Free Appendix - District Court of Delaware - Delaware

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 1 of 30

creditors

clearly

favor the Plan

total

of 98.2%

in

amount and

88.5% of unsecured

creditors

in

number

voted

for the

Plan

In

addition

the

Noteholders

unanimously

support the Plan

The

EC

Plan was rejected

by

several

classes

of creditors

unsecured

creditors

of

CI

R-Nets

claim against

CI

the Noteholders

claims

against

CI CHC
Although

R-Nets
based

claim

against

CHC CHC
of the

Noteholders

guaranty claims

against

CHC
voting

upon

the

outcome

ECs

motion

to

temporarilyallow

claims

for

purposes

the

EC

Plan was

accepted

by Class

CHC

only 23

of 40 ballots

cast

by

CHCs

Unsecured

creditors

were

to

accept

theEC Plan who

Creditors

voted

for

both Plans were permitted to state

preference

as

between

the

Trustees

Plan and

the

EC

Plan

Of

those creditors

more

creditors

stated

preference

for the

Trustees

Plan than the Equity

Plan

Although

the

Trustees

Plan was

rejected

based

upon

the

number

of shares

voting

against

it

68.2% of those holding

shares casting

ballots

on

the

Plan voted

in

favor of the Plan

This

vote was

surprisingly

strong

given

that

the

EC

has vehemently

opposed

the

Plan and

that

7.6% of Coram

is

owned

by Samstocks

related

13d
it

shareholder

group

Perhaps

the

Trustee

said

best

In

comparing the-two Committees
primarily off
all
it

why
plan

do you feel that the Trustees

plan

is

better

than the

Equity

Well
pays of
it

resolves

this

matter only

once

and

for all

It

treats

all

parties

fairly
is

It

of the claims majority
are

The

theyve

had

vote

now
who

Everyone seem
to

in

favor

including
to

of the equity holders small group about
to it the the in the the

The

only ones that

be

opposed stock

my plan

equity category

have

paid for their
that

Theres no doubt

But

overwhelming number
been reported
to

of constituents
are
in

Im

dealing

with according employees
all

vote thats

me

favor of the

plan The
creditors

The

want

plan

TA131-32
Plan While
it

of Coram

clearly

favor the Trustees

is

true

that

Samstock

which

stands to make

almost

1000%

on

its

investment

if

the

Plan

is

confirmed

opposes

it

49

Al 081

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 2 of 30

substantial

number of shareholders voted

to

support

the

Plan

As

result

the

Court

should

confirm

the

Plan

VI

CONCLUSION
For
all

of the foregoing

reasons and

based

on

all

of the evidence

submitted

at

the

confirmation

hearings

the

Court should

enter

Orders confirming

the

Trustees

Plan and

denying

confirmation

of the Equity

Plan.8

Respectfully

submitted

Dated

May 27 2004

SCUNADER HARRISON SEGAL
LEWIS LLP

Barry Wilbur Richard Michael

Bressler Kipnes Barkasy Barrie

Matthew
1600

Holmwood
Suite

Market Street

3600
19103-7286

Philadelphia

Pennsylvania

215 215
-and

751-2000
751-2205

telephone facsimile

WEIR

PARTNERS

LLP

By

Is Kenneth Kenneth
824

Aaron Aaron
Street

4043
Mall
Suite

Market

1001

P.O Box 708
Wilmington Delaware 19899

302 302

652-8181

telephone facsimile

652-8909

Co-Counsel
Trustee

to

Arlin

Adams

Chapter

11

18

See

Trustee

Appendix

at

380

for

Trustees

objections

to

EC

exhibits

and

designations

50

Al 082

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 3 of 30

IN

THE UNITED STATES BANKRUPTCYCOURT FOR THE DISTRICT OF DELAWARE

INRE
Chapter
11

CORAM HEALTHCARE CORP CORAM iNC

and
Case

No

00-3299

MFW

Jointly Administered

Debtors

CHAPTER

11

TRUSTEES POST-CONFIRMATION

hEARING REPLY BRIEF

Barry Wilbur Richard

Bressler Kipnes

Barkasy

Matthew
Michael

Holmwood
Barrie

SCHNADER HARRISON SEGAL
LLP
1600

LEWIS

Market Street

Suite

3600 19103-7213

Philadelphia

Pennsylvania

215751-2000
-and-

Kenneth

Aaron

4043
LLP
Suite

WETR

PARTNERS
Street

824 Market

Mall

1001

P.O Box708
Wilmingtor Delaware 19899

302652-8181
Co-Counsel
Trustee
to

Arlin

Adams

Chapter

11

Al 083

Case 1:04-cv-01565-SLR

Document 126-4

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Page 4 of 30

TABLE

OF CONTENTS

TABLE OF AUTHORITIES INTRODUCTION
II

ii

THE TRUSTEES PLAN

IS

PROPOSED

IN

GOOD FAITH

ifi

THE TRUSTEES PLAN IS FAIR AND EQUITABLE TO CHCS COMMON SHAREHOLDERS BECAUSE THEIR DISTRIBUTION UNDER THE PLAN IS GREATER THAN THE VALUE OF THEIR
INTERESTS
The Trustees Value Comports With The Case

Confirmation

Existing

Law

and Is More Credible Than

ECs

Valuation

If The

ECs
The

Estimates

of The Settlement
Equity

Value of The LitigatIon

Claims Prove Accurate Under

Will Receive

More

than

$126 Million

TrusteesPlan

The Noteholders

Do

Not Receive

Windfall

Under

The Plan

IV

THE TRUSTEES PROPOSED PARTIAL SETTLEMENT OF TIlE PROPOSED DERIVATIVE LITIGATION IS WELL ABOVE THE LOWEST RANGE OF REASONABLENESS THE COURT SHOULD APPROVE THE R-NET SETTLEMENT WHICH WAS NEGOTIATED AND PROPOSED IN GOOD FAITH

12

VI

CONCLUSION

15

EVIDENTIARY

REPLY APPENDIX

Al 084

Case 1:04-cv-01565-SLR

Document 126-4

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Page 5 of 30

TABLE OF AUTHORITIES

FEDERAL CASES
In re

Dow
Exide

Corning

Corp 244 B.R

678

Bankr

E.D Mich 1999 Del 2003

In

re

Technologies

303

B.R

38

Bankr

5-7

In re Lorazepam

Clorazepate

Antitrust

Litigatior 205 F.R.D

369

D.D.C 2002

12

Oak

Park

Calabasas

Condominium

Assoc 302 B.R 665 Bankr
285 F.3d 1231
9t1

C.D Cal 2003
cert

Oiiink 537

Cardellucci 1072

In

re

Cardellucci

Cir

denied

U.S

2002
Inc
93

In re Sound Radio

B.R

849

Bankr

D.N.J

1988

In re Times Sales

Financial

Corp 491
134

F.2d 841

3d

Cit

1974

8-9

Inre

Trans

World Airlines Inc

F.3d

188

3d

Cir 1998

5-6

In re Warfarin

Sodium

Antitrust

Litigatior 212 F.R.D

231

Del 2002 2002

12

Weil

Long

Island

Savings

Bank

188

Supp 2d

258

E.D.N.Y Del 1999

12

In re Zenith

Electronics

Corp

241

B.R

92

Bankr

FEDERAL STATUTES
1lU.S.C.1129

18U.S.C.1962

11-12

11

Al 085

Case 1:04-cv-01565-SLR

Document 126-4

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Page 6 of 30

INTRODUCTION
The
Trustee submits this Brief in reply to
the

Equity

Committees

Post-Trial

Memorandum

EC Brief.1

Unfortunately

the

ECs

argument

is

based

on many

half-truths

mistruths

out of context

quotes

and

blatantly

disregards

the

record

Space

limitations

make

it

impossible to correct

all

of these misstatements

or

address

all

the

internal

inconsistencies

and

contradictory

arguments

in the

ECs

Brief

The

Court carefhlly

listened

to

the

testimony

and

received

the

exhibits

and

will

consider the post-hearing

Briefs

The Trustee

believes

that

the

evidence

in

support of confirmation

of his Plan

is

compelling

II

THE TRUSTEES PLAN
The

IS

PROPOSED

IN

GOOD FAITH
be

EC

conterils

that

the

Trustees

Plan cannot

confmned

because

it

was not

proposed

in

good

faith

as

required by 11

U.S.C

129a3

Apparently

having

been

successful

in

arguing lack of good faith in connection

with the Debtors

prior

plans

the

EC

has decided

to

place the Trustee

into

the same

category

as

the Debtors

prior

conflicted

CEO
all

Despite

the

BCs

extensive

discovery

of every aspect of the Trustees

settlement negotiations

the

evidence

confirms

that

the

Trustee

has proposed

his

Plan with honesty

good intentions

and

reasonable

basis

for

expecting

that

his

Plan

is

feasible

and

can

be

confirmed

and

effected

with results

consistent

with the objectives

-and

purposes

of the Bankruptcy

Code.2

The

record

is

clear

that

the

Trustee

first

pursued

consensual

plan of reorganization and

proposed

the current

Plan only after the

BCs

conduct

established

clear

that

the

EC

had no

Terms

referred

to

herein and not defined Brief

shall

have

the

same naning
the

as

used

in the

Chapter
first

11

Trustees
in this

Post-

Confirmation appear
in the

Hearing Trustees

Trustees

Brief

Transcripts

Trustee

refers

to for the

time

reply Brief

Supplement

Appendix

TSA_
92
107

See

In

re

Zenith

Electronics

Corn

241

B.R
the

Bankr

Del 1999 good
faith

auotin2 standard

In re

Sound Radio
that effected the

Inc

93

B.R 849
proposed
consistent

853

Bankr D.N.J
good
the

1988
intentions

where and

Court noted
for

The

requires

plan be
results

with honesty with

basis

expecting

that

reorganization

can

be

with

objectives

and purposes

of

the

Bankruptcy

Code

Al 086

Case 1:04-cv-01565-SLR

Document 126-4

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Page 7 of 30

genuine

interest

in

consensual

plan

The Trustee moved forward

consistent

with his fiduciary

obligations

to

serve the interests of

all

the

constituencies

In doing

so he negotiated

favorable

settlements

of the substantial

claims

of the

Internal

Revenue

Service and R-Net

He was

able

to

propose

Plan which provided

for

payment

in

full

to

all

unsecured

creditors

other than

the

Noteholders

and

very substantial

certain

distribution

to

the

shareholders

In formulating

his

Plan the Trustee was cognizant

that

the Noteholders

were unsecured

creditors

and

interest

holders

with

claims

including post-petition

interest

in

excess

of $370 million

He was

also

cognizant

of the claims

of

CHC

shareholders

and

sought to maximize their return.3

Finally the

Trustee

proceeded

with the interests of

Coram

thousands

of employees

and

patients/customers

in

mind

groups totally lost sight of by the

BC
negotiations

The

process and substance

of the Trustees

with various

parties

was detailed

in the

testimony

of

the

Trustee

Marshall

Stearns

Hobart

Truesdell

Scott

Victor

Samuel

Bemiss and

even Donald

Liebentritt

That

testimony

made

clear

that

the

Trustee proceeded

in

manner

that

was

model of honesty and

good intentions

and

that

his

goal was

to

achieve

feasible fair and

equitable

result

for

all

the

constituencies

to

which he owed

fiduciary

duty

The

ECs

contentions

to

the

contraly are not supported by the record

Indeed

its

representations

regarding

process

at

times border

on

the intellectually

dishonest

The

following

while by no means exhaustive

are

illustrative

The

evidence

clearly

established

that

the

Trustees

Plan was

agreed

to

on September

25 2002

Indeed

the

EC

itself

submitted

into

evidence

numerous

drafts

of the

Plan Funding Agreement

each

reflecting

ongoing

negotiations

and

various

substantive

changes

including

changes

made up

to

the

very day

the

Plan was

filed

on

May

2003

Those changes

The Trustees
beneficial to

Plan unlike

the

two

prior

failed

Debtors

plans pays

the

unsecured

creditors

in

full

and

is

far

more

CHC

shareholders

Al 087

Case 1:04-cv-01565-SLR

Document 126-4

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Page 8 of 30

included

significant

increased

contribution

to the

settlement by the Noteholders

Between

September

25 2002

and

May 2003

the

Trustee was

also

negotiating

settlements

with the IRS

and R-Net which were necessary
unsecured

prerequisites

to

filing

plan providing

payment

in

full

to

creditors

and

large

distribution

to

shareholders

The

Trustee

attempted

to negotiate

consensual

resolution

with the

EC

but the evidence

revealed that

the

EC was
the

less

than forthright

in

its

negotiating

tactics

After

Samuel

Zell

told

the

Trustee

that

EC

wanted

settlement for shareholders

of approximately

$60 million dollars

TA3 11

the

ECs

initial

demand

at

the mediation

session was

$118 million

and

the

EC

never

decreased

its

demand

below $99 million

TA127
the

Even

worse

Mr
he

Liebentritt

the

ECs

lead spokesman

testified that

just

before

Trustee

was appointed

would have

accepted

an

amount

in the

$50-55

million dollar

range

He

never

disclosed

that

fact

to

the Trustee or his counsel because

as Liebentritt

lamely

said

no

one

asked

that

question

TA260
That
the

EC

had no

intention

of engaging

in

meaningful

negotiations

is

demonstrated

by

the

fact

that

the

EC

had begun

to

work

on

its

own

plan before

the

mediation

session took place

without

even

mentioning

this to

the

Trustee

Indeed

the

EC
its

never

advised

the

Trustee

at

any

time that

it

-was

preparing

its

own

plan until

week

before

EC

Plan was

prematurely

filed in

December

2002

TA259
that the

The

EC

is

inconect

Trustee

did not have

sufficient

information

regarding

the

value

of

Coram

or the proposed

derivative

claims before

entering

into

proposed

settlement with the Noteholders

or proposing

his

Plan

In particular

The uncontradicted

testimony

was

that

both Messrs Victor

and

Bemiss

consistently

advised to the Trustee that

there

was no

realistic

likelihood

that

the

company

Al 088

Case 1:04-cv-01565-SLR

Document 126-4

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Page 9 of 30

could be sold for more than $250 million

TA24-27

TA59

even

though

they stood to

earn far

larger

fees

by

selling

Coram
The and had

Trustee

his

advisors

the

benefit

of the extensive

and

detailed

investigation4

of the prospective

derivative

claims

by counsel

for the

EC

as

well as

additional

investigation

of those claims by Trustees

counsel

and

the

Briefs

and

arguments

all

parties

presented

TA1

26-27

TA265

Even

then

the

Trustee did not agree

to the

Plan

Funding Agreement

with the Noteholders

until

after

he received

Mr

Shestack

advice that

the

settlement

was well above

the low end of the range

of reasonableness

TA1

5-26
increase in

The

EC

asserts

that

notwithstanding

the material

Coram

value

since

the Trustee

made

his

deal with the Noteholders

the

Trustee

acknowledges

that

he

has not increased the return

to

the stockholders

That

statement

is

completely

inaccurate

The

first

amendment

to

the

Trustees

Plan changed

the

recipient

of the net proceeds

of both the proposed

derivative

claim against

Daniel

Crowley and the outside

directors

and

the

PWC
rate

litigation

from Reorganized

Coram

to

the

shareholders

after only payment

of judgment

interest

to

the unsecured

creditors

The

EC

Brief asserts

that

the

settlement

values of these

claims

are

$56 million and

$30 million respectively

Even

if

the

ECs

estimates

are

drastically

overstated

as

it

appears

it

is clear

that

the

Trustees

first

plan amendment

will

likely

increase

substantially

the return

to

the

CHC

shareholders

Likewise

the

Trustees

second

plan

amendment by which
the

the

Noteholders

assume

direct

payment

of the $16 million balance

due

on

IRS settlement and

contribute

$40 million of

the

Noteholders

in

cash5

greatly

benefited

the

The EC spent

millions the

of

dollars

investigating that

the the

litigation

claims before and have

after

the

Trustee

was appointed

TA264

Surely

EC

does

not contend

Trustee

should

duplicated

that

work

The Noteholders

will

now

receive only zero coupon

preferred stock

rather

than

secured

loan

Al 089

Case 1:04-cv-01565-SLR

Document 126-4

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Page 10 of 30

shareholders

Moreover

the

$560000

commitment

fee in the

previous

loan agreement

will

no

longer be required and

will

be

available

for distribution

to

CHC

shareholders

EC
the inconsistencies that

discussion

of the Trustees

second

plan amendment

is

illustrative

of

have pervaded

the

ECs
the

entire

confirmation case

Judge

McKelvie

testified that

it

was hard

to

gauge

whether

settlement

was worth $56 million dollars because

it

was

largely

reflected

by

loan to Reorganized

Coram

TA229

Although

the

Trustee

disagreed

that

the

form of

the

contribution

was

substantively

meaningful

in

order to satisfy

this

concern

the

Trustee

continued

to

negotiate

with the Noteholders

and

persuaded

them

to

make

the

entire

funding

in

cash

It

is

disingenuous

for the

EC now

to

contend

that

the

second

modification

to

the

Plan was entirely

cosmetic

and

adds no value

Similarly

the

EC

ignores

the

undisputed

fact

that

the

Noteholders

have

received

no cash

interest

payments

or cash

dividends

on

their preferred

stock since

these

proceedings

began

several

years ago

which

represents

large

counter-balance

to

the

increase

in

Corams

value since

the

Trustee proposed

his

Plan

III

THE TRUSTEES PLAN IS FAIR TO CHCS COMMON EQUITABLE SHAREHOLDERS BECAUSE THEIR DISTRIBUTION UNDER THE PLAN GREATER THAN THE VALUE OF THEIR INTERESTS
The Trustees
Credible Confirmation

AN

IS

Value Comports With

Existing

Case

Law

and

Is

More
The

Than The

ECs

Valuation

BC

contends

that

Judge

Careys opinion

in

In re Exide

Technologies

303

B.R

48

Bankr
The

Del 2003

supports

its

position

on valuation

This reliance

on Exide

is

misplaced

BC

asserts

that

Exide

rejected

third-party

sale approach

to

the

valuation of an

asset in

bankruptcy

Contrary

to

the

ECs
that

contention

Judge

Carey

did not depart from

established

Third Circuit

precedent

the

fair

valuation of an

asset in

bankruptcy

requires

the

determination

of

its

market

value

which must be analyzed

in

realistic

framework

Al 090

Case 1:04-cv-01565-SLR

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Page 11 of 30

considering

amounts

that

can

be

realized

in

reasonable

time

assuming

willing

buyer and

willing

seller

In re Trans

World Airlines Inc

134

F.3d

188 193-94

3d

Cir 1998.6

Exide states

that

the

most appropriate

method

to

determine

the

enterprise

value of

debtor

corporation

is

by

straight forward

application

of three

standard valuation

methodologies

comparable

company

analysis

comparable

transactions

analysis and

discounted

cash

flow

DCF

analysis

See

Exide 303

B.R

at

65-66

Judge

Carey

criticized

the

debtors

valuation expert because

he made numerous adjustments

to

the

valuation

methodologies

in

order to bring

it

in line

with the experts

view of

the

current

market

value

See

kL

In contrast

EB/SSG made no

such

adjustments

As

explained

by both Victor and

Bemiss EB/SSG

performed

its

valuation of

Coram by

utilizing

this precise

straight forward

application

of the three

standard valuation

methodologies

TA6O-64
of the

Tr Ex

11

EB/SSG

did not

make downward

subjective

adjustments

to the

results

analyses to reflect

their

view of

the

current

market

value

Indeed Bemiss

testified that

the

value indicated

by

the

traditional

methodologies

was aggressive

given

his

knowledge

of the market

TA7O
EC
is

Deloittes

valuation for the

not consistent

with

Exide

It is

not

straight forward

application

of the valuation methodologies

which

as

performed

by Deloitte

yielded

valuation

of $279 million

BC Ex

51

at

38

Apparently

concerned

that

even

this stretched

valuation was

not high enough to support the Equity

Plan

Deloitte

departed

from

its

previous

methodology7

and added

approximately

$100 million

for

what

it

calls

non-operating

assets cash

NOLs

and

goodwill

amortization

In Exide

the

valuation experts

for

both sides

utilized

managements

Indeed

EB/SSG

and

Deloitte

both

indicated

that

they followed

this

approach

TA56-57 TSA34
that
it

Deloitte
first

did not second

ascribe

value

for

cash NOLs

or

goodwill

in the

valuations

performed

for the

Debtors

and

confirmation

hearings

Al 091

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 12 of 30

five-year

projections

in

performing

their

DCF
was

analyses

Deloitte

however

performed

just the

type of adjustment

of which Judge

Carey

critical

--

it

rejected

managements

projections

and

adjusted

Coram

growth

rate

upward

for

its

DCF

analysis from the growth

rate

deemed

appropriate

by management

in

order to

achieve

its

artificially inflated

value evenbefore

adding

the non-operating

assets

Similarly Deloitte

made

overly aggressive

subjective

adjustments

to

EBITDA

which increased

its

indicated

value under

the

comparable

transactions

analysis

by

approximately

$78

million

The EB/SSGs

valuation totaled

more than

eight

times reported

trailing

12 months

EBITDA TA7O-71
interest the

and

utilized

methodologies

consistent

with

Exide

Eveiy expression of

Trustee

and

his

fmancial

advisors

received

supported

EB/SSGs

valuation and

confirmed

that

Coram

is

worth

less

then $250 million

TA24-27

TA58-59

which

leaves

the

common

shareholders

out

of the

money
of The Settlement Value of The Litigation Claims Prove
Million

If The

ECs Estimates
Equity

Accurate

Will Receive

More Than $126

Under

The

Trustees

Plan
Under the Trustees Plan common
shareholders cash
distribution

get

of more than $40

million which

is

in

excess

of the market

cap

of the stock

at

the

time the confirmation

hearings

ended

If the

EC
the

unsupported

estimates

of the settlement wilue

of the

PWC

litigation

$30

million and

claims

against

Crowley and the outside

directors

$56

million

turn

out to be

accurate

CHCs shareholders
the

which

the

testimony

of Victor

Bemiss and Hurst

established

were out of

money
return

will

receive

total

distribution

of

more than $126

millioa

This

would represent

of more than

3000% on
Such

Sarnstock

post-petition

investment

of more

than two million shares

Tr Ex

distribution

is

clearly

fair

and

equitable

Al 092

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 13 of 30

The Noteholders

Do

Not Receive

Windfall

Under

The Plan

The

BC

contends

that

the

Trustees

Plan

is

not

fair

and

equitable

because

the

Noteholders

will

receive more than the value

of their claims

The

ECs

argument

relies

upon

several

false

premises

Initially

the

EC

reduces

the

Noteholders

claims

from more than $370 million to $262

million

The

EC
the

has

still

not coherently

answered

the

question posed

by

the

Court during

argument

on

Noteholders

motion

to

dismiss the equitable

subordination

complaint

If the

enterprise

value

permits post petition they

interest

to

creditor
to

debt holder
the

why would

Noteholders

not be entitled

interest

The

arguments

in the

EC

Brief in this regard

make no more

sense

now

than

when made by

Mr

Bradford

at

argument and were

skeptically

received

by the Court then The

TSA38-42
court in

The

cases relied upon by the

EC

do not support

its

position

In re

Dow
to

Corning

Corp 244 B.R 678 Bankr
creditors

E.D Mich 1999
interest at the

actually

held that

plan that

proposed

pay commercial

post-petition

federal

judgment

rate

instead

of the

contract

rate

was not

fair

and equitable

The

ECs

reliance

upon Onink

Cardellucci

In

re

Cardellucci

285

F.3d

1231

1233

9th1

Cir cert
in

denied 537

U.S

1072

2002
to the

is

also

misplaced

The Ninth

Circuits

holding

Onink was

specifically

limited

distribution

by

trustee

in

Chapter

case pursuant

to

726a5

of the Code

and

is

not applicable

in

Chapter

11

context

See

Oak Park

Calabasas

Condominium

Assoc

302

B.R 665 672 Banks
Act
in

C.D Cal

2003

Likewise

the

Third

Circuits opinion

under

the old Bankruptcy

In re Times Sales

Financial

Corp 491

F.2d 841

3d
to

Cir 1974

Adams

--

holding

no abuse of

discretion

by the

denial

of post-petition

interest

creditor

where

subordination

agreement

did not clearly

provide

that

post-petition

interest

was

to

be subordinated

--

is

inapposite

Al 093

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 14 of 30

The

EC

adds $86 million it unilaterally

attributes

to

the potential

settlement value of the

retained

litigation

claims

to the

Noteholders

column

This

is

not forthright

The shareholders

are to

receive the net proceeds

of such

claims

The

EC

also

contends

inexplicably

that

$41

million of

Coram

cash

will

remain

in the

Noteholders

hands

even

though

all

but $10 million

of that

cash

will

be used

to

pay

creditors

or go

to

the

shareholders

Finally

the

NOLs

will

have

only speculative

if any value

to

the

post-confirmation

Debtors

Coram

Director of Taxation

Scott

Moeller gave

detailed

and unrebutted

testimony

that

the

Debtors

would

likely

lose

an

IRS challenge

to

the

Debtors use of

NOLs
an

due

to

arguably

inconsistent

past

tax

filing

positions

The

ECs

witness

on

NOLs

is

neither

expert in tax nor

NOL

issues

and

he did not

fully

review

Moellers testimony

Tn reality

under

the

Trustees

Plan

the

Noteholders

are

not receiving anything

close

to

the

full

amount of

their

claims

The

Noteholders

are contributing

$56 million in

fresh

funding

and

relinquishing

claims

of more than $370 million and in return

are

receiving

company

that

can

be

fairly

valued

at

no more than $229 million

IV

THE TRUSTEES PROPOSED PARTIAL SETTLEMENT OF THE PROPOSED DERIVATIVE LITIGATION IS WELL ABOVE THE LOWEST RANGE OF REASONABLENESS
In
its

Disclosure

Statement

based

upon Professor

Fischels

initial

report

the

BC

represented

to

creditors

and shareholders

that

the

damages

in the

derivative

action

exceeded

$320 million

Tr Ex
to

at

22

But during

the

confirmation

hearing

Professor

Fischel reduced

his calculation

$265 million

TA2

10-211

Now

that

Dr

Tabak has established

without

Although Reorganized
are
still

not

appropriate
is

for to

valuation purposes what
the

even

if the

$10

million the

in

cash
in

working

capital for
all

remaining claims

in

Corarn
million

added

Noteholders even

receive under excluding

Plan

exchange

their

they

$150

short

of being

made whole
by

their

$56

million cash

settlement

payment

The
the

shortfall

to the

Noteholders
chart

was

illustrated

Mr

Liebentritts

testimony on

cross-examination

regarding

demonstrative

he had

prepared

TSA3O-32

Al 094

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 15 of 30

challenge

that

Professor

Fischel

made

mistake

of more than $100 million and that

the

maximum amount

of damages under

his

flawed

yardstick methodology would approximate

$138

million the

EC

ignores

the

other

potential

deficiencies

in the

yardstick methodology

In fact the

EC

seems

to

have

abandoned Fischels

figures

and now suggests

different

damages theory

The

EC

Brief asserts

that

rescissory

damages based

on

the

sale

of

CPS

are

approximately

$275 million but did not

offer

any

competent

evidence

to

support this belated

damages

calculation

Damages

cannotbe

calculated

simply by subtracting

the sale price

of

CPS

in

2000

from

the

sale price

of Curascript in 2004

As

the

Trustee

explained

such

simple

comparison

is

very

unrealistic because

the

nature

of the company

changed dramatically

after

Coram

sold it

TSA22-24

The

damages

analysis

will

be complex and

it

will certainly

be

opposed vigorously

Furthermore

because

the

Curascrip

sale

occurred

so recently

and

minimal evidence

would be more misleading

than illuminating the Court properly sustained objections

to

questions regarding

the sale

of Curascript and

the

documents

the

EC now

improperly

cites in

support of

its

argument

EC

Exs 150 179 TSA12 TSA21
defenses
available to

TA148-49
contest this

The

EC

also

ignores

the

liability

claim

As

Mr
to

Shestack

testified

the

defendants

would have

strong arguments

as to

why Corams

decision

sell

CPS

did not constitute

breach

of fiduciary

duty

CPS was
The The The The
initial

cash

drain to

on
sell

the

decision

company CPS predated Crowley
competitive bidding

sale sale

was completed was approved

after

by

the

Board of Directors
opinion

Board received

fairness

from Deutsche Bank

Alex Brown

TSA8-9 TSA14-15
if there
is

Finally as pointed

out in our main Brief

basis

for

such

claim

it

would be

against

Crowley and

the

outside

directors

who made

the

decision

to

sell

CPS

The

possibility

of

10

Al 095

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 16 of 30

claim based

on

the sale

of

CPS

does

not in any

way

detract

from

the

reasonableness

of the

Trustees

proposed

settlement with the Noteholders

The

EC

next adds

$55

million in

hard

damages

it

contends

were

established

by

Mr

Godnick

during

his

cross-examination

of Shestack

The

EC

appears

to

contend

that

Mr
asked

Godnick

questions

themselves

constitute

evidence.9

Actually

what

Mr

Godnick

Mr
the

Shestack

was

series

of hypothetical questions

through

which he sought

to

establish

that

maximum amount

of the possible damages in the derivative

case

aside

from damages based

on

Professor

Fischels

yardstick

measure

could not

exceed

$55

million

He made

various

assumptions

to

give

equity the benefit

of the

doubt

TSA1
all

For example he asked

Mr

Shestack

to

assume

that

the

Noteholders

would be

liable for

of the costs

associated

with

Coram

bankruptcy

and

that

those costs

were $45

million without

reference to

any

supporting

documentation

for the

years since

the Goldin

report

was issued

TSA1
reading

Mr
of

Shestack

clearly

did not agree that

there

are

$55

million in

hard

damages

fair

Mr

Shestacks

testimony

suggests that

he

did not concur other

than to suggest that

if

$55

million were the

maximum damages
The

then $56 million was

obviously

tremendous

settlement

TSA1
According
to

EC

next suggests that

its

inflated

damages claim should be trebled

the

EC

Judge

McKelvie

testified-persuasively

that

the

RICO

case against

Cerberus Feinberg

and

Crowley would

survive

summary

judgment motion

EC
the

Brief

at

42

But

Judge

McKelvie

acknowledged

that

he

was not

offering

an

opinion

that

18

U.S.C

1962c

claim would

survive

summary

judgment

TA233-34
RICO
claims

In addition

Judge

McKelvie

testified that

there

was

no guarantee

that

the

other

would

get

past

motion

practice

and

that

he

was not

Neither

Professor admitted

Fischel that

nor Judge

McKelvie
analyze

testified

about

any

hard

damages

To

the

contrary

Judge

McKevie

he did not even

them

TA237
11

Al 096

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 17 of 30

prepared to put

percentage

to

it

TA234

In any

event

surviving

summary judgment does

not

mean

success

at

trial

or

on appeal

The

EC

Brief also

asserts

that

Mr

Shestack

acknowledged

tint

all

of the elements

of

RICO claim
this

except whether

Coram

could prove

pattern

of predicate

acts were

present in

case

EC

Brief at

43

That

statement

is

unsupportable

Mr

Shestack

repeatedly

stated

that

the

biggest obstacle

facing

the

RICO plaintiff
is

was

that

the

alleged scheme was subject

to

vigorous

attack

Yet
that

the

alleged scheme

the

linchpin

of

RICO

claim

In arguing

there

is

evidence

from which Goldman

and

Foothill

could be held liable

under

RICO

EC

Brief

at

45

the

EC

is at

odds

with

its

proposed

complaint

and

is

at

odds

with

its

own

expert

Neither

Goldman

nor Foothill

are

named

as

RICO

defendants

Addressing

the

claims naming

them

Judge

McKelvie

testified that

couldnt

identif from the core facts

that

looked

at

sufficient

facts

to

say from those facts

alone that they would survive

motion

for

summary judgment

TSA29
RICO
and
antitrust

Finally

because

claims

are

so difficult

to

prove

the

recovery

of treble

damages

is

considered

purely

speculative

and

courts

evaluate settlements

by comparing

the

settlement

amount with

the

estimated

single

damages

not treble

damages

In

re

Warfarin

Sodium

Antitrust

Litigation

2-12

F.R.D

231

257-58

Del 2002

C.J Robinson
n.12

see also

In

re

Lorazepam

Clorazepate

Antitrust

Litigatioi

205 F.R.D

369 377

D.D.C 2002

Weil

Long

Island

Savings

Bank

188

Supp 2d 258 264 E.D.N.Y

2002

THE COURT SHOULD APPROVE THE R-NET SETTLEMENT WHICH WAS NEGOTIATED AND PROPOSED IN GOOD FMTH
The Equity Committee contends
that the

Trustees

Plan should not be

confirmed

because

his

Disclosure

Statement did not

adequately

disclose

the

terms of his settlement

with R-Net

This

argument

is

based

upon

serious

distortions

of the record

12

Al 097

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 18 of 30

On May
the

2003 when

the

Trustee

filed his

Plan counsel

for the

Trustee

sent

counsel for

R-Net Creditors

Committee

letter

to

confirm

the

oral

settlement

in

principle

that

the

Trustee had reached

with the R-Net Creditors

Committee and the R-Net Debtors

Contrary

to

the

EC

assertion the

letter

was not

the

final settlement

agreement

--

the

letter

specifically

provides

that

formal settlement agreement

would be negotiated

in

due

course

Tr Ex 27
as

As

Hobart

Truesdell

R-Nets court-appointed

Chief Liquidating

Officer testified

of

May

2003

neither

he nor his counsel had engaged

in

any

negotiations

with counsel for the

Trustee regarding

the

language

of

settlement

agreement

TSA3

Thereafter

the parties

did

negotiate

written settlement agreement

that

contains

number

of different

material

terms from

the

May

letter

The

written

agreement

was executed

at

the

end of

July

2003

Tr Ex 96
Disclosure

copy of

the

written

settlement

agreement

was not included

in the

Trustees

Statement because

it

had not been completed

when

the

disclosure

statement was

approved

The

settlement

agreement

was

filed

on August 18 2003 with

the

Trustees

motion

to

allow R-Nets

claim for voting

purposes

and was included

in the

Trustees

Plan Supplement which was

filed

before the commencement

of the confirmation

hearings

and

prior

to

the

conclusion

of voting

The

EC

claims that

the

Trustee

did not reveal

R-Nets

agreement

to

vote for the Trustees

Plan and

against

the

Equity

Plan

In fact there

was nothing

for the

Trustee to disclose

because

there

was no such

agreement

The

final

integrated

settlement

agreement

does not contain

such

provision and

Mr

Truesdell testified that

R-Net

did not have

an

obligation

to

vote for the

Trustees

Plan or against

the Equity

Plan

TSA4-5 Tr Ex
its

96 Mr
voted

Truesdell explained

that

despite

the

ECs

substantial

efforts

to

solicit

vote

R-Net

against

the

Equity

Plan

because

he

was quizzical

about

how

the

plan was being

funded

TSA5

13

Al 098

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 19 of 30

The

EC

also

asserts

that

the

Plan and Disclosure

Statement

do not reflect

that

the

Noteholders

would be released from R-Nets claims

Contrary

to

this

argument

the

Plan clearly

provides

that

the

Noteholders

are to

receive

complete

release

from

all

persons

who may
11

have

claims

against

them

in any way
the extent

relating

to

the

Debtors

this

Plan or the Chapter

Case

Tr

Ex

at

34

To

there

was any question whether

this

broad

release

language

covered

the R-Net claims

it

was answered

when

before

the

confirmation hearing

commenced
Plan

the

Trustee filed his motion to allow the R-Net claim for voting

purposes

and

the

Supplement

The

EC

is

the

only party in either these proceedings

or the

R-Net

Chapter

11

cases

to

object

to that

release

Indeed

this

Court

confirmed

R-Nets Chapterl

Plan and

approved

R-Net

settlement

with

the

Trustee

in the

R-Net case

The

ECs

arguments

are

continuation

of

its

attempts

to

mislead

the

Court

regarding

the

R-Net settlement

For example

Donald

Liebentritt

inaccurately testified about

how

and

when

the

EC

first

received

copy of

the

R-Net

settlement agreement

During

his

direct

examination

he

testified that

the

EC

learned of R-Net

release

of the Noteholders

when

it

subpoenaed

documents from R-Net

TSA26-27

In fact

as established

during

Mr

Liebentritts cross-

examination

the Trustees

counsel faxed

copy of

the

settlement agreement

which

includes

Nets

release

of the Noteholders

to

Mr

Levy

on

July

30 2003

just after

it

was executed

Tr

Ex 96 TSA36-37
served upon
it

The motion of the R-Net Creditors

Committee

to

quash

the

subpoena

by

the

EC
the

was

filed

about

month

later

and contrary

to

Liebentritts

testimony

was not joined

in

by

Trustee

Tr Ex
estate

97

TSA37
to

The

EC
is

argument

that

funds were used

obtain

R-Net

release

of the

Noteholders

misrepresentation

of the terms of the Trustees

Plan

One

of the main sources of

funding

for the

Trustees

Plan including

the

$7.95

million to be

paid to R-Net

is

the

$56 million

14

Al 099

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 20 of 30

to

be contributed

by

the

Noteholders

Without

global

release

the

Noteholders

would not have

agreed

to

contribute

these

funds

TA1

11-12

And

even

cursoiy review

of the R-Net Plan and

dockets

makes

clear

that

the increase

in the

settlement

payment R-Nets

to

R-Net

was

to

fund

unexpectedly

large

GAP

claims

allowing

dividend

to

unsecured

creditors

VI

CONCLUSION
What
these

proceedings

come

down

to

is

the

following

comparison

If the

Trustees

Plan

is

confinned

the

unsecured

creditors

will

be paid

in full

the

R-Net settlement will be

paid and the R-Net Plan will be implemented

the

IRS claim

will

be paid by the Noteholders

the

Noteholders

will relinquish

the

balance

of their claims

debt-

free

Coram will

proceed

as

private

company

with no

STARK

II

problems

the

shareholders

will

receive

over $40 million in cash

and

the

opportunity

for substantially

more from

the

claims

against

Crowley

the

outside

directors

and

PWC
be

In contrast

if

the

EC

Plan

is

confirmed

there

is

no

reason to believe

that

Coram would

able

to

meet

its

debt obligations

which would include

payments

to

the

IRS and the Noteholders

and

it

will likely

encounter

additional

STARK
return to

II

problems

as

public

company

Furthermore

the

future

of the company

and

any

shareholders

would be bet on

speculative

litigation

that

would

result

in

continued

turmoil for the

Debtors

The choice

is

clear

the

Trustees

Plan

is

better

for

all

constituencies0

and

more

closely

conforms

to the

Bankruptcy

Code

and

its

purposes

Accordingly

it

should be confirmed

space

intentionally left

blank

10

The Trustees

Plan

was accepted

by

all

classes

of

creditors

and Report

clear

majority of

the

shareholders
at

who

cast

ballots

Affidavits

of Balloting Agent

and

the

Trustees

of Plan Voting

TSA

43-103

15

A1100

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 21 of 30

Dated

June

14 2004 LLP

Respectfully

submitted

WEIR By

PARTNERS

SCHNADER HARRISON SEGAL
Bany
Wilbur 1001 Richard
Bressler

LEWIS

LLP

Is Kenneth Kenneth

Aaron Aaron

Kipnes

824 Market

Street

Mall

Suite

Barkasy

P.O Box

708

Matthew Delaware
19899 Michael 1600

Holmwood
Barrie

Wilmington

Ofc 302-652-8181/Fax

302-652-8909

Market Street Ste 3600

Philadelphia

PA

19103-72

13

Co-Counsel

to

Arlin

Adams

Chapter

11

Trustee

16

AllOl

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 22 of 30

EVIDENTIARY

REPLY APPENDIX
150

THE ECS BRIEF IMPROPERLY RELIES ON EXHIBITS ARE INADMISSIBLE
The

AND

179

WIIICH

EC

seeks

to

admit and

relies in the

EC

Brief

upon EC

Exhibits

150

and

179 which

relate to the

recent sale of Curascript to Express

Scripts

EC
and

Exhibit

150

appears

to

be some

sort

of press

release

for

which

the

author

was not

identified

EC

Exhibit

179

is

alleged

by

the

BC

to

be the

Stock

Purchase

Agreement

No
documents

witness

with knowledge

of these documents

or of the transaction

testified

Hence 802

the

constitute

hearsay statements that

are

inadmissible pursuant

to

Fed

Evid

Further without

some testimony

as to the

nature of the company

being

sold

at

the

time of sale

the entire

structure

of the transaction

and

all

considerations

of the parties these documents

would not be

relevant

to the

valuations

or

damages theory here

in

any

event

During

the

hearing

the

EC

sought to

question

Mr
to

Shestack

and

the

Trustee

about

EC

Exhibits

150

and

179 but

the

Court

did not permit

it

do

so

sustaining

objections

STA1

STA21 TA148-49
For these reasons

BC

Exhibits 150

and 179

should

not be admitted

and

should not be

considered

by

the

Court

II

THE EQUITY
DEPOSITION

COMMITTEES ONLY OBJECTION

TO THE TRUSTEES

DESIGNATIONS IS WITHOUT MERIT AND ITS OBJECTIONS TO THE NOTEHOLDERS DESIGNATIONS HAVE NO IMPACT ON THE TRUSTEES POST-CONFIRMATION BRIEF
The

BCs

Objections

To The

Designations

suggests that

the

Trustee

attempted

to

submit

substantial

portions of deposition testimony

without

even

acknowledging

the

requirements

of

admissibility

placed

on

that

testimony

let

alone demonstrating

compliance

with those

requirements

Yet

the

BC

actually

objects

to

only one

individuals

testimony

designated by the

A1102

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 23 of 30

Trustee

Richard

Haydon

and

the

designation

of the testimony

of Richard

Haydon

is

entirely

proper

Many
to

of the

EC

objections of the Noteholders

designations

appear

wrong
to

but are

irrelevant

the

Trustees

Post-Confinnation

Brief since

the

Trustee has not cited

such

designations

The Equity The Equity

Committee Ignores Committee

The Fact That Richard Haydon

Is

Member Of

The

EC
that

objects

to

the

designations

from Richard Haydon

testimony

apparently

contending

Haydon

testimony

is

hearsay and

it

cannot

be admitted

under

an exception

to

the

hearsay rule because

the

requirements

of

Fed

Rule

of Evidence

804b1
the

have

not been

met

Haydon

testimony

however

is

not hearsay and no exception

to

hearsay rule

is

required

Haydon

is

member

of the

EC Tr Ex

at

15

EC

Disc

Statement

at

11

His

deposition testimony

is

admissible as the testimony

of

party-opponent

under

Rule

801

d2.1

The

BC

apparently

agrees with this analysis

as

it

does not object

to

the designations

of either

Donald

Liebentritts or Samuel Zells

deposition testimony

Even

assuming

that

the

BCs

reliance

on Federal Rule

of Evidence

804bl
The

was colTect

its

argument

that

the

requirements

of Rule

804bl

are

not met

is

frivolous

EC

contends

that

this

Court should

exclude

deposition testimony

of

number

of individuals

most of

whom
motive

were

noticed

and

deposed

by

the

BC

on

the basis

that

the parties

did not have

sufficient

to

develop

the

testimony

This

Court

is

well aware

that

these proceedings

have

been

litigated

exhaustively

and while

the

Trustees

Plan

is

significantly

different

than the Debtors

plans

many

of the same

issues

have dominated

e.g

valuation

throughout

these

proceedings

The Federal Rules
Procedure

of Evidence incorporated
the

apply pursuant by Bankruptcy
is

to

l3ankruptcy 7032

Rule
the

9017

In

addition

Federal Rule

of

Civil

32a2
to

Rule

allows

use of deposition
the

testimony taken

from

party

without regard

whether

person

located

more than 100 miles from

place

of

trial

A1103

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 24 of 30

The Equity
Generally Brief

Committees

Objections

To The Noteholders To The

Designations

Are

IncorrectAndAre

Irrelevant

Trustees Post-Confirmation

The

Trustees

Post-Confirmation

Brief did refer

to

four witnesses

designated by the

Noteholders

that

the

EC

contends

are

not admissible

The

EC

objections are meritless

and

the

facts

cited

to

by

the

Trustee

are

amply supported by

other

testimony

cited

in the

Trustees

Brief

On page 31
Amaral

the

Trustee

cited

to

the

deposition testimony

of

Coram

directors

Don

William Casey

Peter Smith and

Sandra

Smoley

to

substantiate

Mr

Shestack

testimony

that

the

directors

testified

under

oath that

Daniel

Crowley did

good job

at

Coram

The testimony

of these individuals

about

Mr

Crowley

performance

clearly

meets

the

EC
Mr
the

Rule

of Evidence

804b

objection

The

EC

had

motive

to

develop

testimony

about

Crowleys

performance

In fact

in

each

case Richard

Levy

counsel for the

EC

asked

question

that

lead to the testimony

relied

upon by the Trustee

Regardless

even

if the

testimony

was hearsay

the

Trustee

cited

the

testimony

for

non-hearsay

uses

First

it

was

cited

to

support

Mr
the

Shestacks

testimony

Second

it

was

cited

to

show

that

in

defending

the

derivatfve

claims

Noteholders

could

elicit

testimony

that

Coram improved
he
cited

operationally

under

Mr

Crowley

Finally

on page 29

of-the

Trustees

Brief

Professor

Fischel

deposition to

show

that

Professor

Fischel

admitted

that

any

number

of factors

could

have

caused

Coram

to

underperform

his

index

Professor

Fischel admitted

this fact

again during

his

testimony

at the

confirmation hearings

on the

current

Plans

TA221

and

the

Trustees

Brief cited

to

the

hearing

transcript

as

well

A1104

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 25 of 30

.1

TflE IINITEI

STATES

1OR

TIlE DISTRICT

BANKRUPTCY COURT OF DELAWABE

lam

Chapterli

CORAM

IWa\LTHCAJU3

CORP

end

Case
Jointly

CORAM INC
Debtoi

No

00-3299

MFW

Adminitethd

Of.ioS

LiD kO5

SECOND

ORDER CONFIpLING THE CHA1TE1 11 TRUSTEES AMENDED JOINT PLAN OF REORGANIZATION

WII3RBASon
captioned bankruptcy

May
estates

203 Ar

in

Adams

the

Chapter

11

idatee

of

the

above

the Tnist

filed

the

Chapter

11

Tr

tea

JointPtan

of

kecranjatjou

t1i Oliginal

P1an

which

Plan

the Ttustee

subsequently

amended

or

madilied

on June

17 2003

the

Amendid Plan
of
thin

September

82003

azdAril

152004

the Second

Amended

PJuna

copy

Second

Plan

is

annexed

hereto

as Exiubit

WI IUIWAS among
other

on June

26 2003

the

Court

entered

an Onlcr the

Solicitation

Order
the

that

things

approved

the Disclosure

Statement

under

Section

1125

of

Bankruptcy

Code

and

lIed

Bankr

3017

approved

the

form an4 method

of

the

notice

of

Confinnation

Heaiing

the Confirmation

Rearing

Notice and

established

certain

plloecdures

forthe

solicitation

and

tabulation

of

votes

with

respect

to

LheAmcrtdcd

Plan

WIIIiRIiAS

th

Confi

adnlleadngNojjco

together

with

thei

the

Amended

PBZI

the Disclosure

Slatcinent

iii

the

Solicitation

Onier

iv

the

appropriate

ballots and

voting

instnrcion

and

apre-addnsssed

return

envclopc

collectively

Solicitation

Paeknge

I.Jnks

othern

is defined

herein

II

capitalized

terms

hali

hye

the

same

nicanings

acribcd

to

them

in

the

Plan

HDATA

1234490_i

SL001657

o1

DEP.EXH
Date5/

A1105

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 26 of 30

were

tranrnitted

in the nianncr

aet forth

in the

Disclosure

Statement

Order

and such

service

is

adequate

provided

by Fed

Bankr

3017d
calification

WHBREAS
Hastbauei principal

Ilteirestee

filed

the

of

publicafion

of

Jacqueline

clerk

of

the

New
the

York Timcs

attialing

to

the

thet

that

the Conflniiation

Hearing Notice

was

published

in

tVew

York

Tftnac

on August

20

2O03

and

ii certification

of

regg

Painter

advertising

clerk

of

the

Wall

Street

.Journ

attesting

to the

fact

that the

Con

Ilnilation

flearln

Notice

was

published

In the

Wall

Street

Jouriwl

on

August20

2003

WHEREAS
appointed in theae

on June

92004
eaaet

Hefty

Colvin

of A1ixPartnei

LLC
Yin

the claims

agent

bankruptcy

flied the Affidavit

of Henty Cot

Ceitiing

the Ballots

Accepting

or Rejecting

Ihe

Chapter

II

Trustees

Amended

Joint

Plan

of RtorganizaIion

Pursuant

to

Chapter

ll..of

the

ankruptcy.Code

Proposed

byihe Chnpter

11 Tniatce

Dated

June

7T

2004 the Voting Repor1
on September

WH.ERI3AS
to the

29

200

the Trustee

tiled

the

Plan Supplement

with

respect

Amended

Plan

WI l1WIIAS

otedions

to

confirrnalio

of

the

Amended

Plan were

filed

collectively

the

Objections WI IRRRAS

the

Court held

conffnnalion

hearings

with

respect

to the

Amended

Plan

as

amended by

the

Second

Amendod1hm

and

competing

plan

of

reorganization

filed

by

the

Equity

Committee

beginning

on September

302003

and

ending

on

April

202004
the

WHIREAS
Iiquity

following

the conolusioti

of

the conlinnation

hearings

Trustee

the

Committee

rind

the Noteholders

subinlUcd

post-conlinnation

hearing

briefs

and

reply

bniefa

WHEREAS
and
the

on Scpnnibcr

102004

the

Trustee

liled

Stipulation

between

the

Trustee

Equity Committee

igarding

the Scconid

Amended

Plan

the Stipulation

PiiAr I7449OI

SL001658

A1106

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 27 of 30

WEBRJ3AS
the

on Ootobcr

52004
of

the

Court isucd an Opinion

the

Optnion
ii staling

and Order

Otd

denying

confirmation

the.Equity

Committees

plan and

that the

reqncstby

the Tresice

fbr conflnnalion

of

the

Second

Amended

lIan

would

be granted

provided

that the

Second

Aniended

Phm

wa

modified

inaccortlance

with

the

Opinion

copies

of

the

Opinion

and Order

are

annexed

hereto

as Exhibits

andC
filed

respectively

and

WHEREAS
Chapter
ii

on October

IS

2004

the

Thste

with

the

Couri

the

Modification

of

Trustees

Seeond

Amended

Joint Plan

of

Rcorganiza1ion

in

Accordance

with Opinion

and Order Dated

October

52004
copy

the Plan

Mo

cation

and

together

with

the

Second

Mnendcd

Plnn

th

Plan

of

the Plan

Modification

is

annexed

as Exhibit

ii IIiAT

NOWTHBIpp

rr is II1iREBY

FOUND AND DETERMINED
Pro

EXCluivcjuris4jopvju.Com J34.afl U.S.C
The Ceiut

dLanI2S$.C
Cases

l57bX2
pursuant
tx

hasiurisdiction

over

the.Baiikrupy

and

the

Plan

28

l57hX2A
Con
rmation

1334b
the ltan
is

Venue isjiiopr

pursuant

io

28

U.S.C

1408

1409

of

core

proeeding

punnrant

to

28 U.S.C

157b2AL
svith

end

this

Court has

exolu

ejutjsdicdo

to

determine

whether

the Plun

complies

the

5ppticubl

provisions

of

the

Renkniplcy

Cod

and

houId

be

confirmed

udicja1

Notion

The

Court

takes

judiciaj

notice

of

the

dacke

ofliteso

Bankniptoy

Cases

maintain

by

the

Clerk

of

the

Bankruptcy

Court and/or

its

duly-appointed

agent

including

without

limitation

all

picadinga

arid

other

document

tiled

all

orders

entcred

aad cvidenc

arid

argument

made

prolfeted

or adduced

at

the

heathgs

held

before

the

Bnkmptey

Cowt

during

the

pdndency

of

the

Banknrptoy

Casos

Pursuant offset
ahall

to

Fed

Bankr
as

72a
conclusions

rnadc

applicable

Eu

conicried

maticra

be eonsfrued

under

Fed

flnnki

of law and

9114

findIngs

corteluajong

lsw

shall

bc construed

appropdjte

as findings offset

where

PHDATAW445

SL001659

A1107

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 28 of 30

Ilurden

of Pnxif

The Tmstee

has

the

burden ot

proving

the

clcmen

of

Section

1129a

ind

of

the

Bankruptcy

Code

by

preponderance

of

the

evklenoe

Transmittal

and

Mailing

of Matedals

Ntce

The

Solieitatioa

Package

was

transmitted

and

servcdin

accordance

with

the Solicitation

Orderand

the

BanicruptoyRules

and

such

tinnamiftal

and

service

were

adequate

and

sufficient

publication

of

the

Confimiation

Hearing

Notice

as act

forth

in the

cetlificatious

of

Jacqueline

Haslhaucrofthe

lfew

York

Treies

and Gregg

Palmer of

the

il1 SWeet

Journal were

adequate and

sufflcient

and no

other

or

further

notice

was

requhL

Voting

Votes

to

accept

and

reject

the

Amended

Plan

have been

solicited

and

tahulared

lhirly

in

good

faith

and

itin

manner

consistent

with

the

Bankniptey

Code

the

Elankiuptcy

Rules and

the Solicitation

Ordce

Plair

Comnllance

with

Bankmntcy

Code

ill

U.S.C

l29rn
aatiajing

Thu Plan

complies

with

the

applicable

provisions

of The Bankruptcy

Code

thereby

Section

I29ulotthe13snlnpteyode

Proner

Classification

U.S.C

ilil

1122

1.123

The Claims and

liqiihy

Interests placed

in

each

Class

are substantially

sirollas-

to other

Claims

arid Equity

1ntcret

us the

case

maybe in

eaQh

such

Class

Valid

business

ctuaI and

ingal

reasons

exiat

brueparately

olassft4ng

the various

Classes

of

Clainis

and

EquiLy

Interests

created

under

the

Plail

and such

CLa.sses

do

not

unfairly

discriminate

between

holders

of Claims and

Equity

lntctests

Thus

di

Plan

satIsfies

Sections

1122

and

t23aXl
11

of

the

Bankruptcy

Code

Spcific

Unimpaired

Classes

tJ.$C

ll23afl

Article

of the

Plan

specifies

that Classes

and

arc unimpaired

under

the

Plan

thereby

satisfying

Section

123q2

of

the

Bankruptcy

Code

PI-IflATA

123.4490_I

SL001660

A1108

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 29 of 30

Speeitled

Treament

of Impaired CIasse

11

U.S.C

U23a31

Mick

4ofthoPndasCasses334.Sand
Claims and
Interests in those

6asimpedandthaPtanspcciflesthetreaimentof

Equity

Classes

thereby

satisfying

Section

123aX3

of

the

Bankruptcy

Code

No
same
trcalment for

Discrimination

11

U.S.C

123a41

The

Plan

provides

for the

each Claim

or

I3ctufty

Interest

in

each

veCln

unless

the holder

of

parlioulazClaiinor

Equity

Intefcst

has

agreed

to

less

lWOrdbIe

treatment

of such

Claim

or

Equity

Interest

thereby

satisfying

8ec.tion

1123aX4
Llan

of

the

Bankmptcy

Code

IinpLenictation

of

11

21aWSil

The Plan

and

the

various

documents

and agreements

set

forth

in

the

Plan

and

the

Plan

Supplement

provide

adequate and proper means

Ibr the

Plans

implementation

thereby

satisfying

Stxtion

123aX5

of

die

Banknzplcy

Code

Non-Vcting

Equity

Securities

Ii U.S.C

Il23
Code

Asliele5.4oflhe

Plan

provides

that the Certificate

oIThcorporetion

and Bylawe of Reorganized

Cream

shall

be

amended

to

satisfy

tho provisions

of

the

Plan and

the

Bankruptcy

including

to pinhibit

the

issuance

ofnunvoling

equity

securities

Thus

the requirements

Section

l23aX6

of

the

Bankmptcy Code

axe

satisfied

Jsinaffoii

of Directors

11 U.S.C

123al7
directors

Article

5.5

of

the Plan

contains

prov1sIon

with

rcspect

to

the

manner

olselcotion

of

of Reorganized

Comm

that

are

cnnaisamt

with

the

intarests

ofereditois

cquity

seourityliolders

and

public

policy

in

accordance

with

Section

123aX7

of

the

Bankruptcy

Code

Mditional

Plan

Pruvisions

U.S.C

11

Z3b
the

The Plans

provisions

are

upprepriute

end

not

inconsistent

with

the

epplicable

provisions

of

Bankruptcy

Code

rnDAmI3449oj

SL

001661

A1109

Case 1:04-cv-01565-SLR

Document 126-4

Filed 04/17/2007

Page 30 of 30

akruptov

Rule

3016a

The

Plan

is

dated

and

identifies

the party

submitting

it

as

pmponent

thereby

satisfying

flankniptcy

Rule

3016a

Pbters Compliance

with

pty Code It U.S.C

U22a2
thereby satisfying

Tnrntee

baa compliedwith

the

app1ib1e

provisions

of

the

nkmpty

Code

Section

1Z9aX2

oCthe Bankaiptoy

Code

Plan

Proposcdjii

Good

Paith

U.S.C

129aX3
and
not

As

set

forth In the

Opinion

the

Truste

has

ptposod

the

Plan

hi

good

faith

by any means

fotbidden

by law

thereby

satisfying

Seetion

11295X3

ofihe Bankniptcy

Code

The Tinatesgcod

filth

is

evident

llntn

flie.tacts

aiid

reconi

of

the

Bankruptcy

Cases

including

the

Disclosure

Statement

and the

hearing

thereon

and

tile

recot1

of

the Conhimnition

Ieaiing

and

Æther pToceedinga

held

in

.tIc

Bankn3ptoy

Cases

Paymcntafor

Scrvics

or

Costs

and

Bxneiises

II U.S.C

ii

129a4
and
expanses

Any
in

paynent

made

or

Lobe

madeby

any of

the Debtors

for services

or

for costs

or

in

connection

with

thc

Banlcmptcy Cases

or

in

eonncction

with

the

Plan and

incident

to

the

Bankruptcy

Caesha

been

appmvcd by

or

is

subject

to the

appmval

of

the

Bankruptcy

Court

as

rcasonabtc

thereby

aatisIing

Section

U29aX4
Tnuldeni

ottho Banknrptcy

Code

10

Directors

Qffioen

and

11

U.S.C

129af5
The
identity

The

Tnthfcc

has

complied

with

Sedan

l29uX
as
initial

of

the

Bankruptcy

Code

and

affiliations

of

the

personS proposed

to

Servo

directors

or officers

of Rnorganized

Corarn

after

confim-inlion

of

the Plan

have been

disclosed

and

the

appointment

to

or continuance

in1

such

offices

of such

persons

is

consistent

with

the

interests

of

boldcrs

of Claims

against

and

l3quity

Interests

in

Reorganized

Cream and with

public

policy

The

identity

of any

insider

that

will

be

employed

or retained

by Reorganized

Comm

and

the nature

of such

insiders

isation

have

also

been

thUy

disclosed

IHDATA

1t3445f1_

SL001662

Al 110