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HILLSVILLE — Carroll officials may have found a better way to end the county's entanglements with AmerLink and Pro-Form Construction than a full-blown trial in bankruptcy court, now that the owner of the two companies has been hit with a $25 million lawsuit.
Carroll County has been trying to get 32 acres of land from Pro-Form and end a 99-year lease with AmerLink at its sales center at the Southwest Virginia Farmer's Market while the former log home manufacturer has been going through bankruptcy.
But after spending a 12-hour mediation session with the bankruptcy trustee in late August and several followup communications with the trustee and others, County Attorney Jim Cornwell brought a settlement proposal to the Carroll Board of Supervisors' regular September meeting Monday.
The bankruptcy trustee continues his job of trying to repay AmerLink's unsecured creditors as much of their money as possible, Cornwell said. As a part of that, the trustee has sued owner Richard Spoor — as well as his wife and other parties — for a sum of more than $25 million.
The suit alleges that, “among other things, Mr. Spoor improperly transferred assets to himself from AmerLink, which caused AmerLink to become insolvent," according to Cornwell and a press release from Carroll County.
The settlement proposal that Cornwell discussed Monday involves:
• allowing the bankruptcy trustee to lease the space in the sales center at the farmers' market to a third-party tenant.
"The trustee will make every effort to have a new tenant which employs at least 10 employees and who will make use of the premises in uses which are compatible with the farmer's market," according to information from the county.
This third-party tenant would pay real estate taxes on the building that AmerLink used for the sales center and also to maintain the facility, Cornwell said. If that tenant abandons the property, then the lease would end.
This will relieve Carroll from having to pay to keep the building up, Cornwell noted. The new tenant may also be able to sublet parts of the premises.
If the bankruptcy trustee cannot find a tenant within 12 months from the date of the lawsuit between Carroll and AmerLink being settled, then the company's lease will expire — meaning "the county will own the improvements free and clear."
In the time the trustee is trying to find a tenant, the trustee will have the responsibility of maintaining the building, according to information from the county.
County officials hope that this proposal will result in a tenant coming in, hiring new employees and increasing traffic at the farmer's market, Cornwell said. But if the trustee does not find a tenant, then Carroll will own outright a building that AmerLink paid to construct.
• giving the bankruptcy trustee 20 months to find a buyer for the property in the Carroll County Industrial Park.
"If the trustee is successful in marketing the property, Carroll County is to receive $700,000 from the sale proceeds," according to information from the county. "If the trustee cannot sell the property at a price to cover his costs and the payment to the county, then he will transfer the property to the county for no consideration."
Should the property be transferred back to Carroll County, then Pro-Form will have 60 days to remove its structures from the property.
If the trustee is successful in selling, the proceeds — net of closing costs and the county payment — are to be held by the trustee for AmerLink, pending the resolution of the lawsuit against Spoor and others and settlement of issues with a creditor of Pro-Form's, according to information from Carroll.
"By this settlement, if approved by the bankruptcy court, Carroll County will end its litigation against Pro-Form and each party will release all claims," according to county officials. "If the trustee sells the property, the county will recoup $700,000, and hopefully, have an industry own the property who will use the property, invest funds in the property and create employment in the county."
Carroll County would, in addition, get an easement through the Pro-Form property in order to be able to access other county land, Cornwell said.
"The alternative to this mediation …. would be to continue with the hearings and trials, probably at great expense to the county," Supervisor Tom Littrell noted.
"The legal fees would continue to rise," Cornwell agreed.
Attorneys are only about a quarter of the way through discovery, he added. The case against Pro-Form would go to trial in January 2011 and there would still be a case against AmerLink over the lease.
A trial may or may not go Carroll County's way — that's another thing to consider, Cornwell said. "No guarantees."
Working with the trustee has been a benefit to the county, he added.
The proposal looks likely to be approved. The parties are in substantial agreement.
"We have no reason to believe the bankruptcy court would not approve this," Cornwell said.
On a motion by Littrell, the county board approved moving ahead with the settlement and continuing to seek the approval of the U.S. Bankruptcy Court on this agreement.
"I feel like it's good as we could hope to get," Supervisors' Chairman Wes Hurst said after the meeting. "We tried to work back and forth [in the mediation] to where we thought we did a good job representing the citizens of the county, and tried to get the best deal we could considering the agreement that was already made prior to us coming."