SIDLEY AUSTIN LLP

Samuel A. Newman (pro hac vice pending) 

555 West Fifth Street 

Los Angeles, California 90013 

Telephone: (213) 896-6000 

Facsimile: (213) 896-6600 

Email: sam.newman@sidley.com

SIDLEY AUSTIN LLP

Jackson T. Garvey (pro hac vice pending) 

One South Dearborn 

Chicago, IL 60603 

Telephone: (312) 853-7000 

Facsimile: (312) 853-7036 

Email: jgarvey@sidley.com 

SIDLEY AUSTIN LLP

Rakhee V. Patel (TX Bar No. 00797213) 

Nathan Elner (TX Bar No. 24123173) 

Parker G. Embry (TX Bar No. 24126826) 

Chelsea McManus (TX Bar No. 24131499) 

2021 McKinney Avenue, Suite 2000 

Dallas, Texas 75201

Telephone: (214) 981-3300 

Facsimile: (214) 981-3400 

Email: rpatel@sidley.com

 nelner@sidley.com

 parker.embry@sidley.com

 cmcmanus@sidley.com 

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

In re:

IMPEL PHARMACEUTICALS INC., et al.1

 Debtors. 

Chapter 11 

Case No. 23-80016 (SGJ) 

(Joint Administration Requested) 

(Emergency Hearing Requested)

DEBTORS’ MOTION FOR ENTRY OF AN ORDER

(I)(A) APPROVING THE BID PROCEDURES; (B) AUTHORIZING THE

DEBTORS TO SELECT JN BIDCO LLC AS THE STALKING HORSE PURCHASER 

SUBSTANTIALLY ALONG THE TERMS DEFINED IN THE STALKING 

HORSE APA AND APPROVING BID PROTECTIONS; 

(C) ESTABLISHING BID DEADLINES, AN AUCTION, AND 

A SALE HEARING; (D) APPROVING THE FORM AND MANNER OF SALE 

NOTICE; (E) APPROVING ASSIGNMENT AND ASSUMPTION PROCEDURES; 

(F) APPROVING THE FORM AND MANNER OF POTENTIAL ASSUMPTION AND 

ASSIGNMENT NOTICE; (II)(A) AUTHORIZING THE SALE OF THE ASSETS FREE 

AND CLEAR; AND (B) APPROVING THE ASSUMPTION AND ASSIGNMENT 

OF DESIGNATED CONTRACTS; AND (III) GRANTING RELATED RELIEF

1 The Debtors in this chapter 11 case, together with the last four digits of the Debtor’s federal tax identification number, 

are: Impel Pharmaceuticals Inc. (8238); and Impel NeuroPharma Australia Pty Ltd (N/A). The Debtors’ service 

address is 201 Elliot Avenue West, Suite 260, Seattle, WA 98119. 

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The debtors and debtors in possession in the above-captioned chapter 11 cases

(collectively, the “Debtors”) state as follows in support of this motion: 

Relief Requested

1. The Debtors seek entry of an order, substantially in the form attached hereto (the 

“Bid Procedures Order”): 

a. approving the proposed bid procedures attached to the Bid Procedures 

Order as Exhibit 1 (the “Bid Procedures”) in connection with the Sale (as 

defined below) of the Assets (as defined below); 

b. authorizing the Debtors’ to select JN Bidco LLC or its designee as the 

Stalking Horse Purchaser substantially along the terms defined in the Asset 

Purchase Agreement Between Impel Pharmaceuticals Inc. and JN Bidco 

LLC (the “Stalking Horse APA”), attached as Exhibit 2 to the Bid 

Procedures Order; 

c. Authorizing and approving, if and to the extent payable pursuant to the 

terms of the Bid Procedures and the Stalking Horse APA, (i) a break-up fee 

(the “Break-up Fee” equal to $450,000 (i.e. approximately 2.6 % of the 

$17.5 million purchase price)); and (ii) the reimbursement from the Debtors 

of reasonable, documented out of pocket fees, costs, and expenses of the 

Stalking Horse Bid (as defined below) up to an amount equal to $300,000, 

in each of (i) and (ii), as more fully set forth in the Stalking Horse APA (the 

“Expense Reimbursement” and together with the Break-Up Fee, the “Bid 

Protections”);

d. establishing the dates and deadlines relating to the Bid Deadline, an auction 

for the Sale (the “Auction”), and, if necessary, a hearing to consider 

approval of the Sale (the “Sale Hearing”); 

e. approving the form of notice of the Sale, the Bid Deadline, the Auction, and 

the Sale Hearing, substantially in the form attached to the Bid Procedures 

Order as Exhibit 3 (the “Sale Notice”);

f. approving the assumption and assignment procedures attached to the Bid 

Procedures Order as Exhibit 4 (the “Assumption and Assignment 

Procedures”) for any executory contract or unexpired lease to be assumed 

by the Debtors and assigned to the bidder who submitted the highest or 

otherwise best bid (the “Winning Bidder”) pursuant to section 365 of the 

Bankruptcy Code (defined below) (if any) (the “Designated Contracts”);

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g. approving the form of notice to each non-Debtor counterparty to Designated 

Contracts (if any), substantially in the form attached to the Bid Procedures 

Order as Exhibit 5 (the “Assignment Notice”); and

h. granting related relief. 

2. In the event the Debtors determine to pursue consummation of a Sale in accordance 

with the Bid Procedures, the Debtors further seek entry of an order authorizing and approving 

(a) the sale of the Assets free and clear of all pledges, liens, security interests, encumbrances, 

claims, charges, options, and interests except to the extent otherwise set forth in the purchase 

agreement executed by the Debtors and the Winning Bidder, (b) the assumption and assignment 

of Designated Contracts (if any), and (c) granting related relief (the “Sale Order”).

Jurisdiction and Venue

3. The United States Bankruptcy Court for the Northern District of Texas (the 

“Court”) has jurisdiction over this matter pursuant to 28 U.S.C. § 1334. This matter is a core 

proceeding pursuant to 28 U.S.C. § 157(b). The Debtors confirm their consent, pursuant to rule 

7008 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), to the Court’s entry 

of a final order in connection with this motion. 

4. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409. 

5. The bases for the relief requested herein are sections 105(a) and 363 of chapter 11 

of title 11 of the United States Code (the “Bankruptcy Code”), Bankruptcy Rules 6003 and 6004, 

and Section E of the Procedures for Complex Chapter 11 Cases in the Northern District of Texas

(the “Complex Procedures”). 

Background 

6. Impel Pharmaceuticals Inc. (“Impel”) is a commercial-stage biopharmaceutical 

company with a mission to develop transformative therapies for people suffering from diseases 

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with high unmet medical needs, including the acute treatment of migraine headaches via Impel’s 

flagship drug—Trudhesa. 

7. On December 19, 2023 (the “Petition Date”), each Debtor filed a voluntary petition 

for relief under chapter 11 of the Bankruptcy Code. A detailed description of the Debtors and their 

business, including facts and circumstances giving rise to these chapter 11 cases is set forth in the 

First Day Declaration,2 filed contemporaneously with this motion and incorporated by reference 

herein. 

8. The Debtors are operating their business and managing their properties as debtors 

in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. Concurrently with 

the filing of this motion, the Debtors have requested procedural consolidation and joint 

administration of these chapter 11 cases pursuant to Bankruptcy Rule 1015(b). No party has 

requested the appointment of a trustee or examiner in these cases, and no statutory committee has 

been appointed. 

Declining Liquidity and Failed Efforts to Sell the Company

9. Since its inception, Impel has incurred losses from operations and generated 

negative cash flows from operating activities. In 2022, Impel achieved 55% of its corporate sales 

goals and the trend continued into the first half of 2023. Impel has therefore been dependent on 

its ability to raise additional capital to continue business operations. See First Day Declaration 

¶ 54. 

10. As more fully detailed in the First Day Declaration, Impel has consummated a 

number of successful capital raise efforts. See First Day Declaration ¶ 51. Impel has raised a total 

2 Capitalized terms used but not otherwise defined in this motion shall have the meanings ascribed to them in the 

Declaration of Brandon Smith, Chief Restructuring Officer of the Debtors, in Support of Chapter 11 Proceedings (the 

“First Day Declaration”).

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of $405.3 million in proceeds from issuance of its common stock, proceeds pursuant to the RIFA 

(as defined in the First Day Declaration), sale and issuance of redeemable convertible preferred 

stock, convertible notes, debt, and warrants as of September 30, 2023. See First Day Declaration 

¶ 56.

11. Beginning in August 2022, Impel began talks with a potential strategic purchaser 

of Impel’s assets. Those discussions continued until approximately January 2023 and the potential 

acquirer submitted a letter of intent to acquire Impel. However, as discussions continued, the 

potential acquirer terminated discussions and the transaction did not close. See First Day 

Declaration ¶ 57.

12. At the time of the collapse of the contemplated sale, Impel had less than 12 months 

of cash on hand. Impel’s Board determined to pursue an additional round of financing to meet 

liquidity needs in September 2022. See First Day Declaration ¶ 58. After extensive discussions 

and consideration of several presentations from Impel’s advisors, the Board determined that it was 

in the best interest of Impel to continue investing in sales and marketing efforts to support growth 

of Trudhesa and demonstrate the attractiveness of the product to potential financing sources and 

strategic partners. See First Day Declaration ¶ 59. 

13. In June 2023, Impel and its advisors progressed in its financing search with a 

number of interested parties. However, the indications of interests were contingent on finding a 

“lead” investor. When none materialized, the Debtors were ultimately unable to secure 

incremental financing. See First Day Declaration ¶ 60. 

14. In July 2023, Impel was not in compliance with the minimum liquidity covenant of 

its Senior Credit Documents (as defined in the First Day Declaration). As such, in July 2023, the 

Board met to consider next steps to address the ongoing liquidity crisis. In August 2023, Impel’s 

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cash flow forecast indicated that its liquidity runway would run out by the first week of September 

2023, particularly in light of lower than expected net sales of Trudhesa, tightening of the equity 

markets, and declining stock prices. The Board instructed management to engage advisors and 

establish a process whereby Impel and its advisors would review and evaluate various strategic 

alternatives available to the Company so that the Company could maintain its optionality while 

preserving assets and maximizing value for creditors and other parties in interest. See First Day 

Declaration ¶ 63–64. 

15. On August 7, 2023, the Board engaged Teneo, to serve as financial advisor to 

Impel. On August 16, 2023, Impel engaged Sidley Austin LLP (“Sidley Austin”), as legal counsel, 

to assist it in evaluation of potential restructuring transactions, including through a section 363 

sale, strategic alternative process, or the amendment of its existing debt. On September 15, 2023, 

the Board approved the retention of Moelis & Company LLC (“Moelis”), as investment banker, 

to assist in marketing the Debtors’ assets and soliciting potential purchasers. See First Day 

Declaration ¶ 65. 

16. Given Impel’s liquidity position, the Board tasked Impel’s management team and 

advisors with the evaluation of all strategic alternatives, including potential bridge financing, 

alternative capital raises, and a sale of the Debtors’ assets so that Impel could maintain its 

optionality while preserving assets and maximizing value for creditors and other parties in 

interests. See First Day Declaration ¶ 66. 

The Debtors’ Marketing Process

17. The Debtors, in consultation with Moelis, launched a prepetition marketing process 

for a sale of substantially all of the Debtors’ assets (the “Assets”) under section 363 of the 

Bankruptcy Code (the “Sale”) on September 19, 2023. The Debtors conducted a robust prepetition 

marketing process (the “Marketing Process”) primarily run by Moelis. Prior to the Petition Date, 

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Moelis contacted approximately 93 potential purchasers. Of those ninety-three (93) potential 

purchasers, twenty-two (22) parties entered into nondisclosure agreements with the Debtors in 

order to gain access to the virtual data room. Moelis shared teasers, a confidential information 

memorandum, financial models, other related financial and operational information, and a process 

letter with potential bidders. Relevant information regarding the Debtors’ business has been made 

available in the virtual data room, which includes more than 1,200 files comprising more than 

46,500 pages of diligence. The process letter provided to potential bidders included a deadline to 

submit an initial non-binding proposal by November 8, 2023. Two (2) parties made non-binding 

offers by this bid deadline, two (2) additional parties submitted proposals following the bid 

deadline but prior to the Petition Date, and each of these parties engaged in negotiations and further 

diligence on a potential purchase. Several additional parties articulated a desire to monitor the 

Debtors’ in-court sale process and re-engage on a potential purchase. No additional parties have 

come forward with a proposal since the bid deadline. 

18. After extensive discussions with potential purchasers and engaging with their key 

stakeholders, the Debtors, in an exercise of their business judgment, named JN Bidco LLC as 

stalking horse bidder for the Assets (the “Stalking Horse Purchaser”), on the terms and subject to 

the conditions more fully described under the Stalking Horse APA attached to the proposed Bid 

Procedures Order as Exhibit 2 (the “Stalking Horse Bid”) and in paragraphs 27 and 29 below. 

19. The Marketing Process was robust and appropriate to identify potential bidders for 

the Assets and, at this juncture, entry into the Stalking Horse Bid presents the best means to achieve 

the best available value of the Debtors’ estates for all stakeholders. See Contractor Declaration (as 

defined below) at ¶ 12. Moelis continues to engage with additional potential bidders, and will 

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continue to do so until a transaction for a sale of a material portion of the Debtors’ assets (a “Sale

Transaction”) is approved by this Court. Id.

The Bid Procedures and Sale Notice 

20. The Debtors seek approval of the Bid Procedures, attached to the Bid Procedures 

Order as Exhibit 1, to establish a clear and open process for the solicitation, receipt, and evaluation 

of bids on a timeline that would allow the Debtors to consummate a sale of the Assets. The Debtors 

are seeking approval of a sale prior to February 12, 2024. 

21. The Bid Procedures set forth: (a) the requirements for participation in the bidding 

and sale process, including the criteria to be designated as a Qualified Bid (as defined in the Bid 

Procedures and to include the Stalking Horse Bid), (b) the process for the submission and 

evaluation of bids, (c) the requirements for participation in, and rules governing the conduct of, 

the Auction, (d) the process for approval of the Sale of the Assets to the Winning Bidder and the 

designation of a Backup Bidder (as defined in the Bid Procedures), and (e) all related dates and 

deadlines. 

22. The Bid Procedures recognize and comport with the Debtors’ fiduciary obligations 

to maximize sale value, do not impair the Debtors’ ability to consider all Qualified Bids made at 

or prior to the Auction, and preserve the Debtors’ right to modify the Bid Procedures as necessary 

or appropriate to maximize value for the Debtors’ estate. See Declaration of Ashish Contractor in 

Support of the Debtors’ Motion for Entry of an Order (I)(A) Approving the Bid Procedures; (B) 

Authorizing the Debtors to select JN Bidco LLC as the Stalking Horse Purchaser Substantially 

Along the Terms Defined in the Stalking Horse APA and Approving Bid Protections; 

(C) Establishing Bid Deadlines, an Auction, and a Sale Hearing; (D) Approving the Form and 

Manner of Sale Notice; (E) Approving Assignment and Assumption Procedures; (F) Approving 

the Form and Manner of Potential Assumption and Assumption Notice; (II)(A) Authorizing the 

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Sale of the Assets Free and Clear; and (B) Approving the Assumption and Assignment of 

Designated Contracts; and (III) Granting Related Relief attached hereto as Exhibit B. (the 

“Contractor Declaration”) at ¶ 13–20. 

23. The Debtors urge that a prompt schedule for the sale of the Assets be established in 

these chapter 11 cases in order to maximize the value of the Debtors’ estates. See Contractor 

Declaration at ¶ 18–19. Accordingly, the proposed Bid Procedures provide the following timeline 

for the marketing and bid process for each of the propose of the proposed Sale Transaction as 

follows: 

SALE TRANSACTION MILESTONES

EVENT OR DEADLINE DATE AND TIME

(ALL IN PREVAILING CENTRAL TIME)

Petition Date P = 0 (Tuesday, December 19, 2023)

Bid Procedures Objection Deadline 7 days prior to the hearing to approve the Bid 

Procedures, at 4:00 pm CT

Initial Cure Notice Deadline P + 17 (January 5, 2024)

Bid Procedures Hearing P + 22 (January 10, 2024) at [TBD]

Service and Publication of Sale Notice 1 business day after entry of the Bid Procedures 

Order or as soon as reasonably practicable 

thereafter

Bid Deadline3 P + 35 (January 23, 2024) at 4:00 pm

Sale Objection Deadline P + 37 (January 25, 2024) at 4:00 pm

Cure Objection Deadline P + 38 (January 26, 2024) at 4:00 pm

Determination of Qualified Bids As soon as reasonably practicable following the 

Bid Deadline

Auction (if necessary) P + 41 (January 29, 2024) at 9:00 am

Deadline to File Notice of Winning Bid As soon as reasonably practicable following the 

Auction

Post-Auction Objection Deadline P + 42 (January 30, 2024) at 4:00 pm

Sale Hearing P + 44 (February 1, 2024) at [TBD]

Anticipated Closing Date P + 55 (February 12, 2024)

24. The Debtors have an urgent need to sell the Assets quickly and efficiently. The 

Budget attached as Exhibit 1 to the proposed interim order filed with the Debtors’ Emergency 

3 The Debtors reserve their right, in their own discretion, to move the deadline for the submission of qualified bids.

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Motion for Entry of Interim and Final Orders Authorizing the Use of Cash Collateral; 

(II) Granting Adequate Protection to Prepetition Term Loan Secured Parties; (III) Modifying

Automatic Stay; (IV) Scheduling a Final Hearing; and (V) and Granting Related Relief filed 

contemporaneously herewith projects that, without the proceeds from the sale to the Stalking Horse 

Bid, the Debtors will deplete their remaining cash on hand by approximately the end of March. 

As a result, the Debtors are seeking approval of an expedited timeline for the Sale in an effort to 

ensure that the Debtors have sufficient cash reserves to reach consummation of the Sale. The 

approximately five (5)-week postpetition marketing and bid process strikes an appropriate balance 

under the facts that exist here, including that the Debtors have extensively marketed the Assets

prior to these chapter 11 cases and that the Debtors entered into the Stalking Horse APA with the 

Stalking Horse Purchaser to establish a floor for the purchase price of the Assets. Id. ¶ 19. 

25. The Debtors also request approval of the Sale Notice, substantially in the form 

attached to the Bid Procedures Order as Exhibit 3. The Debtors propose to serve the Sale Notice 

on all known parties-in-interest in the chapter 11 case, and publish the sale notice on the Debtors’ 

claims, noticing, and solicitation agent’s website for the case. The Debtors submit that service of 

the Sale Notice as set forth in the Bid Procedures is proper and sufficient to provide notice of the 

Auction, the deadline to object to the Sale Transaction, the deadline to object to the Cure Amounts, 

the deadline to object to the assumption and assignment of any desired contracts, and the Sale 

Hearing to all known and unknown parties. 

Stalking Horse Bidder and Bid Protections

26. The Debtors and the Stalking Horse Purchaser have agreed upon the Stalking Horse 

APA, attached to the proposed Bid Procedures Order as Exhibit 2, whereby the Stalking Horse 

Purchaser will purchase the Assets. The Debtors submit that the Stalking Horse APA promotes 

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competitive bidding and maximization of the value of the Assets by establishing a baseline bid in 

connection with the Bid Procedures. See Contractor Declaration ¶ 24. 

27. The material terms of the Stalking Horse APA are summarized in the following 

table:4

SUMMARY OF STALKING HORSE APA

Parties The Stalking Horse APA is entered into by and between JN Bidco LLC

(“Buyer”) and Impel Pharmaceuticals Inc. (the “Seller”).

Purchase Price

(Stalking Horse 

APA, Section 2.9)

At the Closing, Buyer will pay to Seller an amount equal to US $17,500,000.

(the “Purchase Price”). 

For purposes of calculating the Break-Up Fee as a percentage of the Purchase 

Price, the Purchase Price includes only the $17,500,000 upfront purchase 

price and excludes any post-closing contingent consideration, which likely 

has significant option value. 

As provided by Section 2.13 of the Stalking Horse APA, the Buyer is provided 

certain Additional Consideration, including Earn-out Payments, both as 

defined by the Stalking Horse APA. These Earn-out Payments include: 

• Ten percent (10%) of the amount, if any, by which the annual products

Product Net Sales (as defined in the Stalking Horse APA) for each 

fiscal year exceeds $20,000,000 but are less than or equal to 

$45,000,000 during each fiscal year of the Earn-out Period (as defined 

in the Stalking Horse APA); 

• Fifteen percent (15%) of the amount, if any, by which the annual 

Product Net Sales for each fiscal year exceeds $45,000,000 during 

each fiscal year of the Earn-out Period; 

• A $4,000,000 one-time payment when the annual Product Net Sales 

equal or exceed $65,000,000 for a fiscal year during the Earn-out 

Period; and a $8,000,000 one-time payment when the annual Product 

Net Sales equal or exceed $100,000,000 for a fiscal year during the 

Earn-out Period.

Purchased Assets

(Stalking Horse 

APA, Section 2.1)

As more fully detailed in the Stalking Horse APA attached hereto, the 

Transferred Assets consist of the following assets, properties and rights of 

Seller and its Subsidiaries:

• The Trudhesa Assets;

• The POD Technology Assets; 

• all supplies and other inventories Used in the Business; 

• to the extent transferable, the Seller Permits (including any applications 

that are in process) Used in the Business; 

4 The following summary is provided for convenience purposes only. All capitalized terms that are used in this 

summary but not otherwise defined herein shall have the meanings ascribed such terms in the Stalking Horse APA 

attached to the Bid Procedures Order as Exhibit B. To the extent any of the terms below are inconsistent with the 

Stalking Horse APA, the Stalking Horse APA shall control in all respects.

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SUMMARY OF STALKING HORSE APA

• all Contracts to which a member of the Seller Group is a party and which 

are Used in the Business, all of which are listed on Schedule 2.1(e) to the 

Stalking Horse APA excluding Contracts that expire or are terminated 

prior to the Closing and all Designated Contracts that Purchaser elects to 

assume pursuant to Section 5.3(b) of the Stalking Horse APA; 

• all material original books and records, documents, data and information 

of the Seller Group solely related to the Business, other than the Excluded 

Books and Records; provided, however, that the Seller Group shall be 

entitled to retain copies of any such materials; 

• all rights to receive mail and other correspondences and communications 

(including electronic mail) addressed to Seller relating solely to the 

Product (including any such mail and other correspondence and 

communications (including electronic mail) from the FDA or any other 

Governmental Authority, customers, advertisers, suppliers, distributors, 

agents and others and payments with respect to the Product); 

• the Owned Intellectual Property Assets, including that Intellectual 

Property set forth on Schedule 2.1(g) and all (i) royalties, fees, income, 

payments, and other proceeds now or hereafter due or payable to any 

member of the Seller Group with respect to such Intellectual Property, 

and (ii) claims and causes of action with respect to such Intellectual 

Property, whether accruing before, on, or after the Agreement Date, 

including all rights to and claims for damages, restitution, and injunctive 

and other legal or equitable relief for past, present, or future infringement, 

misappropriation, or other violation thereof; 

• all equipment, and other tangible personal property, including carts, 

dollies, office furniture and fixtures, computers, security systems, 

telephone and internet equipment and maintenance equipment and 

supplies, Used in the Business and owned by the Seller Group listed on 

Schedule 2.1(h): 

• all of the Seller Group’s rights, claims or causes of action against third 

parties relating to the assets, properties, business or operations of the 

Seller Group with respect to the Business, the Transferred Assets and the 

Assumed Liabilities (including all guaranties, warranties, indemnities and 

similar rights in favor of the Seller Group or any their Affiliates to the 

extent solely related to the Transferred Assets or the Assumed Liabilities), 

in each case, whether arising by way of counterclaim or otherwise, and 

whether arising out of transactions occurring prior to, on or after the 

Closing Date, except for such rights, claims and causes of related to the 

Excluded Assets or Excluded Liabilities;

• all prepaid expenses, claims, deposits, prepayments, refunds, causes of 

action, demands, actions, suits, choses in action, rights of recovery, rights 

under guarantees, warranties, indemnities and all similar rights against 

third parties, rights of setoff and rights of recoupment, in each case, to the 

extent used in or held for use for the Transferred Assets listed in the

clauses above or the Assumed Liabilities; 

• all accounts receivable, intercompany obligations and other amounts 

receivable by the Seller Group; and

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SUMMARY OF STALKING HORSE APA

• all inventory of the Seller Group.

Excluded Assets

(Stalking Horse 

APA, Section 2.2)

Notwithstanding anything to the contrary set forth in this Agreement or in any 

of the other Transaction Documents, the Parties expressly acknowledge and 

agree that nothing in this Agreement shall be construed to obligate any Seller 

to Transfer to Buyer any assets, properties or rights of Seller other than the 

Transferred Assets, that are not listed in Section 2.1 of the Stalking Horse 

APA, including the following (the “Excluded Assets”), which shall be 

excluded from the Transferred Assets. The Excluded Assets of the Stalking 

Horse APA, include, but are not limited to: 

• all (i) cash and cash equivalents, wherever located, including bank 

balances and bank accounts or safe deposit boxes, monies in the 

possession of any banks, savings and loans or trust companies and similar 

cash items, (ii) escrow monies and deposits in the possession of landlords 

and utility companies, and (iii) investment securities and other short- and 

medium-term investments;

• all records, documents or other information exclusively relating to current 

or former employees of the Seller Group that are not hired by Purchaser, 

and any materials to the extent containing information about any 

employee, disclosure of which would violate Applicable Law or such 

employee’s reasonable expectation of privacy; 

• any interest of the Seller Group under this Agreement or the Related 

Documents, including the right to receive the Purchase Price and to 

enforce the Seller’s rights and remedies thereunder; 

• all Excluded Contracts (including all prepaid assets relating to the 

Excluded Contracts), other than the Assigned Contracts, to which any 

member of the Seller Group or any of their respective Affiliates is a party;

• any (i) Attorney-Client Information arising from communications prior to 

the Closing Date between a member of the Seller Group (including any 

one or more officers, directors or stockholders of such Seller Group 

member), on the one hand, and its counsel, on the other hand, and 

(ii) claims under any director and officer, errors and omissions, fiduciary 

and commercial crime insurance policies; 

• any rights of the Seller Group to Asset Tax refunds (or credits for 

overpayment of Taxes in lieu of a refund) attributable to any Pre-Closing 

Tax Period; 

• all Permits (including applications therefor and any trade or import/export 

Permits) that (i) are not materially related to the Business or (ii) are not 

transferable to Purchaser under Applicable Law; 

• the Excluded Books and Records; 

• any assets not otherwise designated as Transferred Assets or from time to 

time designated by the parties hereto as Excluded Assets;

• the Avoidance Actions; 

• all of the Seller Group’s rights, claims or causes of action against third 

parties relating to the assets, properties, business or operations of the 

Seller Group (including all guaranties, warranties, indemnities and similar 

rights in favor of the Sellers Group or any of their Affiliates) to the extent 

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SUMMARY OF STALKING HORSE APA

arising under the Bankruptcy Code or relating to any of the Excluded 

Assets or Excluded Liabilities, in each case, whether arising by way of 

counterclaim or otherwise, and whether arising out of transactions 

occurring prior to, on or after the Closing Date; 

• all of the Seller Group’s right, title and interest to any the assets set forth 

on Schedule 2.2(n) to the Stalking Horse APA; and 

• all prepaid expenses, claims, deposits, prepayments, refunds, causes of 

action, demands, actions, suits, rights of recovery, rights under 

guarantees, warranties, indemnities and all similar rights against third 

parties, rights of setoff and rights of recoupment, in each case, to the 

extent exclusively related to or exclusively used in or held for use for the 

Excluded Assets listed in the clauses above (APA § (a)-(m)).

Assumed 

Liabilities

(Stalking Horse 

APA, Section 

2.3(a))

The Purchaser is required to assume and agree to perform and discharge, when 

due, the following Assumed Liabilities: 

• all Liabilities relating to the Transferred Assets, whether incurred or 

arising prior to, at or after the Closing (other than those Liabilities relating 

to any breach, tort including any tort based on a failure to warn, failure to 

comply with law, failure to comply with industry standards, Nitrosamine 

Liabilities, or other wrongful conduct); 

• subject to Section 2.4 of the Stalking Horse APA, all Liabilities arising 

under the Assigned Contracts, whether incurred or arising prior to, at or 

after the Closing (other than those Liabilities relating to any breach, tort 

including any tort based on a failure to warn, failure to comply with law, 

failure to comply with industry standards, Nitrosamine Liabilities, or 

other wrongful conduct), and all of the Determined Cure Costs; 

• all Taxes for which Purchaser is liable pursuant to this Agreement; 

• all accounts payable and other intercompany obligations of the Seller 

Group to the extent related to the Business and arising following the 

Petition Date; and

• other Liabilities that are listed on Schedule 2.3(d) to the Stalking Horse 

APA. 

Excluded 

Liabilities

(Stalking Horse 

APA, Section 2.4)

Notwithstanding Section 2.3 of the Stalking Horse APA, Purchaser is 

assuming only the Assumed Liabilities of the Seller Group and will not 

assume or be liable for any Excluded Liabilities (including Seller Group 

Taxes), and the Seller Group shall retain and shall be responsible for, all 

Liabilities of that are not Assumed Liabilities, including all Liabilities 

related to Excluded Assets or any other liabilities of the Business (all such 

Liabilities not being assumed herein referred to as the “Excluded 

Liabilities”).

Bid Protections

(Stalking Horse 

APA, Section 9.3)

The Bid Protections consist of (i) a termination fee equal to $450,000 (i.e. 

approximately 2.6% of the $17.5 million purchase price); and (ii) the 

reimbursement from the Debtors of reasonable, documented out of pocket 

fees, costs, and expenses of the Bid up to an amount equal to $300,000, in 

each of (i) and (ii), as more fully set forth in the Stalking Horse APA. 

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SUMMARY OF STALKING HORSE APA

For purposes of calculating the Break-Up Fee as a percentage of the Purchase 

Price, the Purchase Price includes only the $17,500,000 upfront purchase 

price and excludes any post-closing contingent consideration which likely has 

significant option value.

Termination 

Events 

(Stalking Horse 

APA, Section 9.1)

The Stalking Horse Agreement may be terminated and the Transactions may 

be abandoned at any time prior to the Closing: 

• by mutual written consent of Purchaser and Seller; 

• automatically, upon (i) the consummation of a sale or other disposition of 

all or substantially all of the Transferred Assets to a Person other than 

Purchaser (each, an “Alternate Transaction”), (ii) if, at close of the 

Auction, Purchaser’s bid has not been selected as either the winning bid 

or the Back-Up Bid or (iii) if, at the close of the Auction, Purchaser’s bid 

was selected as the Back-Up Bid, upon the consummation of a Competing 

Bid or Alternative Transaction; 

• by Purchaser or the Seller by written notice to Purchaser or the Seller from 

the other, if the Bankruptcy Case is dismissed or converted to a case under 

chapter 7 of the Bankruptcy Code; 

• by Purchaser or the Seller by written notice to Purchaser or the Seller from 

the other, if Purchaser is not selected as having the winning bid or BackUp Bid at Auction, if any; 

• by Purchaser if the Seller (i) withdraws the motion for the Sale Order, or 

publicly announces its intention to withdraw such motion, (ii) moves to 

voluntarily dismiss the Bankruptcy Cases, (iii) moves for conversion of 

the Bankruptcy Cases to Chapter 7 of the Bankruptcy Code, or (iv) moves 

for appointment of an examiner with expanded powers pursuant to 

Section 1104 of the Bankruptcy Code or a trustee in the Bankruptcy 

Cases; 

• by Purchaser, by written notice from Purchaser to the Seller, if there has 

been a breach or inaccuracy of a covenant, representation or warranty 

made by the Seller in this Agreement, such that the conditions in Section 

8.1 or Section 8.2 of the Stalking Horse APA are not capable of being 

satisfied and which breach is incapable of being cured or, if capable of 

being cured, has not been cured by the Seller prior to the earlier of (i) 20 

Business Days after receipt of written notice from Purchaser requesting 

such breach be cured or (ii) the Outside Date; provided, however, that the 

right to terminate the Stalking Horse APA pursuant to Section 9.1(f) of 

the Stalking Horse APA shall not be available to Purchaser if the failure 

of Purchaser to fulfill any of its obligations under this Agreement has been 

the primary cause of, or resulted in, such breach, or if the conditions in 

Section 8.1 or Section 8.3 of the Stalking Horse APA are not capable of 

being satisfied because there is then a breach or inaccuracy of a covenant, 

representation or warranty made by Purchaser in this Agreement; 

• by the Seller, by written notice from the Seller to Purchaser, if there has 

been a breach or inaccuracy of a covenant, representation or warranty 

made by Purchaser in this Agreement, such that the conditions in Section 

8.1 or Section 8.3 are not capable of being satisfied and which breach is 

incapable of being cured or, if capable of being cured, has not been cured 

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SUMMARY OF STALKING HORSE APA

by Purchaser prior to the earlier of (i) 20 Business Days after receipt of 

written notice from the Seller requesting such breach be cured or (ii) the 

Outside Date; provided, however, that the right to terminate this 

Agreement pursuant to Section 9.1(g) of the Stalking Horse APA shall 

not be available to the Seller if the failure of the Seller to fulfill any of its 

obligations under this Agreement has been the primary cause of, or 

resulted in, such breach, or if the conditions in Section 8.1 or Section 8.31

of the Stalking Horse APA are not capable of being satisfied because there 

is then a breach or inaccuracy of a covenant, representation or warranty 

made by the Seller in of the Stalking Horse APA; 

• by Purchaser or the Seller, by written notice from Purchaser or the Seller 

to the other, if any Governmental Authority of competent jurisdiction 

shall have issued an Order, enacted any Applicable Law or taken any 

other action restraining, enjoining or otherwise prohibiting the 

consummation of the Transactions and, in the case of Orders and other 

actions, such Order or other action shall have become Final Orders; 

provided, however, that the right to terminate the Stalking Horse APA 

pursuant to Section 9.1(h) of the Stalking Horse APA shall not be 

available to the party seeking to terminate if any action of such party or 

any failure of such party to act has contributed to such Order or other 

action and such action or failure constitutes a breach of this Agreement; 

or 

• by Purchaser or the Seller, by written notice from Purchaser or the Seller 

to the other, if the Closing has not occurred on or prior to March 13, 2023 

(the “Outside Date”); provided, however, that the party exercising the 

right to terminate this Agreement pursuant to Section 9.1(i) of the Stalking 

Horse APA shall not have been responsible for such failure of the Closing 

to occur through a breach or inaccuracy of a covenant, representation or 

warranty contained in this Agreement.

• By Purchaser by written notice to the Seller if the Bankruptcy Court 

does not approve the Bid Procedures Order without any material 

modifications (other than such modifications reasonably acceptable to 

Purchaser) to the protections to Purchaser set forth in Section 9.3(a) or 

Section 9.3(b) of the Stalking Horse APA.

28. The Debtors submit that the purchase price agreed upon for the Assets in the 

Stalking Horse APA is the result of extensive, good-faith, arm’s-length negotiations, and is 

currently the highest and best proposal. The Debtors’ proposed entry into the Stalking Horse APA 

for the Assets is in the best interest of the Debtors’ estates and constitutes a good exercise of the 

Debtors’ business judgment. See Contractor Declaration Decl. ¶ 25. 

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29. The Stalking Horse APA contains (a) a provision for expense reimbursement (the 

“Expense Reimbursement”) not to exceed $300,000 following the termination of the Stalking 

Horse APA under certain circumstances, and (b) the Break-Up Fee equal to $450,000, which 

equates to approximately 2.6% of the cash Purchase Price,5 payable in the event that the Stalking 

Horse APA is terminated under certain circumstances and the Debtors consummate an alternative 

transaction. Id. ¶ 26. Based on the marketing process and arms’-length negotiations between the 

Debtors and the Stalking Horse Purchaser, the Debtors have determined that Bid Protections are 

necessary to retain the Stalking Horse Purchaser’s commitment to the consummation of the Sale 

Transaction. Id. ¶ 27–29. The Bid Protections, if earned, are deemed earned upon the occurrence 

of the specific events described in Sections 9.3(a) and 9.3(b) of the Stalking Horse APA. 

Additionally, for the avoidance of doubt, the Stalking Horse Purchaser shall not be required to 

include an amount in cash necessary to satisfy the Bid Protections as part of any Overbid (as 

defined in the Bid Procedures). 

30. The Debtors have agreed that their obligation to pay the Bid Protections pursuant 

to the Stalking Horse APA shall, upon entry of the Bid Procedures Order, constitute an allowed 

superpriority administrative expense of the Debtors with priority over any and all administrative 

expenses of the kind specified in section 503(b) of the Bankruptcy Code. 

The Assumption and Assignment Procedures and Assignment Notice

31. The Debtors are seeking approval of the Assumption and Assignment Procedures 

attached to the Bid Procedures Order as Exhibit 4 in the event the Winning Bidder designates any 

contract or lease for assignment in the Winning Bid in accordance with the Bid Procedures. In 

5 For purposes of calculating the Break-Up Fee as a percentage of the Purchase Price, the Purchase Price includes only 

the $17,500,000 upfront purchase price and excludes any post-closing contingent consideration. 

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such instance, the Assumption and Assignment Procedures (including service of the Assignment 

Notice) will notify the counterparties to any Designated Contracts of the intended assumption and 

assignment of their contracts and the Debtors’ calculation of any cure cost. The Debtors also 

request approval of the Assignment Notice, substantially in the form attached to the Bid Procedures 

Order as Exhibit 5. 

Bid Procedures and Sale Motion Key Terms 

32. In accordance with Sections 17 and 19 of the Complex Procedures, below is a chart 

highlighting the inclusion of certain key terms in the Motion, proposed Bid Procedures Order, 

proposed Sale Order, or other documents. 

RELEVANT COMPLEX 

PROCEDURES PROVISION

SUMMARY6 LOCATION IN 

MOTION, BID 

PROCEDURES,

OR ORDER

Complex Procedures,

Part E Section 17(c) 

Releases, Exculpations and 

Indemnifications 

Section 10.6 of the Stalking Horse APA provides 

general releases effective as of the closing. Those 

releases generally provide that the Seller and 

Purchaser, upon closing, are provided irrevocable 

and unconditional releases for all claims, Actions, 

causes of action, suits, rights, agreements, 

Liabilities and demands whatsoever and all 

consequences thereof, known or unknown, actual 

or potential, suspected or unsuspected, fixed or 

contingent, both in law and in equity, whether 

existing as of the Closing or arising thereafter, 

that a Purchaser Releasing Party has or may have, 

now or in the future, arising out of, relating to, or 

resulting from any act or omission, error, 

negligence, breach of contract, tort, violation of 

law, matter or cause whatsoever from the 

beginning of time to the Closing Date.

Stalking Horse 

APA § 10.16 

Complex Procedures,

Part E Section 17(e) 

The Stalking Horse APA provides for an Outside 

Date of March 13, 2024. The proposed order 

approving the Debtors’ use of their secured 

lenders’ cash collateral includes a milestone that 

Stalking Horse 

APA § 9.1(i) 

6 The summaries contained in herein are qualified in their entirety by the provision of the documents referenced. To 

the extent anything in this summary is inconsistent with such documents, the terms of the applicable documents shall 

control. Capitalized terms used in this summary chart but not otherwise defined have the meanings ascribed to them 

in the Motion, Bid Procedures Motion, or Proposed Sale Order, as applicable.

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Closing and Other 

Deadlines 

the sale of the Debtors’ assets must be completed 

by no later than February 14, 2024, and the 

Debtors anticipate closing the sale by no later than 

February 12, 2024

Complex Procedures,

Part E Section 17(f) 

Good Faith Deposit 

The Stalking Horse APA required the Stalking 

Horse Purchaser to deposit $1,500,000 into the 

Deposit Escrow Account upon execution of the 

Stalking Horse APA, which occurred on 

December 18, 2023. 

The Bid Procedures contemplate that to be 

deemed a Qualified Bid, a bid must be 

accompanied by a cash deposit by wire transfer to 

an escrow agent selected by the Debtors in an 

amount equal to 2.6% of the bidder’s Proposed 

Purchase Price. A defaulting Winning Bidder’s 

or Back-Up Bidder’s Good Faith Deposit shall be 

forfeited to the Debtors. 

This provision was included to ensure the good 

faith of prospective bidders. 

Stalking Horse 

APA recitals; §

2.9 

Bid Procedures 

§ X 

Complex Procedures,

Part E Section 17(i) 

Record Retention 

Purchaser shall keep, for so long as required under 

Purchaser’s internal records retention policies, 

books and records pertaining to the Product Net 

Sales of the Products with respect to each fiscal 

year.

Stalking Horse 

APA § 2.13(f) 

Complex Procedures,

Part E Section 17(j) 

Sale of Avoidance Actions

Avoidance Actions are Excluded Assets from the 

Sale Transaction and shall be retained by the 

Seller pursuant to Section 2.2 of the Stalking 

Horse APA.

Stalking Horse 

APA § 2.2 

Complex Procedures,

Part E Section 17(k) 

Requested Findings as to 

Successor Liability 

The Stalking Horse APA requires that the order of 

this Court approving consummation of the 

Stalking Horse APA shall provide that the sale is 

free and clear of any successor liability, liens, 

claims, end encumbrances, except for the 

Assumed Liabilities set forth in the APA. 

The Stalking Horse Purchaser would not have 

entered into the Stalking Horse APA and would 

not consummate the transactions contemplated 

thereby if the Sale Transaction were not, except as 

otherwise provided in the APA, free and clear of 

all liens, claims, encumbrances, and successor 

liability of any kind or nature whatsoever, or if the 

Stalking Horse Purchaser were not free of all 

successor liability with respect to Debtors’ 

liabilities, except as expressly assumed in the 

APA.

Stalking Horse 

APA § 5.2 

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Further, other Bidders may not make Qualified 

Bids for the Debtors’ assets or consummate the 

transactions contemplated thereby if the sale of 

the Assets to the Winning Bidder were not, except 

as otherwise provided in the purchase agreement 

for such bids, free and clear of all liens, claims, or

encumbrances of any kind or nature whatsoever, 

or if the Winning Bidder were not free of all 

successor liability with respect to Debtors’ 

liabilities, except as expressly assumed in the 

relevant asset purchase agreement.

Complex Procedures,

Part E Section 17(n)

Relief from Bankruptcy Rule 

6004(h)

The Debtors request that the Court enter an order 

providing that notice of the relief requested herein 

satisfies Bankruptcy Rule 6004(a) and that the 

Debtors have established cause to exclude such 

relief from the fourteen-day stay period under 

Bankruptcy Rule 6004(h), which is necessary to 

implement the relief requested in this motion.

Motion ¶ 45; 

Bid Procedures 

Order ¶ 18

Complex Procedures,

Part E Section 19(a)(ii)

Break-Up/Topping Fees and 

Expense Reimbursement

The Bid Protections consist of (i) a termination 

fee equal to $450,000 (i.e. approximately 2.6% of 

the $17.5 million purchase price); and (ii) the 

reimbursement from the Debtors of reasonable, 

documented out of pocket fees, costs, and 

expenses of the Bid up to an amount equal to 

$300,000, in each of (i) and (ii), as more fully set 

forth in the Stalking Horse APA. 30. The 

Debtors have agreed that their obligation to pay 

the Bid Protections pursuant to the Stalking Horse

APA shall, upon entry of the Bid Procedures 

Order, constitute an allowed superpriority 

administrative expense of the Debtors with 

priority over any and all administrative expenses 

of the kind specified in section 503(b) of the 

Bankruptcy Code.

Stalking Horse 

APA § 9.3; Bid 

Procedures XI

Complex Procedures,

Part E Section 19(a)(iii)

Bidding Increments 

The Auction will begin at the Initial Highest Bid, 

and each Qualified Bidder may submit subsequent

Bids for the Proposed Purchase Price in minimum

overbid increments of at least $250,000 over the 

amount of the Proposed Purchase Price in the

highest or otherwise best Bid at that time

Bid Procedures 

XII

Complex Procedures,

Part E Section 19(a)(iv)

Treatment of Break-Up and 

Topping Fees and Expense 

Reimbursement at Auction

If the Stalking Horse Bid is the Initial Highest 

Bid, the initial overbid amount shall be also 

include an amount necessary, in the Debtors’ 

determination, to satisfy the Stalking Horse 

Purchaser’s Bid Protections in cash.

Bid Procedures 

§§ XI-XIII

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The Stalking Horse Purchaser shall not be 

required to include an amount in cash necessary 

to satisfy the Bid Protections as part of any 

Overbid.

Complex Procedures,

Part E Section 19(b)

Provisions Governing 

Qualification of Bidders 

A Qualified Bidder is one who submits a 

Qualified Bid, as defined in § IX of the Bid 

Procedures and summarized below.

Bid Procedures 

§ IX

Complex Procedures,

Part E Section 19(c)

Provisions Governing 

Qualified of Bids

The requirements of a Qualified Bid can be found 

§ IX of the Bid Procedures. By way of summary, 

these the Bid Procedures required that a Bid, to be 

considered a Qualified Bid, must: (i) be submitted 

timely; (ii) disclose the bidder’s identity and 

include a delivery of an executed NDA; 

(iii) propose a Sale Transaction for all the 

Debtors’ assets or identify the assets to be a part 

of the Bid; (iv) provide that the Qualified Bidder 

is prepared to consummate the transaction 

promptly following entry of the purchase and sale 

agreement; (v) not be subject to any 

contingencies, (vi) set forth each regulatory and 

third-party approval required for the bidder to 

consummate the proposed Sale Transaction; 

(vii) include financial and other information 

sufficient for the Debtors to make a reasonable

determination as to the bidder’s ability to 

consummate the Sale Transaction; (viii) identify 

any and all executory contracts and unexpired 

leases to which the Debtors are a party that the 

bidder wishes to have assumed and assigned in 

connection with the Sale Transaction; 

(ix) indicate whether the Bidder intends to hire all 

or some of the employees who are employed 

primarily in connection with the Assets subject to 

the Sale Transaction; (x) include a written As-is, 

Where-Is acknowledgement; (xi) state the 

expected closing date; (xii) not request any bid 

protections; and (xiii) include contact information 

for specific person(s) the Debtors should contact 

in the event they have questions regarding the 

Bid. 

Bid Procedures 

§ IX

Complex Procedures,

Part E Section 19(d)

Modification of Bidding and 

Auction Procedures

The Debtors reserve their rights to modify 

these Bid Procedures in their business judgment, 

subject to the consent of the Administrative 

Agent, not to be unreasonably withheld, and in 

consultation with the Committee, if any, in any

manner that will best promote the goals of these

Bid Procedures 

XVI

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Bid Procedures or impose additional customary

terms and conditions on the Sale, including

extending the deadlines set forth herein, 

adjourning the Auction or the Sale Hearing, 

adding procedural rules that are reasonably 

necessary or advisable under the circumstances to 

conduct the Auction, cancelling the Auction, and 

rejecting any or all Bids or Qualified Bids.

Complex Procedures,

Part E Section 19(e) 

Closing with Alternative 

Backup Bidders

If, for any reason, a Winning Bidder fails to timely 

consummate the purchase of the Assets, the 

Debtors, in consultation with the Committee, if 

any, and with the Administrative Agent’s consent, 

not to be unreasonably withheld, may seek to 

consummate a Sale to the Backup Bidder in 

accordance with the terms of the Backup Bid and 

pursuant to the Proposed APA associated 

therewith without further approval by the Court 

(in which case the Backup Bidder shall be deemed 

the Winning Bidder). 

The Backup Bid(s) and the obligation of the 

Backup Bidder(s) to consummate the purchase of 

the Assets shall remain open and in full force, 

including with respect to the Backup Bidder’s 

Good Faith Deposit, until the earlier of (a) the

closing of a Sale of the Assets to a Winning 

Bidder or Backup Bidder or (b) 45 days after the 

conclusion of the Auction (or, if no Auction is

held, 45 days after the date on which the Debtors 

file a notice of cancellation of Auction).

Bid Procedures 

§ XIV 

Complex Procedures,

Part E Section 19(f) 

Provisions Governing the 

Auction 

If the Debtors receive more than one timely 

Qualified Bid, the Debtors shall conduct an 

auction (the “Auction”) at 9:00 A.M. (prevailing 

Central Time) on [January 29, 2024] (which 

date may be modified by the Debtors in their 

business judgment with the consent of the 

Administrative Agent) virtually or at such other 

place as agreed by the Debtors, the Administrative 

Agent, and Committee, or approved by order of 

the Court, and of which the Debtors will notify the 

Auction Participants. 

Each Qualified Bidder will be required to confirm 

on the record at the Auction that (a) it has not 

engaged in any collusion with respect to the 

bidding or Sale and (b) its Qualified Bid and any 

subsequent Bid, is a good-faith bona fide offer 

Bid Procedures 

XIII 

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and it intends to consummate the proposed sale if 

selected as a Winning Bidder.

Basis for Relief 

I. The Bid Procedures Are Fair, Designed to Maximize the Value Received for the 

Assets, and Are Consistent with the Debtors’ Reasonable Business Judgment. 

33. Bankruptcy Code section 363 and Bankruptcy Rule 6004(f)(1) authorize a debtor 

to sell property outside the ordinary course of business by private sale or by auction. Bankruptcy 

Code section 363(b) provides that “[t]he [debtor in possession], after notice and a hearing, may 

use, sell or lease, other than in the ordinary course of business, property of the estate . . . .” 11 

U.S.C. § 363(b)(1). Bankruptcy Code section 105(a) empowers bankruptcy courts to “issue any 

order, process, or judgment that is necessary or appropriate to carry out the provisions of this title.” 

11 U.S.C. § 105(a). 

34. The procedures used in selling estate assets are subject to the debtor’s business 

judgment, which is entitled to substantial deference, as long as the debtor articulates an adequate 

business justification. See, e.g., In re Cont’l Air Lines, Inc., 780 F.2d 1223, 1226 (5th Cir. 1986) 

(“[F]or a debtor-in-possession or trustee to satisfy its fiduciary duty to the debtor, creditors and 

equity holders, there must be some articulated business justification for using, selling, or leasing 

the property outside of the ordinary course of business.”); In re Asarco, L.L.C., 650 F.3d 593, 601 

(5th Cir. 2011) aff’g 441 B.R. 813, 824 (S.D. Tex. 2010) (“Section 363 of the Bankruptcy Code 

addresses the debtor’s use of property of the estate and incorporates a business judgment 

standard.”). 

35. The paramount goal in any proposed sale of property of the estate is to maximize

the proceeds received by the estate. See, e.g., In re Bigler, LP, 443 B.R. 101, 115 (Bankr. S.D. 

Tex. 2010). Courts uniformly recognize that procedures intended to enhance competitive bidding 

are consistent with the goal of maximizing the value received by the estate and therefore are 

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appropriate in the context of bankruptcy transactions. See, e.g., In re Integrated Res., Inc., 147 

B.R. 650, 659 (S.D.N.Y. 1992) (bid procedures “are important tools to encourage bidding and to 

maximize the value of the debtor’s assets”).

36. The Debtors carefully designed the Bid Procedures to attract active bidding from 

potential purchasers and to maximize the sale value for the Assets in the current market, based on 

the Debtors’ advisors’ experience with similar sales. The Debtors developed the Bid Procedures 

to allow the Debtors to solicit offers and conduct a sale in a controlled, fair, and open fashion that 

will encourage participation by financially capable bidders. 

37. The Bid Procedures provide the Debtors with an opportunity to consider competing 

bids and select the highest or otherwise best offers for the completion of the sale. All creditors can 

be assured that the consideration obtained will be fair and reasonable, and at or above market. The 

Bid Procedures will maximize the value of the Assets and are appropriate under the relevant 

standards governing auction proceedings and bidding incentives in bankruptcy proceedings. The 

Bid Procedures should be approved.

II. The Court Should Authorize Entry into the Stalking Horse APA and Approve the 

Bid Protections.

38. The Debtors seek authority to pay the Bid Protections included in the Stalking 

Horse APA to the Stalking Horse Purchaser in the event such obligations are triggered in 

accordance with the terms of the Stalking Horse APA. Courts have acknowledged that the 

approval of expenses in connection with sales under section 363 of the Bankruptcy Code can be 

warranted to compensate an unsuccessful acquirer whose initial offer served as the basis and 

catalyst for higher and better offers. See In re ASARCO, 650 F.3d at 593, 597-98, 601-03 & n.9. 

To warrant court approval of expenses, the Fifth Circuit requires a showing that the requested fees 

and expenses must be supported by a sound business justification. Id. at 593, 602-03 (favoring 

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business judgment standard governing use of assets outside the ordinary course of business, rather 

than the standard for administrative expenses, in assessing propriety of fees and expenses incurred 

by bidders). 

39. Here, the Bid Protections are a product of extensive arm’s-length, good faith 

negotiations in connections with the Stalking Horse APA. Under the terms of the Stalking Horse 

APA, the Break-Up Fee is $450,000 and the Expense Reimbursement will not exceed $300,000. 

This is consistent with bid protections of similar stalking horse agreements commonly observed 

and approved in complex chapter 11 cases. Given the size and complexity of the transaction and 

the amount of work required by the Stalking Horse Purchaser, the Bid Protections are fair, 

reasonable, and appropriate. 

40. The Bid Protections are necessary to induce the Stalking Horse Purchaser to engage 

in diligence review and serve as the stalking horse. Indeed, the Debtors’ failure to obtain approval 

of the Bid Protections will entitle the Stalking Horse Purchaser to terminate the Stalking Horse 

APA. In such event, the Debtors will lose the benefit of a committed and fair purchase price for 

the Assets as well as risk losing the ability to maximize the value of its estates and pursue an 

orderly wind-down process. 

41. The Debtors request this Court to authorize entry into the Stalking Horse APA and, 

pursuant to the proposed Bid Protections Order, approve the Bid Protections included therein.

III. The Form and Manner of the Sale Notice Should Be Approved.

42. Bankruptcy Rules 2002(a)(2) and 2002(i) generally require a debtor to provide 

creditors with a minimum of 21-days’ notice of a proposed sale of property outside the ordinary 

course of business under Bankruptcy Code section 363(b)(1) by mail to “the debtor, the trustee, all 

creditors and indenture trustees” and any committee appointed under Bankruptcy Code 

section 1102. Bankruptcy Rule 2002(c) requires any such notice to include the time and place of 

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the auction, the hearing, and the deadline for filing any objections to the relief requested. Courts 

are authorized to limit notice of a proposed sale to the United States Trustee, any official committee 

appointed under Bankruptcy Code 1102, and any other creditor or equity holder who requests 

notice.

43. The Debtors seek approval of the Sale Notice as proper and sufficient notice of the 

Auction, the Sale Hearing, and the deadline to object to the Sale. Notice of this Motion and the 

related hearing to consider entry of the Bid Procedures Order, coupled with service of the Sale 

Notice, constitutes good and adequate notice of the Auction and the related proceedings in 

compliance with, and satisfaction of, the applicable requirements of Bankruptcy Rule 2002.

IV. The Assumption and Assignment Procedures and the Assignment of Any 

Designated Contracts Should Be Approved.

44. Bankruptcy Code section 365(a) provides that a debtor-in-possession “subject to 

the court’s approval, may assume or reject any executory contract or unexpired lease of the 

debtor.” 11 U.S.C. § 365(a). The standard governing approval of a debtor’s decision to assume 

or reject an executory contract is whether the debtor’s reasonable business judgment supports 

assumption or rejection. Mirant Corp. v. Potomac Electric Power Co. (In re Mirant Corp.), 378 

F.3d 511, 524-25 & n.5 (5th 2004). Under the business judgment test, a court should approve a 

debtor’s proposed assumption if such assumption will benefit the estate. In re Food City, Inc., 94 

B.R. 91, 93-94 (Bankr. W.D. Tex. 1988).

45. The Assumption and Assignment Procedures are reasonable under the 

circumstances and are necessary to notify parties to Designated Contracts of the assumption and 

assignment of their contract, the related proposed cure amount, and the Winning Bidder’s adequate 

assurance of future performance. The Debtors will be prepared to demonstrate at the Sale Hearing 

that the requirements for assumption and assignment of any Designated Contracts to a Winning 

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Bidder will be satisfied. The Debtors will evaluate the financial wherewithal of potential bidders 

before designating such party a Qualified Bidder or Winning Bidder, including as it relates to such 

Qualified Bidder’s willingness and ability to perform under the Designated Contracts.

46. The Assumption and Assignment Procedures provide the Court and other interested 

parties opportunity to evaluate and, if necessary, challenge the ability of a Winning Bidder to 

provide adequate assurance of future performance and object to the assumption of the 

Designated Contracts or proposed cure amounts. The Court will have a sufficient basis to 

authorize the Debtors to assume and assign the Designated Contracts as set forth in the definitive 

agreement of a Winning Bidder.

47. The Assumption and Assignment Procedures, including the form and manner of the 

Assignment Notice, should be approved as reasonable and necessary measures to adequately notify 

parties in interest and assume and assign Designated Contracts in a fair, efficient, and proper 

manner.

V. The Assets May Be Sold Free and Clear of Liens, Claims, Interests and 

Encumbrances under Bankruptcy Code Section 363(f).

48. Bankruptcy Code section 363(f) authorizes a debtor to sell assets free and clear of 

all liens, claims, interests and encumbrances provided that one of the following conditions is met:

a. applicable non-bankruptcy law permits sale of such property free and clear 

of such interests;

b. such entity consents;

c. such interest is a lien and the price at which such property is to be sold is 

greater than the aggregate value of all liens on such property; 

d. such interest is in bona fide dispute; or

e. such entity could be compelled, in a legal or equitable proceeding, to accept 

a money satisfaction of such interest.

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11 U.S.C. § 363(f). This provision is supplemented by Bankruptcy Code section 105(a), which 

provides that “[t]he Court may issue any order, process or judgment that is necessary or appropriate 

to carry out the provisions of the [Bankruptcy Code].” 11 U.S.C. § 105(a).

49. Because Bankruptcy Code section 363(f) is drafted in the disjunctive, satisfaction 

of any one of its five requirements will suffice to permit the sale of the Assets free and clear of the 

interests. In re Nature Leisure Times, LLC, No. 06-41357, 2007 WL 4554276, at *3 (Bankr. E.D. 

Tex. Dec. 19, 2007). The Debtors anticipate satisfying one or more of the conditions under section 

363(f).

50. To the extent that the Court finds that the Sale satisfies section 363(f), the Debtors 

request that the Court also hold that the Sale is free and clear of successor liability relating to the 

Debtors’ business. The purpose of a free and clear sale under section 363(f) would be frustrated if 

claimants could thereafter assert claims arising from the debtors’ pre-sale conduct against the 

eventual purchaser. The absence of such assurance may chill bidding or result in reduced bids.

VI. Credit Bidding Should Be Authorized Under Bankruptcy Code Section 363(k)

51. A secured creditor is allowed to “credit bid” the amount of its claim in a sale. 

Bankruptcy Code section 363(k) provides, in relevant part, that unless the court for cause orders 

otherwise for cause, the holder of a claim secured by property that is the subject of the sale 

“may bid at such sale, and, if the holder of such claim purchases such property, such holder may 

offset such claim against the purchase price of such property.” 11 U.S.C. § 363(k). Even if a 

secured creditor is undersecured as determined in accordance with Bankruptcy Code section 

506(a), section 363(k) allows such secured creditor to bid the total face value of its claim and does 

not limit the credit bid to the claim’s economic value. See In re Submicron Sys. Corp., 432 F.3d 

448, 459-60 (3d Cir. 2006).

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52. The Bid Procedures provide that Secured Creditors have the right to credit bid all 

or any portion of the Secured Creditor’s claim on a dollar-for-dollar basis pursuant to section 

363(k) with respect to the collateral by which such Secured Creditor is secured; provided, however, 

that any credit bid must include a cash component equal to or exceeding the amount of the Bid 

Protections. A credit bid is permitted only to the extent such credit bid is permitted the Bankruptcy 

Code and nonbankruptcy law. 

VII. The Winning Bidder Should be Entitled to the Protections of Bankruptcy Code 

Section 363(m) 

53. Pursuant to Bankruptcy Code section 363(m), a good faith purchaser is one who 

purchases assets for value, in good faith, and without notice of adverse claims. TMT Procurement 

Corp. v. Vantage Drilling Co. (In re TMT Procurement Corp.), 764 F.3d 512, 521 (5th Cir. 2014). 

If the Debtors seek to consummate a Sale pursuant to a Winning Bid obtained through the Bid 

Procedures, such Sale will have been negotiated at arm’s length or through a fair and open auction 

process. The Debtors request that the Sale Order include a provision that the Winning Bidder for 

the Assets is a “good faith” purchaser within the meaning of Bankruptcy Code section 363(m). 

Providing the Winning Bidder with such protection will ensure that the maximum price will be 

received by the Debtors for the Assets and the Sale closing will occur promptly. 

Waiver of Bankruptcy Rule 6004(a) and 6004(h) 

54. The Debtors request that the Court enter an order providing that notice of the relief 

requested herein satisfies Bankruptcy Rule 6004(a) and that the Debtors have established cause to 

exclude such relief from the fourteen-day stay period under Bankruptcy Rule 6004(h), which is 

necessary to implement the relief requested in this motion. 

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Reservation of Rights 

55. Nothing contained herein or any action taken pursuant to relief requested is 

intended to be or shall be construed as (a) an admission as to the amount of, basis for, or validity 

of any claim against a Debtor entity under the Bankruptcy Code or other applicable nonbankruptcy 

law; (b) a waiver of the Debtors’ or any party in interest’s rights to dispute any claim or interest 

on any grounds; (c) a promise or requirement to pay any claim; (d) a waiver of the Debtors’ or any 

other party in interest’s rights under the Bankruptcy Code or any other applicable law; (e) an 

implication or admission that any particular claim is of a type specified or defined in this motion 

or any order granting the relief requested in this motion or a finding that any particular claim is an 

administrative expense claim or other priority claim; (f) a request for or approval to assume, adopt, 

or reject any agreement, contract, program, policy, or lease under section 365 of the Bankruptcy 

Code; or (g) an admission as to the validity, priority, enforceability, or perfection of any lien on, 

security interest in, or other encumbrance on property of the Debtors’ estates. Likewise, if the 

Court grants the relief sought herein, any payment made pursuant to the Court’s order is not 

intended to be and should not be construed as an admission to the validity of any claim or a waiver 

of the Debtors’ or any party in interest’s rights to subsequently dispute such claim. 

Notice

56. The Debtors will provide notice of this motion to the following: (a) the U.S. Trustee 

for the Northern District of Texas; (b) the holders of the thirty (30) largest unsecured claims against 

the Debtors (on a consolidated basis); (c) Oaktree Fund Administration, LLC as agent to the 

Debtors’ secured lenders, and counsel thereto; (d) the United States Attorney’s Office for the 

Northern District of Texas; (e) the Food and Drug Administration; (f) the Internal Revenue 

Service; (g) the United States Securities and Exchange Commission; (h) the state attorneys general 

for states in which Debtors conduct business; and (i) any party that has requested notice pursuant 

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to Bankruptcy Rule 2002 and Bankruptcy Local Rule 9013-1(d). No other or further notice is 

needed in light of the nature of the relief requested.

[Remainder of page intentionally left blank.]

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The Debtors request entry of the Order, granting the relief requested herein and granting 

such other relief as the Court deems appropriate under the circumstances. 

Dated: December 20, 2023

Dallas, Texas SIDLEY AUSTIN LLP

/s/ Rakhee V. Patel 

Samuel A. Newman (pro hac vice pending)

555 West Fifth Street

Los Angeles, California 90013

Telephone: (213) 896-6000

Facsimile: (213) 896-6600

Email: sam.newman@sidley.com

Rakhee V. Patel (TX Bar No. 00797213)

Jeri Leigh Miller (TX Bar No. 24102176)

Nathan Elner (TX Bar No. 24123173)

Parker G. Embry (TX Bar No. 24126826)

Chelsea McManus (TX Bar No. 24131499)

2021 McKinney Avenue, Suite 2000

Dallas, Texas 75201

Telephone: (214) 981-3300

Facsimile: (214) 981-3400

Email: rpatel@sidley.com

jeri.miller@sidley.com

nelner@sidley.com

parker.embry@sidley.com

cmcmanus@sidley.com

Jackson T. Garvey (pro hac vice pending)

One South Dearborn

Chicago, IL 60603

Telephone: (312) 853-7000

Facsimile: (312) 853-7036

Email: jgarvey@sidley.com

Proposed Counsel to the Debtors and Debtors in 

Possession

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Certificate of Service

I certify that on December 20, 2023, I caused a copy of the foregoing document to be served 

by the Electronic Case Filing System for the United States Bankruptcy Court for the Northern 

District of Texas.

/s/ Rakhee V. Patel 

Rakhee V. Patel

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