Opinion
Civil Action 21-00028-KD-B 21-00029-KD-B 21-00031-KD-B
03-24-2022
BOKF, N.A., as Indenture Trustee, Plaintiff, v. BAMA OAKS RETIREMENT, LLC; SAINT SIMONS HEALTH CARE, LLC; and THE MEDICAL CLINIC BOARD OF THE CITY OF MOBILE SECOND, Defendants, BOKF, N.A., as Indenture Trustee, Plaintiff, v. BAMA OAKS RETIREMENT, LLC; SAINT SIMONS HEALTH CARE, LLC; and THE MEDICAL CLINIC BOARD OF THE CITY OF MOBILE SECOND, Defendants, BOKF, N.A., as Indenture Trustee, Plaintiff, v. GORDON JENSEN HEALTH CARE ASSOCIATION, INC.; KNOLLWOOD NH, LLC; CONQUEST HEALTH SYSTEMS, LLC; MARSH POINTE MANAGEMENT, LLC; and MEDICAL CLINIC BOARD OF THE CITY OF MOBILE SECOND, Defendants.
BIDDING PROCEDURES
I. Notice of Public Auction
a. The Receiver shall publish a Notice of Receiver Sale with the Press Register once a week for at least four (4) weeks prior to the proposed Auction. The Receiver shall also contact and provide a copy of the Notice of Receiver Sale to all persons or entities that the Receiver has identified as (a) having an interest in the Proposed Purchased Assets or (b) potentially interested in acquiring the Proposed Purchased Assets.
b. In addition, within three (3) business days following entry of the Bidding Procedures Order, the Receiver will cause the Indenture Trustees to publish the Bidding Procedures Order at EMMA (the Electronic Municipal Market Access).
II. Access to Diligence Materials
a. To participate in the bidding process and to receive access to due diligence (the “Diligence Materials”), a party (other than the Proposed Stalking Horse) must submit to the Receiver an executed confidentiality and non-disclosure agreement in form and substance satisfactory to the Receiver and evidence demonstrating the party's financial and regulatory capability with respect to an Alternative Transaction, as determined by the Receiver. For the avoidance of doubt, no confidentiality and non-disclosure agreement shall preclude the Receiver from providing the Indenture Trustee with information regarding any party to the process.
b. The Receiver has established an electronic data room to provide all interested parties with access to Diligence Materials. A party (other than the Proposed Stalking Horse) who qualifies for access to Diligence Materials shall be a “Preliminary Interested Party.” All due diligence requests must be directed to the Receiver's counsel, c/o Blake D. Roth and Ryan K. Cochran, Waller, Lansden, Dortch & Davis, LLP, 511 Union Street, Suite 2700, Nashville, Tennessee 37219, 615.244.6804 (facsimile), blake.roth@wallerlaw.com; ryan.cochran@wallerlaw.com.
III. Due Diligence from Bidders
Each Preliminary Interested Party and Qualified Bidder (as defined below) shall comply with all reasonable requests for additional information and due diligence access by the Receiver or its advisors regarding such Bidder (as defined below) and its contemplated transaction. Failure by a Preliminary Interested Party to comply with such reasonable requests for additional information and due diligence access may be a basis for the Receiver to determine that such Preliminary Interested Party is not a Qualified Bidder. Failure by a Qualified Bidder (other than the Proposed Stalking Horse) to comply with requests for additional information and due diligence access may be a basis for the Receiver to determine that a bid made by such Qualified Bidder is not a Qualified Bid. All Bidders must complete their due diligence by no later than May 4, 2022, at 5:00 p.m. (prevailing Central time).
This due diligence deadline is applicable solely to potential bidders other than the Proposed Stalking Horse. The Proposed Stalking Horse's due diligence period is governed solely by the Stalking Horse APA.
IV. Auction Qualification Process
To be eligible to participate in the Auction (as defined below), each offer, solicitation, or proposal (each, a “Bid”), and each party submitting such a Bid (each, a “Bidder”) must be determined by the Receiver to satisfy each of the conditions set forth below. A Bid will not be considered qualified for the Auction if such Bid does not satisfy each of the following conditions:
a. Good Faith Deposit. Each Bid must be accompanied by a deposit of cash of $250,000 (the “Good Faith Deposit”) to the account of Waller, Lansden, Dortch & Davis, LLP, attorneys for the Receiver (the “Escrow Account”), pursuant to wire instructions to be provided upon request.
b. Identification of Bidder and Proposed Transaction. The Bid must:
(i) fully disclose the Bidder's identity and the identity of the entity(ies), if any, which shall be directly or indirectly acquiring a portion of the Proposed Purchased Assets under or in connection with the Bid, as well as any such party's (ies') relationship(s) with the Receiver, any other Bidder, and any other party to this lawsuit; and
(ii) state with specificity the Proposed Purchased Assets to be acquired and the liabilities the Bidder intends to assume.
c. Same or Better Terms. Each Bid must be on terms that, in the Receiver's commercially reasonable business judgment, after consultation with its financial and legal advisors, are the same or better than the terms of the Initial Bid (as defined in the Stalking Horse APA) taken as a whole.
d. Executed Agreement. Each Bid must be based on the Stalking Horse APA and must include executed transaction documents, signed by an authorized representative of such Bidder, pursuant to which the Bidder proposes to effect an Alternative Transaction (the “Modified Asset Purchase Agreement”). A Bid shall also include a copy of the Stalking Horse APA marked against the Modified Asset Purchase Agreement to show all changes requested by the Bidder, including those related to purchase price and to remove all provisions that apply only to the Proposed Stalking Horse (e.g., the Bid Protections (as defined below)).
e. Bids for Portions of the Proposed Purchased Assets. A Bid must offer to purchase all or a portion of substantially all of the Proposed Purchased Assets; provided, however, that if the Bid is for a portion of the Proposed Purchased Assets, the Receiver shall take into consideration, among other factors, its ability to combine such Bid with another Bid or combination of other Bids for a portion of the Proposed Purchased Assets such that the combination of such Bids results in a combination of binding offers to purchase all of the Proposed Purchased Assets.
f. Corporate Authority. A Bid must include written evidence reasonably acceptable to the Receiver demonstrating appropriate corporate authorization to consummate the proposed Alternative Transaction; provided, however, that, if the Bidder is an entity specially formed for the purpose of effectuating the Alternative Transaction, then the Bidder must furnish written evidence reasonably acceptable to the Receiver of the approval of the Alternative Transaction by the equity holder(s) of such Bidder.
g. Proof of Financial Ability to Perform. A Bid must include written evidence that the Receiver concludes, in consultation with its advisors, demonstrates that the Bidder has the necessary financial ability or has received funding commitments (or has cash) sufficient in the aggregate to finance and consummate the Alternative Transaction contemplated, including proof of the Good Faith Deposit in cash and one of:
(i) evidence of sufficient cash to consummate the Alternative Transaction;
(ii) an unconditional lending commitment from a recognized banking institution in the amount of any cash portion of the purchase price of such Bid;
(iii) the posting of an unconditional, irrevocable letter of credit from a recognized banking institution issued in favor of the Receiver in the amount of any cash portion of the purchase price of such Bid; or
(iv) a guarantee from another person or entity in favor of the Receiver in the amount of any cash portion of the purchase price of such Bid (with such person or entity providing written evidence of its financial wherewithal reasonably acceptable to the Receiver).
Such financial information shall include the following:
i. contact names and numbers of financing sources;
ii. the Bidder's current financial statements (audited if they exist) or other similar financial information reasonably acceptable to the Receiver; and iii. any such other form of financial disclosure or credit-quality support information or enhancement acceptable to the Receiver in his commercially reasonable business judgment demonstrating that such Bidder has the ability to close the Alternative Transaction.
h. Proof of Regulatory Ability to Perform. A Bid must include evidence that the Receiver concludes, in consultation with its advisors, demonstrates that the Bidder has the ability to obtain all necessary regulatory approvals to consummate the Alternative Transaction. Such evidence may include, among other factors, the following:
(i) the numbers and type of licensed senior living homes operated within the State of Alabama, and
(ii) a summary of notices of licensure violations or negative certification survey findings received from the state department of health in which such Bidder operates in the last twelve (12) calendar months.
i. Contingencies. Each Bid
(i) may not contain representations and warranties, covenants, or termination rights more onerous than those set forth in the Stalking Horse APA (when considering all such provisions as a whole) and
(ii) may not be conditioned on financing or due diligence contingencies of any kind or any other conditions precedent to such Bidder's obligation to purchase the Proposed Purchased Assets subject to such Bid other than as may be included in the Stalking Horse APA.
j. Participation in More Than One Auction. Any Bidder or Stalking Horse Purchaser may submit a Bid and be declared a Qualified Bidder with a Qualified Bid for one or all the Facilities whether the auction be conducted separately or simultaneously.
k. Bid Deadline. Any competing Bid must be submitted in writing to the Receiver's counsel, c/o Ryan K. Cochran and Blake D. Roth, Waller Lansden Dortch & Davis, LLP, 511 Union Street, Suite 2700, Nashville, Tennessee 37219, 615.244.6804 (facsimile), ryan.cochran@wallerlaw.com; blake.roth@wallerlaw.com, so as to be actually received no later than May 6, 2022 at 5:00 p.m. (prevailing Central time) (the “Bid Deadline”).
l. Indenture Trustees. Each Indenture Trustee is automatically deemed to be a Qualified Bidder with respect to such Indenture Trustee's Collateral and each Indenture Trustee's credit bid rights are automatically deemed to be a Qualified Bid with respect to such Indenture Trustee's Collateral. Following the conclusion of the Bid Deadline, the Receiver's counsel shall notify the Indenture Trustees of all Qualified Bids timely and properly submitted. Within two (2) business days, the Indenture Trustees shall submit their credit bids, if any, to the Receiver for submission as a Qualified Bid to be considered at the Auction.
m. Irrevocable. A bid must be irrevocable through the Auction, provided, however, that if such Bid is accepted as the Successful Bid, such Bid shall continue to remain irrevocable.
A Bid (or combination of Bids) that is actually received from a Bidder before the Bid Deadline and which meets the above requirements for the Proposed Purchased Assets shall collectively constitute a “Qualified Bid” for the Proposed Purchased Assets, and such Bidder (or combination of Bidders) shall constitute a “Qualified Bidder” for the Proposed Purchased Assets. The Receiver shall not consider any Bids received after the Bid Deadline. Notwithstanding anything in these Bidding Procedures to the contrary, the Stalking Horse APA submitted by the Proposed Stalking Horse shall be deemed a Qualified Bid, and the Proposed Stalking Horse shall be deemed a Qualified Bidder.
As soon as reasonably practicable prior to (but no later than two (2) days before) the Auction, the Receiver shall notify each Bidder if they have or have not been selected as a Qualified Bidder. In addition, each Qualified Bidder (including the Proposed Stalking Horse) will receive simultaneous notice from the Receiver of all Qualified Bidders.
AUCTION
The Receiver will conduct an auction (the “Auction”) to determine the highest or otherwise best Qualified Bid for the Proposed Purchased Assets. This determination shall take into account any factors the Receiver reasonably deems relevant to the value of the Qualified Bid to the Receivership Estate and may include, among other things:
(a) the number, type, and nature of any changes to the Stalking Horse APA requested by the Bidder;
(b) the extent to which modifications are likely to delay closing of the sale of the Proposed Purchased Assets and the cost to the Receivership Estates of such modifications or delay;
(c) the total consideration to be received by the Receivership Estates;
(d) the likelihood of the Bidder's ability to close a transaction and the timing of such closing; and
(e) the net benefit to the Receivership Estates, taking into account the Proposed Stalking Horse's rights under these Bidding Procedures and the Stalking Horse APA.
Only parties that the Receiver determines in accordance with these Bidding Procedures are Qualified Bidders may participate in the Auction. If the Proposed Stalking Horse is the only Qualified Bidder, the Receiver may, but is not required to, still conduct the Auction with the Proposed Stalking Horse as the only Qualified Bidder; provided, that, if the Receiver determines to not conduct the Auction, the Receiver shall still be authorized to determine that the Proposed Stalking Horse is the Successful Bidder.
PROCEDURES FOR THE AUCTION
The Auction shall be conducted on May 12, 2022, at 9:30 a.m. (prevailing Central time) at the United States District Court for the Southern District of Alabama located at 155 St. Joseph Street, Mobile, Alabama 36602 (the “Courthouse”). If more than one Qualified Bidder appears at the Auction, the Auction may be adjourned to a nearby location at the discretion of the Receiver; provided, that, upon determining the highest or otherwise best Qualified Bid for the Proposed Purchased Assets, the Auction shall be adjourned and thereafter, concluded at the Courthouse.
Only the Receiver, the Proposed Stalking Horse, any other Qualified Bidder, the Indenture Trustees, any parties to the civil action in which the Receiver is appointed, and their respective representatives and advisors (collectively, the “Permitted Attendees”) shall be permitted to participate in the Auction and shall do so only in person unless the Auction is held by videoconference. Only the Proposed Stalking Horse and such other Qualified Bidders will be entitled to make any Bids at the Auction. To enable the Receiver to ensure sufficient space will be available for all participating in or otherwise desiring to attend the Auction, if any party in interest desires to attend the Auction, but not participate in the auction, such interested party shall provide notice to the Receiver's counsel on or before May 6, 2022, at 5:00 p.m. (prevailing Central time). The failure to provide Receiver's counsel with notice by such time shall provide grounds for the Receiver to prohibit attendance at the Auction.
I. The Receiver shall conduct the Auction.
The Receiver and its advisors shall direct and preside over the Auction. Subject to its compliance with these Bidding Procedures, the Receiver may conduct the Auction in the manner the Receiver determines will result in the highest, best, or otherwise superior offer for any or all of the Proposed Purchased Assets. At the start of the Auction, the Receiver shall describe the terms of the highest or otherwise best Qualified Bid or Qualified Bids received prior to the Bid Deadline (each such highest or otherwise best Qualified Bid, the “Baseline Bid”). The Receiver shall advise each Qualified Bidder (including the Proposed Stalking Horse), in writing, regarding which such Qualified Bid shall be the Baseline Bid as soon as reasonably practicable prior to the commencement of the Auction.
Each Qualified Bidder participating in the Auction must confirm that it (a) has not engaged in any collusion with respect to the bidding or sale of any of the Proposed Purchased Assets and (b) has reviewed, understands, and accepts the Bidding Procedures.
The Receiver may sequester participating Qualified Bidders and other Permitted Attendees in separate rooms and meet and negotiate individually with each such Qualified Bidder to obtain the highest and best offer for the Proposed Purchased Assets. In such event, the Receiver may periodically convene a meeting of all participating Qualified Bidders and Permitted Attendees to discuss the status of the Bids, and the Auction shall not be terminated until all participating Qualified Bidders have been advised of the highest and best Bid and given an opportunity to make a higher or better Bid.
II. Overbids.
An “Overbid” is any Bid made at the Auction subsequent to the Receiver's announcement of the Baseline Bid. To submit an Overbid for purposes of the Auction, a Bidder must comply with the following conditions:
a. Minimum Overbid Increments. If the Baseline Bid is the Proposed Stalking Horse's Bid, the initial Overbid shall exceed the Baseline Bid by $500,000 (the “Initial Overbid”). Any successive Bid (or the Initial Overbid if the Baseline Bid is not the Proposed Stalking Horse's Bid) shall be made in increments valued at not less than $50,000.00. Additional consideration in excess of the amount set forth in the respective Baseline Bid may include cash or non-cash consideration.
b. Bids. All Qualified Bidders attending the Auction (including the Proposed Stalking Horse) shall be permitted to bid at the Auction. For the avoidance of doubt, the Proposed Stalking Horse shall be permitted to include the full amount of the Bid Protections in each bid by the Proposed Stalking Horse for the purposes of comparison to any Overbid in connection with each round of bidding at the Auction.
c. Terms Unchanged. An Overbid at the Auction must comply with the conditions for a Qualified Bid set forth in these Bidding Procedures; provided, however, the Bid Deadline shall not apply. Any Overbid must remain open and binding on the Bidder until and unless the Receiver accepts a higher or otherwise better Overbid.
To the extent not previously provided, the Receiver may request a Bidder submitting an Overbid, submit, as part of its Overbid, additional written evidence (in the form of financial disclosure or credit quality support information or enhancement acceptable to the Receiver in his commercially reasonable business judgment) demonstrating such Bidder's ability to close the Alternative Transaction contemplated by such Overbid.
d. Announcement of Overbids. The Receiver shall announce at the Auction the material terms of each Overbid and the basis for calculating the total consideration offered in each such Overbid.
III. Closing the Auction.
The Auction shall continue until there is only one Qualified Bid for the Proposed Purchased Assets (or combination of Qualified Bids that, in total, encompass all of the Proposed Purchased Assets) that the Receiver determines in its reasonable business judgment, after consultation with its advisors, produces the highest or otherwise best Qualified Bid (such Qualified Bid, the “Successful Bid” and such Bidder, the “Successful Bidder”).
The Successful Bidder shall submit fully executed sale and transaction documents memorializing the terms of the Successful Bid prior to the conclusion of the Auction.
Promptly following the conclusion of the Auction, the Receiver shall announce the Successful Bidder and Successful Bid and shall file with the court notice of the Successful Bidder and Successful Bid. The Receiver shall not consider any Bids or Overbids after the conclusion of the Auction.
IV. Backup Bidder.
Notwithstanding anything in the Bidding Procedures to the contrary, if an Auction is conducted, the Bidder or Bidders with the next highest or otherwise best Bid or Overbid or combination of Bids or Overbids at the Auction, as determined by the Receiver in the exercise of its reasonable business judgment, after consultation with its advisors, will be designated as the backup bidder (the “Backup Bidder”).
In the event that a Bidder or Bidders are identified by the Receiver as the Backup Bidder, such Bidder or Bidders shall be required to serve as the Backup Bidder. The Backup Bidder shall be required to keep its last Bid or Overbid (or combination of Bids or Overbids) (the “Backup Bid”) open and irrevocable until the earlier of 4:00 p.m. (prevailing Central time) on the date that is sixty (60) days after the date of the entry of the Sale Order (the “Outside Backup Date”) and the closing of the transaction with the Successful Bidder.
SALE HEARING
The Successful Bid will be subject to court approval by the Court. The hearing to approve the sale of the Proposed Purchased Assets in accordance with these Bidding Procedures is scheduled to take place at the Courthouse on May 13, 2022, at 11:00 a.m. (prevailing Central time) (the “Sale Hearing”). The Sale Hearing may be adjourned from time to time without further notice to parties in interest other than by announcement of the adjournment in open court on the date scheduled for such Sale Hearing or a notice filed with the court, as applicable; provided, however, that if the Proposed Stalking Horse is the Successful Bidder, the Sale Hearing shall not be adjourned without the express written consent of the Proposed Stalking Horse and Indenture Trustee.
Following the Sale Hearing, if the Successful Bidder fails to consummate its transaction, the Receiver may designate the Backup Bidder to be the new Successful Bidder, in which case the Backup Bidder will be deemed the Successful Bidder and the Receiver will be authorized, but not required, to consummate the transaction or transactions with the Backup Bidder as the new Successful Bidder without further order of the court. In such case, the defaulting Successful Bidder's Good Faith Deposit shall be forfeited to the Receiver. The Good Faith Deposit of the Backup Bidder shall be held by the Receiver until the earlier of Seventy-Two (72) hours after (i) closing of the transaction or transactions with the Successful Bidder (if not the Backup Bidder) and (ii) the Outside Backup Date.
Any objection on any basis to the proposed sale of the Proposed Purchased Assets must be filed in writing with the Court no later than May 12, 2022, at 5:00 p.m. (prevailing Central time) (the “Objection Deadline”) and served on
(a) counsel to the Receiver, c/o Ryan K. Cochran, Waller Lansden Dortch & Davis, LLP, 511 Union Street, Suite 2700, Nashville, Tennessee 37219, (615) 244.6804 (facsimile), ryan.cochran@wallerlaw.com,
(b) counsel to the Proposed Stalking Horse, c/o Bobby Guy, Polsinelli, 401 Commerce Str., Suite 900, Nashville, Tennessee 37219, bguy@polsinelli.com, and Jeremy Johnson, Polsinelli, 150 N. Riverside Plaza, Suite 3000, Chicago, Illinois 60606, Jeremy.johnson@polsinelli.com; and (c) counsel to the Indenture Trustees, c/o Walter E. Jones, Balch & Bingham, LLP, 30 Ivan Allen Jr. Blvd. NW, Suite 700, Atlanta, Georgia 30309, wjones@balch.com,
V. Additional Procedures.
The Receiver reserves its rights, in the exercise of its obligations, to modify the Bidding Procedures or impose, at or prior to the Auction, different or additional terms and conditions on the sale subject to the Bidding Procedures; provided, however, that such rules are not inconsistent in any material respect with the Bidding Procedures or the Stalking Horse APA.
VI. Consent to Jurisdiction as Condition to Bidding.
The Stalking Horse Purchaser and all other Qualified Bidders at the Auction shall be deemed to have
(a) consented to the jurisdiction of the court presiding over this matter to enter an order or orders, which shall be binding in all respects, in any way related to the Receiver, the Receivership Estate, the Bidding procedures, the Stalking Horse APA, any Modified Purchase Agreement, the Proposed Purchased Assets, the Auction, or the construction and enforcement of any Qualified Bid or related documents and
(b) waived any right to a jury trial in connection with any disputes relating to the foregoing.
BID PROTECTIONS
Pursuant to the Bidding Procedures Order, the Stalking Horse Purchaser is entitled to the Bid Protections in accordance with the terms of the Stalking Horse APA and the Bidding Procedures Order. Pursuant to the Bidding Procedures Order, except for the Proposed Stalking Horse, no other party submitting an offer, Bid, Qualified Bid, or Overbid shall be entitled to any expense reimbursement or breakup, termination, or similar fee, unless the Receiver and the Proposed Stalking Horse (in each of their sole discretion) expressly agree otherwise in writing, and by submitting an offer, Bid, Qualified Bid, or Overbid, a Bidder (other than the Proposed Stalking Horse) shall be deemed to waive any right with respect to same.
RETURN OF GOOD FAITH DEPOSITS
The Good Faith Deposits of all Qualified Bidders shall be held in the Escrow Account, but shall not become property of the Receivership Estate absent further order of the court, except as expressly set forth in these Bidding Procedures. The Good Faith Deposit of any Qualified Bidder that is neither a Successful Bidder nor a Backup Bidder shall be returned to such Qualified Bidder not later than five (5) business days after the Sale Hearing. The Good Faith Deposit of the Backup Bidder, if any, shall be returned as set forth above. If a Successful Bidder timely closes the transaction(s) contemplated by its Successful Bid, the Successful Bidder's Good Faith Deposit shall be credited towards its purchase price.