Case No. 02-43582-H4-11, JOINTLY ADMINISTEREDUnited States Bankruptcy Court, S.D. Texas, Houston Division.
December 5, 2002
Alfredo R. Perez, Lydia T. Protopapas, Shayne H. Newell, WEIL, GOTSHAL, MAGES, ATTORNEYS FOR THE DEBTORS AND THE DEBTORS IN POSSESSION.
ORDER (A) APPROVING BID AND SALE PROCEDURES AND (B) SETTING DATE, TIME AND PLACE FOR SALE HEARING [This instrument pertains to Docket #225/226]
WILLIAM GREENDYKE, United States Bankruptcy Judge
Upon consideration of the motion (the “Motion”) of Encompass Services Corporation and its direct and indirect subsidiaries (collectively, the “Debtors”) for an order pursuant to section 363 of the Bankruptcy Code (a) approving bid and sale procedures and (b) setting date, time, and place for a sale hearing; and any objections to the Motion having been overruled, and it appearing that the Debtors have sound business justifications for requesting the sale of certain of their assets; and the Court being satisfied that the relief requested in the Motion is in the best interests of the Debtors and their estates; and it appearing that due notice of this Motion has been given and that no other or further notice be given and sufficient cause appearing therefor, it is
ORDERED that the Motion is granted; and it is further
ORDERED that the Auction, if any, for the sale of assets pursuant to the sale procedures contained herein shall be held in December, 2002 at a time to be determined by Debtor at the offices of Weil, Gotshal
Manges LLP, 700 Louisiana, Suite 1600, Houston, Texas 77002 or such other location as may be designated by the Debtors; and it is further
ORDERED that a hearing on the approval of the sale of any assets to be sold (the “Sale Hearing”) pursuant to the Proposed Sale Process[1] and pursuant to sections 363(b) and (f) and 365 of the Bankruptcy Code shall be held before the Honorable William R. Greendyke, Courtroom 403, 515 Rusk Avenue, Houston, Texas 77002 on December 30, 2002 at 11:00 a.m. Central Standard Time, or as soon thereafter as counsel can be heard; and it is further
ORDERED that the following competitive bidding procedures and process for the sale of assets is hereby approved and shall be employed by the Debtors and any patty interested in submitting a bid for the purchase of the Debtors’ assets:
a. Preliminary Requirements. Each party requesting information relating to the assets is required to (i) demonstrate to the Debtors that such party has identifiable and proven funding sources and the proven ability to complete and close the proposed sale transaction on or before December 31, 2002, and (ii) execute a confidentiality agreement in form and substance satisfactory to the Debtors. Upon fulfillment of the requirements set forth in the preceding sentence to the Debtors’ satisfaction (as determined in their sole discretion), the Debtors shall take such actions as are reasonably necessary to afford such parties reasonable access to requested information regarding the assets on a reasonably prompt basis in a manner that provides all such parties a fair opportunity to evaluate information and to prepare an initial bid by the Bid Deadline (as defined herein)
b. Submission of Bids. Each bid submitted must be (i) in writing, (ii) made upon the terms and conditions set forth in the Proposed Contract Form, marked to show those amendments or modifications proposed by the bidder, (iii) executed by an individual authorized to bind the prospective purchaser to its terms, and (iv) served so as to be received no later than 5:00 p.m. Central Standard Time on December 2002 (the “Bid Deadline”) upon (a) Encompass Services Corporation, 3 Oreenway Plaza, Suite 2000, Houston, Texas 77046, Attn: Gray H. Muzzy; (b) Weil, Gotshal Manges LLP, 700 Louisiana, Suite 1600, Houston, Texas 77002, Attn: Alfredo R. Perez and Shayne H. Newell; (c) Winstead Sechrest Minick P.C., 5400 Renaissance Tower, 1201 Elm Street, Dallas, Texas 75270, Attn: R. Michael Farquhar; (d) Andrews Kurth LLP, 600 Travis Street, Suite 4200, Houston, Texas 77002, Attn: Mr. Hugh Ray By making a bid, a bidder shall be deemed to have agreed to keep its offer open until the earlier of (x) five (5) business days after the assets upon which the bidder is bidding have been disposed of pursuant to these bidding procedures, and (y) January 31, 2003.
c. Qualification of Bidders. The Debtors will determine, through discussions with prospective bidders, their qualifications to bid upon the Debtors’ assets, and shall identify prior to or during the auction, those bidders that have been qualified (the “Qualified Bidders”) to bid for the Debtors’ assets. Such determinations shall be made by the Debtors in their reasonable discretion, based upon information provided by each bidder, and such other information as is available to the Debtors, as to the prospective bidder’s (i) identity and description, (ii) proposed terms of purchase, (iii) identified and proven funding sources, and (iv) proven ability to complete and close the proposed transaction on or before December 31, 2002.
d. Deadline for Initial Bids. Initial bids shall be received by the Debtors and their professionals no later than December 2002 at 5:00 p.m. Central Standard Time, at which time the Debtors shall review such bids and determine in their discretion whether one of the received bids shall be designated as the initially accepted bid (the “Initial Accepted Bid”). All bids must be submitted in writing upon the terms and conditions set forth in the Proposed Contract Form, marked to show those amendments or modifications proposed by the bidder.
e. Selection of Initial Accepted Bid. In the event that the Debtors select one of the initial bids for the purchase of the Debtors’ assets as the Initial Accepted Bid, that selection shall be identified to all Qualified Bidders, the Debtors’ postpetition lenders, the Committee, and the U.S. Trustee, and the bidder of the Initial Accepted Bid shall immediately tender to the Debtors the non-refundable cash deposit specified in the accepted bid.
f. Potential Break-Up Fee. The Debtors shall have the right, but not the obligation, to award the bidder of the Initial Accepted Bid a break-up fee (the “Break-Up Fee”) in the event that the Initial Accepted Bid is not ultimately accepted and approved because of the acceptance and completion of an overbid. For transactions where the cash portion of the proposed purchase price is less than or equal to $20 million, the Debtors are authorized to award a Break-Up Fee of up to three percent (3%) of the cash portion of the proposed purchase price. For transactions where the cash portion of the proposed purchase price is greater than $20 million, the Debtors shall be authorized to award a Break-Up Fee of up to two percent (2%) of the cash portion of the proposed purchase price, unless a higher Break-Up Fee is agreed to by the Committee.
g. Auction. The Debtors shall conduct the Auction with respect to the proposed sale of their assets, as follows: The Debtors will present the Initial Accepted Bid, if any, subject to the opportunity of all Qualified Bidders to make overbids, and the Debtors will then entertain any overbids made by Qualified Bidders. The first such overbid must include a purchase price that is rounded up to the nearest $100,000 and exceeds the Initial Accepted Bid by an amount that is no less than the sum of any awarded Break-Up Fee plus the amount of one percent (1%) of the cash portion of the proposed purchase price[2] and any subsequent overbid must include a purchase price that exceeds the immediately preceding accepted overbid by an amount that is rounded up to the nearest $100,000 and is no less than one percent (1%) of the cash portion of the proposed purchase price. All bids and overbids shall conform to the terms of the Debtors’ Proposed Contract Form, except to the extent of modifications approved by the Debtors. In the event that the Debtors do not designate an Initial Accepted Bid prior to the Auction, then all prospective bidders may make simultaneous initial bids at the Auction and the Debtors shall select one of those bids as the Initial Accepted Bid, provided that only bidders that are Qualified Bidders, or are qualified by the Debtors at the time of the Auction, may present bids or overbids at any time during the Auction. At the conclusion of the Auction, the Debtors shall identify a successful bid or combination of bids for the purchase of assets of the Debtors (the “Successful Bids”), based upon the foregoing auction process and the Debtors’ determination of the highest or otherwise best such bids. Z
h. Sale Hearing. At the Sale Hearing, the Debtors ill present to the Successful Bids to the Court for approval pursuant to sections 363(b) and (f) abd 365 the Bankruptcy Code. The Debtors will request that the Court approve the Successful Bids, which shall be the Initial Accepted Bid, in the event that no qualified overbid has been accepted by the Debtors, or the highest or otherwise best qualified overbid, in the event that the Debtors have accepted such overbid, pursuant to the provisions of sections 363(b) and (t) of the Bankruptcy Code. The Debtors shall be deemed to have accepted a bid only when the Court has approved such bid at the Sale Hearing.
i. Best and Highest Bid. At all times during the Proposed Sale Process, the Debtors shall retain full discretion and right to determine, in their sole discretion and in consultation with their postpetition lenders and the Committee, which bids and proposals, or which combinations of proposals, constitute the highest or otherwise best offers for the purchase of the Debtors’ assets, and which such bids therefore constitute the Initial Accepted Bid, if any, or an acceptable overbid, or the Successful Bids, if any, all subject to final approval by the Court pursuant to the provisions of section 363(b) of the Bankruptcy Code. Without limiting the generality of the foregoing, the Debtors may, at any time before entry of an order of the Court approving a qualified bid, reject any bid that, in the Debtors’ sole discretion and in consultation with their postpetition lenders and the Committee, the Debtors determine is (x) inadequate or insufficient, (y) contrary to the requirements of the Bankruptcy Code, the Proposed Sale Process, or essential elements of the Proposed Contract Form, or (z) contrary to the best interests of the Debtors, their estates, or their creditors.
j. Sale Implementation. Following approval of the Successful Bids at the Sale Hearing, the Debtors shall take all reasonable and necessary steps to complete and implement the asset sales contemplated by those Successful Bids, including, without limitation, requests for approval of assumptions and assignments of executory contract and unexpired leases, and determination of cure amounts for those contracts, that are the subject of such sale. In the event of a failure of consummation of a sale of the Debtors’ assets because of a breach or failure on the part of the successful bidder whose purchase is approved by the Court, the Debtors may select, in their sole discretion and in consultation with their postpetition lenders and the Committee, the next highest or otherwise best bid from a Qualified Bidder, and accept and effectuate that bid without further order of the Court; and it is further
ORDERED that, with respect to a sale or sales of the assets as presented by the Debtors at the Sale Hearing in accordance with the sale process described herein, the Court makes the following determinations with respect to such sales, provided that such sales are conducted in accordance with the terms of the sale process set forth in this Order:
a. that such sales have been agreed upon, and will be made and completed, in good faith, for purposes of the provisions of section 363(m) of the Bankruptcy Code;
b. that such sales shall be made, and the assets sold shall be delivered to the successful bidder, free and clear of all liens, claims, encumbrances and interests (other than specified assumed liabilities); and
c. that such sales as approved in accordance with the Proposed Sale Process are exempt from all sales and transfer taxes otherwise imposed by applicable law, pursuant to the provisions of section 1146(c) of the Bankruptcy Code; and it is further
ORDERED that the Debtors shall give same-day notice by e-mail to any parties to contracts proposed to be assumed and assigned to a Buyer, which parties have requested such notice (the “Contract Parties”), of the identity of the bidder of the Initial Accepted Bid and the bidder chosen at the Auction as having the highest and best bid (the “Highest Auction Bidder”). Such notice shall include the amount of the cure the Debtors propose to pay to such Contract Party, if any, and give basic financial facts describing the Highest Auction Bidder’s financial capability to give adequate assurance of future performance. The Debtors will make a showing at the Sale Hearing concerning cure and adequate assurance of future performance through a competent witness from the Buyer, who will be made available for cross-examination by the Contract Parties and other parties in interest; and it is further
ORDERED that all rights to object to any proposed sale and its terms are preserved and nothing in this Order shall pre-judge or decide any issue that can be raised at the Sale Hearing, other than the reasonableness of the procedures approved by this Order; and it is further
ORDERED that service of a copy of a notice in substantially the form annexed hereto as Exhibit A by United States Postal Service, first-class delivery, as soon as reasonably practiable upon the parties listed on the Debtors’ Master Service List and all parties who have made written expressions of interest in acquiring the Debtors’ assets within two (2) months prior thereto, and shall be deemed good and sufficient notice of this Order, the Auction, the Sale Hearing, and all proceedings to be held therein.
EXHIBIT A
TO CREDITORS AND OTHER PARTIES IN INTEREST:
NOTICE IS HEREBY GIVEN as follows:
1. On December 2, 2002, Encompass Services Corporation and certain of its direct and indirect subsidiaries, as debtors in possession (collectively, the “Debtors”), filed with the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) their Expedited Motion for Order (A) Approving Bid and Sale Procedures and (B) Setting Date, Time and Place for Sale Hearing (the “Motion”), requesting (a) approval of the Proposed Sale Process (as described in detail in the Motion) and authorizing its implementation, including the holding of an Auction and awarding of a Break-Up Fee as an administrative expense claim and the identification of Initial Accepted Bids, if any, and Successful Bids, (b) that a final hearing on the Motion be scheduled for December 30, 2002, at which time the Debtors shall request approval of a sale or sales of the Debtors’ assets as presented by the Debtors in accordance with the Proposed Sale Process.
2. Pursuant to an order of the Bankruptcy Court, dated December, 2002 (the “Sale Process Order”), a hearing (the “Sale Hearing”) to consider any and all Successful Bids and to approve the sale or sales of Assets conducted in accordance with the Proposed Sale Process as approved by the Court (the “Approved Sale Process”) will be held on December 30, 2002 at 11:00 a.m. Central Standard Time, or as soon thereafter as counsel may be heard, before the Honorable William R. Greendyke, United States Bankruptcy Judge, at the United States Bankruptcy Court for the Southern District of Texas, 515 Rusk Avenue, Courtroom 403, Houston, Texas 77002. The Sale Hearing may be adjourned from time to time without further notice other than an adjournment in open court of the adjourned date or dates at the Sale Hearing or an adjourned hearing.
3. The Sale Process Order provides, among other things, that each bid submitted must be (i) in writing, (ii) made upon the terms and conditions set forth in the Proposed Contract Form, marked to show those amendments or modifications proposed by the bidder, (iii) executed by an individual authorized to bind the prospective purchaser to its terms, and (iv) served so as to be received no later than 5:00 p.m. Central Standard Time on December ., 2002 (the “Bid Deadline”) upon (a) Encompass Services Corporation, 3 Greenway Plaza, Suite 2000, Houston, Texas 77046, Attn: Gray H. Muzzy; (b) Weil, Gotshal Manges LLP, 700 Louisiana, Suite 1600, Houston, Texas 77002, Attn: Alfredo R. Perez and Shayne H. Newell; (c) Winstead Sechrest Minick P.C., 5400 Renaissance Tower, 1201 Elm Street, Dallas, Texas 75270, Attn: R. Michael Farquhar; (d) Andrews Kurth LLP, 600 Travis Street, Suite 4200, Houston, Texas 77002, Attn: Hugh Ray. By making a bid, a bidder shall be deemed to have agreed to keep its offer open until the earlier of (x) five (5) business days after the assets upon which the bidder is bidding have been disposed of pursuant to these bidding procedures, and (y) January 31, 2003. Interested parties should refer to the Sale Process Order for additional terms.
4. At the Sale Hearing, the Debtors shall present a sale or sales of the Assets in accordance with the Approved Sale Process, and provided that such sales are conducted in accordance with the terms of the Approved Sale Process, the Court has made the following determinations with respect to such sales:
a. that such sales have been agreed upon, and will be made and completed, in good faith, for purposes of the provisions of section 363(m) of the Bankruptcy Code;
b. that such sales shall be made, and the assets sold shall be delivered to the successful bidder, free and clear of all liens, claims, encumbrances and interests (other than specified assumed liabilities); and
c. that such sales as approved in accordance with the Proposed Sale Process are exempt from all sales and transfer taxes otherwise imposed by applicable law, pursuant to the provisions of section 1146(c) of the Bankruptcy Code.
5. A copy of the Proposed Contract Form to be used in connection with the sale or sales of the Debtors’ Assets is attached as Exhibit A to the Motion. Copies of the Motion and the Sale Process Order may be reviewed during regular Bankruptcy Court ours at the Office of the Clerk of the Bankruptcy Court, 515 Rusk Avenue, Houston, Texas 77002, and may also be obtained upon written request to counsel for the Debtors, Weil, Gotshal Manges LLP, 700 Louisiana, Suite 1600, Houston, Texas 77002, Attn: Shayne H. Newell.