Case 16-07207-JMC-7A Doc 738 Filed 12/08/16 EOD 12/08/16 15:01:37 Pg 1 of 10 SO ORDERED: December 8, 2016. James M. Carr United States Bankruptcy Judge UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION IN RE: ) ) ITT EDUCATIONAL SERVICES, INC., et al. 1 ) Case No. 16-07207-JMC-7A ) Debtors. ) Jointly Administered ORDER GRANTING TRUSTEE S MOTION TO ESTABLISH BID PROCEDURES FOR THE SALE OF REAL ESTATE FREE AND CLEAR OF ALL LIENS, CLAIMS, ENCUMBRANCES AND INTERESTS This matter came before the Court on the Trustee s Motion to Establish Bid Procedures for the Sale of Real Estate Free and Clear of All Liens, Claims, Encumbrances and Interests (the Motion ) [Doc 665], filed by Deborah J. Caruso, the duly appointed, qualified and acting chapter 7 trustee in the above-referenced bankruptcy case (the Trustee ). In the Motion, the Trustee requests, pursuant to 11 U.S.C. 105 and 363 and Rules 2002 and 6004 of the Federal 1 The debtors in these cases, along with the last four digits of their respective federal tax identification numbers are ITT Educational Services, Inc. [1311]; ESI Service Corp. [2117]; and Daniel Webster College, Inc. [5980].
Case 16-07207-JMC-7A Doc 738 Filed 12/08/16 EOD 12/08/16 15:01:37 Pg 2 of 10 Rules of Bankruptcy Procedure (the Bankruptcy Rules ), entry of an order approving the Bid Procedures, 2 to be used in connection with the sale of real estate. The Court, having reviewed the Motion, noting that no objection to the Motion was timely filed, having held a hearing on the Motion on December 8, 2016, and being duly advised in the premises, determines that the Motion should be, and hereby is, GRANTED. Accordingly, IT IS THEREFORE ORDERED that the Bid Procedures attached to this Order as Exhibit 1 are hereby approved and should be used for the sale of all real estate in this bankruptcy case; provided, however, the Trustee shall have the right to elect, in her sole discretion, to exclude any real estate from the Bid Procedures and sell such real estate at either a private or public sale, subject to Court approval of any alternative sale method. ### 2 Capitalized terms used but not otherwise defined herein shall have the meanings used in the Motion.
Case 16-07207-JMC-7A Doc 738 Filed 12/08/16 EOD 12/08/16 15:01:37 Pg 3 of 10 BID PROCEDURES FOR SALE OF REAL ESTATE Set forth below are the bidding procedures (the Bid Procedures ) to be utilized in connection with the sale of any real estate, subject to the sole discretion of the Trustee (defined below), in the bankruptcy case of In re ITT Educational Services, Inc., Case No. 16-07207-JMC- 7A (the Bankruptcy Case ), pending in the United States Bankruptcy Court for the Southern District of Indiana, Indianapolis Division (the Bankruptcy Court ). A. Solicitation Process; Distribution of Bid Procedures and Purchase Agreement. For any sale of real estate in the Bankruptcy Case subject to bidding process, Deborah J. Caruso, the chapter 7 trustee in the Bankruptcy Case (the Trustee ) and/or her authorized agent, A&G Realty Partners, LLC ( A&G Realty ) shall solicit bids for the sale of such real estate, and if an acceptable bid is received, it shall be treated as a stalking horse bid (the Stalking Horse Bid ), subject to these Bid Procedures. The Trustee, and her agent, A&G Realty, shall distribute these Bid Procedures and the purchase agreement (the Stalking Horse PA ) received from the stalking horse (the Stalking Horse Bidder ) to any other potential interested bidders. The Trustee, in her sole discretion, may elect to exclude any real estate from these Bid Procedures and sell such real estate at either a private or public sale, subject to Bankruptcy Court approval of any alternative sale method. Furthermore, the Trustee may determine. in her sole discretion, whether to proceed with a sale of more than one parcel/location of real estate pursuant to a Stalking Horse PA. The fact that a Stalking Horse PA covers a single location shall not preclude the Trustee from accepting Qualifying Bids (defined below) for multiple locations if the Trustee determines that such sales are reasonably likely to result in the highest realizable value of the real estate based on the information then available to the Trustee in connection with determining that a bid is a Prevailing Bid (defined below). B. Sale Motion. Upon receipt of the Stalking Horse PA, the Trustee shall file a motion in the Bankruptcy Case seeking approval of the Stalking Horse PA, subject to the solicitation and receipt of a higher or better offer for the real estate at issue in accordance with these Bid Procedures (the Sale Motion ). In connection with the Sale Motion, the Trustee will request that the Bankruptcy Court schedule a hearing to consider the approval of the Sale Motion (the Sale Hearing ), with notice thereof in accordance with the Notice, Case Management and Administrative Procedures (the Case Management Procedures ) approved by the Bankruptcy Court on October 4, 2016, applicable sections of the Bankruptcy Code, the Bankruptcy Rules and the Local Rules of the Bankruptcy Court. C. Eligibility of Bidders to Participate in Auction. In order to be eligible to bid for the sale of any real estate in this Bankruptcy Case subject to bidding process or otherwise participate in the Auction (defined below), each bidder must be determined, in the sole discretion of the Trustee, to be a Qualifying Bidder (defined below). Until such time as the allowed secured claim of Cerberus Business Finance, LLC ( Cerberus ) has been satisfied in full, the Trustee shall consult with Cerberus as to which bidders constitute Exhibit "1"
Case 16-07207-JMC-7A Doc 738 Filed 12/08/16 EOD 12/08/16 15:01:37 Pg 4 of 10 as Qualifying Bidders; provided however, the Trustee shall have the sole right to determine whether a bidder is a Qualifying Bidder. Further, until such time as Cerberus allowed secured claim has been satisfied in full, Cerberus shall be considered a Qualifying Bidder, entitled to participate in the Auction and credit bid up to the amount of its allowed secured claim outstanding at the time of the Auction. Any credit bid made by Cerberus shall be subject to the terms of the Auction as outlined in paragraph H (below) of these Bid Procedures, provided however, Cerberus shall be exempt from tendering a Qualifying Bidder Deposit (defined below). D. Due Diligence. Subsequent to the filing of the Sale Motion and until the Bid Deadline (defined below), interested parties may obtain information and conduct due diligence with respect to the real estate at issue by contacting Emilio Amendola, with A&G Realty, Tel: (631) 465-9507; Fax: (631) 420-4499; email: emilio@agrealtypartners.com. E. Qualification of Bidders. In order to be considered for status as a Qualifying Bidder, a bidder must: (i) Deliver to A&G Realty Partners, LLC, c/o Emilio Amendola, 445 Broadhollow Road, Suite 410, Melville, NY 11747; email: emilio@agrealtypartners.com; Tel: (631) 465-9507; Fax: (631) 420-4499; with copy to the Trustee, c/o Rubin & Levin, P.C., 135 N. Pennsylvania Street, Suite 1400, Indianapolis, IN 46204; email: mtheisen@rubin-levin.net; Tel: (317) 634-0300; Fax: (317) 263-9411; so as to be received before 5:00 p.m. (prevailing Eastern time) on the 5 th business day prior to the Sale Hearing for the real estate at issue (the Bid Deadline ), a written offer to purchase the real estate at issue (a Qualifying Bid ) that: (a) (b) Consists of an executed form of the purchase agreement for sale that may not deviate substantially from the terms of the applicable Stalking Horse PA, marked to show any proposed revisions that provides for the purchase of the real estate being sold (such bidder s executed purchase agreement, the Bidder PA ). Notwithstanding the foregoing, any bidder may propose to purchase more than one parcel/location of real estate, or conversely if the Stalking Horse Bidder proposes to purchase multiple real estate parcels/locations, any bidder may propose to purchase fewer parcels/locations. The Bidder PA shall be marked to reflect differences as to the real estate proposed to be purchased. Provides for aggregate consideration with respect to the real estate/location that is the subject of the Stalking Horse PA that, in the sole discretion of the Trustee, exceeds the consideration provided under the Stalking Horse PA by the minimum increment described in the applicable Sale Motion. 2
Case 16-07207-JMC-7A Doc 738 Filed 12/08/16 EOD 12/08/16 15:01:37 Pg 5 of 10 (c) (d) (e) (f) (g) Contains no contingencies to the validity, effectiveness, and/or binding nature of the bid, including without limitation, contingencies for due diligence and inspection or financing of any kind. Contains documentation acceptable to the Trustee evidencing that the bidder has financial resources sufficient to close the transaction within thirty (30) days after the Auction which evidence may include, without limitation, evidence of cash on hand, a binding financing commitment from an established and financially sound financial institution or investment fund and the identity of contact persons at the entity issuing such commitment letter. Demonstrates, to the Trustee s satisfaction, that the bidder has the legal capacity to consummate the transaction it is proposing. Includes a statement from the bidder that: (1) the bidder is not an insider of one or more of the debtors; (2) the proposed sale represents an arms-length transaction between the parties, made without fraud or collusion with any other person (including any other prospective bidder); and (3) there has been no attempt to take any unfair advantage of the Trustee such that the bidder may be deem to be purchasing the real estate at issue in good faith pursuant to 11 U.S.C. 363(m). Includes a statement from the bidder that: (1) it is prepared to enter into the transactions contemplated in the Bidder PA immediately upon entry by the Bankruptcy Court of an order approving the sale of the real estate to such bidder; and (2) the Qualifying Bid shall be irrevocable upon submission. (ii) (iii) Contemporaneous with the submission of a Qualifying Bid, a Qualifying Bidder shall tender an earnest money deposit of ten percent (10.0%) of the proposed purchase price for the sale of the real estate (the Qualifying Bidder Deposit ) by cashier s or certified check (made payable to Deborah J. Caruso, Chapter 7 Trustee ) or wire transfer of immediately available funds, which deposit shall be held by the Trustee in accordance with the terms of the Bidder PA and these Bid Procedures. A Qualifying Bidder Deposit will be refunded only if (a) the bid corresponding to the Qualifying Bidder Deposit is rejected; or (b) the bid corresponding with the Qualifying Bidder Deposit is not approved by the Bankruptcy Court. The provisions of this subparagraph shall apply to Qualifying Bidders and controls notwithstanding any conflicting provisions in the Bidder PA. Cerberus shall be exempt from tendering a Qualifying Bidder Deposit. Cerberus and any Stalking Horse Bidder are deemed to be Qualifying Bidders. 3
Case 16-07207-JMC-7A Doc 738 Filed 12/08/16 EOD 12/08/16 15:01:37 Pg 6 of 10 F. Rejection of Qualifying Bid Status for Non-Conforming Bids. The determination as to which bids qualify shall solely be determined by the Trustee, provided however, until such time as Cerberus allowed secured claim has been satisfied in full, the Trustee shall consult with Cerberus as to which bids qualify. The Trustee shall have the sole right to reject bids as non-conforming bids; provided however, the Trustee shall have the right to negotiate with any bidder with respect to clarification of any bid. All bidders determined by the Trustee, in her sole discretion after consultation with Cerberus, to have submitted qualifying bids shall hereinafter be referred to as Qualifying Bidders. G. Bid Deadline. All Qualifying Bids must be submitted to A&G Realty, with copy to the Trustee, in accordance with paragraph E (above), so as to be received not later than the Bid Deadline. H. Terms of Auction. In the event that one or more Qualifying Bids are submitted in accordance with these Bid Procedures, the Trustee will conduct an auction sale of the real estate at issue (the Auction ) on the following terms: (i) (ii) (iii) Time, Date and Location of Auction; Adjournment of Auction; Appearance of Qualifying Bidders at Auction. The Auction will take place at the offices of Rubin & Levin, P.C., 135 N. Pennsylvania Street, Suite 1400, Indianapolis, IN 46204. The Auction will be conducted one (1) business day prior to the Sale Hearing. The Trustee will file a notice of the date and time of the Auction in the Bankruptcy Case and shall give such notice to all Qualifying Bidders. Permitted Attendees at Auction. Unless otherwise ordered or directed by the Bankruptcy Court, only representatives of the Trustee, any other parties invited specifically by the Trustee (including Cerberus until such time as Cerberus allowed secured claim has been satisfied in full), and any Qualifying Bidders (and the professionals for each of the foregoing) shall be entitled to attend the Auction; provided that, only Qualifying Bidders shall be entitled to bid at the Auction. Auction Bid Submission Procedures. Auction bidding shall be subject to the following procedures: (a) (b) For a Qualifying Bid to be considered and in order for a Qualifying Bidder to further bid at the Auction, Qualifying Bidders must appear in person at the Auction, or through a duly authorized representative, unless alternative arrangements are agreed upon in advance by the Trustee. Only Qualifying Bidders shall be entitled to make any subsequent bids at the Auction. 4
Case 16-07207-JMC-7A Doc 738 Filed 12/08/16 EOD 12/08/16 15:01:37 Pg 7 of 10 (c) (d) (e) (f) Bidding will commence with the announcement of the highest or best Qualifying Bid received prior to the commencement of the Auction, which shall be determined solely by the Trustee in her business judgment. Any Qualifying Bidder may then submit successive bids in minimum increments, which will be determined by the Trustee at each Auction depending on the total dollar value of the real estate being sold at the Auction (the Minimum Overbid Amount ). The Trustee reserves the right to change the Minimum Overbid Amount during the course of the Auction. If one or more Qualifying Bids are received by the Trustee, each such Qualifying Bidder shall have the right to improve its respective bid at the Auction. Each successive bid submitted by any bidder at the Auction must contain an actual cash purchase price that exceeds the then existing highest bid by at least the Minimum Overbid Amount. At the commencement of the Auction, the Trustee may announce procedural and related rules governing the Auction, including time periods available to all Qualifying Bidders to submit successive bid(s) in an amount equivalent to at least the Minimum Overbid Amount. (iv) (v) Reservation of Rights. The Trustee reserves the right to: (a) impose, at or before the Auction, additional terms and conditions on the sale of the real estate at issue; (b) extend the deadlines from those set forth herein; (c) adjourn the Auction at any time; (d) withdraw the real estate at issue, or any part of the real estate at issue, from the sale at any time before or during the Auction, and to make subsequent attempts to market the same; and (e) reject all bids if, in the Trustee s reasonable judgment, no bid is for a fair and adequate price. Selection of Prevailing Bid. The Auction shall continue until no Qualifying Bidder is prepared to submit a further bid, at which time the Trustee shall determine in her sole discretion, subject to Bankruptcy Court approval, which bid is the highest and/or best Qualifying Bid (such bid is hereinafter referred to as the Prevailing Bid and such bidder is hereinafter referred to as the Prevailing Bidder ). Until such time as Cerberus allowed secured claim has been satisfied in full, the Trustee shall consult with Cerberus in determining the Prevailing Bid. In making this decision, the Trustee shall consider the amount of the purchase price, the form of consideration being offered, the contents of the Bidder PA, the Qualifying Bidder s ability to close the transaction, the timing thereof, and the net benefit to the estates. The Trustee reserves the right to select a bid as the Prevailing Bid, even if it is not the highest bid. The Prevailing Bidder shall have such rights and responsibilities of the purchaser, as set forth in the Bidder PA. Prior to the Sale Hearing, the Prevailing Bidder shall complete and execute a final 5
Case 16-07207-JMC-7A Doc 738 Filed 12/08/16 EOD 12/08/16 15:01:37 Pg 8 of 10 and revised Bidder PA, as necessary to conform to the terms of the Auction, and all other agreements, contracts, instruments and other documents evidencing and containing the terms and conditions upon which the Prevailing Bid was made (such documents being, collectively, the Prevailing Bidder Sale Documents ). The Prevailing Bid and the Prevailing Bidder Sale Documents shall be irrevocable. (vi) (vii) Selection of Backup Bidder. The Qualifying Bidder that submits the second highest and/or best bid for the real estate at issue, as determined by the Trustee in her sole discretion, may be deemed a backup bidder (such bidder shall be referred to as the Backup Bidder, with such bid being referred to as the Backup Bid ). Until such time as Cerberus allowed secured claim has been satisfied in full, the Trustee shall consult with Cerberus in determining the Backup Bidder, if any. If the Trustee so designates a bidder as a Backup Bidder, such Backup Bidder shall be required to complete and execute a purchase agreement in form and substance reasonably acceptable to the Trustee memorializing, among other things, the amount and other terms of the Backup Bid (the Backup Bidder PA ). Upon the failure of the Prevailing Bidder to timely consummate its purchase of the real estate at issue, pursuant to the terms of the Prevailing Bidder Sale Documents, the Trustee shall be empowered to effect the sale pursuant to the Backup Bidder PA, without further order from the Bankruptcy Court. The Backup Bid and the Backup Bidder PA shall be irrevocable for a period of sixty (60) days after the conclusion of the Auction. The Backup Bidder s Qualifying Bidder Deposit shall be refunded on the earlier of the closing of the sale of the real estate at issue to the Prevailing Bidder or sixty (60) days after the conclusion of the Auction. Irrevocability of Stalking Horse Bid, Qualifying Bids; Rejection of Stalking Horse Bid, Qualifying Bids and Other Successive Bids at the Auction. The Stalking Horse Bid shall be irrevocable upon submission, subject to the terms of the Stalking Horse PA. All other Qualifying Bids shall be irrevocable upon submission. Unless determined by the Trustee to be the Prevailing Bid or Backup Bid, the Stalking Horse Bid, Qualifying Bids and all other successive bids at the Auction shall be deemed rejected at the conclusion of the Auction and the Qualifying Bidder Deposits for such rejected bids shall be returned to the respective bidder. I. Sale Hearing. The Bankruptcy Court shall hold the Sale Hearing to approve the sale of the real estate at issue. The Sale Hearing will be held at the United States Bankruptcy Court for the Southern District of Indiana. At the Sale Hearing, the Trustee will seek the entry of an order approving and authorizing the proposed sale to the Stalking Horse Bidder or to the Prevailing Bidder, if not the Stalking Horse Bidder. The Trustee shall also notify the Bankruptcy Court of the Backup Bidder, if any, and seek entry of an order approving and authorizing the proposed sale to the Backup Bidder in the event the Prevailing Bidder fails to consummate the purchase of the real 6
Case 16-07207-JMC-7A Doc 738 Filed 12/08/16 EOD 12/08/16 15:01:37 Pg 9 of 10 estate. The Sale Hearing may be adjourned or rescheduled without notice other than by announcement of the adjourned date at the Sale Hearing. J. Closing. Unless otherwise agreed to in writing by the parties, the closing of the sale of the real estate at issue will occur no later than thirty (30) days after the Auction, in accordance with the terms of the Prevailing Bidder Sale Documents or the Backup Bidder PA, as applicable. K. Failure of Prevailing Bidder to Consummate Purchase. If the failure by the Prevailing Bidder to consummate the purchase of the real estate, pursuant to the terms of the Prevailing Bidder Sale Documents, is the result of the Prevailing Bidder s breach of, or default or failure to perform under any Prevailing Bidder Sale Documents or the terms of these Bid Procedures (hereinafter the Defaulting Bidder ), such Defaulting Bidder s Qualifying Bidder Deposit shall be forfeited to the Trustee, and the Trustee shall have all rights and remedies available under applicable law. L. Disclosures. Qualifying Bidders shall refrain from any communications with other Qualifying Bidders following the submission of a Qualifying Bid until the Sale Hearing is concluded. M. Commissions. The Trustee shall be under no obligation to pay commission to any agent or broker, with the exception of A&G Realty. All commissions, fees or expenses for agents, other than A&G Realty, may only be paid by bidders and shall not be deducted from the proceeds of the sale of the real estate at issue. N. No Representation; Qualifying Bidder s Duty to Review. The Trustee is not making and has not at any time made any warranties or representations of any kind or character, express or implied, with respect to the real estate at issue, including, but not limited to, any warranties or representations as to habitability, merchantability, fitness for a particular purpose, title, zoning, tax consequences, latent or patent physical or environmental condition, utilities, operating history or projections, valuation, governmental approvals, the compliance of the real estate at issue with governmental laws (including, without limitation, accessibility for handicapped persons), the truth, accuracy or completeness of any documents related to the real estate at issue or any other information provided by or on behalf of the Trustee to a bidder, or any other matter or thing regarding the real estate at issue. All bidders must acknowledge and agree that upon closing the Trustee shall sell and transfer to the Prevailing Bidder and the Prevailing Bidder shall accept the real estate at issue AS IS, WHERE IS, WITH ALL FAULTS, except to the extent expressly provided otherwise in the Bankruptcy Court s order approving the sale. All bidders must agree that they have not relied on and will not rely on, and the Trustee is not liable for or bound by, any express or implied warranties, guaranties, 7
Case 16-07207-JMC-7A Doc 738 Filed 12/08/16 EOD 12/08/16 15:01:37 Pg 10 of 10 statements, representations or information pertaining to the real estate at issue or relating thereto (including specifically, without limitation, information regarding the real estate at issue distributed with respect to such real estate) made or furnished by the Trustee or any real estate broker or agent representing or purporting to represent the Trustee, to whomever made or given, directly or indirectly, orally or in writing, unless specifically set forth in the Bankruptcy Court s order approving the sale. 8