Case CSS Doc 50 Filed 11/20/14 Page 1 of 10 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE.

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1 Case CSS Doc 50 Filed 11/20/14 Page 1 of 10 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Baxano Surgical, Inc., 1 Debtor. Chapter 11 Case No (CSS) Hearing Date Requested: December 10, 2014, at 11:30 a.m. 2 Objection Deadline Requested: December 3, 2014, by 4:00 p.m. DEBTOR S MOTION FOR ENTRY OF AN ORDER APPROVING PROCEDURES FOR THE SALE AND ABANDONMENT OF DE MINIMUS ASSETS The above-captioned debtor and debtor-in-possession (the Debtor ), by its undersigned proposed counsel, hereby moves (the Motion ) the Court for the entry of an order, the proposed form of which is submitted herewith, pursuant to sections 105, 363 and 554 of title 11 of the United States Code (as amended, the Bankruptcy Code ), authorizing the Debtor to sell certain De Minimus Sale Assets (as defined herein) and abandon certain De Minimus Abandonment Assets (as defined herein). In support of this Motion, the Debtor relies on the Declaration of John L. Palmer in Support of Chapter 11 Petition and First Day Motions [D.I. 10] (the Initial Palmer Declaration ). In further support of this Motion, the Debtor respectfully submits as follows: Jurisdiction, Venue and Predicates for Relief 1. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and This matter is a core proceeding within the meaning of 28 U.S.C. 157(b)(2). 2. Venue is proper pursuant to 28 U.S.C and The last four digits of the Debtor s tax identification number are The address of the Debtor s corporate headquarters is 110 Horizon Drive, Suite 230, Raleigh, North Carolina By motion filed contemporaneously herewith, Debtor has requested an expedited hearing prior to November 27, 2014, on certain aspects of the relief sought by this Motion. 1

2 Case CSS Doc 50 Filed 11/20/14 Page 2 of The statutory bases for the relief requested herein are sections 105 and 363 of the Bankruptcy Code. Background 4. On November 12, 2014 (the Petition Date ), the Debtor filed a voluntary petition for relief under chapter 11 the Bankruptcy Code. The Debtor is operating its business and managing its property as a debtor-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 5. No request for the appointment of a trustee or examiner has been made in this chapter 11 case (the Chapter 11 Case ) and, as of the date of the filing of this Motion, no official committees have been appointed or designated. 6. The factual background relating to the Debtor s commencement of this Chapter 11 Case is set forth in detail in the Initial Palmer Declaration and the Supplemental Declaration, which are incorporated herein by reference. Relief Requested 7. By this Motion, the Debtor requests entry of an order authorizing procedures to: (a) effectuate, from time to time, sales of certain assets (collectively, the De Minimus Sale Assets ), including, without limitation, office equipment, furniture, computers and shop tools and equipment, other surplus, obsolete, non-core or burdensome assets in any individual transaction or series of related transactions to a single buyer or group of related buyers with an aggregate selling price equal to or less than $250,000 free and clear of all liens, claims, interests and encumbrances (collectively, the Liens ) with such Liens attaching to sale proceeds with the same validity, extent and priority as had attached to the assets immediately prior to the sale or 2

3 Case CSS Doc 50 Filed 11/20/14 Page 3 of 10 transfer, (b) abandon any asset with an individual value 3 of less than $2,500 (collectively, the De Minimus Abandoned Assets to the extent that a sale thereof cannot be consummated at value greater than the cost of liquidating such De Minimus Abandoned Asset, and (c) pay those necessary fees and expenses incurred in the sale or abandonment of De Minimus Sale Assets or De Minimus Abandoned Assets, including, but not limited to, commission fees to agents, brokers, auctioneers and liquidators with the amount of proposed commission fees to be paid to be disclosed in the Sale Notice (as defined herein). A. The De Minimus Asset Sale Procedures 8. The Debtor proposes to sell De Minimus Sale Assets for the highest and best offer received, taking into consideration the exigencies and circumstances in each such proposed sale or transfer, under the following procedures (the De Minimus Asset Sale Procedures ): a) The Debtor is authorized to consummate such transaction(s) without further order of the Court if the Debtor determines in the reasonable exercise of its business judgment that such sales or transfers are in the best interest of the estate, subject to the procedures set forth herein; b) Any such transaction(s) shall be free and clear of all Liens, with such Liens attaching only to the sale proceeds with the same validity, extent and priority as had attached to the De Minimus Assets immediately prior to such sale or transfer; c) The Debtor shall give written notice of each proposed sale or transfer (a Sale Notice ) to (a) counsel to Hercules Technology Growth Capital, Inc., Cole Shotz, 25 Main Street, Hackensack, NJ, 07601Attn: Bruce Komrower and Ilana Volkov; (b) counsel to the Official Committee of Unsecured Creditors, if any, appointed in this chapter 11 case (the Committee ); and (c) Office of the U.S. Trustee for the District of Delaware, 844 King Street, Suite 2207, Wilmington, DE 19801, Attn: Juliet Sarkessian (collectively, the Notice Parties ); d) The content of the Sale Notice shall consist of (a) identification of the De Minimus Sale Assets being sold or transferred, (b) identification of the purchaser of the assets, (c) the purchase price, and (d) the significant terms of the sale or transfer agreement; 3 For purposes of the De Minimus Asset Abandonment Procedures, value shall refer to the Debtor s good faith estimate of the liquidation value of a De Minimus Abandonment Asset. 3

4 Case CSS Doc 50 Filed 11/20/14 Page 4 of 10 e) As to (i) any sales of De Minimus Sale Assets which, when combined with prior sales of De Minimus Sale Assets would not cause the aggregate received from all sales of De Minimus Sale Assets to exceed $25,000 (the $25,000 Threshold ), and (ii) any sales of De Minimus Sale Assets which would exceed the $25,000 Threshold but which sales are for less than $2,500 per item and less than $10,000 in any aggregated sale of items, (the Low Value Threshold ), the Sale Notice shall not be required to be provided prior to the closing of such sales but, rather, shall be provided within five (5) business days after such sales are consummated; f) As to any sale of a De Minimus Sale Asset effected after the $25,000 Threshold has been exceeded and which exceed the Low Value Threshold (such sales being Required Advance Notice Sales ), the Debtor shall give all Notice Parties the Sale Notice at least three (3) days before the closing of such sale; g) If, as to any Required Advance Notice Sale, no written objection from any of the Notice Parties is received by the Debtor within three (3) days after the date of the service of such Sale Notice (the Notice Period ), then the Debtor is authorized to immediately consummate such sale or transfer; h) If any of the Notice Parties submits a written objection to a Required Advance Notice Sale, then the relevant De Minimus Sale Asset shall be sold or transferred only upon either the consensual resolution of the objection by the parties in question or further order of the Court. If no resolution to the objection is reached, the Debtor will then schedule a hearing to consider the proposed sale of such De Minimus Sale Asset at the next scheduled omnibus hearing in the Chapter 11 Case. i) The Debtor will provide a written report to the Court, the Notice Parties and those parties requesting notice pursuant to Rule 2002 of the Federal Bankruptcy Procedure (the Bankruptcy Rules ), beginning with the month ending on January 31, 2015, and each month thereafter, no later than 15 days after the end of each such month, concerning any such sales made during the preceding month pursuant hereto, including the names of the purchasing parties and the types and amounts of the sales (each, a Monthly Report ). 9. Notwithstanding the foregoing, the Debtor is not seeking the authority to sell De Minimus Sale Assets to insiders, as that term is defined in section 101 of the Bankruptcy Code. 10. To Debtor seeks authority to abandon such De Minimus Abandoned Assets in accordance with the following procedures (the De Minimus Asset Abandonment Procedures ): a) The Debtor shall give written notice of the abandonment (the Abandonment Notice ) to the Notice Parties; 4

5 Case CSS Doc 50 Filed 11/20/14 Page 5 of 10 b) The Abandonment Notice shall contain a description in reasonable detail of the De Minimus Abandonment Assets to be abandoned and the Debtor s reasons for such abandonment; c) If no written objections from any of the Notice Parties are filed with the Court within three (3) days after the date of service of such Abandonment Notice, then the Debtor is authorized to immediately proceed with the abandonment; and d) If a written objection from any Notice Party is filed with the Court within three (3) days after service of such Abandonment Notice, then the relevant De Minimus Abandonment Asset shall be abandoned only upon either the consensual resolution of the objection by the parties in question or further order of the Court after notice and a hearing. Basis for Relief B. The De Minimus Asset Sale Procedures Are Appropriate Under Section 363(b). 11. Section 363(b)(1) of the Bankruptcy Code provides that [t]he trustee, after notice and a hearing, may use, sell or lease, other than in the ordinary course of business, property of the estate. 11 U.S.C. 363(b)(1). Although section 363 of the Bankruptcy Code does not specify a standard for determining when it is appropriate for a court to authorize the use, sale or lease of property of the estate, bankruptcy courts routinely authorize sales of a debtor s assets if such sale is based upon the sound business judgment of the debtor. See, e.g., Meyers v. Martin (In re Martin), 91 F.3d 389, 395 (3d Cir. 1996); In re Montgomery Ward Holding Corp., 242 B.R. 147, 153 (D. Del. 1999); In re Delaware & Hudson Ry. Co., 124 B.R. 169, 176 (D. Del. 1991); In re Trans World Airlines, Inc., No , 2001 WL , at *10-13 (Bankr. D. Del. Apr. 2, 2001). 12. The Debtor currently possesses (and may identify in the future) certain De Minimus Sale Assets that it wants to sell or transfer because such assets are no longer necessary for operating its businesses. To defray any operational, carrying or storage expenses associated with these assets, the Debtor has determined in its business judgment that it is in the best 5

6 Case CSS Doc 50 Filed 11/20/14 Page 6 of 10 interests of the estate to sell or transfer the De Minimus Sale Assets. To that end, the Debtor has proposed the De Minimus Asset Sale Procedures, whereby it can consummate the sale or effectuate the transfer of De Minimus Sale Assets during the pendency of this chapter 11 case. Under these proposed procedures, parties with an interest in the Debtor s De Minimus Sale Assets are fully protected by the opportunity to object and to attend a hearing, if desired. 13. Section 363(f) of the Bankruptcy Code permits a debtor to sell property free and clear of another party s interest in the property if: (a) applicable non-bankruptcy law permits such a free and clear sale; (b) the holder of the interest consents; (c) the interest is a lien and the sales price of the property exceeds the value of all liens on the property; (d) the interest is in bona fide dispute; or (e) the holder of the interest could be compelled in a legal or equitable proceeding to accept a monetary satisfaction of its interest. 11 U.S.C. 363(f). 14. The Debtor proposes to sell or transfer the De Minimus Sale Assets in a commercially reasonable manner, and expects that the value of the proceeds from such sales or transfers will fairly reflect the value of the property sold. The Debtor further proposes that any party with a lien on De Minimus Sale Assets sold or transferred pursuant to this Motion shall have a corresponding security interest in the proceeds of such sale. Moreover, the Debtor proposes that the absence of any objection to the entry of the order approving this Motion, be deemed consent to any sales or transfers pursuant to the Order within the meaning of section 362(f)(2) of the Bankruptcy Code. As such, the requirements of section 363(f) of the Bankruptcy Code would be satisfied for any proposed sales or transfers free and clear of liens, encumbrances and other interests. 6

7 Case CSS Doc 50 Filed 11/20/14 Page 7 of 10 C. The De Minimus Asset Abandonment Procedures Are Appropriate 15. Section 554(a) of the Bankruptcy Code provides that [a]fter notice and a hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate. 11 U.S.C. 554(a). The Debtor expects to take all reasonable steps to sell assets not needed in its operations. The costs associated with sales of certain assets, however, may exceed any possible proceeds thereof. The inability to consummate a commercially reasonable sale of De Minimus Abandonment Assets would indicate that such assets have no meaningful monetary value to the Debtor s estate. Further, the costs of storing and maintaining such De Minimus Abandonment Assets may burden the Debtor s estate. Accordingly, the Debtor contends that, in such circumstances, the abandonment of De Minimus Abandonment Assets pursuant to the De Minimus Asset Abandonment Procedures is in the best interest of the Debtor s estate. 16. In light of the demonstrable benefits of streamlined procedures to sell, transfer or abandon De Minimus Assets, courts in this district have approved similar procedures in other large chapter 11 cases. See, e.g., Flying J Inc., et al, Case No (MFW) (Bankr. D. Del. February 9, 2009); (approving De Minimus sale procedures for sale of assets of up to $5,000,000); In re Meridian Auto. Sys. Composites Operations, Inc., Case No (MFW) (Bankr. D. Del. August 11, 2005) (selling procedures authorized for sales of up to $1,000,000); In re Fleming Cos., Case No (MFW) (Bankr. D. Del. May 21, 2003) (selling procedures authorized for sales of less than $6,500,000 and abandonment procedures authorized); In re Exide Techs., Case No (JCA) (Bankr. D. Del. May 10, 2002) (selling procedures authorized for sales of less than $5,000,000 and abandonment procedures authorized); In re Dura Auto. Sys., Inc., No (KJC) (Bankr. D. Del. Apr. 25, 2007) 7

8 Case CSS Doc 50 Filed 11/20/14 Page 8 of 10 (selling procedures authorized for sales of up to $2,500,000 and abandonment procedures); In re W. R. Grace & Co., Case No (JJF) (Bankr. D. Del. August 2, 2001) (selling procedures authorized for sales of less than $5,000,000 and abandonment procedures authorized). 17. For the foregoing reasons, the Debtor believes that granting the relief requested herein is appropriate and in the best interests of its estate and its creditors. Reservation of Rights 18. Nothing contained herein is intended or should be construed as an admission of the validity of any claim against the Debtor, a waiver of the Debtor s rights to dispute any claim, or an approval or assumption of any agreement, contract or lease under section 365 of the Bankruptcy Code. The Debtor expressly reserves its rights to contest any claim with respect to the De Minimus Sale Assets and De Minimus Abandonment Assets in accordance with applicable non-bankruptcy law. Bankruptcy Rules 6004(a) and (h) 19. To successfully implement the relief requested in this Motion, the Debtor seeks a waiver of the notice requirements under Bankruptcy Rule 6004(a) and the 14-day stay of an order authorizing the use, sale, or lease of property under Bankruptcy Rule 6004(h). As set forth above, the relief requested herein is essential to prevent irreparable damage to the Debtor s operations, going-concern value, and proposed efforts to pursue either a sale or a restructuring of its assets and liabilities. Notice 20. Debtor has provided notice of this Motion to: (a) the Office of the United States Trustee for the District of Delaware; (b) the entities listed on the Consolidated List of Creditors Holding the 20 Largest Unsecured Claims filed by the Debtor pursuant to Bankruptcy Rule 1007(d); (c) Hercules Technology Growth Capital, Inc., the Debtor s secured pre-petition lender 8

9 Case CSS Doc 50 Filed 11/20/14 Page 9 of 10 and proposed post-petition lender, Legal Department, Attn: Chief Legal Officer and Bryan Jadov, 1100 Hamilton Avenue, Suite 310, Palo Alto, CA 94301; (d) Cole Shotz, 25 Main Street, Hackensack, NJ, 07601, Attn: Stuart Komrower and Ilana Volkov, counsel to Hercules Technology Growth Capital, Inc.; (e) the Internal Revenue Service; (f) the Securities and Exchange Commission; and (g) the Delaware Department of Justice Division of Securities. 21. In light of the nature of the relief requested, the Debtor respectfully submits that no further notice is necessary. No Prior Request 22. No prior motion for the relief requested herein has been made to this or any other court. WHEREFORE, the Debtor respectfully requests that the Court (a) enter an order substantially in the form annexed hereto, granting the relief requested herein, and (b) grant to the Debtor such other and further relief as the Court may deem proper. Dated: November 20, 2014 STEVENS & LEE By: /s/ John D. Demmy John D. Demmy (DE Bar No. 2802) Joseph H. Huston (DE Bar No. 4035) 1105 N. Market Street, Suite 700 Wilmington, Delaware Tel. (302) ; 3310 Fax (610) jdd@stevenslee.com jhh@stevenslee.com and 9

10 Case CSS Doc 50 Filed 11/20/14 Page 10 of 10 Robert Lapowsky John C. Kilgannon 1818 Market Street 29th Floor Philadelphia, Pennsylvania Telephone: (215) Proposed Attorneys for Debtor and Debtor-in-Possession 10

11 Case CSS Doc 50-1 Filed 11/20/14 Page 1 of 2 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Baxano Surgical, Inc., 1 Debtor. Chapter 11 Case No (CSS) Re: D. I. ORDER APPROVING PROCEDURES FOR THE SALE OR ABANDONMENT OF DE MINIMUS ASSETS OF THE DEBTOR Upon the motion (the Motion ) 2 of the above-captioned debtor and debtor-in-possession (the Debtor ) for an order authorizing the Debtor to sell certain De Minimus Sale Assets and abandon certain De Minimus Abandonment Assets pursuant to sections 105, 363 and 554 of title 11 of the United States Code, (as amended, the Bankruptcy Code ); the Court finds that (i) it has jurisdiction over the matters raised in the Motion pursuant to 28 U.S.C. 157 and 1334(b), (ii) this is a core proceeding pursuant to 28 U.S.C. 157(b)(2), (iii) the relief requested in the Motion is in the best interest of the Debtor, its estate, and its creditors, (iv) proper and adequate notice of the Motion and the opportunity for a hearing thereon has been given under the particular circumstances and that no other or further notice is necessary, and (v) good and sufficient cause exists for granting of the relief requested in the Motion as set forth herein, and therefore, IT IS HEREBY ORDERED THAT: 1. The Motion is GRANTED as set forth herein. 1 The last four digits of the Debtor s tax identification number are The address of the Debtor s corporate headquarters is 110 Horizon Drive, Suite 230, Raleigh, North Carolina Unless otherwise defined herein, all capitalized terms shall have the meaning ascribed to them in the Motion. 1

12 Case CSS Doc 50-1 Filed 11/20/14 Page 2 of 2 2. Pursuant to section 363(b) of the Bankruptcy Code, the Debtor is authorized to sell or transfer the De Minimus Sale Assets in accordance with the De Minimus Asset Sale Procedures and abandon De Minimus Abandonment Assets in accordance with the De Minimus Asset Abandonment Procedures. 3. Sales to insiders, as that term is defined in Section 101 of the Bankruptcy Code, are not covered by this Order. 4. The failure to object to the relief requested in the Motion shall be determined to be consent to the sale of De Minimus Sale Assets within the meaning of 11 U.S.C. 363(f)(2). 5. The Debtor is authorized to take all actions necessary or appropriate to effectuate the relief granted pursuant to this Order in accordance with the Motion, including paying those necessary fees and expenses incurred in the sale of De Minimus Sale Assets or abandonment of De Minimus Abandonment Assets (including, but not limited to, commission fees to agents, brokers, auctioneers and liquidators). 6. Notwithstanding Bankruptcy Rule 6004(h), the terms and conditions of this Order shall be immediately effective and enforceable upon its entry. 7. This Court retains jurisdiction with respect to all matters related to the interpretation and implementation of this Order. Dated:, 2014 Wilmington, Delaware CHRISTOPHER S. SONTCHI UNITED STATES BANKRUPTCY JUDGE 2