Case No. 02-13533 (AJG) (Jointly Administered).United States Bankruptcy Court, S.D. New York.
June 17, 2003.
ORDER (A) ESTABLISHING PROCEDURES FOR DEBTORS’ PROPOSED AUCTION OF PENTAGON CITY AND RELATED PROPERTY, (B) APPROVING “BREAK-UP FEE” ARRANGEMENT WITH PROPOSED PURCHASER, (C) ESTABLISHING DATE AND TIME FOR SALE HEARING AND (D) APPROVING FORM AND MANNER OF NOTICES
ARTHUR J. GONZALEZ, United States Bankruptcy Judge
A hearing having been held on June 17, 2003 (the “Hearing”), to consider the motion, dated May 30, 2003 (the “Motion”), of WorldCom, Inc. and certain of its direct and indirect subsidiaries, as debtors and debtors in possession (collectively, “WorldCom” or the “Debtors”), for, among other things, the entry of an order pursuant to sections 105 and 363 of title 11 of the United States Code (the “Bankruptcy Code”), and Rule 6004 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), (a) scheduling a hearing to consider the proposed sale (the “Sale Hearing”) by the Debtors of certain real property known as “Pentagon City” and certain related personal property, including the assignment or assumption and assignment of certain contracts and leases in connection therewith (collectively, the “Assets”), free and clear of liens, claims, and encumbrances, pursuant to the Real Estate Purchase Contract, dated as of May 14, 2003, between MCI WORLDCOM Network Services, Inc. (“MCI”), as seller, and Jamestown TSA, L.P., as purchaser (“Purchaser”), a copy of which is annexed to the Motion as Exhibit “A” (the “Agreement”), subject to higher and better offers, (b) establishing procedures for the proposed auction by the Debtors of the Assets, including for the submission of competing offers to acquire the Assets, (c) approving the terms and conditions of the grant of a proposed “break-up fee” to Purchaser, and (d) approving the form and manner of notice of the auction procedures and the Sale Hearing pursuant to Bankruptcy Rule 2002, all as more fully set forth in the Motion; and the Court having jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. § 157 and 1334 and the Standing Order of Referral of Cases to Bankruptcy Court Judges of the District Court for the Southern District of New York, dated July 19, 1984 (Ward, Acting C.J.); and consideration of the Motion and the relief requested therein being a core proceeding pursuant to 28 U.S.C. § 157(b); and venue being proper before this Court pursuant to 28 U.S.C. § 1408 and 1409; and due and proper notice of the Motion having been provided in accordance with the Court’s case management order, dated December 23, 2002, and it appearing that no other or further notice need be provided; and the Court having reviewed the Motion and the papers in support thereof and the responses thereto, if any; and upon the Motion, the papers in support thereof and the responses thereto, if any, and the record of the Hearing; and the Court having found and determined that the legal and factual bases set forth in the Motion and at the Hearing establish just cause for the relief granted herein; and that the relief requested in the Motion is an exercise of the Debtors’ sound business judgment and is in the best interests of the Debtors and their estates and creditors; and upon all of the proceedings had before the Court and after due deliberation and sufficient cause appearing therefor, it is
ORDERED that the following procedures (the “Auction Procedures”) relating to the submission and consideration of competing offers for the Assets (each, an “Alternative Transaction”) are hereby established and approved and the Debtors are authorized to conduct an auction of the Assets (the “Auction”) in accordance therewith:
1. The Debtors shall provide (a) notice of the Sale Hearing and Auction Procedures, substantially in the form of Exhibit “D” to the Motion, together with a copy of the Agreement to all parties known to the Debtors as having expressed a bona fide interest in acquiring the Assets and (b) a copy of the Agreement to all other prospective offerors and parties in interest upon written request to the Debtors through their real estate consultant, Hilco Real Estate, LLC, at the address set forth in paragraph 2, below.
2. Any party wishing to conduct due diligence on the Assets shall, upon execution by such prospective offeror of a confidentiality agreement and access agreement, each in form and substance satisfactory to the Debtors, and delivery to the Debtors of such prospective offeror’s certified financial statements for the preceding two years (or other evidence establishing to the Debtors’ satisfaction such prospective offeror’s financial capability to timely consummate an Alternative Transaction) be granted access to Pentagon City, subject to the rights of the government, as lessee, and to all relevant business and financial information necessary to enable such party to evaluate the Assets for the purpose of submitting a competing offer for an Alternative Transaction. The Debtors shall make such access available during normal business hours as soon as reasonably practicable. Parties interested in conducting due diligence should contact Alan Lieberman at Hilco Real Estate, LLC, 5 Revere Drive, Suite 320, Northbrook, Illinois 60062, Telephone (847) 504-2453, Facsimile (847) 714-1289.
3. To be considered, each competing offer for an Alternative Transaction shall (a) be irrevocable through the date of the closing of the sale of the Assets, (b) be made by a party satisfying the conditions described in the preceding paragraph 2 (a “Competing Offeror”), (c) be submitted in writing and delivered to (i) WorldCom, Inc., Corporate Real Estate, 2400 North Glenville, Richardson, Texas 75082, Attn: Brian Trosper, (ii) Weil, Gotshal Manges LLP, 767 Fifth Avenue, New York, New York 10153, Attn: Elliot L. Hurwitz, Esq., Sharon Youdelman, Esq. and Scott E. Cohen, Esq., counsel to the Debtors, (iii) Hilco Real Estate, LLC, 5 Revere Drive, Suite 320, Northbrook, Illinois 60062, Attn: Alan Lieberman and (iv) Kelley Drye Warren LLP, 101 Park Avenue, New York, New York 10178, Attn: Mark I. Bane, Esq. and Mark R. Somerstein, Esq., counsel to the statutory committee of unsecured creditors (the “Committee”), so as to be received not later than 12:30 p.m. New York City time, on July 16, 2003 and (d) include the following:
(i) A statement of the Competing Offeror’s intent to bid at the Auction;
(ii) A written agreement executed by the Competing Offeror, together with a copy of such agreement marked to show the specific changes to the Agreement that the Competing Offeror requires;
(iii) A purchase price for the Assets that exceeds the Purchase Price, as defined in the Agreement, by at least $2,800,000;
(iv) (A) A good faith deposit in the amount of $7,000,000 in cash or in other form of immediately available U.S. funds (subject to an escrow agreement substantially in the form of the escrow agreement annexed as Exhibit “D” to the Agreement) (the “Initial Deposit”) and (B) a written commitment or other evidence acceptable to the Debtors of the Competing Offeror’s ability to provide, in the event such offer ultimately is determined by the Debtors to be the Final Auction Offer (as defined below), a further deposit in cash or other form of immediately available U.S. funds (subject to an escrow agreement on the same terms as the escrow agreement executed in connection with the delivery of the Initial Deposit) in the amount sufficient to bring the total amount of such Competing Offeror’s deposit up to the amount that is equal to 10% of the purchase price, exclusive of assumed liabilities as calculated by the Debtors, proposed by such Competing Offeror (the “Remaining Deposit,” and together with the Initial Deposit, the “Full Deposit”) within one business day after the Debtors have notified the Competing Offeror that its offer has been determined by the Debtors to be the Final Auction Offer;
(v) Evidence, acceptable to the Debtors, of the Competing Offeror’s (A) ability to consummate the transaction within ten (10) days after the entry of an order approving the sale and (B) future performance to counterparties under the contracts and leases proposed to be assigned, including such adequate assurance as may be required by section 365 of the Bankruptcy Code.
4. Competing offers shall be unconditional and not contingent upon any event, including, without limitation, any due diligence investigation, the receipt of financing or the receipt of any further approval, including, without limitation, from any board of directors, shareholders or otherwise. Any person submitting a competing offer hereby shall be deemed to have submitted to the jurisdiction of this Court.
5. With respect to the executed written agreement submitted by a Competing Offeror, the assignment of the TSA Lease (as defined in the Motion) is subject to the approval of the United States, through the Transportation Security Administration (the “TSA”). Competing Offerors[1] must submit, by July 9, 2003, the following information to (a) David Morrell, Chief Administrative Officer, Transportation Security Administration, 601 So. 12th Street, Arlington, VA 22202, (b) the Debtors through their real estate consultant, Hilco Real Estate, LLC, at the address set forth in paragraph 2, above, and (c) counsel to the Committee, Kelley Drye Warren LLP, at the address set forth in paragraph 2, above:
(i) Proposed novation agreement concerning the TSA Lease marked to show the specific changes to the form annexed as Exhibit “F” to the Agreement;
(ii) A document describing the proposed sale transaction;
(iii) A representation and certification of satisfactory past performance record;
(iv) A certified copy of the Competing Offeror’s boards of directors authorizing the transfer of assets;
(v) A certified copy of the Competing Offeror’s stockholder meeting necessary to approve the transfer of assets;
(vi) An authenticated copy of the Competing Offeror’s certificate and articles of incorporation, if a corporation was formed for the purpose of receiving the assets involved in performing the TSA Lease;
(vii) Balance sheets of the Competing Offeror as of the date immediately before the transfer of assets, as audited by independent accountants (as available at the time of submission);
(viii) Evidence that any security clearance requirements have been met, if applicable (to be submitted after closing of the sale);
(ix) The consent of sureties on the lease if bonds are required, or a statement that none are required;
(x) Identification, name, address, and citizenship of the executive officers of the Competing Offeror;
(xi) Identification, name, address and citizenship of the board of directors of the Competing Offeror;
(xii) Identification of any foreign ownership in the Competing Offeror or any parent company of it;
(xiii) Any other relevant information requested by the TSA;
(xiv) An authenticated copy of the instrument effecting the transfer of Assets (to be submitted after closing of the sale); and
(xv) The opinion of legal counsel for the parties stating that the transfer was properly effected under applicable law and the effective date of transfer (to be submitted after closing of the sale).
6. The Debtors may, in their discretion, communicate prior to the Sale Hearing with any Competing Offeror, in which event, such Competing Offeror shall provide to the Debtors, within one business day after the Debtors’ request therefor, any additional information reasonably required by the Debtors in connection with the Debtors’ evaluation of such Competing Offeror’s offer.
7. Prior to the Auction, the Debtors shall evaluate Purchaser’s offer, as embodied in the Agreement, and any competing offers they have received, and after consultation with the Committee, shall select the offer the Debtors determine to be the highest and best offer for the Assets (the “Initial Auction Offer”). In considering Purchaser’s Offer and competing offers, the Debtors shall consider, among other things, the value thereof to their estates, the changes to the Agreement required by the Competing Offeror, the Competing Offeror’s satisfaction of any governmental or regulatory requirements, and the Competing Offeror’s ability to finance, and timely consummate, its proposed Alternative Transaction.
8. The Auction shall be conducted by the Debtors or their representatives on invitation to Purchaser and all qualified Competing Offerors that have submitted competing offers in accordance with these procedures, and shall commence on July 23, 2003 at 10:00 a.m. New York City time at the offices of the Debtors’ counsel, Weil, Gotshal
Manges LLP, 767 Fifth Avenue, New York, New York 10153.
9. At the commencement of the Auction, the Debtors shall announce the Initial Auction Offer. All bids at the Auction shall be increased therefrom, and thereafter made, in increments of no less than Two Hundred Thousand Dollars ($200,000). The Purchaser may submit competing offer(s) (“Purchaser Subsequent Offer”) without waiving its right to the Break-Up Fee (as defined below) in the event an Alternative Transaction is consummated with a Successful Offeror (as defined below) other than Purchaser (or an affiliate of Purchaser). The Purchaser may not apply or credit any portion of the Break-Up Fee as a component of Purchaser Subsequent Offers.
10. Following the conclusion of the Auction, and after consultation with the Committee’s counsel and financial advisor, the Debtors shall select the offer that they determine to be the highest and best offer for the Assets (the “Final Auction Offer”) and shall inform the party having submitted the Final Auction Offer (the “Successful Offeror”) and file with the Court a notice of such selection. Within one business day after the Debtors so notify the Successful Offeror that its offer has been determined by the Debtors to be the Final Auction Offer, the Successful Offeror, whether or not such party is Purchaser, shall deliver the Remaining Deposit to the Debtors. At the Sale Hearing, the Court will consider the Final Auction Offer for approval.
11. Each Initial Deposit and Remaining Deposit shall be maintained in an interest-bearing account and be subject to the jurisdiction of this Court. The Full Deposit shall be applied by the Debtors against the purchase price to be paid by the Successful Offeror at the closing of the transaction approved by the Court. Promptly following such closing, each Initial Deposit submitted by a party other than a Successful Offeror, together with any interest paid thereon, shall be returned.
12. In the event the Successful Offeror fails to consummate said transaction due to its breach of the terms of its agreement with the Debtors, such Successful Offeror’s Full Deposit, together with any interest paid thereon, shall be forfeited to the Debtors and the Debtors may request authority to consummate a transaction with the Competing Offeror having submitted the next highest and best offer at the final price and terms bid by such Competing Offeror at the Auction (or, if such Competing Offeror fails to consummate such transaction, the Debtors may consummate a transaction with the next highest and best Competing Offeror, and so forth, such subsequent offeror(s) shall be deemed the “Successful Offeror” for purposes of this Order), subject to the delivery by any such Successful Offeror of the Remaining Deposit within one business day after notification by the Debtors.
13. No offer shall be deemed accepted unless and until it is approved by this Court;
and it is further
ORDERED that in the event the Court approves a Final Auction Offer constituting a higher and better offer for the Assets than the Agreement or Purchaser Subsequent Offers and the Debtors consummate such Alternative Transaction with a Successful Offeror other than Purchaser or an affiliate of Purchaser, the Purchaser shall be entitled to a “break-up fee” in the amount of $2,600,000 (the “Break-Up Fee”) payable to Purchaser in cash, by wire transfer of immediately available funds to an account designated in writing by Purchaser, on the business day following the date of consummation of the Alternative Transaction; providedhowever, that Purchaser shall not be entitled to any Break-Up Fee in the event Purchaser is a Successful Offeror and fails to consummate the transaction by reason of its breach of the terms of its agreement with the Debtors. Upon payment of the Break-Up Fee and return of the Purchaser’s Initial Deposit, the Debtors shall be fully released and discharged from any liability or obligation arising under or relating to the Agreement, and neither Purchaser nor any of its affiliates shall have any other remedy or cause of action under or in relation to the Agreement including, without limitation, the reimbursement of expenses incurred in connection with the Agreement and the transactions contemplated thereby. Immediately upon consummation of an Alternative Transaction with a Successful Offeror other than Purchaser or an affiliate of Purchaser, Purchaser shall be released from any and all obligations under the Agreement; and it is further
ORDERED that upon the return of the Initial Deposit submitted by each unsuccessful Competing Offeror following the closing of a transaction with the Successful Offeror, the Debtors shall be fully released and discharged from any liability or obligation arising under or relating to each Competing Offeror’s offer, and neither such Competing Offeror nor any of its affiliates shall have any other remedy or cause of action under or in relation to the sale of the Assets or any other relief requested in the Motion including, without limitation, the reimbursement of expenses incurred in connection with each Competing Offeror’s offer and the transactions contemplated thereby; and it is further
ORDERED that the Sale Hearing to consider the sale of the Assets, the Debtors’ selection of the highest and best offer therefor, and the remainder of the relief requested in the Motion shall be held on July 29, 2003 at 10:00 a.m. (New York City time); and it is further
ORDERED that objections, if any, to the sale of the Assets, the Debtors’ selection of the highest and best offer therefor, and the remainder of the relief requested in the Motion, including objections from counterparties to the contracts and leases proposed to be assigned, including with respect to amounts entitled to be treated as cure obligations under section 365 of the Bankruptcy Code, shall be set forth in writing and state with particularity the nature and extent of the objector’s interests in the Debtors and their estates and the grounds for such objections or other statements of position and shall be filed with the Bankruptcy Court and served upon (i) Weil, Gotshal Manges LLP, 767 Fifth Avenue, New York, New York 10153, Attention: Scott E. Cohen, Esq.; (ii) the Office of the United States Trustee for the Southern District of New York, 33 Whitehall Street, 21st floor, New York, New York 10004, Attention: Mary Elizabeth Tom, Esq.; (iii) Kelley Drye
Warren LLP, 101 Park Avenue, New York, New York 10178, Attn: Mark I. Bane, Esq., and Mark R. Somerstein, Esq.; (iv) Kirkpatrick Lockhart LLP, 1800 Massachusetts Avenue, Washington, DC 20036, Attention: Richard Thornburgh, Esq.; (v) Shearman Sterling, 599 Lexington Avenue, New York, New York 10022, Attn: Douglas Bartner, Esq. and Marc B. Hankin, Esq.; and (vii) Holland Knight LLP, 2099 Pennsylvania Avenue, NW, Suite 100, Washington, D.C. 20006, Attn: Scott Sterling, Esq. and Richard Lear, Esq., so as to be actually received by 4:00 p.m. (New York City time) on July 24, 2003; and it is further
ORDERED that the Debtors may extend the deadlines in the bidding procedures set forth above, adjourn the Auction either prior to the scheduled date and time therefor (in such event notice of such adjournment and rescheduling of the Auction, if any, shall be provided to all parties submitting qualified competing offers) or by announcement at the Auction, and/or adjourn the Sale Hearing by announcement in open Court (in such event the Debtors shall provide notice of the rescheduled Sale Hearing, if any, to all parties submitting qualified competing offers); and it is further
ORDERED that, as soon as practicable after entry of this Order, notice substantially in the form annexed as Exhibit “D” to the Motion shall be (i) provided to Purchaser, all potential interested parties identified by the Debtors, all parties included in the Service List maintained pursuant to the Case Management Order dated December 23, 2002, all taxing authorities having jurisdiction in respect of the Assets, all parties asserting liens against the Assets, all counterparties to the contracts proposed to be assigned or assumed and assigned to Purchaser, the lessee of the Pentagon City property and (ii) published in The Washington Post
and The Wall Street Journal (National Edition), and such notice shall constitute good and sufficient notice of this Order, the Auction Procedures, and the Sale Hearing, and it is further
ORDERED that this Order shall become effective immediately upon its entry; and it is further
ORDERED nothing herein shall prejudice any party’s right to object to the approval of the proposed sale of the Assets or any other relief sought by the Debtors at the Sale Hearing; and it is further
ORDERED that the Court shall retain jurisdiction over any matter or dispute arising from or relating to the implementation of this Order. This retention of jurisdiction shall not be deemed to extend to any dispute that does not involve the interpretation, construction, enforcement and/or effect of this Order or the Agreement.