Opinion
Case No. 01-60386-DOT, Procedurally Consolidated
September 12, 2002
Upon the Motion, dated September 6, 2002 (the "Motion"), of Keith L. Phillips, Chapter 11 Trustee for the Debtors (the "Trustee"), for (I) Entry of a Sale Procedures Order (A) Approving Bidding Procedures, (B) Scheduling Hearing Dates and Establishing a Bidding Deadline, and (C) Approving Notice (collectively, "Part I of the Motion"), and (II) Entry of an Order Approving Sale Free Clear of Liens and Assumption and Assignment of Certain Executory Contracts and Unexpired Leases ("Part II of the Motion"), and the Court having determined that the relief requested in Part I of the Motion is in the best interests of the Debtors, the estates, the creditors and other parties in interest; and upon the record of the hearing held on September 12, 2002 (the "Hearing"); and after due deliberation thereon; and good and sufficient cause appearing therefor;
All capitalized terms not defined herein but defined in the Motion or the attachments thereto shall have the meanings ascribed to them in the Motion or the attachments thereto.
IT IS HEREBY FOUND AND DETERMINED THAT:
Findings of fact shall be construed as conclusions of law and conclusions of law shall be construed as findings of fact when appropriate. See Bankruptcy Rule 7052.
A. The Court has jurisdiction over this matter and over the property of the Debtors and their bankruptcy estate pursuant to 28 U.S.C. § 157(a) and 1334. Venue in this District for these Chapter 11 cases and the Motion is proper pursuant to 28 U.S.C. § 1408 and 1409.
B. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (B), (M) and (N).
C. Appropriate notice of the relief sought in Part I of the Motion, as to content, service, and time based upon the particular circumstances of this case, has been given and no other or further notice is required.
D. Good and sufficient reasons have been shown for approving (i) the manner of notice of the Motion, the Auction, the Bidding Procedures (in the form of Attachment 1 hereto) the hearing on any objections to the Cure Schedule, and the Sale Hearing to be distributed to creditors and other parties in interest, including prospective bidders, and (ii) the Bidding Procedures (including the Break-Up Fee (as defined in the Bidding Procedures)).
E. The proposed Bidding Procedures carefully balance the Trustee's interests in (i) inducing GPM Investments, LLC ("GPM") to commit to consummate the Sale, (ii) preserving the opportunity to attract higher and better offers, and (iii) expediting the sale process.
F. The Trustee has demonstrated a sound business justification for authorizing payment to GPM of the Break-Up Fee, as set forth in the annexed Bidding Procedures, in the amount of $1,250,000, which constitutes approximately 2.5% of the Purchase Price in the Purchase Agreement.
G. Based on the record presented to the Court at the Hearing, the Break-Up Fee is fair and reasonable, and was negotiated by the parties in good faith and at arms' length.
H. The potential payment to GPM of the Break-Up Fee, in accordance with the Purchase Agreement, would be (i) an actual and necessary cost of preserving the estate, within the meaning of 11 U.S.C. § 503(b), (ii) necessary to ensure that GPM will continue to pursue its proposed acquisition of the Purchased Assets, (iii) of substantial benefit to the estate, and (iv) reasonable and appropriate in light of the size and nature of the Sale and the efforts that have been and will be expended by GPM, notwithstanding that the proposed Sale is subject to higher or better offers.
I. The Break-Up Fee was a material inducement for, and a condition of, GPM's entry into the Purchase Agreement. Assurance to GPM of payment of the Break-Up Fee will promote more competitive bidding by inducing GPM's bid, which otherwise would not have been made and without which bidding might be limited.
J. In reliance on the availability of the payment, reimbursement and procedures set forth in the Bidding Procedures, GPM has researched the value of the Purchased Assets, has expended and will expend substantial resources and funds in connection with the purchase of the Purchased Assets, and is willing to serve as a "stalking horse" in connection with the Sale for the purpose of promoting competitive bidding that otherwise would not have occurred. By submitting the bid embodied in the Purchase Agreement, GPM has provided a benefit to the estate by increasing the likelihood that the Purchased Assets will be sold. Absent authorization of the Break-Up Fee, the Trustee may lose the opportunity to obtain the highest and best available offer in respect of the Sale of the Purchased Assets.
K. Based on the record presented to the Court at the Hearing, the Bidding Procedures, including the Break-Up Fee provision, are fair and reasonable, reflect the Trustee's exercise of prudent business judgment consistent with his fiduciary duties, and represent the best method for maximizing the value to the estate of the Purchased Assets.
L. This Court concludes that entry of this Sale Procedures Order is in the best interests of the Debtors, the estates, the creditors and other parties in interest because it will, among other things, retain for the estates the prospect of a successful Sale to GPM, while enabling the Trustee to solicit competing offers in accordance herewith.
M. The notice procedures proposed in the Motion are reasonably calculated to provide sufficient notice of the Sale to creditors and other parties in interest, and those persons and entities interested in bidding on the Purchased Assets.
N. Based upon the foregoing findings and conclusions, and upon the record made before this Court at the Hearing, and good and sufficient cause appearing therefor; it is hereby
ORDERED, ADJUDGED AND DECREED THAT:
1. The relief requested in Part I of the Motion with respect to the Bidding Procedures (including the Break-Up Fee) and the notice of Sale Hearing is granted, subject to the terms and conditions set forth in this Sale Procedures Order.
2. The Sale Hearing shall be held on October 7, 2002, at 10:00 a.m. Eastern time in the United States Bankruptcy Court, Eastern District of Virginia, Richmond Division, Courtroom 335, Richmond, Virginia, at which time the Court will consider the relief requested in Part II of the Motion with respect to the Sale and consider confirmation of the highest and best bidder resulting from the Auction.
3. Objections to the entry of the Sale Order, if any, must (a) be in writing, (b) conform to the requirements of the Bankruptcy Code, the Bankruptcy Rules and the Local Rules of the United States Bankruptcy Court for the Eastern District of Virginia, (c) set forth the name of the objector and the nature and amount of any claim or interest held by such objector against the Debtors or their property, (d) state the legal and factual basis for the objection and the specific grounds therefor, and (e) be filed with the Bankruptcy Court and served upon: (i) counsel to the Trustee, Tyler P. Brown, Hunton Williams, Riverfront Plaza, East Tower, 951 East Byrd Street, Richmond, VA 23219; (ii) counsel to the Official Committee of Unsecured Creditors, Paul M. Nussbaum, Whiteford, Taylor Preston LLP, 7 St. Paul Street, Baltimore, Maryland 21202 and Douglas M. Foley, McGuire Woods LLP, World Trade Center, 101 West Main Street, Suite 9000, Norfolk, Virginia 23510 (the "Committee"); (iii) counsel to GPM, James M. Lewis, Holland Knight LLP, 1600 Tysons Boulevard, Suite 700, McLean, Virginia 22102; and (iv) the Office of the U.S. Trustee, Attn: Robert Van Arsdale, 600 East Main Street, Suite 301, Richmond, Virginia 23219; by two business days prior to the Sale Hearing, (the "Objection Deadline"). Only timely filed and served responses, objections or other pleadings will be considered by the Court at the Sale Hearing. Failure to file and serve an objection in the foregoing manner shall be a bar to the assertion, at the Sale Hearing or thereafter, of any objection to the Motion, the Sale Order, the Sale or of the Debtor's consummation or performance of the Sale.
4. The Sale Hearing may be adjourned from time to time without further notice to creditors or parties in interest other than by announcement of the adjournment in open court or on the Court's calendar on the date scheduled for the Sale Hearing or any other adjourned date.
5. The Bidding Procedures attached hereto as Attachment 1 are hereby approved and shall apply to the Sale.
6. Competing Bids (as defined in the Bidding Procedures) shall be delivered to the Trustee and GPM, so as to be received by them no later than 4:00 p.m. on September 26, 2002 (the "Bid Deadline"). Competing Bids shall be delivered to the Trustee and GPM as follows:
(i) to the Trustee, to:
Thomas E. Kelso Matrix Capital Markets Group 100 South Charles St., Suite 1350 Baltimore, MD 21201 Telephone: 410-752-3833 Facsimile: 410-727-1405
with copies to:
Keith L. Phillips Phillips Fleckenstein 311 5. Boulevard Richmond, VA 23220-5705 Telephone: 804-358-9400 Facsimile: 804-359-9089
and
Tyler P. Brown Hunton Williams Riverfront Plaza, East Tower 951 East Byrd Street Richmond, VA 23219 Telephone: 804-788-8674 Facsimile: 804-788-8218
(ii) to GPM, to:
Arie Kotler, CEO Marlaz Financial Group 63 Rothchild Boulevard Tel Aviv, Israel 65785 Telephone: 972 3-526-5444 Facsimile: 972 3-526-5441
with a copy to:
James M. Lewis Holland Knight LLP 1600 Tysons Boulevard, Suite 700 McLean, VA 22102 Telephone: 703-720-8600 Facsimile: 703-720-8610
7. If a Qualified Competing Bid is submitted, an auction (the "Auction") will be held on September 30, 2002, at 10:00 am. at the offices of counsel for the Trustee, Hunton Williams, Riverfront Plaza, East Tower, 20th Floor, 951 East Byrd Street, Richmond, VA 23219. The Auction shall be conducted in accordance with the Bidding Procedures set forth on Attachment 1 to this Order.
8. The Trustee shall reasonably determine whether a submitted Competing Bid meets the qualifications of a Qualified Competing Bid described herein and whether the Purchase Agreement or a Qualified Competing Bid constitutes the most favorable transaction for the estate. The most favorable transaction, which may be represented by one or more Qualifying Competing Bids, as reasonably determined by the Trustee, shall be submitted to the Court for approval at the Sale Hearing. In the event of a dispute regarding the most favorable transaction, such dispute shall be resolved by the Court.
9. The Trustee is hereby authorized and empowered to take such steps, expend such sums of money and do such other things as may be necessary to implement and effect the terms and requirements established by this Sale Procedures Order.
10. The Break-Up Fee is hereby approved, and the Trustee is authorized to pay such amounts on the terms set forth in the Bidding Procedures.
11. The notice of the Motion and the Sale Hearing described in the Motion shall be good and sufficient, and any requirements for other or further notice are waived and dispensed with pursuant to Bankruptcy Rules 2002, 6004, 6006 and 9014, if given as follows: On or before September 13, 2002 (the "Mailing Date"), the Trustee (or his agents) shall serve the Motion, the Purchase Agreement, the proposed Approval Order and a copy of this Sale Procedures Order by first-class mail, postage prepaid, upon (i) the U.S. Trustee; (ii) counsel for GPM; (iii) counsel for the Committee; (iv) all entities (or counsel therefor) known to have asserted any lien, claim, encumbrance, right of refusal or other interest of any kind whatsoever in or upon the Purchased Assets; (v) all federal, state and local regulatory or taxing authorities or recording offices which have a reasonably known interest in the relief requested by the Motion; (vi) all parties known to have expressed a bona fide interest in acquiring the Purchased Assets; (vii) all non-debtor counter-parties to the contracts and leases proposed to be assigned to the Purchaser; and (viii) all entities who have filed a notice of appearance and request for service of papers in these cases.
12. All of the terms and provisions of this Sale Procedures Order and the Bidding Procedures shall be binding in all respects upon, and shall inure to the benefit of the Purchaser, the Trustee, the estate and their successors and assigns including, without limitation, any trustee appointed in a Chapter 7 case if these cases were to be converted from Chapter 11, and this Sale Procedures Order shall survive the appointment of such a successor trustee, the conversion of this case to a case under Chapter 7 of the Bankruptcy Code, or the dismissal of this case. Nothing contained in any Chapter 11 plan confirmed in this bankruptcy case or the confirmation order confirming any such Chapter 11 plan shall conflict with, modify or derogate from the provisions of this Sale Procedures Order or the Bidding Procedures.
13. This Court shall retain jurisdiction to interpret, construe and enforce the terms and provisions of this Sale Procedures Order in all respects, including without limitation, to decide any disputes arising between the Trustee, on the one hand, and the Purchaser and/or potential bidders, on the other, with respect thereto. This retention of jurisdiction shall not be deemed to extend to any dispute that does not involve the interpretation, construction, enforcement and/or effect of this Sale Procedures Order.
14. The Trustee shall file the Cure Schedule on or before September 13, 2002. Any objections to the Cure Amounts listed in the Cure Schedule shall be filed and served upon counsel to the Trustee and to GPM, at the addresses set forth above, by September 24, 2002. A hearing on any objection(s) filed to the Cure Schedule shall be held on September 26, 2002, at 10 a.m. Eastern time in the United States Bankruptcy Court, Eastern District of Virginia, Richmond Division, Courtroom 335, Richmond, Virginia.