This week we're highlighting the sale of royalty payments from a landfill agreement. You can read the entire sale motion for free and contact the seller to learn more about bidding on these assets or others that we have on our site for subscribers.
Royalty Payments
Snippet from the Sale Motion
I. FACTUAL BACKGROUND
On May 3, 2012 (the “Petition Date”), the Debtors filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code, 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”).
On December 21, 2012, following a hearing on a motion of the United States Trustee to convert or dismiss the Debtors’ case, the United States Trustee appointed Joseph H. Baldiga Chapter 11 trustee of the Debtors’ case.
On January 2, 2013, upon the Trustee’s motion and with the Debtors’ assent, this Court converted the case to Chapter 7, and the Trustee was subsequently appointed the Chapter 7 trustee of this Estate.
On February 14, 2013 and March 27, 2013, the Trustee conducted the initial meeting of creditors pursuant to Bankruptcy Code § 341(a) in the Chapter 7 case.
Since his appointment, the Trustee has worked expeditiously to liquidate certain real and personal property of the Debtors, as identified by the Debtors on their Schedule A and Schedule B, both as amended, for the benefit of the Estate.
Upon review of the Debtors’ Schedules, as amended, and discussions with Mr. Hannon and with Debtors’ counsel, the Trustee determined that Mr. Hannon claims an ownership interest in the Royalties.
II. THE SALE ASSETS
Prior to the Petition Date, on or about October 5, 1999, Mr. Hannon entered into the Taunton Landfill Agreement. The Taunton Landfill Agreement was subsequently amended on April 13, 2000. A copy of the Taunton Landfill Agreement, as amended, is attached hereto as Exhibit B.
Pursuant to Section 9.20 of the Taunton Landfill Agreement, as amended, WMMA agreed to pay to Mr. Hannon an amount equal to seven dollars ($7.00) for each ton of solid waste deposited in a certain landfill located in Taunton, Massachusetts (the “Taunton Landfill Site”) greater than the capacity of 835,000 tons of waste (i.e., the Royalties).
Pursuant to an Agreement for Judgment dated on or about December 11, 2009 and filed in Civil Action No. 2008-1265 before the Massachusetts Superior Court for Norfolk County (the “Agreement for Judgment”), WMMA is required to pay the Royalties in the manner and in the order set forth in the Agreement for Judgment (the “Royalties Payment Waterfall”). A copy of the Agreement for Judgment is attached hereto as Exhibit C.
Specifically, in accordance with Section 4 of the Agreement for Judgment, after full satisfaction of (i) certain monies due to ACSTAR Insurance Company and (ii) $95,969.22 to WMMA, WMMA is required to pay the Royalties as follows:
a. first, $600,000.00 to Stoughton Recycling Technologies, LLC f/k/a T.W. Conroy 5, LLC (“Conroy”);
b. second, $600,000.00 to Boston Environmental and Trucking Corporation (“BEC”);
c. third, $650,000.00 to Conroy;
d. fourth, $650,000.00 to BEC;
e. fifth, $1,000,000.00 in equal amounts to Conroy (50%) and BEC (50%);
f. sixth, after full satisfaction of the payments described in Section 4(a) through (e), any remaining Royalties up to $1,000,000.00 to The McLaughlin Bros., P.C., as Escrow Agent (“Escrow Agent”) to be held for the benefit of Mr. Hannon pursuant to a certain Escrow Agreement dated contemporaneously with the Agreement for Judgment (the “Escrow Agreement”); and
g. seventh, all remaining Royalties to the Escrow Agent in equal amounts to Conroy (50%) and BEC (50%).
In accordance with the Agreement for Judgment and the Royalties Payment Waterfall established therein, the Escrow Agreement directs WMMA to pay Mr. Hannon’s interest in the Royalties to the Escrow Agent and, upon the payment of such Royalties to the Escrow Agent, governs the release of the Royalties to Mr. Hannon. A copy of the Escrow Agreement is attached hereto as Exhibit D.
The Sale Assets are Mr. Hannon’s interest in the Royalties that are payable or become payable pursuant to Section 9.20 of the Taunton Landfill Agreement, as amended, and subject to the Agreement for Judgment and the Escrow Agreement. The Debtors listed the Sale Assets on the Debtors’ Schedule B, as amended, with a current value of “Unknown”. A copy of the Debtors’ Schedule B, as amended, is attached hereto as Exhibit E. Pursuant to Bankruptcy Code § 541(a), the Sale Assets are property of the Debtors’ Estate. The Debtors list no exemptions in the Sale Assets.
During the Debtors’ Chapter 7 case, the Trustee investigated the nature of Mr. Hannon’s interest in the Royalties and learned that WMMA had exceeded the delivery of 835,000 tons of waste to the Taunton Landfill Site, which, in turn, triggered the $7.00 royalty payments for each additional ton of waste delivered. Specifically, to better assess the value of the Sale Assets, in addition to his discussions with Mr. Hannon and his counsel, the Trustee contacted the Escrow Agent, WMMA, Conroy and BEC to determine the status of the Royalties Payment Waterfall and to request an accounting of WMMA’s payment of the Royalties to the Royalties Payment Waterfall recipients.
Routinely throughout the Debtors’ case, WMMA has provided the Trustee with monthly reports of the waste tons delivered to the Taunton Landfill Site which are subject to the royalty stream and the amount of the resulting Royalties. Copies of the relevant reports provided by WMMA and updated through July 2014 (the “WMMA Reports”) and a topographic survey of the Taunton Landfill Site dated June 26, 2013 are attached hereto as Exhibit F.
As part of the Trustee’s marketing efforts, the Trustee compiled a detailed package of information related to the Sale Assets and the status of the Royalties Payment Waterfall for dissemination to potential purchasers, including the Taunton Landfill Agreement, the Agreement for Judgment, the Escrow Agreement and the WMMA Reports. To date, in addition to the Buyer’s offer to purchase the Sale Assets for $70,000.00, the Trustee has also entertained other inquiries from potential purchasers regarding the nature of the Sale Assets and the proposed Private Sale.
Relying on the WMMA Reports, it appears that the royalty stream has generated $2,889,974.29 from May 2008 through July 2014. Upon information and belief, WMMA has distributed the Royalties generated to date in accordance with the Agreement for Judgment as follows:
a. $902,068.08 to ACSTAR Insurance Company;
b. $95,969.22 to WMMA; and
c. remainder to Conroy and BEC (as set forth in Section (4)(a) through (d)
of the Agreement for Judgment).
Currently, upon information and belief, and based on the Trustee’s review of the WMMA Reports, it appears that WMMA is currently paying the monies generated from the Royalties to BEC as the “fourth-level” recipient of the Royalties Payment Waterfall in accordance with the Agreement for Judgment. See Agreement for Judgment, Sec. 4(d).
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