Case No. 03-15299 (PSH), (Jointly Administered)United States Bankruptcy Court, N.D. Illinois
September 11, 2003
ORDER AUTHORIZING AND APPROVING (I) SALE OF CERTAIN OF THE DEBTORS’ ASSETS FREE AND CLEAR OF LIENS, CLAIMS AND ENCUMBRANCES, (II) ASSUMPTION AND ASSIGNMENT OF CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES, AND (III) ASSUMPTION OF CERTAIN LIABILITIES
PAMELA S. HOLLIS, Bankruptcy Judge
Upon the motion, dated June 17, 2003 (the “Motion”)[1] of the above-captioned debtors and debtors-in-possession (the “Debtors”), for inter alia, entry of an order under 11 U.S.C. § 105(a), 363, 365, and 1146(c) and F.R.Bankr.P. 2002, 6004, 6006, and 9014 (the “Sale Order”) authorizing (i) the Debtors’ sale (the “Sale”) of assets related to Store 81 located in Freeport, Illinois (the “Acquired Assets”) to J.B. Sullivan, Inc. (the “Purchaser”) as identified in, and pursuant to, that certain Acquisition Agreement between Eagle Food Centers, Inc. and J.B. Sullivan, Inc. dated August 4, 2003 (the “Purchase Agreement,” a copy of which is attached
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hereto as Exhibit 1), (ii) the Debtors’ assumption and assignment to the Purchaser of certain executory contracts and unexpired lease(s) (the “Assumed Contracts”), pursuant to and as described in the Purchase Agreement, (iii) the assumption by the Purchaser of certain liabilities (the “Assumed Liabilities”), pursuant to and as described in the Purchase Agreement and (iv) the Debtors’ termination of the lease related to Store 081 (as amended, assigned and otherwise modified by the documents related thereto) pursuant to that certain Lease Termination Agreement by and between Rehab Associates X, Inc. (the “Landlord”) and Eagle Food Centers, Inc. (the “Lease Termination Agreement”); and the Court having entered an order on June 27, 2003 (the “Procedures Order”) approving (i) the Bidding Procedures, (ii) the Granting of Certain Bid Protections, (iii) the forms of Purchase Agreement and Lease Termination Agreement, and (iv) the Notice Procedures and the setting of a Sale Hearing; and a hearing on the Motion having been held on September 11, 2003 (the “Sale Hearing”), at which time all interested parties were offered an opportunity to be heard with respect to the Motion; and the Court having reviewed and considered (i) the Motion, (ii) the objections thereto, if any, (iii) the arguments of counsel made, and the evidence proffered or adduced, at the Sale Hearing; and it appearing that the relief requested in the Motion is in the best interests of the Debtors, their estates and creditors and other parties in interest; and upon the record of the Sale Hearing and
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these cases; and after due deliberation thereon; and good cause appearing therefor, it is hereby
FOUND AND DETERMINED THAT:[2]
A. The court has jurisdiction over this Motion pursuant to 28 U.S.C. § 157 and 1334, and this matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) and (N). Venue of these cases and the Motion in this district is proper under 28 U.S.C. § 1408 and 1409.
B. The statutory predicates for the relief sought in the Motion are sections 105, 363, 365 and 1146(c) of 11 U.S.C. § 101 et seq. (the “Bankruptcy Code”), and F.R.Bankr.P. 2002, 6004, 6006 and 9014.
C. As evidenced by the affidavits of service and publication previously filed with the Court, and based on the representations of counsel at the Sale Hearing, (i) proper, timely, adequate and sufficient notice of the Motion, the Sale Hearing, the Sale, the assumption and assignment of the Assumed Contracts, and the Cure Amounts has been provided in accordance with 11 U.S.C. § 102(1), 363 and 365 and F.R.Bankr.P. 2002, 6004
and 9014 and in compliance with the Procedures Order, (ii) such notice was good and sufficient, and appropriate under the particular circumstances, and (iii) no other or further notice of the Motion, the Sale
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Hearing, the Sale, the assumption and assignment of the Assumed Contracts, or the Cure Amounts is or shall be required.
D. As demonstrated by (i) the testimony and other evidence proffered or adduced at the Sale Hearing, (ii) the representations of counsel made on the record at the Sale Hearing, the Debtors have marketed the Acquired Assets and conducted the sale process in compliance with the Procedures Order.
E. Each Debtor (i) has full corporate power and authority to execute the Purchase Agreement and all other documents contemplated thereby, and the sale of the Acquired Assets by the Debtors has been duly and validly authorized by all necessary corporate action of each of the Debtors, (ii) has all of the corporate power and authority necessary to consummate the transactions contemplated by the Purchase Agreement, (iii) has taken all corporate action necessary to authorize and approve the Purchase Agreement and the consummation by such Debtors of the transactions contemplated thereby, and (iv) no consents or approvals, other than those expressly provided for in the Purchase Agreement, are required for the Debtors to consummate such transactions.
F. Approval of the Purchase Agreement and consummation of the Sale at this time are in the best interests of the Debtors, their creditors, their estates, and other parties in interest.
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G. The Debtors have demonstrated both (i) good, sufficient, and sound business purpose and justification and (ii) compelling circumstances for the Sale pursuant to 11 U.S.C. § 363(b) prior to, and outside of, a plan of reorganization in that, among other things, the Sale at the current time will maximize the value of the Acquired Assets and the Business (as defined below) on behalf of the Debtors’ creditors and estates.
H. A reasonable opportunity to object or be heard with respect to the Motion and the relief requested therein has been afforded to all interested persons and entities, including: (i) the Office of the United States Trustee; (ii) counsel for the Purchaser; (iii) counsel for the Creditors’ Committee; (iv) counsel for the Debtors’ postpetition lender; (v) all entities known to have expressed an interest in a transaction with respect to the Acquired Assets during the past six months; (vi) all entities known to have asserted any lien, claim, encumbrance or interest (the “Interests”) in or upon the Acquired Assets; (vii) 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; (viii) all parties to Assumed Contracts; (ix) the United States Attorney’s office; (x) the Securities and Exchange Commission; (xi) the Internal Revenue Service; and (xii) all entities on the 2002 service list.
I. The Purchase Agreement was negotiated, proposed and entered into by the Debtors and the Purchaser without collusion, in good faith, and
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from arm’s-length bargaining positions. Neither the Debtors nor the Purchaser have engaged in any conduct that would cause or permit the Purchase Agreement to be avoided under 11 U.S.C. § 363(n).
J. The Purchaser is a good faith purchaser under 11 U.S.C. § 363(m) and, as such, is entitled to all of the protections afforded thereby. The Purchaser will be acting in good faith within the meaning of 11 U.S.C. § 363(m) in closing the transactions contemplated by the Purchase Agreement at all times after the entry of this Sale Order.
K. The consideration provided by the Purchaser for the Acquired Assets pursuant to the Purchase Agreement (i) is fair and reasonable, (ii) is the highest and best offer for the Acquired Assets, (iii) will provide a greater recovery for the Debtors’ creditors than would be provided by any other practical available alternative, and (iv) constitutes reasonably equivalent value and fair consideration under the Bankruptcy Code and under the laws of the United States, any state, territory, possession, or the District of Columbia.
L. The transfer of the Acquired Assets to the Purchaser will be a legal, valid, and effective transfer of the Acquired Assets, and will vest the Purchaser with all right, title, and interest of the Debtors to the Acquired Assets free and clear of all Interests, including, but not limited to those (A) that purport to give to any party a right or option to effect any forfeiture, modification, right of first refusal, or
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termination of the Debtors’ or the Purchaser’s interest in the Acquired Assets, or any similar rights and (B) relating to taxes arising under or out of, in connection with, or in any way relating to the operation of the Business prior to the Closing Date.
M. The Purchaser would not have entered into the Purchase Agreement and would not consummate the transactions contemplated thereby, thus adversely affecting the Debtors, their estates, and their creditors, if the sale of the Acquired Assets to the Purchaser and the assignment of the Assumed Contracts and Assumed Liabilities to the Purchaser was not free and clear of all Interests of any kind or nature whatsoever, or if the Purchaser would, or in the future could, be liable for any of the Interests.
N. The Debtors may sell the Acquired Assets free and clear of all Interests of any kind or nature whatsoever because, in each case, one or more of the standards set forth in 11 U.S.C. § 363(f)(1)-(5) has been satisfied. Those (i) holders of Interests and (ii) non-debtor parties to Assumed Contracts who did not object, or who withdrew their objections, as the case may be, to the Sale or the Motion are deemed to have consented pursuant to 11 U.S.C. § 363(f)(2). Those (i) holders of Interests and (ii) non-debtor parties to Assumed Contracts who did object fall within one or more of the other subsections of 11 U.S.C. § 363(f) and are adequately protected by having their Interests, if any, attach to the cash proceeds of the Sale ultimately attributable to the property against or in which they claim an Interest.
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O. The (i) transfer of the Acquired Assets to the Purchaser and (ii) assumption and assignment to the Purchaser of the Assumed Contracts and Assumed Liabilities, will not subject the Purchaser to any liability or obligation whatsoever with respect to the operation of the business related to the Acquired Assets (the “Business”) prior to the Closing Date or as a direct or indirect result of such transfer under the laws of the United States, any state, territory, or possession thereof, or the District of Columbia, based, in whole or in part, directly or indirectly, on any theory of law or equity, including, without limitation, any theory of equitable law, including, without limitation, any theory of antitrust or successor or transferee liability, and including, without limitation, any statutory obligation or liability imposed upon a purchaser of assets outside the ordinary course of business.
P. The sale of the Acquired Assets to the Purchaser is a prerequisite to the Debtors’ ability to confirm and consummate a plan or plans of reorganization. The Sale is a sale in contemplation of a plan and, accordingly, subject to the resolution of the 1146(c) Stipulation (as defined herein), may be a transfer pursuant to 11 U.S.C. § 1146(c).
Q. The Debtors have demonstrated that it is an exercise of their sound business judgment to assume and assign the Assumed Contracts to the Purchaser in connection with the consummation of the Sale, and the assumption and assignment of the Assumed Contracts is in the best interests of the Debtors, their
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estates, and their creditors. The Assumed Contracts being assigned to, and the liabilities being assumed by, the Purchaser are an integral part of the Acquired Assets being purchased by the Purchaser and, accordingly, such assumption and assignment of Assumed Contracts and Liabilities are reasonable, enhance the value of the Debtors’ estates, and do not constitute unfair discrimination.
R. The Debtors have, (i) to the extent necessary, cured, or have provided adequate assurance of cure, of any default existing prior to the date hereof under any of the Assumed Contracts, within the meaning of 11 U.S.C. § 365(b)(1)(A), and (ii) to the extent necessary provided compensation or adequate assurance of compensation to any party for any actual pecuniary loss to such party resulting from a default prior to the date hereof under any of the Assumed Contracts, with the meaning of 11 U.S.C. § 365(b)(1)(B), and, to the extent necessary, the Purchaser has provided adequate assurance of their future performance of and under the Assumed Contracts, within the meaning of 11 U.S.C. § 365(b)(1)(C).
NOW THEREFORE, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED THAT:
General Provisions
1. The Motion is GRANTED, as further described herein.
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Approval of the Purchase Agreement
2. The Purchase Agreement, and all of the terms and conditions thereof, is hereby approved.
3. Pursuant to 11 U.S.C. § 363(b), the Debtors are authorized and directed to consummate the Sale, pursuant to and in accordance with the terms and conditions of the Purchase Agreement.
4. The Debtors are authorized and directed to execute and deliver, and empowered to perform under, consummate and implement, the Purchase Agreement, together with all additional instruments and documents that may be reasonably necessary or desirable to implement the Purchase Agreement, and to take all further actions as may be requested by the Purchaser for the purpose of assigning, transferring, granting, conveying and conferring to the Purchaser or reducing to possession, the Acquired Assets, or as may be necessary or appropriate to the performance of the obligations as contemplated by the Purchase Agreement.
Transfer of Acquired Assets
5. Pursuant to 11 U.S.C. § 105(a) and 363(f), the Acquired Assets shall be transferred to the Purchaser, and upon consummation of the Purchase Agreement (the “Closing”) shall be, free and clear of all Interests of any kind or nature whatsoever with all such Interests of any kind or nature whatsoever to attach to the net proceeds of the Sale in the order of their priority, with the same validity,
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force and effect which they now have as against the Acquired Assets, subject to any claims and defenses the Debtors may possess with respect thereto.
6. Any and all net proceeds as a result of the sale of Acquired Assets shall be utilized consistent with the provisions of the Financing (as defined in the Purchase Agreement) and with respect to other liens, if any, to the extent permitted by the Bankruptcy Code.
7. Except as expressly permitted or otherwise specifically provided by the Purchase Agreement or this Sale Order, all persons and entities, including, but not limited to, all debt security holders, governmental, tax, and regulatory authorities, lenders, trade and other creditors, holding Interests or other claims of any kind or nature whatsoever against or in the Debtors, the Acquired Assets, or the Purchaser by reason of such Purchaser’s acquisition of Debtors’ Assets outside the ordinary course of business (whether legal or equitable, secured or unsecured, matured or unmatured, contingent or non-contingent, senior or subordinated), arising under or out of, in connection with, or in any way relating to, the Debtors, the Acquired Assets, the operation of the Business prior to the Closing Date, or the transfer of the Acquired Assets to the Purchaser, hereby are forever barred, estopped, and permanently enjoined from asserting against the Purchaser, its successor or assign, its property, or the Acquired Assets, such persons’ or entities’ Interests or claims.
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8. The transfer of the Acquired Assets to the Purchaser pursuant to the Purchase Agreement constitutes a legal, valid, and effective transfer of the Acquired Assets, and shall vest the Purchaser with all right, title, and interest of the Debtors in and to the Acquired Assets free and clear of all Interests of any kind or nature whatsoever.
Assumption and Assignment to Purchaser of Assumed Contracts
9. Pursuant to 11 U.S.C. § 105(a) and 365, and subject to and conditioned upon the Closing of the Sale, the Debtors’ assumption and assignment to the Purchaser, and the Purchaser’s assumption on the terms set forth in the Purchase Agreement, of the Assumed Contracts is hereby approved, and the requirements of 11 U.S.C. § 365(b)(1) with respect thereto are hereby deemed satisfied.
10. The Debtors are hereby authorized and directed in accordance with 11 U.S.C. § 105(a) and 365 to (a) assume and assign to the Purchaser, effective upon the Closing of the Sale, the Assumed Contracts free and clear of all Interests of any kind or nature whatsoever and (b) execute and deliver to the Purchaser such documents or other instruments as may be necessary to assign and transfer the Assumed Contracts and Assumed Liabilities to the Purchaser.
11. The Assumed Contracts shall be transferred to, and remain in full force and effect for the benefit of, the Purchaser in accordance with their
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respective terms, notwithstanding any provision in the Assumed Contracts (including those of the type described in sections 365(b)(2) and (f) of the Bankruptcy Code) that prohibits, restricts, or conditions such assignment or transfer. Pursuant to 11 U.S.C. § 365(k), the Debtors shall be relieved from any further liability with respect to the Assumed Contracts after such assignment to and assumption by the Purchaser.
12. All defaults or other obligations of the Debtors under the Assumed Contracts arising or accruing prior to the date of this Sale Order (without giving effect to any acceleration clauses or any default provisions of the kind specified in section 365(b)(2) of the Bankruptcy Code), shall be cured by the Debtors at the Closing of the Sale or as soon thereafter as practicable and the Purchaser shall have no liability or obligation arising or accruing prior to the date of the Closing of the Sale, except as otherwise expressly provided in the Purchase Agreement.
13. Each non-Debtor party to an Assumed Contract hereby is forever barred, estopped, and permanently enjoined from asserting against the Debtors or the Purchaser, or the property of either of them, any default, liability or obligation (whether legal or equitable, secured or unsecured, matured or unmatured, contingent or non-contingent, senior or subordinate) existing as of the Closing Date.
Additional Provisions
14. The Lease Termination Agreement by and between Rehab Associates X, Inc. (the “Landlord”) and the Debtors, attached hereto as Exhibit2,
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terminating the Lease (as defined in the Lease Termination Agreement) and that certain Release dated as of August 14, 2003 by and between the Landlord and the Debtors, attached hereto as Exhibit3 are each hereby approved in all respects.
15. The consideration provided by the Purchaser for the Acquired Assets under the Purchase Agreement shall be deemed to constitute reasonably equivalent value and fair consideration under the Bankruptcy Code and under the laws of the United States, any state, territory, possession, or the District of Columbia.
16. The consideration provided by the Purchaser for the Acquired Assets under the Purchase Agreement is fair and reasonable and may not be avoided under section 363(n) of the Bankruptcy Code.
17. On the Closing Date of the Sale, each of the Debtors’ creditors is authorized and directed to execute such documents and take all other actions as may be necessary to release its Interests in the Acquired Assets, if any, as such Interests may have been recorded or may otherwise exist.
18. This Sale Order (a) shall be effective as a determination that, on the Closing Date, all Interests of any kind or nature whatsoever existing as to the Debtors or the Acquired Assets prior to the Closing have been unconditionally released, discharged and terminated, and that the conveyances described herein have been effected, and (b) shall be binding upon and shall govern the acts of all entities including without limitation, all filing agents, filing officers, title agents, title
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companies, recorders of mortgages, recorders of deeds, registrars of deeds, administrative agencies, governmental departments, secretaries of state, federal, state, and local officials, and all other persons and entities who may be required by operation of law, the duties of their office, or contract, to accept, file, register or otherwise record or release any documents or instruments, or who may be required to report or insure any title or state of title in or to any of the Acquired Assets.
19. Each and every federal, state, and local governmental agency or department is hereby directed to accept any and all documents and instruments necessary and appropriate to consummate the transactions contemplated by the Purchase Agreement.
20. All entities who are presently, or on the Closing Date may be, in possession of some or all of the Acquired Assets are hereby directed to surrender possession of the Acquired Assets to the Purchaser on the Closing Date.
21. The Purchaser shall have no liability or responsibility for any liability or other obligation of the Debtors arising under or related to the Acquired Assets, or resulting directly or indirectly from its acquisition of the Acquired Assets; other than those specifically assumed by the Purchaser in the Purchase Agreement. Without limiting the generality of the foregoing, and except as otherwise specifically provided herein and in the Purchase Agreement, the Purchaser shall not be liable for any claims against the Debtors or any of their predecessors or affiliates, and the
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Purchaser shall have no obligations or liabilities under any statute applicable to the sale of goods outside the ordinary course of business, and the Purchaser shall have no direct, indirect, successor or vicarious liabilities of any kind or character whether known or unknown as of the Closing Date, now existing or hereafter arising, whether fixed or contingent, with respect to the Debtors or any obligation of the Debtors arising prior to the Closing Date, including, but not limited to, liabilities or obligations on account of any taxes arising, accruing, or payable under, out of, in connection with, or in any way relating to the operation of the Business prior to the Closing Date, and including, but not limited to, statutory obligations otherwise imposed upon purchasers of goods outside the ordinary course of business.
22. Under no circumstances shall the Purchaser be deemed a successor of or to the Debtors for any Interest against or in the Debtors or the Acquired Assets of any kind or nature whatsoever. The sale, transfer, assignment and delivery of the Acquired Assets shall not be subject to any Interests, and Interests of any kind or nature whatsoever shall remain with, and continue to be obligations of, the Debtors. All persons holding Interests against or in the Debtors or the Acquired Assets of any kind or nature whatsoever shall be, and hereby are, forever barred, estopped, and permanently enjoined from asserting, prosecuting, or otherwise pursuing such Interests of any kind or nature whatsoever against the Purchaser, its property, its successors and assigns, or the Acquired Assets with respect to any
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Interest of any kind or nature whatsoever such person or entity had, has, or may have against or in the Debtors, their estates, officers, directors, shareholders, or the Acquired Assets. Following the Closing Date, no holder of an Interest in the Debtors shall interfere with the Purchaser’s title to or use and enjoyment of the Acquired Assets based on or related to such Interest, or any actions that the Debtors may take in their Chapter 11 cases.
23. This Court retains jurisdiction to enforce and implement the terms and provisions of the Purchase Agreement, all amendments thereto, any waivers and consents thereunder, and of each of the agreements executed in connection therewith in all respects, including, but not limited to, retaining jurisdiction to (a) compel delivery of the Acquired Assets to the Purchaser, (b) compel delivery of the purchase price or performance of other obligations owed to the Debtors, (c) resolve any disputes arising under or related to the Purchase Agreement, except as otherwise provided therein, (d) interpret, implement, and enforce the provisions of this Sale Order, and (e) protect the Purchaser against any Interests in the Debtors or the Acquired Assets or any liabilities or obligations described in paragraph O of this Court’s findings, of any kind or nature whatsoever, attaching to the proceeds of the Sale or otherwise imposed on the Purchaser as a direct or indirect result of such transfer.
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24. The transactions contemplated by the Purchase Agreement are undertaken by the Purchaser in good faith, as that term is used in section 363(m) of the Bankruptcy Code, and accordingly, the reversal or modification on appeal of the authorization provided herein to consummate the Sale shall not affect the validity of the Sale to the Purchaser, unless such authorization is duly stayed pending such appeal. The Purchaser is a purchaser in good faith of the Acquired Assets, and is entitled to all of the protections afforded by section 363(m) of the Bankruptcy Code.
25. The terms and provisions of the Purchase Agreement and this Sale Order shall be binding in all respects upon, and shall inure to the benefit of, the Debtors, their estates, and their creditors, the Purchaser, and its respective affiliates, successors and assigns, and any affected third parties including, but not limited to, all persons asserting Interests in the Acquired Assets to be sold to the Purchaser pursuant to the Purchase Agreement, notwithstanding any subsequent appointment of any trustee(s) under any chapter of the Bankruptcy Code, as to which trustee(s) such terms and provisions likewise shall be binding.
26. The failure specifically to include any particular provisions of the Purchase Agreement in this Sale Order shall not diminish or impair the effectiveness of such provision, it being the intent of the Court that the Purchase Agreement be authorized and approved in its entirety.
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27. The Purchase Agreement and any related agreements, documents or other instruments may be modified, amended or supplemented by the parties thereto, in a writing signed by both parties, and in accordance with the terms thereof, without further order of the Court, provided that any such modification, amendment or supplement does not have a material adverse effect on the Debtors’ estates.
28. The transfer of the Acquired Assets pursuant to the Sale may ultimately be exempt from taxation as provided in section 1146(c) of the Bankruptcy Code, provided that a plan is ultimately confirmed in these cases and subject to the ultimate resolution of that certain Stipulation and Agreed Order Between Eagle Food Centers, Inc. and States of Illinois and Iowa (the “1146(c) Stipulation”), entered by the Bankruptcy Court on August 21, 2003 [Docket no. 478].
29. As provided by Rules 6004(g) and 6006(d) of the Federal Rules of Bankruptcy Procedure, this Sale Order shall not be stayed for 10 days after the entry of the Sale Order and shall be effective immediately upon entry.
[EDITORS’ NOTE: EXHIBIT 1 IS ELECTRONICALLY NON-TRANSFERRABLE.]Page 1