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More details have begun to surface surrounding the Chapter 11 bankruptcy of The Woodwind & The Brasswind, which filed Nov. 21. Here are two supporting stories with information on Guitar Center’s bid and the backstory of the suit that broke Woodwind’s back.

The Highest Bidder
According to court documents, Musician’s Friend’s initial bid for the assets of Woodwind & Brasswind — GC bid through its direct-response division — was $37.1 million, plus assumed liabilities of $2.1 million. This is based on $33 million in inventory value and $3 million in accounts recievable. (If those values or the assumed liabilities change, so will the final sale price.)

For some perspective, Woodwind & Brasswind will likely do more than $130 million in business this year.

Due to bankruptcy law, the bid is subject to overbid at an auction that should take place Jan. 17, 2007. A hearing is set for Dec. 7 to approve the bidding process and finalize the date.

Any initial overbid will be at least $1.2 million greater than Musician’s Friend’s offer. A bidder must also be able to put down a $2 million deposit. If no qualifying bids come in at least seven days before the auction, no auction will take place.

That doesn’t seem likely, however. Bamber told Indiana’s WSBT News that he’s had several other offers. Bamber also told the news station that he would negotiate to keep the company and all employees in South Bend, Ind., it’s headquarters.

Zapf v. Bamber
The day he filed for Chapter 11, Bamber told the South Bend Tribune that a major factor behind the filing was a court judgement of $9 million, the result of two-year lawsuit brought by Stephen and Richard Zapf, former business partners of Bamber and former owners of Music123.

Music Inc. obtained copies of the complaint filed by Stephen and Richard Zapf, as well as Bamber’s counterclaim and countersuit filed with the U.S. Superior Court of New Jersey. The following details outline the story behind that suit as Music Inc. can determine from those documents.

Essentially, the Zapf’s alleged that Bamber had agreed to sell them Woodwind & Brasswind, but he reneged on the deal and fired them.

According to details of the Zapf’s suit, the business relationship between Bamber and the Zapfs began in the early 2000s. The Zapfs were looking for a partner to help them expand their Music123 e-commerce business, and Bamber was looking to expand his Web presence and put a succession plan in place. The two parties entered into negotiations.

In late February 2002, the two companies merged. Stephen and Richard Zapf acquired 25 percent of Woodwind’s shares and became employees of Woodwind & Brasswind.

Things began to sour in spring 2004. The Zapfs said that Bamber approached them to, consistent with his promise two years earlier, sell them the remaining interest in his company. They worked out a deal where the selling price would be $15.7 million.

Bamber alleged that the Zapfs approached him, but that no mutual agreement was reached.

According to the court documents, negotiations went along as planned until Bamber hired The Christman Group, a business consulting firm, to work with him on business development and to provide financial advice. Allegedly, Bamber told the Zapfs that Christman would consummate the sale of his shares, and he asked Stephen to meet with the consultancy to discuss his and Richard’s strategy for the business.

About one week later, Bamber told the Zapfs that he would not sell the business to them.

Bamber admitted that Stephen met with Christman and that, shortly afterward, he told the brothers it was not in his interest to sell his company to anyone, according to Bamber’s counterclaim. He denied, however, that this decision was a breach of any sale agreement.

On June 28, the Zapfs flew out to South Bend to discuss the situation. During the meeting, Bamber terminated the brothers.

According to the shareholders agreement between Bamber and the Zapfs, if terminated for “just cause,” the Zapfs had to offer their shares back to Bamber at a discount from their value as determined by an independent accounting firm.

The Zapfs alleged in the suit that, by firing them, Bamber could buy back their shares at steep discount and then sell them for greater profit. They also claimed that The Christman Group stood to benefit from this through fees.

All this resulted in 15 counts filed by the Zapfs against Bamber — from breach of contract to conspiracy.

Bamber denied all counts. In his counterclaim, he said that the Zapfs failed to disclose to Bamber, their employer, all the details of sublease agreement for a propety they still owned, which resulted in their “just cause” termination.

Before the merger, the property housed a warehouse that served Music123 and Zapf’s Music Store. When Bamber bought Music123, the brothers retained the property, and Bamber began paying rent on it. Bamber said that the Zapfs leased out a portion of the building to another company and, accordingly, charged them rent. But they didn’t reduce Bamber’s payments.

In addition to these claims, other suits became part of the conflict between Bamber and the Zapfs. Ultimately, a jury found in favor of the Zapfs, awarding them $9 million. That was last September. Two months later, Bamber filed Chapter 11.