Case Doc 468 Filed 12/15/17 Entered 12/15/17 15:59:37 Desc Main Document Page 1 of 50

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1 Document Page 1 of 50 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MINNESOTA In re: WYNIT DISTRIBUTION, LLC, WD Navarre Distribution, LLC, WD Encore Software, LLC, WD Navarre Holdings, LLC, WD Navarre Digital Services, LLC, WYNIT Holdings, Inc., WD Navarre Canada, ULC, Debtors. Jointly Administered under BKY BKY BKY BKY BKY BKY BKY BKY Chapter 11 Cases NOTICE OF HEARING AND DEBTORS SECOND OMNIBUS MOTION FOR AN ORDER (I) GRANTING AN EXPEDITED HEARING, AND (II) APPROVING SETTLEMENT AGREEMENTS WITH CERTAIN VENDORS PURSUANT TO 11 U.S.C. 105(a) AND FED. R. BANKR TO: All the parties-in-interest as defined in Local Rule : 1. The above-captioned debtors (the Debtors or WYNIT ) file this motion (the Motion ) requesting the relief described below and give notice of the hearing on the Motion. 2. PLEASE TAKE NOTICE that the Court will hold a hearing on this Motion at 10:00 a.m. (prevailing Central Time) on Thursday, December 21, 2017 in Courtroom 8 West, United States Court House, 300 South Fourth Street, Minneapolis, MN Due to the expedited nature of this Motion, the Debtors do not object to any response to this Motion filed by 4:30 p.m. on Wednesday, December 20, UNLESS A RESPONSE OPPOSING THE MOTION IS TIMELY FILED, THE COURT MAY GRANT THE MOTION WITHOUT A HEARING. 4. The Debtors submit this Motion for an order (the Order ), pursuant to 11 U.S.C. 105(a) and Fed. R. Bankr. P. 9019, to approve a settlement agreement between the

2 Document Page 2 of 50 Debtors and certain vendors (each, as identified herein, a Vendor, collectively, the Vendors ). The Debtors, the Vendors, and the Agent (as defined herein) have reached agreement on the terms of various settlement agreements to (a) resolve claims asserted in the Vendors objections to the Debtors Inventory Sale Motion (as defined herein) (each, a Vendor Objection, collectively, the Vendor Objections ), (b) resolve claims asserted in adversary proceedings and related papers filed by certain of the Vendors against the Debtors and the Agent (each, a Vendor Complaint, collectively, the Vendor Complaints ), (c) resolve any potential claims to inventory or accounts receivable as preserved by certain Vendors in Paragraph 10 of the Final Order (I) Authorizing the Debtors to Obtain Post-Petition Secured Financing Pursuant to 11 U.S.C. 364, (II) Authorizing the Debtors Limited Use of Cash Collateral Pursuant to 11 U.S.C. 363, And (III) Granting Adequate Protection to Prepetition Senior Lenders and Certain Other Prepetition Secured Creditors Pursuant to 11 U.S.C. 361, 362, 363 and 364 [Dkt. No. 298], (d) resolve the disposition of escrowed funds referenced in Paragraph 33 of the Order (I) Authorizing Entry into Agency and Sale Agreement, (II) Authorizing Sale of Assets, and (III) Granting Related Relief [Docket No. 272] (the Initial Sale Order ) and (e) resolve other pending motions filed by certain Vendors in these Chapter 11 cases. A true and correct copy of each fully executed settlement agreement by and among the Debtors, each Vendor and the Agent is attached hereto as Exhibits A and B and incorporated herein by reference (each, a Settlement Agreement, collectively, the Settlement Agreements ). 1 1 Certain of the Settlement Agreements are in the process of being finalized. Fully executed copies of such Settlement Agreements will be field on the docket in advance of, or at, the hearing on this Motion. 2

3 Document Page 3 of 50 BACKGROUND Procedural Posture 5. On September 8, 2017 (the Petition Date ), the Debtors filed separate voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Minnesota (the Court ). 6. By orders of this Court entered on September 13, 2017, the Bankruptcy Cases are jointly administered under the caption set forth above which is designated as the lead case. 7. Each Debtor remains in possession of its assets and continues to operate as a debtor-in-possession in accordance with 11 U.S.C and As of the date of this Motion, an Official Committee of Unsecured Creditors ( Committee ) has been appointed. 9. This is a core proceeding pursuant to 28 U.S.C. 157(2)(A), (M), (N), and (O). 10. This Court has jurisdiction over this matter pursuant to 28 U.S.C Venue is proper in this Court pursuant to 28 U.S.C The Inventory Bid Procedures Motion and Inventory Sale Motion 12. On October 24, 2017, the Debtors filed their Notice of Hearing and Debtors Motion for an Order Approving Bid Procedures for The Sale of Assets Free and Clear of All Liens, Interests, Claims, and Encumbrances Pursuant to 11 U.S.C. 363, and Granting Other Related Relief [Dkt. No. 279] (the Inventory Bid Procedures Motion ). 13. On October 25, 2017, the Debtors filed their Notice of Hearing and Debtors Motion for an Order Approving One or More Potential Sale(s) of the Debtors Assets Free and Clear of All Liens, Interests, Claims and Encumbrances Pursuant to 11 U.S.C. 363, and Granting Other Related Relief [Dkt. No. 280] (the Inventory Sale Motion ). 3

4 Document Page 4 of Under the Inventory Bid Procedures Motion and the Inventory Sale Motion, the Debtors sought to sell certain assets consisting of inventory that was not previously sold in the ordinary course of business or pursuant to other orders of this Court (the Remaining Inventory ). 15. Each of the Vendors and the Debtors are party to certain Distribution Agreements (the Distribution Agreements ), including riders and/or addenda that set forth the terms of an alleged consignment arrangement (the Rider ) as to certain products delivered by each of the Vendors to the Debtors (any products delivered pursuant to such Rider, the Specified Vendor Products ). The Specified Vendor Products are included in the Remaining Inventory to be sold pursuant to the Inventory Sale Motion. 16. On November 9, 2017, the Court entered its Order Granting and Approving the Debtors Motion for an Order Approving Bid Procedures for the Sale of Assets Free and Clear of All Liens, Interests, Claims and Encumbrances Pursuant to 11 U.S.C. 363, and Granting Other Related Relief [Dkt. No. 354] (the Inventory Bid Procedures Order ) approving the bid procedures set forth in the Inventory Bid Procedures Motion and setting a hearing on the Inventory Sale Motion for November 28, On November 30, 2017, the Court entered its Order Authorizing Sale of Remaining Inventory [Docket No. 426] (the Inventory Sale Order ) authorizing the Debtors to consummate the sale contemplated in the Inventory Sale Motion. As part of the Inventory Sale Order, the Court continued the hearings on the Vendor Objections to December 13, 2017 and these Vendor Objections subsequently were continued to December 27,

5 Document Page 5 of 50 Agent s Prepetition Liens and Postpetition Liens 18. Each of the Debtors other than WYNIT Holdings, Inc. is a borrower under that certain Credit Agreement, dated November 29, 2016 (as amended, restated, supplemented or otherwise modified from time to time, the Prepetition Credit Agreement ), by and among Wells Fargo Bank, National Association, as administrative agent (in such capacity, the Prepetition Agent ), and the other lenders party thereto (collectively, the Prepetition Lenders ). WYNIT Holdings, Inc. signed a guaranty of the other Debtors obligations under the Prepetition Credit Agreement. Each of the Debtors also executed the guaranty and security agreements (collectively, as amended, restated, supplemented or otherwise modified from time to time, the Prepetition Security Agreements ) in favor of the Prepetition Lenders to secure performance of the terms and obligations arising under the Prepetition Credit Agreement and, under the Prepetition Security Agreements, each Debtor granted the Prepetition Agent, for the benefit of itself and the Prepetition Lenders, a first priority security interest in and continuing lien on substantially all of each such Debtor s assets and property, and all proceeds, products, accessions, rents, and profits thereof, in each case whether then owned or existing or thereafter acquired or arising, including, without limitation, the Remaining Inventory. 19. Each of the Debtors is a borrower under that certain Senior Secured, Super- Priority Debtor-In-Possession Credit Agreement, dated September 13, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the Postpetition Credit Agreement ), by and among each of the Debtors, Wells Fargo Bank, National Association, as administrative agent (in such capacity, the Postpetition Agent, as either the Postpetition Agent or Prepetition Agent, the Agent ), and the other lenders party thereto (collectively, the Postpetition Lenders ). Under the Postpetition Credit Agreement, each of the Debtors, to 5

6 Document Page 6 of 50 secure performance of the terms and obligations arising under the Postpetition Credit Agreement, granted the Postpetition Agent, for the benefit of itself and the Prepetition Lenders, a first priority security interest in and continuing lien on substantially all of each such Debtor s assets and property, and all proceeds, products, accessions, rents, and profits thereof, in each case whether then owned or existing or thereafter acquired or arising, including, without limitation, the Remaining Inventory. 20. On September 13, 2017, this Court entered that certain Interim Order (I) Authorizing the Debtors to Obtain Post-Petition Secured Financing Pursuant To 11 U.S.C. 364, (II) Authorizing The Debtors Limited Use Of Cash Collateral Pursuant To 11 U.S.C. 363, (III) Granting Adequate Protection To Prepetition Senior Lenders And Certain Other Prepetition Secured Creditors Pursuant To 11 U.S.C. 361, 362, 363, And 364, and (IV) Scheduling Final Hearing Pursuant To Bankruptcy Rule 4001 [Dkt. No. 56] (the First Interim Order ). 21. On September 27, 2017, this Court entered that certain Second Interim Order (I) Authorizing The Debtors To Obtain Post-Petition Secured Financing Pursuant To 11 U.S.C. 364, (II) Authorizing The Debtors Limited Use Of Cash Collateral Pursuant To 11 U.S.C. 363, (III) Granting Adequate Protection To Prepetition Senior Lenders And Certain Other Prepetition Secured Creditors Pursuant To 11 U.S.C. 361, 362, 363, And 364, and (IV) Scheduling Final Hearing Pursuant To Bankruptcy Rule 4001 [Dkt. No. 131] (the Second Interim Order ). 22. On October 27, 2017, this Court entered that certain Final Order (I) Authorizing The Debtors To Obtain Post-Petition Secured Financing Pursuant To 11 U.S.C. 364, (II) Authorizing The Debtors Limited Use Of Cash Collateral Pursuant To 11 U.S.C. 363, and 6

7 Document Page 7 of 50 (III) Granting Adequate Protection To Prepetition Senior Lenders And Certain Other Prepetition Secured Creditors Pursuant To 11 U.S.C. 361, 362, 363, And 364 [Dkt. No. 298] (the Final Order, collectively with the First Interim Order and the Second Interim Order, the Financing Orders ). 23. The Prepetition Lenders made extensions of credit to the Debtors before the Petition Date pursuant to the terms of the Prepetition Credit Agreement, and the Postpetition Lenders made extensions of credit to the Debtors after the Petition Date pursuant to the terms of the Postpetition Credit Agreement and the Financing Orders, which extensions of credit are secured by substantially all of the Debtors assets, including, without limitation, the Debtors inventory and accounts receivable. Vendor Objections to Inventory Sale Motion 24. As part of the Financing Orders (specifically in Paragraph 10 of the Financing Orders), certain of the Vendors reserved their respective rights as to (i) the determination of whether the alleged consignment arrangement set forth in the Rider is a true consignment agreement; (ii) who is the owner of the Specified Vendor Products; and (iii) the extent, validity, and priority of each Vendor s rights and interests in or to, or ownership of, its Specified Vendor Products, or any accounts receivable generated by such Specified Vendor Products, or any proceeds of any of the foregoing. 25. As part of the Financing Orders (specifically in Paragraph 31 of the Financing Orders), each of the Vendors also had the right to investigate and pursue certain claims and causes of action against the Prepetition Agent and Prepetition Lenders to and including a date certain as established by the Financing Orders, which date has passed. 7

8 Document Page 8 of In connection with the Inventory Sale Motion, certain of the Vendors, in their Vendor Objections, assert, inter alia, that certain of the Remaining Inventory is not property of the Debtors estates under 11 U.S.C. 541(a)(1). 27. The Debtors and the Agent dispute these assertions for the reasons set forth in the Debtors Reply to Sale Objections [Dkt. No. 262] and the Agent s Reply in Support of Debtors Motion for an Order (I) Granting an Expedited Hearing, (II) Approving the Sale of Assets Free and Clear of All Liens, Interests, Claims and Encumbrances, and Related Procedures and Bid Protections, Pursuant to 11 U.S.C. 363, and (III) Granting Other Related Relief [Dkt. No. 261]. Vendor Complaints 28. On November 14, 2017, Nuance Communications filed its Complaint For (I) Declaratory Finding That Inventory Is Not Property of the Debtors Bankruptcy Estates; (II) Declaratory Finding That Wells Fargo Bank, National Association s Liens Did Not Attach to Such Inventory; (III) Preventing Conversion Should Debtors Sell Inventory; (IV) Replevin Should Debtors Sell Inventory; (V) Imposition of Constructive Trust Over Sale Proceeds Should Debtors Sell Inventory; and (VI) Breach Of Contract [Dkt. No. 369] against each of the Debtors and the Agent. Nuance Communications, in their Vendor Complaint, allege, inter alia, certain interests in the Remaining Inventory and certain accounts receivable. 29. On November 17, 2017, Symantec Corporation filed its Adversary Complaint [Dkt. No. 374], against each of the Debtors and the Agent. Symantec Corporation, in their Vendor Complaint, allege, inter alia, certain interests in the Remaining Inventory and certain accounts receivable. 8

9 Document Page 9 of The complaints referenced in Paragraph 28 and 29 are the Vendor Complaints. If this Motion is approved, the Vendor Complaints will be dismissed with prejudice. Vendor Motions 31. On November 21, 2017, Symantec Corporation filed its Expedited Motion to Compel Debtors to Assume or Reject Executory Contracts under 11 U.S.C. 365(d)(2) [Dkt. No. 378] (the Symantec Motion ). The Symantec Motion was continued for hearing to December 13, 2017 and subsequently continued to December 27, If this Motion is approved, the Symantec Motion will be withdrawn as it will be resolved by the settlement agreement to be entered into by Symantec, the Debtors and the Agent. SETTLEMENT AGREEMENTS The Settlement Agreements were reached as a result of arms-length negotiations among the Debtors, the Vendors and the Agent to resolve the disputes relating to the Financing Orders, Vendor Complaints, the Vendor Objections, the Symantec Motion and the disposition of the escrowed monies as set forth in Paragraph 33 of the Initial Sale Order. The Debtors submit that the Settlement Agreements represent a beneficial resolution of the pending disputes with the Vendors and Agent on terms that are favorable to the Debtors and their estates. 34. Under each of the Settlement Agreements, all accounts receivable generated prior to a date certain are deemed property of the Debtors estates and subject to the Agent s first priority security interests and liens under the Prepetition Credit Agreement and Postpetition Credit Agreement. Accounts receivable generated after such date certain belong to the Vendors pursuant to the terms of their respective Settlement Agreements. 2 Each of the Settlement Agreements is summarized in this section of the Motion. To the extent that this summary differs from the terms of the Settlement Agreements, the terms of the Settlement Agreement shall govern. These summaries are a true and accurate representation of the agreement reached with each party at the time this Motion was filed. 9

10 Document Page 10 of In addition, under each of the Settlement Agreements, the Vendors either (a) buy back the Specified Vendor Products for an agreed upon price or (b) agree to allow for the proceeds of the sale of the Specified Vendor Products to be split between the Debtors estates and the Agent. If the Specified Vendor Products is sold back to the Vendor under the Settlement Agreement, then 90% of the net proceeds of the sale of the Specified Vendor Products are to be remitted to the Agent in accordance with the Financing Orders and 10% of the net proceeds of the sale of the Specified Vendor Products are retained by the Debtors. Alternatively, if the proceeds of the Specified Vendor Products are to be split, the net proceeds of such sales are allocated as shown in the chart below between the Agent, and the Debtors. 36. As summarized in the chart below, certain of the Settlement Agreements contain releases by the Vendors to the Debtors, including without limitation, a release of any potential claims by the Vendors under Section 503(b)(9) of the Bankruptcy Code. Certain of the Settlement Agreements also contain releases by the Debtors to the Vendors, including without limitation, release of any potential claims under Chapter 5 of the Bankruptcy Code, as described herein. Finally, each of the Settlement Agreements contains releases from the Vendor to the Agent. 37. The material terms of each Settlement Agreement are summarized below: Vendor Exh. Settlement Amount (if Vendor Buying Specified Vendor Inventory) Symantec Corporation Individual Software, Incorporated Chapter 5 Release 503(b)(9) Claim Release Sale Proceeds Split (if Vendor Agreement to Sale of Inventory Pursuant to Inventory Sale Motion Debtor Vendor Agent A $125,000 Yes No N/A N/A N/A B $15,000 Yes Yes N/A N/A N/A 10

11 Document Page 11 of 50 Vendor Exh. Settlement Amount (if Vendor Buying Specified Vendor Inventory) Nero Inc. Nuance Communications, Inc. AVG Technologies USA, Inc. To be filed To be filed To be filed Chapter 5 Release 503(b)(9) Claim Release Sale Proceeds Split (if Vendor Agreement to Sale of Inventory Pursuant to Inventory Sale Motion Debtor Vendor Agent N/A Yes Yes 35% 0% 65% $175,000 Yes Yes N/A N/A N/A $25,000 Yes Yes N/A N/A N/A The Debtors are continuing to negotiate settlement agreements with certain additional vendors. The terms of such settlement agreement would be similar to the Settlement Agreements, as described herein. Therefore, the Debtors reserve the right to supplement this Motion to include additional settlements prior to the hearing on the Motion if they are able to finalize any additional agreements. 38. The Settlement Agreements achieve two goals: (1) an immediate sale of the Specified Vendor Products, thereby maximizing the value of the Remaining Inventory; and (2) an elimination of the potential for costly litigation surrounding the Specified Vendor Products. Because the Specified Vendor Products have a limited shelf life driven by the rapid evolution of existing products and the rapid development of new products, it is critically important to sell the Specified Vendor Inventory as quickly as reasonably possible to maximize value for the Debtors estates. The Settlement Agreement allows the Specified Vendor Inventory to be sold now and without prolonged litigation surrounding the ownership of and the security interests in the Specified Vendor Products, which litigation would be both time consuming and costly to the 11

12 Document Page 12 of 50 estates (in terms of loss of value and incurrence of professional fees). For these reasons, it is in the best interests of the Debtors and their estates to enter into these Settlement Agreements. 39. The Debtors are seeking expedited approval of this Motion. Each of the Settlement Agreements requires a closing by no later than December 29, For those Settlement Agreements in which the Vendors have agreed to allow the Debtors to sell their Specified Vendor Inventory pursuant to the Inventory Sale Motion, the Debtors must be in a position to sell the Specified Vendor Inventory during the holiday season to maximize value. For those Settlement Agreements in which the Vendors are buying back the Specified Vendor Inventory, those Vendors likewise wish to control disposition of their Specified Vendor Inventory during the holiday season and the Debtors have requested that such Specified Vendor Inventory be removed from their warehouses prior to year-end to avoid further rental costs. RELIEF REQUESTED 40. By this Motion, Debtors request that the court Grant an expedited hearing; approve the Settlement Agreements; and Grant such other and further relief as is necessary and appropriate under the circumstances. NO PRIOR REQUEST 41. Debtors filed their first Motion to Approve Compromise Under Rule 9019 (the First 9019 Motion ) [Dkt. No. 382]. 42. On November 28, 2017 and December 15, 2017, the Court entered orders granting the First 9019 Motion. [Dkt. Nos. 421 and 467.] 43. No other request for the relief sought in this Motion has been made to this Court or any other. 12

13 Document Page 13 of In compliance with Local Rule , this Motion is verified and is accompanied by a memorandum of law and proposed order. 45. Pursuant to Local Rule , the Debtors give notice that they may, if necessary, call Patrick Lawton, CFO of the Debtors, 2 W. Washington St., Suite 500, Greenville, SC to testify at the hearing on the Motion regarding the facts set forth herein CONCLUSION WHEREFORE, the Debtors respectfully request the Court enter an Order (i) approving the Motion on an expedited basis; (ii) approving the Settlement Agreements, (iii) granting such other and further relief as is necessary and appropriate under the circumstances. Dated: December 15, 2017 e/ Andrew J. Glasnovich Robert T. Kugler (#194116) Edwin H. Caldie (# ) Phillip J. Ashfield (# ) Andrew J. Glasnovich (# ) STINSON LEONARD STREET LLP 50 South Sixth Street, Suite 2600 Minneapolis, MN Telephone: (612) Facsimile: (612) robert.kugler@stinson.com edwin.caldie@stinson.com phillip.ashfield@stinson.com drew.glasnovich@stinson.com COUNSEL FOR THE DEBTORS 13

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15 Document Page 15 of 50 EXHIBIT A

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27 Document Page 27 of 50 Exhibit A Symantec Inventory IN US$ Returned Total Warehouse Inventory US$ Warehouse Best Buy Retail Total By Location Retail Inventory US$ by Customer Supplier Status Inventory Canada Inventory Inventory Memphis Missisauga Total Bbuy (11/25) Office Depot (11/25) Staples (8/26) Target (11/25) Grand Total SYMANTEC Objecting 2,528,978 #REF! #REF! 97,569 2,431,408 2,528,978 #REF! #REF!

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29 Case Doc Doc Filed Filed 12/15/17 11/27/17 Entered Entered 12/15/17 11/27/17 15:59:37 17:30:12 Desc Desc Main Exhibit(s) Document Exhibit 1 Page Page 29 of 1350 of 13 Exhibit B Wire Instructions

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41 Document Page 41 of 50 Exhibit A Individual Software Inventory IN US$ Returned Total Warehouse Inventory US$ Warehouse Best Buy Retail Total By Location Retail Inventory US$ by Customer Supplier Inventory Canada Inventory Inventory Memphis Missisauga Total Bbuy (11/25) Office Depot (11/25) Staples (8/26) Target (11/25) Grand Total INDIVIDUAL SOFTWARE 120,469 36,851 79, ,411 94,895 25, ,469 15,574 63,517 79,091

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44 Document Page 44 of 50 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MINNESOTA In re: WYNIT DISTRIBUTION, LLC, WD Navarre Distribution, LLC, WD Encore Software, LLC, WD Navarre Holdings, LLC, WD Navarre Digital Services, LLC, WYNIT Holdings, Inc., WD Navarre Canada, ULC, Debtors. Jointly Administered under BKY BKY BKY BKY BKY BKY BKY BKY Chapter 11 Cases MEMORANDUM OF LAW IN SUPPORT OF DEBTORS SECOND OMNIBUS MOTION FOR AN ORDER (I) GRANTING AN EXPEDITED HEARING, AND (II) APPROVING SETTLEMENT AGREEMENTS WITH CERTAIN VENDORS PURSUANT TO 11 U.S.C. 105(a) AND FED. R. BANKR The above-captioned debtors (collectively the Debtors ) submit this memorandum of law in support of their corresponding motion, in accordance with Local Rule (a). Background The facts supporting this memorandum are set forth in the Motion, verified by Patrick Lawton. All capitalized terms used but not otherwise defined herein shall have the meaning given to them in the Motion. Expedited Relief The Debtors request expedited approval of the Motion. Bankruptcy Rule 9006(c) provides that the Court may reduce the notice period for a motion for cause. Here, cause exists to grant the Motion on an expedited basis. As described in more detail in the Motion and in the Declaration of Peter A. Richichi in Support of Chapter 11 Petitions and First Day Motions, due to the seasonal nature of Debtors inventory, the value of the Debtors inventory is fleeting and

45 Document Page 45 of 50 time only diminishes the ultimate return to creditors. With the upcoming holiday season, the Debtors are in a position to dispose of inventory now to maximize value. Once the holiday season has passed, the Debtors inventory values likely will decline and the Vendors may no longer be willing to enter into these Settlement Agreements. Because of this, each of these Settlement Agreements requires a closing no later than December 29, The Debtors are also seeking a closing by December 29, 2017 to ensure that all inventory is removed from their warehouses by year end. Approval of the Settlement Agreements Fed. R. Bankr. P. 9019(a) provides, in pertinent part, that [o]n motion... and after notice and a hearing, the court may approve a compromise or settlement. Settlement agreements are generally favored in a bankruptcy setting because they minimize litigation and expedite the administration of the bankruptcy estate. See Myers v. Martin (In re Martin), 91 F.3d 389, 393 (3d Cir. 1996) (citing 9 Lawrence P. King, Collier on Bankruptcy [1] (15th ed. 1993)); Official Comm. of Unsecured Creditors of Bond v. White Plains Joint Venture (In re Bond), No , 1994 U.S. App. LEXIS 1282, at *9 (4th Cir. 1994) (also citing Collier); Hicks, Muse & Co. v. Brandt (In re Healthco Int l), 136 F.3d 45, 50 n.5 (1st Cir. 1998). The decision to approve the compromise is within the discretion of the Court and is warranted where the settlement is found to be reasonable and fair in light of the particular circumstances of the case. See In re Racing Servs., Inc., 332 B.R. 581, 586 (B.A.P. 8th Cir. 2005) (citing Drexel, Burnham, Lambert, Inc. v. Flight Transp. Corp. (In re Flight Trans. Corp. Sec. Litig.), 730 F.2d 1128, 1135 (8th Cir.1984)); Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, (1968). When considering reasonableness, there is no best compromise, only a range of reasonable compromises. So as long as the one before the court falls within that range, it may be approved. 2

46 Document Page 46 of 50 In re Racing Servs., Inc., 332 B.R. at 586 (citing Nangle v. Surratt States (In re Nangle), 288 B.R. 213, 220 (8th Cir. BAP 2003)). Courts consider the following factors, among others, in determining whether to grant a motion under Fed. R. Bankr. P to approve a compromise or settlement: (1) the probability of success in the litigation; (2) the difficulties, if any, to be encountered in the matter of collection; (3) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; (4) the paramount interest of the creditors and a proper deference to their reasonable views in the premises. In re Flight Trans. Corp. Sec. Litig., 730 F.2d at 1135 (citing Drexel v. Loomis, 35 F.2d 800, 806 (8th Cir.1929)). Here, consideration of these factors supports approval of the Motion and the Settlement Agreements. First, the Settlement Agreements resolve complex legal and factual issues as set forth in the Vendor Objections, Vendor Complaints, the Symantec Motion and the Debtors Reply to Sale Objections [Dkt. No. 262]. The outcome of these disputes is uncertain. Second, if the Debtors are successful in litigating these disputes to conclusion, the Debtors may have no monetary recovery. As this Court knows, the value of the Debtors inventory likely will greatly diminish if it is not sold during the holiday season. Third, the litigation is complex and the time, expense, uncertainty and delay involved in contesting the issues and to fully resolve any and all disputes or claims with respect thereto, including the ownership of and security interests in and liens against the Specified Vendor Products, is likely significant. Finally, the Settlement Agreements are in the best interests of the Debtors estates and their creditors. The Settlement Agreements allow the Debtors to maximize the value of the Specified Vendor Inventory. In addition to resolving disputes surrounding the ownership and sale of the Specified Vendor Products, some of Settlement Agreements provide waivers of all claims by Vendors against the 3

47 Document Page 47 of 50 Debtors or their estates, including, without limitation claims arising under Section 503(b)(9) of the Bankruptcy Code. These waivers provide an enhanced return to all creditors by reducing the amount of claims. In exchange, in certain of the Settlement Agreements, the Debtors have agreed to release certain of the Vendors from any potential liability to the Debtors or their estates, including, without limitation, any avoidance actions under Chapter 5 of the Bankruptcy Code. In agreeing to release certain of the Vendors from such claims, including avoidance actions under Chapter 5 of the Bankruptcy Code, the Debtors considered the potential recoveries against each Vendor on account of any preference actions, the possible defenses to such preference actions and the overall terms of the settlement to determine whether to give the Vendor such a release. Finally, the Debtors will retain a portion of the proceeds recovered under each of the Settlement Agreements, which monies will be available for creditors. The Settlement Agreements represent a final resolution of the matters between the Debtors and each of the Vendors. The Debtors therefore submit that the Settlement Agreement represents a fair and reasonable resolution of the disputes. For the foregoing reasons, the Debtors believe that they have properly exercised their business judgment in the negotiation and execution of the Settlement Agreements, the settlements falls well within the range of reasonableness required for approval of the Settlement Agreements, and that approval of the Settlement Agreements is in the best interests of the Debtors and their estates. The Debtors therefore request that this Court approve the Settlement Agreements in all respects. Waiver of Bankruptcy Rule 6004(h) To the extent Bankruptcy Rule 6004 applies, the Debtors request that this Court order that the stay provided in Bankruptcy Rule 6004(h) shall not apply to the order granting this 4

48 Document Page 48 of 50 Motion and that any order be effective immediately upon entry on the Court s docket. Bankruptcy Rule 6004(h) provides that an order authorizing the use, sale, or lease of property is stayed until the expiration of fourteen (14) days after entry of the order, unless the court orders otherwise. FED. R. BANKR. P. 6004(h). In light of the current circumstances, including the financial condition of the Debtors, the fleeting value of the Debtors inventory and the required outside closing dates of December 29, 2017 under each of the Settlement Agreements, the Debtors believe that the Settlement Agreements should be consummated as soon as practicable. The Settlement Agreements expedite the consummation of the sale of the Debtors Remaining Inventory by eliminating potential litigation surrounding such Remaining Inventory. Accordingly, the Debtors request that the Order be effective immediately upon entry of such order and that the fourteen (14) day stay under Bankruptcy Rules 6004(h) be waived. Conclusion For the foregoing reasons, the Debtors respectfully request that the Court enter the proposed orders granting the relief requested in the Motion. Dated: December 15, 2017 e/ Andrew J. Glasnovich Robert T. Kugler (#194116) Edwin H. Caldie (# ) Phillip J. Ashfield (# ) Andrew J. Glasnovich (# ) STINSON LEONARD STREET LLP 50 South Sixth Street, Suite 2600 Minneapolis, MN Telephone: (612) Facsimile: (612) robert.kugler@stinson.com edwin.caldie@stinson.com phillip.ashfield@stinson.com drew.glasnovich@stinson.com COUNSEL FOR THE DEBTORS 5

49 Document Page 49 of 50 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MINNESOTA In re: WYNIT DISTRIBUTION, LLC, WD Navarre Distribution, LLC, WD Encore Software, LLC, WD Navarre Holdings, LLC, WD Navarre Digital Services, LLC, WYNIT Holdings, Inc., WD Navarre Canada, ULC, Debtors. Jointly Administered under BKY BKY BKY BKY BKY BKY BKY BKY Chapter 11 Cases ORDER APPROVING SETTLEMENT AGREEMENTS WITH CERTAIN VENDORS PURSUANT TO 11 U.S.C. 105(a) AND FED. R. BANKR This matter came before the Court upon the Motion for an Order (I) Granting an Expedited Hearing, and (II) Approving Settlement Agreements with Certain Vendors Pursuant to 11 U.S.C. 105(A) And Fed. R. Bankr (the Motion ) of the above-captioned debtors (the Debtors ) in the above-captioned chapter 11 cases (the Cases ) seeking entry of an order, on an expedited basis, approving settlement agreements (which are attached as Exhibits A and B to the Motion and as Exhibits _,_,_, and _ to the Declaration of [Dkt. No. ], the Settlement Agreements ) among the Debtors, certain vendors ( Vendors ) and Wells Fargo Bank, National Association, as the prepetition and postpetition administrative agent under certain prepetition and postpetition credit agreements (the Agent ); and upon the Court having found that adequate and sufficient notice of the Motion has been given under the circumstances; and it appearing that no other or further notice of the Motion is necessary or required; and the Court having found that it has jurisdiction over the matter pursuant to 28 U.S.C. 157 and 1334; and the Court having reviewed the Motion; and the Court having determined that the relief requested

50 Document Page 50 of 50 in the Motion is in the best interest of the Debtors, their estates, creditors and other parties in interest, and after due deliberation and sufficient cause appearing therefore, IT IS SO ORDERED that: 1. The Motion is GRANTED; 2. Debtors' request for an expedited hearing is approved; 3. Each and every term of the Settlement Agreements is hereby approved, including, without limitation, the releases set forth therein; 4. The Debtors are authorized to enter into each of the Settlement Agreements with the Vendors and the Agent; 5. This Order and the Settlement Agreements shall be binding upon the Debtors and their respective successors or assigns, including, without limitation, any trustee or other fiduciary hereafter appointed as a legal representative of the Debtors under Chapter 7 or Chapter 11 of the Bankruptcy Code; 6. To the extent Bankruptcy Rule 6004 applies, this Order shall be effective upon entry and shall not be stayed under Bankruptcy Rule 6004(h); and 7. This Court shall retain jurisdiction to hear and determine all matters arising from the implementation of this Order. Dated: December, 2017 Kathleen H. Sanberg Chief United States Bankruptcy Judge 2