Beruflich Dokumente
Kultur Dokumente
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In re: ) Chapter 11
)
EAT HERE BRANDS, LLC, et al.1, ) Lead Case No. 19-61688-WLH
)
Debtors. ) Jointly Administered
)
Upon consideration of the Sale Motion [Docket No. 110T &h\Y pMotionq'2 of Eat Here
Brands, LLC, Babalu Atlanta #1 LLC, Babalu Atlanta #2 LLC, Babalu Knoxville #1 LLC,
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1
M\Y =YVhcfg ]b h\YgY W\UdhYf -- WUgYg( U`cb[ k]h\ h\Y `Ugh Zcif X][]hg cZ YUW\ =YVhcfrg Zederal tax
identification number, are as follows: Eat Here Brands, LLC (9694); Babalu Atlanta #1 LLC (4025); Babalu Atlanta
#2 LLC (5240); Babalu Knoxville #1 LLC (3163); Babalu Memphis #1 LLC (9320); Babalu Memphis #2 LLC
(4558); Babalu, LLC (7673); and ;UVU`i ;]fa]b[\Ua $- EE< &-45.'* M\Y =YVhcfgr aU]`]b[ UXXfYgg ]g 5311
Dogwood Road, Suite 200, Roswell, Georgia 30075.
2
Capitalized terms not otherwise defined in this Order shall have the meanings given to them in the Motion.
AGG\14035070v5
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Babalu Memphis #1 LLC, Babalu Memphis #2 LLC, Babalu, LLC, and Babalu Birmingham #1
EE< &Wc``YWh]jY`m( h\Y pDebtorsq1), which requests, among other things, entry of an order
(the pOrderq' difgiUbh hc Lections 105, 363 and 365 of title 11 of the United States Code
(the pBankruptcy Codeq'( Ki`Yg .,,.( 2,,0( 2,06, 9006, and 9008 of the Federal Rules of
;Ub_fidhWm IfcWYXifY &h\Y pBankruptcy Rulesq'( and General Order No. 26-2019 governing
Complex Chapter -- <UgYg &h\Y pComplex Case Proceduresq'6 &]' Uih\cf]ning and approving the
sale (the pSaleq' cZ substantially all of the Debtorsr UggYhg &h\Y pAcquired Assetsq' ZfYY UbX W`YUf
of all liens, claims, interests, and encumbrances (other than the Assumed Liabilities)
&Wc``YWh]jY`m( h\Y pEncumbrancesq'7 &]]' Uih\cf]n]b[ h\Y Uggiadh]cb UbX Ugg][baYbh cZ WYfhU]b
executorm WcbhfUWhg UbX ibYld]fYX `YUgYg &h\Y pDesignated Contractsq'( ]XYbh]Z]YX Vm h\Y =YVhcfs
and more fully described in the Asset Purchase Agreement dated as of September 9, 2019,
attached as Exhibit A hc h\Y Fch]cb &h\Y pAPAq' Vm UbX VYhkYYb h\Y =YVhcfs and
Balu Holdings, LLC &h\Y pPurchaserq'( Ug gidd`YaYnted by the Notice of Assumption and
Assignment filed by the Debtors on September 27, 2019 [Docket No. 137] and the Second
Notice of Assumption and Assignment filed by the Debtors on October 15, 2019 [Docket No.
164] (collectively, h\Y pCure Noticeq'; and (iii) granting certain related relief; and the Court
having held a hearing on October 18, 2019 (the pSale Hearingq' hc UddfcjY h\Y LU`Y free and
clear of the Encumbrances and the assumption and assignment of the Designated Contracts; the
Court having reviewed and considered the Motion, the arguments of counsel, and the evidence
presented at the Sale Hearing; and all objections to the Motion having been either withdrawn or
overruled; and it appearing that the relief requested in the Motion is in the best interests of the
Debtors, their bankruptcy estates, and all creditors and other parties in interest; and sufficient
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Babablu Atlanta #2 LLC joined in the Motion; however, its assets are not being sold pursuant to this Order.
Accordingly, the definition of Debtors in this Order does not include Babablu Atlanta #2 LLC.
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notice of the Motion having been given to all creditors and parties in interest; and upon the
record made at the Sale Hearing and in the Bankruptcy Cases, after due deliberation thereon, and
A. Jurisdiction and Venue. 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).
Venue of the Bankruptcy Cases and the Motion in this district is proper under 28 U.S.C. §§ 1408
and 1409.
B. Statutory Predicates. The statutory predicates for the relief sought in the Motion
are Sections 105, 363, and 365 of the Bankruptcy Code, Rules 2002, 6004, 6006, 9006, and 9008
Petition Date, the Debtors were indebted to Origin Bank, without defense, counterclaim,
less than $5,607,182.58, plus pre-petition interest, fees, expenses, and other amounts arising in
fYgdYWh cZ giW\ cV`][Uh]cbg &Wc``YWh]jY`m( h\Y pPre-Petition Obligationsq'* On August 20, 2019,
the Court entered a Final DIP Order in these Bankruptcy Cases [Docket No. 69] as amended by
that certain Amended Final DIP Order R=cW_Yh Gc* -,/T &h\Y pFinal DIP Orderq'( k\]W\( Uacb[
ch\Yf h\]b[g( Uih\cf]nYX h\Y =YVhcfg hc igY WUg\ Wc``UhYfU` UbX h\Y dfcWYYXg cZ h\Y =YVhcfgr =BI
loan from Origin Bank pursuant to a budget, which was attached to the DIP Financing Motion
[Docket No. 16] as Exhibit C (the pBudgetq'* Pursuant to the Final DIP Order, the Debtors
borrowed the principal amount of %-*.,1 a]``]cb &h\Y pDIP Loan Obligationq' Zfca Origin Bank.
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Findings of fact shall be construed as conclusions of law and conclusions of law shall be construed as findings
of fact when appropriate. See Rule 7052 of the Bankruptcy Rules.
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D. Entry of Bid Procedures Order. On September 27, 2019, this Court entered its
Order (A) Authorizing and Approving Bid Procedures in Connection with the Sale of
Substantially All of the DebtorsN Assets; (B) Scheduling an Auction and Sale Hearing;
(C) Approving the Manner and Form of Notice of Sale, Auction and Sale Hearing, and
(D) Granting Related Relief [Docket No. 135T &h\Y pBid Procedures Orderq'( k\]W\ ]bW`iXYX(
inter alia, approval of certain bid procedures with respect to bids for all or substantially all of the
Debtorsr assets (the pBidding Proceduresq' UbX UddfcjU` cZ h\Y manner and form of notice and
dfcWYXifYg Zcf h\Y Uggiadh]cb UbX Ugg][baYbh cZ =Yg][bUhYX <cbhfUWhg &h\Y pAssumption and
Assignment Proceduresq' UbX h\Y YghUV`]g\aYbh cZ h\Y WifY Uacibhg fYei]fYX hc VY dU]X ]b
presented at the Sale Hearing and the representations of counsel, the Debtors have marketed the
Acquired Assets, conducted the sale process in compliance with the Bid Procedures Order, duly
noticeX h\Y h]a]b[ Zcf h\Y giVa]gg]cb cZ V]Xg UbX dfcdcgYX UiWh]cb &h\Y pAuctionq' ]b U bcb-
collusive, fair, and good faith manner, and have afforded potential purchasers a full and fair
opportunity to make higher and better offers. As a result of not receiving any other Qualified
Bid for the Acquired Assets by the Bid Deadline, the Debtors filed the Notice of No Competing
Bids and Cancellation of Auction on October 11, 2019 [Docket No. 155]. In accordance with the
Bidding Procedures, the Debtors determined that the bid submitted by the Purchaser, and as
memorialized by the APA, is the Successful Bid (as defined in the Bidding Procedures).
Court, and based on the representations of counsel at the Sale Hearing: (i) proper, timely, and
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sufficient notice of the Motion, the Sale Hearing, the Sale, the Assumption and Assignment
Procedures, the assumption and assignment of the Designated Contracts and the Cure Amounts
have been provided in accordance with Sections 102(1), 363 and 365 of the Bankruptcy Code
and Rules 2002, 6004, 6006, and 9006 of the Bankruptcy Rules and in compliance with the Bid
Procedures Order; and (ii) no other or further notice of the Motion, the Sale Hearing, the Sale, or
the assumption and assignment of the Designated Contracts or the Cure Amounts is or shall
be required.
with respect to the Motion and the relief requested therein has been afforded to all interested
H. Sale in Best Interest. Consummation of the Sale of the Acquired Assets at this
time is in the best interests of the Debtors, their creditors, their bankruptcy estates and all other
parties in interest.
I. Business Justification. The Debtors have presented good and sufficient business
reasons justifying the Sale, including, but not limited to, the following: (i) the APA constitutes
the highest and best offer for the Acquired Assets; and (ii) the APA and the closing thereon will
present the best opportunity to realize the value of the Acquired Assets on a going-concern basis
and avoid decline and devaluation of the Acquired Assets. The terms and conditions of the APA,
including, without limitation, the consideration to be realized by the Debtors, are fair and
reasonable. Approval of the Motion, the APA, and the transactions contemplated thereby,
including, without limitation, the Sale and the assumption and assignment of the Designated
Contracts, is in the best interests of the Debtors, their bankruptcy estates and creditors, and all
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J. +UP]V 6HQJWK =DOH. The APA was negotiated, proposed, and entered into by the
Debtors and the Purchaser without collusion, in good faith, abX Uh Ufarg `Yb[h\* Neither the
Debtors nor the Purchaser has engaged in any conduct that would warrant avoidance of the APA
under Section 363(n) of the Bankruptcy Code. The Purchaser has not acted in a collusive
manner with any person and the purchase price was not controlled by any agreement among
potential bidders. M\Y IifW\UgYf ]g bch Ub p]bg]XYfq cZ any of the Debtors as defined in
Section 101(31) of the Bankruptcy Code. The Court finds that the Debtors and the Purchaser
each has the full power and authority to execute, deliver, and perform the APA.
K. Good Faith Purchaser. The Purchaser is a good faith purchaser for value and is
entitled to all of the protections afforded under Section 363(m) of the Bankruptcy Code.
Specifically, (i) the Purchaser recognized that the Debtors were free to deal with any other party
interested in purchasing the Acquired Assets, (ii) the Purchaser complied in all respects with the
provisions in the Bid Procedures Order, (iii) the Purchaser agreed to subject its bid to the
competitive bid procedures set forth in the Bid Procedures Order, (iv) all payments to be made
by the Purchaser in connection with the Sale have been disclosed, (v) the Purchaser is not an
p]bg]XYfq cZ any of the Debtors, as such term is defined in Section 101(31) of the
Bankruptcy Code, and (vi) the negotiation and execution of the APA kUg Uh Ufarg `Yb[h\ UbX ]b
good faith, and at all times the Purchaser and the Debtors were represented by competent counsel
of their choosing.
L. Sale Free and Clear of the Encumbrances. The Debtors may sell the Acquired
Assets free and clear of all obligations, liabilities, and the Encumbrances, other than the
Assumed Liabilities, because, with respect to each creditor asserting an Encumbrance, one or
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more of the standards set forth in Section 363(f)(1)-(5) of the Bankruptcy Code has
been satisfied.
The Designated Contracts being assigned to the Purchaser are an integral part of the Acquired
Assets being purchased by the Purchaser. The Debtors have demonstrated that it is an exercise
of their sound business judgment to assume and assign the Designated Contracts to the Purchaser
in connection with the consummation of the Sale, and the assumption and assignment of the
Designated Contracts is the best interests of the Debtors, their bankruptcy estates, and
their creditors.
has (i) cured or has provided adequate assurance that it will cure, any default existing prior to the
date hereof under any of the Designated Contracts, within the meaning of Section 365(b)(1)(A)
of the Bankruptcy Code, and (ii) provided compensation or adequate assurance of compensation
to any party for any actual pecuniary loss to such party resulting from a default prior to the
Closing under any of the Designated Contracts within the meaning of Section 365(b)(1)(B) of the
Bankruptcy Code. The Purchaser has provided adequate assurance of future performance of and
under the Designated Contracts within the meaning of Section 365(b)(1)(C) of the
Bankruptcy Code.
O. Prompt Consummation. The sale of the Acquired Assets must be approved and
consummated promptly to preserve the value of the Acquired Assets. Therefore, time is of the
essence in consummating the Sale, and the Debtors and the Purchaser intend to close the Sale as
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p]bg]XYfq cf pUZZ]`]UhYq of any of the Debtors, as those terms are defined in the Bankruptcy Code.
Except for the Assumed Liabilities, the transfer of the Acquired Assets to the Purchaser does not,
and will not, subject the Purchaser to any liability whatsoever, with respect to the Debtorsr
operation of their businesses prior to the closing of the Sale or by reason of such transfer under
any theory of law or equity. The Sale is not a consolidation, merger or de facto merger of the
Purchaser and the Debtors and/or the Debtorsr bankruptcy estates. There is no substantial
continuity between the Purchaser and the Debtors, and there is no continuity of enterprise
between the Debtors and the Purchaser. The Purchaser is not a mere continuation of the Debtors
or the Debtorsr bankruptcy estates, and the Purchaser does not constitute a successor to the
Q. Valid Transfer. The transfer of the Acquired Assets to the Purchaser will vest
the Purchaser with all right, title, and interest of the Debtors to the Acquired Assets free and
clear of all Encumbrances, except for the Assumed Liabilities. The Acquired Assets constitute
property of the Debtorsr bankruptcy estates and good title is vested in the Debtorsr bankruptcy
estates within the meaning of Section 541(a) of the Bankruptcy Code. The Debtors are the sole
and rightful owners of the Acquired Assets, and no other person has any ownership right, title, or
interests therein.
R. Asset Purchase Agreement Not Modified. The Order shall not modify the
this Order.
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2. All objections to the Motion or the relief requested therein that have not been
withdrawn, waived, or settled, and all reservations of rights included therein, are OVERRULED
4. Pursuant to Section 363(b) of the Bankruptcy Code, the sale of the Acquired
Assets to the Purchaser, and the transactions contemplated thereby, are approved in all respects,
and are free and clear of all obligations, liabilities and Encumbrances of every kind or nature,
5. Pursuant to Section 363(b) of the Bankruptcy Code, the Debtors are hereby
authorized and directed (a) to sell the Acquired Assets to the Purchaser and consummate the Sale
in accordance with, and subject to the terms and conditions of, the APA; (b) to transfer and
assign all right, title, and interest to all property, licenses, and rights to be conveyed in
accordance with and subject to the terms and conditions of the APA, and (c) to execute and
deliver, and are empowered to perform under, consummate and implement, the APA, and all
6. Pursuant to Sections 363(b) and (f) of the Bankruptcy Code, the Acquired Assets
shall be transferred to the Purchaser upon consummation of the APA at the Closing, free and
clear of any and all claims (as defined in Section 101(5) of the Bankruptcy Code), and all
obligations, liabilities, and Encumbrances of any kind or nature whatsoever based on successor
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or transferee liability; provided, however, that the Acquired Assets shall not be free and clear of
the Assumed Liabilities that are being assumed by the Purchaser in connection with the
7. Upon the Closing of the Sale, all obligations, liabilities, and Encumbrances of any
kind or nature whatsoever shall attach to the proceeds of the Sale to the same extent, validity,
8. Upon the Closing of the Sale, this Order shall be construed and constitute for all
purposes: (a) a general assignment, conveyance, and transfer of the Acquired Assets or a bill of
sale transferring good and marketable title in such Acquired Assets to the Purchaser; and (b) a
general assignment of all right, title, and interest of the Debtors to the Purchaser in the
Designated Contracts. Each and every federal, state, and local governmental agency or
department is hereby directed to accept any and all documents and instruments necessary and
9. All entities which are presently, or as of the Closing may be, in possession of
some or all of the Acquired Assets are hereby directed to surrender possession of the
10. All persons and entities are prohibited and enjoined from taking any action to
adversely affect or interfere with the ability of the Debtors to transfer the Acquired Assets to the
11. Except as expressly permitted by the APA or this Order, all persons and entities
holding claims or Encumbrances against or in any of the Debtors or the Acquired Assets
noncontingent, senior or subordinated), are forever barred and permanently enjoined from
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asserting against the Purchaser, its successors and assigns, their respective property and the
12. On the Closing of the Sale, each of the Debtorsr WfYX]hcfg UfY authorized and
directed to execute such documents and take all other actions as may be necessary to release its
13. Subject to the terms and conditions of this Order and the APA, the transfer of the
Acquired Assets to the Purchaser pursuant to the APA constitutes a legal, valid, and effective
transfer of the Acquired Assets, and shall vest the Purchaser with all right, title, and interest of
the Debtors in and to the Acquired Assets free and clear of all Encumbrances of any kind or
nature whatsoever.
Use of Sale Proceeds to pay PACA Claimants and Certain Claims of Origin Bank
14. Unless previously paid in full in accordance with the Budget1 or the consent of
Origin Bank, (i) the Debtors shall segregate from the proceeds of the sale at Closing the
remaining amount necessary pay all PACA claimants the amounts set forth in the PACA Notice2
in full, and (ii) within five (5) business days of Closing, the Debtors shall pay each such PACA
claimant, from such proceeds of the Sale, the amount necessary to pay such PACA claimant in
15. Within five (5) business days of Closing, the Debtors shall pay origin Bank the
amount necessary to repay the DIP Loan Obligation in full. Within two (2) business days after
the later of the Closing and the expiration of the Challenge Period (as such term is defined in the
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The Budget provides for the payment of $121,589 in PACA claims.
2
IifgiUbh hc h\Y <cifhrg I9<9 HfXYf R=cW_Yh Gc* -./T, on October 14, 2019, the Debtors filed a PACA
Notice [Docket No. 159] &h\Y pPACA Noticeq', which identified PACA claims totaling $160,685.37. Pursuant to
paragraph 6 of the PACA Order, and by virtue of the PACA Notice, Origin Bank and the Committee had three days
from the date of the PACA Notice to object to the PACA claim amounts set forth in the PACA Notice. Neither
Origin Bank nor the Committee filed a timely objection to the amounts set forth in the PACA Notice.
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Final DIP Order), the Debtors shall pay all of the remaining proceeds of the Sale toward the
satisfaction of the Pre-Petition Obligations (as defined in the Final DIP Order) less (1) the
payments to PACA claimants set forth in the preceding paragraph, (2) the payment of the DIP
Loan Obligation in (i) of this paragraph, (3) an amount equal to all unpaid administrative
expenses set forth in the Budget (but only to the extent that the Debtors have insufficient cash on
hand to pay such expenses, and not to exceed $200,000), and (4) $500,000. Any remaining
funds not disbursed in accordance with this Order shall be held by Debtors and shall only be
disbursed in accordance with a Subsequent Budget (as such term is defined in the Final DIP
No Successor Liability
16. M\Y IifW\UgYf ]g bch U pgiWWYggcfq hc any of the Debtors or their bankruptcy
estates by reason of any theory of law or equity, and the Purchaser shall not assume, or be
deemed to assume, or in any way be responsible for any liability or obligation (other than the
Assumed Liabilities) of the Debtors and/or their bankruptcy estates, including, without
limitation, any claims arising under the Worker Adjustment and Retraining Notification Act of
1988 (29 U.S.C. § 2101 et seq.( h\Y pWARN Actq' cf Ubm cZ ]hg jUf]cig ghUhY `Uw analogs of the
WARN Act (such >bWiaVfUbWYg( Wc``YWh]jY`m( pWARN Claimsq'( k]h\ fYgdect to the
17. The Purchaser has given valuable and substantial consideration under the APA for
the releases of any potential claims of successor liability of the Purchaser. Upon consummation
of the Sale, the Purchaser shall not be deemed to (a) be the successor to any of the Debtors,
(b) have, de facto or otherwise, merged with or into any of the Debtors, or (c) be a mere
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18. Except to the extent the Purchaser specifically agreed in the APA to assume the
Assumed Liabilities, or as expressly provided in this Order, the Purchaser shall not have any
liability, responsibility or obligation for any claims, liabilities or other obligations of the Debtors
or their bankruptcy estates, including, without limitation, WARN Claims and any other claims,
liabilities or other obligations related to the Acquired Assets prior to the Closing of the Sale.
Good Faith
19. The Purchaser is a purchaser in good faith of the Acquired Assets, and is entitled
20. Neither the Debtors nor any successor in interest to the Debtorsr bankruptcy
estates shall be entitled to bring an action against the Purchaser, and the Sale may not be
21. Pursuant to Sections 105(a) and 365 of the Bankruptcy Code, and subject to and
conditioned upon the Closing of the Sale, the Debtorsr assumption and assignment to the
IifW\UgYf( UbX h\Y IifW\UgYfrg Uggiadh]cb cb h\Y hYfag gYh Zcfh\ ]n the APA, of the Designated
Contracts is hereby approved, and the requirements of Section 365(b)(1) of the Bankruptcy Code
22. The Debtors are hereby authorized and directed in accordance with
Sections 105(a), 363, and 365 of the Bankruptcy Code to (a) assume and assign to the Purchaser,
effective upon the Closing of the Sale, the Designated Contracts free and clear of all
Encumbrances of any kind or nature whatsoever, and (b) execute and deliver to the Purchaser
such documents or other instruments as may be necessary to assign and transfer the Designated
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23. The Designated Contracts shall be transferred to and remain in full force and
effect for the benefit of the Purchaser in accordance with their respective terms, notwithstanding
any provision in any such Designated Contract that prohibits, restricts, or conditions such
24. Pursuant to Section 365(k) of the Bankruptcy Code, the Debtors shall be relieved
from any further liability with respect to the Designated Contracts after such assignment to and
25. All defaults or other obligations of the Debtors under the Designated Contracts
arising or accruing prior to the date of this Order shall be cured by the Purchaser at the Closing
of the Sale (or as soon thereafter as reasonably practicable) in accordance with Section 365 of the
Bankruptcy Code and the Bid Procedures Order, if applicable, or as otherwise agreed by the
parties, and the Purchaser shall have no liability or obligation arising or accruing prior to the
Closing of the Sale, except as otherwise expressly provided in the APA or to the extent such
26. The Debtors, in consultation with the Purchaser, reserve the right to withdraw any
request to assume and assign a Designated Contract prior to Closing of the Sale, for any reason,
including if a non-Debtor party contests the Cure Amount or the Cure Amount as established by
27. Each non-Debtor party to an assumed and assigned contract is forever barred and
permanently enjoined from raising or asserting against the Debtors or the Purchaser, or the
property of either of them, any assignment fee, default, breach or claim of pecuniary loss, or
condition to assignment, arising under or related to the Designated Contracts, existing as of the
date of the Sale Hearing, or arising by reason of the consummation of the transactions
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contemplated by the APA, without limitation, the Sale and the assumption and assignment of the
Designated Contracts. Any party that may have had the right to consent to the assignment of a
Section 365(e)(2)(A)(ii) of the Bankruptcy Code and otherwise if such party failed to object to
Cure Amount set forth in the Cure Notice, such Cure Amount shall be deemed to be finally
determined and any such counterparty shall be prohibited from challenging, objecting to or
denying the validity and finality of the Cure Amount at any time. The Designated Contracts and
applicable Cure Amounts are set forth on Exhibit A of this Order. Notwithstanding anything is
this Order, the landlord for h\Y =YVhcfgr WcfdcfUhY office lease in Roswell, Georgia, Pavilion
Building LLC c/o Equitable Management Corp. shall have until October 22, 2019 to file an
objection, if any, with this Court to the Cure Amount set forth on Exhibit A for that lease.
Additional Provisions
29. On the Closing, the Debtors and the Purchaser are authorized to take such actions
as may be necessary to obtain a release of any and all obligations, liabilities, and Encumbrances
in the Acquired Assets, if any, to the extent contemplated hereby and by the APA. This Order
(a) shall be effective as a determination that, upon the Closing of the Sale, all Encumbrances of
any kind or nature whatsoever existing as to the Acquired Assets prior to such closing have been
unconditionally released, discharged, and terminated except as otherwise provided in this Order
or the APA, and that the conveyances described herein have been effected, and (b) shall be
binding upon and shall govern the acts of all entities including, without limitation, all filing
officers, title agents, title companies, recorders of mortgages, recorders of deeds, registrars of
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deeds, administrative agencies, governmental departments, secretaries of state, federal, state, and
local officials, and all other persons and entities who may be required by operation of law, the
duties of their office, or contract, to accept, file, register or otherwise record or release any
documents or instruments, or who may be required to report or insure any title or state of title in
or to any of the Acquired Assets. Each and every federal, state, and local governmental agency
or department is hereby directed to accept any and all documents and instruments necessary and
30. The Purchaser and the Debtors shall take such further steps and execute such
further documents, assignments, instruments, and papers as shall be reasonably requested by the
other to implement and effectuate the transactions contemplated in this Order. All interests of
record as of the date of this Order shall be forthwith deemed removed and stricken as against the
Acquired Assets. All entities described in this paragraph and in the paragraph above are
authorized and specifically directed to strike all recorded liens, claims, rights, interests, and
Encumbrances against the Acquired Assets from their records, official and otherwise.
31. If any person or entity that has filed statements or other documents or agreements
evidencing claims, liens, Encumbrances, or interests in any of the Acquired Assets does not
deliver to the Debtors or the Purchaser prior to the Closing of the Sale, in proper form for filing
releases of liens, and easements, and any other documents necessary for the purpose of
documenting the release of all interests and other interests that the person or entity has or may
assert with respect to any of the Acquired Assets as and to the extent required by this Order or
under the APA, the Debtors and/or the Purchaser are hereby authorized to execute and file such
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statements, instruments, releases, and other documents on behalf of such persons or entity with
32. The Debtors will cooperate with the Purchaser and the Purchaser will cooperate
with the Debtors, in each case, to ensure that the transaction contemplated in the APA is
consummated.
33. The terms and provisions of the APA and this Order shall be binding in all
respects upon, and shall inure to the benefit of, the Debtors and their affiliates, successors and
assigns, their bankruptcy estates, and their creditors, the Purchaser, and its affiliates, successors
and assigns, and any affected third parties, including but not limited to, persons asserting
Encumbrances on the Acquired Assets and any subsequently appointed trustee(s) under any
34. The failure specifically to include any particular provisions of the APA in this
Order shall not diminish or impair the effectiveness of such provision, it being the intent of the
35. The APA and any related agreements, documents or other instruments may be
modified, amended or supplemented by the parties thereto, in a writing signed by both parties,
and in accordance with the terms thereof, without further order of the Court, provided that any
such modification, amendment or supplement does not have a material adverse effect on the
Debtorsr bankruptcy estates. To the extent that any provision of the APA conflicts with or is, in
any way, inconsistent with any provision of this Order, this Order shall govern and control.
Bankruptcy Cases or any order of this Court in the Bankruptcy Cases, including any order
entered after any conversion of the Bankruptcy Cases to cases under chapter 7 of the Bankruptcy
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Code, shall alter or conflict with the provisions of the APA or the terms of this Order. The
provisions of this Order and the APA and any actions taken pursuant thereto shall survive
confirmation of a plan or conversion of the Bankruptcy Cases from chapter 11 to chapter 7 of the
Bankruptcy Code.
37. The provisions of this Order are nonseverable and mutually dependent.
38. M\YfY UfY bc Vfc_Yfg ]bjc`jYX ]b WcbgiaaUh]b[ h\Y LU`Y UbX bc Vfc_Yfgr
39. Compliance with the legal requirements relating to bulk sales and transfers is
not required.
40. The Debtors and each other person having duties or responsibilities under the
APA or this Order, and their respective agents, representatives, and attorneys, are authorized and
empowered to carry out all of the provisions of the APA and to perform all acts as are consistent
with, and necessary or appropriate to, implement, effectuate and consummate the APA and this
Order and the Sale all without further notice or application to, or order of, the Court.
41. This Court shall retain exclusive jurisdiction to enforce and implement the terms
42. Within two (2) business days of entry of this Order, the Debtors shall cause a
copy of this Order to be served upon all the parties identified on the Master Service List in these
;Ub_fidhWm <UgYg Ug UddfcjYX Vm h\]g <cifhrg HfXYf >ghUV`]g\]b[ Gch]WY UbX 9Xa]b]ghfUh]jY
43. This Order constitutes a final order within the meaning of 28 U.S.C. § 158(a).
Notwithstanding the possible applicability of Rules 6004, 6006, 7062, or 9014 of the Bankruptcy
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Rules, or otherwise, the provisions of this Order shall be immediately effective and enforceable
19
Exhibit A @ Assumed and Assigned Leases
5101 WHEELIS
CROWNE CENTRE LLC DR, STE 320 MEMPHIS TN 38117 Lease $18,544.60
FONDREN PLACE
Doc 169
Road
PO BOX 171247,
OVERTON SQUARE LLC 825
C/O LOEB PROPERTIES VALLEYBROOK MEMPHIS TN 38119 Lease $17,626.00
INC. DR
1215 Hightower
C/O EQUITABLE ATLANTA GA 30350 Lease $0.00
Trail #200
MANAGEMENT CORP
Filed 10/18/19 Entered 10/18/19 17:08:55
Desc Main
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In re: ) Chapter 11
)
EAT HERE BRANDS, LLC, et al.1, ) Lead Case No. 19-61688-WLH
)
Debtors. ) Jointly Administered
)
Eat Here Brands, LLC, Babalu Atlanta #1 LLC, Babalu Atlanta #2 LLC,
Babalu Knoxville #1 LLC, Babalu Memphis #1 LLC, Babalu Memphis #2 LLC, Babalu, LLC,
and Babalu Birmingham #1 LLC (collectively, the “Debtors”) hereby move this Court
(the “Motion”), pursuant to Sections 105, 363, and 365 of title 11 of the United States Code
(the “Bankruptcy Code”) and Rules 2002, 6004, 6006, 9006, and 9008 of the Federal Rules of
Bankruptcy Procedure (the “Bankruptcy Rules”), for entry of: (i) an order (a) authorizing and
approving bid procedures for the sale of substantially all of the Debtors’ assets; (b) approving the
form of the APA (as defined below), (c) scheduling an Auction and Sale Hearing (each as
defined below); (d) approving the manner and form of notices of Sale, the Auction, and Sale
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax
identification number, are as follows: Eat Here Brands, LLC (9694); Babalu Atlanta #1 LLC (4025); Babalu Atlanta
#2 LLC (5240); Babalu Knoxville #1 LLC (3163); Babalu Memphis #1 LLC (9320); Babalu Memphis #2 LLC
(4558); Babalu, LLC (7673); and Babalu Birmingham #1 LLC (1892). The Debtors’ mailing address is 9755
Dogwood Road, Suite 200, Roswell, Georgia 30075.
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Hearing; and (e) granting related relief; and (ii) an order (a) approving the sale of substantially
all of the Debtors’ assets free and clear of all liens, claims, interests, and encumbrances; (b)
authorizing the assumption and assignment of certain executory contracts and unexpired leases;
and (c) granting related relief. In support of this Motion, the Debtors respectfully state as
follows:
1. The Debtors have negotiated a proposed transaction with Balu Holdings, LLC
(the “Stalking Horse Bidder; together with the Debtors, the “Parties”). The Stalking Horse
Bidder has agreed to purchase substantially all of the Debtors’ assets (the “Acquired Assets”),
subject to Court approval, pursuant to the Asset Purchase Agreement, dated September 9, 2019,
by and among the Parties (the “APA”). A true and correct copy of the APA is attached to this
Motion as Exhibit A. The APA transaction is subject to higher and better offers. In furtherance
of the Debtors’ efforts to maximize the value of their respective bankruptcy estates, they intend
to conduct an Auction for Qualified Bidders (as defined below) to seek other bids to purchase the
Acquired Assets. To further this process, the Debtors seek entry of two orders:
(i) authorizing and approving bid procedures (the “Bid Procedures”) for the sale of
(iii) approving procedures for the assumption and assignment of certain executory
(iii) scheduling an auction (the “Auction”) and a hearing to approve the proposed sale
2
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(iv) approving the manner and form of Notice of the Auction and Sale Hearing for the
sale of substantially all of the Debtors’ assets free and clear of all liens, claims, interest, and
Second, the “Sale Order” in a form substantially similar to the proposed order to be filed2
(as may be modified by a party other than the Stalking Horse Bidder if such other party is the
(i) approving and authorizing the sale of the Acquired Assets free and clear of all
liens, claims, interests, and encumbrances, except to the extent set forth in the APA or the
(ii) authorizing the assumption and assignment of certain executory contracts and/or
BACKGROUND
A. General Background
2. On July 30, 2019 (the “Petition Date”), the Debtors each commenced voluntary
3. The Debtors have continued in possession of their properties and have continued
4. Additional information about the Debtors’ businesses and the events leading up to
the commencement of the Bankruptcy Cases can be found in the Declaration of Ned Lidvall,
2 The Debtors will file the form of the proposed Sale Order within thirty (30) days after the filing of
this Motion.
3
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Chief Executive Officer of the Debtors, in Support of Chapter 11 Petitions and First-Day Orders
The Debtors may file further declaration(s) in support of the Bid Procedures and approval of the
5. The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and
1334. Consideration of this Motion is a core proceeding pursuant to 28 U.S.C. § 157(b)(2). The
venue of these Bankruptcy Cases and this Motion is proper pursuant to 28 U.S.C. §§ 1408
and 1409.
6. On August 20, 2019, the Court entered a Final DIP Order in these Bankruptcy
Cases [Docket No. 69] as amended by that certain Amended Final DIP Order [Docket No. 103]
(the “Final DIP Order”), which, among other things, authorized the Debtors to use cash collateral
and the proceeds of the Debtors’ DIP loan from Origin Bank pursuant to a budget, which was
attached to the DIP Financing Motion [Docket No. 16] as Exhibit C (the “Budget”).
7. The Final DIP Order provides that it shall be a default under the DIP Order if the
Debtors fail to: (i) file a bidding procedures motion with or without a stalking horse on or before
September 10, 2019; (ii) obtain entry of a bidding procedures order within twenty-four (24) days
of Debtors’ filing of the bidding procedures motion; (iii) obtain entry of an order approving the
sale of all or substantially all of the Debtors’ assets on or before October 18, 2019, or (iv) close a
sale of all or substantially all of the Debtors’ assets on or before October 27, 2019.
8. At the first day hearing in these Bankruptcy Cases, in light of the sale milestones
set forth in the Final DIP, the Court provided the Debtors with September 26, 2019 and October
18, 2019, as placeholders for hearings to consider bidding procedures related to any proposed
4
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sale of all or substantially all of their assets and a hearing to ultimately approve a proposed sale
9. If the Stalking Horse Bidder is the Successful Bidder (as defined below) and
closes on the acquisition of the Acquired Assets, it is contemplated that the Stalking Horse
Bidder will hire substantially all of the Debtors’ current employees to continue to operate the
Debtors’ businesses.
10. The following is a summary of the pertinent terms of the APA, which the Debtors
Acquired Assets: Section 1.1 of the APA describes the Acquired Assets,
which are comprised of substantially all of the Debtors’ assets.
The Acquired Assets do not include the Excluded Assets, which are
described in Section 1.2 of the APA. Excluded Assets include all claims
and causes of actions of the Debtors against third parties, including those
arising under Sections 544, 547, 548, 549, and 550 the Bankruptcy Code.
Section 1.3 includes the assignment of certain executory contracts and
unexpired leases, which will be identified in Schedules 1.1(f) and 1.3(b) of
the APA, together with any applicable cure costs.
Assumed Liabilities: The Stalking Horse Bidder will not assume or have any
responsibility with respect to any liabilities of the Debtors or the Debtors’
customers, other than the Assumed Liabilities, which will be described in
Section 2.3of the APA.
Purchase Price: $ 3,620,000 consisting of the cash component set forth in the
APA plus the Assumed Liabilities, less cure costs up to the sum of
$100,000.
3 The following summary is qualified in its entirety by reference to the provisions of the APA. In the event
of any inconsistencies between the provisions of the APA and the summary in this Motion, the terms of the APA, as
applicable, shall control. Unless otherwise defined in the summary set forth in the accompanying text, capitalized
terms shall have the meanings assigned to such terms in the APA, as applicable.
5
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(ii) by the Debtors if there has been a material breach by the Stalking
Horse Bidder, which breach the Stalking Horse Bidder has failed
to cure within thirty (30) days following its receipt of written
notice thereof from Debtors and which breach would cause the
condition set forth in Section 4.1(a) of the APA not to be satisfied;
(iv) by the Debtors if the Court enters the Sale Order approving a sale
to another Qualified Bidder (as defined in the Bid Procedures) or
confirming any Chapter 11 Plan involving any other Alternative
Transaction;
(vii) by the Stalking Horse Bidder if the Bid Procedures Order is not
entered by the Court by September 29, 2019;
(viii) by the Stalking Horse Bidder if the Sale is not entered by the Court
by October 18, 2019;
(ix) by the Stalking Horse Bidder if there has been a material breach by
a Debtor, which breach such Debtor has failed to cure within thirty
(30) days following its receipt of written notice thereof from the
Stalking Horse Bidder and which breach would cause the condition
set forth in Section 4.2(a) of the APA not to be satisfied;
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(xi) by the Stalking Horse Bidder if the Court enters the Sale Order
approving a sale to another Qualified Bidder or confirming any
Chapter 11 Plan involving any other Alternative Transaction;
(xii) by the Stalking Horse Bidder if the Closing shall not have occurred
on or before 5:00 p.m. (Central) on October 27, 2019, but only to
the extent the Closing has not occurred as of October 27, 2019 for
reasons other than the Stalking Horse Bidder’s failure to meet its
obligations under the APA;
(xiv) by the Stalking Horse Bidder, if for any reason the Debtors are
unable, or fail, to assume and assign to the Stalking Horse Bidder
at the Closing any of the Restaurant Leases (as such term is
defined in the APA) except to the extent (x) the Stalking horse
Bidder elects in accordance with the APA that a Restaurant Lease
will not constitute a Purchased Contract (as such term is defined in
the APA) or (y) the Restaurant to which the Restaurant Lease
relates is excluded from the Contemplated Transactions (as such
term is defined in the APA) in accordance with Section 11.4 of the
APA; or
Good Faith Deposit: The Stalking Horse Bidder has provided the Debtors
with a good faith deposit in the amount of $362,000.
Break-Up Fee: A break-up fee of $50,000 in the event that the Debtors close
an Alternative Transaction (as such term is defined in the APA)
(the “Break-Up Fee”). See Section 12.1 through 12.4 of APA.
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Business Information: The Debtors have made or will make available to the
Stalking Horse Bidder all books, records, correspondence, customer lists,
and technical and financial information requested by the Stalking Horse
Bidder and relating to the Acquired Assets as of the date of the Closing.
No Successor Liability: Under the APA, the Stalking Horse Bidder will
acquire all of the Debtors’ right, title and interest in and to all of the
Acquired Assets, free and clear of any liens, claims, interests, or
encumbrances.
Relief from Bankruptcy Rule 6004(h): Under the APA, the Sale Order shall
provide for the waiver of the fourteen (14) day stay period under
Rule 6004(h) of the Bankruptcy Rules.
11. General Order No. 26-2019 (the “Court Procedures Order”) promulgates certain
procedures for use in complex chapter 11 cases that requires that sale motions must highlight the
following provisions (the “Highlighted Provisions”), identify the location of any such provision
8
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whether the Debtors have agreed not to solicit competitive offers or otherwise limit the
shopping of the assets to be sold. The Debtors are seeking approval of Bid Procedures
and to continue to market their assets on a post-petition basis, so this provision
is inapplicable.
12. The Debtors respectfully submit that the inclusion of the Highlighted Provisions
GGG Partners, LLC (“GGG”), Debtors’ financial advisor, and the Debtors’ other professional
advisors, commenced marketing efforts to locate a potential purchaser for the Debtors assets.
The Debtors attempted to find a buyer or financial partner to provide the Debtors with sufficient
9
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post-petition marketing process, GGG assisted the Debtors in: (a) preparing and negotiating
confidentiality agreements for prospective purchasers; (b) preparing detailed information about
the Debtors’ businesses, operations and financial condition; (c) identifying and contacting
potential purchasers; (d) establishing a data room for due diligence to be conducted by
prospective purchasers; (e) drafting a “teaser” describing the transaction; (f) evaluating proposals
15. During the marketing period, GGG and the Debtors contacted over 55 potential
given operational, organizational, and financial information on the Debtors. Of those parties
executing confidentiality agreements, many made visits to the Debtors’ facilities. The Debtors
received seven letters of intent from parties interested in pursuing a deal with the Debtors.
16. No other offer or letter of intent received to date would have provided more
certainty of closing and value to the Debtors or their creditors than the APA with the Stalking
Horse Bidder. Should the Court approve Bid Procedures, the bid of the Staking Horse Bidder
will serve as the floor for all other interested parties for the Acquired Assets.
17. After the anticipated approval of the Bid Procedures, GGG and the Debtors will
continue to market the Debtors assets to qualify any additional buyers and sell the Acquired
Assets to the highest and best bidder through a court-approved process as set forth in the
Bid Procedures.
18. The Debtors will update a transaction introduction teaser for distribution to
potential purchasers, which summary will provide a brief overview of the Debtors and their
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operations. This teaser will be sent to parties that the Debtors believe might have a potential
interest in the Acquired Assets and the financial wherewithal to consummate the transaction
(including those who the Debtors have already contacted). A form of nondisclosure agreement
(“NDA”) will accompany the teaser. The NDA will be in a form materially similar to the one
executed by the Stalking Horse Bidder. For parties executing an NDA, the Debtors will provide
access to an electronic data room website (the “Data Room”), which contains financial
information as well as leases, contracts, and other documents pertaining to the Debtors’
operations and financial performance. All of the information may be accessed by potential
bidders (once such parties execute the NDA) via a secure invitation to the Data Room.
19. The Stalking Horse Bidder has provided the basis for soliciting opening bids for a
possible auction of the Acquired Assets. Pursuant to the Bid Procedures, if the Debtors receive
one or more bids from a Qualified Bidder (as defined in the Bid Procedures) an Auction will be
commenced on a date and time set by the Court. All bids for the Acquired Assets and at the
Auction must comply with the Bid Procedures approved by the Court. In the event of an
Auction, the Debtors intend to enter into a definitive asset purchase agreement with the
Successful Bidder.
20. The Debtors will, as necessary, supply further testimony and evidence at the
second hearing on this Motion (the “Sale Hearing”) outlining the steps they took to solicit offers
RELIEF REQUESTED
21. By this Motion, the Debtors seek entry of the Bid Procedures Order: (i) approving
the Bid Procedures (as set forth below) and establishing procedures for providing notices to
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parties to executory contracts and unexpired leases proposed to be assumed and assigned, and an
opportunity for such counterparties to object, as set forth in the Bid Procedures; and
(ii) scheduling the Auction (if necessary) and the Sale Hearing, and approving the form and
22. As described more fully in the Bid Procedures Order and summarized herein, the
Debtors seek approval to sell the Acquired Assets to a Qualified Bidder that makes the highest or
otherwise best offer for the Acquired Assets, after an additional solicitation period during which
information will be provided to any party in interest purchasing the Debtors’ assets, subject to
23. The Debtors will utilize the services of GGG and their legal counsel to help move
forward with the sale process. As set forth above, GGG will continue its pre-petition and post-
petition efforts to market the Debtors’ assets for sale to potential buyers and conduct a sale
process to aid the Debtors in identifying the highest and best bidder for the Acquired Assets.
Third parties engaging in this process will have the opportunity to conduct due diligence on the
Debtors and their assets, and any bidder constituting a Qualified Bidder shall be entitled to make
a bid at a live auction against the Stalking Horse Bidder for the Debtors’ assets.
24. As described more fully in the Bid Procedures, the Debtors request that
competing bids for the Acquired Assets be governed by the following procedures. 4 The Debtors
also request approval of procedures (the “Cure Procedures”) for notifying counterparties to
executory contracts and unexpired leases of potential Cure Costs (as defined below) with respect
4 The following description of the Bid Procedures is only a summary of the terms of the Bid Procedures set
forth in the Bid Procedures Order. The following summary is qualified in its entirety by reference to the provisions
of the Bid Procedures. In the event of any inconsistencies between the provisions of the Bid Procedures and the
terms herein, the terms of the Bid Procedures shall control.
12
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to those executory contracts and unexpired leases that the Debtors may seek to assume and
a. Qualified Bids. The Debtors shall solicit bids through October 10, 2019
(the “Bid Deadline”). Each competing bidder other than the Stalking Horse Bidder shall, on or
before 12:00 p.m. (prevailing Eastern Time) on the Bid Deadline, deliver to the Debtors as
follows (collectively, a “Qualified Bid”):
-and-
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(which was filed with the Court as Exhibit A to the Sale Motion);
(6) contain a list of the Debtors’ executory contracts and unexpired
leases with respect to which the bidder seeks assignment from the
Debtors; (7) fully disclose the identity of each entity that will be
bidding for the Acquired Assets or otherwise participating in
connection with such bid; and (8) indicate whether such competing
bidder agrees to act as the Back-Up Bidder (as defined below) in
the event that such competing bidder is not the Successful Bidder
(as defined below), as well as identify any date past which it would
not serve as the Back-Up Bidder.
b. Credit Bid by Prepetition and DIP Lender. Origin Bank, serves as the
Debtors’ prepetition secured lender and the Debtors’ post-petition secured lender in these
Bankruptcy Cases. Origin Bank shall be entitled to credit bid up to the full value of its pre-
petition and post-petition secured claims totaling $5,596,700.00 plus any amounts then extended
to the Debtors under the DIP loan (which additional amount shall be provided to any Qualified
Bidder at the Auction).
c. Qualified Bidders. Any initial overbid for the Acquired Assets shall be in
the amount equal to the sum of $3,720,000. In the event that the Debtors shall reasonably
determine that such overbid is a higher and better bid than that set forth in the APA, the Stalking
Horse Bidder shall have the right to amend the APA as necessary in its reasonable discretion, as
agreed with the Debtors, in order to cause the Stalking Horse Bidder’s bid format to be
comparable to such higher and better bid (for the avoidance of doubt, the amendment of the APA
by the Stalking Horse Bidder will in no event result in the cancellation of the Auction if the
Debtors have received at least one (1) other Qualified Bid). Only those persons or entities who
have submitted a Qualified Bid in compliance with the Bid Procedures Order shall be
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a “Qualified Bidder”; provided, however, that the Stalking Horse Bidder shall be deemed to be a
Qualified Bidder for all purposes under the Bid Procedures. Each Qualified Bidder shall be
invited to attend the Auction at the law office of Debtors’ counsel of record, Arnall Golden
Gregory LLP, 171 17th Street, N.W., Suite 2100, Atlanta, Georgia 30363-1031, which Auction
must be attended in person by the Qualified Bidder or an authorized representative of the
Qualified Bidder.
i. At least 24 hours prior to the Auction, the Debtors will notify all
Qualified Bidders in writing of the highest and best Qualified Bid,
as determined by Debtors, in consultation with the Committee and
Origin Bank, which may be the APA (the “Baseline Bid”).
Complete copies of all asset purchase agreements, amendments to
the APA, and all other bid materials submitted by each other
Qualified Bidder will be available to each other Qualified Bidder
upon request to Debtors’ counsel of record.
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iv. If the Debtors do not receive at least one Qualified Bid from a
Qualified Bidder other than the Stalking Horse Bidder, then (1) no
Auction shall be conducted, the Debtors and the Stalking Horse
Bidder are authorized to move forward with the transactions
contemplated by the APA (subject to the entry of the Sale Order)
and the Sale Hearing, the transaction consideration contemplated
by the APA will be determinative of the value of the Acquired
Assets, and the Court shall not consider any competing or
alternative offers or proposals to purchase the Acquired Assets;
and (2) the Debtors will file on the docket in the Lead Bankruptcy
Case a “Notice of Cancellation of Auction.”
f. Successful Bidder. The Debtors may base the selection of the Successful
Bidder and Back-Up Bidder on the following factors, among others: purchase price, liabilities
assumed in the bid (provided that in no event shall the cash component required for a Qualified
Bid be reduced as a result of a bidder’s proposed assumption of liabilities), retention of the
Debtors’ employees, the markup of the form of asset purchase agreement submitted with the bid,
and the apparent ability of a Qualified Bidder to close the proposed transaction. The Debtors
may (a) reject any bid that is (i) inadequate or insufficient, (ii) not in conformity with the
requirements of the Bankruptcy Code, the Bid Procedures, or the terms and conditions of sale, or
(iii) contrary to the best interests of the Debtors, their bankruptcy estates, and their creditors;
and/or (b) refuse to consider any bid that fails to comply with the Bid Procedures. After the
determination of the Successful Bidder, the Debtors shall (i) if the Successful Bidder is a bidder
other than the Stalking Horse Bidder, promptly execute the asset purchase agreement previously
executed and submitted by such Successful Bidder, together with any changes thereto
necessitated by the parties’ actions at the Auction, or (ii) if the Successful Bidder is the Stalking
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Horse Bidder, move forward with the transactions contemplated by the APA. All rights of the
Stalking Horse Bidder, (if any) to object to the Debtors’ selection of a Successful Bidder or
Back-Up Bidder, or to object to the consummation of the sale transaction represented by either
such bid, are preserved and shall be considered by the Court at the Sale Hearing.
i. Within two days (2) days after the Bid Deadline the Debtors will
file a notice of potential assumption, assignment, and/or transfer of
executory contracts and unexpired leases identified by each
Qualified Bidder (the “Designated Executory Contracts”),
substantially in the form attached to this Motion as Exhibit D
(the “Notice of Assumption and Assignment”), and serve such
notice on all non-debtor parties to the Designated Executory
Contracts (the “Contract Notice Parties”). For avoidance of doubt,
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25. The Debtors further seek approval of the APA and approval for the Debtors to
assume the APA, subject to the Bidding Procedures and auction process. As set forth above, the
APA provides the framework for consummating the transactions negotiated between the Debtors
26. The DIP Loan procured by the Debtors matures on October 27, 2019. The
timeline provided in this Motion contemplates a continued marketing and sale process, an
opportunity for third parties to conduct due diligence on the Debtors’ assets, an auction and
subsequent sale all within this period and prior to the maturity of the DIP Loan. If the DIP Loan
were to mature before the closing of the sale, the Debtors would deplete their funds and may be
unable to operate, including make payments to their employees, vendors, and their other
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creditors. As a result, the Debtors may experience a cessation of business, destroying all going
concern value and seriously harming the Debtors and their respective bankruptcy estates.
27. Given the Debtors marketing efforts to date, the proposed timeline is sufficient to
permit third parties interested in purchasing the Acquired Assets to conduct due diligence and
tender a bid. Interested parties will have sufficient notice of the proposed sale and an
opportunity to consider and digest the terms of the APA to determine whether tendering a bid is
in their best interests, thereby maximizing the likelihood of competitive bidding under the
circumstances. In light of the Debtors’ limited resources, the proposed timeline sets out a
framework that will maximize the value of the Debtors’ with minimal cost, which is in the best
28. Notice of Bid Procedures Hearing. On the date that this Motion is filed, the
Debtors propose to serve this Motion and all exhibits thereto, including the APA, and a copy of
the proposed Bid Procedures Order, by first-class mail, postage prepaid, upon the following
parties: (i) all parties identified on the Master Service List in these Bankruptcy Cases, and (ii) via
electronic mail5 on all persons or entities known or reasonably believed to have an interest in
purchasing the Acquired Assets. The Debtors also propose to serve any Order and Notice or
Notice of Hearing related to this Motion upon the following parties: (i) the entire creditor matrix
in each of these Bankruptcy Cases and (ii) via electronic mail on all persons or entities known or
29. Notice of Bid Procedures Order and Bidding Procedures, Auction, and
Sale Hearing. The Debtors propose to file the Sale Notice substantially in the form attached to
5 The Debtors contacted parties interested in purchasing the Acquired Assets, including the Stalking Horse
Bidder, via electronic mail.
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this Motion as Exhibit C and serve such notice upon: (i) the entire creditor matrix in each of the
Bankruptcy Cases and (ii) via electronic mail on all persons or entities known or reasonably
believed to have an interest in purchasing the Acquired Assets. The Debtors also propose to file
a Notice of Assumption related to the Designated Executory Contracts in the APA within two
days (2) of the entry of the Bid Procedures Order, and serve such notice on all of the Contract
Notice Parties.
30. Post-Auction Notice. As soon as possible after the conclusion of the Auction, the
Debtors shall file, but not serve, a notice identifying the highest and best bid selected and
announced by the Debtors as the Successful Bidder, and the bid of the Back-Up Bidder. In the
event that the Successful Bidder identifies any additional executory contracts or unexpired leases
that it did not previously designate as Designated Executory Contracts, the Debtors shall file a
Notice of Assumption and Assignment identifying such additional agreements, and serve such
31. Notice of Cure Related to Designated Contracts by Qualified Bidders Other than
the Staking Horse Bidder. Within two days (2) days after the Bid Deadline the Debtors propose
to file a Notice of Assumption and Assignment substantially in the form attached to this Motion
as Exhibit D specifying the Designated Executory Contracts identified by each Qualified Bidder,
B. Sale Order
32. The Debtors request that this Court set the Sale Hearing on or about
October 18, 2019. At the Sale Hearing, pending the outcome of the Auction and as set forth in
the Bid Procedures, the Debtors intend to seek entry of a Sale Order (a) approving the sale to the
Successful Bidder, free and clear of all liens, claims, interests, and encumbrances
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(collectively, “Interests”), (b) authorizing the assumption and assignment of the Designated
Executory Contracts identified by the Successful Bidder; and (c) authorizing the Debtors to pay
Origin Bank at closing: (i) the amount of sales proceeds necessary to repay Origin Bank’s post-
petition DIP loan in full and (ii) not less than fifty percent (50%) of all excess sales proceeds
(after considering all then budgeted administrative expenses) toward satisfaction of the Pre-
Petition Obligations (as defined in the Final DIP Order), provided that, (a) the Challenge Period
(as defined in the Final DIP Order) shall have expired on or before the closing of the Sale and
(b) no party with standing has filed a Challenge Action (as defined in the Final DIP Order) prior
33. The business judgment rule “operates as a presumption ‘that directors making a
business decision, not involving self-interest, act on an informed basis, in good faith and in the
honest belief that their actions are in the corporation’s best interest.’” Continuing Creditors’
Comm. of Star Telecomms., Inc. v. Edgecomb, 385 F. Supp. 2d 449, 462 (D. Del. 2004) (quoting
Grobow v. Perot, 539 A.2d 180, 187 (Del. 1988)); see also In re Diplomat Constr., Inc.,
481 B.R. 215, 218-19 (Bankr. N.D. Ga. 2012) (Diehl, J.); Ad Hoc Comm. of Equity Holders of
Tectonic Network, Inc. v. Wolford, 554 F. Supp. 2d 538, 555 n.111 (D. Del. 2008); In re Bal
Harbour Club, Inc., 316 F.3d 1192, 1194-95 (11th Cir. 2003); Int’l Ins. Co. v. Johns, 874 F.2d
1447, 1458 (11th Cir. 1989). Thus, this Court should grant the relief requested in this Motion if
the Debtors demonstrate a sound business justification in favor of the requested relief. See In re
Del. Hudson Ry. Co., 124 B.R. 169, 179 (Bankr. D. Del. 1991).
34. The Debtors have determined that a sale of their assets in accordance with the
APA after their marketing and sale process will be the most effective way to maximize the value
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of the Debtors’ bankruptcy estates for the benefit of their creditors in view of the Debtors’ pre
and post-petition marketing efforts to date and the Debtors’ limited resources. The proposed
transaction will also preserve the employment of many the Debtors’ employees. The Debtors
believe that the proposed Bid Procedures will bring the highest and best offer for the Debtors’
assets under the circumstances. The Debtors believe that the assumption of the APA, the
implementation of the Bid Procedures and the timeline proposed in this Motion will further
achieve this goal. Absent approval of the sale of the Acquired Assets to the highest and best
bidder, the Debtors will likely face a piecemeal liquidation and the termination of all of their
employees. As such, the Debtors believe that they have demonstrated a sound business
A. Bid Procedures
35. The Bid Procedures – including the provision of the Break-Up Fee and contingent
Expense Reimbursement – are appropriate to generate maximum value for the Debtors’
stakeholders. The Bid Procedures, inter alia, (i) will provide opportunity to further market the
Debtors’ assets and provide potential bidders with sufficient notice and an opportunity to acquire
information necessary to submit a timely and informed bid, (ii) are designed to maximize the
value received for the Acquired Assets in view of the Debtors’ limited resources by providing
maximum opportunity to engender a competitive bidding process in which all potential bidders
are encouraged to participate and submit competing bids, and (iii) will provide the Debtors with
the opportunity to consider all competing offers and to select the highest or otherwise best offer
36. The proposed Break-Up Fee of $50,000 (which is less than 1.5% of the cash
component of the purchase price in the APA) and contingent Expense Reimbursement of
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$25,000 (which is only payable in the event that the Debtors materially default and do not close
an Alternative Transaction) are necessary to compensate the Stalking Horse Bidder for funds and
other resources deployed to conduct due diligence on the Debtors’ assets, negotiate the APA
with the Debtors, and participate in the sale process. The due diligence and negotiation
performed by the Stalking Horse Bidder have been necessary to providing the market with an
indication of the value of the Debtors’ assets and has provided a benchmark for third parties to
determine whether to submit a bid. The Stalking Horse Bidder has provided significant benefit
to the Debtors’ bankruptcy estates and would not have participated in the sale process absent the
Break-Up Fee and contingent Expense Reimbursement. Accordingly, the Debtors respectfully
submit that the Break-Up Fee and contingent Expense Reimbursement are warranted and
37. The Debtors request this Court’s approval of the Bid Procedures, including the
Break-Up Fee and contingent Expense Reimbursement and the dates established thereby for an
Auction and a Sale Hearing (including shortening notice). Accordingly, the Debtors and all
parties-in-interest can be assured that the consideration for the Acquired Assets will be fair and
reasonable, and there are sound business reasons to approve the Bid Procedures.
38. Section 365(a) of the Bankruptcy Code provides, in pertinent part, that a debtor in
possession “subject to the court’s approval, may assume or reject any executory contract or
[unexpired] lease of the debtor.” 11 U.S.C. § 365(a). The standard governing bankruptcy court
whether the debtor’s reasonable business judgment supports assumption or rejection. See e.g.,
In re Stable Mews Assoc., Inc., 41 B.R. 594, 596 (Bankr. S.D.N.Y. 1984). If the debtor’s
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business judgment has been reasonably exercised, a court should approve the assumption or
rejection of an unexpired lease or executory contract. See Sharon Steel Corp. v. Nat’l Fuel Gas
39. The business judgment test “requires only that the trustee [or debtor-in-
possession] demonstrate that [assumption or] rejection of the contract will benefit the estate.”
Wheeling-Pittsburgh Steel Corp. v. West Penn Power Co. (In re Wheeling-Pittsburgh Steel
Corp.), 72 B.R. 845, 846 (Bankr. W.D. Pa. 1987) (quoting In re Stable Mews Assoc., 41 B.R.
594, 596 (Bankr. S.D.N.Y. 1984)). Any more exacting scrutiny would slow the administration
of a debtor’s estate and increase costs, interfere with the Bankruptcy Code’s provision for private
control of administration of the estate, and threaten this Court’s ability to control a case
impartially. See Richmond Leasing Co. v. Capital Bank, N.A., 762 F.2d 1303, 1311 (5th Cir.
1985). Moreover, pursuant to Section 365(b)(1) of the Bankruptcy Code, for a debtor to assume
an executory contract, it must “cure, or provide adequate assurance that the debtor will promptly
cure,” any default, including compensation for any “actual pecuniary loss” relating to such
elect to assign such contract. See In re Rickel Home Ctr., Inc., 209 F.3d 291, 299 (3d Cir. 2000)
(“The Code generally favors free assignability as a means to maximize the value of the debtor’s
estate.”); see also In re Headquarters Doge, Inc., 13 F.3d 674, 682 (3d Cir. 1994)
(noting purpose of Section 365(f) is to assist trustee in realizing the full value of the
debtor’s assets).
41. Section 365(f) of the Bankruptcy Code provides that the “trustee may assign an
executory contract . . . only if the trustee assumes such contract . . . and adequate assurance of
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future performance” depends on the facts and circumstances of each case, but should be given
“practical, pragmatic construction.” See Carlisle Homes, Inc. v. Arrari (In re Carlisle Homes,
Inc., 103 B. R. 524, 538 (Bankr. D.N.J. 1989); see also In re Natco Indus., Inc., 54 B.R. 436, 440
(Bankr. S.D.N.Y. 1985) (adequate assurance of future performance does not mean absolute
assurance that debtor will thrive and pay rent). Among other things, adequate assurance may be
given by demonstrating the assignee’s financial health and experience in managing the type of
enterprise or property assigned. See In re Bygaph, Inc., 56 B.R. 596, 605-06 (Bankr. S.D.N.Y.
lease from debtor has financial resources and has expressed willingness to devote sufficient
42. Adequate assurance of future performance shall be presented at the Sale Hearing.
If necessary, the Debtors will adduce facts at the Sale Hearing to refute any objection,
demonstrating the financial wherewithal of the Successful Bidder, and its willingness and ability
to perform under any executory contracts and unexpired leases to be assumed and assigned.
The Sale Hearing therefore will provide this Court and other interested parties with ample
opportunity to evaluate and, if necessary, challenge the ability of any Successful Bidder to
provide adequate assurance of future performance under the executory contracts and unexpired
43. Accordingly, the Debtors believe that the procedures proposed in this Motion for
executory contracts and unexpired leases being assumed and assigned on the Closing Date are
appropriate and reasonably tailored to provide Contract Notice Parties with adequate notice in
the form of the Notice of Potential Assignment and Assumption of the proposed assumption
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and/or assignment of their applicable executory contract or unexpired lease, as well as proposed
44. Furthermore, to the extent that any defaults exist under any executory contract or
unexpired lease that is to be assumed and assigned in connection with any sale of the Assets, the
Successful Bidder or the Debtors (as applicable under the Successful Bidder’s asset purchase
agreement) will cure any such default contemporaneously with or as soon as practicable after
45. Accordingly, this Court therefore has a sufficient basis to authorize the Debtors to
assume and assign executory contracts and unexpired leases as may be set forth in any
46. Section 363(b)(1) of the Bankruptcy Code provides that a debtor, “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. § 363(b)(1). Although Section 363 of the Bankruptcy Code does not
specify a standard for determining when it is appropriate for a court to authorize the use, sale or
lease of property of the estate, bankruptcy courts have found that a debtor’s sale or use of assets
outside the ordinary course of business should be approved if the debtor can demonstrate a sound
business justification for the proposed transaction. See, e.g., In re Eagle Picher Holdings, Inc.,
2005 Bankr. LEXIS 2894, at ¶ 3 (Bankr. S.D. Ohio 2005); In re Martin, 91 F.3d 389, 395 (3d
Cir. 1996); In re Abbotts Dairies of Pa., Inc., 788 F.2d 143 (3d Cir. 1986); In re Lionel Corp.,
722 F.2d 1063, 1071 (2d Cir. 1983). Once a debtor articulates a valid business justification,
“[t]he business judgment rule ‘is a presumption that in making the business decision the directors
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of a corporation acted on an informed basis, in good faith and in the honest belief that the action
was in the best interests of the company.’” In re S.N.A. Nut Co., 186 B.R. 98 (Bonier. N.D. Ill.
1995); see also In re Integrated Res., Inc., 147 B.R. 650, 656 (Bankr. S.D.N.Y. 1992); In re
Johns-Manville Corp., 60 B.R. 612, 615-16 (Bankr. S.D.N.Y. 1986) (“a presumption of
47. The sale of a debtor’s assets is appropriate where there are sound business reasons
behind such a determination. See Myers v. Martin (In re Martin), 91 F.3d 389, 395 (3d Cir.
1996); see also Dai-Ichi Kangyo Bank, Ltd. v. Montgomery Ward Holding Corp., (In re
Montgomery Ward Holding Corp.), 242 B.R. 147, 153 (Bankr. D. Del. 1999); In re Del. &
Hudson Ry. Co., 124 B.R. 169, 176 (D.D.C. 1991); Stephens Indus., Inc. v. McClung, 789 F.2d
386 (6th Cir. 1986) (sale of substantially all assets of estate authorized where “a sound business
48. The Debtors have negotiated the APA with the Stalking Horse Bidder, which is an
arm’s length third party with a knowledge and understanding of the Acquired Assets and their
value. The Debtors will utilize a period of time during which interested third parties may
conduct diligence into the Debtors’ assets and submit a competing bid therefor. If one or more
Qualified Bids are received in addition to the APA, the Debtors will hold an open auction and
choose which proposal will provide the maximum benefit for the Debtors’ creditors. If the APA
is the Successful Bid, it will constitute the highest and best offer for the Debtors’ assets
attainable.
49. In addition, all creditors and parties in interest will receive adequate notice of the
Bid Procedures and Sale Hearing as set forth above. Such notice is reasonably calculated to
provide timely and adequate notice to the Debtors’ major creditor constituencies, those parties
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most interested in these Bankruptcy Cases, those parties potentially interested in bidding on the
Acquired Assets, and others whose interests are potentially implicated by any proposed
sale transaction.
50. Given the Debtors’ financial condition and current circumstances, the Debtors
reasonably determined that the most effective way to preserve the value of their assets for the
benefit of all of their stakeholders is through sale of the Acquired Assets in accordance with the
(ii) Sale Free and Clear of Liens, Claims, Interests, and Encumbrances
51. Section 363(f) of the Bankruptcy Code permits a debtor to sell assets free and
clear of all liens, claims, interests, 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). Section 363(f) of the Bankruptcy Code authorizes a debtor to sell assets
(a) applicable non-bankruptcy law permits a 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. § 363(f).
52. Because Section 363(f) of the Bankruptcy Code is drafted in the disjunctive,
satisfaction of any one of its five requirements will suffice to permit the sale of the Acquired
Assets “free and clear” of all Interests. See Mich. Emp’t Sec. Comm’n v. Wolverine Radio Co.
(In re Wolverine Radio Co.), 930 F.2d 1132, 1147 n.24 (6th Cir. 1991) (stating that Bankruptcy
Code section 363(f) is written in the disjunctive; holding that the court may approve the sale
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“free and clear” provided at least one of the subsections of Bankruptcy Code Section 363(f) is
met); In re Trans World Airlines. Inc., No. 01-0056, 2001 WL 1820325, at *3 (Bankr. D. Del.
Mar. 27, 2001) (“Bankruptcy courts have long had the authority to authorize the sale of estate
assets free and clear even in the absence of § 363(f).”); Citicorp Homeowners Servs., Inc. v.
Elliot, 94 B.R. 343, 345 (Bankr. E.D. Pa. 1988) (stating that Section 363(f) of the Bankruptcy
Code is written in the disjunctive; holding that if any of the five conditions of Section 363(f) are
met, the trustee has the authority to conduct the sale free and clear of all liens).
53. One or more of the prongs of Section 363(f) have been satisfied with respect to
each of the Acquired Assets. The Debtors’ believe that their senior secured lender, Origin Bank,
has consented to the proposed sale provided that the Bid Procedures are followed. In addition,
notice of the Debtors’ intent to sell the Acquired Assets to the Successful Bidder free and clear
of all Interests have been provided to all of the Debtors’ creditors and other interested parties,
with ample opportunity to object. Absent objection, such parties should be deemed to have
consented to the sale free and clear of any Interest in the Acquired Assets sold, with such
Interests attaching to the proceeds of such sale. If applicable, the Debtors are prepared to
demonstrate at the Sale Hearing that they have satisfied one or more of the prongs of
Section 363(f) of the Bankruptcy Code to the extent this Motion draws objection of any
interested party.
54. The Debtors also request that they be authorized to disburse the proceeds of the
sale of the Acquired Assets sufficient to repay Origin Bank’s post-petition DIP loan in full and
not less than fifty percent (50%) of all excess sales proceeds (after considering all then budgeted
administrative expenses) toward satisfaction of the Pre-Petition Obligations (as defined in the
Final DIP Order), provided that, (a) the Challenge Period (as defined in the Final DIP Order)
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shall have expired on or before the closing of the Sale and (b) no party with standing has filed a
Challenge Action (as defined in the Final DIP Order) prior to the expiration of the
Challenge Period.
55. Pursuant to Section 363(m) of the Bankruptcy Code, a good faith buyer is one
who purchases assets for value, in good faith, and without notice of adverse claims. See In re
Abbotts Dairies, 788 F.2d at 147; In re Mark Bell Furniture Warehouse, Inc., 992 F.2d 7, 9
(1st Cir. 1993); In re Willemain v. Kivitz, 764 F.2d 1019, 1023 (4th Cir. 1985).
11 U.S.C. § 363(m).
56. Section 363(m) “fosters the ‘policy of not only affording finality to the judgment
of the bankruptcy court, but particularly to give finality to those orders and judgments upon
which third parties rely.’” In re Chateaugay Corp., Case No. 92 CIV. 7054 (PKL), 1993 WL
159969, *3 (S.D.N.Y. May 10, 1993) (quoting In re Abbotts Dairies of Penn., Inc., 788 F.2d 143
at 147); see also Allstate Ins. Co. v. Hughes, 174 B.R. 884, 888 (S.D.N.Y. 1994)
(“Section 363(m) . . . provides that good faith transfers of property will not be affected by the
reversal or modification on appeal of an unstayed order, whether or not the transferee knew of
the pendency of the appeal”); In re Stein & Day, Inc., 113 B.R. 157, 162 (Bankr. S.D.N.Y. 1990)
(“pursuant to 11 U.S.C. § 363(m), good faith buyers are protected from the reversal of a sale on
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57. The Stalking Horse Bidder is a third party unrelated to the Debtors that has
conducted considerable due diligence on the Acquired Assets and negotiated the APA from an
arm’s length position. The Stalking Horse Bidder has been represented by third party legal
counsel in connection with the negotiations of the APA. If the Successful Bidder is the Stalking
Horse Bidder, the Stalking Horse Bidder will have been selected as the highest and best bid after
a sale process market-tested by the Auction. In such a case, the Debtors respectfully request that
the Stalking Horse Bidder be afforded “good faith” buyer status within the meaning of
58. If applicable, the Debtors will adduce facts at the Sale Hearing demonstrating that
the Successful Bidder for the Acquired Assets had negotiated at arm’s length, with all parties
represented by their own counsel. Accordingly, the Sale Order will include a provision that the
Successful Bidder for the Acquired Assets is a “good faith” buyer within the meaning of
Section 363(m) of the Bankruptcy Code. The Debtors believe that providing any
Successful Bidder engaging in a sale transaction with such protection will ensure that the
maximum price will be received by the Debtors for the Acquired Assets, and that the closing of
59. Rule 6004(h) of the Bankruptcy Rules provides that an “order authorizing the use,
sale or lease of property . . . is stayed until the expiration of 14 days after entry of the order,
unless the court orders otherwise.” Additionally, Rule 6006(d) of the Bankruptcy Rules provides
that an “order authorizing the trustee to assign an executory contract or unexpired lease . . . is
stayed until the expiration of the 14 days after the entry of the order, unless the court orders
otherwise.” The Debtors request that the Bid Procedures Order and the Sale Order be effective
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immediately by providing that the 14-day stays applicable under Rules 6004(h) and 6006(d) of
NOTICE
60. Notice of this Motion has been given to the following parties, or in lieu thereof, to
their counsel: (a) the parties identified on the Master Service List in these Bankruptcy Cases as
[Docket No. 33], and (b) via electronic mail on all persons or entities known or reasonably
believed to have asserted an interest in purchasing the Acquired Assets. The Debtors will also
serve a Notice of Hearing on this Motion: (i) on the entire creditor matrix in each of the
Bankruptcy Cases and (ii) via electronic mail on all persons or entities known or reasonably
believed to have an interest in purchasing the Acquired Assets. In light of the nature of the relief
NO PRIOR REQUEST
61. No prior motion for the relief requested in this Motion has been made to this
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WHEREFORE, the Debtors request that this Court: (i) enter the Bid Procedures Order,
(ii) approve the form of the Sale Notice and to the extent necessary shorten notice thereto,
(iii) approve the form of the Notice of Assumption and Assignment and to the extent necessary
shorten notice thereto, (iv) enter the Sale Order (if applicable), and (v) grant the Debtors such
other and further relief as the Court may deem just and appropriate.
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In re: ) Chapter 11
)
EAT HERE BRANDS, LLC, et al.1, ) Lead Case No. 19-61688-WLH
)
Debtors. ) (Joint Administration Requested)
)
Ned Lidvall makes this declaration pursuant to 28 U.S.C. § 1746, and states:
1. My name is Ned Lidvall and I am over 21 years of age. I am the Chief Executive
Officer of each of the above-captioned debtors and debtors in possession, Eat Here Brands, LLC,
Babalu Atlanta #1 LLC, Babalu Atlanta #2 LLC, Babalu Knoxville #1, LLC, Babalu Memphis
#1, LLC, Babalu Memphis #2 LLC, Babalu, LLC, and Babalu Birmingham #1, LLC
(collectively, the “Debtors”), and one of the Managers on the Board of Managers of Eat Here
Brands, LLC. On July 30, 2019 (the “Petition Date”), each of Debtors commenced the above-
captioned bankruptcy cases (the “Bankruptcy Cases”) under Chapter 11 of Title 11 of the United
of the various first day pleadings as described in more detail below. I am one of the four
founders of Eat Here Brands, LLC, and served as Chief Executive Officer from 2012 through
1
The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax
identification number, are as follows: Eat Here Brands, LLC (9694); Babalu Atlanta #1 LLC (4025); Babalu Atlanta
#2 LLC (5240); Babalu Knoxville #1 LLC (3163); Babalu Memphis #1 LLC (9320); Babalu Memphis #2 LLC
(4558); Babalu, LLC (7673); and Babalu Birmingham #1 LLC (1892). The Debtors’ mailing address is 9755
Dogwood Road, Suite 200, Roswell, Georgia 30075.
1
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2014. On May 15, 2019, I re-joined the Debtors as Chief Executive Officer in order to assist the
3. Eat Here Brands, LLC, is a Delaware limited liability company (“Eat Here”), and
was formed on or about May 23, 2012, by the filing of Articles of Organization with the
Delaware Secretary of State. Eat Here currently has 52 members and is Managed by its Board of
Managers consisting of William H. Latham, David A. Roberts, Ned Lidvall, Steven Rockwell,
and Ronald A. Rosati. Eat Here owns 100% of the membership interests of the other Debtors
(as well as certain other non-debtor entities) as well as the trademarks and other intellectual
(“Babalu Atlanta #1”), and was formed on or about June 28, 2016, by the filing of Articles of
Organization with the Georgia Secretary of State. Babalu Atlanta #1’s sole Member is Eat Here.
Babalu Atlanta #1’s Managers are William H. Latham and David A. Roberts. Babalu Atlanta #1
owns the restaurant assets located at the Debtors’ restaurant located at 33 Peachtree Place, N.E.,
(“Babalu Atlanta #2”), and was formed on or about April 12, 2018, by the filing of Articles of
Organization with the Georgia Secretary of State. Babalu Atlanta #2’s sole Member is Eat Here.
Babalu Atlanta #2’s Managers are William H. Latham and David A. Roberts. Babalu Atlanta #2
owns the restaurant assets located at the Debtors’ developing restaurant located at Roswell
2
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(“Babalu Knoxville #1”), and was formed on or about January 23, 2015, by the filing of Articles
of Organization with the Tennessee Secretary of State. Babalu Knoxville #1’s sole Member is
Eat Here. Babalu Knoxville #1’s Sole Manager is William H. Latham. Babalu Knoxville #1
owns the restaurant assets located at the Debtors’ restaurant located at located at 412 S. Gay
(“Babalu Memphis #1”), and was formed on August 11, 2013, by the filing of Articles of
Organization with the Tennessee Secretary of State. Babalu Memphis #1’s sole Member is
Eat Here. Babalu Memphis #1’s Managers are William H. Latham and Ned Lidvall. Babalu
Memphis #1 owns the restaurant assets located at the Debtors’ restaurant located at 2115
(“Babalu Memphis #2”), and was formed on or about June 28, 2016, by the filing of Articles of
Organization with the Tennessee Secretary of State. Babalu Memphis #2’s sole Member is
Eat Here. Babalu Memphis #2’s Managers are William H. Latham and David A. Roberts.
Babalu Memphis #2 owns the restaurant assets located at the Debtors’ restaurant located at 6450
formed on or about July 1, 2010, by the filing of Articles of Organization with the Mississippi
Secretary of State. The original Members of Babalu were William H. Latham and David A.
Roberts. On or about May 23, 2012, pursuant to that certain Contribution Agreement, Mr.
Latham and Mr. Roberts contributed their membership interests in Babalu to Eat Here for the
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Eat Here. Babalu’s Managers are William H. Latham and David A. Roberts. Babalu owns the
restaurant assets located at the Debtors’ restaurant located at 622 Duling Avenue, Jackson,
(“Babalu Birmingham #1”), and was formed on or about October 16, 2013, by the filing of
Articles of Organization with the Alabama Secretary of State. Babalu Birmingham #1’s sole
Member is Eat Here. Babalu Birmingham #1’s Managers are William H. Latham and Ned
Lidvall. Babalu Birmingham #1 owns the restaurant assets located at the Debtors’ restaurant
11. The Babalu concept was created by two successful restaurateurs, William H.
Latham and David A. Roberts, who have owned or operated restaurants both in and outside of
Jackson, Mississippi, for more than 30 years. The Babalu concept was named after the signature
song of the television character Ricky Ricardo, who was played by Desi Arnaz in the television
comedy series I Love Lucy. The Babalu concept features upscale Latin-inspired cuisine born out
of the love and respect for food and for music genres such as the guaracha, cha-cha, and Latin
jazz, which is a major component of the Babalu concept (the restaurants commonly plays Cuban,
Spanish, and Latin music of all genres). In 2010, Mr. Latham and Mr. Roberts opened the first
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12. In early 2012, Mr. Latham and Mr. Roberts formed Eat Here to function as the
Babalu concept’s restaurant holding company. At that time, Eat Here held an interest in the
Jackson Restaurant, a Five Guys franchise that owned and operated four Five Guys restaurants in
Mississippi, and two fine dining restaurants. Eat Here was initially financed through a capital
contribution in exchange for common equity by the four founders (including Mr. Latham and
Mr. Roberts) and the sale of preferred stock through a private placement offering memorandum.
In 2015, Eat Here sold the Five Guys franchise, and then sold the fine dining restaurants in 2017
and 2019 respectively, in order to focus on the development of the Babalu concept.
13. In 2014, Eat Here opened the Memphis Restaurant and later that year opened the
Birmingham Restaurant. In 2015, Babalu opened the Knoxville Restaurant in the historic JC
Penney building in downtown Knoxville. In July of 2016, Babalu opened a restaurant in the
In 2017, Babalu opened the Memphis East Restaurant, and then the Atlanta Restaurant in the
heart of Midtown Atlanta. Later in 2017, Babalu opened a location in Chapel Hill, North
Carolina (the “Chapel Hill Restaurant”) and then another in Lexington, Kentucky
(the “Lexington Restaurant”). In 2018, Babalu started, but has not yet completed, construction
14. Pursuant to that certain Business Loan Agreement dated as of June 14, 2016,
between Eat Here and Origin Bank (the “Business Loan Agreement”), Origin Bank
(“Origin” or ”the “Prepetition Lender”) provided an asset-based loan to Eat Here in the
maximum principal amount of $3 million (the “Business Loan”), which Business Loan is
evidenced by that certain promissory note dated June 14, 2016, made by Eat Here in favor of
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Origin in the original principal amount of $3 million (the “Business Note”), bearing loan number
5002668-10001.
15. Pursuant to that certain Loan Agreement dated as of March 27, 2017, between
Eat Here and Origin, as amended by that certain First Amendment to Loan Agreement dated
May 22, 2017 (as amended, modified, supplemented, or restated, the “Guidance Line Loan
Agreement”), Origin provided a guidance line of credit to Eat Here in the maximum principal
amount of $15 million (the “Loan”), which Loan is evidenced by, among other things: (i) that
certain Promissory Note dated March 27, 2017, bearing loan number 100136-10001 made by
Eat Here in favor of Origin in the original principal amount of $1 million; (ii) that certain
Promissory Note dated March 27, 2017, bearing loan number 100136-10002, made by Eat Here
in favor of Origin in the original principal amount of $1 million; (iii) that certain Promissory
Note dated March 27, 2017, bearing loan number 100136-10003, made by Eat Here in favor
Origin in the original principal amount of $1 million; (iv) that certain Promissory Note dated
July 7, 2017, bearing loan number 100136-10004, made by Eat Here in favor of Origin in the
original principal amount of $1 million; and (v) that certain Promissory Note dated September
18, 2018, bearing loan number 100136-10005, made by Eat Here in favor Origin in the original
16. Pursuant to that certain Second Amendment to Loan Agreement and Other
Documents dated as of July 16, 2019, between the Debtors and Origin (the “Bridge Loan
Agreement”; together with the Business Loan Agreement and the Guidance Line Loan
Agreement, as such agreements may have been amended or modified from time to time,
the “Loan Agreements”), Origin provided a bridge loan to the Debtors in the amount of $275,000
(the “Bridge Loan”), which Bridge Loan is evidenced by, among other things, that certain
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Promissory Note dated July 16, 2019, made by the Debtors in favor of Origin (the “Bridge Loan
Note”; together with the Business Note and the Guidance Loan Notes, the “Notes”).
17. The Notes are secured by, among other things, (i) that certain Security Agreement
dated as of March 27, 2017, by and between Babalu and Origin, covering substantially all of
Babalu’s personal property located at the Jackson Restaurant (the “Jackson Collateral”); (ii) that
certain Security Agreement dated as of March 27, 2017, by and between Babalu Atlanta #1 and
Origin, covering substantially all of Babalu Atlanta #1’s personal property located at the Atlanta
Restaurant (the “Atlanta Collateral”); (iii) that certain Security Agreement dated as of September
18, 2018, by and between Babalu Atlanta #2 and Origin, covering substantially all of Babalu
Atlanta #2’s personal property located at the Roswell Restaurant (the “Roswell Collateral”);
(iv) that certain Security Agreement dated as of March 27, 2017, by and between Babalu
Memphis #1 and Origin, covering substantially all of Babalu Memphis #1’s personal property
located at the Memphis Restaurant (the “Memphis Collateral”); (v) that certain Security
Agreement dated as of March 27, 2017, by and between Babalu Memphis #2 and Origin,
covering substantially all of Babalu Memphis #2’s personal property located at the
Memphis East Restaurant (the “Memphis East Collateral”); (vi) that certain Security Agreement
dated March 27, 2017, by and between Babalu Knoxville and Origin, covering substantially all
of Babalu Knoxville’s personal property located at the Knoxville Restaurant (the “Knoxville
Collateral”); and (vii) that certain Security Agreement dated March 27, 2017, by and between
Babalu Birmingham and Origin, covering substantially all of Babalu Birmingham’s personal
property located at Birmingham Restaurant (the “Birmingham Collateral”; together with the
Jackson Collateral, the Atlanta Collateral, the Roswell Collateral, the Memphis Collateral, the
Memphis East Collateral, and the Knoxville Collateral, the “Location Collateral”)
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(collectively, each of the Security Agreements identified in this paragraph, together with the
Borrower Security Agreement (as defined below) are hereinafter, the “Security Agreements”;
together with the Loan Agreements, the Notes, and any related loan documents executed
18. The Notes are also secured by Origin’s security interest in substantially all assets
of Eat Here pursuant to the Loan Agreements and (i) that certain Commercial Security
Agreement dated June 14, 2016, by and between Eat Here and Origin, and (ii) that certain
Security Agreement dated March 27, 2017, by and between Eat Here and Origin (collectively,
the “Borrower Security Agreement”), covering substantially all of Eat Here’s personal property
(the “Eat Here Collateral”). Pursuant to the Loan Agreements and the Security Agreements,
the Debtors granted to Origin a security interest in and continuing lien on substantially all of the
Debtors’ assets and the proceeds thereof (the “Pre-Petition Lender’s Liens”). Origin’s security
interest in the Eat Here Collateral and the Location Collateral is evidenced by recorded financing
(collectively, the “UCC-1s”). As of the Petition Date, the outstanding balance under the Notes
(the “Babalu Notes”) through a private placement to 35 investors. All but two of the holders of
the Babalu Notes were already members of Eat Here. The Babalu Notes mature in May of 2020.
As of the Petition Date, the outstanding balance on the Babalu Notes was
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E. Trade Creditors
20. In addition to the Debtors’ secured obligations to Origin and Eat Here’s unsecured
obligations to the holders of the Babalu Notes, the Debtors owe approximately $1.4 million to
21. Through year end 2016, in addition to the Jackson Restaurant, Eat Here had
opened four new Babalu branded restaurants: Memphis, Birmingham, Knoxville, and Charlotte
Restaurants. However, in 2016 Eat Here signed multiple leases for new Babalu restaurants, and
in 2017 opened four new restaurants (East Memphis, Atlanta, Chapel Hill, and Lexington
Restaurants), with the last three of those restaurants opening within a four month time-period.
This rapid growth strained Eat Here’s resources and led to increased turnover and inconsistent
operations. As a result, initially strong sales at two of the four new restaurants (the Atlanta and
22. In addition to operating difficulties, a failed effort to sell Eat Here diverted senior
management’s attention away from restaurant operations. Further, compounding the weakness
in sales at several of the new restaurants was the fact that development costs at each location
significantly exceeded budget, which were at least partially financed by the Debtors’ rapidly
amortizing Origin loans. Cash flow from the Atlanta, Chapel Hill, and Lexington Restaurants
was significantly below budget, and those locations operated at negative cash flow levels for
much of their operating history. In addition, high levels of employee turnover in the new
restaurants forced Eat Here to pull staff away from existing restaurants, which further
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23. In early 2018,2 management elected to halt new unit development in response to
the disappointing results at the new restaurants and declining sales at the more established
locations. However, by that time Eat Here and certain newly formed affiliates had already
signed three additional leases in Nashville, Columbus, and a second location in Charlotte.
Efforts to sub-lease those properties proved to be unsuccessful, and Eat Here incurred significant
rent expense without any offsetting revenue. In addition, due to weak revenue, in the Fall of
2018, Eat Here was forced to close the Charlotte Restaurant. Moreover, the Debtors’ Chief
24. Struggling under declining sales and cash flow, lease payments for dark
restaurants and undeveloped locations, and significant debt service obligations, Eat Here
implemented several strategic initiatives in an effort to build sales and reduce operating costs,
including a substantial reduction in corporate overhead. While those measures were initially
successful in improving sales and profitability at several restaurants in early 2019, the rapid pace
of change from several of the strategic initiatives confused customers and sales weakened
beginning in the spring of 2019, which further reduced cash flow. Shortly thereafter, Eat Here
was forced to close the Chapel Hill and Lexington Restaurants. Moreover, the Debtors’
corporate Controller, Candice, Luther, has resigned effective August 1, 2019. Ultimately, the
strain of rent expense at locations with no operating revenue, the loss of portions of their senior
management team, significant debt service obligations, and declining cash flow at existing
2
Although management had decided to curtail expansion in 2018, it became aware of a location near its
corporate headquarters in Roswell, Georgia that had many of the characteristics of Eat Here’s earlier successful
restaurants - it was in a redeveloped area and a historic building. Further, rent was very attractive at this location
and the budgeted investment was relatively low. Consequently, senior management decided to develop the Roswell
Restaurant, and as of the Petition Date, approximately half of the construction costs for this location has been
funded. However, due to the Debtors’ current liquidity issues, construction at the Roswell Restaurant has been
suspended.
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restaurants caused the Debtors to file these Bankruptcy Cases and seek the protection of this
25. On the Petition Date, the Debtors each filed with this Court their voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code. In connection with the Debtors’
Chapter 11 bankruptcy cases, the Debtors have filed or will file the following applications and
motions (collectively, the “First Day Motions”), among others (the “Other Applications”):
2. Debtors’ Emergency Motion for an Order to Extend Time to File Schedules and Statements
of Financial Affairs (“Schedules Motions”)
6. Debtors’ Emergency Motion for Authority to (A) Maintain Existing Bank Accounts, and
(B) Continue Use of Existing Business Forms (“Cash Management Motion”)
7. Debtor’s Emergency Motion For Interim and Final Orders (A) Prohibiting Utilities from
Altering, Refusing, or Discontinuing Service on Account of Prepetition Invoices, (B)
Deeming Utilities Adequately Assured of Future Performance, and (C) Establishing
Procedures for Determining Adequate Assurance of Payment (“Utility Motion”)
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8. Debtor’s Emergency Motion Pursuant to 11 U.S.C. §§ 105, 361, 362, 363, 364 and 507 for
Interim and Final Orders (A) Authorizing: (1) The Debtors to Obtain Post-Petition
Financing; and (2) Use of Cash Collateral; (B) Granting Liens and Providing Superpriority
Administrative Expense Status; (C) Granting Adequate Protection; (D) Modifying
Automatic Stay; (E) Scheduling a Final Hearing; and (F) Granting Related Relief
(“DIP Motion”)
9. Debtors’ Emergency Motion for an Order Authorizing the Debtors to Pay Pre-Petition Sales,
and Other Taxes and Related Obligations (“Sales Tax Motion”)
10. Application for an Order Appointing Omni Management Group as Claims, Noticing, and
Administrative Agent for the Debtors Pursuant to 28 U.S.C. §156(c) and 11 U.S.C. § 105(a),
Nunc Pro Tunc to the Petition Date (“Omni Application”)
11. Debtors’ Application Pursuant to Section 327(a) of the Bankruptcy Code and Bankruptcy
Rule 2014 for an order Authorizing the Retention and Employment of Schulten Ward Turner
& Weiss LLP as Conflicts Counsel for the Debtors Nunc Pro Tunc to the Petition
(“Schulten Application”)
12. Debtors’ Application Pursuant to Section 321(a) of the Bankruptcy Code and Bankruptcy
Rule 2014 for an Order Authorizing the Retention and Employment of GGG Partners, LLC
as Financial Advisor for Debtors Nunc Pro Tunc to the Petition Date (“GGG Application”)
13. Application Pursuant to Section 327(a) of the Bankruptcy Code and Bankruptcy Rule 2014
for an Order Authorizing the Retention and Employment of Arnall Golden Gregory LLP as
Attorneys for Debtors Nunc Pro Tunc to the Petition Date (“AGG Application”)
26. As set forth above, Eat Here Brands, LLC currently has 75 equity security holders
and is Managed by its Board of Managers. Eat Here Brands, LLC owns 100% of the
membership interests of Babalu Atlanta #1 LLC, Babalu Atlanta #2 LLC, Babalu Knoxville #1
LLC, Babalu Memphis #1 LLC, Babalu Memphis #2 LLC, Babalu, LLC, and Babalu
Birmingham #1 LLC. The Debtors anticipate that numerous notices, applications, motions, other
pleadings, hearings, and orders in these Bankruptcy Cases will affect many or all of the Debtors.
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2. Schedules Motion
December 7, 2018. Moreover, the Debtors corporate Controller, Candice, Luther, has resigned
effective August 1, 2019. To prepare the Schedules, the Debtors must gather information from
of the necessary information requires the expenditure of substantial time and effort on the part of
the Debtors; limited and already over-burdened employees. The Debtors submit that the efforts
of their employees during the initial stages of these Bankruptcy Cases are critical and need to be
focused on attending to the Debtors’ businesses and maximizing the value of the Debtors’
bankruptcy estates.
28. Currently, there are over 500 creditors (excluding employees) and parties-in-
interest may be technically entitled to receive notice in these Bankruptcy Cases. To require the
Debtors to provide notice of all pleadings and other papers filed in these Bankruptcy Cases to
these parties-in-interest would be extremely burdensome and costly to the Debtors’ bankruptcy
estates as a result of photocopying and postage expenses as well as other expenses associated
29. The Debtors employ approximately 567 people (the “Employees”), of which 36
are employed on a full-time, salaried basis (“Salaried Employees”) and 531 are hourly
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November 2018, meaning that, as of the open enrollment period, the Hourly Employee averaged
30. The Debtors utilize independent contractors from time to time (collectively,
the “Independent Contractors”). Currently, the Debtors utilizes a single independent contractor
for marketing and graphic-design services. The Independent Contractors receive 1099 forms for
tax purposes, and, accordingly, do not represent a payroll tax burden to the Debtors and are not
entitled to any of the employee benefits discussed in the Employee Wage Motion.
31. The Debtors are seeking authority to pay the wages, additional compensation, and
benefits more fully described below (the “Employee Obligations”) that become payable during
the pendency of these Bankruptcy Cases and to continue at this time its practices, programs, and
policies with respect to their Employees and Independent Contractors, as such practices,
programs, and policies were in effect as of the Petition Date. Even though the Debtors have
incurred certain Employee Obligations prior to the Petition Date, certain of the Employee
Obligations will become due and payable in the ordinary course of the Debtors’ business on and
after the Petition Date. The Employee Obligations include, without limitation: (i) wages, salary,
and other compensation; (ii) payroll taxes; (iii) vacation programs; (iv) expense reimbursement;
(v) auto allowance; and (vi) health and welfare benefits. The Employee Obligations are more
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sales for the preceding four-week fiscal period.3 Mobile-phone and parking
reimbursement, discussed below, are also included in Payroll Obligations. The
gross amount of Payroll Obligations includes certain deductions described
separately below, such as payroll taxes owed by the Employees and/or the
Employer. Additionally, though already paid, Tips are included along with the
Payroll Obligations for the purposes of determining payroll taxes, as discussed
below. As a general rule, Payroll Obligations are deposited directly into the
Employees’ bank accounts, though exceptions are made, in which case payment
will be made by paper check.4 As of the Petition Date, the Debtors owe
approximately $307,000 on account of Payroll Obligations.5
Payroll taxes. These obligations consist of federal, state, and local income taxes,
social security, and Medicare taxes. The payroll taxes include the amounts owed
by Employees that are withheld from the gross amount of the Employees’ wages
or salary as well as the amounts separately owed by the Debtors. Payroll taxes are
withheld from Employee paychecks and remitted along with the net pay and
employer taxes to the payroll company, Paycor, one business day prior to the pay
date. Paycor either directly deposits or remits a paper check for net pay and
remits all taxes to the respective taxing authorities. In the year preceding the
Petition Date, the Debtors’ average payroll tax liability for Employees ranged
from approximately $92,629.49 to $138.190.28 per fiscal period consisting of
approximately $29,763.66 to $44,078.73 for the Employer obligation and
approximately $62,865.83 to $94,111.55 for Employee obligations, which is
included in the gross amount of the Payroll Obligations discussed above. As of
the Petition Date, the Debtors owe approximately $96,500 on account of
outstanding pre-petition payroll taxes.
Unemployment taxes. The Debtors also pay certain state and federal
unemployment taxes computed as a percentage of the first $7,000 of an
Employee’s gross wages for federal unemployment taxes and between $7,000 to
14,000 of an Employee’s gross wages (varying by state) for state unemployment
3
The Debtors operate on 13 fiscal periods. Each fiscal period comprises two two-week
pay periods.
4
Approximately 93% of Employees are enrolled in direct deposit.
5
I have deferred all of my $2,500 weekly compensation for serving as CEO of the Debtors
since my retention and, as of the Petition Date, I am owed approximately $27,000. Through the
Employee Wage Motion, the Debtors are seeking authority to pay me $12,850 (the amount of the
priority cap) for my back compensation.
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taxes. Paycor also collects unemployment taxes each pay period and remits the
taxes to the respective tax authorities. The Debtors’ unemployment tax liability
for June 2019 was $6,197.86. As of the Petition Date, the Debtors owe
approximately $2,500 on account of outstanding pre-petition
unemployment taxes.
Vacation and holiday programs. These obligations consist of time off for vacation
and company holidays. Eat Here Brands, LLC recognizes seven holidays per year.
The other Debtors recognize two (Christmas day and Thanksgiving day). In
addition, full-time salaried employees receive two-weeks’ paid time off, and
Hourly FTE Employee with one-year continuous employment averaging 35 hours
per week for the six months prior to the their anniversary date are eligible for one-
week of paid vacation, with pay calculated at the average of hours worked in the
preceding six-month period.
Health and welfare benefits. The Debtors provide certain Employees with health,
dental, and vision insurance.
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32. Any delay in paying Employee Obligations will adversely impact the Debtors’
relationships with their Employees and will irreparably impair the morale, dedication,
confidence, and cooperation of the very people upon whom the Debtors rely in order for their
businesses to be successful. The Debtors must have the support of their Employees in order for
the Debtors’ efforts in these Bankruptcy Cases to succeed. If the relief requested by the
Employee Wage Motion is not granted, the Debtors will likely be out of business altogether.
33. If the Employee Wage Motion is not granted the Debtors’ Employees will suffer
undue hardship and, in many instances, serious financial difficulties, as the amounts in question
are needed to enable certain of the Employees to meet their own personal financial obligations.
The stability of the Debtors will thus be undermined, perhaps irreparably, by the possibility that
5. Insurance Motion
34. In connection with the operation of their businesses, the Debtors maintain various
insurance policies and programs through several different insurance carriers (the “Insurance
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Carriers”). All insurance policies (except for policies where the entire premium is paid in
advance) covering the Debtors are listed on Exhibit A to the Insurance Motion, together with a
list of the Insurance Carriers, policy terms, and the premiums due thereunder.
35. The insurance policies and programs covering the Debtors include liability and
property insurance policies, which provide the Debtors with insurance coverage relating to,
among other things, D&O Insurance, General liability, Umbrella, Commercial Property, Crime,
36. As of the Petition Date, the Debtors believe that they are current on their
insurance premiums with respect to the prepetition period. However, to the extent there is an
outstanding insurance policy premium payable by the Debtors that relates (in whole or in part) to
the pre-petition period, the Debtors seek authority to pay these pre-petition premiums in the
ordinary course of business as such payments are necessary to keep their insurance policies and
programs in force.
37. Under the laws of the States where the Debtors operate, including Alabama,
Georgia, Mississippi, and Tennessee, the Debtors are required to maintain workers’
compensation policies and programs to provide their employees with coverage for claims arising
from or related to their employment with the Debtors. Worker’s compensation coverage for the
Debtors employees is covered by a workers compensation insurance policy with Eastern Alliance
Insurance Group and Eat Here (the “Workers’ Compensation Program”). Eat Here’s policy with
Eastern Alliance Insurance Group covers claims for bodily injury of up to $1 million per
accident and claims for disease up to $1 million for each employee. Employees submit claims
directly to Eastern Alliance Insurance Group. Debtors’ premium for this policy is $85,716
approximately $150 per employee per year—which covers a period from November 2018 to
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November 2019. The Debtors paid 25% of the premium up front and pay monthly premiums in
38. To the best of my knowledge, as of the Petition Date, there were not any claims
pending against the Debtors under the Workers’ Compensation Program. Accordingly, to the
best of my knowledge, the Debtors are not aware of any deductibles or other amounts owed on
39. The Debtors maintain nine (9) bank accounts (collectively, the “Accounts”) at
Origin Bank (the “Bank”), including: (1) an operating account in the name of Babalu (ending in
5502), (2) an operating account in the name of Babalu Memphis #1 (ending in 3913), (3) an
operating account in the name of Babalu Birmingham #1 (ending in 3925), (4) an operating
account in the name of Babalu Knoxville #1 (ending in 4601), (5) an operating account in the
name of Babalu Atlanta #1, (ending in 9805), (6) an operating account in the name of Babalu
Memphis #2 (ending in 8171), (7) an operating account in the name of Eat Here (ending in 7286)
(collectively, the “Operating Accounts”), (7) a money market account in the name of Eat Here
(ending in 7756) (the “Savings Account”),6 and (9) a payroll account in the name of Eat Here
(ending in 7215) (the “Payroll Account”). Cash revenues7 from each of the restaurant operating
Debtors are deposited into that respective Debtor’s Operating Account. Checks and ACH
payments for alcohol, sales taxes, and vendors are drawn from the Operating Account of each
respective restaurant operating Debtor. At the end of each evening any funds remaining in the
6
Eat Here uses this Account as a savings account. Eat Here does not write checks off of this account, but
occasionally initiates wire transfers from this Account into its Operating Account. This Account currently has a
balance of approximately $3,000.
7
Cash generated from restaurant operations is moved from the Debtors’ restaurants to the Bank through
Loomis (an armored car service). Further, Loomis delivers petty cash to the restaurant operating Debtors based on
their day-to-day cash needs.
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Operating Accounts of the restaurant operating Debtors are swept into Eat Here’s Operating
Account. Any shortfalls in the Operating Accounts of the restaurant operating Debtors are
funded out of Eat Here’s Operating Account. The Debtors used to fund their respective payrolls
through the Payroll Account, which was funded through Eat Here’s Operating Account. The
Debtors currently fund payroll through Paycor (third party payroll processor), which is funded
out of Eat Here’s Operating Account. The Debtors respectfully request that they be permitted to
maintain the Accounts to avoid any disruption or delay in making and receiving payments.
40. Furthermore, by virtue of the nature and scope of the Debtors’ businesses, and
their employees, suppliers of goods and services, and others with whom the Debtors transact
business, it is important that the Debtors be permitted to continue to use their existing business
forms, including checks. A substantial amount of time and expense would be required to print
new business forms and stationery and being required to obtain new business forms would also
likely result in a substantial risk of disruption to the Debtors’ ordinary business affairs.
7. Utility Motion
41. Utility services are essential to the Debtors’ ability to sustain their operations
while these chapter 11 cases are pending. In the normal conduct of their businesses, the Debtors
have direct relationships with approximately four utility companies (collectively, the “Utility
Companies”) for the provision of electric, water, sewage & garbage, cable, telephone, internet,
and other services (the “Utility Services”). A list identifying the Utility Companies and their
notice addresses is attached to the Utility Motion as Exhibit A (the “Utilities Service List”).
To the best of my knowledge the information contained in Exhibit A of the Utility Motion
is accurate.
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42. At all relevant times, the Debtors have attempted to remain current with regard to
their utility bills. Furthermore, to the best of the Debtors’ knowledge, the Debtors are current on
all amounts owing to the Utility Companies, other than payment interruptions that may be caused
43. Continued and uninterrupted Utility Service is vital to the Debtors’ ability to
sustain their operations during these chapter 11 cases. Because of the nature of the Debtors’
operations, termination or interruption of the Debtors’ utility service would dramatically impair
the Debtors’ ability to conduct business and would cause considerable inconvenience to the
Debtors’ customers and employees. If utility providers are permitted to terminate or disrupt
service to the Debtors, the Debtors’ primary revenue source would be threatened.
8. DIP Motion
44. As of the Petition Date, the Debtors, and certain other non-debtor affiliates owed
Origin approximately $5.882 million, secured by the Pre-Petition Collateral and all or
substantially all of the assets of the non-debtor entities. Approximately $275,000 of the
outstanding amount was the Bridge Loan, which was extended by Origin on an emergency basis
to fund the Debtors’ immediate operating needs prior to filing these Bankruptcy Cases,
45. The applicable Debtors are currently in default under the provisions of the Pre-
Petition Loan Documents. The Debtors will be unable to operate their businesses in Chapter 11
without access to Origin’s Cash Collateral and access to the proposed DIP Facility. Given the
Debtors’ remaining assets and their capital and debt structure, the Debtors have been unable to
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46. Without adequate post-petition financing, the Debtors will not have sufficient
available sources of working capital to operate their businesses in the ordinary course for a
period of time sufficient to maximize the value of their assets for the benefit of all stakeholders.
The uncertainty concerning the Debtors’ financial condition has curtailed the Debtors’
availability of credit and acceptable credit terms. More specifically, the Debtors’ ability to
finance their operations and administer these Bankruptcy Cases is dependent on their ability to
obtain the funds made available under the DIP Facility and to use the Cash Collateral of Origin.
47. The inability of the Debtors to obtain sufficient liquidity and to make payments
on certain obligations on a timely basis may result in, inter alia, the Debtors’ inability to
continue the operation of their businesses and to pursue a restructuring. If any of these events
were to occur, the impact on the Debtors’ bankruptcy estates could be catastrophic and would
result in material harm to all of the Debtors’ creditors, investors, employees, and other
constituents. In light of the foregoing, the Debtors have determined, in the exercise of their
sound business judgment, that a post-petition credit facility, which permits the Debtors to obtain
up to $1.205 million in financing (which includes the Bridge Loan), and to use such credit to
finance the operation of their businesses as they attempt to reorganize, is critical to their ongoing
48. The Debtors believe that the debtor in possession financing offered by Origin
presents the best option available to them and would enable the Debtors to preserve their value as
a going concern. The Debtors have engaged in good-faith and extensive, arm’s-length
post-petition financing on the terms and subject to the conditions set forth in the DIP Loan
Agreement and the interim order substantially in the form attached to the DIP Motion as
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Exhibit B (the “Interim Order”), including the condition that the Bridge Loan be rolled into and
49. The credit provided under the DIP Facility will enable the Debtors to finance their
business operations, including the ability to operate their businesses in an orderly and reasonable
manner to preserve and enhance the value of their assets and enterprise for the benefit of all
creditors and parties in interest. It is expected that the availability of credit under the
DIP Facility will provide the Debtors with the necessary liquidity to continue their ordinary
course business operations in order to maximize the return available to the Debtors’ creditors in
these Bankruptcy Cases. Finally, I believe that the implementation of the DIP Facility will be
viewed favorably by the Debtors’ employees, vendors, and customers and thereby permit the
50. Given the Debtors’ remaining assets and their capital and debt structure,
the Debtors are unable to obtain unsecured credit or debt allowable as an administrative expense
in an amount sufficient and readily available to maintain ongoing operations; nor have the
Debtors been able to obtain post-petition financing from an alternative prospective lender on
51. The Debtors have been looking for an alternative source of funding to the Pre-
Petition Lender since at least the first quarter of 2019, and have been unable to find alternative or
better financing on the terms and of the type and magnitude required in these Bankruptcy Cases
on an unsecured basis, or without offering terms substantially similar to or worse than those
under the DIP Facility. I believe that the terms and conditions of the DIP Facility are fair and
reasonable, and were negotiated by the parties in good faith and at arm’s length. Based on this,
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as well as the foregoing factors, I believe that the DIP Facility is the only feasible financing
option for the Debtors and is in the best interests of the Debtors’ respective bankruptcy estates.
52. As described above, after appropriate investigation and analysis and given the
exigencies of the circumstances, the Debtors’ management has concluded that the DIP Facility is
53. As with most other large businesses, the Debtors have significant cash needs.
Accordingly, access to substantial credit is necessary to meet the day-to-day costs associated
with financing the operation of the Debtors’ businesses. In the absence of access to cash and
credit, the Debtors may be unable to operate their businesses or to complete the bankruptcy
process. In turn, without the DIP Facility, the Debtors’ prospects for a successful reorganization
will be impractical and the Debtors’ creditors, estates, and other parties in interest will be
materially harmed.
54. Given the Debtors’ constrained liquidity, the DIP Facility is of critical importance
to operating the Debtors’ businesses and preserving the value of the Debtors’ assets, thereby
providing a greater recovery to the Debtors’ creditors than would be realized if the Debtors were
forced to convert their Bankruptcy Cases to chapter 7 cases – which would invariably result in
the closure of the Debtors’ operating businesses and the Pre-Petition Lender exercising its rights
and remedies under applicable non-bankruptcy law. Accordingly, the Debtors submit that the
availability of post-petition credit under the DIP Facility is necessary to preserve and enhance the
value of their bankruptcy estates for the benefit of all stakeholders in these Bankruptcy Cases.
55. The Debtors are also seeking to use Cash Collateral of Origin immediately after
the entry of the Interim Order. The Debtors will use Cash Collateral to the extent necessary to
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meet their working capital needs and only as set forth in the budget, which is attached to the DIP
56. The Debtors are seeking authority to pay undisputed pre-petition sales taxes, use,
and other obligations (the “Taxes”) owed to the state and local taxing authorities listed on the
attached Exhibit A of the Sales Tax Motion (collectively, the “Taxing Authorities”) in the
57. In connection with the normal operation of their businesses, the Debtors collect,
among other things, sales and use taxes from their customers and other third parties for
remittance to the Taxing Authorities. As reflected in Exhibit A to the Sales Tax motion, the
Debtors estimate that, as of the Petition Date, they hold approximately $169,000 in collected but
unremitted sales taxes, accrued state use taxes, and accrued state and local liquor use taxes.
58. The Debtors believe that they have sufficient cash reserves and will have
sufficient cash from ongoing operations and the proposed debtor-in-possession credit facility to
pay the amounts described in the Sales Tax Motion in the ordinary course of business.
59. I believe that retaining Omni Management Group, Inc. (“Omni”) as the Debtors’
claims and noticing agent is essential to the Debtors’ smooth transition into bankruptcy and the
successful reorganization of the Debtors. The Debtors anticipate that there will be well over 500
creditors and parties in interest in these Bankruptcy Cases. I believe that the number of
anticipated creditors and parties in interest will make it impracticable for the Debtors to serve the
required notices and other papers as part of the required bankruptcy administration in these
Bankruptcy Cases.
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I believe that retaining Schulten Ward Turner & Weiss, LLP (“SWTW”) as the Debtors’
conflicts counsel is essential to the Debtors’ smooth transition into bankruptcy and the successful
reorganization of the Debtors. To the best of the Debtors’ knowledge, and based on the
(the “Mercer Declaration”), the Debtors understand that SWTW does not hold or represent an
interest adverse to the Debtors or their estates. To the best of the Debtors’ knowledge,
understanding and belief, and based on the Mercer Declaration, the Debtors understand that
SWTW is a disinterested person, and their appointment will be in the best interests of the
I believe that retaining GGG Partners, LLC (“GGG”) as the Debtors’ financial advisor is
essential to the Debtors’ smooth transition into bankruptcy and the successful reorganization of
the Debtors. To the best of the Debtors’ knowledge, and based on the Declaration of Curt
Freiberg attached to the GGG Application as Exhibit A (the “Friedberg Declaration”), the
Debtors understand that GGG does not hold or represent an interest adverse to the Debtors or
their estates. To the best of the Debtors’ knowledge, understanding and belief, and based on the
Friedberg Declaration, the Debtors understand that GGG is a disinterested person, and their
appointment will be in the best interests of the Debtors’ estates, creditors, and other parties
in interest.
60. I believe that retaining Arnall Golden Gregory LLP (“AGG”) as the Debtors’
bankruptcy counsel is essential to the Debtors’ smooth transition into bankruptcy and the
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successful reorganization of the Debtors. To the best of the Debtors’ knowledge, understanding
and belief, and based on the Affidavit of Darryl S. Laddin attached to the AGG Application as
Exhibit A (the “Laddin Affidavit”), the Debtors understand that AGG does not hold or represent
any disqualifying interest adverse to the Debtors or their bankruptcy estates. To the best of the
Debtors’ knowledge, understanding and belief, and based on the Laddin Affidavit, the Debtors
understand that AGG is a disinterested person, and their appointment will be in the best interests
61. I have reviewed each of the First Day Motions and Other Applications and, to the
best of my knowledge, believe the facts set forth therein are true and correct. Such
representation is based upon information and belief, through my review of various materials and
other information, and my experience and knowledge of the Debtors’ operations and financial
condition. If called upon to testify, I could and would, based on the foregoing, testify
competently to the facts set forth in each of the First Day Motions and Other Applications.
materials and other information, discussions with the Debtors’ other executives, and discussions
with the Debtors’ professionals, I have formed opinions as to (a) the necessity of obtaining the
relief sought in the First Day Motions and Other Applications; (b) the importance of the relief
sought in the First Day Motions and Other Applications for the Debtors to continue to operate
effectively; and (c) the negative impact upon the Debtors of not obtaining the relief sought in the
63. As described more fully below, the relief sought in the First Day Motions and
Other Applications will minimize the adverse effects of the chapter 11 cases on the Debtors and
ensure that the Debtors’ reorganization effort proceeds as efficiently as possible and results in
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