Declaration/Declaration Of Jeffrey Gilfix Pursuant To Rule 1007-2 Of The Local Bankruptcy Rules For The Southern District Of New York (related document(s) 1 ) filed by Michael S. Fox on behalf of GMG Capital Partners III, L.P.. (Fox, Michael) (Entered: 09/10/2013)
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UNITED STATES BANKRUPTCY COURT
THE SOUTHERN DISTRICT OF NEW YORK
In re:
Chapter 11
GMG CAPITAL PARTNERS III, L.P.,1
Case No. Case No. 13-[ ] ([ ])
Debtors.
(Motion for Joint Administration Pending)
DECLARATION OF JEFFREY GILFIX PURSUANT TO RULE 1007-2 OF THE
LOCAL BANKRUPTCY RULES
FOR THE SOUTHERN DISTRICT OF NEW YORK
I, Jeffrey Gilfix, hereby declare, pursuant to section 1746 of title 28 of the United
States Code, as follows:
1.
I am Chief Operating Officer of GMG Capital Investments, LLC (the âÂÂGeneral
PartnerâÂÂ), which is the general partner of the debtors and debtors in possession of these cases:
GMG Capital Partners III, L.P. (âÂÂGMG IIIâÂÂ) and GMG Capital Partners III Companion Fund,
L.P. (âÂÂCompanion Fund,â and collectively with GMG III, the âÂÂDebtorsâÂÂ). I have been acting in
this capacity since 2001. I am familiar with the general and financial affairs of the Debtors. If I
were called upon to testify, I could and would testify competently to the facts set forth herein. I
am authorized to submit this Declaration on behalf of the Debtors.
2.
On September 10, 2013 (the âÂÂPetition DateâÂÂ), the Debtors filed voluntary
petitions for relief under chapter 11 of title 11 of the United States Code (the âÂÂBankruptcy
CodeâÂÂ). The Debtors, each Manhattan-based limited partnerships organized under the law of
Delaware, are two of four affiliated investment funds. The Debtorsâ assets consist of their
1
The Debtors in these chapter 11 cases, along with the last four digits of each DebtorâÂÂs federal tax identification
number are: (i) GMG Capital Partners III, L.P. (9146), and (ii) GMG Capital Partners III Companion Fund, L.P.
(0603).
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venture capital investments â equity securities in three entities â and accounts receivable in the
form of unpaid fees due from certain of their limited partners. The Debtorsâ operations are
largely managed in Manhattan through JDJ Management, LLC (âÂÂJDJâÂÂ). JDJ is controlled by the
same principals as is the General Partner.
3.
Specifically, GMG III is a venture capital fund formed in August, 2001. The fund
was formed on the heels of two prior successful funds, and many investors from those prior
funds expressed interest in investing in GMG III, and many did just that. Several investments
were already targeted prior to the establishment of the fund. Eventually, four separate limited
partnerships were formed:
GMG Capital Partners III, LP
GMG Capital Partners III Companion Fund, LP
GMG Capital Partners IIIA, LP
GMG Capital Partners IIIB, LP
4.
Although each partnership has different limited partners, the partnerships are
related in that they have the same general partner, and they invested in the same portfolio
companies at the same pro rata allocation to allocate the dollars invested between those portfolio
companies. Stated another way, a $1 million investment in Debtor GMG III would hold the
same investments as a $1 million investment in Debtor Companion Fund, while a $500,000
investment in Debtor Companion Fund would hold half of such investments on a pro rata basis.
In all, approximately $183 million of capital commitments from limited partners were obtained
by GMG III, Companion Fund, IIIA, and IIIB, and investments were made in 13 different
portfolio companies.
5.
The collapse of the investment markets, and the advent of the terrorist attacks of
September 11, 2001 â just one month following GMG IIIâÂÂs formation â significantly affected
GMG III and its sister funds, including unexpected difficulties in raising money for the funds,
2
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difficulties in raising money for our portfolio companies, delays in growth and realizing revenues
by the portfolio companies (necessitating the continuation of fund raising beyond targeted dates
and targeted amounts), and the disappearance, for all intents and purposes, of the initial public
offering market, a major avenue to obtain liquidity for these privately held investments. Several
of GMG IIIâÂÂs portfolio companies, despite creating what were considered excellent technologies,
could not survive these challenges and went out of business. Nonetheless, the Debtors still hold
investments.
6.
GMG III and the other partnerships currently carry investments in three remaining
portfolio companies: 1) Open Peak, Inc.; 2) Lancope, Inc.; and 3) X-Factor Communications,
LLC. GMG III has 44 limited partners, while Companion Fund has 61 limited partners.
7.
Precipitating the Debtorsâ chapter 11 filing, was a money judgment for breach of
contract against the Debtors and certain of their affiliates, jointly and severally, entered by the
Superior Court for the State of Delaware on June 21, 2013. The amount of the money judgment
was approximately $6.950 million. Because the Debtors assets are illiquid at this time, neither
Debtor is in position to satisfy that judgment.
8.
Depending on the methodology of valuation used, the Debtors may be solvent,
even though they have no cash. One such valuation performed by the Debtors collectively
results in as much as approximately $24 million in assets among the two Debtors (of
approximately $41 million allocated to the Debtors and its non-Debtor sister funds).
The
Debtors believe their aggregate debt is approximately $9 million. The Debtorsâ value and ability
to pay their creditors in full, however, ultimately hinges on whether their investments in a certain
venture, Open Peak, and to a lesser extent, their investments in Lancope, come to fruition. I am
3
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fairly confident this will be the case. In the interim, however, the Debtorsâ assets are not ripe for
disposition.
9.
On account of the judgment, a writ of garnishment was issued against Debtor
GMG III, which holds most of the Debtorsâ shares in their investments for itself and on behalf of
Debtor Companion Fund and non-debtor affiliates. Should GMG III be forced to transfer the
Debtorsâ Open Peak and Lancope shares to the judgment creditor, Athenian Venture Partners I,
LLC (âÂÂAthenianâÂÂ), Athenian will be unjustly enriched by obtaining the entire upside of these
investments. This upside is rightly the recovery belonging to the Debtorsâ stakeholders. If
Athenian succeeds, the Debtors will be unable to make any distribution to their remaining
creditors; and the Debtorsâ stakeholders would receive no recoveries from what might very well
be solvent entities. In short, fortuitous timing of the judgment would provide a windfall to
Athenian â granting it a potential recovery in multiples of its claim amount while leaving the
remaining creditors and stakeholders with nothing.
10.
Through the chapter 11 process, the Debtors intend to utilize their exclusivity
periods to formulate a plan. The Debtors have no secured creditors and no bank account. Their
employee wages, rent, vendors and utilities and the like are advanced by JDJ. The Debtors do
not intend at this time to seek immediate emergency relief, but reserve rights to file âÂÂfirst-day
motionsâ as needed The Debtors initially do seek joint administration, a 30 day extension of time
to file their schedules and statements of financial affairs and retention of Olshan Frome Wolosky
LLP as counsel.
11.
Attached hereto is a list of the schedules of information required by Local Rule
1007-2. This information is accurate to my information and belief. However, the Debtors
reserve all rights to supplement and revise this information.
4
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12. .I hereby declare under the penalty ofperjury that the foregoing statements are true
and correct to the best of my knowledge, information and belief.
Dated:
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September 10, 2013
New York, New York
, m...âÂÂ- âÂÂ
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Jeffrey Gillix Lg '
ChiefOperating fï¬Âcer
GMG Capital Investments, LLC
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SCHEDULE 1
20 Largest Unsecured Claims
As required under Local Rule 1007-2(a)(4), the following is a schedule of the Debtorsâ 20 largest unsecured claims.
CREDITOR
CONTACT
ADDRESS & TELEPHONE NO.
1. Athenian Venture Partners I,
L.P.
340 West State Street,
Unit Suite 29, Ste 137D
Athens, OH 45701
2. JDJ Management, LLC2
575 Lexington Avenue, Suite 2890
New York, New York 10022
3. Potter Anderson Corroon
1313 North Market Street
PO Box 951
Wilmington, DE 19899
4. Keevican Weiss Bauerle &
Hirsch LLC
Federated Investors Tower
1001 Liberty Avenue, 11th Floor
Pittsburgh, PA 15222
5. Greenberg Traurig LLP
3333 Piedmont Rd, NE, Suite 2500
Atlanta, GA 30305
6. Nordlicht & Hand
2
JDJ Management, LLC is the Debtorsâ management company.
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Olympic Tower
645 Fifth Avenue
New York, NY 10022
AMOUNT OF
CLAIM
CONTINGENT,
UNLIQUIDATED,
DISPUTED, OR
PARTIALLY SECURED
Unliquidated
$6,950,000.00
$1,075,067.98
$308,116.00
$161,828.00
$101,721.75
$48,019.00
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ADDRESS & TELEPHONE NO.
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AMOUNT OF
CLAIM
62 William Street, 5th Floor
New York, NY 10005
$28,284.75
8. Donald L. Gouge, Jr., LLC
800 N. King Street, Suite 303
Wilmington, DE 19801
$13,773.00
9. United Healthcare Oxford
48 Monroe Turnpike
Trumbull, CT 06611
$5,629.50
10. Susan Lakosil
4290 Randolph Street
San Diego, California 92103
$4,785.00
7. Corporate Power, Inc.
Donald L. Gouge, Jr.
11. Staples Credit Plan
12. Level 3
Dept 51 â 7819342675
PO Box 689020
Des Moines, IA 50368-9020
550 South 24th St
West, Suite 103
Billings, MT 59102
$4,237.22
$1,533.00
13. SignalPoint-New York
PO Box 371874
New York, NY 10087
$1,074.00
14. T-Mobile
PO Box 790047
St. Louis, MO 63179
$573.75
15. Federal Express
PO Box 371461
Pittsburgh, PA 15250-7461
$486.75
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CONTINGENT,
UNLIQUIDATED,
DISPUTED, OR
PARTIALLY SECURED
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16. Pitney Bowes
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ADDRESS & TELEPHONE NO.
Purchase Power
PO Box 371874
Pittsburgh, PA 15250
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AMOUNT OF
CLAIM
$361.50
17. Verizon (Fax)
PO Box 15124
Albany, NY 12212
$226.50
18. Verizon Wireless
PO Box 408
Newark, NJ 07101-0408
$222.00
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CONTINGENT,
UNLIQUIDATED,
DISPUTED, OR
PARTIALLY SECURED
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SCHEDULE 2
5 Largest Secured Claims
As required under Local Rule 1007-2(a)(5), the following lists the Debtorsâ largest secured
claims.3
None.
3
The information herein shall not constitute an admission of liability by, nor is it binding on, the Debtors.
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SCHEDULE 3
Summary of Assets and Liabilities
As required under Local Rule 1007-2(a)(6), the following is a summary of the Debtorsâ assets4
and liabilities. The following data is the most current information available and reflects the
Debtorsâ financial condition as of the Petition Date. The information set forth below shall not
constitute an admission on behalf of the Debtors, nor is it binding upon the Debtors. The
Debtors reserve all rights to challenge the priorities, nature, amount, and status of any claim or
debt and of any lien or security interest securing such interest or debt.
Total Assets: $ 24.6 million
Total Liabilities: $ 8.8 million
4
The Debtorsâ assets are listed at âÂÂbook valueâ and are not intended to be a representation of fair market value,
which fair market value may be materially different.
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SCHEDULE 4
Information Relating to Publicly Held Stock, Debenture and Securities of the Debtors
As required under Local Rule 1007-2(a)(7), the following is a list of the stock, debenture and
other securities of the debtor that are held by the Debtorsâ directors and officers.
None.
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SCHEDULE 5
Debtorsâ Property Not in the Debtorsâ Possession
As required under Local Rule 1007-2(a)(8), the following describes the DebtorâÂÂs property in the
possession or custody of any custodian, public officer, mortgagee, pledge, assignee of rents,
secured creditor or agent for any such entity.
None.
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SCHEDULE 6
Debtorsâ Owned and Leased Property
As required under Local Rule 1007-2(a)(9), the following lists premises owned, leased or held
under other arrangement from which the Debtors operate their business.
Owned Property
None.
Leased Property (Leased By Management Company)
Business Address
575 Lexington Avenue, Suite 2890
New York, New York 10022
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Landlord
Maple REEP-OFC 575 Lex Owner
Landlord Address
PO Box 28344
New York, New York 10087
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SCHEDULE 7
As required under Local Rule 1007-2(a)(10), the following describes the location of the DebtorsâÂÂ
substantial assets, the location of its books and records, and the nature, location, and value of any
assets held by the Debtors outside the territorial limits of the United States.
Location of the Debtorsâ Substantial Assets
1. Asset: CASH as of Petition Date
None.
2. Asset: ACCOUNTS RECEIVABLE as of Petition Date
DESCRIPTION
Management Fees
AMOUNT
$1,300,592.00
3. Shares: All shares of stock owned by Debtors are held in New York, New York.
4. Asset: SECURITY DEPOSITS, DEFERRED LEASES AND OTHER INTANGIBLES
as of Petition Date.
TYPE
Security Deposits
AMOUNT
None
Location of the Debtorsâ Books and Records
The Debtorsâ books and records are maintained at 575 Lexington Avenue, Suite 2890, New
York, New York 10022.
Nature, Location, and Value of Assets Located Outside of the United States
The Debtors do not have assets outside of the territorial United States.
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SCHEDULE 8
Litigation Commenced Against the Debtors
As required under Local Rule 1007-2(a)(11), the following is a list of the nature and status of
each action or proceeding against the Debtors where a judgment against the Debtors or a seizure
of their property may be imminent.
ACTION OR PROCEEDING
Athenian Venture Partners I, L.P., et al v.
GMG Capital Investments, LLC, et al, No.
08C-04-084 DCS, Superior Court of the State
of Delaware in and for New Castle County
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NATURE OF ACTION
STATUS OF ACTION
Breach of Contract
Judgment Entered, Writ of
Garnishment Issued
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SCHEDULE 9
Senior Management
As required under Local Rule 1007-2(a)(12), the following lists the names of the individuals who
comprise the Debtorsâ existing senior management, their tenure with the Debtor, and a brief
summary of their relevant responsibilities and experience.
NAME/POSITION
EXPERIENCE/RESPONSIBILITIES
Joe Gfoeller â Managing Partner
Mr. Gfoeller has been Managing Partner since 2001, and
has over 20 years experience in venture capital.
Dave Mock â Chief Investment
Officer
Mr. Mock has been Chief Investment Officer since 2001,
and has over 30 years experience in venture capital.
Jeffrey Gilfix â Chief Financial
Officer
Mr. Gilfix has been Chief Financial Officer since 2001,
and has over 15 years experience in venture capital.
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SCHEDULE 10
Payments to Employees, Officers, Directors, Stockholders,
and Financial and Business Consultants
As required under Local Rule 1007-2(b)(1)-(2), the following provides (i) the estimated amount
of weekly payroll to the Debtorsâ employees (exclusive of officers, directors, and stockholders)
for the 30 day period following the filing of these chapter 11 petitions; (ii) the estimated amount
proposed to be paid to officers, directors, and stockholders for services for the 30 day period
following the filing of these chapter 11 petitions; and (iii) the estimated amount proposed to be
paid to financial or business consultants for services for the 30 day period following the filing of
these chapter 11 petitions.
PAYMENTS TO EMPLOYEES (NOT INCLUDING
OFFICERS, DIRECTORS, AND STOCKHOLDERS)
PAYMENTS TO OFFICERS AND DIRECTORS
PAYMENTS TO STOCKHOLDERS
PAYMENTS TO FINANCIAL OR BUSINESS
CONSULTANTS
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$0
$0
$0
$0
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SCHEDULE 11
Cash Receipts and Disbursements, Cash Gain or Loss,
and Unpaid Obligations and Receivables
As required under Local Rule 1007-2(b)(3), the following is a schedule for the 30 day period
following the filing of these chapter 11 petitions of estimated (i) cash receipts, (ii) cash
disbursements, (iii) net cash gain or loss, (iv) obligations expected to accrue but remain unpaid,
and (v) receivables expected to accrue but remain unpaid.
ESTIMATED CASH RECEIPTS
ESTIMATED CASH DISBURSEMENTS
ESTIMATED NET CASH GAIN OR LOSS
ESTIMATED OBLIGATIONS EXPECTED TO ACCRUE BUT
REMAIN UNPAID (OTHER THAN PROFESSIONAL FEES)
ESTIMATED RECEIVABLES EXPECTED TO ACCRUE BUT
REMAIN UNPAID
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$0
$0
$0
$0
$0
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Exhibit A
Corporate Organization Structure
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Organizational Structure
Joachim Gfoeller, Managing Partner
David Mock, Chief Investment Officer
Jeffrey Gilfix, Chief Operating Officer
33.33%
33.33%
33.33%
44 Limited Partners
GMG Capital Partners III, L.P.
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GMG Capital Investments, LLC
Additional Non-Debtor Affiliates
61 Limited Partners
GMG Capital Partners III Companion
Fund, L.P.