UNITED STATES BANKRUPTCY COURT NORTHERN …QB\14333929.1 UNITED STATES BANKRUPTCY COURT NORTHERN...

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QB\14333929.1

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

In re ) Chapter 11 ) GIORDANO'S ENTERPRISES, INC., et al., ) Case No. 11-06098 ) (Jointly Administered) Debtors. ) ) Hon. Eugene R. Wedoff ) ) Hearing Date: September 21, 2011 ) Hearing Time: 10:00 a.m.

NOTICE OF MOTION

PLEASE TAKE NOTICE that on Wednesday, September 21, 2011, at 10:00 a.m., or as soon thereafter as counsel may be heard, we shall appear before the Honorable Eugene R. Wedoff, Room 744, United States Courthouse, 219 South Dearborn Street, Chicago, Illinois, or any other Judge sitting in his place or stead, and then and there present the Trustee's Motion for Entry of an Order (A) Approving (I) Sale of Membership Interests of Certain Debtors in Certain Limited Liability Companies to Business Keys, LLC, and Superior Elite, LLC, Free and Clear of Liens, Claims, Encumbrances, and Interests; (II) Assumption and Assignment of Lease of Nonresidential Real Property and Determination of Cure Amount; (III) Settlement of Certain Related Disputes with Purchasers and Elias Giannakopoulos, and (IV) Related Relief and (B) Shortening and Limiting Notice, a copy of which is herewith served upon you.

Dated: September 9, 2011 PHILIP V. MARTINO, not individually, but solely as Chapter 11 Trustee for Giordano's Enterprises, Inc., et al.

By: /s/ Christopher Combest

One of his Attorneys Christopher Combest QUARLES & BRADY LLP 300 North LaSalle Street, Suite 4000 Chicago, Illinois 60654-3406 Phone: (312) 715-5000 FAX: (312) 632-1727 [email protected]

CERTIFICATE OF SERVICE

I, Christopher Combest, an attorney, certify that, on the 9th day of September, 2011, I caused the Trustee's Motion for Entry of an Order (A) Approving (I) Sale of Membership Interests of Certain Debtors in Certain Limited Liability Companies to Business Keys,

Case 11-06098 Doc 729 Filed 09/09/11 Entered 09/09/11 17:12:25 Desc Main Document Page 1 of 20

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1106098110909000000000009

Docket #0729 Date Filed: 9/9/2011

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LLC, and Superior Elite, LLC, Free and Clear of Liens, Claims, Encumbrances, and Interests; (II) Assumption and Assignment of Lease of Nonresidential Real Property and Determination of Cure Amount; (III) Settlement of Certain Related Disputes with Purchasers and Elias Giannakopoulos, and (IV) Related Relief and (B) Shortening and Limiting Notice (the "Motion") and the proposed order granting the Motion ("Order") to be filed electronically, via the Court's CM/ECF System, and thereby to be served upon the parties listed below, to whom the System automatically delivered an electronic copy of each of the Motion and the Order at the following electronic mail addresses:

• Thomas V Askounis [email protected], [email protected];[email protected]

• Heather L Blaise [email protected] • Jennifer S Burt [email protected] • Christopher M Cahill [email protected], [email protected] • Carmen D Caruso [email protected], [email protected] • Joshua W Cohen [email protected] • Yeny Estrada [email protected], [email protected];ecf-

[email protected] • Thomas R. Fawkes [email protected], [email protected] • Chester H. Foster [email protected],

[email protected];[email protected] • James G Froberg [email protected], [email protected] • Zachary J Garrett [email protected] • Cameron M Gulden [email protected],

[email protected];[email protected] • Aaron L Hammer [email protected], [email protected] • Christopher J. Horvay [email protected] • Brian J Jackiw [email protected], [email protected] • Vivek Jayaram [email protected] • Gregory J Jordan [email protected] • Danielle Juhle [email protected], [email protected] • Kathryn A Klein [email protected], [email protected] • Randall Klein [email protected],

[email protected];[email protected] • Richard S Lauter [email protected], [email protected] • Patrick S Layng [email protected] • Joanne Lee [email protected], [email protected] • Neil Lloyd [email protected], [email protected] • Terri M Long [email protected] • Karen Newbury [email protected],

[email protected];[email protected];[email protected] • Andre Ordeanu [email protected], [email protected] • Lars A Peterson [email protected] • James M Philbrick [email protected] • Jeffrey R Platt [email protected], [email protected] • Mark L Radtke [email protected], [email protected] • Bryan I Schwartz [email protected]


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• Jason R. Sleezer [email protected], [email protected] • James B. Sowka [email protected] • Lawrence A. Stein [email protected], [email protected] • Jeffrey Strange [email protected], [email protected] • Pia N Thompson [email protected], [email protected] • Steven B Towbin [email protected]

I further certify that, on September 9, 2011, I caused a copy of the Motion and of the Order to be served, via facsimile transmission (confirmation sheet attached), upon TPG Management, Inc., 9730 South Western Avenue, Suite 418, Evergreen Park, Illinois 60642.

/s/ Christopher Combest

Christopher Combest


QB\14313986.7

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

In re ) Chapter 11 ) GIORDANO'S ENTERPRISES, INC., et al.,1 ) Case No. 11-06098 ) (Jointly Administered) Debtors. ) ) Hon. Eugene R. Wedoff ) ) Hearing Date: September 21, 2011

) Hearing Time: 10:00 a.m.

TRUSTEE'S MOTION FOR ENTRY OF AN ORDER (A) APPROVING (I) SALE OF MEMBERSHIP INTERESTS OF CERTAIN DEBTORS IN CERTAIN LIMITED

LIABILITY COMPANIES TO BUSINESS KEYS, LLC, AND SUPERIOR ELITE, LLC, FREE AND CLEAR OF LIENS, CLAIMS, ENCUMBRANCES, AND INTERESTS; (II)

ASSUMPTION AND ASSIGNMENT OF LEASE OF NONRESIDENTIAL REAL PROPERTY AND DETERMINATION OF CURE AMOUNT; (III) SETTLEMENT OF

CERTAIN RELATED DISPUTES WITH PURCHASERS AND ELIAS GIANNAKOPOULOS, AND (IV) RELATED RELIEF

AND (B) SHORTENING AND LIMITING NOTICE

Philip V. Martino, the duly appointed and serving Chapter 11 trustee ("Trustee") for the

estates of the above-captioned debtors (collectively, the "Debtors") hereby requests entry of an

order, in the form filed in connection with this Motion (the "Joint Venture Order"),

authorizing (a) (i) the sale to Business Keys, LLC ("BKLLC"), of (A) the fifty percent (50%)

membership interest of Debtor Pizza Pizazze, Inc. ("PP"), in Giordano's LLC – Midway Pizza

Series ("Giordano's-Midway") and (B) the fifty percent (50%) membership interest of PP in

Giordano's LLC – Pulaski Pizza Series ("Giordano's-Pulaski"); (ii) the sale to Superior Elite,

1 The Debtors in these cases are: Giordano's Enterprises, Inc., Illinois Management Company, Inc., JBA Equipment Finance, Inc., Altamonte Partners, LLC, Giordano's Franchise, Inc., Giordano's of Florida, Inc., Giordano's Restaurants, Inc., Giordano's Famous Stuffed Pizza, Inc., Americana Foods, Inc., Pizza Pizazze, Inc., Giordano's, LLC, Oakbrook Partners, LLC, Randolph Partners, LLC, Randolph Partners, LLC 20-24 Series, Randolph Partners, LLC – 327 Series, Randolph Partners, LLC – Lake Street Series, Randolph Partners, LLC – Formosa Series, Randolph Partners, LLC – Minooka Series, Randolph Partners, LP, Randolph Partners, LLC – 740 Series, Randolph Partners, LLC – 308 Series, Randolph Partners, LLC – Ogden Oswego Series, Randolph Partners, LLC – 1425 Series, Randolph Partners, LLC – Mount Prospect Series, Belmont Pizza, Inc., Rush Pizza, Inc., Greektown Pizza, Inc., Rosemont Pizza, Inc., Willowbrook Pizza, Inc., Randolph Partners, LLC – Sherberth Series, Randolph Partners, LLC – Oakbrook Partners Series, Randolph Partners, LLC – Cotton Lane Series, and Randolph Partners, LLC – Randall Orchard Series.


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LLC ("SELLC"), of (A) the fifty percent (50%) membership interest of Debtor Randolph

Partners, L.P. ("RPLP"), in Randolph Partners, LLC – 6314 Series ("Midway Real Estate")

and (B) the fifty percent (50%) membership interest of RPLP in Randolph Partners, LLC – 5159

Series ("Pulaski Real Estate"; Pulaski Real Estate, with Giordano's-Midway, Midway Real

Estate, and Giordano's-Pulaski, collectively, the "Joint Ventures"); (b) the assumption by

Debtor Giordano's Franchise, Inc. ("GFI"), and assignment to Beverly Pizza, Inc. ("Beverly

Pizza", and, with BKLLC and SELLC, the "Giannakopoulos Entities"), of that certain Beverly

Plaza Indenture of Lease (the "Beverly Lease") dated as of November 10, 2010, between GFI,

as tenant, and Evergreen Plaza Associates II, LP ("Landlord"), as lessor, pursuant to which

Landlord leases to GFI certain nonresidential real property located at 9613 South Western

Avenue, Chicago, Illinois (the "Beverly Premises"); (c) settlement of certain disputes and

allocation of liabilities among Debtors, the Giannakopoulos Entities, and Elias "Louie"

Giannakopoulos ("Louie"), the principal of BKLLC and SELLC (items (a) though (c) above,

the "Joint Venture Transactions"); (d) approving the shortened and limited notice given of this

Motion, and (e) granting related relief, all as memorialized in the Joint Venture Term Sheet

attached hereto as Exhibit A and effected by the Joint Venture Order. In support, the Trustee

states:

Jurisdiction

1. This Court has jurisdiction pursuant to 28 U.S.C. §§157 and 1334(a) and Rule

40.3.1 of the Local Rules of the United States District Court for the Northern District of Illinois.

2. Venue is proper in this district pursuant to 28 U.S.C. §§1408 and 1409.

3. This is a core proceeding pursuant to 28 U.S.C. §157(b)(2).


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4. The bases for the relief requested herein are 11 U.S.C. §§105(a), 363(b), 363(f),

363(l), 363(m), and 365, and Fed. R. Bankr. P. 2002, 4001, 6004, 6006, 9006(c), 9007, and 9019.

Factual Background

5. On February 16 and 17, 2011, Debtors filed voluntary petitions for relief under

chapter 11 of the United States Bankruptcy Code, 11 U.S.C. §§101 et seq. (the "Code").

6. Pursuant to Code §§1107(a) and 1108, the Debtors initially operated their

businesses and managed their financial affairs as debtors in possession.

7. On March 7, 2011, the United States Trustee appointed a committee of unsecured

creditors (the "Committee").

8. On May 12, 2011, upon the motion of the United States Trustee, the Court

appointed Philip V. Martino as Trustee for the Debtors, thereby taking the Debtors out of

possession and placing their assets and businesses under the control of Trustee.

The Joint Ventures

9. Giordano's-Midway operates a Giordano's®-branded restaurant at 6314 South

Cicero Avenue (near Chicago Midway International Airport) in Chicago, Illinois. Giordano's-

Pulaski operates a Giordano's®-branded restaurant at 5159 South Pulaski Road in Chicago,

Illinois. Giordano's-Midway and Giordano's-Pulaski are joint ventures, each of which is owned

50% by PP and 50% by BKLLC. BKLCC is owned, or otherwise controlled, by Louie.

10. Midway Real Estate owns the real property from which Giordano's-Midway

operates. Pulaski Real Estate owns the real property from which Giordano's-Pulaski operates.

Midway Real Estate and Pulaski Real Estate are joint ventures, each of which is owned 50% by

RPLP and 50% by SELLC. SELCC is owned, or otherwise controlled, by Louie.


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11. The operating agreements (as the same may have been amended) for the Joint

Ventures all contain provisions that purport to prevent, restrict, or condition transfer of the

Debtor-owned interests in the Joint Ventures, including, under certain circumstances, by

requiring PP or RPLP to transfer their respective Joint Venture interests to BKLLC or SELLC, as

applicable, at as much as a 75% discount off of fair market value. Postpetition, both before and

after the Trustee was appointed, BKLLC and SELLC asserted rights to obtain the Debtors'

interests in the Joint Ventures at such a discount. The Trustee disputed the enforceability of the

provisions described above and has included the Debtors' interests in the Joint Ventures in the

package of assets being marketed for sale by the Trustee's investment banker, William Blair &

Company, L.L.C. ("Blair"), and his real estate advisor, Hilco Real Estate, LLC ("Hilco").

Obligations to Bridgeview Bank

12. Giordano's-Pulaski and Pulaski Real Estate are co-borrowers on loans from

Bridgeview Bank in the aggregate principal amount as of July 8, 2011, of $2,053,150.49 (the

"Bridgeview Pulaski Debt"). The total Bridgeview Pulaski Debt is secured by a mortgage on

the real property owned by Pulaski Real Estate and on the personal property of Giordano's-

Pulaski.

13. Midway Real Estate is the borrower on a loan from Bridgeview Bank in the

aggregate principal amount as of July 8, 2011, of $1,962,861.13 (the "Bridgeview Midway

Debt"), which is secured by a mortgage on the real property owned by Midway Real Estate.

14. The agreements that govern the obligations of Pulaski Real Estate and Midway

Real Estate to Bridgeview Bank provide that the sale of more than 25% of the voting interests in

either of those entities would constitute a change in control that would permit Bridgeview Bank


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to accelerate the Bridgeview Midway Debt and Bridgeview Pulaski Debt, as applicable, and

declare the same immediately due and payable.

The Employee Litigation

15. Currently pending in Illinois state court are two civil cases against Debtors

Giordano's Enterprises, Inc. ("GEI"), and Giordano's, LLC ("GLLC") (Case Nos. 06 CH

25361 and 08 CH 00225, which have been consolidated under the latter case number), each of

which asserts violations of Illinois state minimum wage and wage payment laws on behalf of

employees of various Giordano's®-branded restaurants (the "Employee Litigation").

Employees of the Giordano's-Midway and Giordano's-Pulaski may assert claims in the Employee

Litigation.

Terms of the Joint Venture Transactions

16. The following summarizes certain important provisions of the proposed Joint

Venture Transactions2:

(a) Cash Consideration: (i) $1,220,000 (which shall be due on the 15th day after entry of the Joint Venture Order, unless the Joint Venture Order has been stayed pending appeal (the "Payment Date")), plus (b) payment, on the Payment Date, by Giordano's-Midway and Giordano's Pulaski of a 50% cash profit distribution to PP for the month of August 2011, provided, however, that neither PP nor RPLP shall be entitled to any cash profit distribution for months after August 2011.

(b) Assets to be Acquired (the "Purchased Assets"): Except as provided in paragraph 18 of this Motion, the Giannakopoulos Entities are acquiring the following Purchased Assets "AS IS, WHERE IS", with no representations or warranties of any kind, nature, or description (items (i) and (ii) below, collectively, the "Joint Venture Interests"):

(i) By BKLLC:

(A) the fifty percent (50%) membership interest of Debtor Pizza Pizazze, Inc., in Giordano's LLC – Midway Pizza Series, and

2 The following is intended to be a summary of the terms of the Joint Venture Transactions; interested parties should review the Joint Venture Term Sheet, which controls in the event of any inconsistency with this Motion.


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(B) the fifty percent (50%) membership interest of Debtor Pizza Pizazze, Inc., in Giordano's LLC – Pulaski Pizza Series.

(ii) By SELLC:

(A) the fifty percent (50%) membership interest of Debtor Randolph Partners, L.P., in Randolph Partners, LLC – 6314 Series;

(B) the fifty percent (50%) membership interest of Randolph Partners,

L.P., in Randolph Partners, LLC – 5159 Series. (iii) By Beverly Pizza: Assignment of the interest of GFI as tenant in the

Beverly Plaza Lease.

(c) Excluded Assets: BKLLC, SELLC, and Beverly Pizza, respectively, are purchasing only those assets described in the Joint Venture Term Sheet and no others.

(d) Indemnification of PP, RPLP, and GEI:

(i) BKLLC, on its own behalf and on behalf of Giordano's-Midway and Giordano's-Pulaski, and SELLC, on its own behalf and on behalf of Midway Real Estate and Pulaski Real Estate, each agrees to fully indemnify and hold harmless PP, RPLP, Randolph Partners, LLC-333 Series, GEI, and their respective affiliates and subsidiaries from and against any and all obligations and liabilities, whether as borrower, co-borrower, guarantor, or otherwise, under, as applicable, the Bridgeview Midway Debt and the Bridgeview Pulaski Debt, and BKLLC, SELLC, Midway Real Estate, Pulaski Real Estate, and Giordano's-Pulaski will be solely responsible for all obligations relating to the Bridgeview Midway Debt and Bridgeview Pulaski Debt.

(ii) Giordano's-Midway and Giordano's-Pulaski each agrees to bear full and

complete responsibility for, and to fully indemnify and hold harmless PP, RPLP, GEI, GLLC, and their respective affiliates and successors and assigns from and against, any pecuniary amounts awarded to employees of Giordano's-Midway or Giordano's-Pulaski in the Employee Litigation or any similar litigation commenced by an employee of Giordano's-Midway or Giordano's-Pulaski, provided, however, that Giordano's-Midway and Giordano's-Pulaski will not be responsible or liable for claims of employees of any Giordano's Debtor restaurants or affiliates of Debtors other than the restaurants operated by Giordano's-Midway and Giordano's-Pulaski, respectively. PP, RPLP, GEI, GLLC and their respective affiliates and successors and assigns will fully indemnify, defend and hold harmless Giordano's-Pulaski, Giordano's-Midway, and Louie from and against any pecuniary amounts assessed against Giordano's-Midway


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and/or Giordano's-Pulaski for employees of the other Giordano's® restaurants owned by GEI or any of its affiliates, but not those of GEI's franchisees.

(e) Franchise Agreements: As soon as legally permissible, GEI or its successors

and assigns will issue franchise agreements for Giordano's-Midway, Giordano's-Pulaski, and Beverly Pizza (each of which has been operating without a written franchise agreement). As soon as legally permissible, GEI or its successors and assigns will issue franchise agreements for new locations owned, or otherwise controlled, by Louie at Chicago Midway International Airport and Chicago O'Hare International Airport, within the time periods described in the Joint Venture Term Sheet.

(f) Management Fees: Pending issuance of franchise agreements for Giordano's-

Midway and Giordano's-Pulaski, Louie will continue to cause Giordano's-Midway and Giordano's-Pulaski to pay to GEI a five percent (5%) management fee for each of those Joint Ventures, subject to the credits against such fees described in the Joint Venture Term Sheet. Those management fees shall be due up to and including the later of the following dates: (i) the Payment Date and (ii) the date that the franchise agreements to be issued to Giordano's-Midway and Giordano's-Pulaski, respectively, are entered into by the parties thereto.

(g) Consent to Sale: The Giannakopoulos Entities agree that they will neither

oppose nor contest the validity or enforceability of any sale or acquisition of the GIORDANO's® franchise system, except if the sale or acquisition of the GIORDANO's® franchise system is to any entity owned or controlled by John Apostolou or any member of his family.

(h) Releases: Each party to an operating agreement for a Joint Venture shall release

the other party to that Joint Venture from any and all claims, causes of action, obligations, and liabilities arising in favor of any releasing party under the agreement governing such Joint Venture.

(i) Binding Nature of Joint Venture Term Sheet: If the Trustee is unable to issue

franchise agreements prior to the sale of the estates' assets, the rights of Giordano's-Midway, Giordano's-Pulaski, and Beverly Pizza to be issued franchise agreements as described in Paragraph 16(c) above and as set forth in the Joint Venture Term Sheet and the Joint Venture Order shall be binding on any purchaser or assignee of GEI.

(j) Conditions to Closing: Entry of the Joint Venture Order granting this Motion.

(k) Closing Date: The Payment Date.


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Relief Requested

17. The Trustee asks that the Court enter the Joint Venture Order, in the form

submitted with this Motion, for the reasons set forth below.

18. Sale Free and Clear under Code §363(f): Except to the extent provided in the

Joint Venture Term Sheet, effective upon the Debtors' receipt of all of the net proceeds of the

Joint Venture Transactions, all of Debtors' right, title, and interest in and to the Purchased Assets

shall be sold free and clear of all liens, claims, charges, interests (including security interests),

restrictions, and other encumbrances of any kind or nature thereon to the full extent authorized

under Code §363(f), with the same to attach to the net proceeds of the Joint Venture

Transactions, with the same validity and priority and to the same extent as existed before the

Joint Venture Transactions, including, without limitation, a first priority security interest in favor

of Fifth Third Bank, Debtors' prepetition senior secured lender and postpetition secured lender

("Fifth Third"). Upon the closing, Debtors shall be required to immediately remit all of the net

proceeds to Fifth Third to be applied in accordance with the financing orders entered by the

Court.

19. Upon information and belief (such information including the books and records of

Debtors), the only entity with a perfected security interest in the Purchased Assets is Fifth Third.

The Trustee believes that Fifth Third consents to the sale of the Purchased Assets free and clear

of its interests; because no other entity asserts an interest in the Purchased Assets, the Trustee

may transfer the Purchased Assets free and clear of all interests, pursuant to Code §363(f)(2).

20. Assumption and Assignment of Beverly Lease: Code §365 provides that a debtor,

"subject to the court's approval, may assume or reject any executory contract or unexpired lease

of the debtor." The standard governing bankruptcy court approval of a debtor's decision to


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assume or reject an executory contract or unexpired lease is whether the debtor's reasonable

business judgment supports assumption or rejection. See, e.g., In re Stable Mews Assoc., Inc., 41

B.R. 594, 596 (Bankr. S.D.N.Y. 1984). If the debtor's business judgment has been reasonably

exercised, a court should approve the assumption or rejection of an unexpired lease or executory

contract. See Group of Institutional Investors v. Chicago M St. P. & P.R.R. Co., 318 U.S. 523

(1943); Sharon Steel Corp., 872 F.2d 36, 39-40 (3d Cir. 1989). The business judgment test

"requires only that the trustee [or debtor in possession] demonstrate that [assumption or]

rejection of the contract will benefit the estate." Wheeling-Pittsburgh Steel Corp. v. West Penn

Power Co. (In re Wheeling-Pittsburgh Steel Corp.), 72 B.R. 845, 846 (Bankr. W.D. Pa. 1987)

(citing Stable Mews Assoc., 41 B.R. at 596).

21. Section 365(f) of the Bankruptcy Code provides that the "trustee may assign an

executory contract . . . only if the trustee assumes such contract . . . and adequate assurance of

future performance is provided." 11 U.S.C. § 365(f)(2). The meaning of "adequate assurance of

future performance" depends on the facts and circumstances of each case, but should be given

"practical, pragmatic construction." See Carlisle Homes, Inc. v. Arrari (In re Carlisle Homes,

Inc.), 103 B.R. 524, 538 (Bankr. D.N.J. 1989) (citing Matter of U.L. Radio Corp., 19 B.R. 537,

542 (Bankr. S.D.N.Y. 1982); see also In re Natco Indus., Inc., 54 B.R. 436, 440 (Bankr.

S.D.N.Y. 1985) (adequate assurance of future performance does not mean absolute assurance

that debtor will thrive and pay rent).

22. Currently, GFI is the prime tenant of the Beverly Premises under the Beverly

Lease. GFI, in turn, subleases the Beverly Premises to Beverly Pizza. Under the Sublease,

Beverly Pizza is responsible for paying all of the monthly rent and other charges owed by GFI to

Landlord under the Beverly Lease, either (at GFI's direction) to GFI or directly to Landlord. The


10 QB\14313986.7

lease-sublease structure provides the franchisor with "site control" over a franchisee's premises,

but also prevents the franchisee from being in sole control of its business operation. As part of

the Joint Venture Transactions, and given that GEI is seeking to sell its franchise business,

Beverly Pizza wants to have a direct relationship with the Landlord, so as to have control over

the premises from which it does business. To the Trustee's knowledge and belief, Landlord is

not entitled to any amounts under Code §365(b) ("Cure Amounts") in connection monetary or

non-monetary defaults under the Lease. Moreover, Landlord will have adequate assurance of

future performance under the Lease, because the actual economics of the leasehold relationship

will remain the same after the Joint Venture Transaction as before: that is, Beverly Pizza will be

responsible for the obligations of "Tenant" under the Lease and pay those obligations directly to

Landlord.

23. The Trustee therefore asks that the Court authorize him to assume the Beverly

Lease and assign it to Beverly Pizza, with findings that there are no Cure Amounts owed in

connection with that assumption and assignment and that the Trustee and Beverly Pizza have

provided adequate assurance of future performance to Landlord under Code §365(b).

24. Settlement of Disputes Pursuant to Fed. R. Bankr. P. 9019: The Joint Venture

Transactions also represent a settlement of certain disputes among Debtors and the

Giannakopoulos Entities, without any party intending to make any admission of liability to any

other, but in the interest of resolving those disputes cost-effectively and avoiding the delay,

expense, and uncertainty inherent in litigation. Those disputes include (a) enforceability of the

transfer restrictions contained in the documents governing the Joint Venture agreements,

including the enforceability of an asserted right to purchase the Joint Venture Interests at a 75%

discount; (b) valuation of the Joint Ventures Interests; (c) allocation of liability for the Employee


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Litigation, the Bridgeview Midway Debt, and the Bridgeview Pulaski Debt, and (d) issuance of

franchise agreements to the existing Giannakopoulos Entities and other entities formed or to be

formed by Louie.

25. The Court has broad discretion under Fed. R. Bankr. P. 9019(a) to approve a

settlement, provided that it is in the best interests of Debtors' estates. See In re American

Reserve Corp., 841 F.2d 159, 161 (7th Cir. 1987). The Court need not, however, "conclusively

determine claims subject to compromise, nor find that the settlement constitutes the best result

obtainable." In re Apex Oil Co., 92 B.R. 847, 867 (Bankr. E.D. Mo. 1988) (citing In re W.T.

Grant Co., 699 F.2d 599, 613 (2d Cir. 1983)). Similarly, "a precise determination of likely

outcomes is not required, since 'an exact judicial determination of the values in issue would

defeat the purpose of compromising the claim.'" In re Telesphere Communications, 179 B.R.

544, 553 (Bankr. N.D. Ill. 1994) (quoting In re Energy Co-Op, Inc., 886 F.2d 921, 929 (7th Cir.

1989)). All that is required is for the Court to "canvass the issues to determine that the

settlement does not fall 'below the lowest point in the range of reasonableness.'" Apex Oil, 92

B.R. at 867 (citation omitted).

26. In assessing a proposed compromise, the Court must consider: (a) the estate’s

probability of success in the litigation; (b) the cost and complexity of the litigation; and (c) the

creditors' views on the settlement, although such views are not controlling. American Reserve,

841 F.2d at 161-62; Apex Oil, 92 B.R. at 867.

27. The Trustee and Louie (on Louie's own behalf and on behalf of the

Giannakopoulos Entities) have engaged in extended, arm's-length negotiations regarding the

issues addressed by the Joint Venture Term Sheet, in part, to avoid the need to litigate those

same issues. The Trustee has considered those negotiations, including factual information and


12 QB\14313986.7

legal authorities exchanged by the parties, and has assessed alternatives, which include the

potential for time-consuming and costly litigation between the parties regarding the

enforceability of the transfer restrictions contained in the documents governing the Joint Venture

agreements, the risk of loss in any such litigation, the deleterious effect such litigation and the

attendant uncertainty would have on the marketing and sale to third parties of the Joint Venture

Interests, and the benefits conferred upon the Debtors' estates by the indemnification provisions

of the Joint Venture Term Sheet and the retention as franchisees of the Giannakopoulos Entities

– which have historically been among the franchise business's stronger performers. Based on

those considerations, the Trustee has concluded in his business judgment that the terms of the

Joint Venture Term Sheet are fair in all respects and represent a favorable resolution of the

matters described herein in a manner that is in the best interests of Debtors and their estates.

28. After consultation with Blair, Hilco, and Fred Caruso, the Debtors' Chief

Restructuring Officer, the Trustee has also concluded that the sale of the Purchased Assets to the

Giannakopoulos Entities is preferable to marketing them to unrelated third parties as part of the

overall asset sale, for at least the following reasons:

(a) Discussions with interested parties involved in the broader asset sale efforts being conducted by Blair and Hilco to date indicate that the Joint Venture Interests are not considered core to the overall going concern business of the Debtors, nor have interested bidders indicated that purchase of the Joint Venture Interests is essential to their contemplated bids.

(b) Disposition of the Purchased Assets to the Giannakopoulos Entities on the

terms described herein and in the Joint Venture Term Sheet will resolve several uncertainties regarding the marketability of the Joint Venture Interests generally, including the enforceability of the transfer restrictions, and the ultimate liability for the Bridgeview Midway and Pulaski Debt.

(c) The parcels of real property owned by Midway Real Estate and Pulaski

Real Estate are each encumbered by mortgages to Bridgeview Bank that secure debts in excess of the appraised value of those parcels; that concern, plus the potential for Bridgeview Bank to call the loans upon a sale the Joint Venture Interests to a third party,


13 QB\14313986.7

would likely result in a significant discount to any purchase price offered by a third party for the Joint Venture Interests.

(d) Moreover, a third party purchaser would likely also discount the value of

the Joint Venture Interests by (i) the risks associated with the Employee Litigation; (ii) the fact that the acquisition would not provide the purchaser with control of the Joint Ventures, and (iii) the fact that the Joint Venture Interests would not be freely transferrable.

(e) Conversely, the Giannakopoulos Entities would obtain control through the

Joint Venture Transactions, because each of BKLLC and SELLC already owns the other 50% of the relevant Joint Venture, and the Giannakopoulos Entities have already invested money, time, and effort into the Joint Ventures, such that they have an interest qualitatively different from that of any third-party bidder in taking on the obligations associated with the Joint Venture Transactions. A sale to the Giannakopoulos Entities would also resolve, rather than inflame, the disputed issues described in this Motion.

29. To the extent the parties determine that consummation of the Joint Venture

Transactions requires documentation beyond the Joint Venture Term Sheet and the Joint Venture

Order, or such documentation is deemed necessary or convenient by the parties in order to

consummate the Joint Venture Transactions, the Trustee asks that the Court authorize him to

execute such documentation, upon consultation with Fifth Third and the Committee, so long as

the terms of such documentation do not materially alter the terms of the Joint Venture Term

Sheet to the detriment of the Debtors' estates.

30. The marketing and sale efforts involving substantially all of the Debtors' assets

are progressing on a tight timeline, with closing targeted for October 31, 2011. That process will

benefit from certainty as to which assets are available for sale and with what, if any, conditions

attached. The Trustee therefore asks that the automatic stay provisions of Fed. R. Bankr. P.

6004(h) and 6006(d) be waived and that the Joint Venture Order be effective immediately upon

entry.


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Notice

31. This Motion has been filed electronically, and notice thereof will be provided

electronically on the date hereof, via the Court's CM/ECF System, to (a) counsel for (i) BKLLC,

SELLC, Beverly Pizza, and Louie; (ii) Fifth Third Bank, Debtors' prepetition and postpetition

senior secured lender; (iii) Bridgeview Bank; (iv) the Committee; and (v) the United States

Trustee, and (b) entities, or their counsel, who have filed a notice of appearance through the

Court's CM/ECF System; the Motion will also be served via facsimile transmission on TPG

Management, Inc., agent for Evergreen Plaza Associates II, LP.

32. The Trustee submits that those creditors with a significant interest in Debtors'

cases have already filed appearances and are receiving electronic notices or are otherwise able to

monitor the proceedings electronically, either through the Court's electronic docket or through

the web site maintained by Kurtzman Carson Consultants LLC, Debtors' noticing and claims

agent. Therefore, service of notice of this Motion on all creditors would impose costs on the

estates without significantly furthering the purposes of Fed. R. Bankr. P. 2002(a)(3).

Accordingly, pursuant to Fed. R. Bankr. P. 2002(i) and 9007, the Trustee asks that the Court

require service only on the parties listed above. Further, given (a) the limited scope of the

Purchased Assets and narrow range of issues being settled; (b) the fact that all principal parties in

interest are represented by experienced counsel, and (c) the fact that Fifth Third Bank and the

Committee have been have been kept regularly apprised of the status of negotiations and the

evolving terms of the Joint Venture Transactions, the Trustee submits that shortening the notice

period otherwise required under Fed. R. Bankr. P. 2002(a)(3) will not significantly prejudice any

party in interest and asks that the Court approve the notice provided of this Motion as sufficient.


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WHEREFORE, Philip V. Martino, as Chapter 11 Trustee, asks the Court to enter an order

(A) approving the Joint Venture Transactions; (B) approving the form and manner of notice of

this Motion as described above; (C) waiving the provisions of Fed. R Bankr. P. 6004(h) and

6006(d), and (D) granting the Trustee such other and further relief as the Court deems

appropriate.

Dated: September 9, 2011 PHILIP V. MARTINO, not individually, but solely as Chapter 11 Trustee for Giordano's Enterprises, Inc., et al.

By: /s/ Christopher Combest Christopher Combest (ARDC No. 06224701) Quarles & Brady LLP 300 N. LaSalle Street, Suite 4000 Chicago, IL 60654 Telephone: (312) 715-5000 Facsimile: (312) 632-1727 [email protected]


EXHIBIT A

Joint Venture Term Sheet

Case 11-06098 Doc 729-1 Filed 09/09/11 Entered 09/09/11 17:12:25 Desc Exhibit A-Joint Venture Term Sheet Page 1 of 9

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UNITED STATES BANKRUPTCY COURTNORTHERN DISTRICT OF ILLINOIS

In Re: ) BK No.:)) Chapter:)))

Debtor(s) )

GIORDANO'S ENTERPRISES, INC., et al.,11-06098

11Honorable Eugene R. Wedoff

Eastern Division

(Jointly Administered)

ORDER (A) APPROVING (I) SALE OF MEMBERSHIP INTERESTS OF CERTAIN DEBTORS IN CERTAIN LIMITED LIABILITY COMPANIES TO BUSINESS KEYS, LLC,

AND SUPERIOR ELITE, LLC, FREE AND CLEAR OF LIENS, CLAIMS, ENCUMBRANCES, AND INTERESTS; (II) ASSUMPTION AND ASSIGNMENT OF LEASE OF

NONRESIDENTIAL REAL PROPERTY AND DETERMINATION OF CURE AMOUNT; (III) SETTLEMENT OF CERTAIN RELATED DISPUTES WITH PURCHASERS AND ELIAS

GIANNAKOPOULOS, AND (IV) RELATED RELIEF, AND (B) SHORTENING AND LIMITING NOTICE

This matter having come before the Court on the Trustee's Motion for Entry of an Order (A) Approving (I) Sale of Membership Interests of Certain Debtors in Certain Limited Liability Companies to Business Keys, LLC, and Superior Elite, LLC, Free and Clear of Liens, Claims, Encumbrances, and Interests; (II) Assumption and Assignment of Lease of Nonresidential Real Property and Determination of Cure Amount; (III) Settlement of Certain Related Disputes with Purchasers and Elias Giannakopoulos, and (IV) Related Relief, and (B) Shortening and Limiting Notice (the "Motion"; all capitalized terms used but not defined herein shall have the meanings ascribed to them in the Motion); the Court having reviewed the Motion and the Joint Venture Term Sheet and having heard the statements of counsel at a hearing held before the Court on September 6, 2011 (the "Hearing"); the Court finding that (a) the Court has jurisdiction over this matter pursuant to 28 U.S.C. §§157 and 1334 and Rule 40.3.1 of the Local Rules of Procedure of the United States District Court for the Northern District of Illinois and (b) this is a core proceeding pursuant to 28 U.S.C. §157(b)(2); and, based upon the entire record of the Hearing, including consideration of (w) the Motion and Joint Venture Term Sheet, (x) certificate(s) filed with the Court, (y) the failure of any party in interest with standing to object to the Motion, and (z) the representations of counsel at the Hearing, the Court further finding as follows: A. Adequate and sufficient notice of the Hearing and of entry of this Order, and a reasonable opportunity to object to the same, was afforded to all parties entitled thereto, including, without limitation, (a) Business Keys, LLC ("BKLLC"); (b) Superior Elite, LLC ("SELLC"); (c) Beverly Pizza, Inc. ("Beverly Pizza", and, with BKLLC and SELLC, the "Giannakopoulos Entities"); (d) Elias (also known as Louie) Giannakopoulos ("Louie"); (e) Fifth Third Bank, Debtors' prepetition and postpetition senior secured lender ("Fifth Third"); (f) Bridgeview Bank; (g) the Official Committee of Unsecured Creditors ("Committee"); (h) the United States Trustee; (i) Evergreen Plaza Associates II, LP ("Landlord"), and (j) entities not named above, or their counsel, who have filed a notice of appearance through the Court's CM/ECF System. No other or further notice of the Motion, the Hearing, or the entry of this Order need be given to any entity. B. Pursuant to 11 U.S.C. §§363(b) and 363(f), as set forth in the Motion, and the arguments of counsel at the Hearing, the Trustee has advanced good business reasons for consummating the Joint

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Venture Transactions on the terms and conditions contained in the Joint Venture Term Sheet, and doing so represents a reasonable exercise of the Trustee's business judgment. C. The Beverly Plaza Indenture of Lease (the "Beverly Lease") dated as of November 10, 2010, between Landlord and Debtor Giordano's Franchise, Inc., may be assumed by the Trustee and assigned to Beverly Pizza, pursuant to 11 U.S.C. §365. No defaults exist under the Beverly Lease, no payment of cure is required in connection with the assumption of the Beverly Lease, and the Trustee and the Giannakopoulos Entities have provided adequate assurance of future performance under the Beverly Lease, all within the meaning of 11 U.S.C. §365(b). D. The transactions contemplated by the Joint Venture Term Sheet are in the best interest of the Debtors, their creditors and their estates. E. Fifth Third is the sole entity holding liens against, or security interests in, the Purchased Assets, and, pursuant to 11 U.S.C. §363(f)(2), Fifth Third has consented to entry of this Order and to the Joint Venture Transactions. F. The Joint Venture Term Sheet is the result of arm's length bargaining by the parties thereto and, under the circumstances and for the reasons set forth in the Motion and at the Hearing, represents the highest or otherwise best offer reasonably attainable for the sale of the Purchased Assets. NOW, THEREFORE, IT IS HEREBY ORDERED THAT: 1. The Motion is GRANTED, and any objections to the Motion that have not been withdrawn or otherwise resolved are overruled. 2. The Trustee is authorized to execute and implement the terms of the Joint Venture Term Sheet (a copy of which is attached to this Order as Attachment A), and the Trustee, Louie, and the Giannakopoulos Entities are authorized and directed to consummate the Joint Venture Transactions, as set forth in the Joint Venture Term Sheet. 3. To the extent the parties determine that consummation of the Joint Venture Transactions requires documentation beyond the Joint Venture Term Sheet and this Order, or such documentation is deemed necessary or convenient by the parties in order to consummate the Joint Venture Transactions, all parties to the Joint Venture Term Sheet are authorized to execute such documentation, upon consultation with Fifth Third and the Committee, so long as the terms of such documentation do not materially alter the terms of the Joint Venture Term Sheet to the detriment of the Debtors' estates. 4. The requirements of 11 U.S.C. §365 having been met with respect to the Beverly Lease, the Trustee hereby assumes the Beverly Lease and assigns it to Beverly Pizza. 5. The transfer of the Purchased Assets to the Giannakopoulos Entities shall be "as is, where is," with no representations or warranties of any kind, nature, or description, except that all of the Debtors' right, title, and interest in and to the Purchased Assets shall be transferred free and clear of all liens, claims, charges, interests (including security interests), restrictions, and other encumbrances of any kind or nature thereon (collectively, "Interests") to the full extent authorized under 11 U.S.C. §363(f), with the same, including, without limitation, a first priority security interest in favor of Fifth Third, to attach to the net proceeds of the Joint Venture Transactions, with the same validity and priority and to the same extent as existed before the Joint Venture Transactions.

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6. The Trustee shall remit the net proceeds of the Joint Venture Transactions to Fifth Third immediately upon receipt, with those proceeds to be applied in accordance with the financing orders already entered by the Court. 7. The provisions of this Order authorizing the transfer of the Purchased Assets free and clear of Interests shall be self-executing, and neither the Trustee nor the Giannakopoulos Entities shall be required to execute or file releases, termination statements, assignments, consents, or other instruments in order to effectuate, consummate, and implement the foregoing provisions of this Order; provided, however, that this paragraph shall not excuse such parties from performing any and all of their respective obligations under this Order or the Joint Venture Term Sheet. 8. The provisions of this Order and of the Joint Venture Term Sheet, including, without limitation, the right of business entities designated by Louie to be issued the franchise agreements described in Section VI of the Joint Venture Term Sheet, shall be binding upon and inure to the benefit of the Giannakopoulos Entities, the Debtors' estates, all holders of Interests, each of the entities listed in Paragraph A above, and the respective successors and assigns of each of the foregoing, including, without limitation, any purchaser or assignee of the franchise agreements described in Section VI of the Joint Venture Term Sheet. 9. The provisions of Fed. R. Bankr. P. 6004(h) and 6006(d) are hereby waived, and this Order shall be effective immediately. 10. The findings and conclusions set forth herein constitute the Court's findings of fact and conclusions of law pursuant to Fed. R. Bankr. P. 7052, made applicable to this proceeding pursuant to Fed. R. Bankr. P. 9014. To the extent anything characterized in this Order as a finding of fact constitutes a conclusion of law, it is adopted as such, and vice versa. 11. The Court shall retain jurisdiction to enforce the provisions of this Order and of the Joint Venture Term Sheet.

Honorable Eugene R. Wedoff

Enter:

United States Bankruptcy JudgeDated:

Christopher Combest Quarles & Brady LLP 300 N. LaSalle Street, Suite 4000 Chicago, IL 60654 Telephone: (312) 715-5000 Facsimile: (312) 632-1727 [email protected]

Prepared by:

ATTACHMENT A

Joint Venture Term Sheet

Case 11-06098 Doc 729-3 Filed 09/09/11 Entered 09/09/11 17:12:25 Desc Exhibit Attachment A to Proposed Order-Joint Venture Term Sheet Page 1 of 9

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