Opinion
Case No. 03-52300-gwz, No. 03-552304-gwz., 03-52470, 03-52474 Jointly Administered.
February 13, 2004
Jennifer A. Smith, Esq., LIONEL SAWYER COLLINS, Reno, Nevada, and David S. Heller, Esq., Timothy A. Barnes, Esq., LATHAM WATKINS LLP, Chicago, Illinois, Attorneys for Heller Financial, Inc.
STIPULATION AND AGREED ORDER RESOLVING CLAIMS AND INTERESTS OF HELLER FINANCIAL, INC.
This Stipulation and Agreed Order ("Stipulation and Order") is made between Heller Financial, Inc. ("Heller"), the above-captioned debtors (the "Debtors"), C. Alan Bentley, Chapter 11 Trustee ("Trustee") for the Debtors and the Official Committee of Unsecured Creditors (the "Committee") in the above-captioned cases. Each of the foregoing parties referred to collectively herein as, the "Parties".
BACKGROUND
A. On July 9, 2003 (the "Petition Date"), the Debtors and certain of their affiliates commenced their respective reorganization cases (the "Bankruptcy Cases") by filing voluntary petitions in the Bankruptcy Court for the District of Nevada (the "Court") for relief under chapter 11 of the Bankruptcy Code, 11 U.S.C. § 101-1330 (the "Bankruptcy Code"). On July 29, 2003, the Court appointed C. Alan Bentley Chapter 11 Trustee for the Bankruptcy Cases.
B. On April 5, 2001, Heller and Leisure Homes Corporation ("Leisure"), one of the Debtors, entered into a financing arrangement under which Heller provided funds for the acquisition and development of a time-share project known as "Tango Bay" (f/k/a Ramada Vacation Suites at Tango Bay) in Orlando, Florida.
C. On September 23, 2003, the Court entered its Stipulation and Agreed Order (I) Resolving (A) Motion of Heller Financial, Inc. for Relief from Automatic Stay or, in the Alternative, for Adequate Protection; and (B) Trustee's Motion for an Order Authorizing Use of Heller Financial, Inc. Cash Collateral and Providing Adequate Protection; and (II) Authorizing Use of Cash Collateral and Providing Adequate Protection (the "Cash Collateral Stipulation"). In the Cash Collateral Stipulation, the Trustee stipulated as to the validity of the Heller Obligations and perfection and priority of the Heller Liens, each as defined therein and evidenced by the proofs of claim submitted by Heller in the above-captioned cases (as amended, the "Heller Proof of Claims").
D. On November 3, 2003, the Court conducted a hearing with respect to the sale of substantially all the assets of the Debtors to various parties. Among the relief granted by the Court was the sale of Tango Bay to Westgate Resorts, Ltd., and on November 13, 2003, the Trustee filed with the Court his Notice of Lodgment of Order Authorizing (A) Sale of Certain Assets Free and Clear of Liens, Claims, Encumbrances and Interests and (B) The Assumption and Assignment of Certain Executory Contracts to Westgate Resorts, Limited (the "Proposed Westgate Sale Order").
E. The filing of the Proposed Westgate Sale Order gave rise to certain disputes between the Committee and Heller. On that same day, the Committee filed their Objection to the Proposed Westgate Sale Order (the "Committee Order Objection") and the next day, on November 14, 2003, the Trustee and Heller each filed Responses to the Committee Order Objection (the "Trustee Order Response" and the "Heller Order Response," respectively, and together the "Order Responses").
F. On November 20, 2003, the Court conducted a hearing with respect to the Proposed Westgate Sale Order, the Committee Order Objection, and the Order Responses. As a result of the hearing, the Proposed Westgate Sale Order was entered (as entered, the "Westgate Sale Order") and the Court further approved an Order Regarding Procedure for Distribution to Heller under the Westgate Sale Order (the "Heller Distribution Order") wherein the Committee was given a deadline of December 1, 2003 to review a portion of the documents underlying the Heller Obligations and the Heller Liens and to bring an action with respect thereto.
G. On November 25, 2003, in accordance with the Westgate Sale Order and the Heller Distribution Order, the Trustee made a provisional partial payment to Heller on behalf of the Heller Obligations and the Heller Liens in the amount of $16,748,520.42 (the "Provisional Payment").
H. On December 1, 2003, after conducting this limited review, the Committee filed with the Court a Notice Regarding Provisional Distribution of Sale Proceeds to Heller Financial Corporation under the Westgate Sale Order (the "Committee Notice and Reservation"). In the Committee Notice and Reservation, the Committee stated that "on the basis of a limited review of approximately 5% of the subject consumer note files, the Committee will not object to the provisional distribution of sale proceeds to. . . . Heller. . . ." The Committee further reserved the "right to seek to recover all or any portion of the sale proceeds provisionally distributed by the Trustee to Heller. . . ."
I. As a result of the Committee Notice and Reservation and Heller's voiced objections thereto, the Court conducted a further hearing with respect to the parties' disputes on December 2, 2003. At the December 2, 2003 hearing, the parties agreed and the Court ordered as follows:
• Heller was authorized to apply, on a provisional basis, the Provisional Payment toward the satisfaction of Heller Obligations and the Heller Liens, subject to the obligation to repay such distribution to the estate in accordance with the terms of the Westgate Sale Order;
• Trustee was authorized to pay interest on the Heller Obligations, on a provisional basis, for the period from the date of the Provisional Payment through December 1, 2003, which additional interest amounted to $13,096.59, which, after subtracting the interest gained on the Provisional Payment while held by Heller but not applied ($3,441.48), was then calculated to equal $9,655.11 (the "Additional Interest").
• The Committee was granted an additional period to review the consumer loan files and other documents related to the validity and amount of the Heller Obligations and the Heller Liens. Provided such review took place, the Committee agreed to bring any and all causes of action with respect to the amount of the Heller Obligations and the perfection of the Heller Obligations by the Heller Liens no later than December 15, 2003 and to prosecute such challenge on or before December 31, 2003.
J. Thereafter, the Trustee paid to Heller the Additional Interest (together with the Provisional Payment, the "Trustee Payments"). During the week of December 8, 2003, the Committee conducted its further review. On December 12, 2003, the Committee informed Heller that it would not be filing a challenge to the Heller Obligations or the Heller Liens.
K. In order to finally resolve the disputes relating to the Heller Obligations and the Heller Liens and to ensure that (i) Heller is not subject to further challenge in the above-captioned proceedings with respect thereto, and (ii) the Heller Liens are released from the proceeds under the Westgate Sale Order, the parties have agreed to enter into this Stipulation Order. This Stipulation and Order is negotiated in good faith and at arm's length between the Parties and memorializes their agreement as set forth herein.
THEREFORE, THE PARTIES, INTENDING TO BE LEGALLY BOUND HEREBY, STIPULATE AND AGREE FOR ALL PURPOSES IN THE ABOVE-CAPTIONED CASES, AND THIS COURT HEREBY FINDS, DETERMINES, ORDERS, ADJUDGES AND DECREES AS FOLLOWS:
1. In accordance with the Loan Documents, the Debtors are truly and justly indebted to Heller, without defense, counterclaim or offset of any kind with respect to the Heller Obligations in amount of the Trustee Payments. The Heller Obligations are fully secured by the Heller Liens.
2. The Heller Obligations and the Heller Proof of Claim are hereby allowed in their entirety. Heller shall be indefeasibly paid in full with respect to the Heller Obligations by the payment of the Trustee Payments. No further investigation, challenge or other actions with respect to the Heller Obligations and the Heller Liens shall be allowed.
3. Upon the entry of this Stipulation and Order, no party shall assert, on behalf of the Debtors, their estates or otherwise, a claim under section 506(c) of the Bankruptcy Code for any costs and expenses incurred in connection with the preservation, protection or enhancement of the Collateral, the Replacement Collateral, or the Additional Adequate Protection Collateral (each as defined in the Cash Collateral Stipulation). In addition, no party shall seek the payment of any expenses, break-up fee, or other costs, fees, or related obligations associated with the sale of any estate asset from Heller or the Collateral.
4. Upon this Stipulation and Order becoming a final order, the Heller Liens shall be extinguished and the Heller Proof of Claim shall be deemed satisfied in full.
5. The Court shall retain continuing jurisdiction to enforce the terms of this Stipulation and Order.
This Stipulation and Order may be executed in one or more counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same agreement. Facsimile signatures shall be deemed to be original signatures for all purposes with respect to this Stipulation and Order.
SO ORDERED.