Vyaire - Motion to Assume and Assign Contracts to ZOLL Medical
- Date
- 2024-12-11
Summary
A motion of the debtors in In re Vyaire Medical, Inc., et al., Case No. 24-11217 (BLS), the jointly administered chapter 11 cases in the U.S. Bankruptcy Court for the District of Delaware, filed November 22, 2024 as Doc 793. The motion asks the court to authorize the debtors to assume and assign executory contracts to ZOLL Medical Corporation effective as of November 22, 2024, under sections 105 and 365(a) of the Bankruptcy Code and Rule 6006 of the Federal Rules of Bankruptcy Procedure, listing the contracts on Exhibit 1 to the proposed order. It states that the contracts are Additional Contracts under an amendment to the Zoll Asset Purchase Agreement, generally distributor agreements, and that the assignee has agreed to pay any cure costs. The motion also asks that the 14-day stay under Bankruptcy Rule 6006(d) be waived. The nine-page filing notes a hearing date of December 11, 2024.
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Case 24-11217-BLS Doc 793 Filed 11/22/24 Page 1 of 9
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
)
In re: ) Chapter 11
)
VYAIRE MEDICAL, INC., et al.,1 ) Case No. 24-11217 (BLS)
)
Debtors. ) (Jointly Administered)
)
) Hearing Date: December 11, 2024, at 11:00 a.m. (ET)
) Obj. Deadline: December 4, 2024, at 4:00 p.m. (ET)
MOTION OF DEBTORS FOR ENTRY OF AN ORDER AUTHORIZING THE
DEBTORS TO ASSUME AND ASSIGN CONTRACTS TO ZOLL MEDICAL
CORPORATION
The above-captioned debtors and debtors in possession (collectively, the “Debtors and,
each, a “Debtor”), state as follows in support of this motion (the “Motion”).
Relief Requested
1. The Debtors seek entry of an order, substantially in the form attached hereto as
Exhibit A (the “Proposed Order”), pursuant to sections 105 and 365(a) of title 11 of the United
States Code, 11 U.S.C. §§ 101 et seq. (the “Bankruptcy Code”) and Rule 6006 of the Federal Rules
of Bankruptcy Procedure (the “Bankruptcy Rules”), authorizing the assumption and assignment of
the executory contracts (as amended, modified, or altered) set forth on Exhibit 1 to the Proposed
Order (the “Contracts”), to ZOLL Medical Corporation (the “Assignee”) effective as of November
22, 2024.
1
The last four digits of Debtor Vyaire Medical, Inc.’s federal tax identification number are 6495. A complete list
of each of the Debtors in these chapter 11 cases and each such Debtor’s federal tax identification number may be
obtained on the website of the Debtors’ claims and noticing agent at https://omniagentsolutions.com/Vyaire. The
location of Debtor Vyaire Medical, Inc.’s principal place of business and the Debtors’ service address in these
chapter 11 cases is 26125 North Riverwoods Boulevard, Mettawa, Illinois, USA 60045.
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Jurisdiction and Venue
2. The United States Bankruptcy Court for the District of Delaware (the “Court”) has
jurisdiction to consider this Motion under 28 U.S.C. §§ 157 and 1334, and the Amended Standing
Order of Reference from the United States District Court for the District of Delaware dated
February 29, 2012. This is a core proceeding under 28 U.S.C. § 157(b) and, pursuant to Rule
9013-1(f) of the Local Rules of Practice and Procedure of the United States Bankruptcy Court for
the District of Delaware (the “Local Rules”), the Debtors consent to the entry of a final order by
the Court in connection with this Motion to the extent that it is later determined that the Court,
absent consent of the parties, cannot enter final orders or judgments consistent with Article III of
the United States Constitution.
3. Venue of these cases and the Motion in this District is proper under 28 U.S.C. §§
1408 and 1409.
4. The statutory and legal predicates for the relief requested herein are sections 105
and 365 of the Bankruptcy Code and Bankruptcy Rule 6006.
BACKGROUND
A. General Background
5. On June 9, 2024 (the “Petition Date”), the Debtors filed voluntary petitions for relief
under chapter 11 of the Bankruptcy Code. The Debtors are operating their business and managing
their property as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy
Code. On June 11, 2024, the Court entered an order authorizing the procedural consolidation and
joint administration of these chapter 11 cases pursuant to Bankruptcy Rule 1015(b) and Local Rule
1015-1. See Docket No. 84. No request for the appointment of a trustee or examiner has been made
in these chapter 11 cases.
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6. On June 26, 2024, the Office of the United States Trustee for the District of
Delaware appointed the Official Committee of Unsecured Creditors. See Docket No. 121.
7. On November 14, 2024, the Court entered the Findings of Fact, Conclusions of
Law, and Order Approving the Debtors’ Disclosure Statement for, and Confirming the Second
Amended Joint Chapter 11 Plan of Vyaire Medical, Inc. and Its Debtor Affiliates Pursuant to
Chapter 11 of the Bankruptcy Code [Docket No. 745] (the “Confirmation Order”) approving and
confirming the Second Amended Joint Chapter 11 Plan of Vyaire Medical, Inc. and Its Debtor
Affiliates (the “Plan”) [Docket No. 719].2
8. Paragraph 86 of the Confirmation Order and Article V.A of the Plan provide that
except as otherwise provided in the Plan or in the Sale Orders, each Executory Contract or
Unexpired Lease not previously assumed, assumed and assigned, or rejected shall be rejected on
the Effective Date, unless such Executory Contract or Unexpired Lease is, among other things,
“(6) to be assumed by the Debtors and assigned to any Purchaser in connection with any Sale
Transaction and pursuant to any Sale Transaction Documentation.” See Confirmation Order ¶ 86
and Plan, Art. V.A.
B. The Zoll Transaction
9. On July 11, 2024, the Court entered the Order (I) Approving Bidding Procedures
in Connection With the Sale of Substantially All of the Debtors’ Assets, (II) Authorizing the
Debtors to Enter Into a Stalking Horse Agreement and Provide Bid Protections, (III) Approving
the Form and Manner of Notice Thereof, (IV) Scheduling an Auction and Sale Hearing,
(V) Approving Procedures for the Assumption and Assignment of Contracts, (VI) Approving the
2
Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Plan (as defined
herein) or the Confirmation Order (as defined herein)
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Sale of the Debtors’ Assets Free and Clear, and (VII) Granting Related Relief [Docket No. 249]
(the “Bidding Procedures Order”).
10. Pursuant to the Bidding Procedures Order, on August 12, the Debtors initiated a
three-day auction for the Ventilation Business and after multiple rounds of competitive bidding,
on August 15, 2024, the Debtors selected the Assignee as the successful bidder.
11. On September 4, 2024, the Court approved the sale of the Ventilation Business to
the Assignee under the Zoll APA and entered the Order (I) Approving the Zoll Asset Purchase
Agreement and Authorizing the Sale of Certain Ventilation Assets of the Debtors Outside the
Ordinary Course of Business, (II) Authorizing the Sale of Assets Free and Clear of All Liens,
Claims, Interests, and Encumbrances, (III) Authorizing the Assumption and Assignment of
Executory Contracts and Unexpired Leases in Connection Therewith, and (IV) Granting Related
Relief [Docket No. 496] (the “Sale Order”).
12. Pursuant to the Bidding Procedures Order, Sale Order, and Zoll APA, the Debtors
were authorized to assume and assign certain Executory Contracts and/or Unexpired Leases to the
Assignee.
13. On October 9, 2024, the Debtors filed the Notice of Filing of First Amended
Assumed Contracts Exhibit in Connection With Zoll Asset Purchase Agreement [Docket No. 614]
setting forth the Executory Contracts and Unexpired Leases assumed and assigned to the Assignee
pursuant to the Sale Order and Zoll APA.
14. On October 11, 2024, the Debtors filed the Notice of Closing of Sale of Certain of
the Debtors’ Ventilation Assets to Zoll Medical Corp. [Docket No. 626] setting forth the closing
of the sale to the Assignee as of October 11, 2024, and further attaching the First Amendment to
Asset Purchase Agreement as Exhibit 1 thereto (the “APA Amendment”).
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15. Pursuant to the section 1(v) of the APA Amendment, the Debtors and Assignee
agreed that (i) for thirty (30) days following the closing, the Debtors would not reject contracts
from the list of contracts set forth on Schedule 6.24 (the “Additional Contracts”) without written
approval of the Assignee; (ii) within the thirty (30) days, the Assignee may request the assumption
and assignment of the Additional Contracts, and (iii) the Assignee shall reimburse the Debtors for
costs incurred by the Debtors from the closing through the date the Assignee either provides notice
to reject an Additional Contract or the Court enters an Order authorizing the assumption and
assignment of an Additional Contract.
16. Subsequent to the APA Amendment, the Debtors agreed to extend the deadline to
assume and assign or reject the Additional Contracts through the Effective Date of the Plan.
17. The Contracts are included within the Additional Contracts subject to the APA
Amendment and generally consist of distributor agreements between the Debtors and such
counterparties.
18. Following the closing of the sale transaction to the Assignee, the Assignee
contacted all but two of the contract counterparties to the Contracts advising that it had purchased
a part of the Ventilation Business from the Debtors and requested that contracts be amended for
the purpose of maintaining a go forward relationship between the contract counterparties and the
Assignee.
19. The contacted contract counterparties executed such amendment and the Debtors
understand from the Assignee, such parties have further consented to the assumption and
assignment of the Contracts, as amended, to the Assignee.
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BASIS FOR RELIEF REQUESTED
20. Section 365(a) of the Bankruptcy Code provides that a debtor, “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).
21. Courts apply the “business judgment” standard in evaluating a debtor’s decision to
assume or reject an executory contract. See In re AbitibiBowater Inc., 418 B.R. 815, 831 Bankr.
D. Del. 2009) (finding that a debtor’s decision to assume or reject an executory contract will stand
so long as “a reasonable business person would make a similar decision under similar
circumstances”); In re Armstrong World Indus., Inc., 348 B.R. 136, 162 (D. Del. 2006) (“Under
section 365 of the Bankruptcy Code, a debtor may assume an executory contract or unexpired lease
if (i) outstanding defaults under the contract or lease have been cured under section 365(b)(1) of
the Bankruptcy Code, and (ii) the debtor’s decision to assume such executory contract or unexpired
lease is supported by valid business justifications.”). The business judgment test “requires only
that the trustee [or debtor-in possession] demonstrate that [assumption or] rejection of the
executory contract will benefit the estate.” Wheeling-Pittsburgh Steel Corp. v. W. Penn Power
Co. (In re Wheeling-Pittsburgh Steel Corp.), 72 B.R. 845, 846 (Bankr. W.D. Pa. 1987).
22. Section 365(b)(1) of the Bankruptcy Code establishes certain conditions that must
be satisfied before the assumption of an executory contract:
If there has been a default in an executory contract or unexpired
lease of the debtor, the trustee may not assume such contract or lease
unless, at the time of assumption of such contract or lease, the trustee
–
(A) cures, or provides adequate assurance that the trustee will
promptly cure, such default . . . ;
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(B) compensates, or provides adequate assurance that the trustee
will promptly compensate, a party other than the debtor to such
contract or lease, for any actual pecuniary loss to such party
resulting from such default; and
(C) provides adequate assurance of future performance under such
contract or lease.
11 U.S.C. § 365(b)(1).
23. Lastly, section 365(f)(2) of the Bankruptcy Code provides in the pertinent part that:
The trustee may assign an executory contract or unexpired lease of
the debtor only if –
(A) the trustee assumes such contract or lease in accordance with the
provisions of this section; and
(B) adequate assurance of future performance by the assignee of
such contract or lease is provided, whether or not there has been a
default in such contract or lease.
11 U.S.C. § 365(f)(2).
24. Here, the Debtors have determined, in the exercise of their business judgment, that
it is in the best interests of their estates to assume and assign the Contracts to the Assignee.
Pursuant to the APA Amendment, the Debtors agreed to make efforts to assume and assign the
Contracts to the Assignee. Further, the Assignee has agreed to pay any costs associated with the
assumption and assignment of the Contracts, including any cure costs.
25. In addition, the Debtors have sold their businesses, confirmed the Plan, and are in
the process of winding down their affairs. Therefore, but for their obligations under the APA
Amendment, the Debtors have no further need for the Contracts. In addition, the Debtors
understand that all but two of the contract counterparties consent to the assignment of the Contracts
to the Assignee. As such, the Debtors submit that the requirements of section 365(b)(1)(A) of the
Bankruptcy Code are satisfied.
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26. The Debtors further believe that adequate assurance of future performance is
demonstrated since the Assignee will continue to perform under the Contracts, as amended, in the
same manner as the Debtors. Accordingly, the Debtors submit “adequate assurance of future
performance” exists within the meaning of section 365 of the Bankruptcy Code.
27. For the reasons set forth herein, the Debtors believe that they have satisfied the
requirements for assumption and assignment of the Lease set forth in section 365 of the Bankruptcy
Code.
WAIVER OF BANKRUPTCY RULES 6006(d)
28. Bankruptcy Rule 6006(d) provides that an “order authorizing the trustee to assign
an executory contract or unexpired lease . . . is stayed until the expiration of 14 days after the entry
of the order, unless the court orders otherwise.” Given that all affected parties have consented to
the relief and would like the assignment to occur as soon as possible, there is no reason to delay
the effectiveness of the assumption and assignment. Therefore, the Debtors request that the order
authorizing the assumption and assignment of the Contracts be effective immediately by providing
that the 14-day stay under Bankruptcy Rule 6006(d) is waived.
RESERVATION OF RIGHTS
29. Nothing contained in this Motion is (i) an admission as to the validity of any claim
against any Debtors or the existence of any lien against the Debtors’ assets; (ii) a waiver of the
Debtors’ rights to dispute any claim or lien on any grounds; (iii) a promise to pay any claim; or
(iv) an implication or admission that any particular claim would constitute an allowed claim.
NOTICE
30. The Debtors will provide notice of this Motion to: (a) the United States Trustee for
the District of Delaware; (b) counsel to the Committee; (c) the agent of the DIP Facility and counsel
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thereto; (d) the Contract counterparties, or their counsel if known; (e) counsel for the Assignee;
and (f) any party that has requested notice pursuant to Bankruptcy Rule 2002. The Debtors submit
that, in light of the nature of the relief requested, no other or further notice need be given.
NO PRIOR REQUEST
31. No previous request for the relief sought herein has been made by the Debtors to
this or any other court.
CONCLUSION
WHEREFORE, for the reasons stated herein, the Debtors respectfully request that the
Court enter the Proposed Order granting the relief requested in the Motion and such other and
further relief as may be just and proper.
Dated: November 22, 2024
Wilmington, Delaware
/s/ Patrick J. Reilley
COLE SCHOTZ P.C. KIRKLAND & ELLIS LLP
Patrick J. Reilley (No. 4451) KIRKLAND & ELLIS INTERNATIONAL LLP
500 Delaware Avenue, Suite 1410 Joshua A. Sussberg, P.C. (admitted pro hac vice)
Wilmington, Delaware 19801 601 Lexington Ave
Telephone: (302) 652-3131 New York, New York 10022
Facsimile: (302) 652-3117 Telephone: (212) 446-4800
Email: preilley@coleschotz.com Facsimile: (212) 446-4900
Email: joshua.sussberg@kirkland.com
- and -
- and -
Michael D. Sirota, Esq. (admitted pro hac vice)
Warren A. Usatine, Esq (admitted pro hac vice) Spencer A. Winters, P.C. (admitted pro hac vice)
Court Plaza North, 25 Main Street Yusuf U. Salloum (admitted pro hac vice))
Hackensack, New Jersey 07601 333 West Wolf Point Plaza
Telephone: (201) 489-3000 Chicago, Illinois 60654
Facsimile: (201) 489-1536 Telephone: (312) 862-2000
Email: msirota@coleschotz.com Facsimile: (312) 862-2200
wusatine@coleschotz.com Email: spencer.winters@kirkland.com
yusuf.salloum@kirkland.com
Co-Counsel to the Debtors Co-Counsel to the Debtors
and Debtors in Possession and Debtors in Possession
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