The opinion of the court was delivered by: Magistrate Judge Lisa Pupo Lenihan
ORDER OF COURT APPOINTING RECEIVER Doc. Nos. 2 & 8
Currently before the Court for disposition is Plaintiff's Emergency Motion to Appoint Receiver (Doc. No. 2) ("Emergency Motion"), and a Motion for Dismissal of Plaintiff's Emergency Motion to Appoint Receiver, or in Lieu Thereof, a Motion to Appoint Receiver Agreed Upon by Shareholders of Defendants ("Motion for Dismissal/Alternate Receiver"), filed by Thomas Walton (Doc. No. 8). An evidentiary hearing was held on December 18, 2007, at which time Plaintiff was represented by counsel who presented the testimony of two witnesses--Jeffrey Jones, Chief Financial Officer of Huntington Foam Corp., and Nicholas Arrington, Managing Partner of Compass Advisory Partners, LLP, the proposed receiver-- in support of its Emergency Motion. Notably absent from the hearing were the shareholders of Defendants, Thomas Walton and Thomas Brubaker; however, the shareholders were represented at the hearing by their counsel, Schnader Harrison Segal & Lewis LLP.*fn1 Also absent from the hearing was the shareholders' proposed receiver, Mark DuMars, nor was the Court provided with an affidavit from Mr. DuMars or his resume.
AND NOW, this 20th day of December, 2007, upon consideration of the Emergency Motion and the Motion for Dismissal/Alternate Receiver, all of the evidence presented at the hearing, and arguments of counsel, it is hereby ORDERED, ADJUDGED and DECREED that the Emergency Motion is GRANTED and the Motion for Dismissal/Alternative Receiver is DENIED as follows:
A. Findings of Fact and Conclusions of Law Relating to Appointment of Receiver
1. Huntington Foam Corp., Huntington Foam Mexicano, Inc., and Huntington of Mexico, Inc. ("Defendants" or "Companies") are indebted to Plaintiff, which debt is evidenced by, inter alia, a Credit Agreement dated as of October 1, 2004 (as amended and modified, the "Credit Agreement") and is secured by a first priority security interest and lien in and on substantially all of the Defendants' assets (the "Collateral").
2. Service of Plaintiff's Emergency Motion was properly made upon Defendants.
3. Jeffrey Jones was a credible witness.
4. The Defendants are in default under the Credit Agreement.
5. The Defendants' Board of Directors and its two shareholders, each of which, directly or indirectly, owns fifty percent (50%) of the shares of Defendants, were deadlocked and, as a result of the deadlock, management was and is unable to take the necessary actions to manage and operate the Defendants' businesses.
6. The Defendants' business operations have suffered, and continue to suffer, as a result of the deadlock.
7. As a result of the foregoing, Defendants' business operations as a going concern hearing. are at risk of substantially declining.
8. As a result of the foregoing, the security and value of Plaintiff's Collateral is at risk of decline, deterioration, and dissolution.
9. The appointment of a receiver for the Defendants is necessary to stabilize and preserve ...