Case 16-11452-KJC Doc 1002 Filed 11/23/16 Page 1 of 8 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re DRAW ANOTHER CIRCLE, LLC, et al., 1 Debtors. Chapter 11 Case No.: 16-11452 (KJC) (Jointly Administered) Hearing Date: December 20, 2016 at 2:00 p.m. (ET) Objection Deadline: December 13, 2016 at 4:00 p.m. (ET) DEBTORS SECOND MOTION FOR AN ORDER EXTENDING THEIR EXCLUSIVE PERIODS TO FILE A CHAPTER 11 PLAN AND SOLICIT ACCEPTANCES THEREOF The above-captioned debtors and debtors in possession (the Debtors ), by and through their undersigned counsel, hereby file this motion (the Motion ), for entry of an order, substantially in the form attached hereto as Exhibit A (the Proposed Order ), pursuant to section 1121(d) of the Bankruptcy Code, extending (i) the period during which the Debtors have the exclusive right to file a chapter 11 plan (the Exclusive Filing Period ), by 60 days, through and including January 24, 2017 and (ii) the period during which the Debtors have the exclusive right to solicit acceptances thereof (the Exclusive Solicitation Period and, together with the Exclusive Filing Period, the Exclusive Periods ) through and including March 27, 2017, 2 or approximately 60 days after the expiration of the Exclusive Filing Period, as extended. In support of the Motion, the Debtors respectfully represent as follows: 1 The Debtors and the last four digits of their respective federal taxpayer identification numbers are as follows: Draw Another Circle, LLC (2102); Hastings Entertainment, Inc. (6375); MovieStop, LLC (9645); SP Images, Inc. (7773); and Hastings Internet, Inc. (0809). The Debtors executive headquarters are located at 3601 Plains Boulevard, Amarillo, TX 79102. 2 Sixty (60) days from the end of the current Exclusive Solicitation Period is Saturday, March 25, 2017. Thus, the Debtors seek to extend the Exclusive Solicitation Period to the following Monday, March 27, 2017. 2209673v3
Case 16-11452-KJC Doc 1002 Filed 11/23/16 Page 2 of 8 Jurisdiction and Venue 1. The United States Bankruptcy Court for the District of Delaware (the Court ) has jurisdiction over these cases and the Motion pursuant to 28 U.S.C. 157 and 1334 and the Amended Standing Order of Reference from the United States District Court for the District of Delaware dated as of February 29, 2012. This is a core proceeding within the meaning of 28 U.S.C. 157(b)(2). Venue of these cases and the Motion in this district is proper under 28 U.S.C. 1408 and 1409. 3 Background 2. On June 13, 2016 (the Petition Date ), each of the Debtors commenced a voluntary case under chapter 11 of the Bankruptcy Code. The Debtors chapter 11 cases have been consolidated for procedural purposes only and are being administered jointly. The Debtors are authorized to continue to operate their businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On June 21, 2016, the Office of the United States Trustee (the U.S. Trustee ) appointed the Official Committee of Unsecured Creditors (the Committee ). 3. Information regarding the Debtors business operations and capital structure, as well as a description of the reasons for filing these cases and the Debtors goals for these cases is set forth in the Declaration of Duane A. Huesers in Support of the Debtors First Day Pleadings [Docket No. 18]. 4. On the Petition Date, the Debtors filed the Motion for Entry of (I) an Order (A) Approving Bidding Procedures and Bid Protections in Connection with the Sale of 3 Pursuant to Rule 9013-1(f) of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware, the Debtors consent to the entry of a final judgment or order with respect to the Motion if it is determined that the Court, absent consent of the parties, cannot enter final orders or judgments consistent with Article III of the United States Constitution. 2
Case 16-11452-KJC Doc 1002 Filed 11/23/16 Page 3 of 8 Certain Assets (B) Approving Procedures for Assumption and Assignment of Executory Contracts, (C) Approving the Form and Manner of Notice, and (D) Scheduling an Auction and a Sale Hearing, and (II) an Order Authorizing and Approving the Sale of Certain Assets [Docket No. 16] (the Bid Procedures Motion ) seeking to sell certain of the Debtors assets (the Assets ). 5. On July 6, 2016, the Court entered the Order (I) Approving Bid and Sale Procedures, (II) Approving Certain Bidding Protections, (III) Approving the Form and Manner of Notice of the Sale and Assumption and Assignment of Executory Contracts and Unexpired Leases and (IV) Scheduling an Auction and Sale Hearing [Docket No. 260] (the Bid Procedures Order ). 6. In accordance with the Bid Procedures Motion, the Debtors held an auction for the sale of the Assets on July 20, 2016 at 10:00 a.m. (ET). On July 22, 2016, the Court held a hearing and approved the sale of the Assets. On July 25, 2016, the Court entered the Order Authorizing (I) the Sale of Certain of the Debtors Assets Free and Clear of All Claims, Liens, Liabilities, Rights, Interests and Encumbrances, (II) the Debtors to Enter into and Perform Their Obligations Under the Agency Agreement, and (III) Granting Related Relief [Docket No. 449] (the Sale Order ). 7. On August 2, 2016, the Court entered the Order Authorizing (I) the Sale of Hastings Aircraft Free and Clear of All Claims, Liens, Liabilities, Rights, Interests and Encumbrances and (II) Granting Related Relief [Docket No. 503] (the Aircraft Sale Order ), approving the sale of Hastings aircraft. 8. On August 16, 2016, the Debtors filed the Motion for Entry of an Order Authorizing (A) Setting (1) Date to Conduct Auction of Debtors Interest in Certain 3
Case 16-11452-KJC Doc 1002 Filed 11/23/16 Page 4 of 8 Nonresidential Real Property Leases, and (2) Hearing Date for Approval of the Sale of Leases; (B) Approving Bid Procedures and Terms of Auction; (C) Authorizing Debtors to Enter into Lease Termination Agreements; (D) Approving and Authorizing Sale of Leases to Highest or Best Bidder Free and Clear of All Liens, Interests, Claims and Encumbrances Pursuant to Sections 105, 363, and 365 of the Bankruptcy Code; and (E) Waiving the Requirements of Federal Rules of Bankruptcy Procedure 6004(h) and 6006(d) [Docket No. 585]. 9. On September 6, 2016, the Court entered the Order Approving (A) Bid Procedures, (B) Procedures for Assumption and Assignment of Unexpired Leases, and (C) Related Relief [Docket No. 676] (the Lease Sale Order ) establishing, among other things, procedures and guidelines for the disposition of certain unexpired leases of nonresidential real property. 10. On September 23, 2016, pursuant to the Sale Order, the Debtors held an auction for certain of the Debtors intellectual property assets. On September 28, 2016, the Court entered the Order (I) Authorizing the Debtors to Sell Certain Intellectual Property Assets Free and Clear of All Liens, Claims and Encumbrances and (II) Granting Certain Related Relief [Docket No. 754] (the IP Sale Order ) approving the sale of the intellectual property assets. 11. On October 17, 2016, the Court entered the Order Authorizing (I) the Sale of Certain of the Debtors Assets Related to the SP Images Business Free and Clear of All Claims, Liens, Liabilities, Rights, Interests and Encumbrances, (II) the Debtors to Enter into and Perform Their Obligations Under the Asset Purchase Agreement, (III) the Debtors to Assume and Assign Certain Executory Contracts and Unexpired Leases, and (IV) Granting Related Relief [Docket No. 820] (the SP Images Sale Order ) approving the sale of certain assets of Debtor SP Images. 4
Case 16-11452-KJC Doc 1002 Filed 11/23/16 Page 5 of 8 12. Pursuant to the Sale Order, the Aircraft Sale Order, the Lease Sale Order, the IP Sale Order and the SP Images Sale Order, the Debtors have substantially completed the liquidation of their assets. 13. On August 16, 2016, the Debtors filed the Debtors Motion for an Order Extending their Exclusive Periods to File a Chapter 11 Plan and Solicit Acceptances Thereof [Docket No. 583]. On September 6, 2016, the Court entered the Order Extending the Debtors Exclusive Periods to File a Chapter 11 Plan and Solicit Acceptances Thereof [Docket No. 669] extending the period during which the Debtors have the exclusive right to (i) file and (ii) solicit acceptance of a chapter 11 plan through November 25, 2016 and January 24, 2017 respectively (together, the Current Exclusive Periods ). 4 14. At this time, counsel for the Debtors and the Committee are in the process of finalizing a joint combined disclosure statement and plan of liquidation, which the Debtors intend to file in the very near future. The Debtors are filing this Motion in an abundance of caution so that no other plans are filed or solicited at this time. Relief Requested 15. By this Motion, the Debtors seek entry of an order pursuant to section 1121(d) of the Bankruptcy Code: (i) extending the Exclusive Filing Period by 60 days, through and including January 24, 2017 and (ii) the Exclusive Solicitation Period through and including March 27, 2017, without prejudice to their right to seek other appropriate relief. 4 Pursuant to Del. Bankr. LR 9006-2, the filing of this Motion prior to the expiration of the Current Exclusive Periods shall serve to automatically extend the Current Exclusive Periods without the necessity for the entry of a bridge order, until the Court rules on this Motion. 5
Case 16-11452-KJC Doc 1002 Filed 11/23/16 Page 6 of 8 Legal Basis for Relief Requested 16. Under section 1121(b) of the Bankruptcy Code, a debtor has the exclusive right to file a chapter 11 plan in the first 120 days following the commencement of a chapter 11 case. If a debtor files a plan during this exclusive filing period, section 1121(c)(3) of the Bankruptcy Code provides a debtor with 60 days following the expiration of the exclusive filing period (or 180 days following the commencement of the case) to solicit acceptances of a plan. 17. Section 1121(d) of the Bankruptcy Code provides a debtor with a mechanism to extend these exclusive periods, stating that [o]n request of a party in interest made... and after notice and a hearing, the court may for cause reduce or increase the 120-day period or the 180-day period referred to in this section. 11 U.S.C. 1121(d)(1). The ultimate decision to extend a debtor s exclusive periods rests within the discretion of the bankruptcy court. See First Am. Bank of N.Y. v. S.W. Gloves & Safety Equip., Inc., 64 B.R. 963, 965-66 (D. Del. 1986) (finding the authority to extend debtor s exclusivity within the discretion of the bankruptcy court). 18. While the Bankruptcy Code does not define cause, courts rely on various factors to determine whether cause exists to extend a debtor s exclusive periods. These factors include: (i) the size and complexity of the debtor s case; (ii) the debtor s good faith progress towards resolving issues facing the estate; (iii) whether the debtor is seeking exclusivity to pressure creditors to accede to [the Debtors ]... demands; (iv) whether the debtor has demonstrated reasonable prospects for filing a viable plan; and (v) whether the debtor has progressed in negotiations with creditors. See, e.g., In re Express One Int l Inc., 194 B.R. 98, 100 (Bankr. E.D. Tex. 1996) (listing the above factors); In re Gibson & Cushman Dredging Corp., 101 B.R. 405, 409-10 (E.D.N.Y. 1989) (listing certain of the above factors); In re Grand 6
Case 16-11452-KJC Doc 1002 Filed 11/23/16 Page 7 of 8 Traverse Dev. Co. Ltd. P ship., 147 B.R. 418, 420 (Bankr. W.D. Mich. 1992) (same); In re Gen. Bearing Corp., 136 B.R. 361, 367 (Bankr. S.D.N.Y. 1992) (same); In re Southwest Oil Co. of Jourdanton, Inc., 84 B.R. 448, 451-54 (Bankr. W.D. Tex. 1987) (same). 19. The Debtors submit that the above factors support the relief requested. As an initial matter, there can be no dispute that these cases are both large and complex. There also can be no dispute that, during the time that has elapsed in these cases, the Debtors have made significant progress, including selling substantially all of their assets and resolving a significant number of disputes. In addition, the requested extension of the Exclusive Periods will not harm creditors or other parties in interest. Rather, the relief requested herein will ensure that the process moves forward in an orderly fashion. 20. At this time, the Debtors have completed store closing sales, closed all of their retail locations and sold substantially all of their assets. Further, the Debtors and the Committee have drafted a joint combined chapter 11 plan of liquidation and disclosure statement. The Debtors are working diligently to seek confirmation of a liquidating plan, to distribute the value obtained from the various sales and other assets to their various creditor constituencies, and to conclude these chapter 11 cases as quickly as possible. The relief requested herein will permit the Debtors to prepare and solicit support for what the Debtors anticipate to be a consensual chapter 11 plan in the near future. Notice 21. Notice of this Motion will be provided to: (a) the U.S. Trustee; (b) counsel to the Committee; (c) counsel to Bank of America, N.A.; (d) counsel to Pathlight Capital, LLC; and (e) all entities that have requested notice pursuant to Bankruptcy Rule 2002. The Debtors respectfully submit that no further notice of this Motion is required. 7
Case 16-11452-KJC Doc 1002 Filed 11/23/16 Page 8 of 8 No Prior Request 22. No prior motion for the relief requested herein has been made to this or any other court. CONCLUSION WHEREFORE, the Debtors respectfully request that the Court enter an order, substantially in the form of the Proposed Order attached hereto as Exhibit A, granting the relief requested herein and such other and further relief as may be equitable and just. Dated: November 23, 2016 Wilmington, Delaware Respectfully submitted, /s/ Chantelle D. McClamb Christopher M. Samis (No. 4909) L. Katherine Good (No. 5101) Chantelle D. McClamb (No. 5978) WHITEFORD, TAYLOR & PRESTON LLC The Renaissance Centre, Suite 500 405 North King Street Wilmington, Delaware 19801 Telephone: (302) 353-4144 Email: csamis@wtplaw.com kgood@wtplaw.com cmcclamb@wtplaw.com Counsel for the Debtors and Debtors in Possession 8
Case 16-11452-KJC Doc 1002-1 Filed 11/23/16 Page 1 of 2 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re DRAW ANOTHER CIRCLE, LLC, et al., 1 Debtors. Chapter 11 Case No.: 16-11452 (KJC) (Jointly Administered) Hearing Date: December 20, 2016 at 2:00 p.m. (ET) Objection Deadline: December 13, 2016 at 4:00 p.m. (ET) NOTICE OF DEBTORS SECOND MOTION FOR AN ORDER EXTENDING THEIR EXCLUSIVE PERIODS TO FILE A CHAPTER 11 PLAN AND SOLICIT ACCEPTANCES THEREOF PLEASE TAKE NOTICE that, on November 23, 2016, the above-captioned debtors and debtors in possession (the Debtors ) filed the Debtors Second Motion for an Order Extending Their Exclusive Periods to File a Chapter 11 Plan and Solicit Acceptances Thereof (the Motion ). PLEASE TAKE FURTHER NOTICE that any objection or response to the Motion must be (i) filed with the Clerk of the United States Bankruptcy Court for the District of Delaware, 824 Market Street, 3rd Floor, Wilmington, Delaware 19801, on or before December 13, 2016 at 4:00 p.m. (prevailing Eastern Time) (the Objection Deadline ) and (ii) served so as to be actually received no later than the Objection Deadline by the undersigned counsel to the Debtors. PLEASE TAKE FURTHER NOTICE that a hearing to consider the Motion is scheduled to be held before the Honorable Kevin J. Carey, United States Bankruptcy Judge, at the United States Bankruptcy Court for the District of Delaware, 5th floor, Courtroom No. 5, 1 The Debtors and the last four digits of their respective federal taxpayer identification numbers are as follows: Draw Another Circle, LLC (2102); Hastings Entertainment, Inc. (6375); MovieStop, LLC (9645); SP Images, Inc. (7773); and Hastings Internet, Inc. (0809). The Debtors executive headquarters are located at 3601 Plains Boulevard, Amarillo, TX 79102. 2209673v3
Case 16-11452-KJC Doc 1002-1 Filed 11/23/16 Page 2 of 2 824 market street, Wilmington, Delaware 19801 on December 20, 2016 at 2:00 p.m. (prevailing Eastern Time). PLEASE TAKE FURTHER NOTICE THAT IF YOU FAIL TO RESPOND TO THE MOTION IN ACCORDANCE WITH THIS NOTICE, THE BANKRUPTCY COURT MAY GRANT THE RELIEF REQUESTED IN THE MOTION WITHOUT FURTHER NOTICE OR OPPORTUNITY FOR A HEARING. Dated: November 23, 2016 Wilmington, Delaware Respectfully submitted, /s/ Chantelle D. McClamb Christopher M. Samis (No. 4909) L. Katherine Good (No. 5101) Chantelle D. McClamb (No. 5978) WHITEFORD, TAYLOR & PRESTON LLC The Renaissance Centre, Suite 500 405 North King Street Wilmington, Delaware 19801 Telephone: (302) 353-4144 Email: csamis@wtplaw.com kgood@wtplaw.com cmcclamb@wtplaw.com Counsel for the Debtors and Debtors in Possession 2209673 2
Case 16-11452-KJC Doc 1002-2 Filed 11/23/16 Page 1 of 3 EXHIBIT A Proposed Order 2209673v3
Case 16-11452-KJC Doc 1002-2 Filed 11/23/16 Page 2 of 3 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re DRAW ANOTHER CIRCLE, LLC, et al., 1 Debtors. Chapter 11 Case No.: 16-11452 (KJC) (Jointly Administered) Re: Docket No. SECOND ORDER EXTENDING THE DEBTORS EXCLUSIVE PERIODS TO FILE A CHAPTER 11 PLAN AND SOLICIT ACCEPTANCES THEREOF This matter coming before the Court on the Debtors Second Motion for an Order Extending Their Exclusive Periods to File a Chapter 11 Plan and Solicit Acceptances Thereof (the Motion ), 2 filed by the above-captioned debtors and debtors in possession (the Debtors ); the Court having reviewed the Motion; and the Court finding that (i) the Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334; (ii) this is a core proceeding pursuant to 28 U.S.C. 157(b)(2); (iii) notice of the Motion was sufficient under the circumstances; and (iv) cause, within the meaning of section 1121(d) of the Bankruptcy Code, exists for the extension of the Exclusive Periods requested in the Motion; and the Court having determined that the legal and factual bases set forth in the Motion establish just cause for the relief granted herein; IT IS HEREBY ORDERED THAT: 1. The Motion is GRANTED. 1 The Debtors and the last four digits of their respective federal taxpayer identification numbers are as follows: Draw Another Circle, LLC (2102); Hastings Entertainment, Inc. (6375); MovieStop, LLC (9645); SP Images, Inc. (7773); and Hastings Internet, Inc. (0809). The Debtors executive headquarters are located at 3601 Plains Boulevard, Amarillo, TX 79102. 2 Capitalized terms not otherwise defined herein have the meanings ascribed to them in the Motion. 2209673v3
Case 16-11452-KJC Doc 1002-2 Filed 11/23/16 Page 3 of 3 2. The Exclusive Filing Period is extended through and including January 24, 2017, pursuant to section 1121(d) of the Bankruptcy Code. 3. The Exclusive Solicitation Period is extended through and including March 27, 2017, pursuant to section 1121(d) of the Bankruptcy Code. 4. The relief granted in this Order is without prejudice to the Debtors rights to seek further extensions of the Exclusive Periods and the right of the Committee or any other party in interest to seek to terminate or seek a reduction of the Exclusive Periods. 5. The Court shall retain jurisdiction with respect to all matters arising from the interpretation, implementation or enforcement of this Order. Dated:, 2016 Wilmington, Delaware THE HONORABLE KEVIN J. CAREY UNITED STATES BANKRUPTCY JUDGE 2