1

The Debtors include: VPI Liquidation Corp., f/k/a Viking Plastics, Inc., Omega

Pultrusions, Incorporated, Carsonite International Corporation and Omega Polymers

Technologies, Inc.

1

UNITED STATES BANKRUPTCY COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

In the Matter of: :

:

VPI LIQUIDATION CORP.1 : Case No. 06-10992

f/k/a Viking Plastics, Inc. Et al : (Jointly Administered)

Debtor : CHAPTER 11

WILLIAM GATES : Document No. 83

Movant :

v. :

VPI LIQUIDATION CORP. ET AL :

HELLER FINANCIAL, INC. AND :

BAL GLOBAL FINANCE, LLC :

Respondents :

APPEARANCES:

GUY C. FUSTINE, ESQ. AND RICHARD A. LANZILLO, ESQ., ERIE, PA, ATTORNEYS

FOR DEBTORS

LAWRENCE C. BOLLA, ESQ., ERIE, PA, ATTORNEY FOR HELLER FINANCIAL, INC.

BRIAN I. SWETT, ESQ., CHICAGO, IL, ATTORNEY FOR HELLER FINANCIAL, INC.

MICHAEL KAMINSKI, ESQ. AND PAULA A. SCHMECK, ESQ., PITTSBURGH, PA,

ATTORNEYS FOR THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS

STEVEN W. MEYER, ESQ., MINNEAPOLIS, MN, ATTORNEY FOR ANDERSEN CORP.

DAVID B. SALZMAN, ESQ. AND STANLEY E. LEVINE, ESQ., PITTSBURGH, PA,

ATTORNEYS FOR WILLIAM GATES

HARRY W. GREENFIELD, ESQ., CLEVELAND, OH, ATTORNEY FOR CORPORATE

REVITALIZATION PARTNERS, LLC

KATHLEEN ROBB, ESQ, PITSBURGH, PA, ATTORNEY FOR THE UNITED STATES

TRUSTEE

BENTZ, WARREN W.

UNITED STATES BANKRUPTCY JUDGE

September 21 , 2006

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The within Opinion constitutes our findings of fact and conclusion of law.

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OPINION2

On August 21, 2006 (“Petition Date”) Omega Polymer Technologies, Inc. (“OPTI”),

Omega Pultrusions, Inc. (“Omega”), Carsonite International Corp. (“Carsonite”) and VPI

Liquidation Corp. f/k/a Viking Plastics, Inc. (“Viking”) filed voluntary Petitions under Chapter

11 of the Bankruptcy Code. By Order dated August 24, 2006, the Court granted the Debtors

Motion for Joint Administration which consolidated the cases for procedural purposes only and

Joint Administration. 

On September 7, 2006, William Gates (“Gates”) filed the within EMERGENCY

MOTION TO AUTHORIZE THE APPOINTMENT OF A NEW CHIEF EXECUTIVE

OFFICER, TERMINATE THE INTERIM CHIEF EXECUTIVE OFFICER AND THE

ENGAGEMENT OF COUNSEL FOR THE DEBTOR-IN-POSSESSION (“Motion”). The

Official Committee of Unsecured Creditors (“Committee”) supports the Motion. The Debtors,

Heller Financial, Inc. (“Heller”), BAL Global Finance, LLC (BAL”) or (Heller and BAL,

collectively, “Lenders”) and Corporate Revitalization Partners (“CRP”), Dennis Gerrard

(“Gerrard”) and Andersen Corporation (“Andersen”), oppose the Motion. An evidentiary

hearing was held on an Emergency Basis on September 13, 2006. All parties were afforded an

opportunity to file Briefs and the matter is now ripe for decision. 

FACTS

1, The Debtors

The Debtors are privately held, close corporations. OPTI is the parent organization and

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OPTI also conducted operations through Viking until August 3, 2006, when most of

Viking’s operating assets were sold prior to the bankruptcy filing.

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100% shareholder of Omega, Carsonite and Viking. OPTI conducts its operations through

Omega and Carsonite. 3 OPTI has limited assets and is not an operating company. 

Omega is a pultrusions company with an office and manufacturing facility located in

Aurora, Ohio. Its major customer is Andersen Company for whom Omega produces window

and door frames. 

Carsonite is a supplier of marking and safety products for the highway, utility and

recreation markets. It operates two manufacturing facilities at separate locations in South

Carolina. 

2. Debt Structure

The Lenders are owed approximately $12 Million as of the Petition Date and appear to be

secured by a first position on substantially all of the Debtors’ assets. 

Debtors were also parties to a Subordinated Loan Agreement dated May 29, 1998

(the “Subordinated Loan Agreement”) between OPTI and Morningstreet Partners, L.P.

(“Morningstreet”), as successor by assignment from Canterbury Mezzazine Capital, L.P. and

Canterbury Detroit Partners, L.P. OPTI’s obligations under the Subordinated Loan Agreement

appear to be secured by junior liens on substantially all of the Debtors’ assets. 

As of the Petition Date, the Debtors owed approximately $7.73 million on the

Subordinated Loan Agreement. On August 28, 2006, Liberty Acquisitions 825, L.C. (“Liberty”)

acquired the subordinated debt from Morningstreet.

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Debtors’ state that they also owe approximately $3.9 million in unsecured trade debt. 

The estimated liquidation value of the Debtors’ assets is $3.7 - 5.8 million. If the

operations are sold as going concerns, the value may be $8 million. 

3. Events Leading to Bankruptcy Filings

CRP is a turnaround and crisis management firm. Gerrard is a partner in CRP. CRP and

Gerrard were first engaged by the Debtors in February, 2006. Their role expanded between

February and the Petition Date. As of July 5, 2006 the Debtors’ Board of Directors appointed

Gerrard as Interim CEO and engaged CRP to provide corporate restructuring and consulting

service.

The Debtors, pursuant to an agreement dated August 19, 2006, expanded the scope of

CRP’s work “to provide adequate qualified personnel to perform services for client or on behalf

of the client’s bankruptcy ‘Estate’ for its shareholders, creditors or others.” The Debtors

authorized CRP to prepare the Debtors “for a Chapter 11 filing, §363 asset sale and/or orderly

wind down.” 

On August 20, 2006, a special meeting was convened of the Debtors’ Board of Directors. 

The Minutes of the Special Meeting reflect that the Lenders had advised Gerrard that they would

no longer fund the Debtors’ business operations unless the Debtors filed Chapter 11 cases and

proceeded with an orderly liquidation. At the conclusion of the Special Meeting, the Board of

Directors adopted a resolution to authorize the Chapter 11 filings. 

On August 21, 2006, the Debtors filed their voluntary Petitions under Chapter 11 of the

Bankruptcy Code. Subsequent to the Petition Date, between August 21, 2006 and August 28,

2006 all of the members of the Debtors’ Board of Directors resigned. 

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4. Liberty Acquisitions

Liberty is owned by Barbara Wortley. Gates is the chairman or manager of Liberty. 

During the afternoon of August 28, 2006, Gates as “Chairman” of Liberty, transmitted an offer

to purchase the principle assets of Omega. The offer expressly provided that it would remain

valid only until 5 P.M. EST on August 28, 2006. Liberty’s offer for Omega expired at 5 P.M.

EST on August 28, 2006. 

Later that same evening, Liberty entered into a Securities Purchase Agreement under

which it purchased the rights of Morningstreet under the Subordinated Loan Agreement for a

total purchase price of $100,000. Liberty has paid $1,000 to Morningstreet and does not have to

pay the remaining $99,000 unless it obtains control of OPTI. 

As part of the Subordinated Loan Agreement between OPTI and Morningstreet,

Morningstreet acquired, in addition to a Note, certain warrants and stocks. Liberty acquired both

the subordinated debt and the equity positions under the Securities Purchase Agreement with the

understanding that those positions provided Liberty a controlling interest in the equity of OPTI

and the right to appoint a director for OPTI. When Liberty purchased Morningstreets’ interest, it

had not examined any of OPTI’s corporate documents. Liberty now acknowledges that it did not

acquire a “controlling interest”, but rather approximately 40% of the equity.

Although never provided to the parties prior to trial, Gates provides as Exhibits an

undated Corporation Resolution for OPTI which is signed by Barbara Wortley as an OPTI

Shareholder, Securities owned by Liberty and states that “effective the 28th day of August, 2006,

William Gates is hereby appointed to the position of Director of the Company.” Similar

Corporate Resolutions are provided for Omega and Carsonite, except that the effective date is

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August 29, 2006 and both provide that “the Board of Directors of Omega Polymer Technologies,

Inc. hereby appoints William Gates to the Position of Director of the Company,” and they are

signed by William Gates as the Board of Directors - Omega Polymer Technologies, Inc.

On August 29, 2006, Gates appeared unannounced at OPTI’s principal offices in Aurora,

Ohio, and announced to Gerrard that he was the “controlling shareholder” of OPTI and was

assuming operational control of the company. Gates was accompanied by Joseph G. Wortley

and David Griffith, the President of Liberty Protrusions. Gerrard stated that he would not

abandon his position until sufficient proof was provided to support their claims.

Liberty Pultrusions (“Pultrusions”) is a competitor of Omega. On August 29, 2006,

counsel for Liberty transmitted an e-mail to counsel for the Lenders identifying Pultrusions as a

“sister entity” to Liberty and advising the Lenders that Liberty had acquired a 50% interest in the

equity of Omega with the right to appoint a director. At a hearing on August 31, 2006, counsel

for Liberty stated that “Liberty Acquisitions 825, LLC is a corporation that has a sister company

by the name of Liberty Pultrusions which has been engaged in a similar business to the Debtors

for approximately forty years and has been engaged successfully in that business.” Further, in

Exhibit A to Liberty’s motion filed August 30, 2006 at Document No. 56, Liberty identifies its

address as “Liberty Acquisitions 825, L.C. with an address c/o Liberty Pultrusions at 1757

Lebanon School Road, West Mifflin, Pennsylvania...” In a statement to the Court during the

August 31 hearing, Liberty’s counsel stated, “what they [Liberty] were equally surprised was

that as one of - - in the Debtors’ business plan, what was identified as one of its eight largest

competitors, that although they were told the company had been marketed as a going concern

they had never been contacted or made aware that the business was to be available.” 

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“Securities” is a defined term meaning the various classes of Common Stock and

Preferred Stock.

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Canterbury assigned its rights to Morningstreet and Gates purchased Morningstreet’s

rights. 

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Issue

Whether Gates’ designation and appointment as a Director of the Debtors is valid? 

Discussion

The Debtors’ corporate documents provide the requirements for the transfer of equity

positions and for the appointment of Directors. Section 6(a) of the Stockholder and Close

Corporation Agreement, as amended, provides that “the Stockholders shall not transfer or

otherwise dispose of any Securities owned by them, or any interest therein, and any attempt to do

so shall be void and ineffective for all purposes.”4 Section 6(a) continues and provides certain

exceptions to the general rule which are not applicable here and further provides that even if any

of the exceptions are applicable that, “[n]ot withstanding the foregoing, however, no such

transfer shall be made, unless consented to by the Company, to any person, group or entity which

may be deemed a competitor of the Company...”

Liberty is a competitor of OPTI and it never attempted to receive OPTI’s consent to the

transfer.

Section 5(a), as amended, provides that Canterbury shall be entitled to designate one

director.5

 Amended Section 5(a) further provides:

Each of the Stockholders agrees to vote its voting Securities to cause the election

of directors as contemplated by this Section 5(a). A director who a Stockholder is

entitled to designate may only be removed by such Stockholder, and such

Stockholder shall be entitled to fill any vacancy created by the death, resignation

or removal of a director designated by him/it. If any Stockholder (for purposes of

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Liberty asserts that by the acquisition of the subordinated debentures it acquired the

right to designate a director even if a transfer restriction was applicable to Morningstreet’s equity

position. The assertion is without merit. The Shareholder and Close Corporation Agreement

provides for a Stockholder to designate a director.

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this sentence, the Executives as a group will be treated as one Stockholder) who is

entitled to designate director(s) holds less than 50% of the Securities held by such

Stockholder at the close of business on the date hereof (other than by a transfer

permitted by Section 6(a) below, such Stockholder shall lose all of his or its rights

pursuant to this Section 5(a), and any directorship which is vacant and which had

previously been filed by a nominee or designee of such Stockholder shall be

elected by a vote of the stockholders in accordance with the Company’s

Certificate of Incorporation.

The Stockholders and Close Corporation Agreement provides the Stockholders the right

to designate directors. As a competitor of OPTI, Liberty is prohibited from owing an equity

interest in OPTI without OPTI’s consent. Liberty is therefore not a Stockholder “entitled to fill

any vacancy created by the death, resignation or removal of a director designated by him/it.”6

Since Liberty can not be a Stockholder, the Corporation Resolution appointing Gates as Director

of OPTI signed by Barbara Wortley on behalf of Liberty as shareholder is invalid. 

Even if the transfer of Morningstreet’s equity to Liberty could somehow be deemed

valid, Liberty’s attempt to “appoint” Gates to OPTI’s board fails under the Stockholders and

Close Corporation Agreement. The ability of OPTI’s stockholders to designate a director does

not complete the process. Section (2)(a) of Amended Stockholders and Close Corporation

Agreement which Amended §5(a) of the original agreement provides that “[e]ach Stockholder

agrees to vote its voting Securities to cause the election of directors as contemplated by this

Section 5(a).” There has never been a shareholder vote to elect Gates as director of OPTI. 

Gates asserts that he is filling the vacancy left upon the resignation of Morningstreet’s

previous director and that since the prior director “simply appointed himself, and that

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appointment was honored by other directors as stockholders” that Gates should be able to

appoint himself. 

It is possible that the prior appointment was made without following proper procedure. If

so, it was done without question from any interested party. 

We think it appropriate to follow the procedure set forth in the Corporate documents.

Section (2)(a) of the Amended Stockholder and Close Corporation Agreement which

Amends §5(a) of the original agreement provides:

If any Stockholder...who is entitled to designate director(s) holds

less than 50% of the Securities held by such Stockholder at the

close of business on the date hereof (other than by transfer

permitted by Section 6(a) below), such Stockholder shall lose all

of his or its rights pursuant to this Section 5(a) and any

directorship which is vacant and which had previously been filled

by a nominee or designee of such Stockholder shall be elected by a

vote of the stockholders in accordance with the Company’s

Certificate if Incorporation.

Pursuant to Section (2)(a), once Morningstreet sold its stock, it lost “all of ... its rights

pursuant to this Section 5(a)” and “any directorship which is vacant and which had previously

been filled by a nominee or designee of such Stockholder shall be elected by a vote of the

Stockholders in accordance with the Company’s Certificate of Incorporation”. 

The Restated By-Laws of OPTI provides at Section 2.3:

“any vacancy occuring in the Board ... may be filled by a majority of the

remaining members of the Board, although such majority is less than a quorum or

by a plurality of votes cast at a meeting of Stockholders...”

By the time Liberty executed its Securities Purchase Agreement with Morningstreet and

attempted to appoint Gates as a director, all of the other directors had resigned. There were no

remaining members to cast a vote to fill the vacancy and a meeting of the stockholders was not

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held. 

Gates directs our attention to Section 223 of Delaware’s General Corporation Law which

provides

(a) Unless otherwise provided in the certificate of incorporation or by laws:

(1) Vacancies [on the board] may be filled by a majority of the directors then in

office, although less than a quorum, or by a sole remaining director

8. Del. C. 223.

There were no remaining members of the Board to fill the vacancy. Further, as previously

discussed OPTI’s bylaws provide otherwise. 

Gates asserts that if Gates does not have the right or duty to govern the afffairs of the

Debtors, then the Debtors have no board of directors, leaving a void in the process of corporate

governance. 

Under Delaware General Corporation Law, further Board action in the Debtors’

bankruptcy cases is unnecessary: Section 303(a) of the Delaware General Corporation Law

provides:

Any corporation of this State, an order for which relief with respect to which has

been entered pursuant to Federal Bankruptcy Code, 11 U.S.C. §§101, et seq.,...

may put into effect and carry out any decrees and orders of the court or judge in

such bankruptcy proceeding and may take any corporate action provided or

directed by such decrees and orders, without further action by its directors or

stockholders. Such power and authority may be exercised by ... by designated

officers of the corporation ... with like effect as if exercised and taken by

unanimous action of the directors and stockholders of the corporation. 

8 Del. Code §303(a) (2006).

There is no dispute in this proceeding that CRP and Gerrard have acted as “designated

officers of the Corporation” pursuant to resolutions adopted by the Board of Directors of OPTI

on August 20, 2006. Under Section 303(a) of the Delaware General Corporation Law there

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exists no state corporate law impediment relative to further action to be taken by the Debtors’

authorized representatives pursuant to Order or approval of this Court.

Conclusions

For all of the foregoing reasons the EMERGENCY MOTION TO AUTHORIZE THE

APPOINTMENT OF A NEW CHIEF EXECUTIVE OFFICER, TERMINATE THE INTERIM

CHIEF EXECUTIVE OFFICER AND THE ENGAGEMENT OF COUNSEL FOR THE

DEBTOR-IN-POSSESSION filed by William Gates will be denied. A separate Order will be

entered.

 /s/ 

Warren W. Bentz

United States Bankruptcy Judge

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UNITED STATES BANKRUPTCY COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

In the Matter of: :

:

VPI LIQUIDATION CORP. : Case No. 06-10992

f/k/a Viking Plastics, Inc. Et al : (Jointly Administered)

Debtor : CHAPTER 11

WILLIAM GATES : Document No. 83

Movant :

v. :

VPI LIQUIDATION CORP. ET AL :

HELLER FINANCIAL, INC. AND :

BAL GLOBAL FINANCE, LLC :

Respondents :

O R D E R

This 21st day of September, 2006, in accordance with the accompanying Opinion, it

shall be and hereby is, Ordered that the EMERGENCY MOTION TO AUTHORIZE THE

APPOINTMENT OF A NEW CHIEF EXECUTIVE OFFICER, TERMINATE THE INTERIM

CHIEF EXECUTIVE OFFICER AND THE ENGAGEMENT OF COUNSEL FOR THE

DEBTOR-IN-POSSESSION filed by William Gates is DENIED.

 /s/ 

Warren W. Bentz

United States Bankruptcy Judge

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