IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE : :

Transcription

1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re PROLIANCE INTERNATIONAL, INC., et al., 1 Debtors x Chapter 11 Case No (CSS) (Jointly Administered) Hearing Date 9/22/09 at 1130 a.m. (EDT) Obj. Deadline 9/14/09 at 400 p.m. (EDT) SECOND OMNIBUS MOTION OF THE DEBTORS FOR AN ORDER AUTHORIZING THEM TO REJECT CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES, NUNC PRO TUNC AS OF THE REJECTION DATE The above-captioned debtors and debtors-in-possession (collectively, the "Debtors") hereby file this motion (the "Motion"), pursuant to section 365 of title 11 of the United States Code (the "Bankruptcy Code") and Rule 6006 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), for the entry of an order authorizing the rejection of certain executory contracts and unexpired leases identified on Exhibit A hereto (collectively, the "Rejected Contracts"), 2 as of the Rejection Date (as such term is defined below). 3 In support of this Motion, the Debtors respectfully state as follows Jurisdiction 1. This Court has jurisdiction over this Motion pursuant to 28 U.S.C. 157 and This matter is a core proceeding pursuant to 28 U.S.C. 157(b). Venue for this matter is proper in this district pursuant to 28 U.S.C and The Debtors are the following four entities (the last four digits of their respective taxpayer identification numbers, if any, follow in parentheses) Proliance International, Inc. (7383); Aftermarket Delaware Corporation (9862); Aftermarket LLC; and Proliance International Holding Corporation (9275). The address of each of the Debtors is 100 Gando Drive, New Haven, Connecticut The term "Rejected Contracts" includes any modifications, amendments, addenda or supplements to such Rejected Contracts and any restatements thereof. A copy of the proposed order (the "Order") is attached hereto as Exhibit B.

2 Background 2. On July 2, 2009 (the "Petition Date"), each of the Debtors commenced a case under chapter 11 of the Bankruptcy Code. 4 The Debtors are operating their businesses and managing their properties as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 3. On July 15, 2009, the Office of the United States Trustee for the District of Delaware (the "U.S. Trustee") appointed the official committee of unsecured creditors (the "Committee"). No trustee or examiner has been appointed in these chapter 11 cases. Facts Relevant to Relief Requested 4. On the Petition Date, the Debtors filed the Motion of the Debtors for (I) an Order (A) Approving Bidding Procedures for the Sale of Certain Assets, (B) Authorizing the Debtors to Offer Certain Bid Protections and (C) Scheduling Final Sale Hearing and Approving Form and Manner of Notice Thereof, and (II) an Order Authorizing and Approving (A) the Sale of Certain Assets Free and Clear of Liens, Claims and Encumbrances, (B) the Assumption and Assignment of Executory Contracts and Unexpired Leases and (C) Related Relief (Docket No. 19) (the "Sale Motion"). On July 23, 2009, this Court entered the Order (I) Approving Bidding Procedures For The Sale of The Debtors' Assets, (II) Authorizing The Debtors To Offer Certain Bid Protections And (III) Schedule Final Sale Hearing And Approving Form And Manner of Notice Thereof (Docket No. 137) (the "Bidding Procedures Order"). 5. On the Petition Date, three of the Debtors (collectively, the "Sellers") entered into that certain Purchase Agreement, dated July 2, 2009 (the "Purchase Agreement"), which provides for the sale of their North American business to Centrum Equities XV, LLC 4 Background information regarding, among other things, the Debtors' business and the events leading to the commencement of these chapter 11 cases are contained in the Affidavit of Arlen F. Henock in Support of First Day Pleadings, which was filed on the Petition Date. -2-

3 ("Centrum"). The Purchase Agreement, among other things, established Centrum as the stalking horse bidder for the purchase of such assets. At a hearing held on August 13, 2009 (the "Sale Hearing"), the Debtors requested that the Court approve the sale of their North American business to the bidder (the "Successful Bidder") presenting the highest and best bid for such assets (the "Sale"). 6. On August 13, 2009, the Court entered an order authorizing the Debtors, among other things, to consummate the sale of their North American business to Centrum (the "Sale Order"). 7. Pursuant to the Purchase Agreement and the Bidding Procedures Order, on July 23, 2009, the Debtors filed with the Court the Notice of Assumption and Assignment and Proposed Cure Amounts, If Any, With Respect to Executory Contracts and Unexpired Non- Residential Real Property Leases to Be Assumed and Assigned (Docket No. 128) (the "Assumption and Assignment Notice") and served the Assumption and Assignment Notice on the counterparties to the executory contracts and unexpired leases listed thereon (collectively, the "Counterparties"). The Counterparties listed on the Assumption and Assignment Notice were parties to those executory contracts and unexpired leases that Centrum intended, as of the Petition Date, to have deemed Purchased Contracts (as defined in the Purchase Agreement) under the Purchase Agreement. 8. Pursuant to the Purchase Agreement, such Purchased Contracts initially included all of the Debtors' executory contracts and unexpired leases. Pursuant to the Purchase Agreement, Centrum had until three business days prior to the auction (the "Purchased Contracts Disclosure Deadline") to provide the Debtors with the final list of Purchased Contracts. The -3-

4 final list of Purchased Contracts provided by Centrum excluded, among others, the Rejected Contracts identified on Exhibit A hereto. 9. On August 14, 2009, the Debtors filed the Omnibus Motion of the Debtors for an Order Authorizing Them to Reject Certain Executory Contracts and Unexpired Leases, Nunc Pro Tunc as of the Rejection Date (Docket No. 235) (the "First Omnibus Rejection Motion"), by which the Debtors seek to reject other contracts not deemed Purchased Contracts under the Purchase Agreement. By this Motion, the Debtors seek to reject those Rejected Contracts that were not included in the First Omnibus Rejection Motion. Basis for Relief Requested 10. As a result of the Debtors' sale of their North American business, most of the executory contracts and unexpired leases to which the Debtors are a party have become unnecessary to the Debtors as they wind down their estates and liquidate their remaining assets. Because the Debtors are no longer operating their North American business, the Debtors believe that the Rejected Contracts have no value to their estates and, hence, are appropriate for immediate rejection in order to relieve an undue burden on the Debtors' estates. Accordingly, the Debtors hereby request authority to reject the Rejected Contracts pursuant to section 365 of the Bankruptcy Code. 11. Section 365(a) of the Bankruptcy Code provides that a debtor, "subject to the court's approval, may assume or reject any executory contract or unexpired lease." 11 U.S.C. 365(a). Courts routinely approve motions to assume, assume and assign or to reject executory contracts or unexpired leases upon a showing that the debtor's decision to take such action will benefit the debtor's estate and is an exercise of sound business judgment. NLRB v. Bildisco & Bildisco, 465 U.S. 513, 523 (1984) (stating that the traditional standard applied by courts to authorize the rejection of an executory contract is that of "business judgment"); see also In re -4-

5 Taylor, 913 F.2d 102 (3d. Cir. 1990); In re Buckhead America Corp., 180 B.R. 83 (Bankr.D. Del. 1995). 12. Courts in this District have defined "business judgment" as "[t]he presumption that in making business decisions not involving direct self-interest or self-dealing, corporate directors act on an informed basis, in good faith, and in the honest belief that their actions are in the corporation's best interest." Official Comm. of Unsecured Creditors v. Aust (In re Network Access Solutions, Corp.), 330 B.R. 67, 75 (Bankr. D. Del. 2005). The business judgment standard is not strict, it merely requires a showing that either assumption or rejection of the executory contract or unexpired lease will benefit the debtor's estate. Accordingly, courts generally will not second-guess a debtor's business judgment concerning the assumption or rejection of an executory contract or unexpired lease. See In re Decora Indus., Inc., No , 2002 WL , at *8 (D. Del. May 20, 2002) (stating that "[a] debtor satisfies the 'business judgment' test when it determines, in good faith, that assumption of an executory contract will benefit the estate and unsecured creditors"); In re Exide Techn., 340 B.R. 222, 239 (Bankr. D. Del. 2006) (stating that the business judgment standard "is not a difficult standard to satisfy and requires only a showing that [the debtor's decision] will benefit the estate"); In re Trans World Airlines, Inc., 261 B.R. 103, 121 (Bankr. D. Del. 2001) (observing that the business judgment standard is satisfied, and that a debtor's decision to assume or reject must be "summarily affirmed," where such decision is not "the product of bad faith, or whim or caprice") (quotation omitted). 13. As noted above, the Debtors believe that the Rejected Contracts are unnecessary to the wind-down of their estates after the sale of their North American business and, hence, represent an undue burden upon the Debtors' estates. Moreover, the Debtors believe -5-

6 that the Rejected Contracts have no market value i.e., cannot be assigned to a third party for value. Accordingly, rejection of the Rejected Contracts represents an exercise of the Debtors' sound business judgment, is in the best interests of the Debtors' estates and creditors and should be approved, pursuant to section 365 of the Bankruptcy Code. 14. The Debtors further request authority to reject the Rejected Contracts, to the extent that they are executory or unexpired, effective as of the filing of this Motion (the "Rejection Date"). Courts have authorized rejections of executory contracts and unexpired leases, including retroactive rejections, based on the equities under the circumstances. See In re Chi-Chi's, Inc., 305 B.R. 396, 399 (Bankr. D. Del. 2004) (acknowledging that a bankruptcy court may approve a rejection retroactive to the date the motion is filed after balancing the equities in a particular case); In re Fleming Cos., Inc., 304 B.R. 85, 96 (Bankr. D. Del. 2003) (stating that rejection has been allowed nunc pro tunc to the date of the motion or the premises were surrendered); Thinking Machines Corp. v. Mellon Financial Servs. Corp. (In re Thinking Machines Corp.), 67 F.3d 1021, 1028 (1st Cir. 1995) (finding that, "[i]n the section 365 context, this means that bankruptcy courts may enter retroactive orders of approval, and should do so when the balance of equities preponderates in favor of such remediation"); New Valley Corp. v. Corporate Property Assocs. (In re New Valley Corp.), No , 2000 WL , at *16 (D.N.J. Aug. 31, 2000) (finding that equities weighed in favor of retroactive rejection to the date the debtor allowed a lessor to resume control of the property). Courts that have done so generally have permitted rejection of an executory contract or unexpired lease to be effective as of the date on which the nondebtor party to the executory contract or unexpired lease was given definitive notice of the debtor's intent to reject. See, e.g., In re Loewen Group Int'l, Inc., No (PJW) (Bankr. D. Del. Aug. 18, 2000) (authorizing rejection of a nonresidential real -6-

7 property lease effective as of the date of the filing of the rejection motion); In re Imperial Home Decor Group, Inc., No (MFW) (Bankr. D. Del. Feb. 25, 2000) (authorizing rejection nunc pro tunc of car lease as of the date the car was returned to the lessor). 15. Courts in this District, including this Court, have previously granted requests for retroactive rejection. See, e.g., In re Proliance International, Inc., No (CSS) (Bankr. D. Del. Jul. 20, 2009); In re Diamond Glass, Inc., No (CSS) (Bankr. D. Del. Apr. 24, 2008); In re Buffets Holdings, Inc., No (MFW) (Bankr. D. Del. Feb. 13, 2008); In re Teleglobe Commc'ns Corp., No (MFW) (Bankr. D. Del. June 24, 2002); In re Namco Cybertainment, Inc., No (PJW) (Bankr. D. Del. 1998). In Namco, this Court permitted the retroactive rejection of a lease on the conditions that (a) the premises (and the keys thereto) subject to a lease were surrendered with an unequivocal statement of abandonment to the landlord, (b) the motion was filed and served on the landlord, (c) the official committee of unsecured creditors had consented to the relief requested in the motion and (d) the debtor acknowledged that it would not have the right to withdraw the motion prior to the hearing. 16. In the instant case, the nondebtor parties to the Rejected Contracts (collectively, the "Non-Debtor Parties") will have notice of the Debtor's intent to reject the applicable Rejected Contract upon the filing and service of this Motion. Furthermore, the Non- Debtor Parties to the Debtors' operating contracts had reason to expect that their contracts or leases would be rejected, given the Debtors' July 2, 2009 press release regarding the Debtors' entry into the Purchase Agreement. Accordingly, the Debtors believe that, due to their financial condition, the publicity surrounding the sale of their North American business, and the need to reduce unnecessary administrative claims against their estates, the equities under the -7-

8 circumstances weigh in favor of permitting the Debtors to reject the Rejected Contracts, effective as of the Rejection Date. Notice 17. The Debtors have provided notice of this Motion by facsimile and/or overnight mail to (a) the U.S. Trustee; (b) counsel to the Committee; (c) counsel to the Debtors' prepetition secured lenders; (d) the Internal Revenue Service; (e) the Securities Exchange Commission; (f) the Non-Debtor Parties; and (g) those parties who have filed requests for notice pursuant to Bankruptcy Rule The Debtors respectfully submit that no other or further notice of this Motion is required. No Prior Request 18. No prior request for the relief sought herein has been made to this Court or any other court. WHEREFORE, the Debtors respectfully request that the Court enter an order, substantially in the form attached hereto as Exhibit B (i) granting the relief sought herein; and (ii) granting to the Debtors such other and further relief as the Court may deem proper. -8-

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10 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ) Chapter 11 In re ) ) Case No (CSS) PROLIANCE INTERNATIONAL, INC., ) et al., 1 ) (Jointly Administered) ) ) Hearing Date 9/22/09 at 1130 a.m. (EDT) Debtors. ) Objection Deadline 9/14/09 at 400 p.m. (EDT) NOTICE OF MOTION AND HEARING PLEASE TAKE NOTICE that, on August 25, 2009, Proliance International, Inc., ( Proliance ) and the other debtors in the above-captioned cases (collectively with Proliance, the Debtors ), filed the Second Omnibus Motion of the Debtors for an Order Authorizing Them to Reject Certain Executory Contracts and Unexpired Leases, Nunc Pro Tunc as of the Rejection Date (the Motion ) with the United States Bankruptcy Court for the District of Delaware, 824 Market Street, 3 rd Floor, Wilmington, Delaware (the Bankruptcy Court ). PLEASE TAKE FURTHER NOTICE that any responses or objections to the Motion must be filed in writing with the Bankruptcy Court and served upon and received by the undersigned counsel for the Debtors on or before September 14, 2009 at 400 p.m. (Eastern Daylight Time). PLEASE TAKE FURTHER NOTICE that if an objection is timely filed, served and received and such objection is not otherwise timely resolved, a hearing to consider such objection and the Motion will be held before The Honorable Christopher S. Sontchi at the 1 The Debtors are the following four entities (the last four digits of their respective taxpayer identification numbers, if any, follow in parentheses) Proliance International, Inc. (7383); Aftermarket Delaware Corporation (9862); Aftermarket LLC; and Proliance International Holding Corporation (9275). The address of each of the Debtors is 100 Gando Drive, New Haven, Connecticut RLF

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12 EXHIBIT A

13 EMPLOYEE CONTRACTS Counterparty Name Address City State ZIP Code Contact Name Type of Contract Arlen Henock 44 Talmadge Lane Stamford CT Alejandro Portugal 922 Desert Bluff San Antonio TX Bob Elliott 3514 Brooktree Lane Indian Trail NC Bruce Listorti 308 Cypress Landing Longwood FL Charley Johnson 132 Tulip Tree Drive Guilford CT Employment Agreement Chet Latin 5 Warner Street Milford CT Debra Magrone 86 Laurel Ridge Trail Killingworth CT Greg Card 22 Walnut Hill Madison CT Greg Kimball P.O. Box Park City UT Harry Withers 2613 New Concorde Ct Herndon VA Jeff Jackson 6 Rowledge Pond Sandy Hook CT John Carrano 137 Perry Merrill Drive West Haven CT Jonathan Moyer 3 Maple Hill Killingworth CT Ken Flynn 12 Alyssa Drive Cheshire CT Marc Magrone 86 Laurel Ridge Trail Killingworth CT MH Massey 2113 Glenwick Lane Irving TX

14 Counterparty Name Address City State ZIP Code Contact Name Type of Contract Mitch Massey 704 Seguin Lane Mansfield TX Richard Wisot 248 Argyle Orange CT Roland Ewert 547 N. Eddington Drive Orange CA Roy Yancy 1512 Welcome Newnan GA Steve Sukovich 61 Ralph Bethany CT William Long 48 Titus Coan Killingworth CT

15 EXHIBIT B

16 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re PROLIANCE INTERNATIONAL, INC., et al., 1 Debtors x Chapter 11 Case No (CSS) (Jointly Administered) Re Docket No. ORDER AUTHORIZING THE DEBTORS TO REJECT CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES NUNC PRO TUNC AS OF THE REJECTION DATE This matter coming before the Court on the Second Omnibus Motion of the Debtors for an Order Authorizing Them to Reject Certain Executory Contracts and Unexpired Leases of Nunc Pro Tunc as of the Rejection Date (the "Motion"), 2 filed by the above-captioned debtors and debtors-in-possession (collectively, the "Debtors"); the Court having reviewed the Motion and having considered the statements of counsel and the evidence adduced with respect to the Motion at a hearing before the Court (the "Hearing"); the Court having found that (i) the Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334, (ii) venue for this matter is proper in this district pursuant to 28 U.S.C and 1409, (iii) this is a core proceeding pursuant to 28 U.S.C. 157(b), (iv) notice of the Motion and the Hearing was sufficient under the circumstances and (v) the rejection of the Rejected Contracts, effective as of the Rejection Date, is a proper exercise of the Debtors' sound business judgment and is in the best interests of the Debtors, their estates and their creditors; and good and sufficient cause having been shown; 1 2 The Debtors are the following four entities (the last four digits of their respective taxpayer identification numbers, if any, follow in parentheses) Proliance International, Inc. (7383); Aftermarket Delaware Corporation (9862); Aftermarket LLC; and Proliance International Holding Corporation (9275). The address of each of the Debtors is 100 Gando Drive, New Haven, Connecticut Capitalized terms not otherwise defined herein shall have the meanings given to them in the Motion.

17 IT IS HEREBY ORDERED THAT 1. The Motion is GRANTED. 2. The Debtors are authorized to reject the Rejected Contracts identified on Schedule 1 attached hereto, effective as of the Rejection Date. 3. The Non-Debtor Parties shall have until the later of (a) the general bar date for filing prepetition general unsecured claims as may be established in the Debtors' chapter 11 cases or (b) 30 calendar days from the Rejection Date to file a proof of claim for damages arising from the rejection of the Rejected Contracts. 4. The Court shall retain jurisdiction to resolve all matters relating to the implementation of this Order. Dated, 2009 Wilmington, Delaware THE HONORABLE CHRISTOPHER S. SONTCHI UNITED STATES BANKRUPTCY JUDGE - 2 -

18 SCHEDULE 1

19 EMPLOYEE CONTRACTS Counterparty Name Address City State ZIP Code Contact Name Type of Contract Arlen Henock 44 Talmadge Lane Stamford CT Alejandro Portugal 922 Desert Bluff San Antonio TX Bob Elliott 3514 Brooktree Lane Indian Trail NC Bruce Listorti 308 Cypress Landing Longwood FL Charley Johnson 132 Tulip Tree Drive Guilford CT Employment Agreement Chet Latin 5 Warner Street Milford CT Debra Magrone 86 Laurel Ridge Trail Killingworth CT Greg Card 22 Walnut Hill Madison CT Greg Kimball P.O. Box Park City UT Harry Withers 2613 New Concorde Ct Herndon VA Jeff Jackson 6 Rowledge Pond Sandy Hook CT John Carrano 137 Perry Merrill Drive West Haven CT Jonathan Moyer 3 Maple Hill Killingworth CT Ken Flynn 12 Alyssa Drive Cheshire CT Marc Magrone 86 Laurel Ridge Trail Killingworth CT MH Massey 2113 Glenwick Lane Irving TX Mitch Massey 704 Seguin Lane Mansfield TX

20 Counterparty Name Address City State ZIP Code Contact Name Type of Contract Richard Wisot 248 Argyle Orange CT Roland Ewert 547 N. Eddington Drive Orange CA Roy Yancy 1512 Welcome Newnan GA Steve Sukovich 61 Ralph Bethany CT William Long 48 Titus Coan Killingworth CT