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Starbucks filing re: Tully's bankruptcy

Starbucks filing re: Tully's bankruptcy

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Published by KING 5 News
Court filing seeking re-opening of auction.
Court filing seeking re-opening of auction.

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Categories:Types, Business/Law
Published by: KING 5 News on Jan 11, 2013
Copyright:Attribution Non-commercial

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STARBUCKS CORPORATION
Office of Law & Corporate Affairs
2401
 
U
TAH
A
VE
S
OUTH
#800,
 
MS
 
S
 
LA-1S
EATTLE
,
 
WA
 
98134(206)
 
318-4288
12345678910111213141516171819202122232425262728
CLARIFYING RESPONSE OF STARBUCKS CORPORATIONRE CONFIRMATION OF SUCCESSFUL BIDDER - 1
HONORABLE KAREN A. OVERSTREETChapter 11HEARING DATE: Friday, January 10, 2013HEARING TIME: 1:00 p.m.LOCATION: Courtroom 7206, SeattleUNITED STATES BANKRUPTCY COURTWESTERN DISTRICT OF WASHINGTONIn reTC GLOBAL, INC.Debtor,Case No. 12-20253 KAOCLARIFYING RESPONSE OF STARBUCKSCORPORATION
TO DEBTOR’S
MEMORANUM IN SUPPORT OF APPROVALOF PROPOSED SALE OF ASSETS TOGLOBAL BARISTAS, LLCStarbucks Corporation dba
Starbucks Coffee Company (“Starbucks”), a partial bidder and
interested party, submits this clarifying response to the
 Debtor’s Memorandum in Support of 
 Approval of Proposed Sale of Assets to Global Baristas, LLC 
(the “Debtor’s ReplyMemorandum”)
.
The Debtor’s Reply Memorandum contains a series of inaccurate statements
and negative inferences targeted at Starbucks that could materially and adversely impact the SaleHearing unless corrected. When corrected, the D
ebtor’s purported reliance on
its business judgment in awarding an inferior bid is misplaced.Starbucks participated in the January 3 auction and made a series of non-contingent bidsfor
 part of the debtor’s estate:
twenty-five (25)
Tully’s operated real estate leases consisting of 13
company operated locations (the
“Retail Lease
Loc
ations”) and 12 sites located
within Boeingfacilities and subject to the Boeing
Shared Services Group Supplier Management & Procurement 
 
STARBUCKS CORPORATION
Office of Law & Corporate Affairs
2401
 
U
TAH
A
VE
S
OUTH
#800,
 
MS
 
S
 
LA-1S
EATTLE
,
 
WA
 
98134(206)
 
318-4288
12345678910111213141516171819202122232425262728
CLARIFYING RESPONSE OF STARBUCKS CORPORATIONRE CONFIRMATION OF SUCCESSFUL BIDDER - 2
 Agreement 
dated January 31, 2011, as amended
(the “Boeing Agreement”)
1
. See AuctionTranscript at 22:23-35; 23:1-5. Given that Starbucks does
not seek to operate under the Tully’s
name, all Starbucks offers were partial, stand-alone bids for precise real estate locations. Allparties, then and now, unanimously agree that no Starbucks bid required the consent of GreenMountain Coffee Roasters, Inc. (
“GMCR”).
However, the parties understood that any bidder who
intended to operate under the Tully’s name would require the consent of GMCR, who was present
during the 11.5 hour auction.
A. Starbucks Identified Leases and an Intent to Assume Those Leases with Certainty
 Starbucks submitted bid sheets at the auction clearly identif 
ying Tully’s
sites for whichit was bidding on a non-contingent basis. See Exhibit A to the accompanying Declaration of Michael Malanga
(“
Malanga
Decl.”)
; see also Exhibit B to
Debtor’s
 
 Notice of Determination of  Back-Up Bids
filed 1/9/13 [Dkt 508]. There was never any ambiguity about what leasesStarbucks isolated for purchase, nor could there be given the nature of a hybrid bid and each
 party’s
need to evaluate and monetize partial asset classes. At no time during the auction was anyleasehold left outside the scope of a hybrid bid. See Auction Transcript at 24:14-20. Many otherbidders, including Global Baristas, made companion offers to acquire all other sites except the
Starbucks Sites
.The Debtor ignores this crucial fact in asserting
that Starbucks “failed to iden
tify any real
 property leases” in its
APA and equally problematic,
“retain
[ed] the sole discretion to remove one
or more of the leases up until the closing date.”
See
Debtor’s Reply Memorandum at p. 5, lines
11; 13-4. The
 problem with the Debtor’s reliance on Starbucks’
APA in a vacuum is that the Bid
Procedures Order required qualified bidders to redline the Stalking Horse’s APA, which
1
 
Starbucks takes the position the Boeing Agreement is an executory contract that may beassumed and assigned by the Debtor pursuant to 11 U.S.C. §365(a). No representative of theDebtor or the Estate has made a contrary representation.
 
STARBUCKS CORPORATION
Office of Law & Corporate Affairs
2401
 
U
TAH
A
VE
S
OUTH
#800,
 
MS
 
S
 
LA-1S
EATTLE
,
 
WA
 
98134(206)
 
318-4288
12345678910111213141516171819202122232425262728
CLARIFYING RESPONSE OF STARBUCKS CORPORATIONRE CONFIRMATION OF SUCCESSFUL BIDDER - 3
contemplated a sale of substantially all assets to an ongoing operator of the Tully’s brand.
Starbucks was in a unique position because its interests were limited to a real estate acquisitionthereby rendering the proposed APA awkward and mostly inapplicable as a baseline agreement.However, in strict observance of the Bid Procedures Order to become a
Qualified AlternativeBidder
, Starbucks submitted a redlined APA that identified specific leases in Section 2.1(Transfer of Assets). See Starbucks redlined APA appended as Exhibit B to the Malanga Decl.Also chiefly relevant here, and omitted from any mention by the Debtor, was thatStarbucks stated its intent in its Initial Bid submitted December 26 to
assume all leases
at 26locations specifically listed therein. Id. (p.2-3 of Starbucks Cover Letter).
Starbucks’ I
nitial Bidalso contained statements as to how that assumption would be structured:
Starbucks requires that prior to the Debtor’s assignment of these executory contracts that
all obligations thereunder are fully cured pursuant to 11 U.S.C. §365(b) and that nodefaults exist as of the effective date of assignment. Starbucks does not assumeresponsibility for responding to any objection filed with the Bankruptcy Court regardingassumption or assignment of any such agreement. Starbucks does, however, agree tocooperate with the estate in responding to any issue regarding adequate assurances of future performance by Starbucks.Starbucks does not seek assumption of, or any interest in, the
 License Agreement, Supply Agreement and Noncompetition Agreement 
, each dated March 27, 2009 by and among theDebtor and Green Mountain Coffee Roasters, Inc.Id. For absolute clarity given the unusual nature of a partial bid, Starbucks added a confirmingstatement
: “
Starbucks certifies that this or any other offer it may make at auction constitutes abinding and legally enforceable bid and that
no financing contingencies or conditions exist 
.”
Id. atp.3 (emphasis added). If there was any question or doubt regarding
Starbucks’ willingness to
unequivocally
assume lease agreements for sites bid at auction, the question was not raised by theDebtor or anyone else and the transcript is noticeably void of any such concern. It is patently
disingenuous for the Debtor to now allege it lacked certainty about Starbucks’ intent
ion regardingassumptions.

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