Case No. 02-B02474, (Jointly Administered)United States Bankruptcy Court, N.D. Illinois, Eastern Division
August 29, 2002
ORDER APPROVING STANDING BIDDING PROCEDURES TO BE UTILIZED IN CONNECTION WITH ASSET SALES
SUSAN PIERSON SONDERBY, Chief United States Bankruptcy Judge
Upon the motion dated August 9, 2002 (the “Motion”), wherein Kmart Corporation (“Kmart”) and certain of its domestic subsidiaries and affiliates, debtors and debtors-in-possession in the above-captioned cases (collectively, the “Debtors”), moved this Court for entry of an order, pursuant to Sections 105 and 363 of Title 11 of the United States Code, 11 U.S.C. § 101, et seq., as amended (the “Bankruptcy Code”), authorizing the Debtors to implement standing bidding procedures (the “Bidding Procedures”) and bid protection (the “Bid Protection”) in connection with dispositions of various assets; it appearing to the Court that (i) it has jurisdiction over the matters raised in the Motion pursuant to 28 U.S.C. § 157 and 1334; (ii) this is a core proceeding pursuant to 28 U.S.C. § 157(b)(2); (iii) the relief requested in the Motion is in the best interests of the Debtors, their estates and their creditors; (iv) proper and adequate notice of the Motion and the hearing thereon has been given and that no other or further notice is necessary; and (v) upon the record herein after due deliberation thereon; the Court should grant the relief as set forth herein,
IT IS HEREBY ORDERED, ADJUDGED AND DECREED THAT:
1. The form of the Bidding Procedures and Bid Protection described in Exhibit I attached hereto are approved.
2. The Debtors hereby are authorized to utilize the Bidding Procedures and Bid Protection in connection with sales of any assets of the Debtors as determined by them in their discretion.
3. Nothing in this Order alters or modifies the Debtors obligation to file a motion pursuant to Section 365 of the Bankruptcy Code to assume and/or assign any lease.
4. The Debtors shall be authorized to implement non-material changes to the Bidding Procedures in the context of specific transactions, as circumstances warrant and in the best interests of’ the estates; provided, however, that the Court shall determine whether any changes to the Bidding Procedures are material or non-material.
EXHIBIT I Bidding Procedures
Set forth below are the bidding procedures (the “Bidding Procedures”) to be employed with respect to the prospective sale(s) (the “Sale(s)”) of the following item(s) of real or personal property of Kmart Corporation and its Affiliated Debtors (collectively, the “Seller”): [INSERT DESCRIPTION OF PROPERTY] (collectively, the “Assets”).
The Seller will seek entry of an order, among other things, authorizing and approving the Sale(s) to the Qualified Bidder(s) (as hereinafter defined) as the Seller, in the exercise of its business judgment after consultation with its financial advisors and the committees officially formed in these cases (the “Committees), may determine to have made the highest or otherwise best offer to purchase the respective Asset(s) (the “Successful Bidder(s)”).
The Bidding Process
The Seller shall (i) determine whether any person is a Qualified Bidder, (ii) coordinate the efforts of Qualified Bidders in conducting their respective due diligence investigations regarding the Assets, (iii) receive offers from Qualified Bidders, and (iv) negotiate any offer made to purchase the Assets (collectively, the “Bidding Process”). Any person who wishes to participate in the Bidding Process must be a Qualified Bidder. Neither the Seller nor its representatives shall be obligated to furnish any information of any kind whatsoever related to an Asset to any person who is not a Qualified Bidder. The Seller shall have the right to adopt such other rules for the Bidding Process which, in its sole judgment, will better promote the goals of the Bidding Process and which are not inconsistent with any of the other provisions hereof or of any Bankruptcy Court order.
Reservation of Rights
The Seller has been, and will continue to, negotiate and entertain offers for Assets, including package offers that encompass more than one Asset. The Seller reserves the right to enter into agreements for the sale of the Assets, individually or as part of a package, without further notice to any party which agreements, if any, shall be subject to higher or otherwise better bids at an applicable Auction, if any. The Seller may offer in such agreements termination fees or other forms of bid protection as authorized by the Bankruptcy Court and described herein. The Seller shall retain all rights to the Assets that are not subject to a bid accepted by the Seller and approved by the Bankruptcy Court at the Sale Hearing.
Participation Requirements
Unless otherwise ordered by the Bankruptcy Court for cause shown, to participate in the Bidding Process, each person (a “Potential Bidder”) must deliver (unless previously delivered) to the Seller:
(a) An executed confidentiality agreement in form and substance satisfactory to the Seller;
(b) Current audited financial statements or other financial information of the Potential Bidder, or, if the Potential Bidder is an entity formed for the purpose of acquiring the Assets, current audited financial statements or other financial information of the equity holder(s) of the Potential Bidder, or such other form of financial disclosure acceptable to the Seller and its advisors, demonstrating such Potential Bidder’s ability to close the proposed transaction; and
(c) A preliminary (non-binding) proposal regarding (i) the Asset(s) sought to be acquired. (ii) purchase price rang; (iii) the structure mid financing of the transaction (including the amount of equity to be committed and sources of financing), (iv) any additional conditions to closing that it may wish to impose, and (v) the nature and extent of additional due diligence it may wish to conduct.
A Qualified Bidder is a Potential Bidder that delivers the documents described in subparagraphs (a), (b) and (c) above, whose financial information demonstrates the financial capability of the Potential Bidder to consummate the Sale, and that the Seller determines it is reasonably likely (based on the availability of financing, experience and other considerations) to submit a bona fide offer and to be able to consummate the Sale if selected as the Successful Bidder.
Within two business days after a Potential Bidder delivers all of the materials required by subparagraphs (a), (b) and (e) above, the Seller shall determine, and shall notify the Potential Bidder in writing, whether the Potential Bidder is a Qualified Bidder. At the same time that the Seller notifies the Potential Bidder that it is a Qualified Bidder, the Seller may allow the Qualified Bidder to conduct due diligence with respect to the Asset(s) sought to be acquired as hereinafter provided.
Due Diligence
The Seller may afford each Qualified Bidder due diligence access to the Asset(s) sought to be acquired. The Seller will designate an employee or other representative to coordinate all reasonable requests the additional information and due diligence access from such bidders. The Seller shall not be obligated to furnish any due diligence information after the Bid Deadline (as defined herein). Neither the Seller nor any of its affiliates (or any of their respective representatives) are obligated to furnish any information relating to the Assets to any person except to a Qualified Bidder who makes an acceptable preliminary proposal. Bidders are advised to exercise their own discretion before relying on any information regarding the Assets provided by anyone other than the Seller or its representatives.
Bid Deadline
A Qualified Bidder that desires to make a bid shall deliver a written copy of its bid to _______________ on or before _________. The Seller may extend such deadline in its sole discretion (such deadline, including such extension, the “Bid Deadline”). The Debtors shall distribute a copy of the bid to (i) general counsel and local counsel for the Debtors’ pre-petition lenders and post-petition lenders, and (ii) counsel for the Committees. In addition to the above-referenced extension, the Seller may extend the Bid Deadline once or successively, but it is not obligated to do so.
Bid Requirements
All bids must include the following documents (the “Required Bid Documents”):
A letter stating that the bidder’s offer is irrevocable until the earlier of (x) 2 business days after the Asset(s) upon which the bidder is bidding have been disposed of pursuant to these Bidding Procedures, and (y) 30 days after the Sale Hearing.
An executed copy of an Asset Purchase Agreement acceptable in form to the Debtors (the “Asset Purchase Agreement”).
A good faith deposit (the “Good Faith Deposit”) in the form of a certified check (or other form acceptable to the Seller in its sole discretion) payable to the order of the Seller (or such other party as the Seller may determine to hold such funds in escrow) in an amount equal to at least 10% of the value of such bid.
Written evidence of a commitment for financing or other evidence of ability to consummate the proposed transaction satisfactory to the Seller in its sole discretion.
The Seller will consider a bid only if the bid is on terms that are not conditioned on obtaining financing or on the outcome of unperformed due diligence by the bidder. A bid received from a Qualified Bidder that includes all of the Required Bid Documents and meets all of the above requirements is a “Qualified Bid.”
Bid Protection
The Seller may offer, in its sole discretion, a termination fee of up to 2% of the value of the Qualified Bid to induce a Potential Bidder to make the first Qualified Bid; provided however, that (i) if the first such Qualified Bid is submitted by an insider of the Seller, no termination fee shall be offered and (ii) in no event shall more than one termination fee be offered as to each Asset or pool of Assets. The Seller may also offer, in its sole discretion, reasonable and documented expense reimbursement of up to $50,000 to induce a Potential Bidder to make the first Qualified Bid. Such termination fee and expense reimbursement shall only be payable if a higher or otherwise better offer from another bidder results in a closed sale and the party to whom such Bid Protections was provided was not in default of any of its obligations and was otherwise ready, willing and able to close on its proposed transaction.
“As Is, Where Is”
The sale of the Assets shall be on an “as is, where is” basis and without representations or warranties of any kind, nature, or description by the Seller, its agents or its estate except to the extent set forth in the Asset Purchase Agreement(s) of the Successful Bidder(s) as accepted by Seller. Except as otherwise provided in such Agreements, all of the Seller’s right, title and interest in and to the Assets shall be sold free and clear of all pledges, liens, security interests, encumbrances, claims, charges. options and interests thereon and there against (collectively, the “Interests”) in accordance with Section 363 of the Bankruptcy Code, with such Interests to attach to the net proceeds of the sale(s) of the Assets.
Each bidder shall be deemed to acknowledge and represent it has had an opportunity to inspect and examine the Assets and to conduct any and all due diligence regarding the Assets prior to making its offer; that it has relied solely upon its own independent review, investigation and/or inspection of any documents and/or assets in making its bid; and that it did not rely upon any written or oral statements, representations, promises, warranties or guaranties whatsoever, whether express, implied, by operation of law or otherwise, regarding the Assets, or the completeness of any information provided in connection therewith or the Auction, except as expressly stated in these Bidding Procedures or, as to the Successful Bidders, the Asset Purchase Agreement(s).
Auction
After all Qualified Bids have been received, the Seller may conduct an auction (the “Auction”) as to which a Qualified Bid has been received. Auctions shall take place at __________________ on ____________, commencing at ________ a.m. Only a Qualified Bidder who has submitted a Qualified Bid will be eligible to participate at the Auction. At Auctions, Qualified Bidders will be permitted to increase their bids, Based upon the terms of the Qualified Bids received, the level of interest expressed as to a particular Asset and such other information as the Seller determines is relevant, the Seller, in its sole discretion, may conduct an Auction in the manner it determines will result in the highest or otherwise best offer for the Assets including, but not limited to, (i) offering the Assets for bidding as an entire package, in groups of less than all of the Assets, and/or individually, (ii) offering the Assets for bidding in such successive rounds as the Seller determines to be appropriate, and (iii) setting opening bid amounts in each round of bidding as the Seller determines to be appropriate.
Upon conclusion of an Auction or, if the Seller determines not to hold an Auction, then promptly following the Bid Deadline, the Seller, in consultation with its financial advisors and representatives of the Committees, shall (i) review each Qualified Bid on the basis of financial and contractual terms and the factors relevant to the sale process, including those factors affecting the speed and certainty of consummating the Sale and (ii) identify the highest and otherwise best otter (the Successful Bid”). At the Sale Hearing, the Seller shall present to the Bankruptcy Court for approval the Successful Bid(s). The Seller may adopt rules for the bidding process that are not inconsistent with any of the provisions of the Bankruptcy Code, any Bankruptcy Court Order, or these Bidding Procedures.
Acceptance of Qualified Bids
The Seller presently intends to sell the Assets to the highest or otherwise best Qualified Bidder. The Seller’s presentation to the Bankruptcy Court for approval of a particular Qualified Bid does not constitute the Sellers’ acceptance of the bid. The Seller will be deemed to have accepted a bid only when the bid has been approved by the Bankruptcy Court at the Sale Hearing.
Sale Rearing
The Sale Hearings shall take place at the Everett McKinley Dirksen Courthouse, 219 South Dearborn Street, Chicago, Illinois 60604, Courtroom 1725 on _______ Sale Hearings may be adjourned or rescheduled without notice by an announcement of the adjourned date at a Sale Hearing. At such Sale Hearings, the Seller shall present to the Bankruptcy Court for approval of the Successful Bid(s).
Following a Sale Hearing approving the sale of one or more Assets to a Successful Bidder(s), if such Successful Bidder(s) fails to consummate an approved sale because of a breach or failure to perform on the part of such Successful Bidder(s), the next highest or otherwise best Qualified Bid, as disclosed at the Sale Hearing, shall be deemed to be the Successful Bid and the Seller shall be authorized to effectuate such sale without further order of the Bankruptcy Court.
Return of Good Faith Deposit
Good Faith Deposits of all Qualified Bidders shall be held in escrow until the earlier of (x) 3 business days after all Assets upon which the bidder is bidding have been disposed of pursuant to these Ridding Procedures or (y) 31 days after the Sale Hearing.
Modifications
The Seller may (a) determine, in its business judgment after consultation with representatives of the Committees, which Qualified Bid, if any, is the highest or otherwise best otter; and (b) reject at any time before the entry of an order of the Bankruptcy Court approving a Qualified Bid, any bid that, in the Seller’s sole discretion, is (i) inadequate or insufficient, (ii) not in conformity with conditions of sale, or (iii) contrary to the best interests of the Seller, its estate and its creditors. At or before the Sale Hearing, the Debtors may impose such other terms and conditions as they may determine to be in the best interest of the Seller’s estate, their creditors and other parties in interest.