Case Document 1492 Filed in TXSB on 01/18/12 Page 1 of 12

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1 Case Document 1492 Filed in TXSB on 01/18/12 Page 1 of 12 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS VICTORIA DIVISION IN RE: LACK S STORES, INCORPORATED, ET AL., 1 DEBTORS. CASE NO (Chapter 11) (Jointly Administered) Hearing: February 1, 2012; 2:30 p.m. Objections Due: January 27, 2012 EXPEDITED MOTION TO APPROVE SETTLEMENT AND RELEASE AGREEMENT BY AND BETWEEN THE DEBTORS, THE LACKS, AND THE SENIOR SECURED LENDERS PURSUANT TO FED. R. BANKR. P A HEARING WILL BE CONDUCTED ON THIS MATTER ON FEBRURARY 1, 2012 AT 2:30 P.M. AT THE UNITED STATES COURTHOUSE, 515 RUSK AVENUE, HOUSTON, TEXAS, IF YOU OBJECT TO THE RELIEF REQUESTED, YOU MUST RESPOND IN WRITING, SPECIFICALLY ANSWERING EACH PARAGRAPH OF THIS PLEADING. UNLESS OTHERWISE DIRECTED BY THE COURT, YOU MUST FILE YOUR RESPONSE WITH THE CLERK OF THE BANKRUPTCY COURT BY JANUARY 27, YOU MUST SERVE A COPY OF YOUR RESPONSE ON THE PERSON WHO SENT YOU THE NOTICE; OTHERWISE, THE COURT MAY TREAT THE PLEADING AS UNOPPOSED AND GRANT THE RELIEF REQUESTED. REPRESENTED PARTIES SHOULD ACT THROUGH THEIR ATTORNEYS. Lack s Stores, Incorporated and its affiliated debtor entities, as debtors and debtors in possession (collectively, the Debtors ), file this Expedited Motion to Approve Settlement and Release Agreement By and Between the Debtors, the Lacks, and the Senior Secured Lenders Pursuant to Fed. R. Bankr. P (the Motion ). In support of the Motion, the Debtors respectfully submit the following: 1 The Debtors and the last four digits of their tax identification numbers are Lack s Stores, Incorporated (6528), Merchandise Acceptance Corporation (0972), Lack s Furniture Centers, Inc. (9468), and Lack Properties, Inc. (8961). EXPEDITED MOTION TO APPROVE SETTLEMENT AND RELEASE AGREEMENT BY AND BETWEEN THE DEBTORS, THE LACKS, AND THE SENIOR SECURED LENDERS PURSUANT TO FED. R. BANKR. P Page 1 of 12 US v.4

2 Case Document 1492 Filed in TXSB on 01/18/12 Page 2 of 12 JURISDICTION, VENUE, AND PROCEDURAL HISTORY 1. The Court has jurisdiction over this matter pursuant to 28 U.S.C and 157. This Motion concerns the administration of the estates and is a core proceeding pursuant to 28 U.S.C. 157(b)(2)(A), (M), and (O). 2. Venue is proper in this Court pursuant to 28 U.S.C and On November 16, 2010 (the Petition Date ), the Debtors each filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code (the Bankruptcy Code ), thereby commencing the above-referenced cases (collectively, the Cases ). 4. Since the Petition Date, the Debtors have continued to operate and manage their businesses as debtors in possession pursuant to Bankruptcy Code 1107(a) and On November 30, 2010, the United States Trustee appointed an official committee of unsecured creditors in these Cases [Dkt. No. 96]. STATEMENT OF FACTS 6. The Debtors are family-owned Texas corporations headquartered in Victoria, Texas. Prior to filing these Cases, Lack s Stores, Incorporated ( Lack s Stores ) was one of the largest independently-owned retail furniture chains in the United States. Lack s Stores sold a complete line of home furnishings through thirty-six (36) retail stores in twenty-six (26) Texas cities. 2 Historically, Lack s Stores provided in store financing for a substantial portion of customer purchases, and the book amount of the customer notes portfolio as of the Petition Date was approximately $130,000, Lack s Stores is the borrower under that certain Second Amended and Restated Loan and Security Agreement dated as of July 10, 2007 (as amended from time to time, the 2 For a more complete description of the background of the Debtors, please see the Declaration of Melvin Lack in Support of First Day Pleadings [Dkt. No. 14] filed in these Cases. EXPEDITED MOTION TO APPROVE SETTLEMENT AND RELEASE AGREEMENT BY AND BETWEEN THE DEBTORS, THE LACKS, AND THE SENIOR SECURED LENDERS PURSUANT TO FED. R. BANKR. P Page 2 of 12 US v.4

3 Case Document 1492 Filed in TXSB on 01/18/12 Page 3 of 12 Senior Lender Credit Agreement and, collectively with all related promissory notes, deeds of trust, security agreements, financing statements, guaranty agreements, and other documents and agreements, Senior Lender Credit Documents ) among Lack s Stores, on the one hand, and The CIT Group / Business Credit, Inc. as agent (in such capacity, the Agent ) and the other lenders from time to time party thereto (together with the Agent, the Senior Lender Parties ), 3 on the other hand. 8. The Agent asserts that the obligations under the Senior Lender Credit Agreement are secured by a lien on substantially all of the Debtors assets, excluding certain real estate (the Collateral ) and are guaranteed by Merchandise Acceptance Corporation, Lack s Furniture Centers, Inc., and Lack Properties, Inc., in full, and by Melvin Lack, in part. 9. On or about January 24, 2011, the Agent, on behalf of the Senior Lender Parties, filed proofs of claim numbers 183, 187, 188, and 191 in the Cases asserting claims against the Debtors bankruptcy estates arising under or related to the Senior Lender Credit Documents of at least $86,593,906 (the Senior Lender Secured Claim ). 10. Pursuant to cash collateral orders entered by the Court [Dkt. Nos. 62, 185, 649, 778, 1008, 1237, and 1315], the Debtors have paid the Agent, on behalf of the Senior Lender Parties, approximately $69,105,500 during the pendency of these Cases. 11. On December 13, 2011, the Debtors filed their First Amended Disclosure Statement for the Joint Plan of Reorganization for the Debtors (as modified December 13, 2011) [Dkt. No. 1395] (the Disclosure Statement ) and First Amended Joint Plan of Reorganization for the Debtors (as Modified December 13, 2011) [Dkt. No. 1394] (as may be supplemented, 3 The Senior Lender Parties include The CIT Group / Business Credit, Inc.; U.S. Bank National Association; PNC Bank, National Association; JPMorgan Chase Bank, N.A.; and Capital One Leverage Finance Corp. EXPEDITED MOTION TO APPROVE SETTLEMENT AND RELEASE AGREEMENT BY AND BETWEEN THE DEBTORS, THE LACKS, AND THE SENIOR SECURED LENDERS PURSUANT TO FED. R. BANKR. P Page 3 of 12 US v.4

4 Case Document 1492 Filed in TXSB on 01/18/12 Page 4 of 12 modified, or amended, the Plan ). The Bankruptcy Court approved the Disclosure Statement for solicitation purposes on December 14, 2011 [Dkt. No. 1401], and a hearing to consider confirmation of the Plan is scheduled to commence on February 1, The Agent has informed the Debtors that the Senior Lender Parties assert that (a) the Plan is not confirmable, (b) they intend to object to confirmation of the Plan, and (c) pursuant to Bankruptcy Code 506(b), the Senior Lender Parties are entitled to the payment of interest at the default rate on the Senior Lender Secured Claim and postpetition fees, costs, and charges related to the Senior Lender Secured Claim under the Senior Lender Credit Documents (the 506(b) Claim ). The Senior Lender Parties assert that the aggregate amount of the 506(b) Claim as of December 31, 2011 was at least $8,084, The Debtors, however, (a) assert that the Plan is confirmable, (b) contest the allowance of the 506(b) Claim, and (c) assert that the Lack Parties 4 hold potential Claims and causes of action under Bankruptcy Code 506(c) against the Senior Lender Parties arising under or related to the Cases and the Senior Lender Credit Documents and intend to object to the Senior Lender Secured Claim and the 506(b) Claim. C. The Proposed Agreement 14. In order to avoid the cost, inconvenience, and uncertainties associated with potential and future litigation, including, but not limited to, a contested confirmation hearing and litigation regarding the allowance of the Senior Lender Secured Claim and the 506(b) Claim, and without admitting any facts or liability including the validity of any claims or liens, the same being expressly contested and disputed, the parties desire to compromise and settle any and all 4 The Lack Parties are the Debtors, Melvin Lack, and Jane S. Lack. EXPEDITED MOTION TO APPROVE SETTLEMENT AND RELEASE AGREEMENT BY AND BETWEEN THE DEBTORS, THE LACKS, AND THE SENIOR SECURED LENDERS PURSUANT TO FED. R. BANKR. P Page 4 of 12 US v.4

5 Case Document 1492 Filed in TXSB on 01/18/12 Page 5 of 12 outstanding claims and counterclaims among the Lack Parties, on the one hand, and Senior Lender Parties, on the other hand. 15. As a result of the foregoing, the Lack Parties and the Senior Lender Parties have agreed, subject to Court approval, to compromise and settle all outstanding claims between the Lack Parties, on the one hand, and the Senior Lender Parties, on the other hand, pursuant to a Settlement and Release Agreement dated as of January 18, 2012 (the Agreement ). A true and correct copy of the Agreement is attached hereto as Exhibit A Pursuant to the Agreement: a. Allowed Claim; Security for Allowed Claim 6 On the Effective Date (as defined below), the Agent, on behalf of the Senior Lender Parties, shall hold an allowed, secured claim against the Debtors bankruptcy estates in the total amount of $21,400,000 (the Allowed Claim ), payment of which shall be in full and final satisfaction and discharge of the Senior Lender Secured Claim, the 506(b) Claim, and any and all other Claims of any of the Senior Lender Parties including, but not limited to, those Claims arising from or related to the Senior Lender Credit Documents. For purposes of clarification, as of the Effective Date, the Senior Lender Parties shall hold no other Claims or causes of action against any of the Lack Parties, individually or collectively, related to the Cases, any of the Senior Lender Credit Documents, the Senior Lender Claim or the 506(b) Claim, including, but not limited to, any Claim to further prepetition or postpetition interest, fees, costs, or other charges, whether asserted pursuant to Bankruptcy Code 506(b) or otherwise. The Senior Lender Parties expressly acknowledge that all amounts claimed in excess of the amount of the Allowed Claim are disputed by the Lack Parties. Within two (2) business days of the Effective Date, the Senior Lender Parties shall (a) release or cause to be released any and all Liens recorded against the Collateral or any other assets or properties securing the obligations under the Senior Lender Credit Documents and (b) return to the Debtors and the Lacks, as applicable, all original promissory notes and guaranty agreements marked paid in full. 5 Certain provisions of the Agreement are summarized in this Motion. Accordingly, in the event of a conflict between the summary and the Agreement, the Agreement shall control. Terms used but not defined in this Motion shall have the meaning assigned in the Agreement. 6 Agreement at 1. EXPEDITED MOTION TO APPROVE SETTLEMENT AND RELEASE AGREEMENT BY AND BETWEEN THE DEBTORS, THE LACKS, AND THE SENIOR SECURED LENDERS PURSUANT TO FED. R. BANKR. P Page 5 of 12 US v.4

6 Case Document 1492 Filed in TXSB on 01/18/12 Page 6 of 12 b. Settlement Payments and Application of Funds 7 Within two (2) business days of entry of the Approval Order, the Debtors shall pay to the Agent by wire transfer, on account of the Allowed Claim, no less than $15,000,000. Thereafter, the Debtors shall pay to Agent, on account of the Allowed Claim, on the first business day of each calendar month, the amount by which the aggregate collected funds on deposit in the Debtors respective DIP operating accounts as of the immediately preceding Friday (the Sweep Amount ) exceed $3,500,000 (the Reserve Amount ) until the Allowed Claim is paid in full. The Parties acknowledge that the Reserve Amount includes proceeds from the sale of Store #141 in Abilene, Texas which may be subject to the alleged secured Claim of Thrivent Financial for Lutherans ( Thrivent Financial ). In the event the alleged secured Claim of Thrivent Financial is paid or otherwise resolved, the Reserve Amount shall be reduced to $2,000,000 for determination of all subsequent Sweep Amounts. The collected funds on deposit in the Debtors DIP operating accounts shall not include funds maintained on deposit in that certain account known as the Texas Service Contracts Funded Reserve Account, currently held at First National Bank in Port Lavaca Acct. No. XXXX471. All payments to the Agent under this Agreement shall be made by wire transfer. c. Releases by the Debtors 8 On the Effective Date, the Debtors and their respective bankruptcy estates, jointly and severally, hereby forever release, acquit, discharge and covenant not to sue each of the Senior Lender Parties, their respective predecessors, successors, assigns, and legal representatives, and their respective existing and former agents, attorneys, advisors, officers, directors, managers, employees, and equity security holders from any and all Claims, causes of action, and liabilities of any kind whatsoever, at common law, statutory, or otherwise, which any of the Debtors or their respective bankruptcy estates have or might have, or which may hereafter accrue in the future, whether known or unknown, asserted or not asserted, directly or indirectly attributable to, or arising out of or that are based in whole or in part on any act, omission, transaction, event, or other occurrence taking place on or prior to the Effective Date and that are in any way related to the Cases, any of the Senior Lender Credit Documents, the Senior Lender Secured Claim, or the 506(b) Claim; provided that, the foregoing shall not release any of the Senior Lender Parties from their respective obligations under this Agreement. 7 Agreement at 2. 8 Agreement at 3. EXPEDITED MOTION TO APPROVE SETTLEMENT AND RELEASE AGREEMENT BY AND BETWEEN THE DEBTORS, THE LACKS, AND THE SENIOR SECURED LENDERS PURSUANT TO FED. R. BANKR. P Page 6 of 12 US v.4

7 Case Document 1492 Filed in TXSB on 01/18/12 Page 7 of 12 d. Releases by the Lacks 9 On the Effective Date, the Lacks jointly and severally, hereby forever release, acquit, discharge, and covenant not to sue each of the Senior Lender Parties, their respective predecessors, successors, assigns, and legal representatives, and their respective existing and former agents, attorneys, advisors, officers, directors, managers, employees, and equity security holders from any and all Claims, causes of action or liabilities of any kind whatsoever, at common law, statutory, or otherwise, which the Lacks have or might have, or which may hereafter accrue in the future, whether known or unknown, asserted or not asserted, directly or indirectly attributable to, or arising out of or that are based in whole or in part on any act, omission, transaction, event, or other occurrence taking place on or prior to the Effective Date and that are in any way related to the Cases, any of the Senior Lender Credit Documents, the Senior Lender Secured Claim, or the 506(b) Claim; provided that, the foregoing shall not release any of the Senior Lender Parties from their respective obligations under this Agreement. e. Releases by the Senior Lender Parties 10 On the Effective Date, the Senior Lender Parties and their respective successors and assigns jointly and severally hereby forever release, acquit, discharge, and covenant not to sue each of the Lack Parties, their respective predecessors, successors, assigns, and legal representatives, and their respective existing and former agents, attorneys, advisors, officers, directors, managers, employees, and equity security holders from any and all Claims, causes of action or liabilities of any kind whatsoever, at common law, statutory, or otherwise, which any of the Senior Lender Parties have or might have, or which may hereafter accrue in the future, whether known or unknown, asserted or not asserted, directly or indirectly attributable to, or arising out of or that are based in whole or in part on any act, omission, transaction, event, or other occurrence taking place on or prior to the Effective Date and that are in any way related to the Cases, any of the Senior Lender Credit Documents, (including, but not limited to, any guaranty agreement executed by Melvin Lack), the Senior Lender Secured Claim, or the 506(b) Claim, including, without limitation, any Claim for the deficiency between the amounts asserted to be due under the Senior Lender Credit Documents and the amounts paid pursuant to this Agreement and any right to further prepetition or postpetition interest, professional fees, costs, or other amounts, whether asserted pursuant to Bankruptcy Code 506(b) or otherwise; provided that, the foregoing shall not release any of the Lack Parties from their respective obligations under this Agreement. 9 Agreement at Agreement at 5. EXPEDITED MOTION TO APPROVE SETTLEMENT AND RELEASE AGREEMENT BY AND BETWEEN THE DEBTORS, THE LACKS, AND THE SENIOR SECURED LENDERS PURSUANT TO FED. R. BANKR. P Page 7 of 12 US v.4

8 Case Document 1492 Filed in TXSB on 01/18/12 Page 8 of 12 f. Approval by the Bankruptcy Court 11 Immediately upon execution of this Agreement, the Debtors shall take all steps that are reasonably necessary to seek an expedited hearing on a motion to be filed seeking the entry of an order by the Bankruptcy Court approving this Agreement (the Approval Order ) pursuant to Bankruptcy Rule The Approval Order shall be in form and substance satisfactory to the Lack Parties and the Agent. The Agent shall cooperate with, and support the entry of, the Approval Order. The Approval Order shall provide, inter alia, that on the Effective Date, all proofs of claim filed by the Agent or any of the Senior Lenders in any of the Cases shall be deemed expunged from the claims register maintained in the Cases without further action by the Parties or the Bankruptcy Court. The Effective Date hereunder shall be the date upon which both of the following conditions have been satisfied: i. the Approval Order is entered by the Bankruptcy Court on its docket, and ii. the Allowed Claim has been paid in full, in good funds, in accordance with paragraph 2 of this Agreement. g. Plan Confirmation 12 In the event the Debtors seek confirmation of the Plan prior to payment in full of the Allowed Claim, the effective date of the Plan shall be conditioned upon payment in full of the Allowed Claim prior to such date. A. Approval of the Agreement RELIEF REQUESTED 17. Pursuant to Bankruptcy Rule 9019(a), the Debtors respectfully request that the Court approve the Agreement and authorize the parties thereto to take any and all actions that are necessary to implement the Agreement. The Debtors believe that the compromise and settlement set forth in the Agreement is in the best interest of the Debtors estates and creditors and is fair and equitable under the circumstances. 11 Agreement at Agreement at 7(a). EXPEDITED MOTION TO APPROVE SETTLEMENT AND RELEASE AGREEMENT BY AND BETWEEN THE DEBTORS, THE LACKS, AND THE SENIOR SECURED LENDERS PURSUANT TO FED. R. BANKR. P Page 8 of 12 US v.4

9 Case Document 1492 Filed in TXSB on 01/18/12 Page 9 of Bankruptcy Rule 9019(a) provides, [o]n motion by the trustee and after notice and a hearing, the court may approve a compromise or settlement. FED. R. BANKR. P. 9019(a). Bankruptcy Rule 9019 empowers a court to approve a compromise and settlement if it is fair and equitable and in the best interests of the estate. The Fifth Circuit explained: The bankruptcy court s power to approve a proposed settlement or compromise of the estate s claims arises under rule 9019 of the Federal Rules of Bankruptcy Procedure. A proposed settlement must be fair and equitable and in the best interests of the estate. Five factors inform the fair and equitable analysis: (1) the probability of success in the litigation, with due consideration for the uncertainty in fact and law; (2) the complexity and likely duration of the litigation and any attendant expense, inconvenience, and delay, including the difficulties, if any, to be encountered in the matter of collection; (3) the paramount interest of the creditors and a proper deference to their respective views, (4) the extent to which the settlement is truly a product of arm s-length bargaining and not fraud or collusion; and (5) all other factors bearing on the wisdom of the compromise. Cadle Co. v. Mims (In re Moore), 608 F.3d 253, 263 (5th Cir. 2010) (internal citation omitted); see also Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (1968) (setting forth four of the five factors quoted above). 19. Settlements and compromises are a normal part of the process of reorganization. Id. (quoting Case v. Los Angeles Lumber Prods. Co., 308 U.S. 106, 130 (1939)). Additionally, compromises are favored in bankruptcy. See, e.g., In re Martin, 91 F.3d 389, 393 (3d Cir. 1996) (stating that [t]o minimize litigation and expedite the administration of a bankruptcy estate, compromises are favored in bankruptcy ) (internal quotation and citation omitted); Official Comm. of Unsecured Creds. v. White Plains Joint Venture, 1994 U.S. App. LEXIS 1282 *10 (4th Cir. Jan. 26, 1994) (compromises are favored in bankruptcy). Accordingly, the Court is authorized to approve the Agreement. EXPEDITED MOTION TO APPROVE SETTLEMENT AND RELEASE AGREEMENT BY AND BETWEEN THE DEBTORS, THE LACKS, AND THE SENIOR SECURED LENDERS PURSUANT TO FED. R. BANKR. P Page 9 of 12 US v.4

10 Case Document 1492 Filed in TXSB on 01/18/12 Page 10 of In considering a proposed settlement, substantial deference is given to a trustee s or debtor in possession s settlement recommendation. See, e.g., In re Int l Distribution Centers, Inc., 103 B.R. 420, 423 (S.D.N.Y. 1989) ( A court may give weight to the trustee s informed judgment that a compromise is fair and equitable. ); In re Check Reporting Services, Inc., 137 B.R. 653, 658 (Bankr. W.D. Mich. 1992) (court has a duty to determine whether settlements are reasonable before approving them, but may place a certain amount of reliance upon the trustee). 21. To the extent applicable, each of the five factors weighs in favor of approving the Agreement as a fair and equitable means of resolving all pending and future litigation and contested matters by and among the parties, including the Senior Lender Secured Claim, the 506(b) Claim, objections to Plan confirmation to be lodged by the Agent, and all claims and counterclaims among the parties related to or arising from the Cases and the Senior Lender Credit Documents. 22. As detailed above, the Agent asserts that the Senior Lender Parties are entitled to at least $8,084,248 on account of their alleged 506(b) Claim. Although the Debtors contest these amounts, litigation regarding the allowance of the Senior Lender Claim and the 506(b) Claim will be a costly and time-consuming process. Approval of the Agreement, however, would set the Allowed Claim at $21.4 million and avoid the need for future litigation and attendant costs and expenses. 23. Further, not only will entry into the Agreement materially reduce the amounts claimed by the Senior Lender Parties (by over $4,000,000) it will also save the estates considerable resources by avoiding both a contested confirmation hearing and lengthy litigation related to potential claims held by the Lack Parties related to the Cases and the Senior Lender Credit Documents. All litigation situations present a degree of risk, and the claims and rights the EXPEDITED MOTION TO APPROVE SETTLEMENT AND RELEASE AGREEMENT BY AND BETWEEN THE DEBTORS, THE LACKS, AND THE SENIOR SECURED LENDERS PURSUANT TO FED. R. BANKR. P Page 10 of 12 US v.4

11 Case Document 1492 Filed in TXSB on 01/18/12 Page 11 of 12 Debtors seek to release under the Agreement are no different. Any claims of the Debtors estates against the Senior Lender Parties would require a factually intense inquiry and proof of a number of elements that may be difficult to establish. The releases contained in the Agreement address and release all such claims in exchange for a mutual release and a substantial reduction in the alleged claims asserted by the Senior Lender Parties. 24. Entry into the Agreement will also give finality to these estates and permit the Debtors to ultimately confirm a plan and commence distributions to creditors. The Debtors project that general unsecured claims will be paid 100%, with a distribution to equity. The terms of the Agreement help ensure that outcome. As such, the Debtors believe that the Committee will support approval of the Agreement. 25. Moreover, as the Court is aware based upon participation at prior hearings, all parties to the Agreement are represented by separate, experienced counsel zealously advocating for their respective clients best interests. Clearly, this settlement is an arms-length compromise and the product of good faith efforts to resolve outstanding issues. 26. For these reasons, the Agreement is a fair and equitable resolution of any possible dispute among the parties and is in the best interests of the Debtors estates and creditors. PRAYER The Debtors respectfully request that the Court enter an Order approving the Agreement and authorizing the parties to take all actions and execute all documents necessary to implement the Agreement. The Debtors further request that the Court grant them such other and further relief to which they may be justly entitled. EXPEDITED MOTION TO APPROVE SETTLEMENT AND RELEASE AGREEMENT BY AND BETWEEN THE DEBTORS, THE LACKS, AND THE SENIOR SECURED LENDERS PURSUANT TO FED. R. BANKR. P Page 11 of 12 US v.4

12 Case Document 1492 Filed in TXSB on 01/18/12 Page 12 of 12 Dated: January 18, 2012 Respectfully submitted, VINSON & ELKINS LLP By: /s/ Paul E. Heath Daniel C. Stewart, SBT # Paul E. Heath, SBT # Michaela C. Crocker, SBT # Katherine D. Grissel, SBT # Ross Avenue, Suite 3700 Dallas, Texas Tel: Fax: EXPEDITED MOTION TO APPROVE SETTLEMENT AND RELEASE AGREEMENT BY AND BETWEEN THE DEBTORS, THE LACKS, AND THE SENIOR SECURED LENDERS PURSUANT TO FED. R. BANKR. P Page 12 of 12 US v.4

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