Case No. 05-12339 (MFW) Jointly Administered, Related to Docket No. 53.United States Bankruptcy Court, D. Delaware.
September 8, 2005
ORDER PURSUANT TO 11 U.S.C. §§ 363 AND 503 AND FED. R. BANKR. P. 6004 AUTHORIZING AND APPROVING (A) BIDDING PROCEDURES AND (B) BREAK-UP FEE AND EXPENSE REIMBURSEMENT AS ADMINISTRATIVE EXPENSES
MARY WALRATH, Bankruptcy Judge
Upon the Debtors’ motion, dated August 22, 2005 (the “Motion”), for entry of an order (the “Order”) under sections 363 and 503 of the Bankruptcy Code and Rule 6004 of the Bankruptcy Rules (a) approving the competitive bidding procedures proposed herein (the “Bidding Procedures”) and (b) approving for the Purchaser (as defined below) a break-up fee (the “Break-Up Fee”) and expense reimbursement (the “Expense Reimbursement”), as provided for in the Asset Purchase Agreement (the “Asset Purchase
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Agreement”)[1] dated as of May 10, 2005, by and among Russell-Stanley Holdings, Inc., Russell-Stanley Corp., Russell-Stanley, Inc., RSLPCO, Inc., Russell-Stanley, L.P., and Hunter Drums Limited (“Hunter Drums,” and collectively, the “Sellers”) and RSH Acquisition Corp. (the “Purchaser”); and the Court having reviewed the Motion and having determined that the relief requested in the Motion is in the best interest of the Debtors, their estates, creditors, and other parties-in-interest; and it appearing that the proper and adequate notice of the Motion has been given and that no other or further notice is necessary; and upon the record herein; and after due deliberation thereon; and good cause appearing therefor, it is hereby
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FOUND AND DETERMINED THAT:[2]
A. The court has jurisdiction over the 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). Venue is proper under 28 U.S.C. §§ 1408 and 1409.
B. Good and sufficient cause has been established for (a) approving the Bidding Procedures, (b) authorizing the Debtors to pay the Break-Up Fee and Expense Reimbursement upon the terms and conditions set forth in the Asset Purchase Agreement, and (c) determining that the Break-Up Fee and Expense Reimbursement constitute administrative expenses of the Debtors’ estates.
C. The Bidding Procedures are fair, reasonable, and appropriate and are designed to maximize the realizable value of the Purchased Assets for the benefit of the Debtors’ estates, creditors, and other parties-in-interest.
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D. The Debtors have demonstrated a compelling and sound business justification for authorizing the payment of the Break-Up Fee and Expense Reimbursement under the circumstances, timing, and procedures set forth in the Motion.
E. The Debtors’ payment of the Break-Up Fee and Expense Reimbursement, under the conditions set forth in the Motion and in this Order, is (a) an actual and necessary cost of administering the Debtors’ estates within the meaning of section 503(b) of the Bankruptcy Code, (b) of substantial benefit to the Debtors’ estates, their creditors, and all parties-in-interest, (c) reasonable and appropriate, and (d) necessary to ensure that the Purchaser will continue to pursue the Asset Purchase Agreement.
F. The entry of this Order is in the best interests of the Debtors, their estates, creditors, and other parties-in-interest.
NOW THEREFORE, IT IS HEREBY ORDERED, ADJUDGED, AND DECREEDTHAT:
1. The Motion is GRANTED as modified herein.
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2. Notice Of Bidding Procedures. The Debtors shall provide this Order within three (3) days of entry of the Order by overnight courier to (a) known parties that indicated an interest in purchasing substantially all of the assets of the Debtors, (b) counsel to the Agent, (c) the indenture trustee for the Senior Subordinated Notes, and (d) any party-in-interest who, pursuant to Rule 2002 of the Bankruptcy Rules, requested copies of all pleadings in these Chapter 11 cases.
3. Additionally, the notice served and published in accordance with the Court’s order scheduling the hearing to consider confirmation of the Reorganization Plan shall inform interested parties of how to obtain a copy of the Order and the Asset Purchase Agreement.
4. Bid Deadline. All Qualified Bids (as defined below) must be submitted to the Debtors c/o Russell-Stanley Holdings, Inc., 685 Route 202/206, Bridgewater, New Jersey 08807 (Att’n: Elizabeth G. Miller), with copies to Skadden, Arps, Slate, Meagher Flom LLP, Four Times Square, New York, New York 10036 (Att’n: Kayalyn A. Marafioti, Esq. and Frederick D.
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Morris, Esq.), so as to be received not later than 4:00 p.m.(prevailing Eastern Time) on September 28, 2005 (the “Bid Deadline”). As soon as practicable following receipt of a Qualified Bid, the Debtors shall distribute, via courier, a copy of each Qualified Bid to RSH Acquisition Corp., c/o Proskauer Rose LLP, 1585 Broadway, New York, New York 10036 (Att’n: Steven L. Kirshenbaum, Esq. and Jeffrey W. Levitan, Esq.). Additionally, following receipt of a Qualified Bid, the Debtors shall distribute, via overnight courier, a copy of each Qualified Bid to (a) Stikeman Elliott LLP, 6300 Commerce Court West, 199 Bay Street, Toronto, Ontario, Canada M5L 1B9 (Att’n: Simon Romano, Esq.); (b) Hunter Drums, 1121 Pioneer Road, Burlington, Ontario, Canada M5L 1B9 (Att’n: Scott Needham); (c) Fraser Milner Casgrain LLP, 1 First Canadian Place, Toronto, Ontario, Canada M5X 1B2 (Att’n: Joseph Marin, Esq.); (d) Bingham McCutchen, 150 Federal Street, Boston, Massachusetts 02110 (Att’n: Amy Kyle, Esq.); (e) The Bank of New York, as indenture trustee for the Senior Subordinated Notes, 5 Penn Plaza, 13th Floor, New York, New York 10001 (Att’n: Robert Massimillo); and (f) the Office of the United States Trustee, 844 King
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Street, Suite 2313, Lockbox 35, Wilmington, Delaware 19801 (Att’n: Joseph McMahon, Esq.).
5. Qualified Bidders. A qualified bidder shall consist of one or more Persons whom the board of directors of Russell-Stanley Holdings determines, in the good faith exercise of its fiduciary duties and after consultation with its advisers, is financially able to consummate the purchase, either jointly or separately, of the Purchased Assets (a “Qualified Bidder”). Each bidder shall provide documentation establishing that it has sufficient cash on hand, or a financial commitment from an established financial institution or other credit worthy party, to support such prospective purchaser’s ability to meet its commitments pursuant to its bid. If there is any dispute between the Debtors and the Purchaser as to the status of a bidder as a Qualified Bidder, such dispute shall be resolved by the Court.
6. Qualified Bids. A bid shall consist of a letter stating that a Qualified Bidder offers to purchase the Purchased Assets and shall attach the terms and conditions set forth in the bid in a copy of the Asset Purchase Agreement, together with all exhibits and schedules
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thereto, marked to show those proposed amendments and modifications, including but not limited to the purchase price and time of Closing. For purposes of determining the existence of a bid, a bid may be in the form of a joint bid from more than one Person. Additionally, bids shall satisfy each of the following requirements (such bids, “Qualified Bids”):
(a) each bid shall have a cash component of at least an amount equal to the Break-Up Fee;
(b) each bid shall have a value of $1 million greater than the consideration set forth in the Asset Purchase Agreement (including all cash, non-cash consideration and assumed liabilities) plus an amount equal to the Break-Up Fee, which is $2,410,000. Any additional incremental bid shall be an amount $250,000 greater than the prior bid. Each bid shall be accompanied by a commitment to proceed to a Closing on contractual terms at least as favorable to the Sellers as those set forth in the Asset Purchase Agreement;
(c) each bid shall be accompanied by a cash deposit equal to five percent (5%) of the purchase price reflected in such bid;[3]
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(d) each bid shall be accompanied by documentation establishing that the bidder has sufficient cash on hand or a financial commitment from an established institution or other credit-worthy party to support the bidder’s ability to meet its commitment pursuant to its bid;
(e) each bid shall include a commitment to consummate the purchase of the Purchased Assets (including obtaining the receipt of any required governmental or regulatory approvals) within not more than fifteen (15) days after both the Court and the Canadian court have approved the sale; and
(f) each bid shall be irrevocable until the Closing of the purchase of the Purchased Assets.
7. If the Debtors do not receive any Qualified Bids (other than the Asset Purchase Agreement), the Debtors shall report the same to the Court and shall proceed with the confirmation of the Reorganization Plan and consummation of the Asset Purchase Agreement. For purposes of any Auction (as defined below), the Purchaser shall be deemed a Qualified Bidder, and the Asset Purchase Agreement shall be deemed a Qualified Bid.
8. Auction. If the Debtors receive at least one Qualified Bid from a Person other than the Purchaser, then the Debtors shall conduct an auction of the Purchased
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Assets (the “Auction”) at the offices of Skadden, Arps, Slate, Meagher Flom LLP, Four Times Square, New York, New York 10036, on the date that is two (2) business days prior to the hearing scheduled to consider confirmation of the Reorganization Plan (the “Confirmation Hearing”), beginning at 10:00 a.m. (prevailing Eastern Time) or such later date, time, or other place as the Debtors shall notify all Qualified Bidders who have submitted Qualified Bids.
9. Auction Procedures. As soon as reasonably practicable after the Bid Deadline, but in any case prior to the Auction, the Debtors shall identify and give the Purchaser and all Qualified Bidders a copy of the highest or otherwise best Qualified Bid received to date and copies of all other Qualified Bids. In addition, the Debtors shall inform the Purchaser and each Qualified Bidder of the identity of all Qualified Bidders that may participate in the Auction. Only the Sellers (including the Debtors and their counsel), Pricewaterhouse Coopers Inc. in its capacity as Information Officer appointed in Hunter Drums’ Canadian ancillary proceeding, the Purchaser, the administrative agent for the Credit Agreement,
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and any Qualified Bidders (and their representatives) who have timely submitted Qualified Bids shall be entitled to attend the Auction.
10. The Purchaser and Qualified Bidders shall be entitled to make subsequent Qualified Bids at the Auction. At the Auction, bidding shall begin initially with the highest or otherwise best Qualified Bid. Bidding at the Auction shall be in increments of $250,000 and shall continue until such time as the highest or otherwise best Qualified Bid is determined. Immediately upon selection of the highest or otherwise best Qualified Bid, such Qualified Bidder, if different from Purchaser, shall pay (by means of a certified bank check from a U.S. bank or by wire transfer) an additional deposit equal to (a) one hundred percent (100%) of the Break-Up Fee minus (b) the amount of such Qualified Bidder’s initial deposit to be held until the earlier of the Closing Date or the termination of the Qualified Bid. Debtors may announce at the Auction such additional procedural rules as are reasonable under the circumstances (e.g., the amount of time allotted to make subsequent overbids) for conducting
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the Auction so long as such rules are not inconsistent with the Order.
11. The Debtors may determine, in their business judgment, which Qualified Bid is the highest or otherwise best offer (subject to any parties’ rights that they may have to challenge such determination in the Court). Additionally, the Debtors may, at any time before entry of an order of the Court approving a Qualified Bid, reject any bid that the Debtors in their sole discretion believe to be (a) inadequate or insufficient, (b) not in conformity with the requirements of the Bankruptcy Code or the Bidding Procedures, or (c) contrary to the best interests of the Debtors, their estates, or their creditors.
12. Overbidding. Should overbidding take place, the Purchaser shall have the right, but not the obligation, to participate in the overbidding and to be approved as the successful overbidder at the Confirmation Hearing based upon any such overbid;provided, however, that if the Purchaser exercises its right to participate in the overbidding, the Purchaser shall receive a credit
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against its overbid in an amount equal to the Break-Up Fee.
13. Court Approval. Following the Auction, the Debtors shall seek the approval of the Court of the highest or otherwise best bid submitted for the Purchased Assets (the “Successful Bid,” and such bidder, the “Successful Bidder”), which may occur as part of the hearing on confirmation of the Reorganization Plan. Hunter Drums shall seek approval of the Successful Bid from the Canadian Court.
14. Break-Up Fee And Expense Reimbursement. The Debtors are hereby authorized and directed to pay to Purchaser the Break-Up Fee as provided for in the Asset Purchase Agreement, subject to the following modifications: (A) for purposes of determining the circumstances under which the Break-Up Fee is payable as an administrative expense, the definition of Alternative Transaction set forth in section 5.11(d) of the Asset Purchase Agreement is hereby further limited to any such transaction that results in the realization of equal or better value to the Debtors’ estates than the transaction contemplated by the Reorganization Plan; and (B) for purposes of
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determining the circumstances under which the Break-Up Fee is payable as an administrative expense, a termination of the Asset Purchase Agreement under sections 7.1(e)(iii) or 7.1(e)(iv) for dismissal or conversion of any of the Chapter 11 cases to a case under Chapter 7 of the Bankruptcy Code or for the appointment of a trustee that rejects the Asset Purchase Agreement, shall not result in an obligation of the Debtors to pay the Break-Up Fee. Notwithstanding the foregoing, a Break-Up Fee shall also be earned by the Purchaser in the event that the Debtors consummate a sale of substantially all of their assets with a Successful Bidder at the Auction other than the Purchaser. The Debtors are hereby authorized and directed to pay to Purchaser the Expense Reimbursement under the circumstances provided for in the Asset Purchase Agreement; provided, however, that the amount of the Expense Reimbursement payable by the Debtors shall be limited to the lesser of (i) $750,000 and (ii) the actual and reasonable documented expenses of the Purchaser filed with the Court. For purposes of payment of the Break-Up Fee and Expense Reimbursement, in the
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event of any inconsistency between this Order and the Asset Purchase Agreement, this Order shall govern.
15. The Court shall retain jurisdiction over any matter or dispute arising from or relating to the implementation of this Order.
16. The terms of this Order shall survive any termination of the Asset Purchase Agreement.
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