Exhibit 99.2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- ------------------------------------- x
- -- )
In re ) Chapter 11
)
)
UNITEL VIDEO, INC., et al., ) Case No. 99-2979 (PJW)
-- -- )
)
Debtors. ) Jointly Administered
)
- ------------------------------------- x
- --
ORDER PURSUANT TO SECTIONS 105 AND 363 OF THE
BANKRUPTCY CODE: (A) AUTHORIZING AND APPROVING ASSET
PURCHASE AGREEMENT WITH NEP SUPERSHOOTERS, INC.;
(B) AUTHORIZING THE SALE OF CERTAIN OF THE DEBTORS' MOBILE
DIVISION ASSETS, FREE AND CLEAR OF ALL LIENS, CLAIMS, INTERESTS
AND ENCUMBRANCES, SUBJECT TO THE TERMS OF ASSET PURCHASE
AGREEMENT; AND (C) AUTHORIZING THE DEBTORS TO
CONSUMMATE ALL TRANSACTIONS RELATED TO THE ABOVE
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This matter is before the Court on the motion (the "Motion") dated
March 22, 2000 of Unitel Video, Inc. ("Unitel"), R Squared, Inc., Unitel 53 LLC
and Unitel 57 LLC, debtors and debtors in possession herein (collectively, the
"Debtors"), for the entry of, INTER ALIA, this order (the "Approval Order"): (i)
authorizing and approving that certain asset purchase agreement between Unitel
and NEP Supershooters, Inc. (the "Buyer"), substantially in the form of Exhibit
"A" to the Motion (the "Purchase Agreement"), (ii) authorizing the sale of the
Debtors' assets identified in the Purchase Agreement including, but not limited
to, Unitel's owned equipment and tangible personal property set forth on Exhibit
1.1.1 of the Purchase Agreement (collectively, as described and defined in the
Purchase Agreement, the "Property"), to the Buyer, free and clear of all liens,
claims, interests, and
encumbrances, subject to the terms of the Purchase Agreement and subject to
higher or better offers; (iii) authorizing the Debtors to consummate all
transactions related to the above; (iv) authorizing the conditional turnover of
the sale proceeds to Heller Financial, Inc. ("Heller"); and (v) authorizing
relief consistent with the foregoing in connection with any asset purchase
agreement between the Debtors and any other party submitting a higher or better
offer for the Property in accordance with the bidding procedures set forth below
(collectively, the "Relief Requested"); and the Court having on April 3, 2000
entered its Order, INTER ALIA, (i) Scheduling a Hearing to Approve Asset
Purchase Agreement with National Mobile Television, Inc. For the Sale of Certain
of the Debtors' Mobile Division Assets, Free and Clear of All Liens, Claims and
Encumbrances, Subject to Higher or Better Offers, (ii) approving the Form and
Manner of Notice in Connection Therewith, and (iii) Approving Bidding Procedures
for the Submission of Any Competing Bids (the "Procedure Order"); [and the
debtors having received no competing bid for the Property other than that of the
Buyer]; and the Court having considered the Motion and the record in these
proceedings, and having heard the statements of counsel in support of the relief
requested in the Motion at a hearing before the Court (the "Sale Hearing"); and
the Court having found that notice of the Motion was sufficient under the
circumstances; and the Court having been fully advised and having determined
that the legal and factual bases set forth in the Motion and at the Sale Hearing
establish just cause for the relief granted in this Approval Order;
THE COURT MAKES THE FOLLOWING FINDINGS OF FACT AND CONCLUSIONS OF LAW:
JURISDICTION
------------
a. The Court has jurisdiction over this matter under 28 U.S.C. ss.ss. 157
and 1334. This proceeding is a core proceeding under 28 U.S.C. ss.
157(b)(2). Venue is proper in this district under 28 U.S.C. ss.ss. 1408
and 1409.
NOTICE
------
b. The Debtors have complied with all of the procedures for notice of the
Motion and Sale Hearing set forth in the Procedure Order. Such notice
constitutes appropriate and adequate notice to all parties and is in
compliance with Rules 2002, 6004, 6006 and 9014 of the Federal Rules of
Bankruptcy Procedure (the "Bankruptcy Rules"). No other or further
notice of the Motion, the Sale Hearing or the entry of this Approval
Order is necessary.
OBJECTIONS; OTHER BIDDERS
-------------------------
c. In response to the Motion and the notice of the Motion, the Debtors
have received objections to the proposed sale of certain of the
Property to the Buyer under and pursuant to the Purchase Agreement from
the following parties: [list]. No other objection to the proposed sale
has been filed with this Court.
d. [In response to the Motion, the notice of the Motion and the Procedure
Order, the Debtors have received no offers to purchase the Property
other than the Buyer's offer. Accordingly, the Buyer's bid was and
remains the highest and best bid for the Property.]
JUSTIFICATION FOR SALE
----------------------
e. The Debtors have established sound business justification in support of
the proposed sale. Such business justifications include, but are not
limited to, the facts that (i) there is a grave risk of deterioration
of the value of the Property if the sale is not consummated quickly,
(ii) the Purchase Agreement constitutes the highest and best bid
received for the Property, and (iii) the Purchase Agreement and a
Closing1 thereunder present the best opportunity to realize the maximum
present value of the Property and avoid the further decline and
devaluation of such assets. After considering the circumstances
described in the Motion, the Court has determined that the procedures
outlined in the Procedure Order and the Buyer's offer present the best
opportunity for the Debtors to realize the highest recovery possible
for the Property for the benefit of all creditors. The sale process
conducted by the Debtors' Court-approved investment bankers, Houlihan
Lokey Howard & Zukin Capital ("Houlihan Lokey") was non-collusive, fair
and reasonable, and conducted in good faith.
f. The transactions contemplated by the Motion, as approved and
implemented by this Approval Order, are in compliance with and satisfy
all applicable provisions of title 11 of the United States Code (the
"Bankruptcy Code"), including, without limitation, sections 363(b), (f)
and (m) and section 365. The terms and conditions of the sale of the
Property and the other transactions approved by this Approval Order are
fair and reasonable.
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1 All capitalized terms used herein unless otherwise defined herein shall
have the meanings ascribed to such terms in the Purchase Agreement.
g. The Buyer's offer, as approved by this Approval Order, is the highest
and best offer for the Property. The aggregate purchase price offered
by the Buyer constitutes full and adequate consideration and reasonably
equivalent value of the Property.
h. The transfer of the Property on the Closing to the Buyer for the
consideration set forth in the Purchase Agreement is in the best
interests of the Debtors' estates, their creditors and all parties in
interest.
GOOD FAITH
----------
i. The sale process conducted pursuant to the Procedure Order was
non-collusive, fair and reasonable, and was conducted openly and in
good faith. The transfer of the Property to the Buyer represents an
arm's-length transaction and has been negotiated in good faith between
the parties. The Buyer, as transferee of the Property, is a good faith
purchaser under section 363(m) and, as such, is entitled to the full
protection of section 363(m) of the Bankruptcy Code.
SALE FREE AND CLEAR OF LIENS, CLAIMS AND ENCUMBRANCES
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j. The Debtors are authorized to sell the Property free and clear of all
Liens (as defined in Paragraph "(4)" hereinafter) under section 363(f)
of the Bankruptcy Code.
CORPORATE AUTHORITY; CONSENTS AND APPROVALS
-------------------------------------------
k. The Debtors have full corporate power and authority to execute the
Purchase Agreement, any related agreements and all other documents
contemplated by the
Purchase Agreement or such other related agreements, and the sale of
the Property by the Debtors has been duly and validly authorized by all
necessary corporate power and authority necessary to consummate the
transactions contemplated by the Purchase Agreement. No consents or
approvals, other than this Approval Order and those expressly provided
for in the Purchase Agreement, are required for the Debtors to
consummate such transactions.
BASED UPON THE FOREGOING, IT IS HEREBY ORDERED that
(a) The Motion is approved.
(b) The Purchase Agreement, substantially in the form of
that annexed hereto as Exhibit "A" hereof, and the
terms and conditions contained in the Purchase
Agreement are approved. The Debtors are authorized
and directed at the Closing to execute, deliver,
implement and fully perform the Purchase Agreement,
together with all additional instruments, agreements
and documents which are contemplated by the Purchase
Agreement and those instruments, agreements and
documents which may be reasonably necessary,
convenient or desirable in implementing the Purchase
Agreement, and to take all further actions (including
any prorations, adjustments and the like provided for
in the Purchase Agreement) as may be necessary or
appropriate in performing the obligations as
contemplated by
the Purchase Agreement. All objections to the Motion
that were not withdrawn or settled on the record are
overruled.
(c) Subject to the fulfillment of the terms and
conditions of the Purchase Agreement, at the Closing,
Unitel is authorized to sell, transfer, assign and
convey to the Buyer all of Unitel's rights, title and
interest in and to the Property and the Bookings, and
Buyer shall assume all known obligations in
connection with the Bookings. Unitel is authorized
and empowered at the Closing to deliver bills of
sale, assignments and other such documentation
contemplated by the Purchase Agreement and this
Approval Order.
(d) The transfer of the Property to the Buyer as of the
Closing will be free an clear of any and all liens,
claims, interests, charges, and encumbrances therein,
thereon and/or there against of whatever kind,
nature, or description, including, without
limitation, any lien, security interest, pledge,
hypothecation, encumbrance or other charge, interest
or claim (including, but not limited to, any "claim"
as defined in section 101(5) of the Bankruptcy Code)
in, against or with respect to any of the Property,
having arisen, existed or accrued prior to and
through the Closing, whether direct or indirect,
absolute or contingent, choate or inchoate, fixed or
contingent, matured or unmatured,
liquidated or unliquidated, arising by agreement,
statute or otherwise and whether arising prior to, on
or after the Filing Date (as defined in the Motion),
including, without limitation, liens and claims in
favor of Heller and MELF (as defined in the Motion).
All of the foregoing interests described in this
Paragraph "(4)" are collectively referred to herein
as "Liens."
(e) This Approval Order is and will be effective as a
determination that, upon the Closing, all Liens in,
on or upon the Property are adjudged and declared to
be unconditionally released, discharged and
terminated, with all such Liens to attach to the cash
proceeds of the sale of the Property (the
"Proceeds"), with the same force, validity, effect,
priority and enforceability, INTER SE, as such Liens
had in the Property prior to such sale. Except as
otherwise provided in this Approval Order, any issues
regarding the extent, validity, perfection, priority
and enforceability of such Liens with respect to such
proceeds will be determined by the Court, if, as and
when appropriate, upon proper application at a later
date, including pursuant to a proposed plan of
reorganization.
(f) The Debtors are authorized and directed to transfer
the Proceeds to Heller on the Closing subject to the
Liens, PROVIDED that (i) Heller's existing rights
under the Pre-Petition
Loan Agreement and the DIP Facility (each as defined
in the Motion) shall not be expanded as a result of
Heller's possession of the Proceeds and (ii) the
rights and interests of the Debtors and the holders
of the Liens in the Property shall not be effected or
otherwise impaired as a result of Heller's possession
of the Proceeds. Heller is directed to maintain the
Proceeds in a segregated interest-bearing account,
subject to the Liens and the rights of the Debtors or
any third-party lienholders. Subject to the existing
rights of Heller under the DIP Facility and the Pre-
Petition Loan Agreement, to the extent required by
subsequent order of the Court, including an order
confirming a plan of reorganization in these cases,
Heller shall disgorge an amount up to the sum of the
Proceeds to the Debtors to be used by the Debtors to
be used by the Debtors in accordance with such order,
including, INTER ALIA, for ultimate distribution to
the holders of the Liens.
(g) Upon receipt by Heller of the Proceeds, the Debtors'
total indebtedness to Heller under the DIP Facility
and the Pre- Petition Loan Agreement shall be reduced
in an amount equal to the sum of the Proceeds (the
"Total Reduced Indebtedness"), and Heller and the
Debtors shall execute the Release Agreement,
substantially in the form annexed to this
Approval Order as Exhibit "B" hereof, reflecting the
Total Reduced Indebtedness. To the extent that Heller
is required to disgorge any amounts in accordance
with Paragraph "(6)" of this Approval Order, the
Total Reduced Indebtedness shall be reduced by the
amount of any such disgorgement dollar-for-dollar.
(h) Notwithstanding anything to the contrary contained
herein, this Approval Order shall not, in any way,
effect, impair or restrict (i) the liens, claims,
encumbrances and interests in, against or with
respect to, any of the Property granted to Heller
upon the Closing pursuant to a separate agreement
between Heller and the Buyer and (ii) the liens,
claims, encumbrances and interests of any entity
(including the Debtors) in, against, or with respect
to, any of the Debtors' assets other than the
Property.
(i) Except as expressly set forth in this Approval Order
or the Purchase Agreement, the Buyer will not be
deemed to have assumed any "claims" (as that terms is
defined in section 101(5) of the Bankruptcy Code)
against the Debtors. Under no circumstances will the
Buyer be deemed a successor of or to the Debtors for
any liability of the Debtors (whether direct or
indirect, liquidated or unliquidated, choate or
inchoate or contingent or fixed) whatsoever.
(j) All of Unitel's rights, title and/or interests in the
Property and the Bookings are, as of the Closing,
transferred to and vested in the Buyer. Subject to
the fulfillment of the terms and conditions of the
Purchase Agreement, as of the Closing, this Approval
Order will be considered and constitute for any and
all purposes a full and complete general assignment,
conveyance and transfer of the Property and the
Bookings or a bill of sale transferring good and
marketable title in the Property to the Buyer. Any
and all governmental recording offices and all other
parties, persons or entities are directed to accept
this Approval Order as such an assignment or bill of
sale and, if necessary, this Approval Order will be
accepted for recordation on or after the Closing as
conclusive evidence of the free and clear,
unencumbered transfer of title to the Property
conveyed to the Buyer at the Closing.
(k) The transfer of the Property to the Buyer under this
Approval Order is exempt from any transfer or stamp
tax under section 1146(c) of the Bankruptcy Code.
(l) If any of the Property is in the care or custody of
any non- debtor party, such party following the
Closing will immediately upon request surrender any
such Property in its care or custody to the Buyer.
(m) Upon the Closing, the Buyer is granted immediate and
unfettered access to the Property conveyed in the
Closing. The Debtors and their officers, agents and
employees who have access to and control over any of
the Property will cease exercising control over the
Property upon the Closing, and such parties are
enjoined after the Closing from exercising any
control and/or interfering with the Buyer's use,
peaceful enjoyment and control of the Property
without the Buyer's consent.
(n) On the Closing Date, each of the Debtors' creditors
having Liens on any of the Property is authorized and
directed to execute such documents and take all
actions as may be necessary to release its Liens, if
any, in, on or against the Property, if any, as such
Liens may have been recorded or may otherwise exist.
(o) If any person or entity that has filed financing
statements or other documents or agreements
evidencing Liens in, on or against the Property has
not delivered to the Debtors prior to the Closing, in
proper form for filing and executed by the
appropriate parties, termination statements,
instruments of satisfaction, releases of all liens or
other interests that such person or entity has with
respect to the Property, the Debtors
are authorized to execute and file such statements,
instruments, releases and other documents on behalf
of such person or entity with respect to the
Property.
(p) The allocation of the Purchase Price in the Purchase
Agreement will not be biding upon the Debtors'
creditors and other parties in interest and will not
have any precedential value with respect to any
allocations of the value contained in a plan of
reorganization or liquidation involving the Debtors,
their estates and their creditors.
(q) This Court has exclusive jurisdiction to implement
and enforce the terms and provisions of the Purchase
Agreement and this Approval Order, including any
disputes relating thereto or with respect to the
sale, the proceeds of sale, the transfer or
assignment and delivery of the Property to the Buyer
and the Buyer's peaceful use and enjoyment thereof
after the Closing, free and clear of any Liens,
regardless of whether a plan of reorganization has
been confirmed in this case and irrespective of the
provisions of any such plan or order confirming such
plan; and the Court retains jurisdiction over the
parties to the Purchase Agreement with respect to any
controversies which may arise thereunder.
(r) The terms and provisions of this Approval Order are
binding in all respects upon the Debtors, their
employees, officers and directors, their creditors,
their shareholders, any parties having received
notice of these proceedings, any affected third
parties and other parties-in-interest, any persons
asserting a Lien in, on or against the Property, the
Buyer and all of the aforementioned parties'
successors or assigns, including, without limitation,
any trustee subsequently appointed for the Debtors
under the Bankruptcy Code.
(s) The failure specifically to include any particular
provisions in the Purchase Agreement or the
agreements contemplated thereby in this Approval
Order will not diminish the effectiveness of such
provision, it being the intent of this Court that the
Purchase Agreement and agreements contemplated
thereby are authorized and approved in their
entirety.
(t) This is a final order and enforceable upon its entry.
To the extent necessary under Rules 5003, 9014, 9021
and 9022 of the Bankruptcy Rules, the Court expressly
finds that there is no just reason for delay in the
implementation of this Approval Order and expressly
directs entry of judgment as set forth in this
Approval Order.
(u) Under section 363(m) of the Bankruptcy Code, the
reversal or modification of this Approval Order on
appeal will not affect the validity of the transfer
of the Property to the Buyer, as well as the
transactions contemplated or authorized by this
Approval Order, unless the same is stayed pending
appeal prior to the Closing of the transactions
authorized by the Approval Order.
Dated: Wilmington, Delaware
May 8, 2000
/s/ Peter J. Walsh
------------------------------------------
The Honorable Peter J. Walsh
Chief United States Bankruptcy Judge
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re ) Chapter 11
)
UNITEL VIDEO, INC., et al., ) Case No. 99-2979 (PJW)
-- -- )
)
Debtors. ) Jointly Administered
MOTION OF DEBTORS FOR ORDER PURSUANT TO SECTIONS 105 AND 363
OF THE BANKRUPTCY CODE: (A) AUTHORIZING AND
APPROVING ASSET PURCHASE AGREEMENT WITH NEP
SUPERSHOOTERS, INC.; (B) AUTHORIZING THE SALE OF CERTAIN
OF THE DEBTORS' MOBILE DIVISION ASSETS, FREE AND CLEAR
OF ALL LIENS, CLAIMS, INTERESTS AND ENCUMBRANCES,
SUBJECT TO THE TERMS OF ASSET PURCHASE AGREEMENT
AND SUBJECT TO HIGHER OR BETTER OFFERS; (C) AUTHORIZING
THE DEBTORS TO CONSUMMATE ALL TRANSACTIONS
RELATED TO THE ABOVE; AND (D) GRANTING OTHER RELIEF
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TO: THE HONORABLE PETER J. WALSH
CHIEF UNITED STATES BANKRUPTCY JUDGE
Unitel Video, Inc. ("Unitel"), R Squared, Inc. ("R Squared"), Unitel 53
LLC and Unitel 57 LLC, debtors and debtors in possession herein (collectively,
the "Debtors"), by this motion (the "Motion"), respectfully represent as
follows:
JURISDICTION AND VENUE
----------------------
1. This Court has jurisdiction of this Motion pursuant to 28 U.S.C.
Sections 157 and 1334. Venue of the Debtors' chapter 11 cases and this Motion
in this district is proper pursuant to 28 U.S.C. Sections 1408 and 1409. This
is a "core" proceeding pursuant to 28 U.S.C. Section 157(b)(2). The
statutory predicates for the relief sought herein are sections 105 and 363 of
title 11 of the United States Code (the "Bankruptcy Code").
FACTS
-----
A. INTRODUCTION
------------
2. On September 2, 1999 (the "Filing Date"), each of the Debtors filed
a voluntary petition for relief under chapter 11 of the Bankruptcy Code with the
Clerk of this Court. The Debtors have continued to operate their businesses and
manage their properties as debtors in possession pursuant to sections 1107(a)
and 1108 of the Bankruptcy Code. The Debtors' chapter 11 cases have been
consolidated for procedural purposes only and are being jointly administered
pursuant to an order of this Court.
3. No trustee or examiner has been appointed in the Debtors' chapter 11
cases. On September 17, 1999, the Office of the United States Trustee appointed
an official committee of unsecured creditors (the "Committee") pursuant to
section 1102 of the Bankruptcy Code.
B. BACKGROUND
----------
4. Unitel is a public company whose common stock was listed on the
American Stock Exchange. R Squared, a wholly-owned subsidiary of Unitel, is a
California corporation which has guaranteed certain of Unitel's outstanding
indebtedness. Unitel 53 LLC and Unitel 57 LLC are wholly-owned subsidiaries of
Unitel that own real property located in New York City, where Unitel operates
studio facilities. Unitel also owns all of the issued and outstanding capital
stock of Unitel Video Canada Inc., a non-debtor Canadian subsidiary, which also
guaranteed certain indebtedness of Unitel.
5. As at the Filing Date, Unitel was a leading provider of studio and
mobile production facilities. Unitel's studio division (the "Studio Division")
comprises four (4) production studios in New York City that are used by network,
cable and syndicated television producers.
2
Unitel's mobile division (the "Mobile Division") currently provides on-location
services for the taping and live telecasting of sports, musical, entertainment
and cultural events throughout North America. Immediately prior to the Filing
Date, the Debtors discontinued their New York City-based post-production
services business ("Post 38").
6. During the fiscal year ended August 31, 1998, the Debtors generated
sales of approximately $51.7 million. As of May 31, 1999, the Debtors had assets
of approximately $56.7 million (at book value) and liabilities of approximately
$52.4 million. As of the Filing Date, the Debtors had approximately eighty-nine
(89) full-time employees. The Debtors currently have approximately sixty (60)
full-time employees.
7. Virtually all of the Mobile Division assets are either (i)
subject to the first-priority security interest of Heller Financial, Inc.
("Heller") pursuant to that certain Amended and Restated Loan and Security
Agreement dated as of December 12, 1995 (the "Pre-Petition Loan Agreement")
and the Court-approved debtor-in-possession financing facility (the "DIP
Facility") between Heller and the Debtors, (ii) subject to the first-priority
security interest of certain lenders under their respective financing
agreements with the Debtors and subject to the second-priority security
interest of Heller pursuant to the Pre-Petition Loan Agreement and the DIP
Facility (collectively, the "Equipment Lenders"), or (iii) owned by
third-party equipment lessors and are leased to the Debtors.
RELIEF REQUESTED
8. By this Motion, the Debtors seek entry of two (2) orders:
(a) an order (the "Procedure Order"):
(i) approving the form and manner of notice of this
Motion and the relief requested herein;
3
(ii) scheduling a hearing to approve the relief requested
in this Motion (the "Sale Hearing");
(iii) setting a deadline, requirements and procedures for
interested parties to submit any competing bids for
the Property (as hereinafter defined), including the
approval of a break-up fee to be paid to NEP
Supershooters, Inc. (the "Buyer") in the event the
Court authorizes a sale of the Property to a party
other than the Buyer and such a sale is consummated;
and
(iv) setting a date for the filing of objections, if any,
to the relief requested in this Motion; and
(b) an order (the "Approval Order"):
(i) authorizing and approving an asset purchase agreement
between Unitel and the Buyer, substantially in the
form of Exhibit "A" hereof (the "Purchase
Agreement");
(ii) authorizing the sale of Unitel's assets identified in
the Purchase Agreement, including, but not limited
to, Unitel's owned equipment and tangible personal
property set forth on Exhibit 1.1.1 of the Purchase
Agreement (collectively, as described and defined in
the Purchase Agreement, the "Property"),(1) to the
Buyer, free and clear of all liens, claims, interests
and encumbrances, subject to the terms of the
Purchase Agreement and subject to higher or better
offers;
(iii) authorizing the Debtors to consummate all
transactions related to the above;
(iv) authorizing the conditional turnover of the sale
proceeds to Heller; and
(v) authorizing relief consistent with the foregoing in
connection with any asset purchase agreement between
the Debtors and any other party submitting a higher
or better offer for the Property in accordance with
the bidding procedures set forth herein.
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(1) As discussed in further detail hereinafter, the Property consists of
certain of Unitel's owned equipment which is primarily used in
connection with the "Gold" and "Silver" mobile production trucks. The
Property does not include, however, with one exception, any of the
equipment which is subject to the security interests of the Equipment
Lenders.
4
THE PROPOSED SALE OF THE DEBTORS' ASSETS
----------------------------------------
A. THE DEBTOR'S MARKETING EFFORTS
------------------------------
9. Since the Filing Date, the Debtors, their business personnel and
retained professionals, including Getzler & Co., Inc. ("Getzler"), the Debtors'
management consultant, have focused their efforts on stabilizing the Debtors'
two (2) remaining business segments - the Mobile Division and the Studio
Division - pending a contemplated sale of all or substantially all of the assets
related to such businesses, or, alternatively, a restructure of such businesses.
Pursuant to the DIP Facility made available by Heller, the Debtors currently
have sufficient funding to operate their businesses, as well as to conduct a
marketing effort with respect to the Debtors' businesses and assets.(2)
10. By order dated October 8, 1999, the Court authorized the Debtors to
retain Houlihan Lokey Howard & Zukin Capital ("Houlihan Lokey"), as investment
banker, to market and solicit interest in the Debtors' mobile and studio
businesses and assets. Since its retention, Houlihan Lokey, together with the
Debtors and their other retained professionals, have devoted substantial time
and resources in order to comply with the aggressive sale timetable contemplated
by the DIP Facility.
11. Specifically, Houlihan Lokey contacted several hundred entities
which were identified as potentially having an interest in acquiring some or all
of the Debtors' businesses and assets.
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(2) Pursuant to and subject to the "Final Order Authorizing Unitel Video,
Inc. to Obtain Secured Credit, Granting Adequate Protection and
Granting Other Relief," dated October 8, 1999, the "Final Order
Extending Authorization of Unitel Video, Inc. to Obtain Secured Credit,
Granting Adequate Protection and Granting Other Relief," dated December
3, 1999, and the "Stipulation and Order Extending DIP Facility
Previously Approved By Court" dated March 3, 2000 (collectively, the
"DIP Orders"), Heller is committed to provide the DIP Facility to the
Debtors through April 2, 2000 and, subject to the satisfaction of
certain conditions set forth in such DIP Orders (including Heller's
approval of a further extended budget), through April 30, 2000.
5
Thereafter, Houlihan Lokey, with the assistance of Getzler, prepared and
distributed a confidential offering memorandum to those parties which expressed
an interest in buying the Debtors' businesses and assets and had executed an
appropriate confidentiality agreement.
12. Houlihan Lokey received a number of bids from parties interested in
purchasing some or all of the Mobile Division businesses and assets.(3) Houlihan
Lokey conducted discussions with each of the parties that submitted bids for the
Mobile Division businesses and assets in an effort to identify the entity with
the greatest likelihood of closing a transaction for the highest consideration
and on an expeditious basis.(4)
13. Originally, an entity (the "Original Bidder") other than the Buyer
had submitted an offer for substantially all of the Mobile Division assets,
which offer Houlihan Lokey had determined to be the highest and best offer for
the Mobile Division businesses and assets. Accordingly, the Debtors and the
Original Bidder began negotiating the terms of an asset purchase agreement
providing for the sale of substantially all of the Mobile Division assets to the
Original Bidder.
- --------
(3) Houlihan Lokey also received separate bids for the Studio Division
business and assets. Only one party (the "Restructuring Bidder")
submitted a proposal to acquire both the Mobile Division assets and the
Studio Division assets. That proposal was predicated upon a
restructuring of the Debtors' assets. The Debtors and Houlihan Lokey
have diligently investigated such restructuring proposal.
Unfortunately, to date, the Restructuring Bidder has been unable to
demonstrate to the satisfaction of the Debtors and their advisors that
the Restructuring Bidder is committed to consummating the proposed
restructuring transaction in a timely manner and on satisfactory terms.
Nonetheless, the Debtors and their professional advisors remain
available to engage in discussions with the Restructuring Bidder to
explore the viability of the proposed restructuring transaction. The
Debtors have provided notice of the Application to the Restructuring
Bidder as well as all other entities which expressed an interest in
acquiring the Debtors' Mobile Division and Studio Division.
(4) The Debtors believed that it was critical to market the Mobile
Division assets on an expeditious basis in light of, INTER ALIA,
ongoing concerns about a potential loss of Mobile Division customers
resulting from the Debtors' chapter 11 filing.
6
14. In early March, after months of negotiations regarding the terms of
an asset purchase agreement, the Original Bidder indicated that it was no longer
able to acquire substantially all of the Mobile Division Assets, but was still
interested in acquiring the assets consisting of Unitel's "Gold" and "Silver"
mobile production trucks. Accordingly, the Debtors and the Original Bidder began
negotiating the terms of a purchase agreement providing for the sale of the
"Gold" and "Silver"-related assets to the Original Bidder.
15. As the Debtors' negotiations with the Original Bidder neared
conclusion, the Buyer advised the Debtors that it was interested in acquiring
the Property. The Buyer submitted to the Debtors an offer for the Property,
which offer the Debtors and their advisors determined was higher and better than
the existing offer from the Original Bidder. The Debtors and the Buyer then
quickly negotiated the terms of the Purchase Agreement.
B. WIND-DOWN AND LIQUIDATION OF MOBILE DIVISION BUSINESS
-----------------------------------------------------
16. The Mobile Division business has suffered a degree of deterioration
since the Filing Date due to the loss of customers. Yet, the Debtors have
managed to maintain the Mobile Division since the Filing Date while sustaining
only minimal losses in part because of the realistic prospect of a sale of the
business to a third party. The Debtors believe that, in view of the loss of the
offer for substantially all of the Mobile Division assets (and because no other
entity appears ready and willing to purchase substantially all of the Mobile
Division assets),(5) and in view of the ongoing losses being sustained by the
Mobile Division, Heller will not continue to finance the Mobile Division unless
a
- --------
(5) The Debtors remain in active negotiations with a prospective buyer of
their Studio Division and believe that a purchase and sale agreement
will be finalized and submitted to the Court for approval in the near
future.
7
buyer of substantially all of the assets is immediately identified and is
prepared to consummate an unconditional sale forthwith. As such, the Debtors
believe that once the marketplace becomes fully aware of the loss of the
prospective buyer of the Mobile Division and the Mobile Division's current
situation, the Mobile Division will be immediately and irreparably damaged by a
significant loss of customers and employees.
17. Accordingly, the Debtors have determined, with the advice of
their professionals, that an orderly wind-down and liquidation of the Mobile
Division assets (truck-by- truck, or combinations thereof) is the most effective
means of maximizing and preserving the value of the Mobile Division assets. The
Debtors, together with their professionals, have commenced an appropriate
wind-down plan for the Mobile Division, pursuant to which the analog operations
of the Mobile Division shall cease as of April 17, 2000 and the digital
operations shall continue unabated until a closing of the sale of the Property.
The Debtors intend to retain an auctioneer to sell their owned Mobile Division
assets, other than the Property proposed to be sold to the Buyer pursuant to the
Purchase Agreement.
18. The Debtors and their professional advisors have determined that
the present offer submitted by the Buyer pursuant to the Purchase Agreement
represents the highest and best offer for the Property. In addition, the Debtors
and their professional advisors have determined that the Debtors are likely to
receive greater consideration for the Property under the Buyer's offer than they
would realize by including the Property in the planned auction of Mobile
Division assets to be conducted by an auctioneer.
8
C. THE PURCHASE AGREEMENT
19. The Debtors' and the Buyer's negotiations culminated in the
Purchase Agreement attached hereto as Exhibit "A" hereof. The more salient terms
of the Purchase Agreement are described below:(6)
a. THE PARTIES. The proposed seller under the Purchase
Agreement is Unitel. NEP Supershooters, Inc. is the
proposed purchaser.
b. PURCHASED ASSETS. The Property to be sold to the
Purchaser pursuant to the Purchase Agreement (free
and clear of all liens, claims, interests and
encumbrances) consists of, INTER ALIA, the equipment
and tangible personal property set forth on Exhibit
1.1.1 of the Purchase Agreement (collectively, the
"Equipment"). The Equipment consists of that
equipment which (a) is owned by Unitel and is subject
to the security interest of Heller, (b) is primarily
used in connection with the "Gold" and "Siler" mobile
production trucks, and (c) is not subject to the
security interest of any Equipment Lender, other than
the Machinery and Economic Loan Fund ("MELF").
c. PURCHASE PRICE AND ASSUMED LIABILITIES. The total
consideration for the Property is $6,000,000 in cash,
PLUS assumption of the liabilities and obligations
associated with the Bookings (as defined in the
Purchase Agreement).(7)
d. DEPOSIT. In accordance with the Purchase Agreement,
the Buyer, upon execution of the Purchase Agreement,
deposited $600,000 (the "Deposit") into escrow. The
Deposit is non-refundable and shall be retained by
the Debtors (except if the Court fails to enter the
Procedure Order on or before April 4, 2000 or if the
Court approves the sale of the Property to a third
party other than the Buyer or an affiliate of the
Buyer).
- --------
(6) The following description of the terms of the Purchase Agreement is
intended solely to provide the Court and interested parties a brief
overview of the significant terms thereof. The Court and interested
parties are respectfully referred to the Purchase Agreement, a copy of
which is annexed hereto as Exhibit "A" hereof, for the complete terms
thereof.
(7) The Bookings essentially include any contractual obligation or
commitment, oral or written, to provide services with the "Gold" or
"Silver" mobile production trucks.
9
e. CONDITIONS. Consummation of the sale under the
Purchase Agreement is conditioned upon, INTER ALIA,
the entry of the Procedure Order and the Approval
Order.
f. HIGHER AND BETTER OFFERS. As set forth in further
detail below, the Purchase Agreement is subject to
the submission by third parties of higher or better
offers for the Property.
D. PROPOSED BIDDING PROCEDURES
---------------------------
20. As indicated, approval of the Purchase Agreement is subject to
higher or better offers. In an effort to ensure that maximum value is obtained
for the Property, the Debtors propose that the following terms and procedures,
which are consistent with those required by the Purchase Agreement, shall govern
the submission of competing bids for the Property (collectively, the "Bidding
Procedures"):
a. An auction (the "Auction") will be held at the
offices of Kaye, Scholer, Fierman, Hays & Handler,
LLP, located at 425 Park Avenue, New York, New York
(at a date and time specified in the Procedure
Order), at which higher or better offers for the
Property (or substantially all of such Property) may
be presented to the Debtors by third parties
unaffiliated with the Buyer or its affiliates.
b. Only those third parties which (i) have, at least
three (3) business days before the Auction, been
deemed "financially qualified" in the good-faith
judgment of Houlihan Lokey, (ii) provided Houlihan
Lokey, counsel for the Debtors, counsel for Heller
and counsel for the Committee with a draft asset
purchase agreement, marked to show changes from the
Purchase Agreement, and (iii) made, at least one (1)
business day before the Auction, a deposit with
Unitel in an amount of at least $600,000 in
immediately available funds on terms substantially
similar to the terms provided in Section 2.1.2 of the
Purchase Agreement, shall be permitted to bid at the
Auction. All competing bids for the Property and
draft asset purchase agreements shall be disclosed to
the Buyer promptly (but in no event later than 24
hours) after receipt by Houlihan Lokey.
c. In the event that the Bankruptcy Court (or an
appellate court) approves the sale of the Property
(or substantially all of the Property) to a third
10
party (other than the Buyer or an affiliate thereof),
and such third party sale is consummated, then the
Debtors (or their designee) shall pay to the Buyer,
concurrently with the consummation of such third
party sale, a flat fee payment in the amount of
$225,000 in cash or other immediately available funds
(the "Break-Up Fee").
d. The purchase price of any initial bid for the
Property (an "Overbid") must include consideration of
at least $6,300,000 in cash (I.E., at least $300,000
greater than the consideration set forth in the
Purchase Agreement) (a "Minimum Overbid"). Overbids
shall not be conditioned on the outcome of
unperformed due diligence by the bidder.
e. All subsequent Overbids at the Auction must include
additional consideration of at least $100,000 over
the previous bid.
f. The Auction shall not conclude until each
participating bidder has had the opportunity to
submit thereat any additional Overbid with full
knowledge of the existing highest bid. The Buyer
shall have the right, but not the obligation, to
participate in the Auction.
g. The Debtors, with the assistance of their
professionals, and after consultation with the
Committee and Heller, shall determine in good faith
whether a submitted Overbid meets the qualifications
described herein and whether the Purchase Agreement
or a submitted Overbid constitutes the highest or
otherwise best transaction for the Debtors' estates.
The highest and/or best bid as determined by the
Debtors will alone be submitted to the Court for
approval at the Sale Hearing.
THE PROPOSED BIDDING PROCEDURES ARE
IN THE BEST INTERESTS OF THE DEBTORS,
THEIR CREDITORS AND THE ESTATES
-------------------------------------
21. The Bidding Procedures outlined hereinabove are designed to
strike a balance between inviting competitive bids and enabling the Debtors to
close a sale with the Buyer within a reasonable time frame. The Bidding
Procedures are fair, reasonable and necessary to promote the highest and best
sale price, without imposing undue obstacles to the competitive bid process. The
key
11
aspects of the Bidding Procedures, including the Break-Up Fee and the overbid
amount, are required by the Purchase Agreement.
22. The Bidding Procedures were negotiated at arm's-length between the
Debtors and the Buyer. The Debtors do not believe that the proposed Bidding
Procedures would unduly hamper the submission of other competing bids. Moreover,
in view of the complexity of the transactions under consideration, the Bidding
Procedures are reasonable in relation to the risk, effort and expense that the
Buyer has borne and will continue to bear.
23. Sellers of assets often employ break-up fees and other bidding
protections in order to encourage the making of bids. Break-up fees are
"important tools to encourage bidding and to maximize the value of the debtor's
assets." THE OFFICIAL COMMITTEE OF SUBORDINATED BONDHOLDERS V. INTEGRATED
RESOURCES, INC. (IN RE INTEGRATED RESOURCES, INC.), 147 B.R. 650 (S.D.N.Y.
1992). Break-up fees take many different forms, including paying the
out-of-pocket expenses incurred by a bidder in arranging the deal, including due
diligence expenses, or compensating a bidder for its lost opportunity costs. SEE
IN RE HUPP INDUSTRIES, INC., 140 B.R. 191, 194 (Bankr. N.D. Ohio 1992).
24. Outside the bankruptcy context, courts commonly approve break-up
fees. Such fees are presumptively appropriate under the business judgment
rule (8) and non-bankruptcy courts rarely rule on their propriety. SEE, E.G.,
COTTLE V. STORER COMMUNICATIONS, INC., 849 F.2d 570 (11th Cir. 1988); CRTF
CORP. V. FEDERATED DEP'T STORES, 683 F. Supp. 422, 440 (S.D.N.Y. 1988);
SAMJENS PARTNERS I V. BURLINGTON INDUSTRIES, 663 F. Supp. 614 (S.D.N.Y. 1987).
- --------
(8) Under the business judgment rule, absent evidence of self-dealing or
plain excessiveness, a board's decision to agree to a break-up fee
would be presumed to be a valid exercise of its business judgment and
would be approved.
12
25. While many bankruptcy courts outside the Third Circuit apply the
business judgment rule and defer to the board's discretion in considering
whether to approve a break-up fee in the bankruptcy context, SEE, E.G., IN RE
INTEGRATED RESOURCES, INC., 135 B.R. 746, 753 (Bankr. S.D.N.Y. 1992);(9) IN
RE 995 FIFTH AVENUE ASSOCIATES, L.P., 96 B.R. 24, 28 (Bankr. S.D.N.Y. 1989),
the Third Circuit Court of Appeals has recently adopted a different standard
for analyzing the propriety of break-up fees in the bankruptcy context.
26. In O'BRIEN ENVIRONMENTAL ENERGY, INC., 181 F.3d 527, 535 (3d Cir.
1999), the Third Circuit declined to adopt the business judgment rule as the
applicable standard for assessing the propriety of a break-up fee in the
bankruptcy context. Rather, the propriety of a break-up fee depends on whether
such fee meets the requirements for the allowance of a proper administrative
expense under section 503 of the Bankruptcy Code. ID. Therefore, under the Third
Circuit's holding, "the allowability of a break-up fee depends upon the
requesting party's ability to show that the fees were actually necessary to
preserve the value of the estate." ID.
27. Under the Third Circuit's approach, a break-up fee will provide
some benefit to a debtor's estate if, for example, "assurance of a break-up fee
promoted more competitive bidding, such as by inducing a bid that otherwise
would not have been made and without which bidding would have been limited," ID.
at 537, if the initial offer (encompassing the break-up fee) "served as a
catalyst
- ----------
(9) The District Court for the Southern District of New York held in IN RE
INTEGRATED RESOURCES, INC., 147 B.R. at 657, that three issues must be
considered by the Bankruptcy Court in assessing bidding protections
such as break-up fees: "(1) is the relationship of the parties who
negotiated the break-up fee tainted by self-dealing or manipulation,
(2) does the fee hamper, rather than encourage, bidding [and] (3) is
the amount of the fee unreasonable relative to the proposed purchase
price?" The court added that a "break-up fee" may serve one of three
functions: "(1) to attract or retain a potentially successful bid, (2)
to establish a bid standard or minimum for other bidders to follow, or
(3) to attract additional bidders." ID. at 662.
13
to higher bids," ID., or "if the availability of break-up fees and expenses were
to induce a bidder to research the value of the debtor and convert that value to
a dollar figure on which other bidders can rely," ID.
28. The Break-Up Fee and certain of the other Bidding Procedures were
an integral part of the Buyer's bid. In fact, the Buyer's offer to purchase the
Property was predicated upon and conditioned upon the Break-Up Fee. As such, the
assurance of the BreakUp Fee has "promoted more competitive bidding" because it
induced a bid that might otherwise not have been made.
29. For the foregoing reasons, the Break-Up Fee should be approved
pursuant to section 503 of the Bankruptcy Code because it provides a clear
benefit to the Debtors' estates.
30. In addition, the Break-Up Fee here is not unreasonable in relation
to the aggregate consideration offered under the Purchase Agreement. In
comparison to bidding incentives approved in other cases, this request is for a
Break-Up Fee of 3.75% of the transaction amount.(10) SEE, E.G., INTEGRATED
RESOURCES, 147 B.R. at 662 (break-up fee representing up to 3.1% of the
transaction amount plus reimbursement of expenses upheld; expert testified that
outside of bankruptcy break-up fees average 3.3%).
31. Moreover, should the Debtors ultimately determine that a bid
submitted by a third party other than the Buyer is the highest or otherwise best
offer for the Property and subsequently
- --------
(10) The Break-Up Fee is the exclusive amount potential payable to the
Buyer. The Buyer is not entitled to the separate reimbursement of its
costs and expenses incurred in connection with the proposed
transaction.
14
consummate a transaction with such bidder, these estates would receive, at a
minimum, no more (net of the Break-Up Fee) than they would have received under
the proposed transaction with the Buyer.
32. Similarly, the other Bidding Procedures are a necessary tool to
maximize the value of the Debtors' estates and will not unduly hamper the
submission of competing bids. Rather, the other Bidding Procedures will insure
that only parties with a serious and legitimate interest in acquiring the
Property will participate in the Auction process. In addition, many of the
Bidding Procedures were required by the Buyer.(11)
33. Accordingly, the Debtors respectfully submit that this Court should
authorize and approve the Bidding Procedures, including the Break-Up Fee.
THE PROPOSED SALE IS IN THE BEST INTERESTS OF
THE DEBTORS, THEIR CREDITORS AND THE ESTATES
---------------------------------------------
34. Section 363(b)(1) of the Bankruptcy Code provides that "[t]he
trustee, after notice and a hearing, may use, sell or lease, other than in
the ordinary course of business, property of the estate." 11 U.S.C. Sections
363(b)(1). A debtor in possession is given these rights by section 1107(a) of
the Bankruptcy Code. SEE 11 U.S.C. Section 1107(a). Moreover, section 105(a)
of the Bankruptcy Code provides that "[t]he court may issue any order,
process, or judgment that is necessary or appropriate to carry out the
provisions of [the Bankruptcy Code]." 11 U.S.C. Section 105(a).
35. The courts have uniformly held that approval of a proposed sale of
property pursuant to section 363(b) of the Bankruptcy Code is appropriate if a
court finds that the transaction represents a reasonable business judgment on
the part of the debtor. SEE COMMITTEE OF EQUITY SEC.
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(11) The Original Bidder's offer also included a break-up fee, which was the
same amount as the Break-Up Fee.
15
HOLDERS V. LIONEL CORP. (IN RE LIONEL CORP.), 722 F.2d 1063, 1071 (2d Cir.
1983); STEPHENS INDUS., INC. V. MCCLUNG, 789 F.2d 386, 391 (6th Cir. 1986); IN
RE DELAWARE & HUDSON RY. CO., 124 B.R. 169, 176 (D. Del. 1991) (holding that a
court must be satisfied that there is a "sound business reason" justifying the
pre-confirmation sale of assets); IN RE PHOENIX STEEL CORP., 82 B.R. 334, 335
(Bankr. D. Del. 1987) (stating that the elements necessary for approval of a
section 363 sale in a chapter 11 case are "that the proposed sale is fair and
equitable, that there is a GOOD BUSINESS REASON for completing the sale and the
transaction is in good faith") (emphasis added).
36. Additionally, prior to and after enactment of the Bankruptcy Code,
courts have permitted the sale of all or substantially all assets of a debtor
outside the ordinary course of business if such a sale is necessary to preserve
the value of assets for the estate, its creditors or interest holders. SEE IN RE
LIONEL CORP., 722 F.2d 1063; IN RE EQUITY FUNDING CORPORATION OF AMERICA, 492
F.2d 793, 794 (9th Cir.) ("Other circuits have recognized the power of the
bankruptcy court under Chapter X to authorize a sale of the debtor's property
under less than emergency conditions where such sale is necessary to avoid
deterioration in the value of the assets."), CERT. DENIED, 419 U.S. 964 (1974);
SEE ALSO IN RE TEMPO TECHNOLOGY CORP., 202 B.R. 363, 366 (D. Del. 1996)
("section 363(b)(1) of the Bankruptcy Code permits a debtor to sell all or
substantially all of its assets prior to confirmation of a reorganization
plan").
37. The Debtors believe that the proposed sale of the Property
represents a prudent and proper exercise of the Debtors' business judgment, and
is supported by good business reasons. A variety of reasons have justified the
Debtors' ongoing marketing of the Mobile Division business and assets: (i) Since
before the Filing Date, the operation of the Mobile Division has had a
significant negative impact on the Debtors' financial condition and liquidity
and the Mobile Division
16
continues to sustain operational losses (inclusive of reorganization costs)
despite a variety of successful cost-cutting measures adopted since the
Filing Date by the Debtors, with the advice of Getzler; (ii) Since shortly
before the Filing Date, Getzler, an outside financial advisory firm, has, at
the direction of the Debtors' Board of Directors, served as the Debtors'
management consultant, effectively serving the interim role of the Debtors's
chief executive officer and chief financial officer; (iii) Since the Filing
Date, the Debtors have continually faced the looming specter of a potential
loss of mobile customers insofar as the Debtors do not have long-term
contracts with their mobile customers; rather, such customers reserve the
Debtors' services on an event-by-event basis months or weeks before the
scheduled event;(12) and (iv) Pursuant to the DIP Facility, the Debtors are
obligated to market the Mobile Division business and assets. These reasons
continue to justify the proposed sale of the Property at this time.(13)
38. In addition, in view of the contemplated wind-down of the Mobile
Division, the Debtors obviously have little choice but to sell the Mobile
Division assets. The only remaining question for the Debtors is what sale
mechanism will most effectively maximize the value of the Mobile Division
- --------
(12) On a number of occasions, as a result of the chapter 11 filing and the
uncertainty associated therewith, the Debtors have had to make special
assurances to certain customers in order to give such customers the
comfort they requested. Through the efforts of Getzler and the Debtors'
employees, the Debtors have, for the most part, successfully avoided
the loss of a significant number of Mobile Division customers.
Notwithstanding the Debtors' successful retention of most of their
Mobile Division customers, the Debtors appear to have lost the ongoing
business of WWF Entertainment, one of their largest and most profitable
Mobile Division customers. The Debtors have been concerned that
maintaining their Mobile Division customer base could grow increasingly
difficult as the Debtors remain in chapter 11 for an extended period of
time.
(13) The Debtors believe that their failure to move forward in seeking
approval of the proposed transaction will jeopardize the continued
availability of the DIP Facility and could leave the Debtors in a
position without a source of consensual financing.
17
assets. The Debtors, based on the advice of their professionals, believe that
the proposed sale of the Property to the Buyer most effectively maximizes the
value of the Property (and will not detrimentally affect the value of the
remaining Mobile Division assets which the Debtors contemplate will be sold by
auction).(14)
39. In addition, the proposed sale is subject to higher or better
offers, thereby ensuring that any value received by the Debtors' estates is
maximized.
40. Finally, the Debtors firmly believe that creditors will receive
more value through the proposed sale of the property than through inclusion of
the Property in the contemplated piecemeal liquidation and auction of the
remaining Mobile Division assets (on a truck-by-truck basis or otherwise).
41. The foregoing demonstrates no other alternative will at this time
provide a higher value for the Debtors' assets, and supports the conclusion that
the Debtors have exercised their good business judgment in proceeding with the
proposed sale. Accordingly, the sale should be authorized. Moreover, as set
forth hereinafter, accurate and reasonable notice will be provided to all
creditors and other parties in interest in compliance with due process, the
Bankruptcy Code, and the Bankruptcy Rules.
- --------
(14) The offer submitted by the Original Bidder was in the amount of $6.33
million, but such offer contemplated the acquisition of significantly
more assets than the Property. The Debtors, based on the advice of
their professional advisors, believe that the Buyer's $6 million offer
for the Property is several hundred thousand dollars higher and better
than the Original Bidder's $6.33 million offer for the Property plus
other assets.
18
42. All aspects of the proposed sale have been handled in good faith
and at arm's-length. The Purchase Agreement is the product of extensive and
detailed arm's-length negotiations involving the Debtors and their professionals
including counsel and the Buyer and its counsel.
THE ASSET PURCHASE AGREEMENT SHOULD BE APPROVED
PURSUANT TO SECTION 363(f) OF THE BANKRUPTCY CODE
-------------------------------------------------
43. Section 363(f) of the Bankruptcy Code(15) permits the Debtors to
sell assets free and clear of all liens, claims and encumbrances (with any
such liens, claims, interests and encumbrances attaching to the net proceeds
of the sale with the same rights and priorities therein as in the sold
assets). As Bankruptcy Code section 363(f) is stated in the disjunctive, when
proceeding pursuant to section 363(b), it is only necessary to meet one of
the five conditions of section 363(f). The Debtors believe that they will be
able to demonstrate at the Sale Hearing that they have satisfied one or more
of these conditions. Specifically, the Debtors believe that secured creditors
will either consent to the sale under section 363(f)(2), the value to be
received by the Debtors in consideration of the sale of the collateral is
- --------
(15) Section 363(f) of the Bankruptcy Code provides:
The trustee may sell property under subsection (b) or (c) of
this section free and clear of any interest in such property
of an entity other than the estate only if --
a. applicable nonbankruptcy law permits sale of such
property free and clear of such interest;
b. such entity consents;
c. such interest is a lien and the price at which such
property is to be sold is greater than the aggregate
value of all liens on such property;
d. such interest is in bona fide dispute; or
e. such entity could be compelled, in a legal or
equitable proceeding, to accept a money satisfaction
of such interest.
11 U.S.C. Section 363(f).
19
equal to or exceeds the value of the liens upon such collateral under section
363(f)(3), or a sale free and clear can proceed pursuant to section 363(f)(5) of
the Bankruptcy Code because creditors with interests in the Property can be
compelled to accept a monetary satisfaction of their claims.
44. Each item of Equipment is subject to the first-priority security
interest of Heller pursuant to the Pre-Petition Loan Agreement and the DIP
Facility, except for those items which are subject to the first-priority
security interest of MELF (which are also subject to the second-priority
security interest of Heller pursuant to the Pre-Petition Loan Agreement and the
DIP Facility).
45. The Debtors propose that any liens, claims, interests or
encumbrances against or in the Property (collectively, the "Liens") shall attach
to the sale proceeds with the same force, validity, effect, priority and
enforceability, INTER SE, as such Liens had in the property prior to such sale.
In addition, the Debtors are also proposing that for the time being the proceeds
of the sale should be transferred to Heller, subject to the Liens and the rights
of the holders thereof. Temporary payment to Heller is in the best interests of
the Debtors' estates and creditors, as it will reduce the interest payments the
Debtors are required to pay in connection with the DIP Facility and the
Pre-Petition Loan Agreement. Heller has agreed, to the extent necessary, to
disgorge any amounts it may have received in connection with the sale pursuant
to a Court-approved plan of reorganization or other distribution of proceeds.
SECTION 1146(c) OF THE BANKRUPTCY CODE
--------------------------------------
46. Section 1146(c) of the Bankruptcy Code provides that:
[t]he issuance, transfer, or exchange of a security, or the
making or delivery of an instrument of transfer under a plan
confirmed under section 1129 of the [the Bankruptcy Code], may
not be taxed under any law imposing a stamp or similar tax.
20
11 U.S.C. Section 1146(c). It is well-settled that a transfer which is
"necessary to consummation of a plan" is a transfer made under a plan within
the meaning of section 1146(c) of Bankruptcy Code. SEE, E.G., CITY OF NEW
YORK V. JACOBY-BENDER, INC. (IN RE JACOBY-BENDER, INC.), 758 F.2d 840, 842
(2d Cir. 1985); CITY OF NEW YORK V. SMOSS ENTERS. CORP. (IN RE SMOSS ENTERS.
CORP.), 54 B.R. 950, 951 (E.D.N.Y. 1985).
47. It is equally well-settled that even a pre-confirmation sale of a
debtor's assets, if the sale is essential to confirmation of the plan, is "under
a plan" for purposes of section 1146(c) of the Bankruptcy Code. SEE IN RE SMOSS
ENTERS. CORP., 54 B.R. at 951 (sale taking place three months before
confirmation was under plan, and therefore tax exempt, when transfer of property
was essential to confirmation of plan). SEE ALSO IN RE CCA PARTNERSHIP, 70 B.R.
696 (Bankr. D. Del.), AFF'D, 72 B.R. 765 (D. Del.), AFF'D W.O. OP., 833 F.2d 303
(3d Cir. 1987) (allowing the section 1146(c) tax exemption to transfer occurring
prior to confirmation of the plan). CF. IN RE JACOBY-BENDER, INC., 755 F.2d at
841 (despite absence of specific language in plan regarding transfer of
property, court concluded transfer was necessary to consummation of plan, noting
that "Congress' apparent purpose in enacting section 1146 was to facilitate
reorganizations through giving tax relief").
48. The Debtors submit that the sale of the Property to the Buyer is
"under a plan" within the meaning of section 1146(c) of the Bankruptcy Code.
Consummation of a sale of the Property to the successful bidder at the Auction
is clearly essential to preparation and consummation of a chapter 11 plan in the
Debtors' cases. The proceeds to be received upon consummation of the sale of the
Property will be distributed to creditors under a plan. Given these
circumstances, the sale of the Property to the Buyer is one made "under a plan"
pursuant to section 1146(c) of the Bankruptcy Code, and therefore should be
exempt from the imposition of any stamp or similar tax.
21
PURCHASER'S GOOD FAITH
----------------------
49. Pursuant to section 363(m) of the Bankruptcy Code, a good faith
purchaser is one who purchases assets for value in good faith and without notice
of adverse claims. IN RE MARK BELL FURNITURE WAREHOUSE, INC., 992 F.2d 7, 8 (1st
Cir. 1993); IN RE WILLEMAIN V. KIVITZ, 764 F.2d 1019, 1023 (4th Cir. 1985); IN
RE VANGUARD OIL & SERV. CO., 88 B.R. 576, 580 (E.D.N.Y. 1988).
50. The Purchase Agreement was negotiated at arm's-length over a period
of several weeks, with both parties represented by their own counsel. Although
the Debtors engaged in discussions with other parties interested in acquiring
certain of their assets, the Debtors submit that the Buyer's proposal as
contained in the Purchase Agreement represents the highest and best offer for
the Property.
51. Accordingly, the proposed Approval Order includes a provision that
the Buyer, or the successful bidder for the Purchased Assets, is a "good faith"
purchaser within the meaning of section 363(m) of the Bankruptcy Code. The
Debtors believe that providing the Buyer, or the successful bidder, with such
protection will ensure that the maximum price will be received by the Debtors
for the Property and closing of the sale will occur promptly.
PROPOSED NOTICE PROCEDURES
--------------------------
52. Notice of this Motion and Purchase Agreement (together with its
schedules and exhibits) has been already provided to (i) all parties that
expressed serious interest to Houlihan Lokey in purchasing all or significantly
all of the Debtors's Mobile Division and/or Studio Division businesses and
assets; (ii) counsel for the Committee; (iii) counsel for Heller; (iv) counsel
for the Buyer; (v) the Office of the United States Trustee; (vi) all entities
party to the Bookings; (vii) all entities known by the Debtors to have filed a
notice of appearance or a request for receipt of chapter 11 notices and
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pleadings filed in the Debtors' cases as of the date hereof; (viii) all federal,
state and local regulatory and taxing authorities and recording offices which
have a known interest in the relief requested in this Motion; (ix) the
Securities and Exchange Commission; (x) the Internal Revenue Service; and (xi)
all parties (and their counsel, if known) which hold liens on or security
interests in any of the Property.
53. In order to ensure broad dissemination of notice of the sale, the
Sale Hearing and the Bidding Procedures, the Debtors propose that they serve, by
a date to be determined by the Court, by first class U.S. mail:
(a) A conformed copy of the Procedure Order upon (i) all
parties that expressed serious interest to Houlihan Lokey in purchasing
all or significantly all of the Debtors' Mobile Division and/or Studio
Division businesses and assets; (ii) counsel for the Committee; (iii)
counsel for Heller; (iv) counsel for the Buyer; (v) the Office of the
United States Trustee; (vi) all entities party to the Bookings; (vii)
all entities known by the Debtors to have filed a notice of appearance
or a request for receipt of chapter 11 notices and pleadings filed in
the Debtors' cases as of the date hereof; (viii) all federal, state and
local regulatory and taxing authorities and recording offices which
have a known interest in the relief requested in this Motion; (ix) the
Securities and Exchange Commission; (x) the Internal Revenue Service;
and (xi) all parties (and their counsel, if known) which hold liens on
or security interests in any of the Property; and
(b) copies of the "Notice of Hearing to Consider Sale of
Certain of Unitel Video, Inc.'s Mobile Division Assets" (the "Notice"),
substantially in the form of that which is annexed to the Procedure
Order as Exhibit "1" thereof, upon all creditors and equity security
holders identified in the list of creditors and equity security holders
heretofore filed herein with the Court
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by the Debtors and upon all parties having filed a proof of claim or
interest in the Debtors' cases (other than those parties which received
notice under subparagraph (a) above).
54. Under all of the relevant facts and circumstances herein and the
nature of the relief requested herein, the Debtors respectfully submit that the
foregoing notice should be deemed adequate and sufficient notice of the sale,
the Sale Hearing, the Bidding Procedures, and the Motion.
MISCELLANEOUS
-------------
55. As there are no novel issues of law presented herein, the Debtors
waive their right to file a brief in support of the Motion, pursuant to Rule
7.1.2(a) of the Local Rules incorporated by reference into the Local Bankruptcy
Rules by General Order #9D. Because of the nature of the relief requested in
this Motion, the Debtors believe that no briefing is required.
56. No previous request for the relief sought herein has been made to
this or any other Court.
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CONCLUSION
----------
WHEREFORE, the Debtors requested that the Court (i) at the conclusion
of the initial hearing, enter the Procedure Order substantially in the form
annexed hereto as Exhibit "B" hereof, INTER ALIA, approving the Bidding
Procedures (including the Break-Up Fee) and scheduling the Sale Hearing, (ii) at
the conclusion of the Sale Hearing, enter the Approval Order substantially in
the form annexed hereto as Exhibit "C" hereof, INTER ALIA, authorizing the sale
of the Property to the Buyer, or to such other successful bidder that submits a
higher or better offer for the Property in accordance with the Bidding
Procedures, and (iii) grant the Debtors such other relief as the Court may deem
just and proper.
Dated: Wilmington, Delaware
March 22, 2000
KAYE, SCHOLER, FIERMAN,
HAYS & HANDLER, LLP
Mitchel H. Perkiel (MP 8691)
Benjamin Mintz (BM 6060)
425 Park Avenue
New York, New York 10022
(212) 836-8000
- and -
YOUNG CONAWAY STARGATT
& TAYLOR, LLP
/s/ Robert S. Brady
----------------------------------
Robert S. Brady (No. 2847)
Michael R. Nestor (No. 3526)
P.O. Box 391
Rodney Square North, 11th Floor
Wilmington, Delaware 19801
(302) 571-6600
Co-Counsel for the Debtors and
Debtors in Possession
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