Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 1 of 18 UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF MICHIGAN In re: MICHIGAN SPORTING GOODS DISTRIBUTORS, INC., Debtor. Chapter 11 Bankruptcy Case No.: 17-00612-jtg Hon. John T. Gregg / MOTION FOR ENTRY OF ORDER (I) CONDITIONALLY APPROVING DISCLOSURE STATEMENT, (II) FIXING VOTING RECORD DATE, (III) SCHEDULING DISCLOSURE STATEMENT AND PLAN CONFIRMATION HEARING AND APPROVING FORM AND MANNER OF RELATED NOTICE AND OBJECTION PROCEDURES, (IV) APPROVING SOLICITATION PACKAGES AND PROCEDURES AND DEADLINES FOR SOLICITING, RECEIVING, AND TABULATING VOTES ON THE JOINT PLAN, AND (V) APPROVING THE FORM OF BALLOT The above-captioned debtor (the Debtor ) and the Official Committee of Unsecured Creditors (the Committee and together with the Debtor, the Plan Proponents ), file this Motion for Entry of Order (I) Conditionally Approving Disclosure Statement; 1 (II) Fixing Voting Record Date, (III) Scheduling Disclosure Statement and Plan Confirmation Hearing and Approving Form and Manner of Related Notice and Objection Procedures, (IV) Approving Solicitation Packages and Procedures and Deadlines for Soliciting, Receiving, and Tabulating Votes on the Joint Plan, and (V) Approving the Form of Ballot (the Plan Procedures Motion ), and in support, respectfully states as follows: 1 In the event the Court does not approve the Disclosure Statement on a conditional basis and authorize a combined hearing on final approval of the Disclosure Statement and confirmation of the Joint Plan pursuant to 11 U.S.C. 105(d)(2)(B)(vi), Debtor requests that this Motion be treated as a motion seeking approval of the Disclosure Statement and related relief prior to solicitation of votes and distribution of the Joint Plan. 29522201.2\156376-00001
Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 2 of 18 INTRODUCTION 1. By this Motion, 2 the Plan Proponents seek entry of an order (the Plan Procedures Order ): (I) conditionally approving the Disclosure Statement; (II) establishing a Record Date for voting purposes; (III) setting a date for a combined hearing on final approval of the Disclosure Statement and confirmation of the Joint Plan; (IV) establishing and consolidating deadlines to file objections; and (V) granting related relief regarding solicitation and balloting regarding the Joint Plan. A copy of the proposed Plan Procedures Order is attached hereto as Exhibit A. 2. Debtor believes it is appropriate in this case to expedite the confirmation process and submits that entry of the Plan Procedures Order and approval of the procedures described in the Plan Procedures Order will allow Debtor to efficiently conclude this Chapter 11 case. Conditional approval of the Disclosure Statement is authorized under Section 105(d)(2)(B)(vi). 3. Subject to entry of the Plan Procedures Order and the Court s conditional approval of the Disclosure Statement, the Plan Proponents propose to provide notice and an opportunity to appear and be heard at the consolidated hearing on final approval of the Disclosure Statement and confirmation of the Joint Plan by delivery of either a voting solicitation package or a nonvoting package to creditors and other parties in interest entitled to receive one, in addition to a notice (the Plan Procedures Notice ) substantially in the form attached as Exhibit 1 to the proposed Plan Procedures Order. JURISDICTION AND AUTHORITY 4. On February 14, 2017 (the Petition Date ), Debtor commenced this bankruptcy case by filing a voluntary petition for relief under chapter 11 of the Bankruptcy Code, 11 U.S.C. 101-1330, et seq. (the Bankruptcy Code ). 2 Capitalized terms used but not defined herein have the meanings ascribed to such terms in the Joint Plan. 29522201.2\156376-00001
Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 3 of 18 5. Debtor continues to manage its properties and operate its business as a debtor-inpossession in accordance with Bankruptcy Code 1107 and 1108. No trustee, examiner, or official committee has been appointed in this case. 6. On February 21, 2017, the United States Trustee appointed the Committee [Dkt. No. 116]. 7. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334. This is a core proceeding pursuant to 28 U.S.C. 157(b). Venue of this case is proper under 28 U.S.C. 1408 and 1409. 8. The statutory predicates and authority for the relief sought herein are found at Sections 105(d)(2)(B)(vi) and 1124 through 1129 of the Bankruptcy Code, Federal Rules of Bankruptcy Procedure 2002, 3017, 3018, and 3020 (the Bankruptcy Rules ), and the Local Rules for the Western District of Michigan (the Local Rules ). FACTUAL BACKGROUND 9. Founded in 1946, Debtor is a retail sporting goods chain headquartered in Grand Rapids, Michigan. Debtor offered a broad range of sporting and outdoor products, including apparel and sporting equipment from Nike, Under Armor, Burton, K2 Sports, Columbia, and Adidas. 10. At one time, Debtor employed over 1,300 full and part-time associates and operates 68 stores throughout the Midwest. Debtor s operations generated over $170 million in annual revenues. 11. Unfortunately, Debtor s business operations, like many of its peers in the sporting goods retail space, were impacted in recent years by adverse business trends, including the rapid 29522201.2\156376-00001
Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 4 of 18 migration of sales from traditional brick-and-mortar retailers to online resellers, the expansion of competing distribution channels and specialty retailers, and changing consumer preferences. 12. Weak 2016 Black Friday and holiday sales resulted in further significant impairment of Debtor s liquidity and as a result, in December of 2016, Debtor and its professionals entered into negotiations with an ad hoc committee of trade vendors and other key creditor constituencies, including its landlords, for financial concessions, all in an effort to address Debtor s liquidity constraints and reach a consensual, out-of-court financial restructuring. 13. Notwithstanding the good faith attempts of the ad hoc committee and other creditor stakeholders, however, Debtor was ultimately unable to finalize a restructuring plan, leading to Debtor s bankruptcy on February 14, 2017. 14. Debtor retained the Tiger Capital Group, LLC and Great American Group, LLC, two of only a very few companies that was capable of conducting a liquidation of the scope and magnitude of Debtor s business, to conduct the liquidation of its stores, distribution center, and corporate headquarters, including the sale of all existing inventory, furniture, trade fixtures, and equipment. 15. The liquidation of substantially all of Debtor s assets concluded in May 2017, with total gross collections (including from sale of inventory, augment inventory supplied by Consultant of which Debtor received a percentage of the sales, and furniture, fixtures and equipment) of approximately $88,827,000.00. 16. As more fully described in the Disclosure Statement, Debtor paid its lender Wells Fargo Bank in full, anticipates that all allowed administrative expenses will also be paid in full, and expects an approximate aggregate pro rata distribution of $400,000 to unsecured creditors. 29522201.2\156376-00001
Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 5 of 18 17. In sum, the Joint Plan provides the following treatment for the various classes of Claims and Equitable Interests: UNCLASSIFIED CLAIMS Description Summary of Treatment Entitled to Vote Priority Taxes Paid in full upon Effective Date, or as No soon as practically possible thereafter Administrative Expense Claims Paid in full No CLASSIFIED CLAIMS Class Description Summary of Treatment Entitled to Vote 1 Priority Non-Tax Claims Unimpaired: Paid in full No (est. amount: $150,000) 2 Unsecured Claims (est. amount: $45 million) (estimated, does not include 503(b)(9) Administrative Claims) Impaired: Unsecured claims will receive (i) upon the Effective Date, a release from any liability for Avoidance Actions; plus (ii) upon the later of the Distribution Date or the date on which all Allowed Administrative Expense Claims and Class 1 Claims have been paid in full, a Pro Rata share of the Unsecured Creditors Fund 3 Equity Interests Equity Interests are cancelled No Yes 29522201.2\156376-00001
Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 6 of 18 RELIEF REQUESTED 18. The following table sets forth proposed dates and deadlines proposed und the Plan Procedures Order. Hearing to Conditionally Approve Disclosure, 2017 at Statement Voting Record Date Plan Procedures Order entry date Deadline for Debtor to Serve Solicitation 3 business days after Plan Packages Procedures Order entry Voting Deadline 31 days after Plan Procedures Order entry Plan and Disclosure Statement Objection 31 days after Plan Procedures Deadline Order entry Objection Reply Deadline 35 days after Plan Procedures Order entry Voting Report 35 days after Plan Procedures Order entry Confirmation Hearing 38 days after Plan Procedures Order entry I. THE DISCLOSURE STATEMENT CONTAINS ADEQUATE INFORMATION AND SHOULD BE CONDITIONALLY APPROVED AND FINALLY APPROVED 19. A plan proponent must provide creditors and interest holders with adequate information regarding a debtor s proposed chapter 11 plan. That means a disclosure statement must, as a whole, provide enough information as is reasonably practicable to allow an informed judgment by impaired creditors and interest holders that are entitled to vote, taking into account that impaired creditors and interest holders may be able to obtain sufficient information to make a reasonable judgment from sources other than the disclosure statement. 3 3 Section 1125(a)(1) of the Bankruptcy Code provides: adequate information means information of a kind, and in sufficient detail, as far as is reasonably practicable in light of the nature and history of Debtor and the condition of Debtor s books and records, including a discussion of the potential material Federal tax consequences of the plan to Debtor, any successor to Debtor, and a hypothetical investor typical of the holders of claims or interests in the case, that would enable such a hypothetical investor of the relevant class to make an informed judgment about the plan, but adequate information need not include such information about any other possible or proposed plan and in determining whether a disclosure statement provides adequate information, the court shall consider the complexity of the case, the benefit of additional information to creditors and other parties in interest, and the cost of providing additional information. 11 U.S.C. 1125(a)(1). 29522201.2\156376-00001
Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 7 of 18 20. The type and amount of information sufficient to satisfy Section1125(a)(1) is determined on a case-by-case basis, taking into consideration the cost of preparing the statements, the need for relative speed in solicitation and confirmation, and the need for investor protection. See H.R. Rep. No. 95-595, 95th Cong., 1st. Sess. 409 (1977); See Cadle Co. II. v. PC Liquidation Corp. (In re PC Liquidation Corp.), 383 B.R. 856, 866 (E.D.N.Y. 2008) (holding that a disclosure statement was adequate where it enabled a creditor to make an informed judgment about the plan); In re Adelphi Commc ns Corp., 352 B.R. 592, 600 (Bankr. S.D.N.Y. 2006) (adequate information requires a finding that there is enough information and that what is said is not misleading ). 21. In examining the adequacy of a disclosure statement, the Court has broad discretion. See, e.g., Menard-Sanford v. Mabey (In re A.H. Robins Co., Inc.), 880 F.2d 694, 696 (4th Cir. 1989); Tex. Extrusion Corp. v. Lockheed Corp. (In re Tex Extrusion Corp), 844 F.2d 1142, 1157 (5th Cir. 1988). Courts generally examine how a disclosure statement addresse the following: a) the circumstances that gave rise to the filing of the bankruptcy petition; b) a description of the available assets; c) the anticipated future of the debtor; d) the source of the information provided in the disclosure statement; e) a disclaimer, which typically indicates that no statements or information concerning the debtor or its assets or securities are authorized, other than those set forth in the disclosure statement; f) the condition and performance of the debtor while in chapter 11; g) information regarding Claims against the estate; 29522201.2\156376-00001
Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 8 of 18 h) a liquidation analysis setting forth the estimated return that creditors would receive under chapter 7; i) the accounting or valuation methods used to produce the financial information in the disclosure statement; j) information regarding the future management of the debtor, including the amount of compensation to be paid to any insiders, directors, and/or officers of the debtor; k) a summary of the plan of reorganization; l) an estimate of all administrative expenses, including attorney s fees and accountant s fees; m) the collectability of any accounts receivable; n) any financial information, valuations or pro forma projections that would be relevant to creditors determinations of whether to accept or reject the plan; o) information relevant to the risks being taken by creditors and Interest Holders; p) the actual or projected value that can be obtained from avoidable transfers; q) the existence, likelihood and possible success of nonbankruptcy litigation; r) the tax consequences of the plan; and s) the relationship of the debtor with affiliates. See, e.g., In re Scioto Valley Mortgage Co., 88 B.R. 168, 170-71 (Bankr. S.D. Ohio 1988); In re Ferretti, 128 B.R. 16, 19 (Bankr. D.N.H. 1991); In re U.S. Brass Corp., 194 B.R. 420, 424 (Bankr. E.D. Tex. 1996). This list is not exclusive, and the court must decide what is appropriate and relevant in each case. See, Ferretti, 128 B.R. at 18-19; In re Phoenix Petroleum Co., 278 B.R. 385, 393 (cautioning that no one list of categories will apply in every case ). 22. The Plan Proponents submit that the Disclosure Statement meets these standards and contains adequate information to allow Debtor s creditors entitled to vote on the Joint Plan to make an informed judgment. 29522201.2\156376-00001
Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 9 of 18 23. To expedite the confirmation process, the Plan Proponents respectfully request that this Court preliminarily and conditionally approve the Disclosure Statement, subject to a final hearing in conjunction with confirmation of the Joint Plan. 24. Authority to conditionally approve the Disclosure Statement in a case that is neither a prepackaged case nor a small business debtor is provided by 11 U.S.C. 105(d)(2)(B)(vi). 4 25. Conditional approval of the Disclosure Statement subject to final approval at a consolidated hearing is warranted and appropriate in this case to minimize administrative expenses associated with closing this bankruptcy case. Courts in this district have provisionally approved disclosure statements subject to final approval at a combined hearing on such disclosure statements and confirmation in In re Family Christian Stores, Case No. 15-00643-jtg, and Great Lakes Comnet, Inc.., Case No. 16-00290-jtg. 26. Accordingly, Debtor requests that the Disclosure Statement be conditionally approved as providing adequate information under Section 1125 of the Bankruptcy Code, subject to final approval at a combined hearing on the Disclosure Statement and confirmation of the Joint Plan. 4 11 U.S.C. 105(d)(2)(B)(vi) provides in relevant part: (d) The court, on its own motion or on the request of a party in interest... (2) unless inconsistent with another provision of this title or with applicable Federal Rules of Bankruptcy Procedure, may issue an order at any such conference prescribing such limitations and conditions as the court deems appropriate to ensure that the case is handled expeditiously and economically, including an order that... (B) in a case under chapter 11 of this title... (vi) provides that the hearing on approval of the disclosure statement may be combined with the hearing on confirmation of the plan. 11 U.S.C. 105(d)(2)(B)(vi). 29522201.2\156376-00001
Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 10 of 18 II. ESTABLISHING A RECORD VOTING DATE 27. Bankruptcy Rule 3017(d) provides that, for purposes of soliciting votes in connection with the confirmation of a chapter 11 plan, creditors and equity security holders shall include holders of stock, bonds, debentures, notes, and other securities of record on the date the order approving the disclosure statement is entered or another date fixed by the court, for cause, after notice and a hearing. Fed. R. Bankr. P. 3017(d). Bankruptcy Rule 3018(a) contains a similar provision regarding determination of the record date for voting purposes. 28. In accordance with these rules, Debtor requests that the entry date of the Plan Procedures Order be the Voting Record Date for purposes of determining: (i) the Holders of Claims in the voting classes, who will receive solicitation packages and are entitled to vote to accept or reject the Joint Plan, (ii) the Holders of Claims and Interests in the non-voting classes, who will also receive nonvoting packages; (iii) the amount of each Holder s Claim for solicitation and voting purposes; and (iv) whether Claims have been properly and timely assigned or transferred to an assignee pursuant to Bankruptcy Rule 3001(e) such that the assignee (and not the original Claim Holder) can vote to accept or reject the Joint Plan as the Holder of a Claim. With respect to transferred Claims, if any, Debtor requests that (i) if the notice of transfer required by Bankruptcy Rule 3001(e) is filed on or before the Voting Record Date, the solicitation package will be mailed to the transferee in accordance with the notice of transfer, and the transferee will be entitled to cast a ballot to accept or to reject the Joint Plan (if such Claim is in a voting class), and (ii) if the notice of transfer is filed after the Voting Record Date, then the solicitation package will be mailed to the original or immediately preceding Claim Holder, and such Claim Holder will be entitled to cast a ballot to accept or to reject the Joint Plan (if such Claim is in a voting class). 29522201.2\156376-00001
Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 11 of 18 III. ESTABLISHING A CONSOLIDATED HEARING DATE FOR FINAL APPROVAL OF THE DISCLOSURE STATEMENT AND CONFIRMATION OF THE JOINT PLAN, AND DEADLINES FOR FILING OBJECTIONS TO BOTH 29. Section 105(d)(2)(B) of the Bankruptcy Code authorizes the Court to issue an order, at the request of a party in interest, that sets the scope and format of the notice of the hearing to approve a disclosure statement or that combines the hearing on approval of the disclosure statement with the hearing on confirmation of the plan. 11 U.S.C. 105(d)(2)(B)(v) and (vi). 30. The Plan Proponents seek to consolidate the dates for the hearings on final approval of the Disclosure Statement and confirmation of the Joint Plan, and to establish the dates for objections to both. Debtor requests that the Court schedule the following hearings and deadlines within the time frames requested set forth in Paragraph 18 above: (a) a combined hearing (the Confirmation Hearing ) on approval of the Disclosure Statement and confirmation of the Joint Plan, and (b) a deadline (the Objection Deadline ) for objections, if any, to the adequacy of the Disclosure Statement or confirmation of the Joint Plan. 31. The proposed Plan Procedures Order requires that any objections must (a) be in writing; (b) state the name and address of the objecting party and the nature of the Claim or Interest held by such party; (c) state with particularity the basis and nature of any objection to the adequacy of the Disclosure Statement or confirmation of the Joint Plan; and (d) be filed with the Court and served so to be received no later than 5:00 p.m. prevailing Eastern time on the Objection Deadline. 29522201.2\156376-00001
Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 12 of 18 32. Further, the Plan Proponents request that the hearing on this Plan Procedures Motion and Conditional Approval of the Disclosure Statement be held within fourteen (14) of the filing of this Motion, subject, of course, to the Court's calendar. 5 33. If the Disclosure Statement is conditionally approved, the Plan Procedures Notice and applicable solicitation or nonvoting package will be served on creditors and parties in interest entitled to receive them no later than three (3) business days thereafter. IV. Approval of Solicitation Packages and Solicitation Procedures A. Approval of Form of Solicitation Packages and Procedures for Distribution of Solicitation Packages 34. Bankruptcy Rule 3017(d) sets forth the solicitation materials that must be provided to creditors and equity security holders. To comply with that rule, Debtor proposes to transmit or cause to be transmitted by first class mail to the creditors that are entitled to vote in the voting class, by no later than the Solicitation Date, a Solicitation Package containing the following: a) The Disclosure Statement, including the Joint Plan, and all Exhibits annexed thereto; b) The Plan Procedures Order (excluding exhibits); c) The Plan Procedures Notice, which includes a summary of the Joint Plan; d) The form of Ballot for voting to accept or to reject the Joint Plan, and voting instructions (the Voting Instructions ); e) At the election of the Committee, a letter supporting the Joint Plan by the Plan Proponents; and f) A pre-addressed return envelope. 35. In addition, pursuant to Bankruptcy Rule 2002(b) and 3017(d), notice of the time fixed for filing objections to the Joint Plan and for the Confirmation Hearing must be mailed to 5 A separate motion seeking relief for shortened notice will be filed contemporaneously with this Motion. 29522201.2\156376-00001
Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 13 of 18 the nonvoting classes and all creditors, equity holders, parties in interest and persons requesting notice that are not entitled to vote and do not receive a Solicitation Package, with such notice delivered by serving a Nonvoting Package containing the following: a) The Plan Procedures Notice; and b) The Notice of Nonvoting Status (a proposed form of which is attached hereto as Exhibit 3 to Exhibit A. 36. Debtor requests that it be authorized (but not required) to distribute the Disclosure Statement and Joint Plan (and all Exhibits) to Class 2 in electronic format in lieu of paper format. The Plan Procedures Order (excluding exhibits), Plan Procedures Notice, Ballots, the letter and envelopes will also be provided in paper format. 37. Debtor anticipates that the distribution of the Solicitation and Nonvoting Packages can be accomplished within three business days of the entry of the Plan Procedures Order (the Solicitation Date ). 38. Local Rule 3018 provides that unless the Court orders otherwise, all ballots must be filed with the Clerk of the Court. Due to the number of ballots that may be returned in this case, Debtor requests that Rust Omni serve as the Voting Agent in these cases and that all original ballots be sent directly to Rust Omni. The Court previously authorized the retention of Rust Omni to act as balloting agent. (Dkt. No. 200). B. Approval of Procedures for Tabulating Acceptances and Rejections of the Joint Plan 39. For purposes of voting on the Joint Plan, with respect to all Holders of Claims against Debtor, Debtor proposes that the amount of a Claim used to tabulate acceptance or rejection of the Joint Plan should be the following: a) the amount of the Claim listed in the Debtor s Schedules; provided that (i) such Claim is not scheduled as contingent, unliquidated, undetermined or disputed or in the amount of $0.00, (ii) no Proof of Claim has been timely 29522201.2\156376-00001
Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 14 of 18 filed (or otherwise deemed timely filed under applicable law), (iii) such Claim has not been satisfied by Debtor, or (iv) such Claim has not been resolved pursuant to a stipulation or order entered by the Court. b) The undisputed, non-contingent, and liquidated amount specified in a proof of Claim against Debtor, timely filed with the Court or Rust Omni by the Voting Record Date (or otherwise deemed timely filed by the Court under applicable law) to the extent such Proof of Claim has not been amended or superseded by another Proof of Claim and is not the subject of an objection filed at least ten (10) days before the Voting Deadline (or, if such Claim has been resolved pursuant to a stipulation or order entered by the Court, the amount set forth in such stipulation or order). c) If applicable, the amount temporarily allowed by the Court for voting purposes pursuant to Bankruptcy Rule 3018. d) Except as otherwise provided in subsection (c) hereof, a Ballot cast by an alleged Creditor who has timely filed a Proof of Claim in a wholly unliquidated, unknown, or uncertain amount that is not the subject of a Claim objection filed at least ten (10) days before the Voting Deadline shall be counted to determine whether the section 1126(c) of the Bankruptcy Code has been met, and shall be ascribed a value of one dollar ($1.00) for voting purposes only. e) Except as otherwise provided in subsection (c) hereof, with respect to a Ballot cast by an alleged Creditor who has timely filed a Proof of Claim, but the Claim is the subject of a Claim objection filed at least ten (10) days before the Voting Deadline, Debtor requests, in accordance with Bankruptcy Rule 3018(a), that the Ballot not be counted for voting purposes, unless otherwise ordered by the Court. f) Notwithstanding subsection (e) hereof and except as otherwise provided in subsection (c) hereof, if Debtor has requested that a Claim be reclassified and/or allowed in a fixed, reduced amount pursuant to a Claim objection to such Claim, the Ballot of the Holder of such Claim shall be counted in the reduced amount requested by Debtor and/or in the requested category, unless otherwise ordered by the Court. g) Notwithstanding anything to the contrary contained herein, to the extent that a Creditor holds duplicate Claims against Debtor (by virtue of one or more timely-filed Proofs of Claim, the Schedules of Debtor, or a combination of both), the amount of such Claim shall be counted only once and not aggregated in duplicate amounts for voting purposes. 40. Debtor further requests that the following voting procedures and standard assumptions be used in tabulating the Ballots: 29522201.2\156376-00001 - 14 -
Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 15 of 18 a) For purposes of the number of ballots cast under Section 1126(c) of the Bankruptcy Code, separate Claims held by a single Creditor against Debtor in the voting class will be aggregated as if such Creditor held a single Claim against Debtor in the voting class, and the votes related to those Claims shall be treated as a single vote on the Joint Plan. b) Creditors with multiple Claims within the voting class must vote all such Claims in the voting class to either accept or reject the Joint Plan, and may not split their vote(s) within the voting class. Accordingly, an individual Ballot that partially rejects and partially accepts the Joint Plan on account of multiple Claims within the voting class will not be counted. c) In the event a Claim is transferred after the transferor has executed and submitted a Ballot to the Voting Agent and after the Voting Record Date, the transferee of such Claim shall be bound by any such vote (and the consequences thereof) made by the Holder of such transferred Claim as of the Voting Record Date and no cause will exist to permit any vote change under Bankruptcy Rule 3018(a). d) The delivery of a Ballot will be deemed made only when the Voting Agent has actually received the original, executed Ballot. e) If a Holder of a Claim casts more than one Ballot voting the same Claim(s) before the Voting Deadline, the last properly-executed Ballot received before the Voting Deadline shall supersede and revoke any earlier-received Ballot, and only the last Ballot received before the Voting Deadline shall be counted. f) If a Holder of a Claim casts multiple Ballots on account of the same Claim, which are received by the Voting Agent on the same day, but which are voted inconsistently, such Ballots shall not be counted. g) Except as otherwise provided in subsection (c) hereof, any party who has delivered a valid Ballot for the acceptance or rejection of the Joint Plan may withdraw such acceptance or rejection by delivering a written notice of withdrawal to the Voting Agent at any time prior to the Voting Deadline. To be valid, a notice of withdrawal must (i) contain the description of the Claims to which it relates and the aggregate principal amount represented by such Claims, (ii) be signed by the withdrawing party in the same manner as the Ballot being withdrawn, (iii) contain a certification that the withdrawing party owns the Claims and possesses the right to withdraw the vote sought to be withdrawn, and (iv) be actually received by the Voting Agent prior to the Voting Deadline. Debtor expressly reserves the right to contest the validity of any such withdrawals of Ballots. 29522201.2\156376-00001 - 15 -
Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 16 of 18 41. The following types of Ballots will not be counted in determining whether the Joint Plan has been accepted or rejected: a) Any Ballot that fails to clearly indicate an acceptance or rejection, or that indicates both an acceptance and a rejection, of the Joint Plan. b) Any Ballot received after the Voting Deadline, except by order of the Bankruptcy Court or if Debtor, in its sole discretion, has granted an extension of the Voting Deadline with respect to such Ballot, or by order of the Bankruptcy Court. c) Any Ballot containing a vote that the Bankruptcy Court determines was not solicited or procured in good faith or in accordance with the applicable provisions of the Bankruptcy Code. d) Any Ballot that is illegible or contains insufficient information to permit the identification of the Claim Holder. e) Any Ballot cast by an Entity that does not hold a Claim in the voting class. f) Any unsigned Ballot or Ballot without an original signature. 42. The Plan Proponents reserve the right to request that the Court reject any and all Ballots not in proper form, the acceptance of which would, in the opinion of Debtor or the Committee, be unlawful. The Plan Proponents further reserve the right to waive any defects or irregularities or conditions of delivery as to any particular Ballot. The interpretation of all balloting rules and procedures (including the Ballot and the respective instructions thereto) by the Voting Agent and the Plan Proponents, unless otherwise directed by the Bankruptcy Court, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with deliveries of ballots must be cured by the Voting Deadline or such later time as the Plan Proponent or the Bankruptcy Court determines. Because of the potential volume of Ballots that may be received, neither the Plan Proponents nor any other person will be under any duty to provide notification of defects or irregularities with respect to Ballots that are cast, nor will any of them incur any liabilities for failure to provide such notification. Unless otherwise directed by 29522201.2\156376-00001 - 16 -
Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 17 of 18 the Bankruptcy Court, the receipt and casting such defective Ballots will not be deemed to have been made until such defects or irregularities have been cured or waived; although Debtor shall provide a summary or copy of such defective or irregular ballots with the Court in conjunction with the Voting Report (defined below). C. Submission of Voting Report. 43. The Plan Proponents request that the Court establish a deadline for the Voting Agent to file a voting report (the Voting Report ) that is approximately 3 days prior to the Confirmation Hearing, verifying the results of its voting tabulations reflecting votes cast to accept or reject the Joint Plan. The Voting Report will, among other things, describe every Ballot that does not conform to the Voting Instructions or that contains any form of irregularity, including, but not limited to, those Ballots that are late, illegible (in whole or in material part), unidentifiable, lacking signatures, lacking necessary information, or damaged. 44. The Plan Proponents submit that the tabulation rules and other related vote tabulation procedures set forth above will establish a fair and equitable voting process and should be approved. D. Approval of Form of Ballot and Plan Summary 45. Bankruptcy Rule 3017(d) requires Debtor to mail a form of ballot to all creditors and equity security holders entitled to vote on the Joint Plan. Fed. R. Bankr. P. 3017(d). Debtor proposes to distribute a ballot to Class 2, the only creditor class entitled to vote on the Joint plan, based on Official Form No. 14, but modified to reflect the provisions of the Joint Plan. The Form of the proposed Ballot is annexed to the Plan Procedures Order as Exhibit 2. All Ballots will be accompanied by a return envelope addressed to the Voting Agent for First-Class Mail delivery to: 29522201.2\156376-00001 - 17 -
Case:17-00612-jtg Doc #:490 Filed: 07/17/17 Page 18 of 18 Michigan Sporting Goods Distributors, Inc. Ballot Processing c/o Rust Consulting/Omni Bankruptcy 5955 DeSoto Ave., Suite 100 Woodland Hills, CA 91367 NOTICE 46. Debtor will provide notice of this Motion to: (i) the U.S. Trustee; and (ii) all parties who have filed a notice of appearance and request for service of papers pursuant to Bankruptcy Rule 2002. In light of the nature of the relief requested herein, that being conditional approval of the Disclosure Statement and not final approval, the Plan Proponents submit that no other or further notice is necessary. WHEREFORE, the Plan Proponents submit that the relief requested herein is in the best interest of all parties and respectfully request that the Court conduct a hearing on this Motion on shortened notice, and enter the proposed Plan Procedures Order in the form attached hereto and identified as Exhibit A. Date: July 17, 2017 Respectfully Submitted, /s/ Stephen Grow Stephen Grow (P 39622) Elisabeth M. Von Eitzen (P 70183) R. Michael Azzi (P 74508) WARNER NORCROSS & JUDD LLP 111 Lyon Street, NW, Suite 900 Grand Rapids, Michigan 49503 (616) 752-2418 Counsel to Debtor and Debtor in Possession /s/ Jonathan S. Green Jonathan S. Green (P33140) Marc N. Swanson (P 71149) MILLER, CANFIELD, PADDOCK AND STONE, P.L.C. 150 West Jefferson, Suite 2500 Detroit, Michigan 48226 (313) 496-6420 -and- Cathy Rae Hershcopf Robert Winning COOLEY LLP 1114 Avenue of the Americans New York, NY 10036-7798 (212) 479-6000 Counsel for Official Committee of Unsecured Creditors 16056681-4 29522201.2\156376-00001 - 18 -
Case:17-00612-jtg Doc #:490-1 Filed: 07/17/17 Page 1 of 22 EXHIBIT A UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF MICHIGAN In re: MICHIGAN SPORTING GOODS DISTRIBUTORS, INC., Debtor. Chapter 11 Bankruptcy Case No.: 17-00612-jtg Hon. John T. Gregg / ORDER (I) CONDITIONALLY APPROVING DISCLOSURE STATEMENT, (II) FIXING VOTING RECORD DATE, (III) SCHEDULING DISCLOSURE STATEMENT AND PLAN CONFIRMATION HEARING AND APPROVING FORM AND MANNER OF RELATED NOTICE AND OBJECTION PROCEDURES, (IV) APPROVING SOLICITATION PACKAGES AND PROCEDURES AND DEADLINES FOR SOLICITING, RECEIVING AND TABULATING VOTES ON THE JOINT PLAN, AND (V) APPROVING THE FORM OF BALLOT This matter having come before the Court on the motion (the Motion ) of Debtor and Official Committee of Unsecured Creditors ( Committee and together with the Debtor, the Plan Proponents ), for entry of an order, pursuant to sections 105, 1124 through 1129 of title 11 of the United States Code, 11 U.S.C. 101-1532 (the Bankruptcy Code ), Rules 2002, 3017, 3018, and 3020 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), and the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the Western District of Michigan (the Local Rules ) (i) conditionally approving the Disclosure Statement filed in this case [Dkt. No. ] (as it may be amended, supplemented or
Case:17-00612-jtg Doc #:490-1 Filed: 07/17/17 Page 2 of 22 modified from time to time, the Disclosure Statement ) as containing adequate information, (ii) fixing a record date (the Voting Record Date ) for voting on the Joint Plan (as it may be amended, supplemented or modified from time to time pursuant to the terms thereof, the Joint Plan ), (iii) scheduling a date for the hearing to consider final approval of the Disclosure Statement and confirmation of the Joint Plan (the Confirmation Hearing ) and approving the form and manner of the related notice and objection procedures for the Confirmation Hearing, (iv) approving the proposed contents of the solicitation and nonvoting packages (the Solicitation and Nonvoting Packages ) and establishing solicitation, voting, and tabulating procedures with respect to the Joint Plan, and (v) approving the form of ballot for the Voting Class; the Court having jurisdiction to consider the Motion pursuant to 28 U.S.C. 1334 and 157; and it appearing that due and adequate notice of the Motion has been given under the circumstances, and that no other or additional notice need be given; and it appearing that the relief requested in the Motion is in the best interests of Debtor s estate, its creditors, and other parties in interest; and after due deliberation, and good and sufficient cause appearing therefor, it is hereby ORDERED THAT: 1. The Motion is GRANTED as set forth herein. 2. Any and all objections to conditionally approving of the Disclosure Statement, to the extent not previously resolved or withdrawn, are overruled in their entirety. 3. The Disclosure Statement conditionally contains adequate information as required by Bankruptcy Code Section 1125 and is hereby conditionally approved. Debtor is authorized to distribute, or cause to be distributed, the Disclosure Statement and Solicitation and Nonvoting Packages in order to solicit votes on, and pursue final approval of the Disclosure Statement and
Case:17-00612-jtg Doc #:490-1 Filed: 07/17/17 Page 3 of 22 confirmation of the Joint Plan. Prior to the Solicitation Date, Debtor is also authorized to make corrections and finalize changes to the Disclosure Statement or Joint Plan. 4. The procedures set forth below for the solicitation and tabulation of votes to accept or reject the Joint Plan provide for a fair and equitable voting process and are consistent with section 1126 of the Bankruptcy Code. 5. The contents of the Solicitation and Nonvoting Packages, as set forth in the Motion, comply with Bankruptcy Rules 2002 and 3017 and constitute sufficient notice to all interested parties including, without limitation, Holders of Claims against and Equitable Interests in Debtor. 6. The notice of the Confirmation Hearing, substantially in the form attached hereto as Exhibit 1 (the Plan Procedures Notice ) complies with the requirements of Bankruptcy Rules 2002(b), 2002(d), and 3017(d) and is approved. 7. Rust Consulting/Omni Bankruptcy will serve as the Voting Agent in these cases and all original ballots must be sent directly to the Voting Agent at: Michigan Sporting Goods Distributors, Inc. Ballot Processing, c/o Rust Consulting/Omni Bankruptcy, 5955 DeSoto Ave., Suite 100, Woodland Hills, CA 91367 8. The Ballot, substantially in the form attached hereto as Exhibit 2, is approved. 9. The Voting Record Date with respect to Holders of Claims shall be, 2017. The Voting Record Date shall be used for purposes of determining: (i) the Holders of Claims in the voting classes, who will receive Solicitation Packages and are entitled to vote to accept or reject the Joint Plan, (ii) the Holders of Claims and Interests in the non-voting classes, who will receive Nonvoting Packages but are not entitled to vote to accept or reject the Joint Plan; (iii) the amount of each Holder s Claim for solicitation and voting purposes; and (iv)
Case:17-00612-jtg Doc #:490-1 Filed: 07/17/17 Page 4 of 22 whether Claims have been properly and timely assigned or transferred to an assignee pursuant to Bankruptcy Rule 3001(e) such that the assignee (and not the original Claim Holder) can vote to accept or reject the Joint Plan as the Holder of a Claim. With respect to transferred Claims, if any, (i) if the notice of transfer required by Bankruptcy Rule 3001(e) is filed on or before the Voting Record Date, the Solicitation Package will be mailed to the transferee in accordance with the notice of transfer, and the transferee will be entitled to cast a Ballot to accept or to reject the Joint Plan (if such Claim is in a Voting Class), and (ii) if the notice of transfer is filed after the Voting Record Date, then the Solicitation Package will be mailed to the original or immediately preceding Claim Holder, and such Claim Holder will be entitled to cast a Ballot to accept or to reject the Joint Plan (if such Claim is in a Voting Class). 10. Debtor is authorized to distribute, or cause to be distributed, by first-class mail to each Holder of a Claim that is entitled to vote in one of the voting classes as of the Voting Record Date a Solicitation Package containing the following: a) The Disclosure Statement, including the Joint Plan and all Exhibits annexed thereto; b) The Plan Procedures Order (excluding exhibits); c) The Plan Procedures Notice, which includes a summary of the joint plan; d) The Ballot to be used in voting to accept or to reject the Joint Plan, and applicable Voting Instructions; e) Letter supporting confirmation of the Joint Plan by the Plan Proponents, if any; and f) A pre-addressed return envelope. 11. Debtor is authorized (but not required) to distribute the Disclosure Statement and Joint Plan (together with all exhibits thereto) in CD or other electronic format in lieu of paper format.
Case:17-00612-jtg Doc #:490-1 Filed: 07/17/17 Page 5 of 22 12. Debtor must cause notice of the time fixed for filing objections to the Joint Plan and for the date of the Confirmation Hearing to be served upon the nonvoting classes and all creditors, equity holders, and parties in interest that are not otherwise entitled to vote and do not otherwise receive a Solicitation Package, by serving upon such persons the Nonvoting Package containing the following: a) The Plan Procedures Notice; and b) The Notice of Nonvoting Status (in the form attached as Exhibit 3). 13. Debtor is authorized to mail a complete copy of the Solicitation Package (excluding ballots) to the U.S. Trustee, and any state federal or state governmental units having a specific interest in this case, if applicable. 14. Debtor must complete, or cause to be completed, the distribution of the appropriate Solicitation or Nonvoting Packages to all Holders of Claims or Equitable Interests as well as parties in interest no later than, 2017 (the Solicitation Date ). 15. Debtor will not be required to mail the Solicitation Packages and Non-Voting Packages to any Holders of Claims or Equitable Interests, as applicable, that have listed addresses that have previously been determined to be undeliverable, unless Debtor (through the Voting Agent) is provided with an accurate address for each Claim or Equitable Interest Holder s previously undeliverable address not less than five (5) calendar days prior to the Solicitation Date. 16. The deadline by which all Ballots must be properly executed, completed, delivered to, and actually received by the Voting Agent shall be, 2017 at.m. (prevailing Eastern Time) (the Voting Deadline ), provided, however, that Debtor is permitted, in consultation with the Committee, to extend the Voting Deadline at any time before
Case:17-00612-jtg Doc #:490-1 Filed: 07/17/17 Page 6 of 22 or after the Voting Deadline, on behalf of any individual voter or the Voting Class, as facts and circumstances may require. 17. Each Holder of a Claim in the Voting Class shall be entitled to vote the amount of its Claim as of the Voting Record Date. 18. For purposes of voting on the Joint Plan, with respect to all Holders of Claims against Debtor, the amount of a Claim used to tabulate acceptance or rejection of the Joint Plan shall be as follows: a) The amount of the Claim listed in Debtor s Schedules; provided that (i) such Claim is not scheduled as contingent, unliquidated, undetermined or disputed or in the amount of $0.00, (ii) no Proof of Claim has been timely filed (or otherwise deemed timely filed under applicable law), (iii) such Claim has not been satisfied by Debtor, or (iv) such Claim has not been resolved pursuant to a stipulation or order entered by the Court. b) The undisputed, non-contingent and liquidated amount specified in a Proof of Claim against Debtor timely filed with the Court or the Voting Agent by the Voting Record Date (or otherwise deemed timely filed by the Court under applicable law) to the extent such Proof of Claim has not been amended or superseded by another Proof of Claim and is not the subject of an objection filed at least ten (10) days before the Voting Deadline (or, if such Claim has been resolved pursuant to a stipulation or order entered by the Court, the amount set forth in such stipulation or order). c) If applicable, the amount temporarily allowed by the Court for voting purposes pursuant to Bankruptcy Rule 3018. d) Except as otherwise provided in subsection (c) hereof, a Ballot cast by an alleged Creditor who has timely filed a Proof of Claim in a wholly unliquidated, unknown or uncertain amount that is not the subject of a claim objection filed at least ten (10) days before the Voting Deadline shall be counted in determining whether the numerosity requirement of section 1126(c) of the Bankruptcy Code has been met, and shall be ascribed a value of one dollar ($1.00) for voting purposes only. e) Except as otherwise provided in subsection (c) hereof, with respect to a Ballot cast by an alleged Creditor who has timely filed a Proof of Claim, but the Claim is the subject of a claim objection filed at least ten (10) days before the Voting Deadline, the Ballot will not be counted for voting purposes.
Case:17-00612-jtg Doc #:490-1 Filed: 07/17/17 Page 7 of 22 f) Notwithstanding subsection (e) hereof and except as otherwise provided in subsection (c) hereof, if Debtor has requested that a Claim be reclassified and/or allowed in a fixed, reduced amount pursuant to a claim objection to such Claim, the Ballot of the Holder of such Claim shall be counted in the reduced amount requested by Debtor and/or in the requested Class. g) Notwithstanding anything to the contrary contained herein, to the extent that a Creditor holds identical and/or duplicate Claims against Debtor (by virtue of one or more timely-filed Proofs of Claim, Debtor s Schedules, or a combination of both), the amount of such Claim shall be counted only once and not aggregated in duplicate amounts for voting purposes. 19. The following voting procedures and standard assumptions shall be used in tabulating the Ballots: a) For purposes of the numerosity requirement of section 1126(c) of the Bankruptcy Code, separate Claims held by a single Creditor against Debtor in the Voting Class will be aggregated as if such Creditor held a single Claim against Debtor in the Voting Class, and the votes related to those Claims shall be treated as a single vote on the Joint Plan. b) Creditors with multiple Claims within the Voting Class must vote all such Claims in any the Voting Class to either accept or reject the Joint Plan, and may not split their vote(s) within the Voting Class. Accordingly, an individual Ballot that partially rejects and partially accepts the Joint Plan on account of multiple Claims within the Voting Class will not be counted. c) In the event a Claim is transferred after the transferor has executed and submitted a Ballot to the Voting Agent, the transferee of such Claim shall be bound by any such vote (and the consequences thereof) made by the Holder of such transferred Claim as of the Voting Record Date and no cause will exist to permit any vote change under Bankruptcy Rule 3018(a). d) The delivery of a Ballot will be deemed made only when the Voting Agent has actually received the original, executed Ballot. e) If a Holder of a Claim casts more than one Ballot voting the same Claim(s) before the Voting Deadline, the last properly-executed Ballot received before the Voting Deadline shall supersede and revoke any earlier-received Ballot, and only the last Ballot received before the Voting Deadline shall be counted.
Case:17-00612-jtg Doc #:490-1 Filed: 07/17/17 Page 8 of 22 f) If a Holder of a Claim casts multiple Ballots on account of the same Claim, which are received by the Voting Agent on the same day, but which are voted inconsistently, such Ballots shall not be counted. g) Except as otherwise provided in subsection (j) hereof, any party who has delivered a valid Ballot for the acceptance or rejection of the Joint Plan may withdraw such acceptance or rejection by delivering a written notice of withdrawal to the Voting Agent at any time prior to the Voting Deadline. To be valid, a notice of withdrawal must (i) contain the description of the Claims to which it relates and the aggregate principal amount represented by such Claims, (ii) be signed by the withdrawing party in the same manner as the Ballot being withdrawn, (iii) contain a certification that the withdrawing party owns the Claims and possesses the right to withdraw the vote sought to be withdrawn, and (iv) be actually received by the Voting Agent prior to the Voting Deadline. Debtor s right to contest the validity of any such withdrawals of Ballots is expressly reserved. 20. The following types of Ballots will not be counted in determining whether the Joint Plan has been accepted or rejected: a) Any Ballot that fails to clearly indicate an acceptance or rejection, or that indicates both an acceptance and a rejection, of the Joint Plan. b) Any Ballot received after the Voting Deadline, except by order of the Bankruptcy Court or if Debtor, in its sole discretion, has granted an extension of the Voting Deadline with respect to such Ballot. c) Any Ballot containing a vote that the Bankruptcy Court determines was not solicited or procured in good faith or in accordance with the applicable provisions of the Bankruptcy Code. d) Any Ballot that is illegible or contains insufficient information to permit the identification of the Claim Holder. e) Any Ballot cast by an Entity that does not hold a Claim in a voting class. f) Any unsigned Ballot or Ballot without an original signature. 21. The Plan Proponents are authorized to reject any and all Ballots not in proper form, the acceptance of which would, in the opinion of the Plan Proponents, be unlawful. The Plan Proponents are further authorized to waive any defects or irregularities or conditions of