IN THE UNITED STATES BANKRUPTCY COURT FOR THE …cases.gcginc.com/hii/pdflib/347_60070.pdf · 11...

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IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS

VICTORIA DIVISION In re: § Chapter 11 § HII TECHNOLOGIES, INC., et al.1 § 15-60070 (DRJ) Debtors § (Jointly Administered)

EXPEDITED MOTION TO (1) ASSUME AND AMEND OFFICE LEASE, (2) MARKET AND SELL OFFICE FURNITURE AND RELATED DE MINIMIS ASSETS

THIS MOTION SEEKS AN ORDER THAT MAY ADVERSELY AFFECT YOU. IF YOU OPPOSE THE MOTION, YOU SHOULD IMMEDIATELY CONTACT THE MOVING PARTY TO RESOLVE THE DISPUTE. IF YOU AND THE MOVING PARTY CANNOT AGREE, YOU MUST FILE A RESPONSE AND SEND A COPY TO THE MOVING PARTY. YOU MUST FILE AND SERVE YOUR RESPONSE WITHIN 21 DAYS OF THE DATE THIS WAS SERVED ON YOU. YOUR RESPONSE MUST STATE WHY THE MOTION SHOULD NOT BE GRANTED. IF YOU DO NOT FILE A TIMELY RESPONSE, THE RELIEF MAY BE GRANTED WITHOUT FURTHER NOTICE TO YOU. IF YOU OPPOSE THE MOTION AND HAVE NOT REACHED AN AGREEMENT, YOU MUST ATTEND THE HEARING. UNLESS THE PARTIES AGREE OTHERWISE, THE COURT MAY CONSIDER EVIDENCE AT THE HEARING AND MAY DECIDE THE MOTION AT THE HEARING.

EXPEDITED RELIEF HAS BEEN REQUESTED. IF THE COURT CONSIDERS THE MOTION ON AN EMERGENCY BASIS, THEN YOU WILL HAVE LESS THAN 21 DAYS TO ANSWER. IF YOU OBJECT TO THE REQUESTED RELIEF OR IF YOU BELIEVE THAT THE EMERGENCY CONSIDERATION IS NOT WARRANTED; YOU SHOULD FILE AN IMMEDIATE RESPONSE. REPRESENTED PARTIES SHOULD ACT THROUGH THEIR ATTORNEY. A HEARING WILL BE HELD FEBRUARY 1, 2015 AT 2:30 P.M. AT 515 RUSK, COURTROOM 400, HOUSTON, TEXAS.

To the Honorable David R. Jones, United State Bankruptcy Judge:

HII Technologies, Inc. and its subsidiaries, as debtors and debtors in possession in these

chapter 11 cases (collectively, the “Debtors”), file this expedited Motion seeking authority to

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s tax identification number,

are: (i) Apache Energy Services, LLC (4404); (ii) Aqua Handling of Texas, LLC (4480); (iii) HII Technologies, Inc. (3686); (iv) Sage Power Solutions, Inc. fka KMHVC, Inc. (1210); and (v) Hamilton Investment Group, Inc. (0150).

Case 15-60070 Document 347 Filed in TXSB on 01/22/16 of 8

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assume and amend a lease and sell certain de minimis office furniture, and would respectfully

show the Court as follows:

SUMMARY OF RELIEF REQUESTED

1. The Debtors seek to assume a lease (the “Lease”)2 with Ten Voss, Ltd

(“Lessor”), for office space located at 8588 Katy Freeway in Houston, Texas (the “Property”)

pursuant to 11 U.S.C. § 365 and amend the same. The assumed lease would be consensually

modified to 1) reduce rent to a flat $8,762.88 2) modify the lease term to a month-to-month term

and 3) subordinate claims to the landlord’s lenders.

2. The Debtors also have certain office furniture and office equipment (the “Office

Furniture”) located at the Property. The Debtors seek an order establishing procedures to

dispose of these assets and de minimis assets without the need for further motion and order of

this Court.

3. There is a need for expedited consideration because the Debtors are about to

enter into the plan process of the cases and the existing lease will otherwise be deemed rejected

as of February 1, 2016.

BACKGROUND

4. On September 18, 2015, the Debtors each filed voluntary petitions under chapter

11 of title 11, United States Code.

5. The Debtors’ cases are jointly administered, and they continue to administer their

assets as debtors-in-possession pursuant to sections 1107 and 1108 of the Bankruptcy Code.

2 See Exhibit A attached hereto.


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LEGAL BASIS

6. This Court has jurisdiction to consider this Motion under 28 U.S.C. §§ 157 and

1334, and venue is proper under 28 U.S.C. §§ 1408 and 1409. This is a core proceeding under

28 U.S.C. § 157(b).

7. The statutory bases for the relief requested are sections 105, 363, and 365 of title

11 of the United States Code (the “Bankruptcy Code”) and Rules 2002 and 6004 of the Federal

Rules of Bankruptcy Procedure.

8. Bankruptcy Code section 365 authorizes a debtor to assume or reject lease leases

and executory contracts. See 11 U.S.C. § 365. The Debtors may enter into post-petition leases

when authorized by the Court under 11 U.S.C. § 363.

9. Section 363(b)(1) of the Bankruptcy Code permits a debtor to use property of the

estate “other than in the ordinary course of business” after notice and a hearing. 11 U.S.C.

§ 363(b)(1). Courts authorize the use and sale of estate property outside the ordinary course of

business so long as there is a legitimate business justification. In re Martin, 91 F.3d 389, 395

(3d Cir. 1996) (citing In re Schipner, 933 F.2d 513, 515 (7th Cir. 1991)); Montgomery Ward

Holding Corp., 242 B.R. 147, 153 (D. Del. 1999); In re Delaware Hudson Ry. Co., 124 B.R.

169, 179 (Bankr. D. Del. 1991).

10. The proposed amendment to the Lease is one page. As part of the original lease,

the Debtors will also execute a subordination agreement with the landlord in order to comply

with the Landlord’s commercial lending arrangements and covenants.

11. Section 105(a) of the Bankruptcy Code empowers a court to “issue any order,

process, or judgment that is necessary to carry out the provisions of [the Bankruptcy Code].”


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11 U.S.C. § 105(a). Further, Section 105(d) of the Bankruptcy Code provides, in pertinent part,

that:

The court, on its own motion or on the request of a party in interest . . . 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.

11 U.S.C. § 105(d)(2).

11 Once a debtor articulates a valid business justification for a use of estate property

under Section 363(b)(1), a court reviews the debtor’s request under the “business judgment

rule,” which triggers “a presumption that in making a business decision the directors of a

corporation acted on an informed basis, in good faith and in the honest belief that the action was

in the best interests of the company.” In re Integrated Resources, Inc., 147 B.R. 650, 656

(S.D.N.Y. 1992) quoting Smith v. Van Gorkurn, 488 A.2d 858, 872 (Del. 1985)); see also

Institutional Creditors of Cont’l Air Lines Inc. v. Cont’l Air Lines Inc. (In re Cont’l Air Lines

Inc.), 780 F.2d 1223, 1226 (5th Cir. 1986).

12 The business judgment rule has vitality in chapter 11 cases and shields a debtor’s

management or a debtor from judicial second guessing. See In re Myers, 91 F.3d 389, 395 (3d

Cir. 1996) (noting that “under normal circumstances the court would defer to the Debtors’

judgment so long as there is a legitimate business justification”); Montgomery Ward, 242 B.R. at

153.

13 The Debtors believe that the notice procedures for the De Minimis Sale

procedures complies with Bankruptcy Rules 2002 and 6004, and are reasonably calculated to

provide due, adequate and timely notice to all parties in interest the disposition of smaller asset

lots.


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14 The Debtors also believe that the De Minimis Sale procedures provide a benefit

to the estates by allowing the Debtors to gain additional value for the estates and their creditors

without incurring the transactional costs associated with a more traditional sale under Section

363 of the Bankruptcy Code. Rule 6003 is not implicated as no sale would occur before the 21st

day after the petition.

15 Further, under the proposed De Minimis Sale procedures, the estates stand to

capture additional benefits by selling smaller unwanted assets subject to such procedures at a

price which provides economic value to the estate, which would not otherwise be beneficial if

the Debtors were required to incur the administrative expense of filing a standard sale motion

and holding a hearing on the proposed sale.

PROPOSED SALE OF OFFICE FURNITURE

16 There are approximately 6-10 offices in the Debtors’ leased space, along with

coffee makers, conference room tables, chairs, phones, computers (except financial and

corporate data, which is preserved and not sold), and miscellaneous office equipment. The

office equipment is in good repair. It is bulky and difficult to move and store. The Debtors

asked an auctioneer to consider the lot, but it was too small for him to move and sell

economically.

17 The CRO has sold office furniture before and she has had success receiving

reasonable offers from the public using online or print advertisements. The CRO has her own

offices and does not need the furniture.

18 The Debtors need to market and sell the Office Furniture for a reasonable price.

The CRO may move or store the Office Furniture if she believes doing so would fetch a higher

price. The CRO believes that marketing and sale of the Office Furniture is of benefit to the


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estates because (i) there is only one employee, the CEO, and he does not need the Office

Furniture; (ii) the Debtors’ business does not require the same space since it has sold many of its

assets; (iii) the lease will be abandoned at some time in the future near confirmation; and (iv) the

sale will relieve the Debtors of any further obligation to store the Office Furniture.

19 The CRO proposes to market and sell the Office Furniture by customary means,

by advertisements online or in print. If sold to anyone except the landlord, the Debtors would

only accept cash or the equivalent for the sale. The sale would be in parcels or as an entirety. If

sold to the landlord, the Office Furniture may be traded for administrative expenses as if it were

cash.

PROPOSED DE MINIMIS SALE PROCEDURES

20 In addition to the Office Furniture, the Debtors have equipment and smaller

assets that they no longer need and that are not necessary for a successful reorganization. The

Debtors propose to sell these de minimis assets on an ongoing piecemeal basis for the best and

highest price. The Debtors receive occasional offers for odd lots of property; it is not

economical to file a section 363 motion—with its attendant delays—for each single lot sold.

These sales are unrelated to the Debtors’ reorganization.

21 If a proposed sale is equal to or less than $4,000.00 (each a “De Minimis Sale”),

the Debtors request that the Court authorize the Debtors to close such De Minimis Sales under

the following procedures:

a. Upon reaching an agreement for the sale of assets for less than $4,000, the Debtors and the proposed purchaser will enter into a sale agreement.

b. Upon execution of the sale agreement, the Debtors will file with the Court a notice proposing approval of the sale.

c. The notice shall include:

i. a copy of the sale agreement;


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ii. a declaration from the Debtors setting forth the factual predicate describing the benefits of the proposed sale; and

iii. a proposed form of order approving the sale.

d. The Debtors shall serve the notice on the parties listed on the Official Service List.

e. Parties shall have five (5) days from the date of service of the notice to serve the Debtors with a written objection to the proposed sale.

f. If the Debtors do not receive timely objection to the proposed sale, the Debtors shall file a notice of no objection and will have authority to close the proposed De Minimis Sale free and clear of claims without further approval of the Court. The Debtors shall file a notice with the Court with the monthly operating report of all De Minimis Sales completed within the reporting period setting forth the terms of such sales.

g. If a timely objection is received, the Debtors shall schedule an expedited hearing with the Court seeking approval of the proposed De Minimis Sale.

22 The Debtors respectfully submit to the Court that the above facts represent sound

business justifications for assuming and amending the Lease and selling the Office Furniture and

other assets; such decisions are likewise in the best interests of the Debtors, creditors, and equity

holders.


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WHEREFORE, the Debtors respectfully request that the Court (i) grant the Motion; (ii)

authorize the Debtors to assume and amend the Lease substantially in the form of Exhibit A; (iii)

authorize the Debtors to sell the Office Furniture and related assets using customary means; (iii)

establish the requested De Minimis Sale procedures; and (iv) grant such other and further relief

as is just and proper.

Dated: January 22, 2016. MCKOOL SMITH, P.C.

By: /s/Hugh M. Ray, III

Hugh M. Ray, III State Bar No. 24004246 Christopher D. Johnson State Bar No. 24012913 Benjamin W. Hugon State Bar No. 24078702 600 Travis, Suite 7000 Houston, Texas 77002 Tel: 713-485-7300 Fax: 713-485-7344

Counsel for Debtors-in-Possession

CERTIFICATE OF SERVICE

The undersigned certifies that on January 22, 2016, a true and correct copy of this document was served via the ECF system to the parties on the ECF service list, including the United States Trustee, and the pleading is being delivered to the Noticing Agent for service upon the parties on the Master Service List. Additionally, a copy of this has been sent to the Landlord at the address on the attached Lease.

/s/Hugh M. Ray, III Hugh M. Ray, III


McKool 1148628v1

First Amendment to Office Building Lease

This FIRST AMENDMENT TO OFFICE BUILDING LEASE (this “First Amendment”) is made and entered into as of the 1st day of February, 2016 by and between TEN-VOSS, LTD (“Landlord”), and HII Technologies, Inc. (“Tenant”, and collectively with Landlord, the “Parties”).

RECITALS

Whereas, on July 23, 2014, the Parties entered into that certain Office Building Lease (the “Original Lease”), whereby Landlord leased to Tenant approximately 4,608 square feet of office space located at 8588 Katy Freeway, Suite 430, Houston, Texas 77024 9the “Premises”); and

Whereas, the term of the Original Lease ended on or about August 31, 2019; and

Whereas, on September 18, 2015, Tenant commenced a voluntary chapter 11 bankruptcy case in the Southern District of Texas (the “Bankruptcy Case”) and currently operates is business as a debtor in possession under the director of Loretta Cross, its Chief Restructuring Officer; and

Whereas, Tenant and Landlord have agreed to amend the Term of the Original Lease to allow Tenant to lease the Premises on a month-to-month term, beginning February 1, 2016.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained herein and in the Original Lease, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1. Paragraph 4 of the Original Lease is deleted and replaced with the following:

“Beginning on the date of this First Amendment, the Term of this lease shall be month-to-month, until terminated on the first day of the month after 30 days’ written notice by either party.”

2. Paragraph 5 is deleted and replace with the following:

“Rent shall be the sum of $8,762.88 each month during the Term of this lease.”

This First Amendment is conditioned upon and subject to approval of the Bankruptcy Court. Tenant intends to seek an order of the Bankruptcy Court approving the assumption of the Original Lease, as amended by this First Amendment, without claims for rejection or cure.

Case 15-60070 Document 347-1 Filed in TXSB on 01/22/16 Page 1 of 42

njones

Typewritten Text

EXHIBIT "A"

McKool 1148628v1

This First Amendment has been executed by Landlord and Tenant as of the __ day of ___________, 2016.

TENANT:

HII TECHNOLOGIES, INC.

By:

Name: Loretta Cross

Title: Chief Restructuring Officer

LANDLORD:

TEN-VOSS, LTD.

By:

Name:

Title:


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IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS

VICTORIA DIVISION In re: § Chapter 11 § HII TECHNOLOGIES, INC., et al.1 § 15-60070 (DRJ) Debtors § (Jointly Administered)

ORDER ON EXPEDITED MOTION TO (1) ASSUME AND AMEND OFFICE LEASE, (2) MARKET AND SELL OFFICE FURNITURE AND RELATED DE MINIMIS ASSETS

(Refers to Docket No. _____)

ON CONSIDERATION of the Expedited Motion for Order Authorizing Sale of Athletic

Equipment and Authorizing De Minimis Sale Procedures (the “Motion”)2 filed by the Debtor,

Lon Morris College, any responses or objections thereto, and the argument of counsel, if any, the

Court finds the Motion to be well-taken and should be granted. It is therefore:

ORDERED that the Motion is GRANTED; and, it is further

ORDERED that the Debtors are authorized to amend and assume the Lease with Ten

Voss, Ltd (“Lessor”), for office space located at 8588 Katy Freeway in Houston, Texas (the

“Property”) as proposed in the Motion; and it is further

ORDERED that the Debtors are authorized to market and sell the Office Furniture

(including related equipment and assets) as set forth in the Motion; and it is further

ORDERED that, except as the Court may otherwise order, the following procedures (the

“De Minimis Sale Procedures”) applicable to proposed sales of assets where the total

consideration for such sale is equal to or less than $5,000.00 (the “De Minimis Assets” and the

sales thereof “De Minimis Sales”) are hereby APPROVED and ESTABLISHED as follows:

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s tax identification number,

are: (i) Apache Energy Services, LLC (4404); (ii) Aqua Handling of Texas, LLC (4480); (iii) HII Technologies, Inc. (3686); (iv) Sage Power Solutions, Inc. fka KMHVC, Inc. (1210); and (v) Hamilton Investment Group, Inc. (0150).

2 Capitalized terms not otherwise defined herein shall have the meaning assigned to them in the Motion.


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a. Upon reaching an agreement for the sale of assets for less than $5,000, the Debtors and the proposed purchaser will enter into a sale agreement.

b. Upon execution of the sale agreement, the Debtors will file with the Court a notice proposing approval of the sale.

c. The notice shall include:

i. a copy of the sale agreement;

ii. a declaration from the Debtors setting forth the factual predicate describing the benefits of the proposed sale; and

iii. a proposed form of order approving the sale.

d. The Debtors shall serve the notice on the parties listed on the Official Service List.

e. Parties shall have five (5) days from the date of service of the notice to serve the Debtors with a written objection to the proposed sale.

f. If the Debtors do not receive timely objection to the proposed sale, the Debtors shall file a notice of no objection and will have authority to close the proposed De Minimis Sale free and clear of claims without further approval of the Court. The Debtors shall file a notice with the Court with the monthly operating report of all De Minimis Sales completed within the reporting period setting forth the terms of such sales.

g. If a timely objection is received, the Debtors shall schedule an expedited hearing with the Court seeking approval of the proposed De Minimis Sale.

SIGNED: ___________________, 2016

__________________________________________ THE HONORABLE DAVID JONES UNITED STATES BANKRUPTCY JUDGE


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