APPLICATION OF THE D EBTOR FOR AN ORDER AUTHORIZING AND APPR OVING

33 Pages·2013·0.55 MB·English

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: ) Chapter 11
)
POWERWAVE TECHNOLOGIES, INC.,1 ) Case No. 13-10134 (MFW)
)
Debtor. )
)

APPLICATION OF THE DEBTOR FOR AN ORDER
AUTHORIZING AND APPROVING THE EMPLOYMENT OF
BRADLEY I. DIETZ AS CHIEF RESTRUCTURING OFFICER FOR
THE DEBTOR NUNC PRO TUNC TO MARCH 15, 2013

Powerwave Technologies, Inc., the above-captioned debtor and debtor in possession (the
“Debtor”), hereby submits this application (the “Application”) for entry of an order, substantially
in the form attached hereto as Exhibit A (the “Proposed Order”), authorizing the Debtor to
employ Bradley I. Dietz as its Chief Restructuring Officer (“CRO”), effective nunc pro tunc to
March 15, 2013. In support of this Application, the Debtor respectfully represents as follows:
Jurisdiction
1. This Court has jurisdiction to consider the Application pursuant to 28 U.S.C. §§
157 and 1334.
2. This is a core proceeding pursuant to 28 U.S.C. § 157(b).
3. Venue is proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409.
4. The statutory predicates for the relief requested herein are sections 105(a) and
363(b) of title 11 of the United States Code (11 U.S.C. §§ 101–1532, as amended, the
“Bankruptcy Code”).

1 The last four digits of the Debtor’s federal tax identification number are 3423.

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Background
5. On January 28, 2013 (the “Petition Date”), the Debtor commenced a voluntary
case under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”). The Debtor
continues to operate its business and manage its properties as a debtor in possession as
authorized by sections 1107(a) and 1108 of the Bankruptcy Code. No request has been made for
the appointment of a trustee or examiner in this chapter 11 case. On February 7, 2013, the Office
of the United States Trustee appointed an Official Committee of Unsecured Creditors (the
“Committee”) in this chapter 11 case.
6. The factual background relating to the Debtor’s commencement of its chapter 11
case is set forth in detail in the Declaration of Ronald J. Buschur, President and Chief Executive
Officer of Powerwave Technologies, Inc., in Support of the Debtor’s First Day Motions and
Applications (the “Buschur Declaration”) [Docket No. 24], filed on January 30, 2013 in the
Debtor’s chapter 11 case and incorporated herein by reference.
7. As disclosed to the Court at a March 14, 2013 continued hearing on the Debtor’s
motion seeking authority to use cash collateral, and as set forth in the third interim order
authorizing the use of cash collateral entered by the Court on March 14, 2013 [Docket No. 255]
(the “Third Interim Cash Collateral Order”), the Debtor’s prepetition secured lender, P-Wave
Holdings, LLC (“P-Wave”), with the support of the Committee, required that the Debtor retain
the services of a CRO no later than March 21, 2013 and, if such retention does not occur, a
“Termination Event” under the Third Interim Cash Collateral Order will arise.
8. After negotiations with P-Wave and the Committee, and after a careful analysis,
the Debtor’s Board of Directors, after a meeting and upon the advice of the Debtor’s
professionals and senior management, concluded that it was in the best interests of the Debtor’s
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estate to retain a CRO with the duties described in the Third Interim Cash Collateral Order.
Thus, the Debtor agreed to retain a CRO, the failure of which would constitute a “Termination
Event” under the Third Interim Cash Collateral Order. (See Third Interim Cash Collateral Order
at ¶ 12) (“The Debtor will appoint a CRO, whose identity and scope of employment are
reasonably satisfactory to P-Wave and the Creditors’ Committee”).
9. Accordingly, effective as of March 15, 2013, and subject to the Court’s approval,
the Debtor and Mr. Dietz entered into an engagement letter (the “Engagement Letter”), a copy of
which is attached hereto as Exhibit B, pursuant to which Mr. Dietz will serve as the Debtor’s
CRO. P-Wave and the Committee support the retention of Mr. Dietz as CRO, which will satisfy
the requirements of the Third Interim Cash Collateral Order.
Relief Requested
10. By this Application, the Debtor requests the entry of an order pursuant to sections
105(a) and 363(b) of the Bankruptcy Code authorizing the employment of Mr. Dietz as the
Debtor’s CRO in its chapter 11 case nunc pro tunc to March 15, 2013.
A. Mr. Dietz’s Qualifications
11. Mr. Dietz is an experienced financial professional with over twenty-five years of
corporate finance experience in mergers and acquisitions and corporate restructuring. Mr. Dietz
headed the restructuring business of Peter J. Solomon Company (“PJS”) as a Managing Director
and Partner for ten years. Mr. Dietz has worked with companies, management teams, boards of
directors and creditor constituencies to realize value through improvement in operations and
balance sheet initiatives in all of his assignments, including his current duties as a member of the
boards of directors of seven companies.
12. Prior to joining PJS, Mr. Dietz spent ten years at Citibank in the bank’s
restructuring group principally managing large syndicated credits. Mr. Dietz was a Managing
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Director and Senior Credit Officer of Citibank. Mr. Dietz was also a mergers and acquisitions
banker in Citibank’s Investment Banking Division prior to joining the restructuring group.
13. Mr. Dietz currently serves as Chairman of the Board of Orchard Brands, a leading
multi-channel retailer. Mr. Dietz is also a lead director of ACA Financial Guaranty, a monoline
insurance company. Mr. Dietz is active or has served on approximately a dozen boards, or has
acted as a fiduciary for companies, including Cinram International Income Fund, Stratus
Technologies, Cosmetic Essence, Nationwide Argosy, Citrus Lands of Louisiana, Pillowtex,
Friedman’s Jewelers, Bally Total Fitness and First Capital Holdings. Mr. Dietz has brought
substantial financial experience to these director/trusteeships, having advised boards in a broad
array of transactions during his career. Mr. Dietz has chaired or served on all of the principal
board committees including audit, risk, governance and compensation.
14. As set forth in the Third Interim Cash Collateral Order, the Debtor is retaining
Mr. Dietz to: (a) market the assets of the Debtor; and (b) recommend and implement a transition
and restructuring plan for any assets or business lines not likely to be sold promptly to a third
party purchaser. Based on Mr. Dietz’s expertise and experience in the restructuring space, the
Debtor believes that the retention of Mr. Dietz as the Debtor’s CRO is in the best interests of the
Debtor’s estate.
B. Services to Be Provided
15. Subject to entry of the Proposed Order and consistent with the terms of the
Engagement Letter, Mr. Dietz will serve as the CRO of the Debtor, reporting to a committee
comprised of non-management, independent directors appointed by the Debtor’s Board of
Directors. Subject to entry of the Proposed Order and consistent with the terms of the
Engagement Letter, the duties of Mr. Dietz will include the following:
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a. recommending and implementing a restructuring plan designed to
mitigate the Debtor’s current cash burn;
b. marketing the assets of the Debtor;
c. recommending and implementing a transition and restructuring
plan for any assets or business lines not likely to be sold promptly
to a third party purchaser;
d. having sole decision making authority to retain an investment
banker to assist the Debtor with the sale and marketing process;
and
e. in accordance with the terms of the Third Interim Cash Collateral
Order, decision making authority regarding the funding of non-
debtor affiliates or paying prepetition obligations owed to shippers,
warehouseman or other holders of possessory liens against the
Debtor.
C. Professional Compensation
16. The principal terms of Mr. Dietz’s engagement are as follows:
a. Mr. Dietz shall be paid $35,000 each month (“Monthly Payment”)
commencing upon Court approval (nunc pro tunc to March 15) and
on the 15th of each month thereafter. If such date is not a business
day, the payment shall be made on the preceding business day.
Each Monthly Payment shall be fully earned upon payment.
b. The Debtor shall reimburse Mr. Dietz for reasonable out-of-pocket
expenses including, but not limited to, costs of travel, legal counsel
(including legal counsel retained to draft and enforce the
Engagement Letter), any applicable state sales or excise tax and
other direct expenses.
17. Mr. Dietz will file with the Court a monthly statement of compensation received
from the Debtor, but will not apply to the Court for approval of amounts paid. Mr. Dietz will be
paid monthly by the Debtor for its services and expenses on the terms set forth in the
Engagement Letter. The Debtor will not seek authority to engage Mr. Dietz as a professional
under section 327 of the Bankruptcy Code in its chapter 11 cases.
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18. The Debtor believes that this compensation is fair and reasonable in light of
industry practice and market rates, Mr. Dietz’s experience in comparable chapter 11 cases and
the scope of work to be performed.
19. As set forth in the Dietz Declaration, the Debtor does not owe Mr. Dietz any
amount for services performed or expenses incurred prior to the commencement of the Debtor’s
chapter 11 case, and, thus, Mr. Dietz is not a prepetition creditor of the Debtor.
D. Indemnification
20. In addition to any insurance policies carried by the Debtor that would cover Mr.
Dietz, the Engagement Letter further provides that the Debtor will indemnify and hold harmless
Mr. Dietz from and against any and all losses, claims, damages, liabilities, penalties, judgments,
awards, costs, fees, expenses and disbursements, directly or indirectly caused by, relating to,
based upon, arising out of or in connection with this engagement of Mr. Dietz as CRO by the
Debtor or the performance by Mr. Dietz of any services rendered pursuant to such engagement,
unless there is a final non-appealable order of a Court of competent jurisdiction, at the trial level,
finding Dietz directly liable for gross negligence or willful misconduct (the “Indemnification
Provisions”), which provisions are defined in the Engagement Letter.
21. The terms of the Indemnification Provisions were fully negotiated between the
Debtor and Mr. Dietz at arm’s length and the Debtor respectfully submits that the
Indemnification Provisions are reasonable and appropriate. Accordingly, as part of this
Application, the Debtor requests that this Court approve the Indemnification Provisions.
E. Mr. Dietz’s Disinterestedness
22. To the best of the Debtor’s knowledge, information and belief, Mr. Dietz does not
have any connection with or any interest adverse to the Debtor, its significant creditors, or any
other significant party in interest known to Mr. Dietz, or its respective attorneys and accountants,
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except as may be set forth in the Dietz Declaration. Although the Debtor submits that the
retention of Mr. Dietz is not governed by section 327 of the Bankruptcy Code, the Debtor
attaches the Declaration of Bradley I Dietz, attached hereto as Exhibit C, which discloses,
among other things, any relationship that Mr. Dietz has with the Debtor, its significant creditors,
or other significant parties in interest known to Mr. Dietz. The Debtor submits that Mr. Dietz is
otherwise a “disinterested person” as that term is defined by section 101(14) of the Bankruptcy
Code.
Basis for Relief
23. The Debtor requests authority to retain Mr. Dietz under the terms of the
Engagement Letter pursuant to section 363 of the Bankruptcy Code, which provides in pertinent
part that a debtor “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). Courts interpreting section
363(b) have held that transactions should be approved pursuant to such provision where, as here,
they are supported by management’s sound business judgment. See, e.g., Meyers v. Martin (In
re Martin), 91 F.2d 389, 395 (3d Cir. 1996) (citing Fulton State Bank v. Schipper (In re
Schipper), 933 F.2d 513, 515 (7th Cir. 1991)); Comm. Of Equity Sec. Holders v. Lionel Corp. (In
re Lionel Corp.), 722 F.2d 1063 (2d Cir. 1983); In re Del. & Hudson Ry. Co., 124 B.R. 169, 176
(D. Del. 1991) (noting that the Third Circuit had adopted the “sound business purpose” test for
section 363(b)).
24. The retention of corporate officers is proper under section 363 of the Bankruptcy
Code. Courts recognize the applicability of section 363(b) of the Bankruptcy Code to the use of
estate property to compensate individuals employed outside the ordinary course of business. See
In re First Int’l Services Corp., 25 B.R. 66, 69 (Bankr. D. Conn. 1982). Indeed, courts have
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relied upon section 363(b) as the basis upon which to employ and compensate professionals to
serve as officers or other management-level personnel employed by the debtor. See, e.g., In re
Spansion Inc., Case No. 0-10690 (KJC) (Bankr. D. Del. Apr. 13, 2009); In re Verasun Energy
Corp., Case No. 08-12687 (PJW) (Bankr. D. Del. Dec. 17, 2008); In re WorldSpace, Inc., Case
No. 08-12412 (KJC) (Bankr. D. Del. Nov. 10. 2008); In re Hines Horticulture, Inc., Case No.
08-11922 (KJC) (Bankr. D. Del. October 2, 2008).
25. The Debtor has determined, in the exercise of its business judgment, that the fee
structure set forth in the Engagement Letter appropriately reflects the nature of the services to be
provided by Mr. Dietz, contains reasonable terms and conditions of employment, and should be
approved under section 363 of the Bankruptcy Code. Additionally, the Debtor submits that the
employment of Mr. Dietz as CRO is consistent with the “J. Alix Protocol” established by the
U.S. Trustee.
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Notice
26. Notice of this Application has been given to: (a) the Office of the United States
Trustee for the District of Delaware; (b) counsel for the Committee; (c) counsel for P-Wave; and
(d) all other parties requesting notice pursuant to Bankruptcy Rule 2002. Due to the nature of the
relief requested herein, the Debtor respectfully submits that further notice of this Motion is neither
required nor necessary.
WHEREFORE, the Debtor respectfully requests for the reasons set forth herein that the
Court enter an order, substantially in the form attached hereto as Exhibit A, authorizing and
approving the employment by the Debtor of Mr. Dietz as the Debtor’s CRO, effective as of
March 15, 2013, and granting such other and further relief as this Court deems just and proper.

Dated: March 17, 2013 /s/ Kevin Michaels
Kevin Michaels
Chief Financial Officer
Powerwave Technologies, Inc.
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Exhibit A
[Proposed Order]

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