UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF OHIO
In re:
MERIDIAN PRECISION COMPONENTS, INC.,
Debtor.
Chapter 11
Case No. 22-50318-JLG
Hon. Janet L. Grasso
SUPPLEMENTAL BRIEF OF VANTAGE MOBILITY SYSTEMS CORP. IN SUPPORT OF STALKING-HORSE BID PROTECTIONS
Filed: May 6, 2022
Calderwood & Harkness LLP 600 Lexington Avenue, 38th Floor New York, NY 10022 Telephone: (212) 558-4000 Facsimile: (212) 558-3588
Counsel for Vantage Mobility Systems Corp., Stalking-Horse Bidder
Nathaniel Bower, Esq. (Responsible Partner) Amy Chesterton, Esq. (Lead Associate)
TABLE OF AUTHORITIES
Cases
Statutes and Rules
Other Authorities
I. PRELIMINARY STATEMENT
Vantage Mobility Systems Corp. ("VMS" or the "Stalking-Horse Bidder"), by and through its undersigned counsel, Calderwood & Harkness LLP, respectfully submits this Supplemental Brief in support of the proposed bid protections in connection with the Section 363 sale of substantially all assets of Meridian Precision Components, Inc. (the "Debtor"). VMS files this Supplemental Brief to address the issues reserved by this Court at the April 22, 2022 Bid Procedures Hearing, and to respond directly and comprehensively to the arguments raised by the Official Committee of Unsecured Creditors (the "Committee") in its Limited Objection filed on April 8, 2022 (Dkt. 172).
This Brief is filed pursuant to the Court's direction at the April 22, 2022 Bid Procedures Hearing (Dkt. 198), at which the Court approved the Bid Procedures governing the auction and sale of the Debtor's assets but reserved ruling on the proposed break-up fee pending supplemental briefing from all parties. VMS is filing this Brief within the briefing schedule established by the Court at that hearing.
VMS responds specifically to the Limited Objection to Stalking-Horse Bid Protections filed on April 8, 2022 by the Committee, which is represented by Pendergast McCabe & Lowe LLP. The Committee's objection is narrow in scope. The Committee does not challenge the overall bid procedures framework, the proposed auction format, the sale timeline, or the expense reimbursement cap. Rather, the Committee seeks to reduce the break-up fee from 3.0% to 2.0% of the $63.5 million purchase price, contending that a 3.0% break-up fee is "excessive" for an asset sale of this magnitude. As set forth in detail below, the Committee's position is unsupported by the facts, the law, and the commercial realities of the marketplace for distressed Tier 2 automotive supplier assets.
The proposed bid protections consist of two components: (a) a break-up fee of $1.905 million, representing 3.0% of the $63.5 million purchase price set forth in the Asset Purchase Agreement dated March 30, 2022 (the "APA"); and (b) an expense reimbursement cap of $750,000, covering VMS's actual, documented, out-of-pocket expenses incurred in connection with the negotiation, execution, and pursuit of the transaction. In total, the bid protections amount to $2.655 million, or approximately 4.18% of the purchase price. These protections are reasonable, appropriate, and squarely within the range that bankruptcy courts in this district and throughout the country have routinely approved in Section 363 sales of comparable size and complexity.
The Committee's insistence on a reduction from 3.0% to 2.0% — a decrease that would reduce the break-up fee to only $1.27 million — ignores the substantial investment that VMS has made in this transaction. VMS has expended enormous resources over a period of months to conduct due diligence on the Debtor's three Ohio manufacturing facilities, to evaluate and price environmental liabilities, to analyze the Debtor's collective bargaining obligations, to negotiate a complex asset purchase agreement, and to secure financing commitments from its lender and equity sponsor. VMS's estimated total transaction costs are approximately $4.2 million — costs that are entirely at risk and that would be wholly unrecoverable if VMS is outbid at the auction. A break-up fee of only $1.27 million would be manifestly inadequate to compensate VMS for even a fraction of this investment.
The stalking-horse bid protections serve a critical function that benefits the entire estate. VMS's stalking-horse bid of $63.5 million establishes a price floor for the auction that provides certainty of a baseline recovery for all constituencies. Without VMS's willingness to serve as the stalking horse, the Debtor would face the prospect of an auction without a committed bidder — a circumstance that would dramatically increase the risk of a fire-sale outcome in an already distressed market for Tier 2 automotive supplier assets. The bid protections compensate VMS for the unique value it provides to the sale process and for the real costs and risks it has incurred in exchange for that role.
For the reasons set forth below, VMS respectfully submits that the proposed bid protections are reasonable, necessary, well within the range approved by courts in comparable transactions, supported by the Debtor and the pre-petition senior secured lender, and essential to preserving the integrity and value-maximizing potential of the sale process. The Committee's objection should be overruled, and the break-up fee and expense reimbursement cap should be approved in their entirety.
II. BACKGROUND
A. The Debtor and the Chapter 11 Case
Meridian Precision Components, Inc. (the "Debtor" or "Meridian") is an Ohio corporation headquartered at 4500 Industrial Parkway, Elyria, Ohio 44035 (Employer Identification Number: 34-1987625). Meridian is a Tier 2 automotive supplier that specializes in the manufacture and finishing of precision metal stampings, welded assemblies, and e-coat finished structural components for the North American light-vehicle market. The Debtor's core product lines include structural body-in-white components, cross-members, brackets, and sub-assemblies that are supplied to multiple Tier 1 suppliers and original equipment manufacturers ("OEMs").
Meridian operates three manufacturing facilities, all located in northern Ohio. Its primary facility is a stamping and tool-and-die operation located at the Elyria headquarters site, occupying approximately 285,000 square feet and housing the Debtor's major press lines, including multiple progressive and transfer stamping presses with capacities ranging from 400 to 1,500 tons. The second facility is a welding and assembly plant located in Mansfield, Ohio, occupying approximately 140,000 square feet, where the Debtor performs robotic MIG and resistance welding, as well as mechanical assembly and inspection. The third facility is an e-coat and finishing operation located in Sandusky, Ohio, occupying approximately 68,000 square feet, where the Debtor applies electrodeposition coating and other protective finishes to stamped and welded components prior to shipment to customers. All three facilities are owned in fee by the Debtor.
Prior to the petition date, Meridian employed approximately 620 people across its three facilities, including both salaried and hourly employees. Approximately 195 production workers at the Elyria stamping plant are represented by Local 2287 of the International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America (the "UAW" or "UAW Local 2287") under a collective bargaining agreement that was last renewed in 2019 and is scheduled to expire in September 2023. The remaining employees at the Mansfield and Sandusky facilities are non-union.
The Debtor's financial performance deteriorated significantly in fiscal year 2021. Meridian reported revenue of $138.4 million in FY2021, a decline from $156.2 million in FY2020, attributable primarily to the loss of a major OEM stamping program that was re-sourced to a competitor. The Debtor reported an operating loss of ($11.2 million) in FY2021, driven by the revenue decline, significant raw-material cost inflation (particularly in flat-rolled steel and aluminum), and the continuing burden of legacy pension and other post-employment benefit ("OPEB") obligations owed to the Northern Basin Employee Benefits Trust. Supply chain disruptions, semiconductor shortages affecting OEM production schedules, and freight cost increases further compressed the Debtor's margins during this period.
The Debtor was founded in 1974 by Raymond Kaspar, who served as its Chief Executive Officer until his retirement in 2020. Following Mr. Kaspar's departure, the Debtor's pre-petition lenders, led by Great Lakes Industrial Credit Corp. ("GLICC"), negotiated the appointment of Brenda Wisnicki as Chief Executive Officer. Ms. Wisnicki is an experienced turnaround professional who was engaged to stabilize operations and evaluate strategic alternatives, including a potential sale of the business or an orderly wind-down.
On February 14, 2022, the Debtor filed its voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") in this Court. At the time of the petition, the Debtor's books and records reflected total assets of approximately $87.3 million (at book value) and total liabilities of approximately $129.6 million, resulting in a balance-sheet deficiency of approximately $42.3 million. The Chapter 11 case is being administered under Case No. 22-50318-JLG before the Honorable Janet L. Grasso, United States Bankruptcy Judge.
B. The Debtor's Capital Structure and Secured Debt
Great Lakes Industrial Credit Corp. ("GLICC") is the Debtor's pre-petition senior secured lender and holds a first-priority security interest in and lien upon substantially all of the Debtor's assets, including all accounts receivable, inventory, equipment, general intangibles, real property, and the proceeds thereof. GLICC's security interest arises under a Credit Agreement dated September 12, 2019 (as amended by the First Amendment dated March 15, 2020 and the Second Amendment dated November 1, 2021), by and between the Debtor, as borrower, and GLICC, as administrative agent and sole lender.
As of the petition date, the outstanding indebtedness under the GLICC Credit Agreement was approximately $72.4 million, consisting of $28.0 million outstanding on a revolving credit facility and $44.4 million outstanding on a term loan facility. Both facilities bear interest at SOFR plus applicable margins, and the Credit Agreement contains customary financial maintenance covenants, including a minimum fixed-charge coverage ratio and a maximum total net leverage ratio. The Debtor was in default of certain of these financial covenants as of the petition date.
GLICC also provided the Debtor with a debtor-in-possession financing facility (the "DIP Facility") in the form of a $15.0 million revolving credit facility, bearing interest at SOFR plus 550 basis points, with a 1.0% unused commitment fee and a 2.0% exit fee. The DIP Facility was approved by interim order of this Court on February 22, 2022 (Dkt. 47) and by final order on March 18, 2022 (Dkt. 112). The DIP Facility provides the Debtor with the liquidity necessary to fund ongoing operations, maintain customer programs, and conduct the sale process during the Chapter 11 case.
Below the secured debt layer, the Debtor's capital structure includes substantial unsecured obligations. Trade claims amount to approximately $18.5 million, held by a diverse group of suppliers of raw materials (primarily steel and aluminum), tooling, freight, and other goods and services. Pension and OPEB claims, asserted by the Northern Basin Employee Benefits Trust, total approximately $14.7 million and relate to the Debtor's legacy defined benefit pension plan and retiree health benefit obligations. Additional unsecured claims of approximately $24.0 million include intercompany obligations, lease rejection damages, and miscellaneous unsecured liabilities. In total, unsecured claims are estimated at approximately $57.2 million.
GLICC has been an active and supportive participant in the Chapter 11 case and the sale process. On April 14, 2022, GLICC, through its counsel, Whitfield & Chambers LLP (partner Adrienne Whitfield), filed a Statement in Support of the Bid Procedures (Dkt. 185), expressly supporting the proposed bid protections, including the 3.0% break-up fee and the $750,000 expense reimbursement cap. GLICC's support is significant: as the holder of $72.4 million in secured debt against a purchase price of $63.5 million, GLICC is by far the party with the greatest economic stake in the outcome of the sale process. GLICC's willingness to support the proposed bid protections reflects its informed business judgment that the protections are necessary and appropriate to maximize the value realized from the sale.
C. The Sale Process and the Stalking-Horse APA
Upon the commencement of the Chapter 11 case, the Debtor, in consultation with GLICC and with the approval of this Court, retained Calloway Strauss Advisory, LLC ("Calloway Strauss") as its financial advisor and investment banker to conduct a marketing and sale process for substantially all of the Debtor's assets pursuant to Section 363 of the Bankruptcy Code. The retention of Calloway Strauss was approved by the Court on March 4, 2022 (Dkt. 78). Managing Director Elliot Calloway has led the Calloway Strauss engagement and has extensive experience in distressed mergers and acquisitions in the automotive supplier sector.
Calloway Strauss conducted an extensive pre-petition and post-petition marketing process. Prior to the petition date, beginning in approximately November 2021, Calloway Strauss contacted over forty potential strategic and financial buyers with interest or experience in the automotive components sector. Following the petition filing, Calloway Strauss continued its outreach, distributing confidential information memoranda and facilitating management presentations and facility tours for interested parties. Despite these efforts, the marketing process yielded limited interest, reflecting the challenging market conditions for distressed Tier 2 automotive suppliers, including ongoing supply chain disruptions, raw material cost volatility, and the uncertainty associated with the Debtor's pension and OPEB obligations and environmental liabilities.
Of the parties contacted, only two expressed meaningful interest in acquiring the Debtor's assets on a going-concern basis. VMS submitted a stalking-horse bid, and Axton Industrial Holdings, LLC ("Axton"), a privately held stamping and fabrication company based in Indianapolis, Indiana, submitted a non-binding indication of interest that valued the Debtor's assets at a range of $56 million to $60 million. Axton's indication of interest was significantly below VMS's stalking-horse bid, and Axton declined to commit to a binding offer or to serve as a stalking-horse bidder, citing concerns about the complexity and risk profile of the transaction, including the environmental remediation liabilities and the UAW collective bargaining obligations. Axton has remained in contact with Calloway Strauss and has not been precluded from participating in the auction.
Following extensive arms'-length negotiations between VMS and the Debtor, with the active involvement of their respective counsel — Calderwood & Harkness LLP for VMS and Hargrove Tillinghast LLP for the Debtor — VMS and the Debtor executed the Asset Purchase Agreement on March 30, 2022 (the "APA"). The APA provides for a purchase price of $63.5 million, consisting of $58.5 million in cash payable at closing plus the assumption of estimated cure costs of approximately $5.0 million associated with the assumed executory contracts and unexpired leases.
The assets to be acquired under the APA (the "Purchased Assets") include substantially all of the Debtor's operating assets, specifically:
(a) all three manufacturing facilities (Elyria, Mansfield, and Sandusky), each owned in fee by the Debtor;
(b) all machinery, equipment, tooling, fixtures, and other tangible personal property located at or used in connection with the three facilities;
(c) all inventory, including raw materials, work-in-process, and finished goods;
(d) all accounts receivable outstanding as of the closing date;
(e) all intellectual property, including trade secrets, know-how, proprietary manufacturing processes, and technical data;
(f) all customer contracts and OEM programs, including all rights under purchase orders and supply agreements;
(g) the "Meridian" trade name and all associated trademarks and trade dress; and
(h) all permits, licenses, and governmental authorizations to the extent transferable.
The assumed liabilities under the APA include the following:
(a) cure costs under assumed executory contracts and unexpired leases, estimated at approximately $5.0 million;
(b) post-closing obligations arising under assumed contracts;
(c) certain accrued employee wages and benefits, estimated at approximately $2.1 million, including accrued wages, vacation pay, and health insurance obligations for employees who receive offers of employment from VMS;
(d) environmental remediation obligations at the Elyria facility, estimated at approximately $1.4 million based on a Phase II Environmental Site Assessment conducted by Pinehurst Environmental Sciences, Inc. and relating primarily to soil and groundwater contamination associated with historical degreasing and plating operations at the site; and
(e) all liabilities arising from the operation of the Purchased Assets after the closing date.
The APA expressly excludes the following liabilities (the "Excluded Liabilities"):
(a) all pre-petition unsecured claims;
(b) all pre-petition secured debt owing to GLICC;
(c) all obligations under the DIP Facility;
(d) all pension and OPEB withdrawal liabilities asserted by the Northern Basin Employee Benefits Trust;
(e) all intercompany claims; and
(f) all administrative expense claims and professional fee claims arising in the Chapter 11 case.
VMS has committed to offering employment to at least 480 of Meridian's approximately 620 employees, subject to customary screening and background check processes. This commitment is a material term of the APA and reflects VMS's intent to operate the Debtor's facilities as a going concern, preserving jobs and productive capacity in the communities where the Debtor's plants are located.
VMS has deposited $3.175 million (representing 5.0% of the $63.5 million purchase price) as a good-faith deposit, which is held in escrow by Granite Trust & Escrow Co. pending the closing of the transaction or the earlier termination of the APA. The deposit is refundable to VMS upon termination of the APA under the circumstances specified therein.
The APA and the Bid Procedures establish a minimum overbid increment of $1.0 million, such that any competing bid submitted at the auction must be for a purchase price of at least $64.5 million. This overbid increment is designed to ensure that the estate receives meaningful incremental value from any bid that displaces VMS as the winning bidder.
The Termination Outside Date under the APA is December 31, 2022, after which either party may terminate the APA if the closing has not occurred. No filing is required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as the $63.5 million purchase price falls below the 2022 applicable threshold of $101.0 million. VMS will be required to obtain Ohio Environmental Protection Agency notification and approval in connection with the transfer of certain environmental permits associated with the Elyria facility.
D. VMS and Its Sponsor
Vantage Mobility Systems Corp. ("VMS") is a Delaware corporation headquartered at 1800 Butterworth Avenue SW, Grand Rapids, Michigan 49534 (Employer Identification Number: 38-4012789). VMS is a diversified manufacturer of adaptive mobility equipment and precision-machined automotive components, serving OEM customers throughout the North American light-vehicle market. VMS operates five manufacturing facilities across Michigan and Indiana, employing approximately 1,800 people, and has established long-standing relationships with major OEMs and Tier 1 suppliers.
VMS is a portfolio company of Ridgepoint Capital Partners, LP ("Ridgepoint"), a Delaware limited partnership headquartered at 200 South Wacker Drive, Suite 3100, Chicago, Illinois 60606. Ridgepoint is a middle-market private equity firm focused on industrial and manufacturing investments, managing approximately $3.2 billion in committed capital across multiple fund vintages. VMS sits within Ridgepoint Capital Fund II, LP, a 2017-vintage fund with $1.1 billion in committed capital. The general partner entity responsible for the investment is Ridgepoint Capital GP II, LLC.
In FY2021, VMS reported revenue of $412.0 million and EBITDA of $51.8 million. VMS has a strong balance sheet and sufficient liquidity to consummate the acquisition of Meridian's assets. Ridgepoint acquired VMS in 2018 for an enterprise value of $385.0 million, consisting of $154.0 million in equity contributed by Ridgepoint and $231.0 million in senior secured debt provided by Lakeshore Commercial Lending, Inc.
VMS's strategic rationale for the acquisition of Meridian's assets is centered on vertical integration. VMS currently relies on third-party suppliers for a significant portion of its body-in-white structural stamping requirements. The acquisition of Meridian's three Ohio facilities — particularly the Elyria stamping plant with its large-tonnage press capabilities — would enable VMS to bring a substantial portion of its stamping requirements in-house, reducing supply chain risk, improving cost competitiveness, and enhancing VMS's overall product offering to its OEM customers. VMS's management team has identified significant operational synergies, including the consolidation of raw-material purchasing, the rationalization of freight and logistics costs, and the deployment of VMS's lean manufacturing and quality systems across the Meridian facilities.
The proposed acquisition will be funded through two sources. First, VMS will draw $30.0 million under an incremental term loan facility utilizing the accordion feature under its existing credit agreement with Lakeshore Commercial Lending, Inc. This incremental facility is subject to approval by the Lakeshore credit committee, and VMS's relationship manager, Christine Farber, has confirmed that the credit committee review process is underway and expected to be completed prior to the anticipated closing date. Second, Ridgepoint will contribute $33.5 million in equity to fund the balance of the purchase price and transaction costs. Ridgepoint has delivered a commitment letter confirming its willingness to fund the equity contribution, subject to customary conditions.
The VMS deal team responsible for the transaction includes Gerald "Gerry" Hartsfield, Chief Executive Officer of VMS, and Diana Rozhenko, Chief Financial Officer of VMS. The Ridgepoint deal team includes Tobias "Toby" Kessler, Managing Director, and Mariana Solano, Principal. Both teams have been actively involved in the due diligence process, the negotiation of the APA, and the preparation of integration plans for the Meridian facilities.
E. Procedural History
The following is a summary of the key events in the Chapter 11 case relevant to this Supplemental Brief:
February 14, 2022: The Debtor filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code in this Court, initiating Case No. 22-50318-JLG. The Debtor continued to operate its business and manage its properties as debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
February 18, 2022: The Debtor filed an application to retain Calloway Strauss Advisory, LLC as its financial advisor and investment banker to conduct the sale process and market the Debtor's assets.
February 22, 2022: This Court entered an interim order (Dkt. 47) authorizing the Debtor to obtain post-petition financing from GLICC in the form of the $15.0 million DIP revolving credit facility.
March 1, 2022: The United States Trustee appointed the Official Committee of Unsecured Creditors (the "Committee") in the Chapter 11 case. The Committee consists of three members: (i) Aldric Stamping & Tool Co., a trade creditor holding an approximate $3.8 million unsecured claim and serving as Committee chairperson; (ii) the Northern Basin Employee Benefits Trust, the holder of pension and OPEB claims totaling approximately $14.7 million; and (iii) Crestwood Logistics, Inc., a freight and logistics vendor holding an approximate $1.1 million unsecured claim. The Committee retained Pendergast McCabe & Lowe LLP as its legal counsel, with partner the Honorable Franklin Lowe (ret.) and associate Sandra Okoro handling the engagement. The Committee also retained Dunbar Phelps Group, LLC, with Managing Director Janet Hirsch, as its financial advisor.
March 4, 2022: This Court approved the retention of Calloway Strauss Advisory, LLC as the Debtor's financial advisor and investment banker (Dkt. 78).
March 18, 2022: This Court entered the final order (Dkt. 112) authorizing the DIP Facility on a final basis, approving the $15.0 million revolving credit facility on the terms previously described.
March 30, 2022: VMS and the Debtor executed the Asset Purchase Agreement, establishing VMS as the stalking-horse bidder for the Section 363 sale.
April 5, 2022: The Debtor filed its Motion to Approve Bid Procedures and Stalking-Horse Protections (Dkt. 156), seeking approval of the bid procedures, the break-up fee of $1.905 million, and the expense reimbursement cap of $750,000.
April 8, 2022: The Committee filed its Limited Objection to Stalking-Horse Bid Protections (Dkt. 172), contending that the proposed 3.0% break-up fee is excessive for an asset sale of this size and seeking a reduction to 2.0%. The Committee did not object to the bid procedures generally, the auction format, the sale timeline, or the expense reimbursement cap.
April 14, 2022: GLICC filed its Statement in Support of the Bid Procedures (Dkt. 185), through Whitfield & Chambers LLP, expressly supporting the proposed bid protections including the 3.0% break-up fee and the $750,000 expense reimbursement cap.
April 22, 2022: This Court conducted the Bid Procedures Hearing. At the hearing, the Court approved the Bid Procedures (Dkt. 198) governing the conduct of the auction and the sale of the Debtor's assets. However, the Court reserved ruling on the break-up fee pending supplemental briefing from all parties, directing the parties to file supplemental briefs in accordance with a schedule established at the hearing.
May 6, 2022: This Supplemental Brief is filed by VMS in accordance with the Court's briefing schedule.
III. ARGUMENT
A. Legal Standard for Approval of Bid Protections in Section 363 Sales
Section 363(b)(1) of the Bankruptcy Code authorizes a trustee or debtor-in-possession, after notice and a hearing, to use, sell, or lease property of the estate other than in the ordinary course of business. 11 U.S.C. Section 363(b)(1). A sale under Section 363 must be supported by a sound business justification and must be conducted in a manner that is fair, reasonable, and designed to maximize the value of the estate for the benefit of all stakeholders. See Fed. R. Bankr. P. 6004; N.D. Ohio LBR 6004-1.
Break-up fees and expense reimbursement provisions are a well-established and widely accepted feature of the Section 363 sale process. Their fundamental purpose is to compensate a stalking-horse bidder for the time, expense, and opportunity cost it incurs in negotiating and executing a binding purchase agreement, conducting extensive due diligence, and establishing a floor price against which competing bids may be measured at auction. Without such protections, prospective acquirers would have little incentive to invest the substantial resources necessary to serve as a stalking-horse bidder, as they would bear the risk that all such expenditures would be lost if a competing bidder submitted a higher offer at auction.
Courts evaluate break-up fees and expense reimbursement provisions under the business-judgment standard. The court must determine whether the proposed bid protections: (i) reflect a reasonable exercise of the debtor's business judgment; (ii) are reasonably necessary to preserve the value of the estate; and (iii) are in the best interests of the estate and its creditors. See In re Hupp Indus., Inc., 140 B.R. 191, 194 (Bankr. N.D. Ohio 1992); In re Integrated Defense Techs., Inc., 563 F.3d 1296, 1306 (11th Cir. 2009).
Some courts have analyzed break-up fees under the administrative expense standard of Section 503(b) of the Bankruptcy Code, asking whether the stalking-horse bidder's participation in the sale process provided an actual and necessary benefit to the estate. See In re Reliant Energy Channelview LP, 594 F.3d 200, 206-07 (3d Cir. 2010); In re Coltec Indus., Inc., 280 B.R. 655, 662 (Bankr. W.D.N.C. 2002). Under either standard, the result in this case is the same: VMS's stalking-horse bid and the associated bid protections confer a substantial and demonstrable benefit on the estate.
Under Sixth Circuit and Northern District of Ohio precedent, courts considering the reasonableness of stalking-horse bid protections in Section 363 sales evaluate the following factors:
(a) The relationship between the break-up fee and the proposed purchase price. Courts assess whether the fee, expressed as a percentage of the purchase price, falls within the range commonly approved in comparable transactions. A fee that is disproportionately large relative to the purchase price may warrant greater scrutiny.
(b) Whether the bid protections encourage or chill bidding. Bid protections should facilitate, not impede, the development of a competitive auction. A break-up fee that effectively deters potential competing bidders from participating in the auction may be found unreasonable.
(c) The degree to which the stalking-horse bidder has contributed to the value-maximization process. The court considers the stalking-horse bidder's investment in due diligence, its assumption of risk, and the value that the stalking-horse bid brings to the estate by establishing a price floor.
(d) The impact of the protections on the estate and unsecured creditors. The court considers whether the bid protections, if triggered, would disproportionately harm unsecured creditors or otherwise diminish estate value.
See In re Hupp Indus., 140 B.R. at 194-95; In re General Castings Corp., No. 17-50228, at 5-6 (Bankr. N.D. Ohio Oct. 12, 2017); In re Valley Forge Composites, Inc., No. 21-10044, at 4 (Bankr. N.D. Ohio June 22, 2021); see also In re Fisker Automotive Holdings, Inc., 510 B.R. 55, 60-61 (Bankr. D. Del. 2014); In re Gulf States Steel, Inc., 285 B.R. 497, 507-08 (Bankr. N.D. Ala. 2002); 3 Collier on Bankruptcy, para. 363.02[4] (16th ed. 2022).
Courts in the Sixth Circuit and throughout the country have routinely approved break-up fees in the range of 2.0% to 5.0% of the purchase price, and in some cases higher, depending on the facts and circumstances of the particular transaction. Factors that may support approval of a break-up fee at the higher end of the range include the complexity of the transaction, the distressed nature of the assets being sold, the limited number of potential bidders, the extent of the stalking-horse bidder's due diligence investment, and the importance of the stalking-horse bid in establishing a meaningful price floor. See In re Biltmore Precision Stamping, Inc., No. 20-42817 (Bankr. N.D. Ohio 2021) (approving 3.5% break-up fee in $42.0 million sale of automotive stamping operations); In re Valley Forge Composites, Inc., No. 21-10044 (Bankr. N.D. Ohio 2021) (approving 3.0% break-up fee plus expense reimbursement totaling 4.2% in $28.5 million sale of composites manufacturing assets); In re Argo Indus. Mfg., Inc., No. 18-33412 (Bankr. N.D. Ohio 2019) (approving 3.25% break-up fee in $51.0 million sale); In re General Castings Corp., No. 17-50228 (Bankr. N.D. Ohio 2017) (approving 3.0% break-up fee in $37.0 million sale of foundry operations); In re SR Acquisition Corp.*, No. 13-13656 (Bankr. N.D. Ohio 2014) (approving 4.0% break-up fee in sale of food-processing assets).
The case law is clear that there is no per se rule limiting break-up fees to any particular percentage. The inquiry is inherently fact-specific and requires the court to weigh the totality of the circumstances in each case. As demonstrated below, the proposed 3.0% break-up fee in this case is well supported by the facts and is squarely within the range approved by courts in comparable Section 363 sales of industrial and automotive supplier assets.
B. The Proposed Bid Protections Are Reasonable and Appropriate
1. The Break-Up Fee of $1.905 Million (3.0%) Is Within the Market Range. The proposed break-up fee of $1.905 million represents exactly 3.0% of the $63.5 million purchase price set forth in the APA. Combined with the expense reimbursement cap of $750,000, the total bid protections amount to $2.655 million, or approximately 4.18% of the purchase price. Both the break-up fee individually and the total bid protections collectively fall comfortably within the range of bid protections that bankruptcy courts have approved in Section 363 sales of comparable size and complexity.
A survey of recent Section 363 sales in the automotive and industrial supplier sector confirms that VMS's proposed bid protections are squarely within market norms. The following table summarizes approved bid protections in comparable transactions:
As the foregoing table demonstrates, the proposed break-up fee of 3.0% and total bid protections of 4.18% are entirely consistent with — and in several instances below — the protections approved in comparable automotive and industrial supplier Section 363 sales. Courts in the Northern District of Ohio have specifically approved break-up fees of 3.0% or more in multiple cases involving industrial manufacturing assets, including Biltmore Precision Stamping (3.5%), Valley Forge Composites (3.0%), Argo Industrial Manufacturing (3.25%), and General Castings Corp. (3.0%).
It is well recognized that break-up fees in the lower range of 1.5% to 2.0% are typically associated with larger transactions where the absolute dollar amount of the fee is sufficient to compensate the stalking-horse bidder even at a lower percentage. The ABI Commission to Study the Reform of Chapter 11 acknowledged in its Final Report (2014) that bid protections in the range of 3.0% to 4.0% are standard in middle-market transactions. For a transaction of this size — $63.5 million — a break-up fee of only 2.0% (as proposed by the Committee) would yield a fee of just $1.27 million, an amount that is demonstrably inadequate to compensate VMS for its investment in the transaction, as detailed below.
The Committee has not identified any case in this district or any other comparable jurisdiction in which a court reduced a 3.0% break-up fee to 2.0% in a Section 363 sale of this size and complexity. To the contrary, the weight of authority strongly supports approval of the proposed 3.0% break-up fee.
2. VMS Made a Substantial Due Diligence Investment. The reasonableness of the proposed bid protections must be evaluated against the backdrop of the substantial investment that VMS has made in this transaction. VMS's due diligence efforts were extensive, spanning multiple months and involving legal, financial, environmental, and operational workstreams across all three of the Debtor's Ohio manufacturing facilities, encompassing a combined footprint of approximately 493,000 square feet.
VMS's due diligence investment included the following principal components:
Environmental Due Diligence. VMS engaged Pinehurst Environmental Sciences, Inc. ("Pinehurst"), a nationally recognized environmental consulting firm, to conduct environmental assessments of all three of the Debtor's facilities. At the Elyria facility, Pinehurst conducted a comprehensive Phase II Environmental Site Assessment, including soil borings, groundwater monitoring well installation and sampling, and analysis of volatile organic compounds, semi-volatile organic compounds, and metals in soil and groundwater. The Phase II ESA identified approximately $1.4 million in estimated environmental remediation obligations, primarily associated with historical degreasing and plating operations conducted at the Elyria site in the 1980s and 1990s. VMS agreed to assume these environmental remediation obligations as part of the APA — an assumption that no other bidder has offered to make and that significantly enhanced the value of VMS's bid from the estate's perspective. Pinehurst also conducted Phase I Environmental Site Assessments at the Mansfield and Sandusky facilities, which did not identify recognized environmental conditions requiring further investigation.
Title and Survey Work. VMS engaged Commonwealth Abstract & Title Services, LLC ("Commonwealth") to conduct title searches, obtain title insurance commitments, and review existing surveys for all three of the Debtor's owned-in-fee real property parcels. The title work revealed certain encumbrances and easements that required analysis and resolution as part of the APA negotiation process.
Labor and Employment Analysis. VMS conducted a detailed analysis of the Debtor's workforce of approximately 620 employees across three facilities, including a comprehensive review of the collective bargaining agreement with UAW Local 2287 covering approximately 195 production workers at the Elyria plant. VMS engaged labor counsel to evaluate the terms and conditions of the existing CBA, assess potential successor employer obligations, and advise on the negotiation of a new collective bargaining agreement post-closing. This analysis was particularly complex given the UAW's interest in preserving jobs and benefits, and VMS's commitment to offering employment to at least 480 of the Debtor's employees.
Legal Due Diligence. VMS's counsel, Calderwood & Harkness LLP, conducted exhaustive legal due diligence encompassing all material aspects of the Debtor's business, including corporate organization and governance documents, real property records and zoning compliance, material contracts and customer agreements, intellectual property (including proprietary manufacturing processes and trade secrets), environmental regulatory compliance, labor and employment matters, pending and threatened litigation, tax matters (including state and local property tax obligations), and pension and OPEB liabilities. Calderwood & Harkness reviewed thousands of documents in the Debtor's virtual data room and participated in multiple due diligence sessions and management presentations.
APA Negotiation. The negotiation of the APA was protracted and complex. VMS and the Debtor (through their respective counsel, Calderwood & Harkness LLP and Hargrove Tillinghast LLP) exchanged and negotiated multiple drafts of the APA over a period of approximately six weeks, resolving a number of difficult issues, including the scope and allocation of assumed liabilities, the treatment of environmental remediation obligations, the calculation and allocation of cure costs, the terms of VMS's employment commitment, the representations and warranties framework, the closing conditions, and the termination provisions. The APA ultimately executed on March 30, 2022 represents the product of extensive, good-faith, arms'-length negotiation.
Financial and Operational Due Diligence. In addition to the foregoing, VMS conducted financial and operational due diligence on the Debtor's manufacturing operations, including analysis of production volumes, capacity utilization, equipment condition, capital expenditure requirements, customer programs, and integration planning. VMS's CFO, Diana Rozhenko, and the Ridgepoint deal team (Managing Director Tobias Kessler and Principal Mariana Solano) were directly involved in the financial analysis underlying the purchase price determination.
VMS's total estimated transaction costs — encompassing legal fees, environmental consulting, title and survey work, financial advisory services, transfer taxes, and related professional expenses — are approximately $4.2 million. These costs represent a significant at-risk expenditure that would be entirely unrecoverable absent the proposed bid protections if VMS is outbid at auction. The proposed break-up fee of $1.905 million would compensate VMS for only approximately 45% of its estimated transaction costs — a ratio that underscores the reasonableness and indeed the modesty of the proposed protections.
3. The Stalking-Horse Bid Provides Critical Benefits to the Estate. VMS's stalking-horse bid of $63.5 million provides critical and tangible benefits to the estate and all of its stakeholders. The stalking-horse framework is a cornerstone of the Section 363 sale process, and the benefits it provides are well recognized by courts and practitioners.
First and most fundamentally, VMS's stalking-horse bid establishes a price floor for the auction. The existence of a binding, fully committed bid at $63.5 million provides certainty to the estate that, at a minimum, it will receive that amount for its assets. This certainty is of enormous value in a distressed sale context, where the alternative — an open auction without a stalking-horse bid — carries the very real risk of depressed bidding and a sub-optimal outcome.
Second, the stalking-horse structure benefits all constituencies by attracting and encouraging competitive bidding. Potential bidders who might otherwise be reluctant to expend the resources necessary to evaluate and bid on the Debtor's assets are encouraged to participate when they see that a credible baseline bid has been established through a thorough and transparent process. The $1.0 million minimum overbid increment ensures that any competing bid will be at least $64.5 million, providing the estate with at least $1.0 million in incremental value over the stalking-horse bid.
Third, the marketing process conducted by Calloway Strauss demonstrated the limited market interest in the Debtor's assets, underscoring the difficulty of securing a committed stalking-horse bidder. Of the over forty parties contacted by Calloway Strauss, only VMS was willing to serve as a stalking-horse bidder. The only other party to express meaningful interest, Axton Industrial Holdings, LLC, submitted a non-binding indication of interest valuing the assets at only $56 million to $60 million — a range that is $3.5 million to $7.5 million below VMS's $63.5 million bid. Axton did not agree to serve as the stalking horse, did not agree to the proposed break-up fee, and did not execute a binding purchase agreement. Axton's unwillingness to commit reflects the complexity, risk, and uncertainty inherent in this transaction, including the environmental liabilities, union labor considerations, and the overall distressed condition of the Debtor's business.
Fourth, without the stalking-horse bid and its associated protections, the estate would face the very real risk of an auction without a committed bidder, potentially resulting in a fire-sale outcome that would further reduce recoveries for all stakeholders. GLICC, with $72.4 million in outstanding pre-petition secured debt, already faces an estimated recovery of only approximately 87.7% based on VMS's $63.5 million bid (before deducting DIP obligations and sale-related costs). A fire-sale outcome — at the level of Axton's indication of interest or lower — would significantly worsen GLICC's recovery and would eliminate any prospect of recovery for unsecured creditors.
The benefits that VMS's stalking-horse bid provides to the estate are precisely the type of contributions that bid protections are designed to compensate. VMS has invested substantial resources, assumed significant risk, and provided critical value to the sale process. The 3.0% break-up fee is fair and reasonable compensation for these contributions.
4. VMS Agreed to Assume Significant Liabilities. In evaluating the reasonableness of the proposed bid protections, the Court should also consider the totality of VMS's commitment under the APA, which extends well beyond the $58.5 million cash purchase price. VMS has agreed to assume substantial additional obligations that reduce the liabilities borne by the estate and enhance the overall recovery for all stakeholders.
Specifically, VMS has agreed to assume the following liabilities:
(a) Cure costs under assumed executory contracts and unexpired leases, estimated at approximately $5.0 million, which represent arrearages that must be paid to counterparties as a condition to the assumption and assignment of the Debtor's contracts under Section 365 of the Bankruptcy Code;
(b) Accrued employee wages and benefits, estimated at approximately $2.1 million, including unpaid wages, accrued vacation pay, and health insurance premiums for employees who receive and accept offers of employment from VMS;
(c) Environmental remediation obligations at the Elyria facility, estimated at approximately $1.4 million based on the Pinehurst Phase II ESA, relating to soil and groundwater contamination from historical manufacturing operations; and
(d) All post-closing liabilities arising from the operation of the Purchased Assets.
VMS has further committed to offering employment to at least 480 of the Debtor's approximately 620 employees, a commitment that preserves significant economic value for the estate's stakeholders and the communities in which the Debtor's facilities are located. This employment commitment was a key component of the APA negotiations and reflects VMS's genuine intent to operate the acquired facilities as a going concern.
VMS's willingness to assume these liabilities — particularly the approximately $1.4 million in environmental remediation obligations and the commitment to negotiate a new collective bargaining agreement with UAW Local 2287 following the closing — reflects precisely the kind of investment and risk assumption that stalking-horse bid protections are specifically designed to compensate. No other party has offered to assume these obligations. The environmental remediation liabilities alone represent a long-tail obligation with inherent uncertainty that VMS has nevertheless agreed to undertake as part of its overall bid. A bidder that assumes such liabilities and commits to preserving hundreds of jobs has earned the protection of a reasonable break-up fee.
C. The Bid Protections Do Not Chill Bidding
A central consideration in the Court's evaluation of bid protections is whether the protections would have a chilling effect on competitive bidding, thereby defeating the value-maximization objective of the Section 363 sale process. See In re Fisker Automotive Holdings, 510 B.R. at 61; In re Neff Corp., No. 10-12610, at *6 (Bankr. S.D.N.Y. Jan. 28, 2010). The proposed bid protections in this case do not chill bidding; to the contrary, they are specifically structured to promote and encourage competitive participation in the auction.
The minimum overbid increment of $1.0 million ensures that any competing bidder must offer at least $64.5 million — an amount that exceeds VMS's stalking-horse bid by $1.0 million and exceeds VMS's bid plus the total bid protections ($63.5 million + $2.655 million = $66.155 million) by a negative margin only if the overbid does not also exceed the break-up fee level. To state it differently, the incremental value that the estate would receive from a competing bid at the minimum overbid level ($64.5 million) would be $1.0 million, against which the estate would pay $2.655 million in bid protections, resulting in a net cost of $1.655 million. However, any competing bidder capable of offering $64.5 million would almost certainly be willing to bid higher in a competitive auction environment, and subsequent bid increments would rapidly offset and exceed the cost of the bid protections. The bid protections thus do not create an insurmountable barrier to competitive bidding.
Moreover, the break-up fee and expense reimbursement are payable only upon the occurrence of specified triggering events — specifically, if VMS is outbid at the auction or if the Debtor terminates the APA under certain enumerated circumstances set forth in the APA. The bid protections do not deter competitive bidding in any way. Rather, they establish a transparent and quantifiable cost of displacing the stalking-horse bidder — a cost that any serious competitor can easily evaluate and incorporate into its bidding strategy and financial model.
The limited interest demonstrated during the Calloway Strauss marketing process further confirms that the bid protections have not chilled bidding. The only party other than VMS to express meaningful interest in the Debtor's assets was Axton Industrial Holdings, LLC, whose non-binding indication of interest valued the assets at $56 million to $60 million — well below VMS's stalking-horse bid of $63.5 million. Axton's decision not to serve as the stalking horse was not attributable to the proposed bid protections; rather, Axton's own concerns about the complexity and risk of the transaction — including the environmental liabilities, the union labor considerations, and the overall distressed condition of the Debtor's business — explain its unwillingness to commit to a binding offer. Axton has not been precluded from participating in the auction and remains free to submit a qualifying competing bid.
It is well settled that the existence of a stalking-horse bid with reasonable bid protections in fact encourages, rather than discourages, competitive bidding. Potential bidders are more likely to invest the time and resources necessary to participate in an auction when they have confidence that there is a credible baseline bid, a fair and transparent process administered under court supervision, and a committed counterparty willing to close the transaction if no higher bid is received. See In re Delphi Corp., 2009 WL 2482146, at 4 (Bankr. S.D.N.Y. Aug. 6, 2009); In re Valley Forge Composites, No. 21-10044, at 5 (Bankr. N.D. Ohio June 22, 2021); In re Biltmore Precision Stamping, No. 20-42817, at *4 (Bankr. N.D. Ohio 2021). The proposed bid protections serve this salutary function and should be approved.
D. The Committee's Objection Should Be Overruled
1. The Committee's Argument That 3.0% Is "Excessive" Is Unsupported. The Committee's Limited Objection, filed on April 8, 2022 (Dkt. 172), asserts in conclusory fashion that a 3.0% break-up fee is "excessive" for an asset sale of this size and seeks a reduction to 2.0% of the purchase price. The Committee's objection, however, provides no meaningful legal or factual support for its position.
The Committee cites no controlling authority — from this Court, the Northern District of Ohio, or the Sixth Circuit — for the proposition that a 3.0% break-up fee is per se unreasonable in a $63.5 million Section 363 sale. Nor could it, as no such authority exists. As demonstrated in detail in Section III.B.1 above, courts in this jurisdiction and throughout the country have routinely approved break-up fees of 3.0% or higher in transactions of comparable or smaller size. In this very district, break-up fees of 3.0% were approved in Valley Forge Composites ($28.5 million purchase price) and General Castings Corp. ($37.0 million purchase price), and a break-up fee of 3.5% was approved in Biltmore Precision Stamping ($42.0 million purchase price). In SR Acquisition Corp.*, this Court approved a break-up fee of 4.0%. The Committee's suggestion that 3.0% exceeds the bounds of reasonableness is simply inconsistent with the established body of case law in this district.
The Committee's preferred alternative — a 2.0% fee yielding a break-up fee of only $1.27 million — would be demonstrably inadequate to compensate VMS for its out-of-pocket expenditures and opportunity costs. VMS's estimated total transaction costs are approximately $4.2 million. A break-up fee of $1.27 million would reimburse VMS for approximately 30% of its out-of-pocket costs — a result that would be both commercially unreasonable and inconsistent with the purpose and function of stalking-horse bid protections. Even when combined with the $750,000 expense reimbursement cap, total protections at a 2.0% break-up fee level would be only $2.02 million, or approximately 48% of VMS's total estimated transaction costs. The inadequacy of this alternative underscores the reasonableness of the proposed 3.0% fee.
2. The Bid Protections Are Consistent with the Interests of Unsecured Creditors. The Committee's stated concern is the impact of the proposed bid protections on recoveries for unsecured creditors. While VMS respects the Committee's fiduciary role in advocating for the interests of the unsecured creditor constituency, the Committee's concern is misplaced in the context of this case.
The Debtor's balance sheet reflects a deficiency of approximately $42.3 million between total liabilities ($129.6 million) and total assets ($87.3 million at book value). GLICC's pre-petition secured claim of $72.4 million alone exceeds the $63.5 million purchase price by approximately $8.9 million. When the DIP Facility obligations and other administrative and priority claims are added to the secured claim, the aggregate amount of senior claims far exceeds the expected sale proceeds. As a result, unsecured creditors — holding claims estimated at approximately $57.2 million — are unlikely to receive any distribution from the sale proceeds regardless of whether the break-up fee is set at 2.0% or 3.0%.
To put the difference in concrete terms: the Committee seeks a reduction in the break-up fee from $1.905 million to $1.27 million — a difference of $635,000. Even if this $635,000 were somehow preserved for the benefit of the estate (which would occur only in the event VMS is outbid), the entirety of that amount would be absorbed by GLICC's secured claim, with no incremental benefit flowing to unsecured creditors. The Committee's objection thus seeks to deprive VMS of $635,000 in earned compensation for a hypothetical benefit that, given the capital structure of the estate, would accrue exclusively to GLICC — the very party that has affirmatively supported the proposed 3.0% break-up fee.
Furthermore, the bid protections would reduce estate value only in the event VMS is outbid at auction. In that scenario, by definition, the winning bid will exceed VMS's stalking-horse bid by at least the $1.0 million minimum overbid increment, and likely by a greater amount as a result of competitive bidding dynamics. The incremental value generated by a higher bid would at least partially — and likely fully — offset the cost of the bid protections.
The Committee's financial advisor, Dunbar Phelps Group, LLC (Managing Director Janet Hirsch), has not submitted any analysis — whether in the form of a declaration, an expert report, or even an informal estimate — demonstrating that a reduction in the break-up fee from 3.0% to 2.0% would materially improve unsecured creditor recoveries. The absence of any such analysis is telling and reflects the reality that, given the capital structure of this estate, the difference between a 2.0% and 3.0% break-up fee has no practical impact on unsecured creditor recoveries.
GLICC, the party with by far the greatest economic stake in the outcome of the sale — holding $72.4 million in secured claims that will be impaired under any realistic scenario — has affirmatively supported the proposed bid protections. GLICC's Statement in Support, filed through its counsel, Whitfield & Chambers LLP, on April 14, 2022 (Dkt. 185), expressly endorses both the 3.0% break-up fee and the $750,000 expense reimbursement cap. GLICC's support reflects the informed business judgment of the party that stands to bear the actual economic cost of the bid protections if they are triggered, and it should be accorded significant weight by this Court.
3. Reducing the Break-Up Fee Would Undermine the Sale Process. Beyond the legal and factual deficiencies in the Committee's position, the practical consequences of reducing the break-up fee would be highly detrimental to the sale process and, ultimately, to the very unsecured creditors the Committee purports to represent.
Reducing the break-up fee after VMS has committed to serve as the stalking-horse bidder on the basis of the negotiated bid protections would send a profoundly negative signal to potential stalking-horse bidders — in this case and in future cases before this Court. If stalking-horse bidders cannot rely on the bid protections they negotiate with a debtor, they will be less willing to invest the substantial time, resources, and capital necessary to serve as a stalking horse. The result would be fewer stalking-horse bids, lower price floors, and reduced recoveries for estates and their creditors. The policy implications of the Committee's position extend well beyond this case.
VMS's commitment to serve as the stalking-horse bidder for Meridian's assets was expressly contingent upon the proposed bid protections as negotiated. VMS invested months of effort and millions of dollars in due diligence, legal analysis, environmental assessment, financial modeling, and APA negotiation in reliance on the expectation that, if outbid, it would receive the negotiated break-up fee and expense reimbursement. A material reduction in those protections — from 3.0% to 2.0%, a reduction of more than one-third — would potentially undermine VMS's willingness to maintain its stalking-horse position. While VMS is not threatening to withdraw its bid, VMS is entitled to the benefit of the bargain it struck with the Debtor, and a unilateral reduction imposed over VMS's objection would fundamentally alter the economics of VMS's participation.
The Debtor itself, acting through its experienced management team and its counsel, Hargrove Tillinghast LLP (partner Marcus Tillinghast and associate Priya Venkatesh), agreed to the proposed bid protections as part of the negotiated APA. The Debtor filed its Motion to Approve Bid Procedures and Stalking-Horse Protections on April 5, 2022 (Dkt. 156), incorporating the 3.0% break-up fee and $750,000 expense reimbursement cap as integral terms of the proposed bid procedures. The Debtor's decision to agree to these terms reflects the exercise of its informed business judgment — a judgment that is entitled to deference under the business-judgment standard applicable to Section 363 sales. The Debtor's CEO, Brenda Wisnicki, an experienced turnaround professional, and the Debtor's financial advisor, Calloway Strauss Advisory, LLC (Managing Director Elliot Calloway), determined that the proposed bid protections were necessary and appropriate to secure VMS's stalking-horse bid and to maximize value for the estate. This Court should respect and defer to that judgment.
E. The Expense Reimbursement Cap of $750,000 Is Reasonable
While the Committee's Limited Objection is directed solely at the break-up fee and does not specifically challenge the expense reimbursement cap, VMS addresses the expense reimbursement provision here for completeness and to provide the Court with a full record on all aspects of the proposed bid protections.
The $750,000 expense reimbursement cap provides for the reimbursement of VMS's actual, documented, out-of-pocket expenses incurred in connection with the negotiation, execution, and pursuit of the transaction. Covered expenses include, without limitation, legal fees, environmental consulting fees (Pinehurst Environmental Sciences, Inc.), title and survey costs (Commonwealth Abstract & Title Services, LLC), and related professional expenses