Case 16-11452-KJC Doc 835 Filed 10/19/16 Page 1 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 Nos. 585 & 676 CERTIFICATION OF COUNSEL REGARDING PROPOSED ORDER APPROVING DEBTORS ENTRY INTO LEASE TERMINATION AGREEMENT WITH LANDLORD (TRAMONTANA GROUP I LLC, MARTINI-PACE, LLC, 4K S LLC, AND 1666 NORTH AVALON, LLC) The undersigned counsel to the above-captioned debtors and debtors in possession (the Debtors ), hereby certifies as follows: 1. 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 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] (the Motion ) 2 in the above-referenced chapter 11 cases. 2. On September 6, 2016, the United States Bankruptcy Court for the District of Delaware (the Court ) entered the Order Approving (A) Bid Procedures, (B) Procedures for 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 are to be given the meanings ascribed to them in the Motion.
Case 16-11452-KJC Doc 835 Filed 10/19/16 Page 2 of 3 Assumption and Assignment of Unexpired Leases, and (C) Related Relief [Docket No. 676] establishing, among other things, procedures and guidelines for the disposition of certain unexpired leases of nonresidential real property. 3. The Debtors, in consultation with the Committee, have entered into a Lease Termination Agreement (the LTA ) with Tramontana Group I, LLC, Martini-Pace, LLC, 4K s LLC and 1666 North Avalon, LLC (collectively, the Landlord ) regarding the Debtors leasehold interest in the Debtors retail store operating at certain premises commonly known as store no. 9672 in Jonesboro, Arkansas (the Lease ). Attached hereto as Exhibit 2 is the Declaration of Spence J. Mehl in Support of Entry of Proposed Order Approving Debtors Entry Into Lease Termination Agreement With Landlord (Tramontana Group I, LLC, Martini-Pace, LLC, 4K s LLC and 1666 North Avalon, LLC). 4. The LTA provides for, among other things, the termination of the Debtors interest in the Lease upon the occurrence of the Termination Date, as defined in the LTA, in consideration for which the Landlord has waived all claims against the Debtors estates, including claims for the final month of rent. 5. A copy of the proposed form of order (the Proposed Order ) approving the LTA is attached hereto as Exhibit 1, approving the LTA, which is attached as Exhibit A to the Proposed Order. The Landlord has reviewed the Proposed Order approving the LTA and consents to entry thereof. 2
Case 16-11452-KJC Doc 835 Filed 10/19/16 Page 3 of 3 WHEREFORE, the Debtors have determined, in consultation with the Committee that entry into the LTA is in the best interests of the Debtors estates and all parties in interest, the Debtors respectfully request that the Court enter the Proposed Order substantially in the form attached hereto as Exhibit 1, without further notice or hearing at the Court s earliest convenience. Dated: October 19, 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 3
Case 16-11452-KJC Doc 835-1 Filed 10/19/16 Page 1 of 9 EXHIBIT 1 (Proposed Order)
Case 16-11452-KJC Doc 835-1 Filed 10/19/16 Page 2 of 9 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 Nos. 585, 676, & ORDER APPROVING DEBTORS ENTRY INTO LEASE TERMINATION AGREEMENT WITH LANDLORD TRAMONTANA GROUP I LLC, MARTINI-PACE, LLC, 4K S LLC, AND 1666 NORTH AVALON, LLC) Upon consideration of the above-captioned debtors and debtors-in-possessions (the Debtors ) Motion for Entry of an Order Authorizing (A) Setting (1) Date to Conduct Auction of Debtors Interest in Certain 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] (the Motion ) 2 seeking, among other things, entry of an order authorizing the disposition of certain of the Debtors unexpired leases; and the Court having entered that certain Order Approving (A) Bid Procedures, (B) Procedures for Assumption and Assignment of Unexpired Leases, and (C) Related Relief [Docket No. 676] (the Lease Bid Procedures Order ) establishing, among other things, procedures and guidelines for the disposition of certain 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 are to be given the meanings ascribed to them in the Motion. 2
Case 16-11452-KJC Doc 835-1 Filed 10/19/16 Page 3 of 9 unexpired leases of nonresidential real property; and the Declaration of Spence J. Mehl in Support of Entry of Proposed Order Approving Debtors Entry Into Lease Termination Agreement With Landlord (Tramontana Group I, LLC, Martini-Pace, LLC, 4K s LLC and 1666 North Avalon, LLC) and the Debtors and Tramontana Group I, LLC, Martini-Pace, LLC, 4K s LLC and 1666 North Avalon, LLC (collectively, the Landlord ), the landlord of the unexpired lease of nonresidential real property covering certain premises commonly known as store no. 9672 (the Lease ) having agreed to consensually terminate such Lease on the terms set forth in the Lease Termination Agreement attached hereto as Exhibit A (the Agreement ); and it appearing that this Court has jurisdiction to consider 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; and it appearing that venue of these chapter 11 cases and the Motion in this District is proper pursuant to 28 U.S.C. 1408 and 1409; and it appearing that this matter is a core proceeding pursuant to 28 U.S.C. 157(b); and this Court having determined that the relief requested in the Motion is in the best interests of the Debtors, their estates, creditors and other parties in interest; and this Court having found that the relief requested in the Motion is justified by the facts and circumstances; and it appearing that proper and adequate notice of the Motion has been given and that no other or further notice is necessary; and after due deliberation thereon; and good and sufficient cause appearing therefor, IT IS HEREBY ORDERED, ADJUDGED and DECREED that: 1. The Motion is granted as set forth herein. 2. Pursuant to sections 105, 363, and 365 of the Bankruptcy Code, the Debtors are authorized to enter into and perform under the Agreement. 3. The terms of the Agreement are approved in their entirety. 3
Case 16-11452-KJC Doc 835-1 Filed 10/19/16 Page 4 of 9 4. The parties to the Agreement are authorized to take any action necessary to effectuate the terms of this Order and the Agreement without further order of this Court. 5. The Landlord shall be forever barred, except as provided in the Agreement, from asserting a claim with respect to its Lease or the underlying premises, and by agreement of the parties, any claims previously filed or to be filed by the Landlord shall be expunged, with prejudice, including any alleged administrative expense claims or claims arising under or in connection with sections 365 or 502(b)(6) of the Bankruptcy Code. 6. The termination of the Lease and the surrender of the subject premises by the Debtors to the Landlord is a legal, valid and effective conveyance of the Lease and the underlying premises to the Landlord and shall vest the Landlord with all right, title and interest in and to the Lease and the premises pursuant to section 363(f) of the Bankruptcy Code, free and clear of any and all claims, liens and encumbrances, with all such encumbrances to attach to the proceeds of the conveyance to the same extent and with the same validity and priority, and the same defenses, as they presently exist, subject to the terms and conditions of this Order. Any entities holding any such interests are enjoined from asserting such interests against the Landlord, their respective successors or assigns, or the Lease or subject premises. 7. The Landlord has acted in good-faith and is a good-faith purchaser under section 363(m) of the Bankruptcy Code and, as such, is entitled to all protections and immunities afforded hereby. The negotiation and execution of the Agreement was in good faith and was an arm s length transaction. Neither the Landlord nor the Debtors have engaged in any conduct that would prevent the application of section 363(m) of the Bankruptcy Code or cause the application of, or implicate, section 363(n) of the Bankruptcy Code to the Agreement, or to otherwise prevent the consummation of the surrender of the subject premises to the Landlord in accordance 4
Case 16-11452-KJC Doc 835-1 Filed 10/19/16 Page 5 of 9 therewith. In the absence of a stay pending appeal, the Landlord will be acting in good faith within the meaning of section 363(m) of the Bankruptcy Code in closing the transactions contemplated by the Agreement following entry of this Order. 8. Upon the Termination Date (as defined in the Agreement), any of the Debtors personal property or furniture, fixtures and equipment remaining on the premises shall be deemed abandoned by the Debtors free and clear of all liens, claims, encumbrances and interests (collectively, the Interests ), and Landlord may dispose of such property, in its sole discretion, free and clear of such Interests and without liability to the Debtors or any third party; provided, however, that the Debtors are required to comply with the abandonment provisions set forth in paragraph 24 of 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 ). 9. Notwithstanding Bankruptcy Rule 6004, this Order shall be effective and enforceable immediately upon entry. 10. This Court shall retain jurisdiction with respect to all matters arising from or related to the implementation or interpretation of this Order. Dated:, 2016 Wilmington, Delaware THE HONORABLE KEVIN J. CAREY UNITED STATES BANKRUPTCY JUDGE 5
Case 16-11452-KJC Doc 835-1 Filed 10/19/16 Page 6 of 9 Exhibit A AGREEMENT
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Case 16-11452-KJC Doc 835-2 Filed 10/19/16 Page 1 of 5 EXHIBIT 2 (Declaration)
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Case 16-11452-KJC Doc 835-2 Filed 10/19/16 Page 4 of 5 as store no. 9672 in Jonesboro, Arkansas. The Debtors operate a retail store at the Landlord s premises pursuant to a lease between the Debtors and Landlord (the Lease ). 7. In accordance with the Lease Bid Procedures Order, the Debtors, in consultation with the Committee, determined that it was in the best interests of the Debtors estates to enter into a Lease Termination Agreement (the LTA ) with the Landlord. 8. All actions taken by the Debtors and their agents with respect to the negotiations of the LTA were taken in good faith. The negotiations between the Debtors and the Landlord were conducted at arm s-length, with the parties being represented by separate counsel. The Landlord s bid for the Lease was a good-faith bona fide offer that the Debtors intend to consummate subject to the terms and conditions of the LTA. 9. The Debtors determined that the sale of the Lease, pursuant to the LTA, allows the Debtors to maximize the value associated with the Lease after engaging in extensive, arm s-length, good-faith negotiations with the Landlord. Accordingly, the Debtors believe that the LTA is not the product of collusion or bad faith. 10. Furthermore, the Debtors believe that the price to be paid to the Debtors under the LTA is fair and reasonable. The terms set forth in the LTA are fair and equitable and enable the Debtors to maximize the value to the Debtors estates of the Lease. Accordingly, in my business judgment, execution of the LTA is critical to maximizing the value of the Lease and benefitting the Debtors estate and all parties in interest. The LTA represents the highest and best value for the Lease. 11. The Landlord is not an insider or affiliate of any of the Debtors and no common identity of incorporators, directors or controlling stockholders exists between the Landlord and the Debtors. 3
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