Gysum Resources Materials LLC v. Rep-Clark LLC

1 || Robert R. Kinas (NV Bar No. 6019) Patrick G. Byrne (NV Bar No. 7636) 2 || Kelly H. Dove (NV Bar No. 10569) Charles E. Gianelloni (NV Bar No. 12747) 3 || SNELL & WILMER L.L.P. 3883 Howard Hughes Parkway, Suite 1100 4 || Las Vegas, NV 89169 Telephone: (702) 784-5200 5 | Facsimile: (702) 784-5252 Email: rkinas@swlaw.com 6 pbyme@swlaw.com kdove@swlaw.com 7 cgianelloni@swlaw.com Attorneys for Appellee Rep-Clark, LLC — 8 — UNITED STATES DISTRICT COURT — 9 — DISTRICT OF NEVADA — 10 — 11 | GYPSUM RESOURCES, LLC, a Nevada Case No. 2:22-cv-00144-CDS limited liability company; and GYPSUM 2 12 || RESOURCES MATERIALS, LLC, a Nevada = limited liability company, STIPULATION AND ORDER TO 2. 43 VOLUNTARILY DISMISS APPEAL Appellants WITH PREJUDICE 14 v. — 328 — 2228 15 || REP-CLARK, LLC, a Colorado limited liability company; and Does 1 through 20, 2 16 | inclusive, 2 Appellee 2 7 Pppe 18 Appellants Gypsum Resources, LLC and Gypsum Resources Materials, LLC (together, 19 |) the “Debtors”) and Respondent Rep-Clark LLC (“Rep-Clark”) Rep-Clark, LLC (“Rep-Clark” and 20 || together with Debtors, the “Parties”), by and through their counsel of record, stipulate and agree 21 || to voluntarily dismiss the above-captioned appeal with prejudice pursuant to Fed. R. Bankr. P. 22 || 8023 as follows: 23 WHEREAS, Debtors, Rep-Clark and the Official Committee of Unsecured Creditors of 24 |) Gypsum Resources, LLC filed a Joint Motion for Approval of Compromise, Pursuant to Fed. R. 25 |) Bankr. P. 9019, Between Gypsum Resources Materials, LLC, Gypsum Resources, LLC, the 26 | Official Committee of Unsecured Creditors of Gypsum Resources Materials, LLC, and Rep27 | Clark, LLC, Including Substantive Consolidation of Debtors’ Estates m the joimtly administered 28 || bankruptcy proceeding, Case No. BK-S-19-14796-mkn, which provided in relevant part that the A887_0974_4990 1 || Parties agreed to voluntarily dismiss the above-captioned appeal with prejudice. See ECF No. 2 || 2213 at § 30, attached as Exhibit 1. 3 WHEREAS, the bankruptcy court entered the Order Granting Joint Motion for Approval 4 || of Compromise, Pursuant to Fed. R. Bankr. P. 9019, Between Gypsum Resources Materials, LLC, 5 || Gypsum Resources, LLC, the Official Committee of Unsecured Creditors of Gypsum Resources 6 || Materials, LLC, and Rep-Clark, LLC, Including Substantive Consolidation of Debtors’ Estates 7 || (the “Order”). See ECF No. 2246 at 3, attached as Exhibit 2. 8 WHEREAS, the Parties agree to voluntarily dismiss the above-captioned appeal with 9 || prejudice pursuant to the Order, with each Party to bear its or their own costs and attorneys’ fees 10 |] and costs related to the appeal. 1] IT IS SO STIPULATED. g 12 || DATED: October 13, 2023 DATED: October 13, 2023 | 5 g 13 || SNELL & WILMER LLP. FOX ROTHSCHILD LLP 14 /s/ Robert R. Kinas /s/ Brett A. Axelrod Robert R. Kinas (NV Bar No. 6019) Brett A. Axelrod (NV Bar No. 5859) | 2242 15 |) Patrick G. Byrne (NV Bar No. 7636) Rex D. Garner (NV Bar No. 9401) | Kelly H. Dove (NV Bar No. 10569) 1980 Festival Plaza Drive, Suite 700 | 2° 16 || Charles E. Gianelloni (NV Bar No. 12747) Las Vegas, NV 89135 3883 Howard Hughes Parkway, Suite 1100 Telephone: (702) 262-6899 "17 |] Las Vegas, NV 89169 Facsimile (702) 597-5503 Telephone: (702) 784-5200 Attorneys for Appellants Gypsum Resources, 18 || Facsimile: (702) 784-5252 LLC and Gypsum Resources Materials, LLC 19 Attorneys for Appellee Rep-Clark, LLC — 20 — — 21 — ORDER — 22 — 23 Based on the parties’ stipulation, this case is dismissed with prejudice, with each party 24 || to bear its own costs and fees. The Clerk of Court is kindly instructed to close this case. 25 J) 26 LA UNITED STATES DISTRICT JUDGE 27 [ ) 28 Dated: October 30, 2023 4829-0924-4290 -2EXHIBIT 1 Joint Motion for Approval of Compromise [ECF No. 2213] BRETT A. AXELROD, ESQ. — 1 — Nevada Bar No. 5859 2 FOX ROTHSCHILD LLP 1980 Festival Plaza Drive, Suite 700 3 Las Vegas, Nevada 89135 Telephone: (702) 262-6899 4 Facsimile: (702) 597-5503 Email: baxelrod@foxrothschild.com — 5 — Counsel for Debtors 6 UNITED STATES BANKRUPTCY COURT 7 DISTRICT OF NEVADA 8 In re Case No. BK-S-19-14796-mkn 9 GYPSUM RESOURCES MATERIALS, Jointly Administered with Case No. BK-S-19-14799-mkn LLC, — 10 — Chapter 11 11 Affects Gypsum Resources Materials, LLC JOINT MOTION FOR APPROVAL OF Affects Gypsum Resources, LLC COMPROMISE, PURSUANT TO FED. R. 12 Affects all Debtors BANKR. P. 9019, BETWEEN GYPSUM 13 RESOURCES MATERIALS, LLC, GYPSUM RESOURCES, LLC, THE OFFICIAL 14 Debtors. COMMITTEE OF UNSECURED CREDITORS OF GYPSUM RESOURCES MATERIALS, 15 LLC AND REP-CLARK, LLC, INCLUDING SUBSTANTIVE CONSOLIDATION OF — 16 — DEBTORS’ ESTATES — 17 — Hearing Date: October 4, 2023 18 Hearing Time: 9:30 a.m. 19 Gypsum Resources Materials, LLC (“GRM”) and Gypsum Resources, LLC (“GR” and, 20 together with GRM, “Debtors”), debtors and debtors in possession in the above-captioned chapter 11 21 cases (the “Chapter 11 Cases”), by and through their counsel of record, Fox Rothschild, LLP, along 22 with the Official Committee of Unsecured Creditors of Gypsum Resources Materials, LLC (the 23 “Committee”) and Rep-Clark LLC (“Rep-Clark”), by and through their respective counsel, 24 respectfully submit this joint motion (the “Motion”) for entry of an order, pursuant to Rule 9019(a) 25 of the Federal Rules of Bankruptcy Procedure (“Bankruptcy Rules”), approving that certain Final 26 Term Sheet for Global Settlement, dated on or about August 25, 2023 (the “Agreement”) by and 27 between the Debtors, the Committee, and Rep-Clark (collectively, the “Parties”). The Agreement 1 paves the way for Debtors to pay all their creditors in full and emerge from bankruptcy. A true and 2 correct copy of the Agreement is attached as Exhibit 1 to the Declaration of James M. Rhodes 3 (“Rhodes Declaration”) filed concurrently herewith. 4 By this Motion, the Parties request approval of the Agreement and authorization from the 5 Court to take all actions contemplated by the Agreement (as described below), including the 6 substantive consolidation of the Debtors’ estates, which is essential to the efficient effectuation of the 7 parties’ settlement. This Motion is made and based upon the following memorandum of points and 8 authorities, the Rhodes Declaration, the papers and pleadings on file with this Court in the Chapter 9 11 Cases, and any oral argument presented at the time of the hearing of this Motion. 10 MEMORANDUM OF POINTS AND AUTHORITIES 11 I. 12 PRELIMINARY STATEMENT 13 The Agreement is the outcome of a one-day settlement conference attended by the Parties and 14 presided over by Judge Zive, plus negotiations following the settlement conference. It provides a 15 comprehensive resolution of the disputes between the Debtors and Rep-Clark, and authorizes the 16 Committee with consultation from the Debtors and Rep-Clark to conduct a marketing process for all 17 of Debtors’ assets, while simultaneously authorizing the Debtors to consummate an alternative 18 transaction (i.e., a refinancing or equity infusion) in lieu of a sale, culminating in a transaction 19 generating sufficient proceeds to pay all allowed claims in full. The Agreement should be approved 20 because it is in the best interests of the Debtors’ estates and creditors. See Rhodes Declaration, ¶ 21 5 & Exhibit 1 thereto. 22 II. 23 JURISDICTION 24 1. This Court has jurisdiction to consider and determine this matter pursuant to 28 U.S.C. 25 §§ 157 and 1334. This matter is a core proceeding within the meaning of 28 U.S.C. § 157 (b). 26 2. Venue in this Court is proper pursuant to 28 U.S.C. §§ 1408 and 1409. 27 3. The statutory bases for the relief requested herein are section 105 of title 11 of the 1 III. 2 FACTUAL BACKGROUND 3 A. General Background. 4 4. On July 26, 2019 (the “Petition Date”), the Debtors filed their voluntary petitions for 5 relief under Chapter 11 of the Bankruptcy Code. 6 5. On August 5, 2019, the Court entered its Order directing the joint administration of 7 the Chapter 11 Cases [Docket No. 38]. 8 6. The Debtors are continuing in possession of their property and are operating and 9 managing their businesses, as a debtor in possession, pursuant to sections 1107 and 1108 of the 10 Bankruptcy Code. See generally Chapter 11 Case Dockets. 11 7. The Committee was appointed on August 30, 2019, in GRM’s Chapter 11 Case 12 [Docket No. 118]. 13 B. Disputes with Rep-Clark 14 8. GR owns over 2000 acres of land (the “Property”) in the Southwest part of the Las 15 Vegas valley (“Blue Diamond Hill”) upon which sits a gypsum mine (the “Mine”), operated by GR’s 16 wholly owned subsidiary, GRM. See Rhodes Declaration, ¶ 6. 17 9. On February 8, 2018, GR entered into the Gypsum Reserves Agreement and Joint 18 Escrow Instructions (the “Reserves Agreement”) with Rep-Clark. Under the Reserves Agreement: 19 (a) Rep-Clark paid GR $30 million; and (b) Rep-Clark received in exchange, among other things: (i) 20 title to patented mining claims (“Mining Claims”) on certain sub-surface gypsum reserves (the 21 “Reserves”) located on the Property, subject to GR’s reservation of surface rights; (ii) a monetary 22 interest (equal to $16 million or more) in sales from a certain tract of land in the Property after it was 23 developed and sold (the “Land Royalty”); (iii) the possibility of receiving a $17 million payment (the 24 “QE Payment”) if GR’s “Royalty Coverage Ratio” became less than certain specified amounts; (iv) 25 the possibility of receiving a “Tonnage Payment” if reserves were not proven; (v) the possibility of 26 receiving a $3 million “Environmental Payment” if government regulators did not issue a no-action 27 letter; and (vi) under the Mining Lease (defined below), certain royalty payments. The Reserves 1 under the Reserves Agreement, the Mining Lease, or the Land Royalty Agreement (defined below) a 2 default under the other agreements. See Rhodes Declaration, ¶ 7. 3 10. On February 12, 2018, and pursuant to the Reserves Agreement, Rep-Clark and GRM 4 entered into the Mining Lease Agreement (the “Mining Lease”). The Mining Lease gives GRM the 5 exclusive right to extract and sell gypsum found within the Mining Claims in exchange for payment 6 of a royalty (“Royalty”) on 20 million tons of gypsum. Among other things, the Mining Lease 7 contains a “Debt to EBITDA Ratio” covenant, applicable both to GRM and GR (which had 8 guaranteed the Mining Lease), triggering termination of the Mining Lease and the obligation 9 immediately to pay all royalties due over the life of Mining Lease (approximately $53 million). See 10 Rhodes Declaration, ¶ 8. 11 11. As part of the Reserves Agreement, Rep-Clark and GR entered into that certain Land 12 Royalty Agreement (the “Land Royalty Agreement”), providing, among other things, that a default 13 under the Mining Lease is a default under the Land Royalty Agreement, and requiring GR, upon 14 default, immediately to pay Rep-Clark the Land Royalty. See Rhodes Declaration, ¶ 9. 15 12. GRM made all five quarterly Reserves Payments due through March 2019. In a letter 16 dated May 2, 2019, Rep-Clark asserted that GR was in violation of the Royalty Coverage Ratio for 17 the year ending December 31, 2018 and demanded the payment of the $17 million QE Payment. In 18 a letter dated May 24, 2019, Rep-Clark asserted that GR and GRM were in violation of the Debt to 19 EBITDA ratio in the Mining Lease for the year ending December 31, 2018, that the default was not 20 curable, that Rep-Clark had the right to terminate the Mining Lease and that, upon termination, the 21 Compensatory Royalty (approximately $53 million) will be immediately due. The default under the 22 Mining Lease triggered a default under the Land Royalty Agreement. See Rhodes Declaration, ¶ 10. 23 13. In direct response, Debtors filed for bankruptcy in July 2019. Since May 2021, 24 Debtors have paid Rep-Clark $6.75 million in adequate protection payments. See Rhodes 25 Declaration, ¶ 11. 26 14. In August 2019, Debtors filed an adversary proceeding seeking a determination that 27 the Reserves Agreement/Mining Lease transaction is for secured financing, not a true sale/leaseback 1 No. 19-01083-MKN; Docket No. 193], ruling that the Mining Lease is a true lease. The Debtors 2 promptly appealed the decision to the United States District Court [Adv. P. No. 19-01083-MKN; 3 Docket No. 200] (the “Recharacterization Appeal”) and the parties filed their appellate briefs; over 4 one year later, Judge Traum recused herself, and the Recharacterization Appeal is now pending before 5 Judge Silva. See Rhodes Declaration, ¶ 12. 6 15. In May 2021, Debtors filed an objection [Docket No. 1254] to Rep-Clark’s proofs of 7 claim aggregating $120 million [POC Nos. 19-1, 20-2 & 48-1]. The parties subsequently stipulated 8 that: (a) if the Mining Lease is a true lease, the cure amount owing would not include the 9 Compensatory Royalty, Additional Compensatory Royalty, or Land Royalty Payment [Docket 10 No. 1289]; and (b) Rep-Clark shall have aggregate allowed claims of $62.5 million as of December 11 31, 2021 (subsequently extended by stipulation to March 31, 2022) [Docket No. 1716] (the “Rep12 Clark Claim”). See Rhodes Declaration, ¶ 13. 13 16. In April 2021, Debtors and Rep-Clark entered into a stipulation requiring Debtors to 14 make monthly adequate protection payments to Rep-Clark in the amount of $250,000.00 [Docket No. 15 1243]. Since May 2021, Debtors have paid Rep-Clark $6.75 million in adequate protection payments. 16 See Rhodes Declaration, ¶ 14. 17 17. In October 2021, the Debtors filed their Fourth Amended Joint Chapter 11 Plan of 18 Reorganization [Docket No. 1662] (the “Plan”), providing two alternative treatments for the Rep19 Clark Claim, each one including the surrender of a portion of Rep-Clark’s collateral (real property 20 and/or mineral stockpiles) in satisfaction of the Rep-Clark Claim. Rep-Clark contends that the Plan 21 cannot be confirmed, arguing that the surrender of its collateral is impermissible under applicable 22 case law. See Rhodes Declaration, ¶ 15. 23 18. In October 2021, Debtors also filed a motion to value Rep-Clark’s real property 24 collateral [Docket No. 1675] (the “Real Property Valuation Motion”) for purposes of determining 25 how much would be required to be surrendered in satisfaction of the Rep-Clark Claim. In July 2022, 26 this Court entered an Order denying the Real Property Valuation Motion without prejudice [Docket 27 No. 2000], on the grounds that the individual parcels must be appraised separately. Unless the 1 Settlement Agreement is approved, Debtors intend to refile the Real Property Valuation Motion. See 2 Rhodes Declaration, ¶ 16. 3 19. In addition, both Rep-Clark and Debtors have commissioned appraisals of the mineral 4 stockpiles, with the expectation of reaching a litigated resolution of their value (the “Stockpile 5 Valuation”) unless the Settlement Agreement is approved. See Rhodes Declaration, ¶ 17. 6 20. Rep-Clark and Debtors have stipulated to continue the hearings on Plan confirmation 7 and on the Real Property and Stockpile Valuation eight times, the most recent of which was filed in 8 March 2023 [Docket No. 2151]. See Rhodes Declaration, ¶ 18. 9 21. In short, there are numerous outstanding disputes between Debtors and Rep-Clark, 10 including with respect to confirmation of the Plan, the Recharacterization Appeal, the Real Property 11 Valuation Motion, and the Stockpile Valuation (collectively, the “Rep-Clark Disputes”). See Rhodes 12 Declaration, ¶ 19. 13 C. Litigation with Clark County. 14 22. The Plan provides for the payment of general unsecured claims from, among other 15 sources, the proceeds of Debtors’ litigation with Clark County, as described below. Unfortunately, 16 Debtors are not as far along in reaching a resolution in their favor as they had anticipated based on 17 the evidence discovered to date. See Rhodes Declaration, ¶ 20. 18 23. Shortly after acquiring the Blue Diamond Hill, GR initiated zoning and entitlement 19 efforts to pursue commonly sought and approved development rights, which would include increased 20 residential density. However, bowing to political pressures, both the State of Nevada and Clark 21 County enacted restrictions designed to preclude development of GR’s Property. In 2005, GR filed 22 suit and prevailed in invalidating those efforts. The County and GR subsequently entered into a 23 binding settlement agreement in 2010, which included a requirement that the County act in good faith 24 pursuant to the Major Projects process. After initially obtaining tentative approvals for density up to 25 some 5000 residential units, the County returned to its efforts to stifle development. Those efforts 26 culminated in April 2019, where various County officials, both current and former, maneuvered to 27 prevent a full and fair vote on GR’s applications to proceed. See Rhodes Declaration, ¶ 21. 1 24. As a result, in May 2019, GR filed a complaint against the County and the County 2 Board of Commissioners (the “Board”) in the United States District Court for the District of Nevada 3 (the “District Court”). During the course of discovery, GR uncovered facts supporting its claims and 4 highlighting the impropriety of the County’s and individual Board member’s actions, which included 5 findings by the Federal Magistrate Judge that evidence was intentionally destroyed in order to conceal 6 improprieties in the County’s consideration of GR’s applications. See Rhodes Declaration, ¶ 22. 7 25. Nonetheless, on May 26, 2023, the District Court granted summary judgment in favor 8 of the County, dismissed GR’s federal claims, and announced that it was exercising its discretion to 9 not hear the majority of claims, which were based on state law. GR is entitled to renew those claims 10 in state court. GR appealed the District Court’s ruling granting partial summary judgment to the 11 County. See Rhodes Declaration, ¶ 23. 12 26. On June 7, 2023, GR filed a complaint against the County and the Board based on the 13 state law claims in the District Court for Clark Country, Nevada. GR’s experts had previously 14 calculated its damages resulting from the County’s actions as ranging between $1.7 billion and 15 $2.2 billion, the difference depending upon assumptions about development density. See Rhodes 16 Declaration, ¶ 24. 17 D. The Settlement Conference. 18 27. In light of the pendency of these cases, the complicated disputes among the parties, 19 and the prospect of many months – if not years – of protracted, costly litigation, the Debtors, Rep20 Clark, and the Committee decided in February 2023 that a settlement conference (a “Settlement 21 Conference”) was warranted in an effort to resolve the parties’ respective claims. On February 8, 22 2023, a Stipulation to Attend Settlement Conference [Docket No. 2126] was filed by the parties, 23 proposing a Settlement Conference before Bankruptcy Judge Gregg W. Zive on June 22, 2023. 24 Initially, the Stipulation provided that the Debtors and Rep-Clark, but not the Committee, would 25 attend the Settlement Conference in person. 26 28. On March 22, 2023, the Court entered an order [Docket No. 2150] scheduling the June 27 22, 2023 Settlement Conference before Judge Zive, and ordering the Committee to appear in person. 1 well as the exchange of written settlement offers, in advance of the Settlement Conference. The 2 parties complied in full with this order. 3 29. On June 22, 2023, as ordered, the parties attended and participated in the Settlement 4 Conference in Reno, Nevada. The Settlement Conference lasted approximately five (5) hours, and 5 included an initial joint session before Judge Zive, individual sessions of each of the participating 6 parties with Judge Zive, discussions among the parties without Judge Zive present, and a final joint 7 session with Judge Zive. Over the course of the day, the parties negotiated and came to an agreement 8 on a framework for the completion of these long-pending cases. During this final joint session, the 9 Committee’s counsel read into the record a settlement term sheet that had been negotiated by the 10 parties. This term sheet – with several modifications agreed to following the Settlement Conference 11 – forms the basis of the Agreement for which approval is being sought through this Motion. 12 IV. 13 THE SETTLEMENT TERMS 14 30. Pursuant to the Agreement, the Parties have agreed to settle the Rep-Clark Disputes 15 and provide for a sale process run by the Committee intended to facilitate the payment of all allowed 16 claims against the estates within two years. The settlement has been incorporated into the 17 Agreement, an executed copy of which is attached hereto as Exhibit 1 to the Rhodes Declaration. 18 The key terms of the Agreement are summarized as follows:1 — 19 — 1. The parties agree that a process for the sale (a “Sale Transaction”) of the 20 Debtors' real property holdings (collectively, the “Property”), shall be instituted through an application to employ a broker, this Motion, and a 21 motion under section 363(b) of the Bankruptcy Code to sell property, along with any other necessary and related motions or pleadings (the “Sale 22 Pleadings”).. 2. The Property shall be defined to include the entirety of the Debtors' real — 23 — property, i.e., the 2200-acre Blue Diamond Hill property, and the Debtors' 24 mining rights and reserves. 3. The Sale Pleadings shall provide as follows: 25 a. The Committee shall take the lead role in conducting the sale process, with all material decisions concerning the process to — 26 — 27 1 The following description is qualified in its entirety by the terms of the Agreement, which shall control in the event of require consultation with the Debtors and Rep-Clark. The Final Term Sheet describes in more detail the Committee’s consultation 2 obligations and a dispute resolution procedure in the event the Debtors or Rep-Clark dispute any material decision of the 3 Comunittee. b. The Debtors shall provide all relevant data in a data room set up for 4 the sale process and shall respond timely to all reasonable due 5 diligence requests. The Committee shall have no more than twenty-four (24) months 6 from the time the Court approves the employment of a broker to conduct the sale process (the “Marketing Period”); any extensions 7 shall require the consent of the parties and an order of the Court. d. The broker shall be selected within 60 days of execution of the Final a Term Sheet. Each of the Parties shall be permitted to nominate 9 broker candidates, and all Parties shall be entitled to participate in broker vetting and interviews. The Parties shall vote on the broker 10 candidates and no broker shall be retained absent approval of all Parties. In the event that the Parties cannot agree to the retention of 1 a broker, Judge Zive will mediate. 2 1. The broker’s retention shall not be terminable by the Debtors alone, but will require the express consent of the Parties. 13 Disputes regarding the termimation of a broker shall be mediated, also by Judge Zive. 14 ll. If mediation regarding either (i) retention of a broker; or (11) termination of a broker is unsuccessful, any Party may file a motion with the Bankruptcy Court to have the dispute 16 adjudicated, and the Parties consent to such motion being brought on an emergency basis. — 17 — — 18 — — 19 — — 20 — — 21 — — 22 — — 23 — f. During the Marketing Period, the Debtors and their principal, James 24 Rhodes, shall have the right to seek alternative transactions, including but not limited to a refinancing or an equity raise, — 26 — 27 Any brokerage agreement shall provide that it may be terminated upon the closing of Alternative Transaction. A — 28 — market-based termination fee payable to the broker in the event of — 1 — termination may be negotiated into the brokerage agreement. 2 i. Debtors may retain the services of an investment banker to pursue an Alternative Transaction and shall be responsible 3 for the payment of any fees and expenses charged by such investment banker. 4 g. In the event that a Sale Transaction or an Alternative Transaction is not substantially consummated by the close of the Marketing — 5 — Period, the Parties agree that a Chief Restructuring Officer having 6 relevant mining and land development experience shall be retained to assume the operations of the Debtors and conduct a liquidation of 7 the Debtors’ assets. 4. All insider avoidance action claims shall be tolled through the conclusion — 8 — of the Marketing Period. Upon closing of a Sale Transaction or Alternative 9 Transaction that satisfies unsecured claims in full, such claims shall be deemed waived and released in their entirety 10 5. The Debtors shall continue to make $250,000 monthly adequate protection payments to Rep-Clark pursuant to the terms of the adequate protection 11 stipulation, and shall be permitted to continue mining operations so long as such payments are made. — 12 — 6. The Debtors’ pending appeal of the judgment of the Bankruptcy Court 13 entered on January 11, 2022 (Case No. 2-22-cv-00144-CDS, D. Nev.) shall be dismissed with prejudice. 14 7. The parties shall stipulate and request that the Debtors’ estates be substantively consolidated. — 15 — 8. Upon Court approval, an initial pro rata distribution shall be made to 16 holders of allowed general unsecured claims in both bankruptcy estates in the amount of $1 million (or such lesser amount as agreed to by the 17 Committee and the Debtors), representing unsecured creditors’ share of the Debtors’ prior sale of the Industrial Parcel. — 18 — 19 See Rhodes Declaration, ¶ 25 & Exhibit 1 thereto. 20 V. 21 ARGUMENT 22 A. Legal Standard. 23 31. “Compromises are a normal part of the process of reorganization.” Protective Comm. 24 for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (1968) (citations 25 and internal quotation marks omitted). Accordingly, Bankruptcy Rule 9019 provides: “On motion 26 by the trustee and after notice and a hearing, the court may approve a compromise or settlement.” 27 Fed. R. Bankr. P. 9019(a). 1 32. The Court is afforded “great latitude in approving compromise agreements.” 2 Woodson v. Fireman’s Fund Ins. Co. (In re Woodson), 839 F.2d 610 , 620 (9th Cir. 1988). “The 3 purpose of a compromise agreement is to allow the trustee and the creditors to avoid the expenses 4 and burdens associated with litigating sharply contested and dubious claims.” Martin v. Kane (In re 5 A&C Props.), 784 F.2d 1377, 1380-81 (9th Cir. 1986). Moreover, “[t]he law favors compromise and 6 not litigation for its own sake . . . .” Id. at 1381 . Accordingly, to approve a settlement agreement, a 7 bankruptcy court need not conduct a mini-trial on the merits of the claims or an exhaustive 8 investigation into the underlying dispute between the parties. United States v. Alaska Nat’l Bank (In 9 re Walsh Constr., Inc.), 669 F.2d 1325, 1328 (9th Cir. 1982). It is sufficient that the court find that 10 the settlement was negotiated in good faith and that it is fair and equitable. A&C Props., 784 F.2d at 11 1381. 12 33. The Ninth Circuit has identified four factors that a bankruptcy court must consider in 13 determining whether a proposed settlement agreement is reasonable, fair and equitable: 14 (a) the probability of success in the litigation; (b) the difficulties, if any, to be encountered in the matter of collection; 15 (c) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; and — 16 — (d) the paramount interest of the creditors and a proper deference to their 17 reasonable views in the premises. 18 A & C Props., 784 F.2d at 1381 (citations omitted). 19 34. In considering these factors, bankruptcy courts need only canvass the issues, not 20 decide disputed facts and questions of law. See Burton v. Ulrich (In re Schmitt), 215 B.R. 417 , 423 21 (B.A.P. 9th Cir. 1997). “If the court were required to do more than canvass the issue[s], ‘there would 22 be no point in compromising; the parties might as well go ahead and try the case.’” Suter v. Goedert 23 (In re Suter), 396 B.R. 535, 548 (D. Nev. 2008) (quoting 10 Collier on Bankruptcy, ¶ 9019.02). 24 Additionally, “while creditors’ objections to a compromise must be afforded due deference, such 25 objections are not controlling.” A & C Props., 784 F.2d at 1382 . Indeed, the settlement need not be 26 the best that could have been achieved, but only must not fall “below the lowest point in the range of 27 reasonableness.” In re Pac. Gas & Elec. Co., 304 B.R. 395, 417 (Bankr. N.D. Cal. 2004) (quoting In 1 internal quotation marks omitted)); accord Redwood Trust v. Am. Bldg. Storage, LLC (In re Am. 2 Bldg. Storage, LLC), No. CC-06-1259-MOPAD, 2007 WL 7532281 , at *5 (B.A.P. 9th Cir. Apr. 2, 3 2007) (not for publication). 4 B. The A&C Properties Factors Weigh Heavily in Favor of Approving the Agreement. 5 35. All of the applicable A&C Properties factors favor the approval of the Agreement, as 6 discussed below: 7  Although Debtors believe that they have a reasonable likelihood of prevailing on the issues, there is always uncertainty involved in litigation. The Agreement provides 8 Debtors with a prompt resolution of the Rep-Clark Disputes and paves the way for the payment of all claims in full. See Rhodes Declaration, ¶ 26. — 9 —  With respect to any difficulties to be encountered in the matter of collections, the 10 estates assets are not liquid and this agreement is a path forward to obtain sufficient cash proceeds to pay creditors in full and provides creditors with a path certain and a — 11 — deadline for receipt of payments. See Rhodes Declaration, ¶ 26. 12  Here, “the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it,” is arguably the most important factor when analyzing — 13 — the pending Agreement. If the Agreement is not approved or does not become 14 effective for any reason, resolution of the pending disputes between Debtors and RepClark will require a substantial investment of Debtors’ time and resources, given that 15 the litigation involves claims that are vigorously contested. See Rhodes Declaration, ¶ 26 . — 16 —  Finally, when analyzing the paramount interest of the creditors and a proper deference 17 to their reasonable views in the premises, it is of utmost importance to note that the terms of the Agreement were reached in good faith, and with the goal of reaching a 18 compromised resolution for the benefit of all stakeholders. See Rhodes Declaration, ¶ 26 . — 19 — 36. Furthermore, the settlement is desirable to the Debtors because while it provides for a — 20 — mechanism to satisfy all creditor claims in full through a Committee-run sale process, it — 21 — simultaneously affords the Debtors the flexibility to seek alternative transactions that will not only — 22 — permit payment in full of creditors, but also, the Debtors’ continued ownership of the Property (and — 23 — therefore, the opportunity to develop the Property consistent with the Debtors’ long-held plans). The — 24 — settlement further allows the Debtors to retain ownership and control of a key asset: the Clark County — 25 — Litigation, which is expressly carved out from the scope of the Committee’s sale mandate. — 26 — 37. For all of these reasons, it is in the best interest of the Debtors’ estates and creditors — 27 — 1 C. The Debtors’ Estates Should be Substantively Consolidated. 2 38. A material term of the parties’ settlement is the stipulation by the parties that the 3 Debtors’ estates be substantively consolidated. In light of the fact that the sale process will be 4 conducted prior to Plan confirmation, substantive consolidation at this time is important for two 5 reasons: (i) it alleviates any standing concerns regarding the Committee’s conduct of the sale process 6 (since it has only been appointed in the GRM case); and (ii) it ensures that the Committee-led sale 7 process is being conducted for the benefit of all unsecured creditors of these estates. 8 39. The leading case in the Ninth Circuit on substantive consolidation is In re Bonham, — 9 — 229 F.3d 750 (9th Cir. 2000). In Bonham, the Ninth Circuit holds that the Bankruptcy Court has the 10 power to substantively consolidate entities. Bonham, 229 F.3d at 763.2 11 40. “The effect of substantive consolidation is, inter alia, the pooling of the assets and 12 liabilities of the consolidated entities and the satisfaction of claims from the common fund.” In re 13 World Access, Inc., 301 B.R. 217, 272 (Bankr. N.D. Ill. 2003); see also FDIC v. Colonial Realty Co., — 14 — 966 F.2d 57, 58 (2d Cir. 1992). 15 41. This Court’s authority to substantively consolidate separate entities is derived from its 16 equitable powers under section 105(a) of the Bankruptcy Code. World Access, 301 B.R. at 272 ; see 17 also In re Owens Corning, 419 F.3d 195, 216 (3d Cir. 2005) (expressly acknowledging the legitimacy 18 of substantive consolidation); In re Raymond Prof’l Group, Inc., 438 B.R. 130, 138 (Bankr. N.D. Ill. 19 2010). Substantive consolidation inquiries are fact intensive. World Access, 301 B.R. at 272 . 20 42. The Bonham court references In re Augie/Restivo Baking Co., 860 F.2d 515 (2d Cir. 21 1988) as instructive, and has adopted the Augie/Restivo test for evaluating the propriety of a proposed 22 substantive consolidation. Bonham, 229 F.3d at 766 (“The Second Circuit’s approach is more 23 grounded in substantive consolidation and economic theory; it is also more easily applied. Thus, we 24 adopt it and utilize it in our analysis of this case.”). — 25 — — 26 — 2 See also Gill v. Sierra Pacific Constr., Inc. (In re Parkway Calabasas ), 89 B.R. 832 (Bankr.C.D.Cal.1988), aff'd, 949 27 F.2d 1058 (9th Cir.1991); cf. United States v. Alaska Nat'l Bank of the North (In re Walsh Construction, Inc.), 669 F.2d 1325, 1330 (9th Cir.1982) (recognizing in dicta power to substantively consolidate entities, but noting that power to be 1 43. Both Bonham and Augie/Restivo require the consideration of two factors: (1) whether 2 creditors dealt with the entities as a single economic unit and did not rely on the separate credit of 3 each or (2) whether the operations of the Debtors were excessively entangled to the extent that 4 consolidation will benefit all creditors. Bonham, 229 F.3d at 766. “The presence of either factor is 5 a sufficient basis to order substantive consolidation.” Id. (emphasis added).–The parties are unaware 6 of there being creditors that commonly dealt with the Debtors as a single economic unit. Accordingly, 7 in order for substantive consolidation to be approved, the parties must demonstrate that the operations 8 of the Debtors were excessively entangled to the extent that consolidation will benefit all creditors. 9 44. Consolidation is justified under the second factor where “the time and expense 10 necessary even to attempt to unscramble [the assets and liabilities is] so substantial as to threaten the 11 realization of any net assets for all the creditors...or where no accurate identification and allocation 12 of assets is possible. In such circumstances, all creditors are better off with substantive consolidation.” 13 World Access, 301 B.R. at 274 (internal quotations omitted); see also Chemical Bank v. Kheel, 369 14 F.2d 845, 848 (2d Cir. 1966) (finding that equity allows consolidation “where the interrelationships 15 of the group are hopelessly obscured and the time and expense necessary to even to attempt to 16 unscramble them is so substantial as to threaten the realization of any net assets for all the creditors”). 17 45. Here, the parties submit that looking to another commonly utilized substantive 18 consolidation test – that first propounded by the District of Columbia Circuit in In re Auto-Train 19 Corp., 810 F.2d 270 (D.C. Cir. 1987) – may be instructive in evaluating the extent to which these 20 estates are entangled. Among other factors, courts employing an Auto-Train analysis look at the 21 following: 22 a. The presence or absence of consolidated financial statements. b. The unity of interest and ownership between various corporate entities. 23 c. The existence of parent and intercorporate guaranties of loans. d. The degree of difficulty in segregating and ascertaining individual assets and liabilities — 24 — e. The transfer of assets without formal observance of corporate formalities. 25 f. The commingling of assets or business functions g. The profitability of consolidation at a single location. 26 h. The parent owns a majority of the subsidiary’s stock. i. The entities have common officers or directors. 27 j. The subsidiary is grossly undercapitalized. l. Disregarding the legal requirements of the subsidiary as a separate corporation. — 1 — m. The existence of a single integrated cash management system. 2 n. The use of a common name by parent and subsidiary. o. The common use of intercompany transactions. — 3 — 4 Eastgroup Props. V. S. Motel Ass’n, 935 F.2d 245 , 249 (11th Cir. 1991) (further holding that “no 5 single factor . . . is determinative”). 6 46. Here, numerous indicia of entanglement of the Debtors exist that support the 7 substantive consolidation of the estates. 8 47. Unity of interests and ownership. Here, the membership interests of GR are owned 9 48.946% by the James M. Rhodes Dynasty Trust I, 48.946% by the James M. Rhodes Dynasty Trust 10 II, 1.059% by the James Michael Rhodes Irrevocable Children’s Education Trust, and 1.049% by 11 Truckee Springs Holdings, Inc., and GR is the sole member of GRM. See Rhodes Declaration, ¶ 27. 12 48. Commingling of assets. While there has not been technical “commingling” of the 13 Debtors’ assets (i.e., that assets of one Debtor have been conveyed to another), there is an inherent 14 difficulty in separating the Debtors’ assets, given that the land on which GRM’s mining operations 15 sit is owned by GR. 16 49. The existence of parent and intercompany guaranties of loans. The senior lender 17 and/or largest creditor of both Debtors is Rep-Clark. Rep-Clark’s claims, liens, and interests pervade 18 the assets of both Debtors as more fully discussed below: 19  Rep-Clark owns patented mining claims within the Blue Diamond Hill property, and leases those claims back to GRM under a Mining Lease Agreement dated February 20 12, 2018. GR is also a party to the Mining Lease Agreement by virtue of it being the surface owner, and guaranteed all of GRM’s obligations thereunder pursuant to a 21 Guaranty of Mining Lease dated November 9, 2018. See Proof of Claim of Rep-Clark (GRM, Claim No. 48). As such, GR and GRM are co-obligated as to GRM’s largest — 22 — creditor. 23  Rep-Clark further has substantial claims, liens, and security interests on the assets of GR, pursuant to a series of agreements between the parties that are more fully set forth 24 in Rep-Clark’s proof of claim against GR. See Proof of Claim of Rep-Clark (GR, Claim No. 20). Specifically, Rep-Clark has liens on three material parcels of GR’s — 25 — real estate holdings, known as the “QE Parcel,” “Land Royalty Parcel,” and 26 “Environmental Payment Parcel,” and its claim is orders of magnitude larger than any other claim asserted against GR. — 27 — 1 50. Common officers and directors. Truckee Springs Holdings, Inc. is the manager of 2 each of GR and GRM. James Rhodes is the President, Secretary and Treasurer of Truckee Springs 3 Holdings. See Rhodes Declaration, ¶ 28. 4 51. The parent owns a majority of the subsidiary’s stock. GRM is wholly-owned by GR. 5 See Docket No. 14 (Rhodes Declaration in Support of First-Day Motions). 6 52. The common use of intercompany transactions. The Committee alleges that in periods 7 preceding the Petition Date, intercompany transactions, not only between the Debtors, but among the 8 Debtors and other affiliates commonly owned by James Rhodes, were commonplace. Based on an 9 analysis performed by the Committee, there are myriad examples of (i) cash transfers between Debtor 10 and non-Debtor affiliates, as well as between the Debtors; and (ii) payments made by the Debtors in 11 satisfaction of obligations of non-Debtor entities (or vice versa). The process of reconciling these 12 transfers and payments, which easily aggregate to over $10 million in relevant periods prior to the 13 Petition Date, would be an enormous, costly undertaking. See Rhodes Declaration, ¶ 29. 14 53. Accordingly, sufficient factors exist for this Court to determine that the estates of GR 15 and GRM are sufficiently intertwined so as to justify the substantive consolidation of the estates. 16 54. In addition to the Auto/Train analysis, substantive consolidation is justified in these 17 cases for two other reasons: first, the consent of the parties; and second, because no creditor will be 18 prejudiced by the proposed substantive consolidation. 19 55. Consent of the Parties. In Owens-Corning, the Third Circuit adopted the same two20 part test adopted in Bonham and Augie/Restivo, with an important modifier: those factors need only 21 be considered in the absence of consent. Owens-Corning, 419 F.3d at 211 . Here, while the Debtors, 22 the Committee, and Rep-Clark have not polled each and every creditor in these cases to inquire as to 23 their position, the Debtors note that: (i) Rep-Clark, the largest (by far) creditor in these cases, holding 24 nearly ninety percent (90%) of the aggregate claims of both estates; (ii) the Committee, representing 25 the interests of the GRM creditors; and (iii) the Debtors each support substantive consolidation. The 26 Debtors are informed that the Committee inquired as to whether Cashman Equipment Company (one 27 of the most active creditors in these cases) would support substantive consolidation, and Cashman 56. Because the Debtors and representatives of the vast bulk of the secured and unsecured 2 || claims against both estates support substantive consolidation, and provided that no creditor objects 3 || to the requested treatment, the Debtors submit that the Court can approve substantive consolidation 4 || without even considering the Bonham factors. 5 57. Lack of prejudice to creditors of both estates. Based on the circumstances of these 6 || cases, substantive consolidation will not cause any harm to creditors of either of the Debtors’ estates, 7 || and in fact, will maximize recoveries to all unsecured creditors. The record makes clear that the value 8 || of the assets of GR — even taking as true the valuation submitted by Rep-Clark’s appraiser during the 9 || course of the parties’ litigation (which the Debtors have disputed as undervaluing the property) — far 10 || exceed the combined claims of both Debtors, which the Debtors estimate to be approximately $7511 million in the aggregate. See Appraisal of Glenn M. Anderson of Anderson Valuation Group, 12 || Docket No. 1336-1 (valuing GR real property holdings at $275,000,000). The Debtors dispute the 13 || Anderson appraisal. GR’s creditor pool consists predominantly of secured creditors, whose claims 14 || will be satisfied out of their collateral before any distributions to unsecured creditors, and therefore, 15 creditors are at no risk of their recoveries being impacted by the inclusion of the (largely 16 || unsecured) GRM creditors in a combined claim pool. Indeed, safeguards are built into the sale process 17 || proposed by the Agreement that will mitigate the risk of a prejudicial outcome as a result of 18 || substantive consolidation — 19 — — 20 — — 21 — 22 58. For the foregoing reasons, the substantial benefits to be gained from substantive 23 || consolidation overwhelmingly support its approval. 24 VI. 25 CONCLUSION 26 59. The Agreement should be approved for the reasons set forth above. The Agreement 27 |\is fair and equitable, was negotiated in good faith, and otherwise satisfactorily meets the Ninth 28 || Circuit’s test for approving compromises of controversies under Bankruptcy Rule 9019. 1 WHEREFORE, for all of the foregoing reasons, the Debtors respectfully request that this 2 Court enter an Order, in the form attached as Exhibit A hereto: (i) approving the 3 Agreement; (ii) authorizing the Debtors to take all actions contemplated by the Agreement; and 4 (iii) granting such further relief as the Court deems just and proper. 5 Dated this 5th day of September, 2023. — 6 — FOX ROTHSCHILD LLP — 7 — By /s/ Brett A. Axelrod 8 BRETT A. AXELROD, ESQ. Nevada Bar No. 5859 9 1980 Festival Plaza Drive, Suite 700 Las Vegas, Nevada 89135 — 10 — Counsel for Debtor — 11 — TUCKER ELLIS LLP — 12 — By /s/ Thomas R. Fawkes — 13 — THOMAS R. FAWKES, ESQ. 14 Pro Hac Vice 233 S. Wacker Dr., Suite 6950 15 Chicago, Illinois 60606 Counsel for the Official Committee of Unsecured 16 Creditors of Gypsum Resources Materials, LLC — 17 — BLACK & WADHAMS — 18 — By /s/ Brigid M. Higgins 19 BRIGID M. HIGGINS, ESQ. Nevada Bar No. 5990 — 20 — 10777 West Twain Avenue, Suite 300 21 Las Vegas, Nevada 89135 Counsel for the Official Committee of Unsecured 22 Creditors of Gypsum Resources Materials, LLC 23 SNELL & WILMER, L.L.P. — 24 — By /s/ Robert R. Kinas 25 ROBERT R. KINAS, ESQ. Nevada Bar No. 6019 26 3883 Howard Hughes Pkwy., Suite 1100 Las Vegas, NV 89169 — 27 — Counsel for Rep-Clark, LLC EXHIBIT A — 1 — PROPOSED ORDER — 2 — — 3 — — 4 — — 5 — 6 BRETT A. AXELROD, ESQ. Nevada Bar No. 5859 7 FOX ROTHSCHILD LLP 1980 Festival Plaza Drive, Suite 700 — 8 — Las Vegas, Nevada 89135 9 Telephone: (702) 262-6899 Facsimile: (702) 597-5503 10 Email: baxelrod@foxrothschild.com Counsel for Debtors 11 UNITED STATES BANKRUPTCY COURT — 12 — DISTRICT OF NEVADA — 13 — In re Case No. BK-S-19-14796-mkn — 14 — GYPSUM RESOURCES MATERIALS, Jointly Administered with — 15 — LLC, Case No. BK-S-19-14799-mkn — 16 — Affects Gypsum Resources Materials, LLC Chapter 11 17 Affects Gypsum Resources, LLC Affects all Debtors ORDER GRANTING JOINT MOTION 18 FOR APPROVAL OF COMPROMISE, PURSUANT TO FED. R. BANKR. P. — 19 — Debtors. 9019, BETWEEN GYPSUM 20 RESOURCES MATERIALS, LLC, GYPSUM RESOURCES, LLC, THE 21 OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF — 22 — GYPSUM RESOURCES MATERIALS, 23 LLC AND REP-CLARK, LLC, INCLUDING SUBSTANTIVE 24 CONSOLIDATION OF DEBTORS’ ESTATES — 25 — Hearing Date: October 4, 2023 — 26 — Hearing Time: 9:30 a.m. — 27 — 1 The Court, having reviewed and considered Joint Motion of the Debtors, the Official 2 Committee of Unsecured Creditors of Gypsum Resources Materials, LLC, and Rep-Clark, LLC for 3 an order, pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure, for approval of the 4 Agreement as more fully set forth in the Motion; and upon consideration of the Declaration of James 5 M. Rhodes in support thereof; and the parties having appeared by and through their respective 6 counsel, and all other appearances having been noted on the record; the Court having stated its 7 findings of fact and conclusions of law on the record at the hearing on the Motion, which findings of 8 fact and conclusions of law are incorporated herein by this reference in accordance with Federal Rule 9 of Civil Procedure 52, as made applicable by Bankruptcy Rule 9014; and it appearing that the relief 10 requested is warranted on the grounds, among others, that the Agreement: (a) was negotiated in good 11 faith and is fair and equitable, (b) contemplates an immediate resolution of the Rep-Clark Disputes 12 on terms favorable to the Debtors and their estates; (c) provides for a structured sale process designed 13 to result in the payment of all claims in full within two years; (d) avoids litigation which could prove 14 to be protracted and expensive; and (e) is in the best interests of the Debtors, the estates and its 15 creditors because the Agreement resolves the Rep-Clark Disputes without the incurrence of additional 16 expense and paves the way for the Debtors to emerge from bankruptcy after payment of all claims in 17 full; after due deliberation and sufficient cause appearing therefor, it is hereby: 18 ORDERED that the Motion is GRANTED; and 19 IT IS FURTHER ORDERED that: 20 1. The Agreement is approved; 21 2. The substantive consolidation of the estates of Debtors Gypsum Resources, LLC and 22 Gypsum Resources Materials, LLC is hereby approved; 23 3. The Debtors are authorized to take all actions contemplated by the Agreement; and 24 4. This Court shall, and hereby does, retain jurisdiction with respect to all matters arising 25 from or related to the implementation and interpretation of this Order. — 26 — — 27 — 1 Prepared and Respectfully Submitted by: FOX ROTHSCHILD LLP — 2 — 3 By /s/Brett A. Axelrod BRETT A. AXELROD, ESQ. 4 Nevada Bar No. 5859 1980 Festival Plaza Drive, Suite 700 5 Las Vegas, Nevada 89135 Telephone: (702) 262-6899 — 6 — Counsel for Debtors 7 APPROVED/DISAPPROVED: OFFICE OF THE UNITED STATES TRUSTEE — 8 — BY: — 9 — [ ] 10 Trial Attorney for United States Trustee, Tracy Hope Davis — 11 — 12 LR 9021 CERTIFICATION 13 In accordance with LR 9021, counsel submitting this document certifies that the order 14 accurately reflects the court’s ruling and that (check one): 15 The court waived the requirement of approval under LR 9021(b)(1). 16 No party appeared at the hearing or filed an objection to the motion. I have delivered a copy of this proposed order to all counsel who appeared at — 17 — the hearing, and any unrepresented parties who appeared at the hearing, and each has 18 approved or disapproved the order, or failed to respond, as indicated below: — 19 — ________ , Office of the Approved / Disapproved 20 United States Trustee — 21 — 22 I certify that this is a case under Chapter 7 or 13, that I have served a copy of this order with the motion pursuant to LR 9014(g), and that no party has objection to 23 the form or content of the order. 24 # # # — 25 — — 26 — — 27 — EXHIBIT 2 Order Granting Joint Motion for Approval of Compromise [ECF No. 2246] 58S BANKR nga 2 YF 3 Honorable Mike K. Nakagawa a WU J, United States Bankruptcy Judge eee” 4 Hintered on Docket Ortober 06, 20 — 5 — 6 || BRETT A. AXELROD, ESQ. Nevada Bar No. 5859 7 ||FOX ROTHSCHILD LLP g 1980 Festival Plaza Drive, Suite 700 Las Vegas, Nevada 89135 g || Telephone: (702) 262-6899 Facsimile: (702) 597-5503 10 || Email: baxelrod@foxrothschild.com Counsel for Debtors UNITED STATES BANKRUPTCY COURT yy DISTRICT OF NEVADA 14 In re Case No. BK-S-19-14796-mkn ~ 15 GYPSUM RESOURCES MATERIALS, Jointly Administered with LLC, Case No. BK-S-19-14799-mkn — 16 — 7 Affects Gypsum Resources Materials, LLC Chapter 11 _] Affects Gypsum Resources, LLC 18 IX] Affects all Debtors ORDER GRANTING JOINT MOTION FOR APPROVAL OF COMPROMISE, 19 PURSUANT TO FED. R. BANKR. P. 9019, BETWEEN GYPSUM 20 RESOURCES MATERIALS, LLC, 1 GYPSUM RESOURCES, LLC, THE OFFICIAL COMMITTEE OF 22 UNSECURED CREDITORS OF GYPSUM RESOURCES MATERIALS, 23 LLC AND REP-CLARK, LLC, INCLUDING SUBSTANTIVE CONSOLIDATION OF DEBTORS’ 5 ESTATES 26 Hearing Date: October 4, 2023 Hearing Time: 9:30 a.m. — 27 — — 28 — 1 The Court, having reviewed and considered Joint Motion of the Debtors, the Official 2 Committee of Unsecured Creditors of Gypsum Resources Materials, LLC, and Rep-Clark, LLC for 3 an order, pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure, for approval of the 4 Agreement as more fully set forth in the Motion; and upon consideration of the Declaration of James 5 M. Rhodes in support thereof; and the parties having appeared by and through their respective counsel, 6 and all other appearances having been noted on the record; the Court having stated its findings of fact 7 and conclusions of law on the record at the hearing on the Motion, which findings of fact and 8 conclusions of law are incorporated herein by this reference in accordance with Federal Rule of Civil 9 Procedure 52, as made applicable by Bankruptcy Rule 9014; and it appearing that the relief requested 10 is warranted on the grounds, among others, that the Agreement: (a) was negotiated in good faith and 11 is fair and equitable, (b) contemplates an immediate resolution of the Rep-Clark Disputes on terms 12 favorable to the Debtors and their estates; (c) provides for a structured sale process designed to result 13 in the payment of all claims in full within two years; (d) avoids litigation which could prove to be 14 protracted and expensive; and (e) is in the best interests of the Debtors, the estates and its creditors 15 because the Agreement resolves the Rep-Clark Disputes without the incurrence of additional expense 16 and paves the way for the Debtors to emerge from bankruptcy after payment of all claims in full; after 17 due deliberation and sufficient cause appearing therefor, it is hereby: 18 ORDERED that the Motion is GRANTED; and 19 IT IS FURTHER ORDERED that: 20 1. The Agreement is approved;1 21 2. The substantive consolidation of the estates of Debtors Gypsum Resources, LLC and 22 Gypsum Resources Materials, LLC is hereby approved; 23 3. The Debtors, the Committee, and Rep-Clark, as applicable, are authorized to take all 24 actions contemplated by the Agreement; — 25 — — 26 — 27 1 The Allowed Amount of Rep Clark’s secured claim will be determined by the court at a later date pursuant to the formula set forth in the Ninth Stipulation to Vacate Confirmation Hearing and 1 4. Any distribution of the Segregated Funds shall only be made in accordance with a 2 confirmed chapter 11 plan in these cases, or by subsequent order of this Court; and 3 5. This Court shall, and hereby does, retain jurisdiction with respect to all matters arising 4 from or related to the implementation and interpretation of this Order. — 5 — — 6 — — 7 — — 8 — Prepared and Respectfully Submitted by: — 9 — 10 FOX ROTHSCHILD LLP 11 By /s/Brett A. Axelrod BRETT A. AXELROD, ESQ. 12 Nevada Bar No. 5859 1980 Festival Plaza Drive, Suite 700 — 13 — Las Vegas, Nevada 89135 14 Telephone: (702) 262-6899 Counsel for Debtors — 15 — 16 APPROVED: 17 OFFICE OF THE UNITED STATES TRUSTEE — 18 — By: /s/Edward M. McDonald, Jr. 19 Edward M. McDonald, Jr. Trial Attorney for United States Trustee, 20 Tracy Hope Davis — 21 — APPROVED: — 22 — TUCKER ELLIS LLP — 23 — 24 By: /s/Thomas R. Fawkes Thomas R. Fawkes, Esq. 25 233 South Wacker Drive, Suite 6950 Chicago, Illinois 60606 26 Counsel for the Official Committee of Unsecured Creditors — 27 — 1 APPROVED: 2 || SNELL & WILMER L.L.P. 3 || By: __/s/ Robert R. Kinas ROBERT R. KINAS, ESQ. 4 Nevada Bar No. 6019 5 3883 Howard Hughes Pkwy., Suite 1100 Las Vegas, Nevada 89169 6 || Counsel for Rep-Clark, LLC — 7 — — 8 — CERTIFICATION OF COUNSEL PURSUANT TO LOCAL RULE 9021 9 . we . . In accordance with Local Rule 9021, counsel submitting this document certifies as follows: — 10 — L] The Court has waived the requirement of approval in LR 9021(b)(1). — 11 — [] No party appeared at the hearing or filed an objection to the motion. — 12 — J Ihave delivered a copy of this proposed order to all counsel who appeared 13 at the hearing, any unrepresented parties who appeared at the hearing, and 14 each has approved or disapproved the order, or failed to respond, as indicated below: Edward M. McDonald Jr. Approved 16 Trial Attorney 7 Office of the United States Trustee 18 Thomas R. Fawkes, Esq. Approved Tucker Ellis LLP 19 Counsel for the Official Committee Of Unsecured Creditors — 20 — 71 Robert R. Kinas, Esq. Approved Snell & Wilmer L.L-P. 22 Counsel for Rep-Clark, LLC 23 [J] Icertify that this is a case under Chapter 7 or 13, that I have served a copy of this order with the motion pursuant to LR 9014(g), and that no 24 party has objected to the form or content of the order. — 25 — 26 ### — 27 — — 28 —