article
10.3 of the Joint Plan (exclusive of the Shaw Group) shall be time limited
to the post-petition activities of such Released Entities related to the
Case.
(h) All objections to confirmation of the Joint Plan, or other
pleadings in any manner opposed to, or seeking the continuance of, the
Court's consideration of Confirmation are withdrawn by the Shaw Group with
prejudice, and the Shaw Group fully supports the entry by the Court of this
Order and shall abide by and timely comply with the terms and provisions of
the Joint Plan, including Article 6.2 of the Joint Plan.
27. Except as modified by Paragraph 26 above, the Joint Plan resolves all
disputes between the Debtors and the Released Entities, as provided in Article
10.3 of the Joint Plan, with respect to all claims that the Debtors ever had,
now have, or may claim to
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 15
<PAGE>
have or hereafter have, or which the Debtors could have asserted or could
assert, jointly or severally, including without limitation claims held in their
corporate capacity and claims that third parties may assert derivatively on
behalf of the Debtors absent bankruptcy. Confirmation of the Joint Plan releases
each Released Entity from all such claims, counterclaims, demands,
controversies, costs, contracts, debts, sums of money, accounts, reckonings,
bonds, bills, damages, obligations, liabilities, objections, actions and causes
of action of any nature, type or description, arising prior to the Confirmation
Date, whether in law or in equity, in contract, tort, or otherwise, known or
unknown, suspected or unsuspected, including claims for negligence, gross
negligence, or otherwise. On the Effective Date, the Debtors shall be authorized
to execute general releases in favor of the Released Entities consistent with
the Joint Plan.
28. Except as modified by Paragraph 26 above, on the Effective date, the
Debtors shall execute releases of the Released Officers consistent with the
Joint Plan.
29. Any claim or cause of action may be settled by Reorganized ICH or the
Trust, as applicable, pursuant to Article 11.10 of the Joint Plan without the
necessity of Court approval under Bankruptcy Rule 9019 or otherwise. To the
extent the Trust is entitled to assert a Retained Cause of Action pursuant to
the Joint Plan, the Trust may compromise, settle or release any such Retained
Cause of Action with the consent of Reorganized ICH. Nothing herein shall
prohibit Reorganized ICH or the Trust from seeking Bankruptcy Court approval of
the compromise, settlement or release of any claim.
30. As of the Effective Date, in accordance with Section 1141(d)(1) of the
Bankruptcy Code: (i) all the outstanding shares of common stock, $1.00 par value
per share of ICH (the "Common Stock"), all outstanding shares of $1.75
Convertible Exchangeable Preferred Stock, Series 1986-A, $25.00 stated value,
issued by ICH (the
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 16
<PAGE>
"Preferred Stock"), and all rights of the Interest holders therein, (ii) all
outstanding 11 1/4% Senior Subordinated Notes due 1996 and outstanding 11 1/4%
Senior Subordinated Notes due 2003 issued by ICH (the "Notes" and, together with
the Common Stock and the Preferred Stock, the "Securities") and, (iii) the
indentures, debentures or statements of resolution and other agreements
heretofore binding upon the Debtors or their assets with respect to the
Securities shall be deemed to be terminated, cancelled, extinguished, void, and
of no further force or effect in accordance with the Joint Plan without any
action by the holders of such Securities, and no consideration shall be paid or
delivered with respect thereto except as otherwise provided in the Joint Plan.
Notwithstanding the foregoing, the distribution provisions of the Indentures
shall be followed by the Trust in order to facilitate distribution to record
holders of the Notes to the extent not inconsistent with the provisions of the
Joint Plan, the Trust Agreement, and this Order.
31. Subject to Paragraph 33 below, the Effective Date shall be the date for
determining the Entities holding Securities who are entitled to receive
distributions pursuant to the Joint Plan. As of the close of business on the
Effective Date, the transfer ledgers in respect of the Securities shall be
closed, and no transfer of the Securities occurring after the Effective Date
shall be recognized. Reorganized ICH, the Trust, the Transfer Agent, the
Distribution Agent, the Indenture Trustee and their respective agents shall be
entitled instead to recognize and deal for purposes herein with only those
holders of record stated on the respective transfer ledgers for the Securities
as of the close of business on the Effective Date.
32. Subject to Paragraph 33 below, distributions and deliveries called for
by the Joint Plan, other than distributions with respect to non-classified
Claims, shall be proper if made (i) to the holders of Allowed Claims in ICH
Classes 1, 2, 3, 4 and 5 (except as
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 17
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provided in clause (ii) below), ICH Classes 6 and 7 (to the extent, if any, of
Securities- Related Claims within those Classes), SWL Holding Classes 1 and 2,
and Care Classes 1 and 2, at the addresses set forth on the proofs of claim
Filed by such holders (or at the last known addresses or such holders if no
proof of claim is Filed or if the Debtors have been notified of a change of
address), (ii) to Record Holders of Notes as of the record date for any
particular distribution, on account of their ICH Class 5 Claims, at the
addresses contained in the records of the Indenture Trustee as of the Effective
Date and (iii) to the Record Holders of Preferred Stock and Common Stock, as of
the record date for any particular distribution, at the addresses contained in
the records of the appropriate Transfer Agent as of the Effective Date. The
record date for purposes of determining the Entities holding the Securities and
other Claims that are entitled to receive initial distributions under the Joint
Plan shall be the Effective Date.
33. No distribution shall be mailed to any holder of an Allowed Claim or
Allowed Interest if any mailing to such holder's last known address has been
returned as undeliverable, unless and until the Debtors or the Distribution
Agent (as such term is defined in the Joint Plan) are notified of such holder's
then-current address, at which time all distributions then due shall be made to
such holder without interest. All claims for undeliverable distributions shall
be made on or before the later of (a) two years after the Effective Date or (b)
120 calendar days after an order of the Bankruptcy Court allowing such holder's
Claim or Interest becomes a Final Order, after which period the Claim or
Interest of any holder with respect to such undeliverable distribution shall be
deemed abandoned, discharged, and forever barred as of the second anniversary of
the Effective Date. Notwithstanding the above, if any beneficial interest in the
Trust ("Trust Interest") is transferred after the initial issuance of
certificates by the Trust representing Trust Interests,
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 18
<PAGE>
distributions to be made with respect to any such Trust Interest shall be made
to the record holder of such Trust Interest on the applicable record date
determined in accordance with the Trust Agreement. Notwithstanding anything
herein to the contrary, no Trust Interest shall be transferable prior to receipt
of appropriate advice from the Securities and Exchange Commission (the "SEC")
which satisfies the Trustees of the Trust as to the transferability of Trust
Interests on terms that are reasonable and economical as determined by the
Trustees.
34. Any holder of an Allowed Claim or Allowed Interest arising on account
of outstanding Securities who has not surrendered such holder's Securities as
set forth in Article 9.1(d) of the Joint Plan within two (2) years after the
Effective Date shall forfeit, to the extent permitted by law, such holder's
right to receive any distribution under the Joint Plan with respect to such
Allowed Claim or Allowed Interest, provided that this provision shall not apply
to Securities-Related Claims.
35. The Trust shall be governed by the terms, conditions, and rules
substantially as set forth in the form of trust agreement filed with the Court
on January 24, 1997 (the "Trust Agreement"), and the Trust Agreement, together
with changes thereto as may be consistent with this Order and the Joint Plan, is
approved. Susan A. Brown is approved as the Managing Trustee and John A. Tobin,
Jeffrey Schultz, and Gregory Lathrop are approved as Supervising Trustees of the
Trust. The Trust is authorized to enter into such employment agreement with
Susan A. Brown as the Managing Trustees may approve, which agreement may be on
substantially the same terms as her existing Employment Agreement.
36. The Restated Certificate of Incorporation and the By-Laws of
Reorganized ICH are approved. Reorganized ICH is authorized to appoint an
initial Board of Directors
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 19
<PAGE>
consisting of between four (4) and nine (9) members. The following persons are
hereby approved as the initial board of directors to commence on the Effective
Date:
James R. Arabia
Michael D. Dunn
Kenneth T. Giddens
Carl D. Robinson
James R. Arabia is approved as President and Chief Executive Officer of
Reorganized ICH upon the terms and conditions provided for in the Joint Plan and
set forth in the Disclosure Statement.
37. All Securities held in treasury by ICH immediately before the Effective
Date shall be cancelled and extinguished as of the Effective Date without any
action on the part of ICH and no payment or distribution shall be made with
respect thereto.
38. The Distribution Agent is authorized to make distributions of
Reorganized ICH Common Stock and cash as required in the Joint Plan to be
distributed to holders of Allowed ICH Class 6 and 7 Interests. The Managing
Trustee or such agent as the Managing Trustee may employ in her sole discretion
shall be authorized to make all other distributions of cash as are required to
be made under the Joint Plan; provided that distributions to be made to Record
Holders of the Notes as of the Effective Date may be made by the Managing
Trustee, such other agent as the Managing Trustee may employ in her sole
discretion, the Distribution Agent, or the Indenture Trustee.
39. No payment or distributions shall be required to be made with respect
to all or any portion of a Contested Claim or Contested Interest unless and
until such Claim or Interest becomes an Allowed Claim or Allowed Interest as
determined by Final Order.
40. Following the Effective Date, the Trust shall withhold from the
property to be distributed under the Joint Plan, and shall reserve, an amount
sufficient to be distributed
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 20
<PAGE>
on account of Contested Claims as of the Initial Distribution Date (the Reserved
Distribution Amount"). As to any Contested Claim, upon a request for estimation
by the party in interest, the Bankruptcy Court shall determine what amount is
sufficient to withhold as the Reserved Distribution Amount. In the event that no
party in interest elects to request such an estimation from the Bankruptcy Court
with respect to a Contested Claim, the Debtors or, after the Effective Date, the
Managing Trustee shall withhold as the Reserved Distribution Amount the amount
which, in the discretion of the Managing Trustee, such Claimant would have
received under the Joint Plan, if any, if the proof of claim Filed by or on
behalf of the Claimant were Allowed. Reorganized ICH shall reserve sufficient
authorized but unissued shares of Reorganized ICH Common Stock to allow for
distributions to holders of Allowed Securities-Related Claims, if any, related
to the Common Stock or Preferred Stock.
41. Payments and distributions to each holder of a Contested Claim or
Contested Interest, to the extent that it ultimately becomes an Allowed Claim or
Allowed Interest, shall be made in accordance with the provisions of the Joint
Plan governing the respective Class of Claims or Interests of which such
Contested Claim or Contested Interest belongs. As soon as practicable after the
date that the order or judgment of the Bankruptcy Court allowing such Claim or
Interest becomes a Final Order, any Reserved Distribution Amount that would have
been distributed to the holder of such Claim or Interest had such Claim or
Interest been an Allowed Claim or Allowed Interest on the Effective Date, to the
extent of the Allowed Amount of such Claim or Interest, shall be distributed to
the holder of such Claim or Interest.
42. Any asset and property to be distributed by the Trust under the Joint
Plan which remains unclaimed or otherwise not deliverable to the person entitled
thereto on the
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 21
<PAGE>
later of (a) two years after the Effective Date or (b) 120 calendar days after
an Order allowing such person's Claim or Interest becomes a Final Order, shall
become vested in, and shall be transferred and delivered to the Trust for
distribution pursuant to the Joint Plan. In such event, such person's Claim or
Interest shall no longer be deemed to be Allowed and such person shall be deemed
to have no further Claim or Interest in respect of such distribution and shall
not participate in any further distributions under the Joint Plan.
43. Until such time as a contingent Claim or unliquidated Claim becomes
fixed and Allowed, such Claim shall be treated as a Contested Claim for purposes
relating to voting, allowance, and distributions under the Joint Plan. The
Bankruptcy Court upon request by the Debtors or, after the Effective Date, by
the Trust or Reorganized ICH, shall in a summary proceeding on each such
contingent Claim or unliquidated Claim, by estimation determine the allowability
of each such contingent or unliquidated Claim.
44. Payment to be made by the Trust pursuant to the Joint Plan shall be
made by check drawn on a domestic bank or by wire transfer from a domestic bank.
45. The Trust is authorized to disregard, and shall not make distributions
in respect of, Allowed Claims whose Pro Rata share of the proposed distribution
would be less than $5.00. In such case, the Allowed Amount of such Claims for
purposes of such distribution shall be reduced to zero.
46. Reorganized ICH is authorized to make distributions of Reorganized ICH
Common Stock in whole share amounts only, and no fractional shares of
Reorganized ICH Common Stock shall be distributed pursuant to the Joint Plan.
Fractional shares of Reorganized ICH Common Stock to which any Beneficial or
Record Holder of Preferred Stock or Common Stock as of the Effective Date may be
entitled shall be rounded to the
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 22
<PAGE>
nearest whole share. Beneficial holders of fewer than 14 shares of Preferred
Stock and Beneficial holders of fewer than 101 shares of Common Stock shall not
be entitled to any distribution of Reorganized ICH Common Stock on account of
their respective Interests, and in each such case, the Allowed Amount of such
Interests for purposes of such distribution shall be reduced to zero.
47. Notwithstanding the provisions of Article IV of the Joint Plan; (a)
Allowed Claims, if any, of a particular class that are subordinated to other
Allowed Claims of such class pursuant to Section 510 of the Bankruptcy Code
shall be paid only after payment in full of all such non-subordinated Claims of
such class; and (b) Allowed Class 6 Interests, if any, that are subordinated to
other Allowed Class 6 Interests, pursuant to Section 510 of the Bankruptcy Code
shall not be entitled to receive any distributions until after the distribution
to holders of Allowed non-subordinated Class 6 Interests equals the full amount
of their liquidation preference of $25.00 per share of Preferred Stock.
48. For purposes of calculating the distribution of Reorganized ICH Common
Stock to holders of Allowed Securities-Related Claims based on Common Stock, if
any, pursuant to the provisions of Article IV of the Joint Plan, holders of
Allowed Securities- Related Claims, if any, based on Common Stock shall be
entitled to receive their Pro Rata portion of shares of Reorganized ICH Common
Stock in an amount equal to: (i) the total amount of all Allowed
Securities-Related Claims within ICH Class 7, divided by (ii) $254 million,
multiplied by (iii) 1,309,524, multiplied by (iv) a fraction, the numerator of
which is the Allowed Amount of such holder's Allowed Securities-Related Claim
within ICH Class 7, and the denominator of which is the total amount of all
Allowed Securities-Related Claims within ICH Class 7.
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 23
<PAGE>
49. Pursuant to Section 1142(b) of the Bankruptcy Code and as a condition
precedent to a holder of an Allowed Claim or Interest in ICH Class 5, ICH Class
6 or ICH Class 7 receiving a distribution under the Joint Plan on account of
Securities, such holder of the Securities must deliver to the Distribution Agent
or to the Managing Trustee or her agent, as applicable, the Securities giving
rise to such holder's Allowed Claim or Interests, or such evidence or other
documents regarding ownership of such Securities as the Distribution Agent or
the Managing Trustee may require, together with the Letter of Transmittal,
properly completed and executed by such holder of the Securities, and any
documents required by the Letter of Transmittal, on or before the second (2nd)
anniversary of the Effective Date.
50. Each professional person whose retention with respect to the Debtors'
cases has been approved by the Bankruptcy Court and who holds, or asserts, an
Administrative Claim under Section 330(b)(2)-(5) of the Bankruptcy Code (a "Fee
Claim") shall be required to file with the Bankruptcy Court a final fee
application within sixty days after the Effective Date and to serve notice
thereof on all parties entitled to such notice pursuant to the Order
Establishing Interim Procedures and Guidelines for Compensation of Professional
Persons. The failure to timely file the fee application as required under
Article 2.1(b) of the Joint Plan shall result in the Fee Claim being forever
barred and discharged. A Fee Claim, with respect to which a fee application has
been properly Filed pursuant to the Joint Plan, shall become an Administrative
Claim only to the extent allowed by Final Order. Not later than five days prior
to the Effective Date, each such professional person shall serve an estimate of
such final Fee Claim on all parties entitled to such notice pursuant to the
Order Establishing Interim Procedures and Guidelines for Compensation of
Professional Persons. The estimated amounts of such Fee Claims shall on the
Effective
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 24
<PAGE>
Date be reserved by the Trust for payment of such Fee Claims and shall not be
treated as Available Cash under the Trust. All Fee Claims shall be paid promptly
by the Trust after such amounts are allowed by Final Order of the Bankruptcy
Court.
51. All amounts due and owing to Susan A. Brown and Rodney D. Moore
pursuant to their respective Employment Agreements entered into with ICH as of
January 1, 1996, shall be paid in cash in full by the Trust on the Initial
Distribution Date. Any additional amounts that become payable under such
Employment Agreements shall be paid in cash in full by the Trust as and when due
thereunder without further order or approval of the Bankruptcy Court.
52. Any other person or Entity who claims to hold any other Administrative
Claim shall be required to file with the Court an application within sixty days
after the Effective Date and to serve notice thereof on all parties entitled to
such notice. The failure to file timely the application as required under the
Joint Plan shall result in the Claim being forever barred and discharged. An
Administrative Claim with respect to which an application has been properly
Filed pursuant to the Joint Plan, shall become an Allowed Administrative Claim
to the extent such claim is allowed by Final Order.
53. The Joint Plan provides for the continuation of retiree benefits, as
the term is defined under Section 1114 of the Bankruptcy Code, as obligations of
the Trust. The Trust is authorized to exercise the Debtors' rights under the
applicable retiree benefit documents, including the modification of such
benefits in accordance with such plan documents and the payment of sums to a
third party for the provision of such benefits to retirees henceforth. In
addition, the Debtors are authorized to take such action as may be necessary or
appropriate to terminate all existing employee benefit plans, other than the
retiree benefit plan, on or before the Effective Date.
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 25
<PAGE>
54. Any obligations of the Debtors, pursuant to the Order Regarding
Indemnification of Officers and Directors of Debtors entered February 14, 1996,
shall not be discharged or impaired by Confirmation or Consummation of the Joint
Plan; accordingly, such indemnification obligations shall survive unaffected by
the reorganization contemplated by the Joint Plan and shall be performed and
honored by the Trust regardless of the Confirmation of the Joint Plan, provided
however, that such obligations shall not be obligations of Reorganized ICH. The
balance of the $500,000 fund provided for in such order (the "Indemnification
Fund") shall be transferred to the Trust and utilized as provided in such Order.
All other obligations of the Debtors with respect to indemnifications of
officers and directors, or agents, representatives, successors or assigns
thereof, shall be treated as executory contracts rejected under Article 8.1 of
the Joint Plan, and all Claims arising from or related thereto shall be treated
and classified as provided by Article 8.2 of the Joint Plan, subject to any and
all defenses thereto and to subordination of such Claims under applicable
provisions of the Bankruptcy Code. The withdrawal of the Proofs of Claim of C.
Fred Rice shall not affect the survival of any claim by him for indemnity by ICH
as treated under Article 10.7 of the Joint Plan.
55. The Consolidated Tax Allocation Agreement (the "Tax Agreement") to
which the Debtors are parties shall be rejected on the Effective Date, and any
claims existing under such agreement between and among the Debtors and BML, ICH
Funding Corporation, and REO Holding Corporation shall be deemed to be zero.
Each of the Debtors are authorized to execute and deliver to Modern American
Life Insurance Company ("Modern") and Western Pioneer Life Insurance Company
("Western") such instruments and documents as may be necessary or appropriate to
release Modern and Western from any further liability with respect to taxes
(including under or pursuant to the
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 26
<PAGE>
Tax Agreement to which Debtors are, and Modern and Western formerly were, a
party) as contemplated by, and in satisfaction of BML's and the Debtors'
obligations under, Section 5.17 of the Modern/Western Agreement and Section 10
of the Closing Statement and Amendment to Purchase Agreement dated June 28,
1996, between BML and Reassure America Life Insurance Company. Each of the
Debtors are authorized to execute and deliver to Philadelphia American Life
Insurance Company ("Philadelphia American ") such instruments and documents as
may be necessary or appropriate to release Philadelphia American from any
further liability with respect to taxes (including under or pursuant to the Tax
Agreement to which Debtors are, and Philadelphia American formerly was, a party)
as contemplated by, and in satisfaction of BML's and the Debtors' obligations
under, Section 5.18 of the Philadelphia American Agreement and Section 9 of the
Closing Statement and Agreement dated June 28, 1996, between BML and New Era
Enterprises, Inc.
56. Any other executory contract or an unexpired lease not expressly
assumed, as provided in Section 365(a) of the Bankruptcy Code on or before the
Confirmation Date, is deemed rejected. Without limiting the foregoing, the
Independent Contractor and Service Agreement dated February 11, 1994, between
ICH Corporation and Robert T. Shaw and the Independent Contractor and Service
Agreement dated February 11, 1994 between ICH Corporation and C. Fred Rice have
been previously terminated, and all claims pursuant to such agreements will be
withdrawn with prejudice and released pursuant to Section 6.2(b) of the Joint
Plan. Any Claims made on account of executory contracts or unexpired leases that
are deemed rejected pursuant to the Joint Plan must be filed with the Bankruptcy
Court within 30 days after the Confirmation Date or such Claim shall be forever
barred and discharged.
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 27
<PAGE>
57. The Joint Plan and its classification scheme contains certain
compromises of various potential claims, rights and causes of action, including
the Settlement with the Shaw Group, the release of the Released Entities, and
the release of the Released Officers. All such compromises embodied in the Joint
Plan and the classification scheme set forth in the Joint Plan are reasonable,
have been consented to and accepted by virtue of the acceptance of the Joint
Plan by the requisite members of each impaired Class of Claims and Interests,
and are approved by the Court.
58. On the Effective Date, the Shaw Group shall (i) pay $500,000 in cash to
Reorganized ICH and (ii) withdraw the claims that the Shaw Group and the members
thereof filed with prejudice to refiling such claims in the Case.
59. Notwithstanding any provisions of the CFSB Interest to the contrary,
the CFSB Interest shall not be subject to any transferability or ownership
restrictions, save and except those conditions set forth in Article 6.2(c) of
the Joint Plan. The Shaw Group and the Trust shall immediately perform all of
their respective obligations set forth in Article 6.2(c) of the Joint Plan and
Paragraph 26 of this Order regarding the CFSB Interest.
60. Notwithstanding a contrary interpretation of the provisions of Article
III and Article IV of the Joint Plan with respect to the ICH Class 2 and ICH
Class 5 Claims, if any, of Sayyah, the following shall apply:
(a) Objection. Any objection counterclaim or action for affirmative
recovery related to Sayyah's Claims shall be brought, if at all, not later
than thirty (30) days following the Effective Date. In the event no
objection to Sayyah's proof of claim is filed within that time, then the
ICH Class 2 Secured
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 28
<PAGE>
Claim of Sayyah shall be deemed allowed and satisfied by setoff as of the
Petition Date and the unsecured ICH Class 5 Claim of Sayyah for the
deficiency shall be deemed an Allowed Claim in ICH Class 5.
(b) Treatment of ICH Class 2 Claim of Sayyah. Upon an objection, the
Court will determine the amount and timing of the offset or recoupment to
which Sayyah is entitled. The Debtor, the Creditors' Committee and, upon
its formation, the Trust, agree that the date of any offset or recoupment
applied shall be deemed to occur no later than the earlier of (i) February
15, 1997, or (ii) the Effective Date.
(c) Treatment of ICH Class 5 Claim of Sayyah. The remainder of the
Claim of Sayyah not treated as an ICH Class 2 Claim shall be treated as an
Unsecured Claim in ICH Class 5 in the amount set forth in Sayyah's proof of
claim and calculated as set forth above, or in the amount, if any, as may
be determined by the Court upon timely objection.
(d) Claims Reserve. The Trust shall reserve the amount of $3.3 million
with respect to the ICH Class 5 Claim of Sayyah under the provisions of the
Joint Plan. This amount shall not be determined as a limit to the amount,
if any, of an allowed ICH Class 5 claim of Sayyah.
61. On the Initial Distribution Date, the Creditors Committee and the
Equity Committee shall cease to exist and have no further status as parties in
interest except for
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 29
<PAGE>
purposes of prosecuting any applications for Fee Claims, participating in any
appeal of the Confirmation Order, and participating in the proceedings on the
Bankruptcy Rule 9019 motion referred to in Paragraph 26 above, in which events
such committees shall cease to exist immediately after the resolution of such
matters. Following the termination of the Committees, any professional that was
employed by the Creditors Committee may be employed by the Trust and any
professional that was employed by the Equity Committee may be employed by
Reorganized ICH. The Trust may adopt and succeed to any unresolved pleading
filed by the Creditors Committee during the Chapter 11 Case; Reorganized ICH may
adopt and succeed to any unresolved pleading filed by the Equity Committee
during the Chapter 11 Case; and the Trust or Reorganized ICH may adopt and
succeed to any unresolved pleading filed by the Debtors during the Chapter 11
Case.
62. The Trust Interests, Trust Certificates, and Reorganized ICH Common
Stock (collectively, the "Plan Securities") offered, sold and/or issued pursuant
to the Joint Plan are deemed to have been offered, sold and/or issued pursuant
to Section 1145 of the Bankruptcy Code. Pursuant to Section 1145 of the
Bankruptcy Code, the exemption of the offer and sale of securities from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and any state or local law requiring registration for the
offer or sale of a security, applies with respect to: the Plan Securities
distributed pursuant to the Joint Plan and any other interests that may be
deemed to be securities offered, sold, issued, or distributed pursuant to the
Joint Plan and to the transactions contemplated thereunder. Without limiting the
generality of the foregoing: (i) the offer, sale and issuance of the Trust
Interests or Trust Certificates (to the extent such interests and/or
certificates constitute securities under the Securities Act), and the
distribution by the Trust of the Trust Interests or Trust Certificates (to the
extent such interests and/or certificates constitute
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 30
<PAGE>
securities under the Securities Act), to Claimants pursuant to the Joint Plan
are exempt from the requirements of Section 5 of the Securities Act and all
securities laws of all applicable governmental units pursuant to Section
1145(a)(1) of the Bankruptcy Code; (ii) the offer, sale and issuance by
Reorganized ICH of the Reorganized ICH Common Stock, and the distribution by
Reorganized ICH and of Reorganized ICH Common Stock, pursuant to the Joint Plan
are exempt from the requirements of Section 5 of the Securities Act and all
securities laws of all applicable governmental units pursuant to Section
1145(a)(1) of the Bankruptcy Code; and (iii) all of the Plan Securities
distributed pursuant to the Joint Plan and any other securities that may be
deemed to be distributed pursuant to the Joint Plan shall be subject to the
provisions of Section 1145(b)(1) of the Bankruptcy Code relating to the
definition of an underwriter in Section 2(11) of the Securities Act, and to
compliance with rules and regulations of the Securities and Exchange Commission
(the "SEC"), if any, applicable at the time of any future transfer of such
securities.
63. As established in Paragraph 33 above, the record date for purposes of
determining the Entities holding the Securities and other Claims that are
entitled to receive initial distributions under the Joint Plan shall be the
Effective Date. Pursuant to Bankruptcy Rules 1007(i) and 3020(d), and Section
1142(b) of the Bankruptcy Code, (i) Bank of Louisville and Trust Company, the
indenture trustee for the Notes and the transfer agent for the Common Stock, or
KeyCorp Shareholders Services, Inc. (collectively the "Transfer Agents"), are
hereby directed to disclose to the Debtors, the Trust, Reorganized ICH, and the
Trust Depository Institutions (the "Depositories") and such other transfer
agents, street name holders and all other bank, broker and agent nominees listed
as record holders of the Securities ("Other Record Holders") for which they act
as trustee or transfer agent and to the extent available, within ten (10)
calendar days after the Effective Date, the name,
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 31
<PAGE>
address, and taxpayer identification or social security number of each such
beneficial owner, and the amount and type of the Securities, identified by CUSIP
(if available) or other identification number, owned by each such beneficial
owner on whose behalf they hold record title to the Securities, using the
Effective Date as the record date; (ii) the Depositories are hereby directed to
disclose to the Debtors, the Trust and Reorganized ICH the lists of such
transfer agents, street name holders and all other bank, broker and agent
nominees in whose name the Securities are registered with the Depositories
("Depository Record Holders") and, to the extent available, within twenty (20)
calendar days after the Effective Date, the name, address, and taxpayer
identification or social security number of each such beneficial owner; and the
amount and type of the Securities, identified by CUSIP (if available) or other
identification number, owned by each such beneficial owner on whose behalf they
hold record title to Securities, using the Effective Date as the record date;
(iii) the Other Record Holders, the Depository Record Holders and all other
transfer agents, street name holders and other bank, broker or agent nominee
record holders of the Securities that hold record title on behalf of beneficial
owners of the Securities are hereby directed to provide to the Debtors, the
Trust and Reorganized ICH, within thirty (30) calendar days after the Effective
Date, the name, address, and taxpayer identification or social security number
of each such beneficial owner; and the amount and type of the Securities,
identified by CUSIP (if available) or other identification number, owned by each
such beneficial owner on whose behalf they hold record title to Securities,
using the Effective Date as the record date. The directions contained above
shall apply and be effective notwithstanding the provisions of Rule 14b-1 and
Rule 14b-2 promulgated under the Securities Exchange Act of 1934, as amended.
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 32
<PAGE>
64. The issuance, transfer or exchange of the Plan Securities to be issued
under the Joint Plan, and the recognition, continuation, or creation of liens on
assets or property of the Debtors, Reorganized ICH or the Trust, or the transfer
of any asset or property, pursuant to the Joint Plan, or the making, delivery or
recordation of any instrument of transfer under the Joint Plan, shall not be
taxed under any law imposing a stamp tax, transfer tax or other similar tax or
fee. All filing and recordation officers or authorities responsible for the
assessment or collection of any such tax or fee may rely on the terms of this
Order for all such purposes.
65. In the event the Chapter 11 Cases (or any of them) shall be
inadvertently deemed closed or fully administered before the substantial
consummation of the Joint Plan, then such Chapter 11 Case(s) may be reopened
pursuant to Section 350(b) of the Bankruptcy Code and Rule 5010 of the
Bankruptcy Rules for cause.
66. The Debtors shall promptly serve notice of the entry of this Order,
together with notice of the last day for filing administrative expense claims,
claims arising from the rejection of executory contracts, and applications for
allowances of compensation and/or reimbursement of expenses, pursuant to
Bankruptcy Rules 2002(f)(7) and 3020(c) and the terms of the Joint Plan. Such
notice shall be given by U.S. Mail and by publication in The Dallas Morning News
and The Wall Street Journal (national edition).
67. The Debtors shall mail a copy of this Order to all parties on the
Master Service List.
68. This Order shall be, and hereby is, declared to be in recordable form
and shall be accepted by any filing or recording officer or authority of any
applicable Governmental Unit for filing and recording purposes without further
or additional orders, certifications or other supporting documents. Further, the
Court authorizes the Debtors to
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 33
<PAGE>
file a memorandum of this Order in any appropriate filing or recording office as
evidence of the matters herein contained.
69. The Joint Plan has been proposed in good faith and not by any means
forbidden by law. Section 1129(a)(3) of the Bankruptcy Code has been fully
complied with. There was proper disclosure with respect to the Joint Plan, and
there was proper solicitation of the Joint Plan. Sections 1125(d) and 1125(e) of
the Bankruptcy Code have been fully complied with.
70. The distribution of the Disclosure Statement and solicitation of
acceptances of the Joint Plan from the Claimants and holders of Interests are
exempt from federal proxy regulations pursuant to the express terms of Section
1125(e) of the Bankruptcy Code.
71. The reversal or modification of this Order on appeal shall not affect
the validity of the Joint Plan or any other agreement, document, instrument or
action authorized or directed by this Order or under the Joint Plan as to the
Debtors, the Trust, any Trustee, Reorganized ICH, or any other Entity acting in
good faith, whether or not that Entity knows of the appeal, unless this Order is
stayed pending appeal.
72. All transactions consistent with the provisions of the Joint Plan
effected by the Debtors during the period commencing on the Petition Date and
ending on the Confirmation Date are ratified by the Court.
73. Objections to Claims or Interests, if any, shall be filed and served
within 90 days after the Effective Date. Responses to the objections must be
filed within 30 days of service thereof.
74. The Trust and Reorganized ICH shall obtain settings for hearings on all
applications for the award of compensation or expenses and motions for
administrative expenses, and, consistent with the notice requirements of
Bankruptcy Rule 3007, to
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 34
<PAGE>
determine objections to claims. Within 45 days after the foregoing hearings, the
Trust shall file a post-confirmation report.
75. The Trust and Reorganized ICH, after substantial consummation, as
defined under 11 U.S.C. ss. 1101(2), shall file an application for final decree
and obtain a setting on the application within 180 days of the Effective Date,
and if the application for final decree is not filed within 180 days of the
Effective Date, a status conference will be held.
76. The Bankruptcy Court shall retain exclusive jurisdiction over these
Chapter 11 Cases after Confirmation, notwithstanding consummation or substantial
consummation, for the following purposes:
(a) to consider and effect any modification of this Joint Plan under
Section 1127 of the Bankruptcy Code;
(b) to hear and determine all controversies, suits and disputes that
arise in connection with the interpretation or enforcement of this Joint
Plan and the Trust Agreement;
(c) to hear and determine all requests for compensation and/or
reimbursement of expenses for the period commencing on the Petition Date
through the Confirmation Date;
(d) to hear and determine all objections to Claims and Interests, and
to determine the appropriate classification of any Claim or Interests, and
other controversies, suits and disputes that may be pending at or initiated
after the Confirmation Date, except as provided herein;
(e) to hear and determine all claims that the Debtors, as debtors in
possession qua trustee, or Reorganized ICH or the Trust, as applicable, as
the
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 35
<PAGE>
successors and designated representatives of the Debtors and the Estates
could assert under the Bankruptcy Code;
(f) to consider and act on such other matters consistent with this
Joint Plan as provided in this Order;
(g) to make such orders as are necessary and appropriate to carry out
and implement the provisions of the Joint Plan, including to effect the
further assurances provided in Article 11.9;
(h) to approve the reasonableness of any payments made or to be made,
within the meaning of Section 1129(a)(4) of the Bankruptcy Code;
(i) to exercise the jurisdiction granted pursuant to Section 505(a)
and (b) of the Bankruptcy Code to determine any and all federal, state,
Commonwealth, local and foreign tax liabilities of, and any and all refunds
of such taxes paid by the Debtors;
(j) to hear and determine any issues or matters in connection with any
property not timely claimed as provided in the Joint Plan;
(k) to hear and determine issues related to the Trust or
administration of the Trust Assets; and
(l) to hear and determine post-confirmation date motions to approve
compromises and settlements pursuant to Bankruptcy Rule 9019.
77. Notwithstanding the foregoing, Reorganized ICH and the Trust shall
retain the right to commence or prosecute any of their respective claims in any
court of competent jurisdiction.
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 36
<PAGE>
78. In the event and to the extent that any provision of this Order
conflicts with any provision of the Joint Plan with respect to the Effective
Date, the Sayyah Claim, or the Shaw Group settlement, the provisions of this
Order shall control.
SIGNED this ____ day of February, 1997.
--------------------------
ROBERT C. McGUIRE
CHIEF BANKRUPTCY JUDGE
Submitted by:
Daniel C. Stewart, SBT #19206500
Josiah M. Daniel, III, SBT #05358500
WINSTEAD SECHREST & MINICK P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270-2199
Telephone: (214) 745-5400
Telecopy: (214) 745-5390
ATTORNEYS FOR THE DEBTORS
Michael A. Rosenthal, SBT #17284490
I. Richard Levy, SBT #12265020
GIBSON, DUNN & CRUTCHER
1717 Main Street, Suite 5400
Dallas, Texas 75201
Telephone: (214) 698-3100
Telecopy: (214) 698-3400
ATTORNEYS FOR THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS
Peter D. Wolfson
John A. Bicks
PRYOR, CASHMAN, SHERMAN & FLYNN
410 Park Avenue
New York, NY 10022
Telephone (212) 421-4100
Telecopy: (212) 326-0814
ATTORNEYS FOR THE OFFICIAL COMMITTEE OF EQUITY SECURITY HOLDERS
ORDER CONFIRMING FIRST AMENDED JOINT PLAN
OF REORGANIZATION UNDER CHAPTER 11 Page 37
LONE STAR LIQUIDATING TRUST AGREEMENT
Dated as of February 19, 1997
Established by
I.C.H. CORPORATION
(including CARE FINANCIAL CORPORATION
and SWL HOLDING CORPORATION)
and
Accepted by
SUSAN A. BROWN
as
Managing Trustee
<PAGE>
TABLE OF CONTENTS
Page
I. DEFINITIONS 2
1.1 General 2
1.2 Certain Definitions 2
II. CREATION OF THE TRUST 4
2.1 Purpose of Trust 4
2.2 Appointment and Acceptance of Managing Trustee 4
2.3 Appointment and Acceptance of Supervisory Trustees 4
2.4 Name of Trust 4
2.5 Transfer of Trust Assets to Trust 4
2.6 Causes of Action 5
2.7 Termination of The Trust 5
III. RIGHTS, POWERS AND DUTIES OF MANAGING TRUSTEE 6
3.1 Declaration Acknowledged in Beneficial Interest 6
3.2 Management of Trust 6
3.3 May Incur Debt 7
3.4 Recovery on Causes of Action 7
3.5 Distribution of Available Cash 7
3.6 Assets Distributable to Unlocated Beneficiaries 7
3.7 Investments 8
3.8 Reserves 8
3.8.1 Disputed Claims Reserves 8
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3.8.2 Operating Reserve 8
3.9 Selection of Agents 8
3.10 Records and Reporting 9
3.10.1 Records 9
3.10.2 Periodic Reports 9
3.10.3 Tax Information 10
3.10.4 Additional Reports and Filings 10
3.11 Disposition of Assets to Debtors and Other Interested Parties 10
IV. TRUSTEES 10
4.1 The Managing Trustee 10
4.4.1 Independent Managing Trustee 10
4.1.2 Managing Trustee's Compensation and Reimbursement 11
4.1.3 Resignation 11
4.1.4 Removal 11
4.1.5 Appointment of Successor Managing Trustee 11
4.2 Supervisory Trustees 12
4.2.1 Resignation 12
4.2.2 Removal 12
4.2.3 Appointment of Successor Supervisory Trustee 12
4.2.4 Supervisory Trustees' Compensation and Expenses 12
4.3 Actions Requiring the Consent of Supervisory Trustees 12
4.3.1 Termination, Extension of Trust; Amendment of Agreement 12
4.3.2 Agreements, Documents, Instruments 12
4.3.3 Borrowing 13
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4.3.4 Investment 13
4.3.5 Reserves 13
4.3.6 Distributions from Trust 13
4.3.7 Action and Proceedings 13
4.3.8 Transfers of Trust Certificates 13
4.3.9 Governmental Filings 13
4.3.10 Sales or Transfers of Assets 13
4.4 Method of Obtaining Approval of Supervisory Trustees 13
4.5 Reliance by Trustees 14
4.6 Trustee's Standard of Care; Exculpation 14
4.7 Indemnification 15
4.8 Insurance 15
4.9 No Liability for Acts of Predecessors 15
4.10 No Implied Obligations 15
4.11 No Personal Obligation for Trust Liabilities 15
4.12 Bond Requirement; Exercise of Powers 15
4.13 Trust Continuance 15
4.14 Effect of Trust on Third Parties 15
V. [RESERVED] 15
VI. RIGHTS, POWERS AND DUTIES OF BENEFICIARIES 15
6.1 Nature of Certificates 15
6.2 Transfer and Exchange 16
6.2.1 Appointment of Registrar and Transfer Agent 16
6.2.2 Registration and Transfer of Trust Interests 16
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6.2.3 Access to Register by Trust Beneficiaries 17
6.3 Absolute Owners 17
6.4 Issuance of Certificates Upon Transfer 17
6.5 Mutilated, Lost, Stolen or Destroyed Certificates 17
6.6 Record Date 17
6.7 Interest Beneficial Only 18
6.8 Exemption from Registration 18
6.9 Votes by Beneficiaries 18
6.10 Effect of Death, Incapacity, or Bankruptcy of Beneficiary 18
6.11 Conflicting Claims 18
VII. MISCELLANEOUS 19
7.1 Applicable Law 19
7.2 Relationship Created 19
7.3 Interpretation 19
7.4 Partial Invalidity 19
7.5 Entire Agreement 19
7.6 Counterparts 19
7.7 Notices 20
7.8 Effective Date 20
7.9 Tax Provisions 20
7.9.1 Income Tax Status 20
7.9.2 Tax Returns and Reports 21
7.9.3 Withholding 21
7.9.4 Tax Identification Numbers 21
iv
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7.9.5 Tax Year 21
7.10 Amendment of Trust 21
VIII. RETENTION OF JURISDICTION 21
8.1 21
v
<PAGE>
LONE STAR LIQUIDATING TRUST AGREEMENT
This Lone Star Liquidating Trust Agreement (the "Agreement"), dated as of
February 19, 1997, is established by I.C.H. Corporation (including Care
Financial Corporation and SWL Holding Corporation, the "Debtors") pursuant to
the Debtors' First Amended Joint Amended Plan of Reorganization, as amended (the
"Joint Plan") in the Chapter 11 case styled In re I.C.H. Corporation et al, Case
No. 395-36351-RCM-11 (the "Case"), in the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division (the "Court"), and is accepted by
the Managing Trustee (as defined in Section 1.2 of this Agreement) for the
benefit of the Trust Beneficiaries (as defined in Section 1.2 of this
Agreement).
WHEREAS, on October 10, 1995, the Debtor filed its voluntary petition
pursuant to Chapter 11 of the Bankruptcy Code with the Court;
WHEREAS, the Court confirmed the Joint Plan by entering the Order
Confirming Joint Plan on February 7, 1997;
WHEREAS, the Joint Plan provides for the creation of a trust to be composed
of all assets of the Debtors and of their Estates (except the Retained Assets)
to be administered and liquidated for the benefit of the holders of Allowed ICH
Class 5 Claims as provided in the Joint Plan and is further to provide for
distributions of certain property or cash to other classes under the Joint Plan;
WHEREAS, the Trust is intended to be treated as a liquidating trust
pursuant to Treasury Regulations ss. 301.7701-4(d), and as a grantor trust
subject to the provisions of Subchapter J, Subpart E of the Internal Revenue
Code of 1986, as amended (the "Tax Code"), owned by the Trust Beneficiaries as
grantors.
WHEREAS, the Joint Plan provides for the orderly disposition and
liquidation of the Trust Assets (as defined in Section 1.2 of this Agreement)
during a period not to exceed three (3) years from the formation of this Trust
(unless extended as provided in Section 2.7 of this Agreement), and further
provides that the Managing Trustee shall deliver Available Cash (as defined in
Section 1.2 of this Agreement) in compliance with the terms of the Joint Plan;
WHEREAS, pursuant to the terms of the Joint Plan, this Trust shall be
managed by the Managing Trustee, and supervised by the Supervisory Trustees
appointed in this Agreement and the Joint Plan, and approved by the Court, all
as provided in this Agreement;
WHEREAS, the Joint Plan provides for and requires the appointment of the
Managing Trustee for the purposes outlined herein and the Managing Trustee has
been appointed and approved and has agreed to serve in such capacity under the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby
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acknowledged, the parties hereto do hereby covenant and agree as follows:
I. DEFINITIONS
1.1 General. All capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned thereto in the Joint Plan, or, if not
defined in the Joint Plan and defined in the Bankruptcy Code shall have the
meanings assigned thereto in the Bankruptcy Code unless the context clearly
requires otherwise.
1.2 Certain Definitions. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the terms
defined in this Section 1.2 shall have the meaning assigned to them in this
Section 1.2 , and shall include the plural as well as the singular, and the
masculine as well as the feminine and vice versa.
"Agreement" shall mean this Lone Star Liquidating Trust Agreement dated as
of February 19, 1997.
"Available Cash" shall mean as of any date of calculation, the aggregate of
all cash or cash equivalents available for immediate distribution held by the
Trust, as reflected on the books and records of the Trust, less (i) until
released from reserve or paid, cash required to be placed in reserve or paid on
the Effective Date as provided in Article II of the Joint Plan, (ii) until
distributed, cash required to fund distributions with respect to Secured Claims
as provided in Section 4.1(a)(i) of the Joint Plan, (iii) until released from
reserve, cash, if any, required to fund the Contested Claim Reserve, (iv) the
Operating Reserve, (v) any such cash or cash equivalents deriving from SWL
Holding Corporation or Care Financial Corporation, or their respective assets,
and necessary to make the payments, if any, to the classes of Claimants in such
Estates and (vi) until the Final BML Reconciliation Date, cash, if any, required
to fund a $5,000,000 reserve against the obligation of the Trust under Section
7.5(c) of the Joint Plan.
"Case" shall have the meaning given to such term in the introductory
paragraph of this Agreement.
"Contested Claims Reserve" shall have the meaning given to such term in
Section 3.8.1 hereof.
"Court" shall have the meaning given to such term in the introductory
paragraph of this Agreement.
"Debtors" shall have the meaning given to such term in the introductory
paragraph of this Agreement.
"Distribution Date" means an Initial Distribution Date, and thereafter,
subject to Section 3.5 hereof, such dates as the Managing Trustee and
Supervisory Trustees from time to time designate as a Distribution Date.
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"Initial Distribution Date" has the meaning set forth in the Joint Plan.
"Managing Trustee" means Susan A. Brown, or any successor thereto appointed
pursuant to the terms of this Agreement.
"Operating Reserve" shall mean the operating reserve established pursuant
to Section 3.8.2 hereof.
"Permitted Investments" means:
(i) securities issued or directly and fully guaranteed or insured by
the government of the United States or any agency or
instrumentality thereof having maturities of not more than one
year from the date of acquisition;
(ii) time deposits, certificates of deposit and bankers' acceptances
of any domestic commercial bank the short term debt obligations
of which have been rated A-1 by Standard & Poor's Corporation or
P-1 by Moody's Investors Service, Inc. and which mature in not
more than one year;
(iii)commercial paper rated A-1 or the equivalent thereof by Standard
& Poor's Corporation or P-1 or the equivalent thereof by Moody's
Investors Service, Inc., and in each case having maturities of
not more than 90 days from the date of acquisition; and
(iv) money market funds or money market mutual funds (other than
closed-end funds) which maintain a constant net asset value and
have at the time of such investment a rating by Moody's Investors
Service, Inc. or Standard & Poor's Corporation at least
equivalent to "A."
"Joint Plan" shall have the meaning given to such term in the introductory
paragraph of this Agreement.
"Supervisory Trustees" means John M. Tobin, Jeffrey Schultz and Gregory
Lathrop, or any successors thereto appointed pursuant to the terms of this
Agreement.
"Tax Code" shall mean the Internal Revenue Code of 1986, as amended.
"Termination Date" shall have the meaning given to such term in Section 2.7
hereof.
"Trust" shall mean the Lone Star Liquidating Trust constituted and
established pursuant to this Agreement.
"Trust Assets" shall mean all (i) funds, assets and properties of the
Debtors and their Estates of any kind and character and (ii) claims and causes
of action against third parties on account of any indebtedness or liability to
the Debtors or to their Estates, and all other claims owed to and all other
causes of action in favor of the Debtors and their Estate (to the extent not
specifically compromised or released pursuant to the Joint
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Plan or an agreement referred to and incorporated in the Joint Plan), in each
case as the same exist as of the date hereof but excluding Retained Assets (and
claims and causes of action against third parties related to the Retained
Assets).
"Trust Beneficiary" shall mean a holder of an Allowed ICH Class 5 Claim in
accordance with the Joint Plan.
"Trustees" shall mean the Managing Trustee and the Supervisory Trustees,
and their respective successors appointed pursuant to the terms of this
Agreement.
II. CREATION OF THE TRUST
2.1 Purpose of Trust. The Debtor and the Managing Trustee, in compliance
with the Joint Plan, hereby constitute and create this Lone Star Liquidating
Trust for the purpose of effecting an orderly disposition, liquidation and
distribution of the Trust Assets, distributing the Available Cash to the Trust
Beneficiaries and making the other distributions and payments called for in the
Joint Plan to be made by the Trust, and with no objective to continue or engage
in the conduct of a trade or business. The Trust shall engage only in those
activities that shall be reasonably necessary to that purpose and consistent
with its objective not to continue or engage in the conduct of a trade or
business.
2.2 Appointment and Acceptance of Managing Trustee. In accordance with the
provisions of the Joint Plan, Susan A. Brown is hereby named, constituted, and
appointed as Managing Trustee, to act and serve as Managing Trustee of the Trust
and to hold, manage, liquidate the Trust Assets and to distribute Available Cash
subject to the conditions set forth herein and in the Joint Plan and to make the
other distributions and payments called for in the Joint Plan to be made by the
Trust. The Managing Trustee is willing, and does hereby accept the appointment,
to act and serve as Managing Trustee of the Trust, and to hold the Trust Assets
and administer the Trust pursuant to the terms of this Agreement.
2.3 Appointment and Acceptance of Supervisory Trustees. In accordance with
the provisions of the Joint Plan, John M. Tobin, Jeffrey Schultz and Gregory
Lathrop are hereby named, constituted, and appointed as Supervisory Trustees, to
act and serve as Supervisory Trustees of the Trust and to supervise the
management and liquidation of the Trust Assets and distribution of the Available
Cash subject to the conditions set forth herein and in the Joint Plan. Each
Supervisory Trustee is willing, and does hereby accept the appointment, to act
and serve as a Supervisory Trustee of the Trust and to supervise the
administration of the Trust pursuant to the terms of this Agreement.
2.4 Name of Trust. The Trust established hereby shall bear the name "Lone
Star Liquidating Trust." In connection with the exercise of their powers as
Trustees hereunder, a Trustee may use this name or such variation thereon as
such Trustee sees fit, or may use her or his own name, as Managing Trustee or
Supervisory Trustee, as applicable.
2.5 Transfer of Trust Assets to Trust. In accordance with the provisions of
the Joint Plan, all right, title, and interests of the Debtors and their Estates
in and to the Trust Assets are hereby vested in the Trust and
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preserved for the benefit of the Trust Beneficiaries. From and after the
Effective Date, all Trust Assets, together with the Available Cash, shall be
administered by the Managing Trustee, subject to Section 4.3 hereof, on behalf
of the Trust Beneficiaries and the other intended recipients of distributions
from the Trust as provided in the Joint Plan. Prior to the creation of the
Trust, the Debtors shall have executed or caused to be executed, and
simultaneously with the creation of the Trust shall deliver or cause to be
delivered to, or upon the order of, the Managing Trustee, any and all documents
and other instruments as may be necessary or useful to convey and to confirm
title to the Trust Assets to the Trust, including those listed or described on
Exhibit A hereto. The Debtors (and any successor entity thereto) will, upon the
reasonable request of the Managing Trustee, execute, acknowledge and deliver
such further instruments and do such further acts as may be necessary or proper
to transfer to the Managing Trustee any portion of the Trust Assets intended to
be conveyed hereby in the form and manner provided for in the Joint Plan and to
vest in the Managing Trustee the powers, instruments or funds in trust
hereunder. Except to the extent provided by Section 7.5(c)(iii) of the Joint
Plan, the Debtors, for themselves and any predecessor or successor entity,
hereby disclaim and waive any and all right to any reversionary interest in any
of the Trust Assets.
2.6 Causes of Action. As provided in Sections 10.2(a) and 10.2(c) of the
Joint Plan, all claims and causes of action which are Trust Assets, are hereby
vested in the Trust and preserved for enforcement by the Managing Trustee for
the benefit of the Trust Beneficiaries. To the extent permitted by law, all
rights under Section 363(h) of the Bankruptcy Code are also preserved for the
benefit of the Debtors' estate, and the Managing Trustee shall have the right to
exercise same subject to Court approval.
2.7 Termination of The Trust. The Trust shall terminate upon the earlier to
occur (the "Termination Date") of: (A) the fulfillment of the Trust's purpose by
the liquidation of all of the Trust Assets and the distribution of the Available
Cash or (B) three (3) years after the Effective Date. In order to terminate the
Trust prior to three (3) years after the Effective Date, the Managing Trustee,
subject to Section 4.3 hereof, shall deliver a notice to all Trust Beneficiaries
setting forth the date on which the Trust will terminate, and if no Trust
Beneficiary files an objection with the Court within forty-five (45) days after
the date of such notice the Trust shall terminate on the date set forth in the
notice. Notwithstanding the foregoing, in the event the Managing Trustee shall
have been unable after continuing reasonable efforts to sell or otherwise
dispose of and realize upon the Trust Assets in the initial three (3) year term
of the Trust or if other circumstances require such extension, the Managing
Trustee, subject to Section 4.3 hereof, shall have the right to apply to the
Court to extend the term of the Trust for additional periods of time, provided
that each such extension must be approved by the Court within six (6) months of
the beginning of the extended term. Upon such application the Trust shall
continue until the date approved by the Court, or if the extension is
disapproved by the Court, the expiration of the six month period; provided that
in no event shall the Termination Date occur later than the tenth anniversary of
the Effective Date.
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III. RIGHTS, POWERS AND DUTIES OF MANAGING TRUSTEE
3.1 Declaration Acknowledged in Beneficial Interest. The Managing Trustee
hereby acknowledges that, on and after the Effective Date, the Trust
Beneficiaries and their successors and assigns as permitted in Article 6 hereof,
as their interests may appear, will have a beneficial interest in all Trust
Assets. The Managing Trustee will retain only such powers as are necessary to
collect, liquidate, or otherwise convert the Trust Assets into cash and to
invest cash in Permitted Investments pending distribution and to pay all
expenses, taxes, and other payments referred to in this Trust.
3.2 Management of Trust. Subject to the terms hereof and the Joint Plan,
including, without limitation, Section 4.3 hereof, the Managing Trustee shall
take charge of the Trust Assets and shall endeavor to collect, conserve,
protect, and liquidate, or otherwise convert into cash, all claims, causes of
action, and assets which constitute the Trust Assets and all such other property
incidental thereto as may hereafter be acquired from time to time under this
Trust. To this end and subject to the provisions of Section 4.3, the Managing
Trustee shall manage the affairs of the Trust, negotiate and consummate sales of
the Trust Assets, enter into agreements binding the Trust, and execute,
acknowledge, and deliver any and all instruments which are necessary, required,
or deemed by the Managing Trustee to be advisable in connection with the
performance of the Managing Trustee's duties hereunder and shall have full power
and authority to take any action consistent with the purpose and provisions of
the Joint Plan. Except as otherwise provided in this Agreement, and without
prior or further authorization of the Court, but subject to Section 4.3 hereof,
the Managing Trustee may control and exercise authority over the Trust Assets,
the acquisition, management, and disposition thereof, and the management and
conduct of the business of the Trust to the same extent as if the Managing
Trustee were the sole legal and beneficial owner thereof in her own right. No
person dealing with the Trust shall be obligated to inquire into the authority
of the Managing Trustee in connection with the acquisition, management, or
disposition of Trust Assets. In connection with the management and use of the
Trust Assets, the Managing Trustee, without limitation of her power and
authority, may do the following:
(i) accept the assets transferred and provided to the Trust pursuant
to this Agreement and the Joint Plan;
(ii) distribute to recipients other than Trust Beneficiaries those
amounts or assets contemplated to be distributed by the Trust in
the Joint Plan and distribute Available Cash to the Trust
Beneficiaries in accordance with the terms of this Trust and the
Joint Plan;
(iii)endorse the payment of notes or other obligations of any person
or make contracts withrespect thereto;
(iv) engage in all acts that would constitute ordinary course of
business in performing the obligations of a trustee under a trust
of this type;
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(v) cause Trust Certificates to be issued to Trust Beneficiaries in
the number and manner provided in the Joint Plan;
(vi) invest Trust Assets in Permitted Investments;
(vii)execute deeds, bills of sale and other instruments of transfer in
connection with the sale, assignment or transfer of the Trust
Assets; and
(viii) establish such bank accounts as she may deem necessary or
appropriate, draw checks on such bank accounts and perform such
other necessary and appropriate duties with respect to such
accounts, or designate individuals as signatories to draw checks
on such bank accounts and to perform such other duties as she may
direct and authorize.
3.3 May Incur Debt. Subject to Section 4.3, the Trust may borrow such sums
of money at any time and from time to time for such periods of time upon such
terms and conditions from such persons or corporations for such purposes as the
Managing Trustee may deem advisable, and secure such loans with any of the Trust
Assets, provided that no recourse shall be had to the Trustees or any Trust
Beneficiary on any such debt.
3.4 Recovery on Causes of Action. The Managing Trustee shall investigate
all claims and causes of action that are Trust Assets and make recommendations
to the Supervisory Trustees regarding the same, and, subject to Section 4.3, may
sue upon, mediate, arbitrate, and/or compromise and settle all such claims and
causes of action.
3.5 Distribution of Available Cash. Pursuant to the terms of the Joint
Plan, on the dates provided for in the Joint Plan the Managing Trustee shall
distribute from the Trust Assets the amounts required in Articles II and IV of
the Joint Plan. The Managing Trustee shall distribute at least annually all
Available Cash to holders of record of Trust Interests and to other Claimants in
accordance with the treatment of Claims provided in the Joint Plan. In
determining whether there is any Available Cash available for distribution, the
Managing Trustee may, in her discretion, give due consideration to the
possibility that there may exist unasserted Claims against the Trust or asserted
Claims which are not yet Allowed Claims or otherwise not yet due and payable and
may establish reserves therefor in accordance with Section 3.8.1. The Managing
Trustee shall make vigorous and continuing efforts to dispose of the Trust
Assets, to make prompt and timely distributions, and to avoid undue prolongation
of the duration of the Trust. The Trust shall not retain cash or cash
equivalents in excess of a reasonable amount to meet claims and contingent
liabilities or to maintain the value of the Trust Assets.
3.6 Assets Distributable to Unlocated Beneficiaries. The Managing Trustee
shall, or shall appoint the Distribution Agent to, hold any unclaimed
distributions or other payments to any Trust Beneficiaries or other person
entitled thereto who cannot be located. The Managing Trustee shall, and shall
instruct the Distribution Agent to, make disposition of any such distributions
or payments in accordance with the Joint Plan.
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3.7 Investments. Pending distribution, the Managing Trustee shall invest
the Trust Assets in Permitted Investments.
3.8 Reserves.
3.8.1 Disputed Claims Reserves. On or as soon as practicable following the
Effective Date, the Managing Trustee shall establish a reserve for distributions
on account of Contested Claims as of the Initial Distribution Date (the
"Contested Claims Reserve"). Upon any distribution to holders of Allowed Claims
in Classes in which Contested Claims still exist, the Managing Trustee shall
withhold from such distributions and set aside in the Contested Claims Reserve
an amount as provided in Section 9.5 of the Joint Plan. At such time thereafter
that any Contested Claim, or portion thereof, becomes an Allowed Claim, the
Managing Trustee shall distribute to the holders of such Allowed Claim from the
Contested Claims Reserve cash in an amount equal to the amount such holder would
have received through such date had such holder's claim been an Allowed Claim as
of the Effective Date. The Contested Claims Reserve shall be terminated when all
Contested Claims are resolved; provided however, that as a Contested Claim may
be resolved, to the extent that the amount reserved for the Contested Claim
exceeds the amount due, if any, under a distribution as such Contested Claim
becomes an Allowed Claim, such funds shall become Trust Assets available for
distribution to Trust Beneficiaries. Any property remaining in the Contested
Claims Reserve upon its termination and after any distributions pursuant to this
section shall no longer be restricted and shall be Trust Assets available for
liquidation and distribution to Trust Beneficiaries.
3.8.2 Operating Reserve. On or as soon as practicable following the
Effective Date, the Managing Trustee shall establish the Operating Reserve with
cash in an amount reasonably determined to be necessary to fund the expenses of
the Trust, including costs of the Distribution Agent for distributions made
pursuant to the Joint Plan, in an amount approved by the Supervisory Trustees.
Thereafter, the amount of the Operating Reserve may be increased or decreased by
the Managing Trustee with the consent of the Supervisory Trustees if the
Managing Trustee determines that a greater or lesser amount is prudent and
reasonably sufficient to satisfy the obligations and liabilities, including tax
liabilities (whether absolute, contingent, asserted, unasserted, payable, not
yet payable or otherwise) of, or assumed by, the Trust. The amount of the
Operating Reserve shall not exceed $2,000,000; subject to increase by any amount
as determined by the Managing Trustee, with the consent of the Supervisory
Trustee, to be prudent and reasonably sufficient to satisfy the obligations and
liabilities of the Trust with respect to third party obligations assumed by the
Trust, including without limitation obligations of the Trust under or pursuant
to the Modern/Western Agreement and the Philadelphia American Agreement.
3.9 Selection of Agents. The Managing Trustee may select and employ
brokers, banks, custodians, investment advisors, attorneys, accountants,
auditors, and other agents on behalf of the Trust. Except as otherwise required
to fulfill the terms hereof, such agents may be employed without regard to prior
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employment of such agents by any Trust Beneficiary or by the Creditors'
Committee. The Managing Trustee may retain as a consultant to the Trust any
person or persons having particular knowledge of the Debtors' affairs
(including, without limitation, any officer or director or former officer or
director of any Debtor or any entity owned by a Debtor), and may place reliance
upon the advice of any such person. The Managing Trustee may pay the salaries,
fees, and expenses of agents and consultants engaged by the Managing Trustee out
of the Trust Assets. No Trustee shall be liable for any loss to the Trust or any
person interested therein by reason of any mistake or default of any such agent
or consultant as shall be selected and employed or retained without fraud,
willful misconduct or without gross negligence.
3.10 Records and Reporting.
3.10.1 Records. The Managing Trustee shall maintain good and
sufficient books and records of account relating to the Trust Assets, the
Available Cash, the management thereof, all transactions undertaken by the
Managing Trustee, all expenses incurred by or on behalf of the Trust, all
distributions either contemplated or effectuated under the Joint Plan or
this Agreement.
3.10.2 Periodic Reports. The Managing Trustee shall prepare the
following reports and shall distribute such reports to each Supervisory
Trustee and any Trust Beneficiary who requests a copy:
(A) on a monthly basis, within two (2) weeks after the end of
each month, an unaudited report of the receipts and disbursements of
the Trust and the Cash position of the Trust; and
(B) on a quarterly basis commencing with the first calendar
quarter ending after the Effective Date, within forty-five (45) days
after the end of such calendar quarter, a report of the activities of
the Trust detailing for the preceding quarterly period the activities
of the Trust including:
(i) an unaudited operating statement (prepared on a cash
basis) showing all revenues received by the Trust and all
expenses of operations of the Trust (including all expenses
associated with the sale of any Trust Assets paid by the Trust);
(ii) an unaudited written report and accounting showing (a)
the assets and liabilities of the Trust at the end of such
period, (b) any changes in the Trust Assets, (c) the amount of
any reserves or escrows of the Trust, (d) any material action
taken by the Managing Trustee or the Supervisory Trustees in the
performance of their duties under the Joint Plan and this
Agreement; and
(iii) an overall status report of the Trust for the next
quarterly period.
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Monthly reports for any month ending a quarterly period may be
included in the quarterly report for such period. Quarterly
reports for the fourth quarter of each calendar year may be
included within the annual reports described below, if such
annual reports are prepared.
(C) to the extent required by the Court or by applicable law (or
to gain an exemption from applicable law), within 90 days after the
end of each calendar year, beginning with the first year end occurring
after the Effective Date, the Trust will prepare reports for the prior
year as described in clause (i) and (ii) above, except that such
reports shall be for a full year (or portion thereof in which the
Trust has been in existence) and shall be audited.
(D) The Managing Trustee shall prepare and furnish to the
Supervisory Trustees such additional reports and accountings as the
Supervisory Trustees may from time to time reasonably request.
All monthly, quarterly and, if prepared, annual reports shall be
filed with the Court. In addition, all monthly, quarterly and, if
prepared, annual reports may be filed with the Securities and Exchange
Commission (the "Commission") to the extent the Managing Trustee deems
such action to be in the best interest of the Trust or to the extent
required by applicable law or in order to gain an exemption from
compliance with applicable law.
3.10.3 Tax Information. The Managing Trustee shall furnish to the
Trust Beneficiaries and other recipients of distributions from the Trust
such information and returns with respect to any federal or state tax as
shall be required by law.
3.10.4 Additional Reports and Filings. The Managing Trustee shall (i)
prepare, file and distribute such additional registration statements,
reports and submissions as may be necessary to cause the Trust and the
Trustees to be in compliance with applicable law and (ii) prepare and file
with the Court such reports and submissions as are required by the Joint
Plan. Copies of any such reports, registration statements and submissions
shall be distributed to the Supervisory Trustees and, in the discretion of
the Managing Trustee, filed with the Commission.
3.11 Disposition of Assets to Debtors and Other Interested Parties. Subject
to Section 4.3, the Managing Trustee is specifically authorized and empowered to
negotiate at arms' length and enter into agreements with the Debtors'
affiliates, the Trust Beneficiaries and other interested parties for the sale of
any portion of the Trust Assets.
IV.TRUSTEES
4.1 The Managing Trustee.
4.4.1 Independent Managing Trustee. The Managing Trustee may not be a
Trust Beneficiary.
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4.1.2 Managing Trustee's Compensation and Reimbursement. As
compensation for services rendered in the administration of this Trust, the
proposed Managing Trustee shall be compensated in an amount and upon terms
which are mutually acceptable to the proposed Managing Trustee and the
Supervisory Trustees; provided that the initial Managing Trustee shall be
compensated on terms substantially in conformity with the compensation
provided for in the employment agreement between Susan A. Brown and the
Debtors dated as of January 1, 1996. The Managing Trustee shall be
reimbursed for all reasonable expenses (including, but not limited to,
attorneys fees) incurred in the performance of her duties hereunder.
4.1.3 Resignation. The Managing Trustee may resign as such by
executing and delivering an instrument in writing to the Supervisory
Trustees upon no less than thirty (30) days advance notice.
4.1.4 Removal. The Managing Trustee may be removed from office (a) for
fraud or willful misconduct in connection with the affairs of the Trust
upon the motion of the Supervisory Trustees, and upon a finding by the
Court of fraud or willful misconduct by such Managing Trustee after a
hearing before the Court upon not less than 30 days' Notice, (b) for such
physical or mental disability as substantially prevents the Managing
Trustee from performing her duties as Managing Trustee upon the motion of
the Supervisory Trustees, and upon a finding by the Court of such physical
or mental disability after a hearing before the Court on not less than 30
days' Notice or (c) for cause, which shall include a breach of fiduciary
duty or an unresolved conflict of interest, (other than as specified in the
foregoing clauses (a) and (b)) upon the motion of the Supervisory Trustees,
and upon finding by the Court that cause for such removal has been shown
after a hearing before the Court on not less than 30 days' Notice.
4.1.5 Appointment of Successor Managing Trustee. In the event of the
death or incompetency, resignation, or removal of the Managing Trustee, the
Supervisory Trustees shall appoint a successor Managing Trustee. Such
appointment shall specify the date on which such appointment shall be
effective. Every successor Managing Trustee appointed hereunder shall
execute, acknowledge, and deliver to the Supervisory Trustees and to the
retiring Managing Trustee an instrument accepting such appointment, and
thereupon such successor Managing Trustee, without any further act, deed,
or conveyance, shall become vested with all the rights, powers, trusts, and
duties of the retiring Managing Trustee. In the event of the resignation or
removal of the Managing Trustee, such Managing Trustee shall promptly (a)
execute and deliver such documents, instruments, and other writings as may
be requested by the Supervisory Trustees or reasonably requested by the
successor Managing Trustee to effect the termination of the retiring
Managing Trustee's capacity under the Trust and the conveyance of the Trust
Assets then held by the retiring Managing Trustee to her successor Managing
Trustee; (b) deliver to the Supervisory Trustees or the successor Managing
Trustee all documents, instruments, records, and other writings related to
the Trust as may be in the possession of the retiring Managing Trustee; and
(c) otherwise assist and cooperate in effecting the assumption of its
obligations and functions by such successor Managing Trustee.
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4.2 Supervisory Trustees
4.2.1 Resignation. A Supervisory Trustee may resign as such by
executing and delivering an instrument in writing to the Managing Trustee
and the remaining Supervisory Trustees.
4.2.2 Removal. A Supervisory Trustee may be removed in the event
physical or mental disability prevents a Supervisory Trustee from
substantially performing his duties hereunder upon the unanimous consent of
the other Supervisory Trustees. A majority of the Trust Beneficiaries
voting pursuant to this Agreement may at any time remove any Supervisory
Trustee with or without cause.
4.2.3 Appointment of Successor Supervisory Trustee. Upon the death,
resignation or removal of a Supervisory Trustee, the remaining Supervisory
Trustees may (but shall not be required to) appoint a Trust Beneficiary (or
employee or member thereof) as a successor Supervisory Trustee. If there
are no remaining Supervisory Trustees, the Managing Trustee may apply to
the Court for the appointment of a Supervisory Trustee or Supervisory
Trustees. Such appointment shall specify the date on which such appointment
shall be effective. In no event shall any insider or affiliate of the
Debtors serve as a Supervisory Trustee. In the event of the resignation or
removal of a Supervisory Trustee, such Supervisory Trustee shall promptly
(a) execute and deliver such documents, instruments, and other writings as
may be requested by the Managing Trustee to effect the termination of the
retiring Supervisory Trustee's capacity under the Trust; (b) deliver to the
Managing Trustee all documents, instruments, records, and other writings
related to the Trust as may be in the possession of the retiring
Supervisory Trustee; and (c) otherwise assist and cooperate in effecting
the assumption of its obligations and functions by such successor
Supervisory Trustee.
4.2.4 Supervisory Trustees' Compensation and Expenses. As compensation
for services rendered to the Trust, each Supervisory Trustee shall receive
$2,000 per month. The Trust shall reimburse the reasonable expenses of the
Supervisory Trustees (including, but not limited to, attorneys fees)
incurred in connection with their service as Supervisory Trustees.
4.3 Actions Requiring the Consent of Supervisory Trustees. The following
actions may be taken by the Managing Trustee on behalf of the Trust only with
the approval of the Supervisory Trustees
4.3.1 Termination, Extension of Trust; Amendment of Agreement. The
delivery of a notice seeking to terminate the Trust prior to three years
after the Effective Date or application to the Court to extend the Trust
term as provided in Section 2.7 or the amendment of this Agreement as
provided in Section 7.10 hereof;
4.3.2 Agreements, Documents, Instruments. The execution by the
Managing Trustee of any agreement, document or instrument (A) with any
affiliate or former affiliate or employee or former employee of any Debtor
or a Trust Beneficiary; (B) that obligates the Trust in excess of $50,000;
or
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(C) the term of which extends beyond one year;
4.3.3 Borrowing. The borrowing of any sums of money;
4.3.4 Investment. The investment of Trust Assets and Available Cash in
any manner other than in Permitted Investments;
4.3.5 Reserves. The establishment, increase or decrease of the
Operating Reserve;
4.3.6 Distributions from Trust. The distribution of any amounts from
the Trust and the designation of a Distribution Date with respect thereto,
provided that the Managing Trustee without further approval by the
Supervisory Trustees may make the distributions set forth in the Joint Plan
to persons other than Trust Beneficiaries and distributions to persons as
specifically ordered by the Court; provided, further that the Trust shall
make the annual distribution as set forth in Section 3.5;
4.3.7 Action and Proceedings. The commencement or bringing of any
action or proceeding, the defense of any action or proceeding against the
Trust, the settlement of any such action or proceeding, and the expenditure
by the Trust of amounts in respect thereof, including legal fees;
4.3.8 Transfers of Trust Certificates. Any change to either the form
of Trust Certificate or the placement of a legend on a Trust Certificate as
contemplated by Section 6.1 the effect of which may impede the transfer of
the Trust Interest represented by a Trust Certificate, appointment of a
Registrar other than the Trust or the Distribution Agent, or the
establishment of any additional requirements for transfer of Trust
Certificates;
4.3.9 Governmental Filings. Any material filing with or application to
any governmental agency relating to the Trust, the Trust Assets or the
Trust Certificates other than ordinary routine filings and applications
incidental to the activity of the Trust and the administration of the Trust
Assets; provided that the Managing Trustee may without further approval of
the Supervisory Trustees file any reports expressly contemplated to be
filed by this Agreement or the Joint Plan; and
4.3.10 Sales or Transfers of Assets. The sale, assignment or transfer
of any Trust Asset, except as otherwise set forth herein or approved by
order of the Court, in an amount exceeding $500,000.
4.4 Method of Obtaining Approval of Supervisory Trustees. Whenever called
for in this Agreement, the approval of the Supervisory Trustees shall mean the
affirmative consent of at least two (2) Supervisory Trustees or, if only one
Supervisory Trustee is serving hereunder at any time, with the consent of such
Supervisory Trustee or, if no Supervisory Trustees are serving hereunder at any
time, upon Order of the Court (and the Managing Trustee shall be authorized to
file an appropriate motion for relief with the
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Court). Affirmative consent of a Supervisory Trustee shall be had by written
confirmation of a Supervisory Trustee upon the written request of the Managing
Trustee to all Supervisory Trustees serving hereunder delivered at the time at
least five (5) business days in advance of the proposed action and delivered as
provided in Section 7.7 by facsimile or hand or overnight delivery. Each
Supervisory Trustee shall respond promptly to any request by the Managing
Trustee for the approval of the Supervisory Trustees. If (A) the Supervisory
Trustees do not respond promptly to the request of the Managing Trustee for
consent or (B) there is only one Supervisory Trustee serving hereunder at the
time and such Supervisory Trustee disapproves the proposed action, the Managing
Trustee may file an appropriate motion for relief with the Court.
4.5 Reliance by Trustees. A Trustee may rely, and shall be fully protected
personally in acting upon, any resolution, statement, certificate, instrument,
opinion, report, notice, request, consent, order, or other instrument or
document which such Trustee has no reason to believe to be other than genuine
and to have been signed or presented other than by the proper party or parties
or, in the case of facsimile transmissions, to have been sent other than by the
proper party or parties, in each case without obligation to satisfy himself or
herself that the same was given in good faith and without responsibility for
errors in delivery, transmission, or receipt. In the absence of fraud, willful
misconduct or gross negligence, a Trustee may rely as to the truth of statements
and correctness of the facts and opinions expressed therein and shall be fully
protected personally in acting thereon. The Trustees may consult with and rely
on the advice of legal counsel and such other experts, advisors, consultants or
other professionals as shall have been retained pursuant to this Agreement and
shall be fully protected in respect of any action taken or suffered by them in
accordance with the written opinion of legal counsel.
4.6 Trustee's Standard of Care; Exculpation. No Trustee, (and no director,
officer, affiliate, employee, employer, agent or representative of any Trustee)
shall be personally liable in connection with the affairs of the Trust to any
other Trustee, any Trust Beneficiary, or the Trust, or any other person, except
for such of the Trustee's acts or omissions as shall constitute fraud, willful
misconduct or gross negligence.
4.7 Indemnification. Except in those situations in which a Trustee is not
exonerated of personal liability as aforesaid, a Trustee (including each former
Trustee or estate of a decedent Trustee) shall be defended, held harmless and
indemnified from time to time from the Trust Assets against any and all losses,
claims, costs, expenses and liabilities (including legal fees and expenses) and
any costs of defending any action to which a Trustee may be subject in
connection with any action, suit, proceeding or investigation brought or
threatened against such Trustee in such Trustee's capacity as Trustee or in any
other capacity contemplated by this Agreement, the Joint Plan or in any matter
arising out of or related to this Trust Agreement or the affairs of the Trust.
The Trust may indemnify and hold harmless employees and agents of the Trust to
the same extent as is provided in this Section 4.7 for the Trustees. It is the
intention of this Agreement that the Trustees shall be indemnified for their
negligence.
4.8 Insurance. If requested by a Supervisory Trustee, or if the Managing
Trustee so desires, and if available on commercially reasonably terms, the
Managing Trustee shall endeavor to obtain insurance
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covering liabilities of all of the Trustees (and such insurance coverage may
extend beyond the term of the Trust for a reasonable period), or employees or
agents of the Trust incurred in connection with their services to the Trust and
with such coverages and limits as the Trustees deem desirable.
4.9 No Liability for Acts of Predecessors. No successor Trustee shall be in
any way responsible for the acts or omissions of the Debtors, or officers,
directors, agents, predecessors or successors thereof; or of any Trustee in
office prior to the date on which such person becomes Trustee, unless a
successor Trustee expressly assumes such responsibility.
4.10 No Implied Obligations. No Trustee shall be liable except for the
performance of such duties and obligations as are specifically set forth herein,
and no implied covenants or obligations shall be read into this Trust.
4.11 No Personal Obligation for Trust Liabilities. Persons dealing with the
Trustees, or seeking to assert claims against the Debtor, shall look only to the
Trust Assets to satisfy any liability incurred by the Trustees to such person in
carrying out the terms of this Trust, and the Trustees shall have no personal,
individual obligation to satisfy any such liability.
4.12 Bond Requirement; Exercise of Powers. The Trustees shall not be
required to furnish a bond to secure the proper performance of their respective
duties hereunder. Except as other expressly provided in this Agreement, the
Trustees shall not be required to procure authorization by any court in the
exercise of any power conferred upon the Trustees by this Trust.
4.13 Trust Continuance. The death or incompetency, resignation, or removal
of a Trustee shall not operate to terminate the Trust created by this Agreement
or to revoke any existing agency created pursuant to the terms of this Agreement
or invalidate any action previously taken by the Trust or Trustees.
4.14 Effect of Trust on Third Parties. There is no obligation on the part
of any purchaser or purchasers from the Trust or any agent of the Trust, or on
the part of any other persons dealing with the Trust or any agent of the Trust,
to see to the application of the purchase money or other consideration passing
to the Trust or any agent of the Trust, or to inquire into the validity,
expediency, or propriety of any such transaction by the Trust or any agent of
the Trustees.
V. [RESERVED]
VI. RIGHTS, POWERS AND DUTIES OF BENEFICIARIES
6.1 Nature of Certificates. Beneficial interests in the Trust ("Trust
Interests") with respect to Trust Beneficiaries shall be allocated in accordance
with Section 7.3(e) of the Plan. The Trust Interests may be represented by
certificates substantially in the form attached hereto as Exhibit B, with such
changes as the Managing Trustee may from time to time find necessary or
desirable to conform to the provisions of this Trust Agreement, the Joint Plan
and any applicable laws or regulations. The Managing Trustee may cause to be
placed on any Trust Certificate such legends as she deems on advice of counsel
are required or appropriate under securities, tax or other laws and regulations
in connection with tax withholding pursuant to Section 7.9.3 or otherwise. Any
person to whom a Trust Certificate is issued or transferred, by virtue of the
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acceptance thereof, shall assent to and be bound by the terms and conditions of
this Agreement and the Joint Plan. The principal amount of Trust Interests
represented by any single certificate shall be designated on the face of such
certificate. All certificates shall be executed by the manual or facsimile
signatures of the Managing Trustee. In case any Managing Trustee who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be Managing Trustee before such certificate is issued by the Trust it
may be issued with the same effect as if any such Managing Trustee had not
ceased to be Managing Trustee. All Trust Certificates shall be legended as
provided in the forms for such certificates attached hereto as Exhibit B.
6.2 Transfer and Exchange.
6.2.1 Appointment of Registrar and Transfer Agent. The Managing
Trustee shall appoint a Registrar and Transfer Agent for the purpose of
registering and transferring Trust Interests as herein provided. The
Registrar and Transfer Agent may be a duly qualified institution or the
Trust itself. For its services hereunder, the Registrar and Transfer Agent,
unless it is the Trust, shall be entitled to receive reasonable
compensation from the Trust.
6.2.2 Registration and Transfer of Trust Interests. The Managing
Trustee shall cause to be kept at the office of the Registrar and Transfer
Agent, or at such other place or places as shall be designated by her from
time to time, the Trust Register. Prior to the distribution, if any, of
Trust Certificates, Trust Interests may not be transferred and no purported
transfer of any Trust Interest will be registered on the Trust Register.
After any such distribution of Trust Certificates, any Trust Interest may
be transferred by the registered holder of any Trust Certificate or in or
by the duly authorized attorney of the registered holder of any Trust
Certificate, upon presentation of the Trust Certificate to the Registrar
and Transfer Agent for cancellation, accompanied by delivery of a duly
executed written instrument of transfer in the form approved by the
Registrar and Transfer Agent and such other documents as may be reasonably
required by the Managing Trustee as well as evidence satisfactory to the
Managing Trustee that such transfer is in accordance with all applicable
federal and state securities laws. Any such transfer shall be registered in
the Trust Register. The transferor shall pay reasonable transfer charges
established by the Registrar and Transfer Agent for the purpose of
reimbursing the Trust and the Registrar and Transfer Agent for the expenses
incident thereto, including any tax or other governmental charge.
Notwithstanding the above, no Trust Interest may be transferred unless such
transfer is made (i) pursuant to a registration statement effective under
the Securities Act of 1933, as amended ("Securities Act"), or pursuant to
an available exemption from the registration requirements of the Securities
Act and (ii) in accordance with all applicable state securities laws.
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6.2.3 Access to Register by Trust Beneficiaries. Trust Beneficiaries
and their duly authorized representatives shall have the right, upon
reasonable prior written notice to the Registrar and Transfer Agent and the
Managing Trustee, and in accordance with reasonable regulations prescribed
by the Registrar and Transfer Agent and the Managing Trustee, to inspect
and, at the expense of the Trust Beneficiary, make copies of the Trust
Register, in each case for a purpose reasonably related to such Trust
Beneficiary's beneficial interest in the Trust.
6.3 Absolute Owners. The Trustees may deem and treat the Trust Beneficiary
of record as the absolute owner of such Trust Interests for the purpose of
receiving distributions and payments thereon or on account thereof and for all
other purposes whatsoever.
6.4 Issuance of Certificates Upon Transfer. Whenever any Trust Certificate
shall be presented for transfer or exchange as permitted by the provisions of
Section 6.1 and 6.2, the Managing Trustee shall cause the Registrar and Transfer
Agent to issue, authenticate and deliver in exchange therefor, the new Trust
Certificate(s) in respect to the Trust Interests which the transferee, and if
any Trust Interest is retained, the transferor, will be entitled to receive new
Trust Certificate(s) for the retained interest.
6.5 Mutilated, Lost, Stolen or Destroyed Certificates. If a Trust
Beneficiary claims that his Trust Certificate has been mutilated, defaced, lost,
stolen or destroyed, the Trust shall issue and the Registrar and Transfer Agent
shall authenticate a replacement Trust Certificate if the Managing Trustee's
requirements are met. Such Trust Beneficiary shall pay reasonable charges
established by the Managing Trustee and the Registrar and Transfer Agent for the
purpose of reimbursing the Trust and the Registrar and Transfer Agent for the
expenses incident thereto, including any tax or other governmental charges. In
the case of lost, stolen or destroyed certificates, such Trust Beneficiary will
indemnify, and if required by the Managing Trustee or the Registrar and Transfer
Agent, provide a bond or other security sufficient in the judgment of the
Managing Trustee to protect the Trust, the Trustees, the Registrar and Transfer
Agent or any authenticating agent from any loss which any of them may suffer if
a Trust Certificate is replaced. The Trustees shall incur no liability to anyone
by reason of anything done or omitted to be done by them in good faith under the
provisions of this Section 6.5. All Trust Certificates shall be held and owned
upon the express condition that the provisions of this Section 6.5 are exclusive
in respect of the replacement or payment of mutilated, defaced, lost, stolen, or
destroyed certificates and shall, to the extent permitted by law, preclude any
and all other rights or remedies respecting such replacement or the payment in
respect thereto. Any duplicate certificate issued pursuant to this Section 6.5
shall constitute original interests in the Trust and shall be entitled in the
manner provided herein to equal and proportionate benefits with all other Trust
Interests issued hereunder in any moneys or property at any time held by the
Trustees for the benefit of the Trust Beneficiaries. The Trustees and the
Registrar and Transfer Agent shall not treat the original certificate as
outstanding.
6.6 Record Date. The date of record for determining entitlement of any
holder of a Trust Interest to any payments shall be (a) in the case of the
Initial Distribution Date, the Effective Date, and with respect to a subsequent
Distribution Date 15 Business Days prior to a Distribution Date, and (b) in all
other cases
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(including entitlement of a holder of a Trust Interest to any notice hereunder),
may be fixed by the Managing Trustee but shall not be more than 30 days nor less
than 10 days before the date upon which notice is to be given, subject to any
terms of the Joint Plan that provide otherwise. Except with respect to an
Initial Distribution Date, as to which no notice need be given hereunder, the
Managing Trustee shall give notice of a Distribution Date to holders of Trust
Interests and the record date in connection therewith in the monthly report
prepared under Section 3.10.2(B) and filed with the Court at least 10 Business
Days prior to the corresponding record date.
6.7 Interest Beneficial Only. The ownership of a beneficial interest
hereunder shall not entitle any beneficiary to any title in or to the Trust
Assets as such, or to any right to call for a partition or division of the same,
or to require an accounting except as specifically required by the terms hereof.
6.8 Exemption from Registration. The parties hereto intend that the rights
of the Trust Beneficiaries arising under this Trust shall not be "securities"
under applicable laws, but none of the parties hereto represent or warrant that
such rights shall not be securities or shall be entitled to exemption from
registration under applicable securities laws. If such rights constitute
securities, the parties hereto intend for the exemption from registration
provided by Section 1145 of the Bankruptcy Code to apply to their issuance under
the Joint Plan.
6.9 Votes by Beneficiaries. The outcome of any vote of holders of Trust
Certificates shall be determined in favor of the majority of holders of Trust
Certificates actually voting, based upon the face amount of their Trust
Certificates.
6.10 Effect of Death, Incapacity, or Bankruptcy of Beneficiary. The death,
incapacity, bankruptcy or dissolution of a holder of a Trust Certificate during
the terms of this Trust shall not operate to terminate the Trust, nor shall it
entitle the representatives or creditors of a holder of a Trust Certificate to
an accounting, or to take any action in the courts or elsewhere for the
distribution of the Trust Assets or for a partition thereof; nor shall it
otherwise affect the rights and obligations of any holder of a Trust
Certificate.
6.11 Conflicting Claims. In the event the Managing Trustee becomes aware of
any disagreement or conflicting claims with respect to the Trust Assets, or if
the Managing Trustee in good faith is in doubt as to any action which should be
taken under this Trust after consultation with the Supervisory Trustees, who,
after a vote are deadlocked, or, if the Supervisory Trustees have disapproved
the Managing Trustee's request for approval and the Managing Trustee reasonably
believes that the effect of such disapproval is in violation of her duty to the
Trust Beneficiaries under this Agreement, the Managing Trustee shall have the
absolute right at her election to do any or all of the following:
(i) To the extent of such disagreement or conflict, or to the extent
deemed by her necessary or appropriate in light of such disagreement or
conflict, withhold or stop all further performance under this Trust (save
and except the safekeeping of the Trust Assets) until the Managing Trustee
is satisfied that such disagreement or conflicting claims have been fully
and finally resolved; or
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(ii) File a suit in interpleader or in the nature of interpleader in
the Court and obtain an order requiring all persons and parties involved to
litigate in the Court their respective claims arising out of or in
connection with this Trust; or
(iii) File any other appropriate motion for relief in the Court.
VII. MISCELLANEOUS
7.1 Applicable Law. The Trust created herein shall be construed, regulated,
and administered under the laws of the State of Texas and the United States of
America; provided that the Trust and any interpretation or enforcement of the
provisions of this Agreement shall be subject to the jurisdiction of the Court
as contemplated by Section 8.1 hereof.
7.2 Relationship Created. The only relationship created by this Trust is
the trustee-beneficiary relationship between the Trustees and the Trust
Beneficiaries. No other relationship or liability is created. Nothing contained
herein shall be construed so as to constitute the Trustees and the Trust
Beneficiaries or their successors in interest as creating any association,
partnership, or joint venture of any kind.
7.3 Interpretation. The enumeration and headings contained in this Trust
are for convenience of reference only and are not intended to have any
substantive significance in interpreting the same.
7.4 Partial Invalidity. If any term or provision of this Agreement is held
to be illegal, invalid, or unenforceable under present or future laws effective
during the term of this Agreement, such term or provision shall be fully
severable and this Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part of this
Agreement; and the remaining terms and provisions of this Agreement shall remain
in full force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement and this
Agreement shall be construed so as to limit any term or provision so as to make
it legal, valid and enforceable within the requirements of applicable law, in
lieu of such illegal, invalid or unenforceable provision, provided that such
construction, to the maximum extent possible, shall give effect to the purposes
of the Joint Plan.
7.5 Entire Agreement. This Agreement (including the recitals hereof) and
the Joint Plan constitute the entire agreement by and among the parties, and
there are no representations, warranties, covenants, or obligations except as
set forth herein and in the Joint Plan. This Agreement and the Joint Plan
supersede all prior and contemporaneous agreements, understandings negotiations,
and discussions, written or oral, if any, of the parties hereto relating to any
transaction contemplated hereunder. Except as otherwise specifically provided
herein or in the Joint Plan, nothing in this Agreement is intended or shall be
construed to confer upon or to give any person other than the parties hereto and
the Trust Beneficiaries any rights or remedies under or by reason of this
Agreement.
7.6 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an
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original document, but all of which counterparts shall together constitute one
and the same instrument.
7.7 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be addressed (i) if to the Managing
Trustee, to Susan A. Brown, Managing Trustee, (A) and if on or prior to March
31, 1997, to 500 N. Akard, 12th Floor, Dallas, Texas, 75201, telephone number
(214) 954-7660 and facsimile number (214) 954-7717 and (B) if after March 31,
1997, to 3811 Turtle Creek Blvd., 300 Turtle Creek Centre, Dallas, Texas, 75219,
telephone number (214) 528-4834 and facsimile number (214) 520-3149, or such
other address as such Managing Trustee will have furnished to the Supervisory
Trustees and set forth in the monthly report prepared under Section 3.10.2(A)
hereof; (ii) if to any Trust Beneficiary, in writing to the record holders of
the Trust Interests as such address as is set forth in the Trust Register; (iii)
if to the Supervisory Trustees, to Gregory Lathrop, c/o Lathrop Investment
Management Corp., #10 Corporate Hill Dr., Suite 225, Little Rock, Arkansas,
72205, telephone number (501) 227-4930, and facsimile number (501) 227-7630, Dr.
Jeffrey Schultz, c/o Schultz Investments, c/o Christian Brothers University, 650
E. Parkway South, Memphis, Tennessee, 38104, telephone number (901) 321-3300,
and facsimile number (901) 321-3580; and John M. Tobin, c/o BEA Associates, One
Citicorp Center, 153 East 53rd, 57th Floor, New York, New York, 10022, telephone
number (212) 326-5418, and facsimile number (212) 759-3772, or such other
respective addresses as the Supervisory Trustees will have furnished to the
Managing Trustee in writing in accordance with this Section 7.7, or (iv) if to
the Debtors, to Chief Executive Officer, I.C.H. Corporation, 9404 Genesee
Avenue, Suite 330, LaJolla, California 92087, telephone number (619) 587-8533,
and facsimile number (619) 535-1634, or such other address as the Debtors will
have furnished to the Managing Trustee in writing in accordance with this
Section 7.7. All such notices, requests, consents and other communications shall
be given by facsimile, hand delivery, overnight delivery or, to a Trust
Beneficiary only, first class mail, postage prepaid, and shall be deemed given
when actually delivered or, with respect to a Trust Beneficiary only, if mailed,
three (3) business days after deposit in the U.S. Mail.
7.8 Effective Date. This Trust, and the transfer of Trust Assets to the
Managing Trustee, shall become effective on the Effective Date of the Joint
Plan.
7.9 Tax Provisions.
7.9.1 Income Tax Status. For all purposes of the Tax Code, the Debtor
shall be deemed to have transferred the Trust Assets to the Trust
Beneficiaries and the other recipients of distributions hereunder pursuant
to the Joint Plan and thereupon the Trust Beneficiaries shall be deemed to
have transferred their share of the Trust Assets to the Trust. For all
federal income tax purposes, consistent valuations shall be used by the
Trust and the Trust Beneficiaries for the transferred Trust Assets. The
Trust is intended to be treated as a liquidating trust pursuant to Treasury
Regulations ss. 301.7701-4(d), and as a grantor trust subject to the
provisions of Subchapter J, Subpart E of the Tax Code, owned by the Trust
Beneficiaries as grantors. Any items of income, deduction, credit, or loss
of the Trust shall be allocated for federal income tax purposes among the
Trust Beneficiaries pro-rata on the basis of their beneficial interests.
The Managing Trustee is authorized to take any action that may be necessary
20
<PAGE>
or appropriate to minimize any potential tax liability of the Trust
Beneficiaries arising out of the operations of the Trust.
7.9.2 Tax Returns and Reports. In accordance with Treasury Regulation
ss. 1.671-4(a), the Managing Trustee shall cause to be prepared and filed,
at the cost and expense of the Trust, an annual information tax return
(Form 1041) with the Internal Revenue Service, with a schedule attached
showing the item of income, deduction, and credit attributable to the Trust
and detailing the allocation of such items of income, deduction, and credit
among the Trust Beneficiaries as required pursuant to the Form 1041
instructions for grantor trusts. Copies of such Form 1041 and attached
schedules will be delivered promptly to each Trust Beneficiary. In
addition, the Managing Trustee shall cause to be prepared and filed in a
timely manner, such other state or local tax returns as are required by
applicable law by virtue of the existence and operation of the Trust and
shall pay any taxes shown as due thereon. Within thirty (30) days after the
end of each calendar year, the Managing Trustee shall cause to be prepared
and mailed to a Trust Beneficiary such other information as may be
requested by such Trust Beneficiary in writing to enable such Trust
Beneficiary to complete and file his, her, or its federal, state and local
income and other tax returns.
7.9.3 Withholding. The Managing Trustee may withhold from the amount
distributable from the Trust at any time such sum or sums as may be
sufficient to pay any tax or taxes or other charge or charges which have
been or may be imposed on the distributee or upon the Trust with respect to
the amount distributable or to be distributed under the income tax laws of
the United States or of any state or political subdivision or entity by
reason of any distribution provided for any law, regulation, rule, ruling,
directive, or other governmental requirement.
7.9.4 Tax Identification Numbers. The Managing Trustee may require any
Trust Beneficiary or other distributee to furnish to the Managing Trustee
its Employer or Taxpayer Identification Number as assigned by the Internal
Revenue Service and the Managing Trustee may condition any distribution to
any Trust Beneficiary or other distributee upon receipt of such
identification number.
7.9.5 Tax Year. The taxable year of the Trust shall, unless otherwise
required by the Internal Revenue Code, be the calendar year.
7.10 Amendment of Trust. This Trust Agreement may be amended, modified or
altered only upon (i) the recommendation of the Managing Trustee to the
Supervisory Trustees and the approval of the Supervisory Trustees, and (ii)
Order of the Court.
VIII. RETENTION OF JURISDICTION
8.1 As provided in the Joint Plan, the Court has retained jurisdiction over
the Trust, the Trustees, and the Trust Assets, including, without limitation,
the determination of all controversies and disputes arising under or in
connection with this Trust.
21
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this instrument to be
executed as of the day and year first above written.
I.C.H. CORPORATION, a Delaware corporation
By: /s/ Susan A. Brown
------------------
Susan A. Brown, Co-Chief Executive Officer
By: /s/ Rodney D. Moore
-------------------
Rodney D. Moore, Co-Chief Executive Officer
MANAGING TRUSTEE
/s/ Susan A. Brown
------------------
Susan A. Brown
SUPERVISORY TRUSTEES
/s/ John M. Tobin
-----------------
John M. Tobin
/s/ Jeffrey Schultz
-------------------
Jeffrey Schultz
/s/ Gregory Lathrop
-------------------
Gregory Lathrop
22
<PAGE>
EXHIBIT A
ICH Assets and Securities Transferred to Lone Star Liquidating Trust
1. All cash and short-term investments (excluding $2.5 million,
$500,000 Tenneco settlement proceeds);
2. All restricted cash including:
- Republic Tower Rental Trust Account;
- Consolidated Fidelity tax obligation escrow;
- The escrow relating to the PennCorp Purchase agreement;
- Rights under the Modern/Western Escrow Agreement with
Reassure America Life Insurance Company;
3. All real property, other than the Perry Park, KY land and
improvements, including:
- Baton Rouge, LA land;
- Ponderosa Inn, Burly, ID;
- Deltona Lakes, FL land;
- Real property known as Post Oak Park, located in
Houston, Texas.
4. All Facilities Management Installation stock:
5. BML Agency stock;
6. SLC Financial Services stock;
7. All First Commonwealth Corporation stock;
8. All Churchill Downs stock;
9. All XRC Corp. stock;
10. All National Energy Group, Inc. stock;
11. All Kentucky Central Life Insurance Co. stock;
12. All Kentucky Investors, Inc. stock;
13. All Worthington Industries. Inc. stock;
14. All IMO Delaval Inc. stock;
15. All Transamerica Corporation stock;
16. Southwestern Financial Corp. $40 million Note due 2005;
Exhibit A-1
<PAGE>
17. Distribution and Liquidation Interest in Stone Capital Corp.;
18. Penncorp Purchase Agreement, including without limitation any and
all rights, claims, counterclaims, choses and causes of action
that may be asserted or enforced under Article VI (including
without limitation Section 6.5);
19. All ICH Funding Corporation stock;
20. Reinsurance receivables owed to BML;
21. Mississippi Power and Light Co. Debenture;
22. Fund America Investors Corp. Bonds;
23. Vanguard American Finance ABS 93-C5;
24. All Certified Capital Corp. stock;
25. Hicks Muse Limited Partnership (Hatbrands L.P.);
26. Hicks Muse Limited Partnership (Hatbrands Montana L.P.);
27. Rights, claims or actions under the Modern/Western Agreement
and/or the Philadelphia American Agreement;
28. Receivable from BML for Capital and Surplus Retention Assets; and
29. All claims, choses and causes of action relating to the assets
transferred to Lone Star Liquidating Trust pursuant to the terms
of the Joint Plan and the Order.
Exhibit A-2
<PAGE>
EXHIBIT B
[FORM OF FACE OF TRUST CERTIFICATE]
Beneficial Interest ("Trust Interest") in the
Lone Star Liquidating Trust Established Under the
Lone Star Liquidating Trust Agreement
Certificate No. Face Amount of Trust
Interests
T-___________ Represented by this Certificate
See Reverse for Description of Certain Terms,
Conditions and Restrictions on the Trust Interest
This certifies that _______________ is the registered holder of Trust
Interests in the face amount of ______________________ in the Trust established
under the Lone Star Liquidating Trust Agreement ("Trust Agreement"), dated as of
February ___, 1997, established by I.C.H. Corporation pursuant to the First
Amended Joint Plan of Reorganization in the Chapter 11 case styled In re I.C.H.
Corporation et al., Case No. 395- 36351-RCM-11 (the "Case"), in the United
States Bankruptcy Court for the Northern District of Texas, Dallas Division (the
"Court") as confirmed by the order of such Court entered on ___________, 1997
(as so confirmed, the "Joint Plan"), and accepted by the Managing Trustee for
the benefit of the Trust Beneficiaries. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Trust Agreement and the
Joint Plan, to which Trust Agreement and Joint Plan the holder of this
Certificate by virtue of the acceptance hereof assents and by which such holder
is bound. All terms not specifically defined herein shall have the meanings set
forth in the Trust Agreement. Subject to the Trust Agreement and the limitations
set forth therein, including the payment of all fees related to transfers, the
transfer of Trust Interests represented by this Certificate is registerable in
the Trust Register kept by the Registrar and Transfer Agent upon surrender of
this Certificate for that purpose, duly endorsed by, or accompanied by a written
instrument of transfer satisfactory in form to the Managing Trustee and the
Registrar and Transfer Agent, duly executed by, the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates evidencing a like amount of Trust Interests will be issued to the
designated transferee or transferees; provided, however, that no Certificates
evidencing less than $1,000 shall be issued.
In Witness Whereof, this Certificates has been executed by the Managing
Trustee hereunto duly authorized.
Dated:
[Name of Managing Trustee], as Managing Trustee
for the Lone Star Liquidating Trust]
Exhibit B-1
<PAGE>
Countersigned and Registered:
[Name of Registrar and Transfer Agent]
By:
Authorized Signature
Exhibit B-2
<PAGE>
[FORM OF FACE OF TRUST CERTIFICATE]
Beneficial Interest ("Trust Interest") in the
Lone Star Liquidating Trust Established Under the
Lone Star Liquidating Trust Agreement
The Trust Interests represented by this Certificate represent beneficial
interests in the Trust established under the Trust Agreement and Joint Plan as
confirmed by the United States Bankruptcy Court, Northern District of Texas,
Dallas Division, by Order entered on _________________, 1997.
The Managing Trustee will furnish without charge to each holder who so
requests complete copies of the Trust Agreement and the Joint Plan. Such
requests should be made in writing to the Managing Trustee at her principal
office at:
3811 Turtle Creek Boulevard
300 Turtle Creek Centre
Dallas, Texas 75219
The record date for determining entitlement to distributions of Available
Cash, if any, from the Trust to Trust Interest holders listed in the Trust
Register shall be established pursuant to the Trust Agreement.
At the office or agency of the Managing Trustee maintained for such purpose
and in the manner and subject to the limitations provided in the Trust
Agreement, this Certificate may be exchanged for new Certificates evidencing a
like aggregate amount of Trust Interests. Upon due presentation for registration
of transfer of this Certificate at the above-mentioned office or agency and the
payment of all fees provided in the Trust Agreement related to such transfer,
and subject to the limitations set forth in the Trust Agreement, a new
Certificate or Certificates evidencing a like aggregate number of Trust
Interests will be issued to the transferee or transferees as provided in the
Trust Agreement. The Managing Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection with any
exchange or registration of transfer of this Certificate in addition to the fees
provided in the Trust Agreement.
The Managing Trustee or any agent of the Managing Trustee may deem and
treat the Person in whose name this Certificate is registered upon the Trust
Register as the absolute owner hereof for all purposes, and neither the Managing
Trustee nor any such agent shall be affected by any notice to the contrary until
changed in the Trust Register in accordance with the Trust Agreement.
The obligations and responsibilities of the Managing Trustee and
Supervisory Trustees with respect to the Trust Interest under the Trust
Agreement shall terminate upon the payment to holders of Trust Interests of all
amounts held in the Trust and required to be paid to them pursuant to the Trust
Agreement and, in any event, upon termination of the Trust.
Exhibit B-3
<PAGE>
In the event of any omissions in the terms of this Certificate, or in the
event of any conflict between the terms of this Certificate and the terms of the
Trust Agreement, the terms of the Trust Agreement shall control.
-----------------------------------------
THE EXERCISE OF VOTING RIGHTS WITH RESPECT TO THE INTERESTS REPRESENTED BY
THE TRUST CERTIFICATES AND THE TRANSFER OF TRUST CERTIFICATES ARE SUBJECT TO
RESTRICTIONS SET FORTH IN THE TRUST AGREEMENT.
-----------------------------------------
THE TRUST INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATES SECURITIES
LAWS AND HAVE BEEN ISSUED PURSUANT TO THE EXEMPTION TO THE REGISTRATION
REQUIREMENTS THEREOF AFFORDED BY 11 U.S.A. ss. 1145. ACCORDINGLY, THIS
CERTIFICATE CAN ONLY BE SOLD OR OTHERWISE TRANSFERRED. PLEDGED OR HYPOTHECATED
PURSUANT TO THE PROVISIONS OF SUCH SECTION.
Exhibit B-4
EXHIBIT 3.2
[FORM OF FACE OF TRUST CERTIFICATE]
Beneficial Interest ("Trust Interest") in the
Lone Star Liquidating Trust Established Under the
Lone Star Liquidating Trust Agreement
Certificate No. Face Amount of Trust
Interests
T-___________ Represented by this Certificate
See Reverse for Description of Certain Terms,
Conditions and Restrictions on the Trust Interest
This certifies that _______________ is the registered holder of Trust
Interests in the face amount of ______________________ in the Trust established
under the Lone Star Liquidating Trust Agreement ("Trust Agreement"), dated as of
February ___, 1997, established by I.C.H. Corporation pursuant to the First
Amended Joint Plan of Reorganization in the Chapter 11 case styled In re I.C.H.
Corporation et al., Case No. 395-36351-RCM-11 (the "Case"), in the United States
Bankruptcy Court for the Northern District of Texas, Dallas Division (the
"Court") as confirmed by the order of such Court entered on ___________, 1997
(as so confirmed, the "Joint Plan"), and accepted by the Managing Trustee for
the benefit of the Trust Beneficiaries. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Trust Agreement and the
Joint Plan, to which Trust Agreement and Joint Plan the holder of this
Certificate by virtue of the acceptance hereof assents and by which such holder
is bound. All terms not specifically defined herein shall have the meanings set
forth in the Trust Agreement. Subject to the Trust Agreement and the limitations
set forth therein, including the payment of all fees related to transfers, the
transfer of Trust Interests represented by this Certificate is registerable in
the Trust Register kept by the Registrar and Transfer Agent upon surrender of
this Certificate for that purpose, duly endorsed by, or accompanied by a written
instrument of transfer satisfactory in form to the Managing Trustee and the
Registrar and Transfer Agent, duly executed by, the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates evidencing a like amount of Trust Interests will be issued to the
designated transferee or transferees; provided, however, that no Certificates
evidencing less than $1,000 shall be issued.
In Witness Whereof, this Certificates has been executed by the Managing
Trustee hereunto duly authorized.
Dated: ______________________________________________
[Name of Managing Trustee], as Managing Trustee
for the Lone Star Liquidating Trust]
<PAGE>
Countersigned and Registered:
[Name of Registrar and Transfer Agent]
By:__________________________________
Authorized Signature
<PAGE>
[FORM OF FACE OF TRUST CERTIFICATE]
Beneficial Interest ("Trust Interest") in the
Lone Star Liquidating Trust Established Under the
Lone Star Liquidating Trust Agreement
The Trust Interests represented by this Certificate represent beneficial
interests in the Trust established under the Trust Agreement and Joint Plan as
confirmed by the United States Bankruptcy Court, Northern District of Texas,
Dallas Division, by Order entered on _________________, 1997.
The Managing Trustee will furnish without charge to each holder who so
requests complete copies of the Trust Agreement and the Joint Plan. Such
requests should be made in writing to the Managing Trustee at her principal
office at:
3811 Turtle Creek Boulevard
300 Turtle Creek Centre
Dallas, Texas 75219
The record date for determining entitlement to distributions of Available
Cash, if any, from the Trust to Trust Interest holders listed in the Trust
Register shall be established pursuant to the Trust Agreement.
At the office or agency of the Managing Trustee maintained for such purpose
and in the manner and subject to the limitations provided in the Trust
Agreement, this Certificate may be exchanged for new Certificates evidencing a
like aggregate amount of Trust Interests. Upon due presentation for registration
of transfer of this Certificate at the above-mentioned office or agency and the
payment of all fees provided in the Trust Agreement related to such transfer,
and subject to the limitations set forth in the Trust Agreement, a new
Certificate or Certificates evidencing a like aggregate number of Trust
Interests will be issued to the transferee or transferees as provided in the
Trust Agreement. The Managing Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection with any
exchange or registration of transfer of this Certificate in addition to the fees
provided in the Trust Agreement.
The Managing Trustee or any agent of the Managing Trustee may deem and
treat the Person in whose name this Certificate is registered upon the Trust
Register as the absolute owner hereof for all purposes, and neither the Managing
Trustee nor any such agent shall be affected by any notice to the contrary until
changed in the Trust Register in accordance with the Trust Agreement.
The obligations and responsibilities of the Managing Trustee and
Supervisory Trustees with respect to the Trust Interest under the Trust
Agreement shall terminate upon the payment to holders of Trust Interests of all
amounts held in the Trust and required to be paid to them pursuant to the Trust
Agreement and, in any event, upon termination of the Trust.
<PAGE>
In the event of any omissions in the terms of this Certificate, or in the
event of any conflict between the terms of this Certificate and the terms of the
Trust Agreement, the terms of the Trust Agreement shall control.
-----------------------------------------
THE EXERCISE OF VOTING RIGHTS WITH RESPECT TO THE INTERESTS REPRESENTED BY
THE TRUST CERTIFICATES AND THE TRANSFER OF TRUST CERTIFICATES ARE SUBJECT TO
RESTRICTIONS SET FORTH IN THE TRUST AGREEMENT.
-----------------------------------------
THE TRUST INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATES SECURITIES
LAWS AND HAVE BEEN ISSUED PURSUANT TO THE EXEMPTION TO THE REGISTRATION
REQUIREMENTS THEREOF AFFORDED BY 11 U.S.A. ss. 1145. ACCORDINGLY, THIS
CERTIFICATE CAN ONLY BE SOLD OR OTHERWISE TRANSFERRED. PLEDGED OR HYPOTHECATED
PURSUANT TO THE PROVISIONS OF SUCH SECTION.
Exhibit 10.1
COMPENSATION AGREEMENT
by and between
LONE STAR LIQUIDATING TRUST
and
SUSAN A. BROWN, as Managing Trustee
effective as of February 19, 1997
1
<PAGE>
TABLE OF CONTENTS
Page
1. Defined Terms 3
2. Managing Trustee's Compensation and Reimbursement 3
(a) Base Salary 3
(b) Bonus Payments 3
(c) Benefits. 4
(d) Proration. 4
3. Compensation Upon Termination. 5
(a) Compensation Upon Termination. 5
(b) Survival. 5
4. Other Provisions Relating to Termination. 5
(a) Continuing Cooperation. 5
(b) Confidentiality. 5
5 . Successors and Assignments. 5
6. Notice. 5
7. Severability. 5
8. Miscellaneous. 6
9. GOVERNING LAW. 6
10. Counterparts. 6
2
<PAGE>
COMPENSATION AGREEMENT
This Compensation Agreement (this "Agreement") is effective as of the 19th
day of February, 1997 ("Effective Date"), by and between Lone Star Liquidating
Trust (the "Trust"), and Susan A. Brown (the "Managing Trustee").
WHEREAS, the Lone Star Liquidating Trust has been established pursuant to
the Lone Star Liquidating Trust Agreement", dated as of February 19, 1997, (the
"Trust Agreement by I.C.H. Corporation (including Care Financial Corporation and
SWL Holding Corporation) and accepted by Susan A. Brown, as Managing Trustee;
WHEREAS, Section 4.1.2 of the Trust Agreement provides that the initial
Managing Trustee shall be compensated on terms substantially in conformity with
the compensation provided for in the employment agreement between Susan A. Brown
and I.C.H. Corporation dated as of January 1, 1996 (the "Employment Agreement");
WHEREAS, the Supervisory Trustees have consented to the execution of a
Compensation Agreement with Managing Trustee substantially on the terms set
forth in Section 4.1.2 of the Trust Agreement and in the Employment Agreement;
WHEREAS, the Employment Agreement has been terminated pursuant to the
Acknowledgment of Termination of Employment Agreement dated as of the date
hereof, Managing Trustee has accepted the appointment to act as Managing Trustee
of the Trust, and Managing Trustee and the Trust desire to enter into this
Agreement to set forth the terms of Managing Trustee's compensation;
NOW, THEREFOR, in consideration of the foregoing premises and the mutual
covenants herein contained, and other good and valuable consideration, the
parties do hereby covenant and agree as follows:
1. Defined Terms. All capitalized terms used herein and not otherwise
defined shall have the meaning assigned thereto in the Trust Agreement.
2. Managing Trustee's Compensation and Reimbursement.
(a) Base Salary. Managing Trustee shall receive a base salary paid by
the Trust at the annual rate of $250,000 ("Base Salary") during each
calendar year of the Term, payable in equal monthly installments.
(b) Bonus Payments. Managing Trustee shall be entitled to receive, in
addition to the Base Salary, Bonus payments when and if Available Cash is
distributed to the Trust Beneficiaries from the Trust determined as
follows:
(i) if the value of Available Cash distributed to Trust
Beneficiaries under the Trust Agreement (adjusted as set forth below)
(the "Total Value Distributed") is less than or
3
<PAGE>
equal to $260 million, then Managing Trustee shall not be entitled to
any Bonus;
(ii) if the Total Value Distributed is greater than $260 million
but less than or equal to $280 million, then Managing Trustee shall be
entitled to a Bonus in an amount equal to 1% of the excess of the
Total Value Distributed over $260 million;
(iii) if the Total Value Distributed is greater than $280 million
but less than or equal to $310 million, then Managing Trustee shall be
entitled to an additional Bonus in an amount equal to 2% of the excess
of the Total Value Distributed over $280 million; or
(iv) if the Total Value Distributed is greater than $310 million,
then Managing Trustee shall be entitled to an additional Bonus in an
amount equal to 2.5% of the excess of the Total Value Distributed over
$310 million.
For purposes of determining the Total Value Distributed, the value of cash
distributed shall be discounted at the rate of 4% per annum for the period from
the date of distribution back to January 1, 1997; provided, that the date of any
distribution to a Distribution Agent shall be deemed the date of distribution
for purposes hereof.
(c) Benefits. Managing Trustee shall be entitled to be reimbursed by
the Trust in a reasonable amount for the cost incurred by Managing Trustee
to purchase:
(i) health insurance coverage substantially similar to that
provided by I.C.H. Corporation to Managing Trustee immediately prior
to the termination of the Employment Agreement, and
(ii) a term life insurance policy covering the life of Managing
Trustee and providing a lump sum death benefit of $500,000 payable to
such beneficiaries as Managing Trustee designates.
(d) Proration; Withholding. Any payments payable to Managing Trustee
under this Agreement (other than the payment of Bonus payments pursuant to
Section 2(b) hereof) in respect of any calendar year during which Managing
Trustee is employed by the Trust for less than the entire year, unless
otherwise expressly provided herein, shall be prorated in accordance with
the number of days in such calendar year during which she is so employed.
Any payments payable to Managing Trustee under this Agreement shall be
subject to all applicable deductions and withholdings for federal, state,
city or other taxes or other amounts as shall be required pursuant to any
law or regulation.
4
<PAGE>
3. Compensation Upon Termination.
(a) Compensation Upon Termination. Managing Trustee shall be entitled
to the following compensation from the Trust upon the termination of her
service as Managing Trustee by reason of death, resignation or removal:
(i) Managing Trustee's Base Salary to the date of Managing
Trustee's death, resignation or removal; plus
(ii) the Bonus, if any, as and when determined pursuant to
Section 2(b) hereof.
(b) Survival. The provisions of this Section 3 shall survive any
termination of this Agreement.
4. Other Provisions Relating to Termination.
(a) Continuing Cooperation. In the event of the removal or resignation
of Managing Trustee, Managing Trustee agrees to reasonably cooperate with
and to make herself available to the Trust to assist it in the orderly
administration of its affairs. For such assistance and cooperation,
Managing Trustee shall be paid $150 per hour.
(b) Confidentiality. Managing Trustee agrees, in the event of her
removal or resignation prior to substantial completion of the purpose of
the Trust, to maintain in confidence all proprietary and confidential
information of the Trust.
5. Successors and Assignments. This Agreement shall be binding upon, and
inure to the benefit of, the Trust, Managing Trustee, and their respective
successors. assigns, personal and legal representatives, executors,
administrators, heirs, distributees, devisees. and legatees, as applicable. This
Agreement may not be assigned (either voluntarily or involuntarily) by any party
hereto without the express written consent of the other party and approval of
the Bankruptcy Court, if necessary. Any attempted assignment in violation of
this Section 5 shall be void and ineffective for all purposes. In the event of
an assignment permitted by this Section 5, this Agreement shall be binding upon
the heirs, successors, and assigns of the parties hereto.
6. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be given in the manner set
forth in the Section 7.7 of the Trust Agreement.
7. Severability. In the event that any provision of this Agreement, or the
application thereof to any person or circumstance, is held by a court of
competent jurisdiction to be invalid, illegal, or unenforceable in any respect
under present or future laws effective during the effective term of any such
provision, such invalid, illegal, or unenforceable provision shall be fully
severable: and this Agreement shall then be construed and enforced as if such
invalid, illegal, or unenforceable provision had not been contained in this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore, in
5
<PAGE>
lieu of each such illegal, invalid, or unenforceable provision, there shall be
added automatically as part of this Agreement, a provision as similar in terms
to such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid and enforceable.
8. Miscellaneous. This Agreement and the Trust Agreement sets forth the
entire understandings of the parties with respect to the subject matter hereof,
it incorporates and merges any and all previous communications and
understandings with respect to the subject matter hereof, oral or written, and
no provision of this Agreement may be modified, waived, or discharged unless
such waiver, modification, or discharge is agreed to in the manner set forth in
Section 7.10 of the Trust Agreement.
9. GOVERNING LAW. (a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES SUBMIT TO THE EXCLUSIVE JURISDICTION
OF THE BANKRUPTCY COURT WITH RESPECT TO ALL DISPUTES ARISING UNDER THIS
AGREEMENT.
10. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original, but all of which together will
constitute one and the same agreement.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth below, to be effective as of the date first above written.
THE TRUST:
LONE STAR LIQUIDATING TRUST
Date: February 19, 1997 By:/s/ Susan A. Brown
------------------
Susan A. Brown
Managing Trustee
MANAGING TRUSTEE:
Date: February 19, 1997 /s/ Susan A. Brown
------------------
Susan A. Brown
7
Exhibit 10.2
EMPLOYEE LEASING AGREEMENT
EMPLOYEE LEASING AGREEMENT (the "Agreement"), dated February 19, 1997,
among Lone Star Liquidating Trust, a Texas trust (the "Trust"), Facilities
Management Installation, Inc., a Delaware corporation ("FMI" and together with
the Trust sometimes collectively referred to herein as the "Trust Companies")
and Southwestern Financial Services Corporation, a Delaware corporation
("SWFSC").
INTRODUCTORY PROVISIONS
The following are true and correct and form the basis for and are a part of
this Agreement:
A. SWFSC is a party to (i) that certain Employee Leasing Agreement dated as
of December 29, 1995, with I.C.H. Corporation ("ICH"), FMI and other
subsidiaries of ICH (as amended and extended to date, the "ICH Agreement") and
(ii) that certain Employee Leasing and Data Processing Capacity Agreement dated
as of December 29, 1995 with Bankers Multiple Line Insurance Company, an
Illinois insurance company ("BML" (as amended and extended to date, the "BML
Agreement"). Both the ICH Agreement and the BML Agreement expire by their terms
on the date hereof.
B. ICH filed a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code in the U.S. Bankruptcy Court, Northern District of Texas, Dallas
Division on October 10, 1995. Pursuant to the First Amended Joint Plan of
Reorganization Under Chapter 11, as approved by Order dated February 7, 1997
(the "Plan"), the Trust was established to which certain assets of ICH have been
transferred, including the capital stock of FMI. Further, the Trust has agreed
with Reorganized ICH (as defined in the Plan) to provide such administrative and
management services to it and BML as was being provided under the ICH Agreement
and BML Agreement, respectively, immediately prior to the expiration of such
agreements, which services will be obtained by the Trust under and pursuant to
this Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
EMPLOYEE LEASING AGREEMENT - Page 1
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ARTICLE I
Leased Employee Services
1.1 In General. The leased employees are substantially all of the employees
of SWFSC, and the Executive Managers set forth on Schedule 1.1, who perform the
tasks set forth in Article VI hereto for SWFSC and its affiliates and who
performed substantially all of the services reasonably necessary or required for
the conduct of the business of the companies, including ICH, FMI and BML, that
SWFSC served under the ICH Agreement and BML Agreement prior to the date hereof.
Such business as so conducted and to the extent to be conducted under this
Agreement for and on behalf of the Trust Companies is referred to as the
"Business." Such leased employees, as changed from time to time in accordance
with this Agreement, are herein called the "Leased Employees." Subject to
Section 1.3, the Leased Employees, together with their offices, and office
equipment, (including computer and other data processing equipment) and supplies
(collectively, the "Offices"), will be made available to the Trust Companies to
the extent reasonably necessary or required for the conduct of the Business
under the supervision, direction and control of Susan A. Brown, Managing Trustee
(the "Trustee").
1.2 Acceptance. The Trust Companies hereby acknowledge that the Leased
Employees to be made available to the Trust Companies as of the date hereof
collectively have the qualifications, training and experience reasonably
necessary or required for the conduct of the Business in accordance with sound
business practices in all material aspects.
1.3 Allocation of Time. SWFSC will use its reasonable efforts in good faith
to allocate on a fair and equitable basis the time of the Leased Employees among
the other companies to which it provides services, including its own affiliates
and the Trust Companies.
ARTICLE II
Leased Employees
2.1 Provision of Leased Employees. SWFSC hereby leases the Leased Employees
to the Trust Companies on a non-exclusive basis during the term of this
Agreement. At all times during the term of this Agreement, SWFSC will have the
right to determine, in the reasonable exercise of its discretion, the identity
of Leased Employees and the percentage of the Leased Employees' time to be
devoted to the Trust Companies; provided, however, at all times during the term
hereof SWFSC will (a) provide the Trust Companies with Leased Employees who
collectively have the qualifications, training and experience reasonably
necessary for the conduct of the Business in accordance with sound business
practices in all material aspects, and (b) subject to Section 1.3, cause such
Leased Employees to devote such time as may be reasonably necessary or required
for the conduct of the Business.
EMPLOYEE LEASING AGREEMENT - Page 2
<PAGE>
2.2 SWFSC As Sole Employer. The Leased Employees shall at all times remain
the employees of SWFSC. SWFSC shall have the sole authority and responsibility
to hire, terminate, determine the rate and manner of compensation and benefits
of, evaluate and discipline the Leased Employees. Such authority and
responsibility shall be exercised without prior consultation with, or notice to,
the Trust Companies, except that insofar as their work for the Trust Companies
is concerned, the activities of the Leased Employees shall be under the
direction, supervision and control of the Trustee, as provided in Article IV.
The Trust Companies shall not have any obligation for the payment of any
compensation or benefits to any Leased Employee. Notwithstanding the provisions
of Section 2.1, SWFSC shall, at the request of the Trust Companies, make
reasonable efforts to replace or reassign any Leased Employee who does not
adequately perform assigned tasks, as determined by the Trustee in the
reasonable exercise of her discretion.
2.3 No Solicitation. During the period beginning on the date hereof and
ending on the later of (a) the first anniversary of the date hereof, or (b) six
months after the termination of this Agreement, the Trust Companies shall not
directly or indirectly, employ, or offer employment to or solicit, encourage or
induce any person employed by SWFSC to leave the employ of SWFSC without the
prior consent of SWFSC, provided, that the Trust Companies may solicit for
employment any Leased Employee whose employment by SWFSC has been involuntarily
terminated by SWFSC but only to the extent such solicitation commences following
such Leased Employee's termination of employment with SWFSC.
2.4 No Agency. In the performance of their duties in respect of the
Business, the Leased Employees shall be the agents of the Trust Companies and
not of SWFSC. The Trust Companies shall not hold out the Leased Employees, and
shall use commercially reasonable efforts to cause the Leased Employees not to
hold themselves out, as agents of SWFSC in the course of the performance by the
Leased Employees of their duties in respect of the Business.
ARTICLE III
Use of Facilities, Equipment and Supplies
3.1 No Ownership Interest: Limited Rights. The Trust Companies shall have
no property interest or other rights in the Offices. Each Trust Company
acknowledges that its only right under this Agreement is to the lease of the
Leased Employees and to have the use of Offices in the manner provided herein,
and that it is not granted any right to the use of any specific equipment or
software or any particular configuration thereof, except as provided herein.
3.2 Lease of Facilities. If either party so desires, the Trust Companies
will enter into a mutually agreeable lease, sublease or other such arrangement
with SWFSC pursuant to this Agreement for the use by the Trust Companies of any
SWFSC facilities that the Trust Companies exclusively occupies. Such lease,
sublease or other arrangement will be for the term of this Agreement only,
unless otherwise expressly agreed by SWFSC, and will have such other terms as
the parties agree.
EMPLOYEE LEASING AGREEMENT - Page 3
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3.3 Purchase of Specific Equipment and Forms. In the event the Business
requires the use of any specific equipment or any business forms, including,
without limitation, letterhead, notices and other customer communications, or
any other item, in each case, which will be used exclusively by the Trust
Companies (collectively the "Purchased Items"), SWFSC may, in its sole
discretion, purchase such item for the account of the Trust Companies, provided,
that if the amount required to be expended for any Purchased Item exceeds
$5,000, such expenditure shall not be made without the prior consent of the
Trustee. The full cost of the Purchased Item, which cost shall include any
reasonable expenses of SWFSC in procuring the Purchased Item, shall be reflected
on the next succeeding monthly billing statement provided to the Trust Companies
pursuant to Section 6.2. Following the termination of this Agreement, Purchased
Items not held in the name of the Trust Companies shall be transferred and
conveyed to the Trust Companies at no additional cost to the Trust Companies,
except for the reasonable expenses incurred by SWFSC in transferring such
Purchased Items to the Trust Companies, which expenses shall be paid by the
Trust Companies immediately upon receipt of such Purchased Item.
3.4 Maintenance of Books and Records. During the term of this Agreement,
and subject to applicable law or regulation, SWFSC shall maintain for and on
behalf of the Trust Companies such books and records of the Trust Companies as
the Trustee may reasonably request in the same manner, and subject to the same
records retention policy, as SWFSC uses for the books and records of its
affiliates. If at any time the Trust Companies object to the records retention
policy of SWFSC, the Trust Companies may (at the Trust Companies' expense)
remove and retain such books and records. SWFSC shall provide access to such
books and records to the Trust Companies and its designees at the offices of
SWFSC during normal business hours, and shall furnish such books and records to
the Trust Companies upon reasonable request.
3.5 Use of Trust Companies Property. In the performance of their duties
hereunder the Leased Employees will have the right to use any piece of equipment
or software which is owned by the Trust Companies or which the Trust Companies
has the right to use. The Trust Companies will use commercially reasonable
efforts to obtain all consents from third parties, if any, which may be
necessary for the Leased Employees to use any such equipment or software.
ARTICLE IV
Management Obligations of the Trust Companies
4.1 Management General.
(a) SWFSC shall make available the Leased Employees to conduct the
Business under the direction and supervision of the Trustee. The Trust
Companies acknowledge that the duties of the Leased Employees will be
administrative, technical and ministerial in nature and that the Leased
Employees will not set policy for the Trust Companies. The Trustee shall
establish or approve all policies under which the Leased Employees operate,
including,
EMPLOYEE LEASING AGREEMENT - Page 4
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without limitation, policies with respect to compliance with all applicable
insurance and other laws.
(b) Although the direct supervision of any individual Leased Employee
may be carried out, and the activities and performance of such individual
Leased Employee may be directed by, another Leased Employee, all such
supervisory activities shall be performed by the Leased Employees as agent
for and on behalf of the Trust Companies and not SWFSC. The Trustee shall
bear the responsibility to direct the Leased Employees, and any such direct
supervision of Leased Employees by other Leased Employees shall in no way
lessen the responsibility of the Trust Companies and the Trustee for the
direction and supervision of the Leased Employees.
(c) The Trustee shall act through the management structure of SWFSC,
including the Executive Managers, in dealing with SWFSC and the Leased
Employees.
4.2 The Trustee.
(a) The Trust Companies shall cause the Trustee to devote such time,
attention and skill as may be necessary or appropriate to perform the
duties and responsibilities of the Trustee outlined in this Agreement.
(b) The Trust Companies will promptly notify SWFSC if Susan A. Brown
is terminated or ceases to act as the Trustee for any reason, and when a
new trustee is retained or appointed. In the event that the Trust Companies
fail to have a trustee appointed to perform the obligations of the Trust
Companies under this Agreement for a period of five consecutive business
days, SWFSC may, at its sole option, cease to make the Leased Employees
available hereunder until such time as a replacement trustee has been duly
appointed and SWFSC has been notified thereof.
EMPLOYEE LEASING AGREEMENT - Page 5
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ARTICLE V
Services
5.1 Services Required. Subject to Section 1.3, SWFSC will make the Leased
Employees available to the Trust Companies to the extent reasonably necessary or
required for the conduct of the Business, including without limitation, the
performance of the following services as reasonably directed or requested by the
Trustee:
(a) Accounting, audit support and tax services;
(b) Administrative and support services; and
(c) Such other services as may be reasonably required for the conduct
of the Business and as agreed by SWFSC and the Trust Companies.
ARTICLE VI
Fees and Expenses
6.1 Fees and Expenses of Term. During the Term of this Agreement, the fees
and expenses to be paid to SWFSC by the Trust Companies hereunder shall be the
Trust Companies' pro rata portion of certain fees and expenses of SWFSC
calculated on the basis set forth on Schedule 6.1.
6.2 Billing and Payment. Within 30 days following the end of each calendar
month during the Term hereof or the date of termination of this Agreement, SWFSC
will provide to the Trust Companies a statement showing the fees and expenses
allocable to the Trust Companies for such prior calendar month or portion
thereof, together with amounts paid by SWFSC in respect of any Purchased Item
not yet billed to the Trust Companies.. The Trust Companies will pay each such
statement in full within 15 days of receipt. Without limiting any other right of
SWFSC, payments made by the Trust Companies later than 15 days shall accrue
simple interest at 10% per annum (or such lesser rate as may be the legal
maximum rate of interest).
6.3 Audit/Dispute of Statements. The Trust Companies may audit a billing
statement that has not been previously audited and sustained, or otherwise
agreed to and not changed and that the Trust Companies believe in good faith to
be incorrect provided such audit is commenced within a 15-day period after the
receipt of such billing statement. The Trust Companies may audit a billing
statement for the purposes of determining whether (i) the amounts allocated to
the Trust Companies are appropriately allocated to the Trust Companies (rather
than to an affiliate of SWFSC), and (ii) the calculation or determination of
costs underlying the billing have been performed in accordance with this
Agreement. The Trust Companies shall have no other right to audit, dispute,
object to or otherwise challenge any statement or part thereof. Any such audit
shall be completed, if at all, within 15 days after it is commenced. SWFSC shall
cooperate with any such audit, including by providing
EMPLOYEE LEASING AGREEMENT - Page 6
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to the Trust Companies all supporting documentation relating to the billing
statement being audited. If such audit indicates the need for an adjustment of
the amounts charged, the Trust Companies may dispute the correctness of such
statement or any charges thereon, by proposing, in writing, an adjustment and
the reasons therefor, each in reasonable detail. Any proposed adjustment shall
specify the allocated items, if any, that require adjustment and be accompanied
by data supporting the proposed adjustment. Any statement (or part thereof) not
disputed as to correctness by the Trust Companies (or as to which an audit has
not been commenced) within the 15-day period shall thereafter conclusively be
deemed correct for all purposes. In the event that a billing statement is
disputed under this Section 6.3, representatives of SWFSC and the Trustee shall
confer within 5 business days of delivery to SWFSC of the proposed adjustment.
If SWFSC and the Trust Companies are unable to resolve such dispute within 5
business days, any such dispute shall be finally resolved in accordance with
Article VIII hereto. If such final resolution occurs after the termination of
this Agreement, such adjustment shall be paid by the Trust Companies or repaid
by SWFSC, as the case may be, within 15 days of the date of the final
resolution. Nothing in this Section 6.3 shall relieve the Trust Companies from
its obligation to pay each monthly statement or the statement prepared at the
termination of this Agreement in full within 15 days of receipt, whether or not
such statements reflect amounts that are being audited or disputed.
ARTICLE VII
Remedies and Indemnification
7.1 Limited Remedies. SWFSC's sole liability to the Trust Companies for any
failure to carry out, or error or omission in carrying out, its obligations
hereunder (unless such failure, error or omission results from bad faith,
willful malfeasance or gross negligence of SWFSC) shall be to correct the
failure, error or omission as soon as reasonably practicable under the
circumstances. SWFSC shall not be liable to the Trust Companies or any other
person for following instructions of the Trust Companies or the Trustee, and all
remedial actions on the part of SWFSC with respect to any inaccurate, erroneous
or mistaken instructions from the Trust Companies or the Trustee shall be at the
sole cost and expense of the Trust Companies. IN NO EVENT SHALL SWFSC, ITS
AFFILIATES OR ANY OF THEIR OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISERS, OR
REPRESENTATIVES (COLLECTIVELY, THE "REPRESENTATIVES") BE LIABLE TO THE TRUST
COMPANIES UNDER OR IN CONNECTION WITH THIS AGREEMENT UNDER ANY THEORY OF TORT,
CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY DAMAGES,
DIRECT OR INDIRECT, CONSEQUENTIAL OR OTHERWISE, EXCEPT FOR SUCH DAMAGES THAT
RESULT FROM ITS OR THEIR RECKLESSNESS OR WILLFUL MISCONDUCT.
7.2 Indemnification.
(a) SWFSC agrees to indemnify and to hold the Trust Companies harmless
from any and all Losses incurred by the Trust Companies as the result of
any act or omission by
EMPLOYEE LEASING AGREEMENT - Page 7
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SWFSC in the performance of its duties hereunder if SWFSC's act or omission
constitutes bad faith, willful malfeasance or gross negligence.
(b) The Trust Companies agree to indemnify and hold SWFSC, its
affiliates and each of their Representatives (collectively, the "SWFSC
Indemnities") harmless from any and all Losses (whether attributable in
whole or in part to the acts or omissions of the SWFSC Indemnitees)
resulting from any act or omission by the Trust Companies or the Trustee
related to the performance of this Agreement if the Trust Companies' or
Trustee's act or omission constitutes bad faith, willful malfeasance or
gross negligence.
(c) As used herein, "Losses" shall mean any and all liabilities,
obligations, commitments, losses, fines, penalties, sanctions, costs
(including court costs but excluding costs and expenses of in-house experts
and other personnel), expenses, interest, deficiencies or damages (whether
absolute, accrued, conditional or otherwise and whether or not resulting
from third-party claims) that are quantifiable in monetary terms, including
reasonable out-of-pocket expenses and reasonable fees and expenses of
attorneys, accountants, consultants and expert witnesses (excluding costs
and expenses of in-house experts and other personnel) incurred in the
investigation or defense of claims asserted against an Indemnified Party
(as defined in Section 7.3).
7.3 Indemnification Procedures. In the case of any claim asserted against a
party entitled to indemnification under this Agreement (the "Indemnified
Party"), notice shall be given by the Indemnified Party to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity under
this Article VII may be sought, and the Indemnified Party shall permit the
Indemnifying Party (at the expense of the Indemnifying Party) to assume the
defense of any claim or any litigation resulting therefrom, provided that (i)
the counsel for the Indemnifying Party who shall conduct the defense of such
claim or litigation shall be reasonably satisfactory to the Indemnified Party,
(ii) the Indemnified Party may participate in such defense at its expense, and
(iii) the omission by the Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its indemnification obligation under
this Agreement except to the extent that such omission results in a failure of
actual notice to the Indemnifying Party and the Indemnifying Party is materially
damaged as a result of such failure to give notice. Except with the prior
written consent of the Indemnified Party, the Indemnifying Party, in the defense
of any such claim or litigation, shall not consent to the entry of any judgment
or enter into any settlement that provides for injunctive or other nonmonetary
relief affecting the Indemnified Party or that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to the
Indemnified Party of a release from all liability with respect to such claim or
litigation without any payment by the Indemnified Party. If the Indemnified
Party shall in good faith reasonably determine that the conduct of the defense
of any claim subject to indemnification hereunder or any proposed settlement of
any such claim by the Indemnifying Party might reasonably be expected to affect
adversely the Indemnified Party's ability to conduct its business, or that the
Indemnified Party may have available to it one or more defenses or counterclaims
that are inconsistent with one or more of those that may be available to the
Indemnifying Party in
EMPLOYEE LEASING AGREEMENT - Page 8
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respect of such claim or any litigation relating thereto, the Indemnified Party
shall have the right at all times to participate in the defense or settlement
relating to any such claim at the sole cost of the Indemnifying Party. In the
event that the Indemnifying Party does not accept the defense of any matter as
above provided, the Indemnified Party shall have the full right to defend
against any such claim or demand and shall be entitled to settle or agree to pay
in full such claim or demand at the sole cost of the Indemnifying Party. In any
event, the Indemnifying Party and the Indemnified Party shall cooperate in the
defense of any claim or litigation subject to this Section 7.3 and the records
of each shall be available to the other with respect to such defense.
7.4 Other Remedies. The rights and remedies herein provided are cumulative
and are not exclusive of any rights or remedies an Indemnified Party may
otherwise have at law or in equity.
7.5 Survival. The indemnity and other provisions of this Article VII shall
survive the termination of this Agreement.
7.6 Force Majeure. SWFSC shall not be liable to the Trust Companies for a
failure to comply with the terms hereof where such failure is due to causes
beyond its reasonable control. The suspension of SWFSC's obligation pursuant to
this Section 7.6 shall not relieve SWFSC from performing any other obligations
not affected by such cause, excuse the Trust Companies from performing its
obligations under this Agreement, or extend the term of this Agreement.
ARTICLE VIII
Dispute Resolution
8.1 Arbitration of Disputes. Any dispute, controversy or claim arising out
of or relating to this Agreement, or the Schedules hereto, or the breach,
termination, validity or enforceability hereof shall be finally and exclusively
settled by arbitration in accordance with this Article VIII. The arbitration
shall be conducted in accordance with the commercial rules of the American
Arbitration Association ("AAA") in effect at the time of the arbitration, except
as they may be modified by mutual agreement of the parties. Arbitration under
this Section shall be initiated by a written demand for arbitration specifying
the controversy or claim on which arbitration is sought as well as the relief
requested. Service of the arbitration demand shall be effective if made pursuant
to the notice provisions of Section 10.9 of this Agreement. The board of
arbitrators shall be composed of three arbitrators, each being qualified to make
evaluations of the matters under dispute. Each of the parties to the arbitration
shall appoint one arbitrator and shall notify the other party of such
appointment within 15 days after receipt by the respondent of the written demand
to arbitrate. The two arbitrators so appointed by the parties shall appoint a
third, presiding arbitrator, within 30 days after their appointment. If either
party fails to appoint its arbitrator or the two appointed arbitrators are
unable to appoint a third arbitrator, each within the stated period, an
arbitrator shall be chosen by the AAA in accordance with its rules. The
arbitration shall take place in Dallas, Texas, or such other place as the
parties mutually agree. The arbitration proceedings, all documents and all
testimony, written or oral, produced in connection therewith shall be
confidential. The arbitration award shall be final and
EMPLOYEE LEASING AGREEMENT - Page 9
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binding on the parties and may include costs, including attorneys' fees. Any
arbitration award may be enforced in any court having jurisdiction over the
party against which enforcement is sought.
ARTICLE IX
Term and Termination
9.1 Term. This Agreement shall begin on the date hereof and continue
through the close of business on the last day of the 12th calendar month
commencing after the date hereof (the "Term").
9.2 Termination.
(a) This Agreement may be terminated by either party at any time for
material breach of this Agreement by the other party and the failure of the
breaching party to cure such breach within 30 days after receiving written
notice of such breach in accordance with the notice provisions of this
Agreement. The terminating party shall give notice of termination under
this Section 9.2 and shall specify the date as of which the termination
shall be effective.
(b) During the Term, this Agreement may be terminated on 90 days prior
written notice by either party.
(c) Promptly upon termination hereof, SWFSC shall deliver to the Trust
Companies or its designees all books and records, forms, statements, files,
reports and other data and information in the form (including digital
storage) in which they were prepared or collected by SWFSC in connection
with the performance of this Agreement.
(d) Except for Article VI, Article VII and Section 10.3, upon
termination this Agreement shall become void and have no effect and there
shall be no continuing obligation or liability on the party of any party
hereto or its affiliates or Representatives, provided, that termination
shall not relieve any party from liability for any breach hereof.
ARTICLE X
Miscellaneous
10.1 Independent Contractor Status. SWFSC relationship to and with the
Trust Companies under this Agreement is and at all times shall be as an
independent contractor. Nothing contained herein, and no act done under this
Agreement, shall be construed as establishing a partnership, joint venture or
other relationship between the parties.
10.2 Exclusive Agreement. During the term of this Agreement, the Trust
Companies shall not, without the prior written consent of SWFSC, obtain services
similar to those provided by Leased
EMPLOYEE LEASING AGREEMENT - Page 10
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Employees from any other person except its own employees. Nothing herein shall
prevent SWFSC from leasing its employees or providing any other services to any
other person.
10.3 Confidential Proprietary Information. The parties acknowledge that
during the term of this Agreement, each of the parties and their agents,
employees and representatives may obtain or have access to certain proprietary
information of the other. Each of the parties agrees that such proprietary
information will be maintained on a strictly confidential basis, will be used
solely for the purposes contemplated herein, and will be disclosed only to those
of the parties' respective agents, employees and representatives who require
such information for purposes of their performance hereunder, or as required by
applicable law or regulation.
10.4 NO WARRANTIES. SWFSC MAKES NO REPRESENTATION OR WARRANTIES OF ANY
KIND, EXPRESS OR IMPLIED, IN LAW OR IN FACT, WITH RESPECT TO THE ACCURACY,
PERFORMANCE, QUALITY, FITNESS OR SUITABILITY FOR A PARTICULAR PURPOSE, OR
MERCHANTABILITY, OR AGAINST INFRINGEMENT, OF THE FACILITIES, EQUIPMENT AND
SUPPLIES FURNISHED TO THE LEASED EMPLOYEES HEREUNDER.
10.5 Further Assurances. Each party hereto shall execute and deliver any
additional instruments, letters and other documents reasonably necessary in
order to effect or carry out the provisions of this Agreement and shall cause to
be done, and to assist and cooperate with the other parties doing, all things
necessary, proper or advisable to accomplish and carry out, in the most
expeditious manner practicable, the intent of the parties as expressed herein.
10.6 Severability. If any provision of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the provisions of this Agreement shall remain in full force and effect. The
parties shall endeavor in good faith negotiations to replace any invalid,
illegal or unenforceable provision with a valid legal and enforceable provision,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provision.
10.7 Agreement: No-Third Party Beneficiaries. This Agreement and the other
documents and instruments referred to herein (a) constitute the entire agreement
and understanding and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and (b) except as otherwise expressly specified herein, are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
10.8 Assignment. This Agreement shall not be assignable or otherwise
transferable by any party hereto without the prior written consent of the other
parties hereto, and any purported assignment or other transfer without such
consent shall be void and unenforceable.
10.9 Notices. Any notice, demand, election, request, consent or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) when
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personally delivered or delivered by telecopy on a business day during normal
business hours (at the place of receipt) at the address or number designated
below, or (b) on the second business day following the date of mailing by
overnight courier, fully prepaid, addressed to such address, whichever shall
first occur. The addresses for such communication shall be:
If to the Trust Companies:
Lone Star Liquidating Trust
500 North Akard, 12th Floor
Dallas, Texas 75201
Attention: Susan A. Brown
Telecopy: (214) 954-7717
If to SWFSC:
Southwestern Financial Services Corporation
500 North Akard
Dallas, Texas 75201
Attention: Glenn H. Gettier, Jr.
Telecopy: (214) 954-7345
10.10 Amendments and Waivers. This Agreement may not be amended,
supplemented or discharged, and none of its provisions may be modified, except
expressly by an instrument in writing signed by the party to be charged. Any
term or provision of this Agreement may be waived, but only in writing by the
party which is entitled to the benefit of that provision. No waiver by any party
of any default with respect to any provision, condition or requirement hereof
shall be deemed to be a continuing waiver in the future thereof or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.
10.11 Counterpart. This Agreement may be executed in one or more
counterparts, which together shall constitute but one instrument. It shall not
be necessary for each party to sign each counterpart so long as each party has
signed at least one counterpart.
10.12 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Texas without regard to the
provisions thereof pertaining to the principles of conflict of laws.
EMPLOYEE LEASING AGREEMENT - Page 12
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IN WITNESS WHEREOF, SWFSC and the Trust Companies have executed this
Agreement as of the date first written above.
LONE STAR LIQUIDATING TRUST FACILITIES MANAGEMENT INSTALLATION,
INC.
By: /s/Susan A. Brown By: /s/Susan A. Brown
----------------- -----------------
Susan A. Brown, Managing Trustee Susan A. Brown,
Co-Chief Executive Officer
SOUTHWESTERN FINANCIAL SERVICES
CORPORATION
By: /s/Glenn H. Gettier, Jr.
------------------------
Glenn H. Gettier, Jr., President
EMPLOYEE LEASING AGREEMENT - Page 13
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Schedule 1.1
EXECUTIVE MANAGERS
Glenn H. Gettier, Jr.
Robert C. Greving
Daniel B. Gail
John T. Hull
Robert J. Bruce
W. Hubert Mathis
<PAGE>
Schedule 6.1
Employee Leasing Agreement
This Schedule sets forth the methodology for allocating the fees and
expenses incurred for the benefit of the Trust Companies.
I. Direct Expenses
Direct Expenses are all fees and expenses incurred by SWFSC for the
exclusive benefit of the Trust Companies.
The following are examples of Direct Expenses:
o Cost and expenses incurred in connection with auditing the financial
statements for the Trust Companies or, at the request of the Trust
Companies, for ICH and BML.
o Legal fees incurred in connection with the employment of legal
counsel.
o Special tax, accounting or other studies performed by independent
professional or consulting individuals or organizations.
o Taxes, other than FICA and employment taxes paid by SWFSC with respect
to SWFSC's employees and federal, state and local taxes withheld by
SWFSC.
All Direct Expenses that are paid by SWFSC shall be charged one hundred
percent (100%) to the Trust Companies.
II. Indirect Expenses
Indirect Expenses are all fees and expenses of SWFSC incurred on behalf of
the Trust Companies other than Direct Expenses . Indirect Expenses include the
salaries of the Leased Employees providing services to the Trust Companies
required by the Trustee. Leased Employees' salaries shall be charged to the
Trust Companies at the rate of one hundred (100%) of such Leased Employees'
regular monthly salaries multiplied by the percentage of time for pay purposes
such Leased Employees actually worked for the Trust Companies during the month
in question. All other Indirect Expenses incurred by SWFSC on behalf of the
Trust Companies will be charged to the Trust Companies each month at a rate
equal to sixty percent (60%) of the actual amount of salaries charged to the
Trust Companies for the Leased Employees providing services to the Trust
ADDENDUM NO. 1 TO EMPLOYEE LEASING AGREEMENT
ADDENDUM NO. 1, dated as of February 19, 1998 (the "Addendum"), to Employee
Leasing Agreement dated as of February 19, 1997 (the "Agreement"), among Lone
Star Liquidating Trust, a Texas trust (the "Trust"), Facilities Management
Installation, Inc., a Delaware corporation ("FMI" and together with the Trust
sometimes collectively referred to herein as the "Trust Companies") and
Southwestern Financial Services Corporation, a Delaware corporation ("SWFSC").
WHEREAS, the parties wish to extend the term of the Agreement and to amend
Schedule 1.1 thereto;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. The Term of the Agreement shall continue through the close of business
on March 31, 1999, unless further extended by the parties.
2. Schedule 1.1 to the Agreement is amended and restated in its entirety to
read as set forth in Schedule 1.1 attached to this Addendum.
3. References in the Agreement to the "Agreement" shall mean the Agreement
as amended and modified hereby and reference to "Term" shall mean the Term of
the Agreement as extended hereby. This Addendum supersedes any prior agreements
or understandings with respect to the subject matter hereof. Except as amended
hereby, the Agreement shall continue in full force and effect. This Addendum may
be executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument. This Addendum shall be governed by and
construed and enforced in accordance with the laws of the state of Texas without
regard to the provisions thereof pertaining to the principles of conflict of
laws.
IN WITNESS WHEREOF, the SWFSC and the Trust Companies have executed this
Addendum as of the date first written above.
LONE STAR LIQUIDATING TRUST FACILITIES MANAGEMENT INSTALLATION,
INC.
By: /s/ Susan A. Brown By: /s/ Susan A. Brown
Name: Susan A. Brown Name: Susan A. Brown
Its: Managing Trustee Its: Co-Chief Executive Officer
SOUTHWESTERN FINANCIAL SERVICES
CORPORATION
By: /s/ John Bower
Name: John Bower
Its: Senior Vice President,
Administration
<PAGE>
Schedule 1.1
EXECUTIVE MANAGERS
John Bower
John T. Hull
W. Hubert Mathis
David Montgomery
