application of debtors pursuant to 11 u.s.c. § 327(a) …...1 in the united states bankruptcy court...
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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re: APEX LINEN SERVICE LLC, et al.,1 Debtors.
) ) ) ) ) ) )
Chapter 11 Case No. 20-11774 (LSS) (Jointly Administered) Hearing Date: August 7, 2020 at 2:00 p.m. (EDT) Obj. Deadline: July 31, 2020 at 4:00 p.m. (EDT)
APPLICATION OF DEBTORS PURSUANT TO 11 U.S.C. § 327(a) AND 328 FOR
AUTHORITY TO EMPLOY AND RETAIN FOCALPOINT SECURITIES, LLC AS INVESTMENT BANKER, NUNC PRO TUNC TO JULY 10, 2020
The above-captioned debtors and debtors-in-possession (the “Debtors”) file this
application (the “Application”) seeking entry of an order, substantially in the form attached hereto
as Exhibit A, pursuant to sections 327(a) and 328(a) of title 11 of the United States Code (the
“Bankruptcy Code”), Rule 2014(a) of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy
Rules”), and Rule 2014-1 of the Local Rules of Bankruptcy Practice and Procedure (the “Local
Rules”) of the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy
Court”), authorizing the Debtors to retain and employ FocalPoint Securities LLC (“FocalPoint”)
as its investment banker, nunc pro tunc to July 10, 2020 (the “Retention Date”).
In support of this Application, the Debtors have relied upon (i) the Declaration of Michael
Fixler in Support of Application of Debtors Pursuant to 11 U.S.C. §327(a) and 328 for Authority
to Employ and Retain FocalPoint Securities LLC as Investment Banker, Nunc pro Tunc to July 10,
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, as applicable are: Apex Linen Service LLC (9075), Highland Apex Holdings LLC (0537), Highland Avenue Capital Partners LLC (2825), Highland Apex GP LLC (9246), and Highland Apex Management LLC (5476). The location of the Debtors’ corporate headquarters, and the business address for Apex Linen Service LLC is 6375 S. Arville Street, Las Vegas, NV 89118. The business address for all other Debtors is 205 Pier Avenue, Suite 102, Hermosa Beach, CA 90254.
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2020 (the “Fixler Declaration”), a copy of which is attached hereto as Exhibit B. In further support
of this Application, the Debtors respectfully state as follows:
JURISDICTION
1. This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. §§ 157 and
1334, and the Amended Standing Order of Reference from the United States District Court for the
District of Delaware, dated February 29, 2012. This is a core proceeding pursuant to 28 U.S.C.
§ 157(b)(2), and the Debtors consents, pursuant to Rule 9013-1(f), to the entry of a final order by
the Court in connection with this Application to the extent that it is later determined that the Court,
absent consent of the parties, cannot enter final orders or judgments in connection herewith
consistent with Article III of the United States Constitution.
2. Venue is proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409.
3. The statutory predicates for the relief requested herein are sections 327(a), 328 and
1107 of the Bankruptcy Code.
BACKGROUND
4. On July 6, 2020 (the “Petition Date”), each of the Debtors commenced with this
Court a voluntary case under chapter 11 of the Bankruptcy Code (the “Chapter 11 Cases”). The
Debtors are authorized to continue operating their businesses as debtors-in-possession pursuant to
sections 1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner, or statutory committee
of creditors has been appointed in the Chapter 11 Cases.
5. Additional information regarding the Debtors’ businesses and the circumstances
leading to the commencement of the Chapter 11 Cases is set forth in the Declaration of Christopher
Bryan In Support of First Day Motions [Docket No. 25] (the “Bryan Declaration”), filed on July
9, 2020 and incorporated herein by reference.
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6. Western Alliance Bank, Breakwater Credit Opportunities Fund I, LP, Breakwater
Credit Opportunities Fund II, LP and United Insurance Company of America (collectively, the
“Lenders”) are the Debtors’ lenders and secured creditors. Western Alliance Bank asserts that it is
currently owed approximately $6,711,000 from a revolving loan. Additionally, Western Alliance
Bank alleges that it was owed $3,000,000 as of July 1, 2020 on account of a term loan it has
extended to the Debtors. The Debtors also entered into term loans with Breakwater Credit
Opportunities Fund I, LP totaling $1,000,000, Breakwater Credit Opportunities Fund II, LP
totaling $3,000,000 and United Insurance Company of America, totaling $10,000,000. Breakwater
Management LP serves as the collateral agent and administrative agent for the Lenders regarding
the term loans and the revolving loan. The total amount of the term loans asserted by the Lenders
is $17,000,000, and thus the term loans and the revolver are asserted to be in the aggregate amount
of approximately $23,711,000. The Debtors were current on payments to the Lenders through June
2020. The Lenders assert an interest in the Debtors’ Cash Collateral.
7. The Debtors do not have sufficient unencumbered cash and need liquidity to
operate their business and pay operating expenses critical to the business, including utilities,
payroll, insurance, taxes, and repairs and maintenance. The inability to obtain a debtor-in-
possession loan will likely result in the shutdown of the Debtors’ business operations. The value
of the Debtors as a going concern is significantly greater than the value of its assets in a liquidation.
8. Pre-petition, the Debtors began negotiations with the Lenders regarding funding,
and those negotiations continued post-petition. The Debtors and the Lenders agreed to the post-
petition use of cash collateral (to the extent the Lenders have an interest in same) solely to permit
the Debtors to make payroll. See Stipulated Interim Order Authorizing Use of Cash Collateral and
Scheduling Further Interim Hearing [Docket No. 30].
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9. Although negotiations continue with the Lenders, the Debtors remain focused on
evaluating the best course of action to emerge from Chapter 11 bankruptcy. Accordingly,
immediately upon the Retention Date, FocalPoint turned to urgent matters, including finding
alternative financers to provide requisite capital for the Debtors’ postpetition operations and
evaluating the Debtors’ assets so as to assist the Debtors and their professionals in forming an exit
strategy for these cases.
RELIEF REQUESTED
10. By this Application, the Debtors seek to employ and retain FocalPoint, an
investment banking firm which maintains offices at 150 N. Riverside Plaza, #2820, Chicago,
Illinois 60606 as its investment banker, effective as of July 10, 2020.
FOCALPOINT’S QUALIFICATIONS
11. The Debtors have selected FocalPoint because the partners and associates of
FocalPoint have considerable expertise in the fields of bankruptcy, insolvency, reorganizations,
liquidations, valuation, and debt restructuring, among other expertise. FocalPoint is a leading,
independent middle market investment bank with approximately 50 professionals in Chicago, Los
Angeles, New York, and Shanghai. FocalPoint’s professionals have significant experience in the
business services sector, and specifically with respect to advising other route-based businesses.
FocalPoint’s special situations professionals also represent diverse backgrounds in law, public
accounting, senior lending and investment banking. The principals of FocalPoint have extensive
experience representing financially distressed companies in both bankruptcy proceedings and out-
of-court transactions.
12. Considering the importance of obtaining the proper financing to allow these
Chapter 11 Cases to move forward to a successful reorganization, as well as the significant value
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a going-forward business will produce for the Debtors’ estates, the Debtors seek this Court’s
approval of FocalPoint’s retention. The Debtors believe that FocalPoint is well qualified and
uniquely situated to represent them in these Chapter 11 Cases.
13. FocalPoint’s professionals have assisted and advised parties in numerous chapter
11 proceedings. In particular, they have provided services to debtors, creditors’ committees, and
other constituencies in chapter 11 cases, including: Omni Facility Services (Bankr. S.D.N.Y.);
Chart Industries, Inc. (Bankr. D. Del.); Delphi Corporation (Bankr. S.D.N.Y.); Pull’R Holdings,
LLC (Bankr. C.D. Cal.); Gas City, Ltd. (Bankr. N.D. Ill.); Michael’s Market, Inc. (Bankr. N.D.
Ill.); Natural Pork Production II, LP (Bankr. S.D. Iowa); Constar International Holdings, LLC
(Bankr.); Valuepart, Inc. (Bankr. N.D. Tex.); Chellino Crane, Inc. (Bankr. N.D. Ill.); Schramm,
Inc. (Bankr. D. Del.); and Loot Crate, Inc. (Bankr. D. Del.).
SERVICES TO BE PROVIDED
14. It is anticipated that FocalPoint will render professional services to the Debtors,
including, without limitation, the following:
A. To the extent it deems necessary, appropriate and feasible, familiarize itself with business, operations, assets, financial condition and prospects of the Debtors;
B. Evaluate the Debtors’ debt capacity in light of its projected cash flows and assist in the determination of an appropriate capital structure for the Debtors;
C. Advise the Debtors in analyzing its strategic alternatives and structuring and effecting the financial aspects of any Transaction;2
D. Design the appropriate process to effect and initiate any Transaction, including an analysis of the various alternatives and, if appropriate, the lenders and investors (“Counterparties”) to be contacted for the Transaction;
2 Terms not defined herein are defined in the Engagement Agreement, attached hereto as Exhibit C.
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E. Prepare any financial models, financial analysis, or marketing materials, as appropriate and necessary to initiate and effect any Transaction including those to be provided to Counterparties in conjunction with any Transaction;
F. As appropriate, solicit interest from Counterparties in any Transaction;
G. Assist the Debtors and their other professionals in reviewing and evaluating the terms of any proposed Transaction and, if directed, negotiate the terms thereof;
H. Advise the Debtors on the risks and benefits of considering a transaction with respect to the Debtors’ intermediate and long-term business prospects and strategic alternatives to maximize the business enterprise value of the Debtors;
I. Determine valuation ranges for the Debtors and any securities that the Debtors offer or proposes to offer in connection with a Transaction;
J. Assist or participate in negotiations with parties in interest, including any current or prospective creditors of, holders of equity in, or claimants against the Debtors and/or their respective representative in connection with a Transaction;
K. Advise the Debtors with respect to, and attend, meetings of the Debtors’ Board of Directors (or equivalent body) and its committees, creditor groups, official constituencies and other interested parties, as necessary; and
L. As appropriate, provide relevant testimony with respect to any Transaction.
TERMS OF RETENTION
15. In connection with this engagement, FocalPoint has agreed to the following
compensation structure (the “Fee and Expense Structure”):3
(a) Upon the Debtors’ receipt of funds from a debtor-in-possession financing, the Debtors will pay FocalPoint advisory fees of (i) $50,000 (the “Initial Advisory Fee”), payable upon this Court’s approval of the Application and (ii) $25,000 per month thereafter during the term hereof (each, a “Monthly Advisory Fee”), due and payable, in advance, on each monthly anniversary of the date of this Agreement.
3 The following summary is provided for purposes of convenience only. In the event of any inconsistency between this summary and the terms and provisions of the Engagement Agreement, the terms of the Engagement Agreement shall control. Capitalized terms used but not otherwise defined in the summaries of the Engagement Agreement contained herein shall have the meanings ascribed to such terms in the Engagement Agreement.
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(b) A fee (the “Restructuring Transaction Fee”) of $650,000, shall be earned and paid upon the earlier of: (a) the completion of any Restructuring including, without limitation, the confirmation and effectiveness of a Plan or (b) the closing of any Restructuring or Sale transaction. For the avoidance of doubt, the closing of a Sale by the Company’s existing creditors through a 363 sale will be deemed to be a Restructuring and not a Sale for purposes of calculating the Transaction Fees earned and payable to FocalPoint.
(c) In the event that the Company pursues a Financing, a fee (each, a “Financing Fee”) to be earned and paid either as underwriting discounts, placement fees or other compensation upon the closing of any Financing equal to:
(1) 3.0% of the amount of committed debtor-in-possession financing (the “DIP Financing Fee”),
(2) 2.0% of the amount of funded or committed indebtedness in connection with an exit from Chapter 11, via a Plan of Reorganization or otherwise, and
(3) 5.0% of the gross amount of any funded or committed preferred or common equity, convertible or otherwise equity-linked securities or obligations in connection with an exit from Chapter 11 via a Plan of Reorganization or otherwise.
(d) In the event that the Company pursues a Sale, a fee (the “Sale Transaction Fee”) to be earned and paid upon the closing of any Sale equal to $750,000 plus five percent (5%) of Transaction Value in excess of $24 million.
(e) In the event the Company’s Chapter 11 cases are dismissed within ninety (90) days of the date of this Engagement Letter, the Restructuring Transaction Fee shall not be earned. And, in the event a Restructuring is completed by the Company’s lenders and/or its equity owners without any market test or outreach to third party investors or buyers by FocalPoint (other than solely in connection with any potential debtor-in-possession financing), the Restructuring Transaction Fee shall not be earned.
(f) FocalPoint shall credit an amount equal to the first three (3) Monthly Advisory Fees paid to FocalPoint (equal to $100,000) against any Restructuring Transaction Fee, Financing Fee or Sale Transaction Fee, provided, however, there will be no credit in connection with the DIP Financing Fee. Further, in the event any debtor-in-possession financing is provided by the Company’s existing creditors, no DIP Financing Fee will be payable to FocalPoint.
16. The Debtors believe that the Fee and Expense Structure is comparable to those
generally charged by investment bankers of similar stature to FocalPoint for comparable
engagements, both in and out of bankruptcy proceedings, and reflects a fair contingency amount,
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which is tied to the consummation and closing of the transactions and services contemplated by
the Debtors and FocalPoint in the Engagement Agreement.
FOCALPOINT’S DISINTERESTEDNESS
17. The standard for a debtor in possession to employ an investment banker is set forth
in sections 327(a) and 1107 of the Bankruptcy Code, as interpreted by the Third Circuit. Those
sections provide that a debtor in possession, with the court’s approval, may employ attorneys “that
do not hold or represent an interest adverse to the estate,” and that are “disinterested persons.” 11
U.S.C. § 327(a); 11 U.S.C. § 1107. A “disinterested person” is defined as one who does not have
an interest materially adverse to the interest of the estate, by reason of any direct or indirect
relationship with the debtor, or for any other reason. 11 U.S.C. § 101(14)(e). In general, however,
subject to the requirements of sections 327(a) and 1107, a debtor in possession is entitled to the
professionals of its choosing. See, e.g., In re Vouzianas, 259 F.3d 103, 108 (2d Cir. 2001)
(observing that “[o]nly in the rarest cases should the trustee be deprived of the privilege of selecting
his own counsel”).
18. Upon information and belief based on the Fixler Declaration, FocalPoint does not
hold or represent any interest adverse to the Debtors’ estates, creditors, or members. FocalPoint
confirms that they have no connection with the Debtors’ creditors or other parties-in-interest in
these Chapter 11 Cases, other than as described in the Fixler Declaration. However, FocalPoint is
a firm with a national practice and may represent or may have represented certain of the Debtors’
creditors in matters unrelated to these Chapter 11 Cases.
19. To the best of the Debtors’ knowledge, FocalPoint is a “disinterested person” as
that term is defined in section 101(14) of the Bankruptcy Code, and does not represent or hold any
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interest adverse to the interests of the Debtors’ estates with respect to the matters for which it is to
be employed.
NOTICE
20. Notice of this Application has been provided to (a) the Office of the United States
Trustee for the District of Delaware; (b) the creditors holding the twenty (20) largest unsecured
claims against the Debtors’ estate, as identified in the Debtors’ chapter 11 petitions; and (c) all
parties that have timely filed appearances pursuant to Bankruptcy Rule 2002. The Debtors
respectfully submit that no other or further notice need be provided.
NO PRIOR REQUEST
21. No prior application for the relief requested herein has been made to this or any
other court.
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WHEREFORE, the Debtors respectfully request the entry of an order (a) authorizing
and approving the employment and retention of FocalPoint as investment banker to the Debtors,
nunc pro tunc to July 10, 2020 and (b) granting such other and further relief as the Court deems
appropriate.
Dated: July 19, 2020
Apex Linen Service LLC, et al.
/s/ Jeff Nerland By: Jeff Nerland Title: Chief Restructuring Officer (Subject to Court approval) I hereby affirm that I, as the Authorized Representative of the Debtors, have vested decision-making authority for the Debtors to Jeff Nerland, Senior Managing Director of GlassRatner Advisory & Capital Group, LLC, and proposed Chief Restructuring Officer of the Debtors. /s/ Christopher Bryan Christopher Bryan, Authorized Representative of Apex Linen Service LLC, et al., Debtors and
Debtors-in-Possession
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EXHIBIT A
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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re: APEX LINEN SERVICE LLC, et al.,1 Debtors.
) ) ) ) ) )
Chapter 11 Case No. 20-11774 (LSS) (Jointly Administered) Related to Docket No. ___
ORDER AUTHORIZING THE EMPLOYMENT OF FOCALPOINT SECURITIES LLC
AS INVESTMENT BANKER, NUNC PRO TUNC TO JULY 10, 2020 Upon the Application (the “Application”)2 of the above-captioned debtors and debtors-in-
possession (the “Debtor”) for an order, pursuant to sections 327(a) and 328 of the Bankruptcy
Code, authorizing the Debtors to employ and retain FocalPoint Securities LLC (“FocalPoint”) as
the Debtors’ investment banker, nunc pro tunc to July 10, 2020; and upon review of the Fixler
Declaration filed therewith; and the Court being satisfied based on the representations made in
the Application and the Fixler Declaration that FocalPoint is a disinterested person as that term is
defined under section 101(14) of the Bankruptcy Code; it appearing that the relief requested is in
the best interests of the Debtors’ estates, their creditors, and other parties in interest; and it
appearing that the Court has jurisdiction over this matter under 28 U.S.C. §§ 157 and 1334; and
it appearing that this proceeding is a core proceeding under 28 U.S.C. § 157(b); and it appearing
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal
tax identification number, as applicable are: Apex Linen Service LLC (9075), Highland Apex Holdings LLC (0537), Highland Avenue Capital Partners LLC (2825), Highland Apex GP LLC (9246), and Highland Apex Management LLC (5476). The location of the Debtors’ corporate headquarters, and the business address for Apex Linen Service LLC is 6375 S. Arville Street, Las Vegas, NV 89118. The business address for all other Debtors is 205 Pier Avenue, Suite 102, Hermosa Beach, CA 90254.
2 Capitalized terms not otherwise defined herein shall have the same meaning as provided in the Application.
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that venue of this proceeding and this Application in this District is proper under 28 U.S.C.
§§ 1408 and 1409; and notice of this Application and the opportunity for a hearing on this
Application was appropriate under the particular circumstances and that no other or further
notice need be given; and after due deliberation and sufficient cause appearing therefore; it is
hereby ORDERED that:
1. The Application is approved as set forth herein.
2. Pursuant to sections 327(a) and 328(a) of the Bankruptcy Code, the Debtors are
authorized and empowered to employ FocalPoint as its investment banker, nunc pro tunc to July
10, 2020, to perform the services set forth in the Application and the Fixler Declaration.
3. The compensation, fees, and reimbursement of expenses payable to FocalPoint
pursuant to the Engagement Agreement, together with the indemnification and contribution
obligations owed to FocalPoint under the Engagement Agreement are approved, and shall be
subject to review only pursuant to the standard of review set forth in section 328(a) of the
Bankruptcy Code and shall not be subject to the standard of review set forth in section 330 of the
Bankruptcy Code or any other standard of review.
4. The Debtor is authorized to compensate and reimburse FocalPoint pursuant to the
terms of the Engagement Agreement, subject to the procedures set forth in the Bankruptcy Code,
the Bankruptcy Rules, the Local Rules, and any other applicable orders of this Court.
5. Notwithstanding the preceding paragraphs, the United States Trustee for the
District of Delaware (the “U.S. Trustee”) shall retain the right to object to the compensation,
fees, and expenses to be paid to FocalPoint pursuant to the Application and the Engagement
Agreement based on the reasonableness standard provided for in section 330 of the Bankruptcy
Code, and the Court shall consider any such objection by the U.S. Trustee under section 330 of
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the Bankruptcy Code. This Order and the record relating to the Court’s consideration of the
Application shall not prejudice or otherwise affect the rights of the U.S. Trustee to challenge the
reasonableness of FocalPoint’s compensation, fees, and expenses under the standard set forth in
the preceding sentence. Accordingly, nothing in this Order or such record shall constitute a
finding of fact or conclusion of law binding the U.S. Trustee, on appeal or otherwise, with
respect to the reasonableness of FocalPoint’s fees.
6. In light of the services to be provided by FocalPoint and the compensation
structure in the Engagement Agreement, FocalPoint and its professionals shall be excused from:
(i) any requirement to maintain or provide detailed time records in accordance with Bankruptcy
Rule 2016(a), Local Rule 2016-2, and the United States Trustee Fee Guidelines; and
(ii) conforming with a schedule of hourly rates for its professionals. Instead, FocalPoint shall
maintain time records in half-hour increments setting forth, in a summary format, a description
of the services rendered by each professional and the amount of time spent on each date by each
such individual in rendering services on behalf of the Debtors, and will present such records
together with its fee applications filed with the Court.
7. To the extent FocalPoint discovers any connection with any interested party or
enters into any new relationship with any interested party, FocalPoint will promptly supplement
its disclosure to the Court.
8. The terms and conditions of this Order shall be immediately effective and
enforceable upon its entry, notwithstanding the possible applicability of Bankruptcy Rule 6004,
7062, or 9014.
9. To the extent that this Order is inconsistent with the Engagement Agreement, the
terms of this Order shall govern.
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10. The Court shall retain jurisdiction with respect to all matters arising from or
related to the implementation of this Order.
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EXHIBIT B
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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re: APEX LINEN SERVICE LLC, et al.,1 Debtors.
) ) ) ) )
Chapter 11 Case No. 20-11774 (LSS) (Jointly Administered)
DECLARATION OF MICHAEL FIXLER IN SUPPORT OF APPLICATION OF DEBTORS PURSUANT TO 11 U.S.C. §327(A) AND 328 FOR AUTHORITY TO EMPLOY AND RETAIN FOCALPOINT SECURITIES LLC AS INVESTMENT
BANKER, NUNC PRO TUNC TO JULY 10, 2020
I, Michael Fixler, declare, pursuant to Bankruptcy Rule 2014(a), that:
1. I am a Managing Director of the investment banking firm FocalPoint Securities
LLC (“FocalPoint”), a financial advisory and investment banking firm. I am authorized to make
this declaration on behalf of FocalPoint. Unless otherwise stated in this declaration, I have personal
knowledge of the facts set forth herein.2
2. This declaration is being submitted in connection with the proposed employment
and retention of FocalPoint as investment banker to the debtors and debtors in possession in the
above-captioned cases (collectively, the “Debtors”) to perform services as set forth in the
Application of the Debtors pursuant to 11 U.S.C. §§ 327(a) and 328,for Authority to Employ and
Retain FocalPoint Securities LLC as Investment Banker, Nunc Pro Tunc to July 10, 2020 (the
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, as applicable are: Apex Linen Service LLC (9075), Highland Apex Holdings LLC (0537), Highland Avenue Capital Partners LLC (2825), Highland Apex GP LLC (9246), and Highland Apex Management LLC (5476). The location of the Debtors’ corporate headquarters, and the business address for Apex Linen Service LLC is 6375 S. Arville Street, Las Vegas, NV 89118. The business address for all other Debtors is 205 Pier Avenue, Suite 102, Hermosa Beach, CA 90254.
2 Certain of the disclosures herein relate to matters within the personal knowledge of other professionals at FocalPoint and are based on information provided by them.
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“Application”).3 I submit this Declaration in compliance with Bankruptcy Code Sections 105, 327,
328 and 1107(a) and to provide the disclosure required under Bankruptcy Rules 2014(a), 2016,
and 5002 and Local Rule 2014-1.
FocalPoint’s Qualifications
3. FocalPoint is a leading, independent middle market investment bank with
approximately 50 professionals in Chicago, Los Angeles, New York, and Shanghai. FocalPoint’s
professionals have significant experience in the business services sector, and specifically with
respect to advising other route-based businesses.
4. FocalPoint’s special situations professionals also represent diverse backgrounds in
law, public accounting, senior lending and investment banking. The principals of FocalPoint have
extensive experience representing financially distressed companies in both bankruptcy
proceedings and out-of-court transactions.
5. FocalPoint’s professionals have assisted and advised parties in numerous chapter
11 proceedings. In particular, they have provided services to debtors, creditors’ committees, and
other constituencies in chapter 11 cases, including: Omni Facility Services (Bankr. S.D.N.Y.);
Chart Industries, Inc. (Bankr. D. Del.); Delphi Corporation (Bankr. S.D.N.Y.); Pull’R Holdings,
LLC (Bankr. C.D. Cal.); Gas City, Ltd. (Bankr. N.D. Ill.); Michael’s Market, Inc. (Bankr. N.D.
Ill.); Natural Pork Production II, LP (Bankr. S.D. Iowa); Constar International Holdings, LLC
(Bankr.); Valuepart, Inc. (Bankr. N.D. Tex.); Chellino Crane, Inc. (Bankr. N.D. Ill.); Schramm,
Inc. (Bankr. D. Del.); and Loot Crate, Inc. (Bankr. D. Del.).
6. The resources, capabilities and experience of FocalPoint in advising debtors will
be of significant assistance to the Debtors during the course of the Chapter 11 Cases. An
3 Capitalized terms not otherwise defined herein have the meanings set forth in the Application.
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investment banker with a deep bench of experience, such as FocalPoint, fulfills a critical need that
complements the services offered by the Debtors’ other restructuring professionals. As the Debtors
work to maximize value, the Debtors will benefit from the services of a capable and experienced
investment banker such as FocalPoint.
7. Prior to July 10, 2020 (the “Retention Date”), FocalPoint had no institutional
knowledge of the Debtors and the above-captioned bankruptcy cases (these “Chapter 11 Cases”).
At all times since the Retention Date, FocalPoint has worked closely with the Debtors’
management, creditors, and other professionals and advisors to advise the company regarding
potential restructuring opportunities to identify potential sources of capital and investors.
FocalPoint’s work for the Debtors has included, but has not been limited to: reviewing and
analyzing the Debtors’ business, operations, and financial projections; communicating with
lenders, other stakeholders, potential third party providers of capital and their advisors; and
advising and assisting the Debtors in structuring the terms of debtor-in-possession financing.
8. As a result of its active engagement in the above-mentioned processes, FocalPoint
has also acquired significant knowledge of the Debtors and their businesses and is intimately
familiar with the Debtors’ financial affairs, debt structure, business operations, capital structure,
key stakeholders, financing documents, and related matters. Such experience and expertise,
accordingly, makes FocalPoint a natural selection as the Debtors’ investment banker and will assist
the Debtors and their professionals in providing effective and efficient services in the Chapter 11
Cases.
9. Indeed, if the Debtors were required to retain an investment banker other than
FocalPoint in connection with the Chapter 11 Cases, the Debtors, their estates, and all parties in
interest would be prejudiced by the time and expenses necessary to familiarize another professional
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with the intricacies of the Debtors and their business operations. In addition, the delay in timing to
retain an investment banker other than FocalPoint would be extremely detrimental to the Debtors’
abilities to maintain operations, given that FocalPoint has already made diligent efforts to provide
competing financing proposals in light of the Debtors’ urgent need of funding.
10. If the Application is approved, several FocalPoint personnel, all with substantial
expertise in the areas discussed above, will continue to provide services to the Debtors. Such
personnel will work closely with the Debtors’ management and other professionals throughout the
reorganization process. By virtue of its extensive experience and its prepetition representation of
the Debtors, FocalPoint is well-qualified to provide services to and represent the Debtors’ interests
in the Chapter 11 Cases.
No Duplication of Services
11. FocalPoint believes that its services will not duplicate the services that other
professionals will be providing to the Debtors in the Chapter 11 Cases. FocalPoint will carry out
unique functions and will use reasonable efforts to coordinate with the Debtors’ other retained
professionals to avoid unnecessary duplication of services.
Professional Compensation
12. In consideration of the services to be provided by FocalPoint, and as more fully set
forth in the Engagement Agreement, subject to Court approval, the Debtors have agreed to pay
FocalPoint in cash under the following fee structure (the “Fee and Expense Structure”):4
(a) Upon the Debtors’ receipt of funds from a debtor-in-possession financing, the Debtors will pay FocalPoint advisory fees of (i) $50,000 (the “Initial Advisory
4 The following summary is provided for purposes of convenience only. In the event of any inconsistency between this summary and the terms and provisions of the Engagement Agreement, the terms of the Engagement Agreement shall control. Capitalized terms used but not otherwise defined in the summaries of the Engagement Agreement contained herein shall have the meanings ascribed to such terms in the Engagement Agreement.
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Fee”), payable upon this Court’s approval of the Application and (ii) $25,000 per month thereafter during the term hereof (each, a “Monthly Advisory Fee”), due and payable, in advance, on each monthly anniversary of the date of this Agreement.
(b) A fee (the “Restructuring Transaction Fee”) of $650,000, shall be earned and paid upon the earlier of: (a) the completion of any Restructuring including, without limitation, the confirmation and effectiveness of a Plan or (b) the closing of any Restructuring or Sale transaction. For the avoidance of doubt, the closing of a Sale by the Company’s existing creditors through a 363 sale will be deemed to be a Restructuring and not a Sale for purposes of calculating the Transaction Fees earned and payable to FocalPoint.
(c) In the event that the Company pursues a Financing, a fee (each, a “Financing Fee”) to be earned and paid either as underwriting discounts, placement fees or other compensation upon the closing of any Financing equal to:
(1) 3.0% of the amount of committed debtor-in-possession financing (the “DIP Financing Fee”),
(2) 2.0% of the amount of funded or committed indebtedness in connection with an exit from Chapter 11, via a Plan of Reorganization or otherwise, and
(3) 5.0% of the gross amount of any funded or committed preferred or common equity, convertible or otherwise equity-linked securities or obligations in connection with an exit from Chapter 11 via a Plan of Reorganization or otherwise.
(d) In the event that the Company pursues a Sale, a fee (the “Sale Transaction Fee”) to be earned and paid upon the closing of any Sale equal to $750,000 plus five percent (5%) of Transaction Value in excess of $24 million.
(e) In the event the Company’s Chapter 11 cases are dismissed within ninety (90) days of the date of this Engagement Letter, the Restructuring Transaction Fee shall not be earned. And, in the event a Restructuring is completed by the Company’s lenders and/or its equity owners without any market test or outreach to third party investors or buyers by FocalPoint (other than solely in connection with any potential debtor-in-possession financing), the Restructuring Transaction Fee shall not be earned.
(f) FocalPoint shall credit an amount equal to the first three (3) Monthly Advisory Fees paid to FocalPoint (equal to $100,000) against any Restructuring Transaction Fee, Financing Fee or Sale Transaction Fee, provided, however, there will be no credit in connection with the DIP Financing Fee. Further, in the event any debtor-in-possession financing is provided by the Company’s existing creditors, no DIP Financing Fee will be payable to FocalPoint.
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13. FocalPoint believes that the Fee and Expense Structure is comparable to those
generally charged by investment bankers of similar stature to FocalPoint for comparable
engagements, both in and out of bankruptcy proceedings, and reflects a fair contingency amount,
which is tied to the consummation and closing of the transactions and services contemplated by
the Debtors and FocalPoint in the Engagement Agreement.
14. The Fee and Expense Structure summarized above and described fully in the
Engagement Agreement is consistent with FocalPoint’s normal and customary billing practices for
comparably sized and complex cases and transactions, both in and out-of-court, involving the
services to be provided in connection with the Chapter 11 Cases. Moreover, the Fee and Expense
Structure is consistent with and typical of arrangements entered into by FocalPoint and other
investment banks in connection with the rendering of comparable services to clients such as the
Debtors. FocalPoint and the Debtors believe that the Fee and Expense Structure is both reasonable
and market-based.
15. FocalPoint’s restructuring, strategic, and financial expertise as well as its capital
markets knowledge, financing skills, restructuring capabilities, and marketing and sale expertise,
some or all of which may be required by the Debtors during the term of FocalPoint’s engagement
hereunder, were important factors in determining the Fee and Expense Structure, and the ultimate
benefit to the Debtors of FocalPoint’s services provided hereunder could not be measured by a
reference to the number of hours to be expended by FocalPoint’s professionals.
16. The Fee and Expense Structure has been agreed upon by the parties in anticipation
that a substantial commitment of professional time and effort will be required of FocalPoint and
its professionals and in light of the fact that (i) such commitment may foreclose other opportunities
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for FocalPoint and (ii) the actual time and commitment required of FocalPoint and its professionals
to perform its services may vary substantially from week to week and month to month.
Record Keeping and Applications For Compensation
17. It is not the general practice of investment banking firms, including FocalPoint, to
keep detailed time records similar to those customarily kept by attorneys. Because FocalPoint does
not ordinarily maintain contemporaneous time records in one-tenth hour increments or provide or
conform to a schedule of hourly rates for its professionals, FocalPoint should, pursuant to Local
Rule 2016-2(h), be excused from compliance with such requirements and should only be required
to maintain time records in half-hour increments setting forth, in a summary format, a description
of the services rendered by each professional and the amount of time spent on each date by each
such individual in rendering services on behalf of the Debtors.
18. FocalPoint will also maintain detailed records of any actual and necessary costs and
expenses incurred in connection with the aforementioned services. In connection with seeking any
payment from the Debtors as compensation for professional services rendered or reimbursement
of expenses incurred in connection with the Chapter 11 Cases, FocalPoint will file interim and
final fee applications for the allowance of compensation for services rendered and reimbursement
of expenses incurred, in accordance with the terms of the Engagement Agreement and the
applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, Local Rule 2016-2 and any
other applicable procedures established by the Court.
Disinterestedness and Eligibility
19. In connection with its proposed retention by the Debtors in the Chapter 11 Cases,
FocalPoint undertook to determine whether it had any conflicts or other relationships that might
cause it not to be disinterested or to hold or represent an interest adverse to the Debtors.
Specifically, FocalPoint obtained from the Debtors and/or their representatives the names of
Case 20-11774-LSS Doc 69-2 Filed 07/19/20 Page 8 of 13
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individuals and entities that may be parties in interest in the Chapter 11 Cases (the “Potential
Parties in Interest”), and such parties are listed on Schedule 1 annexed hereto.
20. To the best of my knowledge and belief, FocalPoint has not represented any
Potential Parties in Interest in connection with matters relating to the Debtors, their estates, assets,
or businesses and will not represent other entities which are creditors of, or have other relationships
to, the Debtors in matters relating to the Chapter 11 Cases except as set forth herein.
21. Prior to the Petition Date, FocalPoint did not receive any payments from the
Debtors.
22. As of the Petition Date, the Debtors did not owe FocalPoint for any fees or expenses
incurred prior to the Petition Date.
23. FocalPoint provides financial advice and investment banking services to an array
of clients on capital markets, mergers and acquisitions, divestitures, special committee
assignments, recapitalizations, restructurings and other strategic transactions. As a result,
FocalPoint has represented, and may in the future represent, certain Potential Parties in Interest in
matters unrelated to the Chapter 11 Cases, either individually or as part of representation of a
committee of creditors or interest holders. To the best of my knowledge, information and belief,
insofar as I have been able to ascertain after reasonable inquiry, none of these representations are
adverse to the Debtors’ interests.
24. To the best of my knowledge and belief, neither FocalPoint nor I, nor any other
employee of FocalPoint that will work on the Debtors’ engagement, has any connection with or
holds any interest adverse to the Debtors, their estates or the Potential Parties in Interest, except as
set forth below:
(a) In connection with its debt capital markets and special situations practices, in the ordinary course of business, FocalPoint has and, may in the future, present loan
Case 20-11774-LSS Doc 69-2 Filed 07/19/20 Page 9 of 13
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opportunities to Western Alliance Bank, Breakwater Credit Opportunities Fund I, LP, Breakwater Credit Opportunities Fund II, LP and United Insurance Company of America (collectively, the “Lender Parties in Interest”), provided, however, none in connection with the Chapter 11 Cases.
(b) In the ordinary course of business, FocalPoint may have been, or may in the future, be engaged by a borrower of the Lender Parties in Interest in matters unrelated to the Debtors and the Chapter 11 Cases, however, to the best of my knowledge we are not currently engaged by any such borrower.
(c) As part of its diverse practice, FocalPoint appears in numerous cases, proceedings and transactions involving attorneys, accountants, investment bankers, financial advisors and financial consultants, some of whom may represent claimants and parties in interest in the Chapter 11 Cases.
(d) Furthermore, FocalPoint has in the past been, and may in the future be, represented by attorneys and law firms in the legal community, some of whom may be involved in these proceedings. Specifically, Sheppard Mullin represents FocalPoint in many matters as general outside counsel. However, Sheppard Mullin does not represent FocalPoint with respect to anything in connection with these cases, and I have never interacted with any of the specific Sheppard Mullin attorneys appearing in these cases.
(e) In addition, FocalPoint has in the past worked, and likely will in the future be working, with or opposite other professionals involved in these cases in matters unrelated to these cases. Based on my current knowledge of the professionals involved, and to the best of my knowledge, none of these business relationships constitute interests materially adverse to the Debtors in the matters upon which FocalPoint is to be employed.
(f) While employed by other firms, certain professionals presently employed by FocalPoint may have previously represented creditors, equity holders or other parties in interest in the Chapter 11 Cases in connection with matters unrelated to the Debtors and the Chapter 11 Cases. FocalPoint does not believe that these matters create a conflict of interest regarding the Debtors or the Chapter 11 Cases.
25. To the best of my knowledge, information and belief, insofar as I have been able to
ascertain after reasonable inquiry, except as set forth above and subject to the information set forth
elsewhere in this Declaration and in the attached schedules, FocalPoint has not been retained to
assist any entity or person other than the Debtors on matters relating to, or in direct connection
with, the Chapter 11 Cases. FocalPoint will, however, continue to provide professional services to
entities or persons that may be creditors or equity security holders of the Debtors or interested
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parties in the Chapter 11 Cases; provided that such services do not relate to, or have any direct
connection with, the Chapter 11 Cases or the Debtors.
26. I am not related or connected to and, to the best of my knowledge, no other
professional of FocalPoint who will work on this engagement is related or connected to, any United
States Bankruptcy Judge for the District of Delaware, any of the District Judges for the District of
Delaware who handle bankruptcy cases, or any employee in the Office of the United States Trustee
for the District of Delaware.
27. Accordingly, except as otherwise set forth herein, insofar as I have been able to
determine, none of FocalPoint, I, nor any employee of FocalPoint who will work on the
engagement holds or represents any interest adverse to the Debtors or their estates, and FocalPoint
is a “disinterested person” as that term is defined in Bankruptcy Code Section 101(14), as modified
by Bankruptcy Code Section 1107(b), in that FocalPoint, and its professionals and employees who
will work on the engagement: (a) are not creditors, equity holders, or insiders of the Debtors; (b)
Were not, within two years before the date of filings of the Debtors’ chapter 11 petitions, a director,
officer or employee of the Debtors; and (c) do not have an interest materially adverse to the interest
of the Debtors’ estates or any class of creditors or equity security holders, by reason of any direct
or indirect relationship to, connection with, or interest in, the Debtors, or for any other reason.
28. If FocalPoint discovers additional information that requires disclosure, FocalPoint
promptly will file a supplemental disclosure with the Court as required by Bankruptcy Rule 2014.
Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is true
and correct.
Dated: July 19, 2020 By: /s/ Michael Fixler___________________________ Michael Fixler
Managing Director
Case 20-11774-LSS Doc 69-2 Filed 07/19/20 Page 11 of 13
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Schedule 1
Apex Linen Services Conflict List
Debtors:
Apex Linen Service LLC
Highland Apex Holdings LLC
Highland Avenue Capital Partners, LLC
Highland Apex GP LLC
Highland Apex Management, LLC.
Principals of Debtors:
Christopher Bryan
Peter Li
Joseph Li
Adverse Parties:
Western Alliance Bancorporation
Kannegiesser Etech, In.
Private Advisors Coinvestment Fund VI, LP
Private Advisors Small Company Coinvestment Fund LP
Private Advisors Small Company Coinvestment Fund-ERISA, LP
Cynthia P. Goldman
Private Advisors Small Company Private Equity Fund VIII, LP
Washington Pike, LP
BPEA V, L.P
Anne C. Cataldo
Michael J Kendall
Kevin Michael Smith
Goodwin Procter LLP
Breakwater Credit Opportunities Fund, L.P.
Breakwater Credit Opportunities Fund II LP
Will Sarat Chuchawat at SheppardMullin
Litigation Parties:
ALSI Inc. (Nevada Corp)
Joseph W. Dramise
Glenn E. Martin, IV
John W. Smagala
Bert E. Arnlund
Kade Miller
Charles Gianelloni
Greenberg Traurig
Case 20-11774-LSS Doc 69-2 Filed 07/19/20 Page 12 of 13
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Creditors:
Opal Investments LLC
Housing Authority of the City of Pittsburgh
Sobel Westex
Kannegiesser Etech, Inc.
Sheppard, Mullin, Richter & Hampton LLP
Blue Sapphire LLC
Kelly & Laurie Elsner
Winston & Strawn, LLP
Braun USA (Procter & Gamble)
PSJ Holdings, Inc.
Standard Textile Co., Inc.
AMC Capital
Las Vegas Water District
Garner Machinery Corporation
Ecolab USA Inc.
Venus Group Inc.
Richard J. Kalski
Gary Russ
United Cleaners Supply, Inc.
Sharp Packaging Systems
Renaissance Las Vegas Hotel
Southwest Laundry Equipment, LLC
Southwest Linen
Staples
Sunbay Supplies LLC
Superior Window Cleaning
Thermal Engineering of Arizona
Thermopatch
Tmobile
ULINE
Union Pacific Railroad Company
United Cleaners Supply, Inc.
US Energy
Venus Group Inc
Warehouse Las Vegas
Waxie Sanitary Supply
Westin Las Vegas
Ezra Nilson
Rush Truck Leasing
Case 20-11774-LSS Doc 69-2 Filed 07/19/20 Page 13 of 13
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EXHIBIT C
Case 20-11774-LSS Doc 69-3 Filed 07/19/20 Page 1 of 13
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Impactful Investment Banking for Entrepreneurs and Capital Providers
150 N Riverside Plaza #2820 Chicago IL 60606
T 312-508-5788, focalpointllc.com
PRIVATE AND CONFIDENTIAL
Jeff Nerland, Chief Restructuring Officer
Apex Linen Service LLC
Address Line One Two Three
July 11, 2020
Re: Financial Advisory Services Engagement Letter
Dear Jeff:
This letter agreement (the “Agreement”) will confirm the understanding between Apex Linen Service LLC (together with its subsidiaries and affiliates, the “Company”) and FocalPoint Securities, LLC (“FocalPoint”), pursuant to which FocalPoint has been retained, on the terms and subject to the conditions set forth herein and subject to Bankruptcy Court approval,
as the Company’s exclusive financial advisor in connection with a possible sale, merger, acquisition, reorganization, financial restructuring or recapitalization of the Company, its business or assets, or any portion thereof in a single or multiple transactions including, without limitation, the confirmation of a plan of reorganization under Chapter 11 of the Bankruptcy Code (a “Plan”) or a sale of assets under Section 363 of the Bankruptcy Code (collectively or individually referred to herein as a “Transaction”). Unless otherwise noted, all capitalized terms used herein shall have the meaning set forth in the Appendix A to this Agreement.
Services to be Rendered (“Services”)
As part of our engagement, we will, if appropriate and requested:
• To the extent it deems necessary, appropriate and feasible, familiarize itself with business, operations, assets, financial condition and prospects of the Company;
• Evaluate the Company’s debt capacity in light of its projected cash flows and assist in the determination of an appropriate capital structure for the Company;
• Advise the Company in analyzing its strategic alternatives and structuring and effecting the financial aspects of any Transaction;
• Design the appropriate process to effect and initiate any Transaction, including an analysis of the various alternatives and, if appropriate, the lenders and investors (“Counterparties”) to be contacted for the Transaction;
• Prepare any financial models, financial analysis, or marketing materials, as appropriate and necessary to initiate and effect any Transaction including those to be provided to Counterparties in conjunction with any Transaction;
• As appropriate, solicit interest from Counterparties in any Transaction;
• Assist the Company and its other professionals in reviewing and evaluating the terms of any proposed Transaction and, if directed, negotiate the terms thereof;
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[2]
• Advise the Company on the risks and benefits of considering a transaction with respect to the Company’s intermediate and long-term business prospects and strategic alternatives to maximize the business enterprise value of the Company;
• Determine valuation ranges for the company and any securities that the Company offers or proposes to offer in
connection with a Transaction;
• Assist or participate in negotiations with parties in interest, including any current or prospective creditors of, holders of equity in, or claimants against the Company and/or their respective representative in connection with a Transaction;
• Advise the Company with respect to, and attend, meetings of the Company’s Board of Directors (or equivalent body) and its committees, creditor groups, official constituencies and other interested parties, as necessary; and
• As appropriate, provide relevant testimony with respect to any Transaction.
Professional Fees and Expenses
In consideration of the Services provided by FocalPoint, the Company, and its successors, if any, agrees to pay FocalPoint the following fees in cash:
1. Commencing as of the date hereof, whether or not a Transaction is proposed or consummated, advisory fees of (i) $50,000 (the “Initial Advisory Fee”) and (ii) $25,000 per month thereafter during the term hereof (each, a “Monthly Advisory Fee”). The Initial Monthly Advisory Fee shall be earned upon the execution of this Agreement
by the Company and payable upon Bankruptcy Court approval of FocalPoint’s retention in the Chapter 11 cases. Thereafter, a Monthly Advisory Fee shall be earned, due and payable, in advance, on each monthly anniversary of the date of this Agreement.
2. A fee (the “Restructuring Transaction Fee”) of $650,000, shall be earned and paid upon the earlier of: (a) the completion of any Restructuring including, without limitation, the confirmation and effectiveness of a Plan or (b) the closing of any Restructuring or Sale transaction. For the avoidance of doubt, the closing of a Sale by the Company’s existing creditors through a 363 sale will be deemed to be a Restructuring and not a Sale for purposes
of calculating the Transaction Fees earned and payable to FocalPoint.
3. In the event that the Company pursues a Financing, a fee (each, a “Financing Fee”) to be earned and paid either as underwriting discounts, placement fees or other compensation upon the closing of any Financing, equal to:
a. 3.0% of the amount of committed debtor-in-possession financing (the “DIP Financing Fee”),
b. 2.0% of the amount of funded or committed indebtedness in connection with an exit from Chapter 11,
via a Plan of Reorganization or otherwise, and
c. 5.0% of the gross amount of any funded or committed preferred or common equity, convertible or
otherwise equity-linked securities or obligations in connection with an exit from Chapter 11 via a Plan of Reorganization or otherwise.
4. In the event that the Company pursues a Sale, a fee (the “Sale Transaction Fee”) to be earned and paid upon the closing of any Sale equal to $750,000 plus five percent (5%) of Transaction Value in excess of $24 million.,.
5. The parties acknowledge that more than one fee may be payable to FocalPoint pursuant to the provisions herein.
6. In the event the Company’s Chapter 11 cases are dismissed within ninety (90) days of the date of this
Engagement Letter, the Restructuring Transaction Fee shall not be earned. And, in the event a Restructuring is completed by the Company’s lenders without any market test or outreach to third party investors or buyers by
FocalPoint (other than solely in connection with any potential debtor-in-possession financing), the Restructuring Transaction Fee shall not be earned.
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[3]
7. FocalPoint shall credit an amount equal to the first three (3) Monthly Advisory Fees paid to FocalPoint (equal to
$100,000) against any Restructuring Transaction Fee, Financing Fee or Sale Transaction Fee, provided, however, there will be no credit in connection with the DIP Financing Fee. Further, in the event any debtor-in-possession
financing is provided by the Company’s existing creditors, no DIP Financing Fee will be payable to FocalPoint.
Expenses will be invoiced separately by FocalPoint each month and will be reimbursed by the Company in accordance
with Appendix A in addition to the fees set forth above. The expenses incurred will consist of, but are not limited to,
the following: postage and shipping charges, use of third-party databases, telephone, copying, facsimiles, printing,
travel, lodging, overtime meals, transportation, and other miscellaneous engagement expenses, including, but not
limited to, the reasonable fees and expenses of its outside legal counsel incurred in connection with the performance of
this Agreement and the matters contemplated hereby.
This Agreement, together with Appendix A attached hereto, constitutes the entire agreement of the parties hereto with respect to this engagement, supersedes all other oral or written representations, understanding or agreements relating to this Agreement, and may not be amended except by written agreement signed by both parties.
We appreciate the opportunity to provide you with our professional services. If this engagement letter meets with your approval, please sign a copy of this Agreement, initial a copy of Appendix A. If you have any further questions or comments, please feel free to contact Michael Fixler at 312-508-5780. Very truly yours,
FOCALPOINT SECURITIES, LLC
By: __________________________ By:
Michael Fixler David Porter
Managing Director Chief Compliance Officer
Confirmed and agreed to on July 11, 2020
APEX LINEN SERVICE LLC
By: __________________________
Jeff Nerland
Chief Restructuring Officer
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[4]
Company’s Tax Identification Number: [ ]
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APPENDIX A GENERAL BUSINESS TERMS
Impactful Investment Banking for Entrepreneurs and Capital Providers
150 N Riverside Plaza #2820 Chicago IL 60606
T 312-508-5788, focalpointllc.com
This Appendix A is pursuant to the Letter Agreement, dated July 11, 2020, between Apex Linen Service LLC and FocalPoint Securities, LLC. Unless otherwise noted, all capitalized terms used herein shall have the meaning set forth in the Agreement.
1. Definitions. For purposes of this Agreement, capitalized terms shall have the following definitions:
a. “Transaction Fee” or “Transaction Fees” shall collectively refer to any Restructuring Transaction Fee, Financing Fee or Sale Transaction Fee on a combined or individual basis.
b. "Transaction Value" shall be the total proceeds and other consideration paid or received (including assets retained as described below), or to be paid or received, by the Company or its security holders, employees or
creditors in connection with a Transaction (which consideration shall be deemed to include amounts in escrow), including, without limitation, the gross value of all cash and the fair market value of: (i) equity securities
(including, but not limited to, common stock, preferred stock, warrants, options, stock appreciation rights, in each case whether or not vested or issued), equity interests, carried interests and equity reinvestment, in the Company, its successor or buyer; (ii) straight or convertible debt instruments or other obligations held by the Company or its security holders, whether or not vested or issued; (iii) interest-bearing debt (including capitalized leases) and pension (including SERP liabilities or obligations) and other unfunded liabilities assumed or
refinanced in connection with a Transaction; (iv) guarantees and other similar liabilities of the Company; (v) assets or businesses retained by the Company, in the event of an asset sale, or distributed to the Company’s shareholders, in the event of a stock sale, merger or similar reorganization; (vi) amounts paid with respect to other assets or businesses in which the Company or its security holders or creditors have an interest and that are included in the Transaction; (vii) amounts paid to the Company, its security holders, employees or directors in connection with non-competition agreements; (viii) amounts paid with respect to severance, employee benefit
plans, management retention, consulting, lease, royalty, licensing or any similar agreements; (ix) excess amounts paid for above market employment and consulting agreements; (x) amounts paid, at any time during FocalPoint’s period of engagement, as extraordinary dividends or other compensation paid to the Company's security holders in contemplation of a Transaction; and (xi) any obligations of the Company or its security holders', including transaction expenses, which are forgiven or assumed by a purchaser or, in the event of a
stock sale, merger or similar organization, which are left outstanding after a Transaction. In the event of a sale of less than 100% of the equity interests of the Company, the Transaction Value shall be calculated as if 100%
of the ownership of the equity interests of the Company has been sold dividing (i) the Transaction Value by (ii) the percentage of ownership which is sold. The face amount of all escrowed funds, promissory notes, seller notes, fixed future payments, or other non-contingent future payments will be considered received by Company at Closing and included in Transaction Value for purposes of calculating FocalPoint’s Transaction Success Fee.
c. For the purpose of calculating the Transaction Value, any securities will be valued at the time of the closing of the Transaction as follows: (i) if such securities are traded on a stock exchange or the National Market System,
the securities will be valued at the average last sale or closing price for the ten trading days immediately prior to the closing of the Transaction; (ii) if such securities are traded primarily in over-the-counter transactions (OTC), the securities will be valued at the mean of the closing bid and asked quotations similarly averaged over a ten trading day period immediately prior to the closing of the Transaction; and (iii) if such securities have not been traded prior to the closing of the Transaction, FocalPoint will prepare a valuation of the securities and FocalPoint and the Company will mutually agree on a fair valuation thereof for the purposes of calculating
FocalPoint’s Transaction Success Fee (or, if FocalPoint and the Company cannot agree, as determined by an independent third-party accounting or valuation firm mutually chosen by the parties). Any other non-cash consideration shall be valued at the fair market value thereof as of the day prior to the closing of the Transaction, as such fair market value shall be mutually agreed by FocalPoint and the Company acting in good faith (or, if FocalPoint and the Company cannot agree, as determined by an independent third-party accounting or valuation firm mutually chosen by the parties).
d. In the event that the Company proceeds with a Transaction that includes earn-out provisions or other performance-based contingent consideration (“Earnouts”), the Company and FocalPoint will negotiate in good faith to agree on the value of such Earnout for the purpose of calculating that portion of the Transaction Success Fee to be paid to FocalPoint upon the Closing in consideration thereof, and, if they cannot so agree, the value
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APPENDIX A GENERAL BUSINESS TERMS
[6]
of the Earnout shall be included in Transaction Value for the purposes of FocalPoint’s fee calculation hereunder only if and when paid to the Company or its security holders.
e. “Financing” shall mean: (i) a private issuance, sale or placement of the equity, equity-linked or debt securities
(including any 144A offering), instruments or obligations of the Company with one or more Counterparties except to the extent issued to existing security holders of the Company in exchange for their existing securities, or (ii) any secured or unsecured loan or other financing, including any “debtor in possession financing” or “exit financing” in connection with a case under the Bankruptcy Code, and (iii) any rights offering.
f. “Restructuring” shall mean any recapitalization or restructuring (including, without limitation, through any exchange, conversion, cancellation, forgiveness, retirement and/or a material modification or amendment to
the terms, conditions or covenants thereof) of the Company’s debt securities and/or equity securities and/or other indebtedness, obligations or liabilities (including, without limitation, preferred stock, partnership interests, lease obligations, trade credit facilities, tort obligations or other secured and unsecured claims or indebtedness) including pursuant to any repurchase, exchange transaction, a Plan or solicitation of consents, waivers, acceptances or authorizations.
g. “Sale” shall mean the disposition to one or more third parties in one or a series of transactions of (i) all or
substantially all of the equity securities of the Company, or (ii) substantially all or a portion of the assets (including the assignment of any executory contacts) or businesses of the Company or its subsidiaries, in either case, including through a sale or exchange of capital stock, options or assets, a lease of assets with or without a purchase options, a merger, consolidation or other business combination, an exchange or tender offer, a recapitalization, the formation of a joint venture, partnership or similar entity or any similar transaction. For avoidance of doubt, “Sale” shall include a credit bid by any secured lender, a sale under section 363 of the
Bankruptcy Code or a Plan that (i) incorporates a Sale or (ii) is a “new money” Plan.
2. Payment of Invoices. FocalPoint’s invoices are due upon presentation. Invoices upon which payment is not received within thirty days of the invoice date shall accrue a late charge from the invoice date of the lesser of: (a) 1½% per month or (b) the highest rate allowable by law, in each case compounded monthly to the extent allowable by law. The Initial Monthly Advisory Fee, any Monthly Advisory Fees, Transaction Fees or unpaid expenses owing to FocalPoint shall be paid at each applicable Closing, except as set forth in the Agreement with respect to Earnouts.
Transaction Fees (and any unpaid expenses or other fees) shall be paid in full to FocalPoint at the Closing directly by the Company out of the proceeds of the initial funding under any Transaction or from other cash available to the Company, including, without limitation, through borrowings under existing or new lines of credit. The Company agrees that the consummation of the Closing shall be expressly conditioned on the concurrent payment by the Company of such amount to FocalPoint. In the event of any dispute over the amount of any fee payable, the Company hereby irrevocably agrees to escrow the disputed amount from the proceeds of the Transaction and immediately pay to FocalPoint any portion of the Transaction Success Fee not in dispute upon Closing.
Notwithstanding the foregoing, in the event the Company commences a case under Chapter 11, then the payment of fees and reimbursement of expenses shall be governed by the terms of the order employing FocalPoint in said Chapter 11 case.
3. Term. This Agreement shall commence on the date hereof and shall terminate upon the earliest of: (a) the consummation of a Transaction or (b) the date this Agreement is terminated by either party at any time for any
reason by giving written notice to the other party not less than thirty (30) days before the effective date of such termination. Upon termination of the Agreement, the Company will reimburse FocalPoint for all unpaid expenses
incurred in connection with this Agreement through the effective date of termination. Notwithstanding the foregoing, if within eighteen (18) months following the termination by either party of this Agreement (the “Fee Period”): the Company (x) consummates a Transaction or (y) enters into a definitive agreement to effect a Transaction that is consummated concurrently therewith or at any time thereafter (including following the expiration of the Fee Period), FocalPoint will be entitled to receive upon the Closing thereof the Transaction Success Fee. The provisions of this
Agreement relating to payment of the Transaction Success Fee on any Earnouts, Transactions during the Fee Period, limitation on warranties, limitation on damages and indemnification set forth in Section 9 of this Appendix A, Company responsibilities, limitation on actions, confidentiality obligations set forth in Section 14 of this Appendix A, public references, credit, interpretation, assignment, waiver of jury trial/legal fees, arbitration and governing law shall survive any termination hereof.
4. Exclusivity. The Company agrees that FocalPoint shall be the Company’s sole and exclusive financial advisor in
connection with any proposed Transaction. The Company shall promptly identify to FocalPoint: (a) all potential Counterparties who have been in contact with the Company during the six months prior to FocalPoint’s engagement;
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and (b) all potential Counterparties who make inquiries to the Company during the term of the Agreement.
5. Reasonableness of Fees. The parties acknowledge that a substantial professional commitment of time and effort will be required of FocalPoint and its professionals to provide the Services, and that such commitment may foreclose
other opportunities for FocalPoint. Moreover, the actual time and commitment required to provide the Services may vary substantially, creating “peak load” issues for FocalPoint. Given the numerous issues that may arise in engagements such as this, FocalPoint’s commitment to the variable level of time and effort necessary to address such issues, the expertise and capabilities of FocalPoint that will be required in this engagement, and the market rate for FocalPoint’s services of this nature, the parties agree that the fee arrangement provided for herein is reasonable, fairly compensates FocalPoint, and provides the requisite certainty to the Company. Furthermore, FocalPoint shall not be required to maintain time records.
6. Retention of FocalPoint. In the event that the Company becomes or is a debtor under Chapter 11 of the
Bankruptcy Code, the Company shall use good faith efforts to promptly apply to the bankruptcy court having jurisdiction over the chapter 11 case or cases (the “Bankruptcy Court”) for the approval pursuant to sections 327 and 328 of the Bankruptcy Code of this Agreement and FocalPoint’s retention by the Company under the terms of
this Agreement and subject to the standard of review provided in section 328(a) of the Bankruptcy Code and not subject to any other standard of review under section 330 of the Bankruptcy Code (the “Application”). The Company
shall supply FocalPoint with a draft of the Application and any proposed order authorizing FocalPoint’s retention sufficiently in advance of the filing to enable FocalPoint and its counsel to review and comment thereon. FocalPoint shall cooperate with the Company in the preparation of the Application and will provide the Company and its counsel with the information and support necessary to prepare the Application. FocalPoint shall have no obligation to provide any services under this agreement unless the terms of this agreement are approved under section 328(a) of the Bankruptcy Code by a final order of the Bankruptcy Court no longer subject to appeal, rehearing, reconsideration
(other than under Fed. R. Civ. P. 60 or Fed. R. Bankr. P. 9024) or petition for certiorari, and which order is acceptable to FocalPoint in all respects. FocalPoint acknowledges that in the event that the Bankruptcy Court approves its retention by the Company, FocalPoint’s fees and expenses shall be subject to the jurisdiction and approval of the Bankruptcy Court under section 328(a) of the Bankruptcy Code and any applicable fee and expense guidelines and orders.
7. Fee Protections. The Company shall use good faith efforts to obtain “carve-outs” from secured lenders and/or an
order from the Court, in each case acceptable to FocalPoint, that provide that the Monthly Advisory Fees, Transaction Fees and other obligations owed to FocalPoint under this Agreement will be paid either directly from the proceeds of any Transaction, paid from other cash available to the Company including under new or existing credit lines, or paid from a “carve-out” from the collateral of the secured creditor (collectively, the “Fee Protections”), without further order from the Court, subject to authorization under section 328 of the Bankruptcy Code. FocalPoint shall be under no obligation to provide the services under this Agreement without Fee Protections acceptable to FocalPoint in its sole discretion, such acceptance not to be unreasonably withheld.
8. Company Responsibilities and Cooperation. a. The Company shall cooperate with FocalPoint in the performance by FocalPoint of the Services, including, without
limitation, by providing FocalPoint with reasonable facilities and timely access to data, information and personnel of the Company. The Company shall be responsible for the performance of its personnel and agents and for the
accuracy and completeness of all data and information provided to FocalPoint for purposes of the performance by FocalPoint of the Services. The Company acknowledges and agrees that FocalPoint’s performance is dependent upon the timely and effective satisfaction of the Company’s responsibilities hereunder and timely decisions and approvals of the Company in connection with the Services. FocalPoint shall be entitled to rely on all decisions and approvals of, and data and information provided by, the Company without independent
verification. The Company will promptly notify FocalPoint in writing of any material inaccuracy or misstatement in, or material omissions from, any information previously delivered to FocalPoint, or any materials provided to any interested party.
b. The Company, in consultation with its legal counsel, as appropriate, shall, without limitation, be solely responsible for the following in connection with the Services: (i) preparation of any historical and prospective financial statements, including, without limitation, financial projections supported by appropriate assumptions which, to the Company’s best knowledge and belief represent the Company’s results of operations and changes
in financial position; (ii) providing or preparing all data, material and other information concerning, without
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limitation, the business, assets, liabilities, and cash flows of the Company that FocalPoint reasonably requests in connection with the Services; (iii) preparation, negotiation, review, and execution of all documentation with respect to any transaction; (iv) determination of the value range or range of terms within which negotiations shall occur with respect to any transaction as well as the ultimate value, pricing and/or terms to be agreed to
in connection with any transaction; and (v) designation of a management-level individual or individuals to be responsible for all decisions with respect to the Services and FocalPoint’s involvement in activities associated with the Services, including, without limitation, the adequacy thereof.
c. The Company agrees that it is solely responsible for ensuring that any Transaction complies with applicable law. The Company further agrees that FocalPoint is not being engaged to: (i) provide, any fairness opinion with respect to a Transaction or its terms or any valuation of the Company, its securities or its assets, (ii) provide, nor shall it be responsible for providing, legal, tax or accounting advice, (iii) participate in the preparation or
interpretation of any legal documents or (iv) conduct any appraisal of assets or liabilities of the Company or any other person. Furthermore, FocalPoint’s services are limited to those specifically provided for in this Agreement, or subsequently agreed upon, in writing, by the parties hereto. FocalPoint shall have no obligation or responsibility for any other services.
d. It is expressly understood that, unless otherwise provided for herein, FocalPoint’s reports, recommendations, analyses, conclusions and other documents, if any, whether written or oral, do not, in whole or in part, constitute a fairness or solvency opinion or feasibility determination and the Services will be advisory in nature. FocalPoint
will not render any advice as to whether, or at what price, any Transaction should be entered into. The Company acknowledges that FocalPoint cannot commit the Company to the terms of any transaction, or consummate any transaction on behalf of the Company, and that the Company, through its management, shall make all decisions that commit the Company with respect to any transaction.
e. The Company agrees that none of it, its controlling equity holders, its affiliates or its management will initiate any discussions regarding a Transaction during the term of this Agreement except with prior consultation with
FocalPoint. In the event the Company, its controlling equity holders, its affiliates or its management receives any inquiry regarding a Transaction from any party, the Company shall promptly inform FocalPoint of such inquiry so that FocalPoint can assist the Company in evaluating such party and its interest in a Transaction and in any resulting negotiations.
f. The Company represents and agrees as follows:
i. If applicable, the Company shall assist FocalPoint with the preparation of a private placement memorandum or similar marketing document (the “Memorandum”). The Company shall not distribute
the Memorandum to any potential lender, investor or other third party without the prior written concurrence of FocalPoint.
ii. The Company agrees that it is solely responsible for the accuracy, completeness and appropriateness of any Memorandum, including, without limitation, all information contained in or omitted from any such Memorandum.
9. Limitation on Damages and Indemnification.
a. As a material part of the consideration for the agreement of FocalPoint to provide the Services, the Company
shall: (i) indemnify and hold harmless FocalPoint and its affiliates, and their respective past, present and future directors, officers, shareholders, partners, members, employees, agents, representatives, advisors, subcontractors and controlling persons (collectively, the “Indemnified Parties”), to the fullest extent lawful, from
and against any and all claims, losses, damages, expenses or liabilities (or actions in respect thereof), joint or several, (collectively “Claims”) arising out of or related to this Agreement, FocalPoint’s engagement under this Agreement, any transaction or any action taken or omitted to be taken by an Indemnified Party or the Company in connection with this Agreement and (ii) reimburse each Indemnified Party for all expenses (including, without limitation, the fees and expenses of counsel) as they are incurred in connection with investigating, preparing, pursuing, defending, settling or compromising any action, suit, dispute, inquiry, investigation or proceeding, pending or threatened, brought by or against any person (including, without limitation, any shareholder or
derivative action), arising out of or relating to the formulation or consummation of any transaction, this Agreement, or other such engagement, transaction or action. However, the Company shall not be liable under the foregoing indemnity and reimbursement agreement for any Claim which is finally judicially determined by a court of competent jurisdiction to have resulted solely from the bad faith, gross negligence or intentional
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misconduct of FocalPoint.
b. In circumstances where all or any portion of the provisions of this paragraph are finally judicially determined to be unenforceable, insufficient or unavailable for any reason the Company shall contribute to any Claims relating
to this engagement in such proportion that reflects the relative benefits to the Company, on the one hand, and to FocalPoint, on the other hand (whether or not a transaction is consummated). For purposes of this paragraph, the relative benefits to the Company and FocalPoint arising out of this engagement shall be deemed to be in the same proportion as the total value received or contemplated to be received by the Company as a result of or in connection with the Transaction contemplated by this Agreement bears to the fees actually paid to FocalPoint by the Company hereunder. If the allocation provided in the two immediately preceding sentences is unenforceable or unavailable for any reason, the Company shall contribute to such Claims, as is appropriate to
reflect not only the relative benefits received or contemplated to be received, as provided above, but also the relative fault that FocalPoint’s conduct bears to all other conduct giving rise to such Claims.
c. The Company shall not settle, compromise or consent to the entry of any judgment in or otherwise seek to terminate any pending or threatened action, suit, dispute, inquiry, investigation or proceeding in respect of
which indemnification or contribution may be sought hereunder (whether or not an Indemnified Party is an actual or potential party thereto), unless such settlement, compromise, consent or termination contains a
release of the Indemnified Parties reasonably satisfactory in form and substance to FocalPoint.
d. No Indemnified Party shall have any liability (whether direct or indirect and regardless of the legal theory advance) to the Company or any of its creditors, employees, directors or shareholders or any person or entity asserting claims for any Claims in an aggregate amount in excess of the fees paid by the Company to FocalPoint pursuant to this Agreement, except and solely to the extent that they are determined to have resulted solely
from the bad faith, gross negligence or intentional misconduct of FocalPoint. In no event shall any Indemnified Party be liable for consequential, special, indirect, incidental, punitive, or exemplary loss, damage, or expense relating to this engagement.
e. The indemnity, reimbursement, and other obligations and agreements of the Company set forth herein: (i) shall apply to any services provided by FocalPoint to the Company prior to the date hereof and to any modifications of this Agreement; (ii) shall be in addition to any obligation or liability which such parties may otherwise have
to any Indemnified Party, (iii) shall remain operative and in full force and effect regardless of any investigation made by or on behalf of such parties or any Indemnified Party or any person controlling any of them, and (iv) shall survive the completion of the Services and any expiration or termination of the relationship established by this Agreement.
f. Notwithstanding any p