Case No. 02-B02474 (Jointly Administered)United States Bankruptcy Court, N.D. Illinois, Eastern Division
September 24, 2002
ORDER PURSUANT TO 11 U.S.C. § 361 AND 363 AUTHORIZING GRANT OF ADEQUATE PROTECTION TO LASALLE BANK AS TRUSTEE
SUSAN PIERSON SONDERBY, United States Bankruptcy Judge
Upon the motion dated June 11, 2002 (the “Motion”),[1] of LaSalle Bank National Association, a National Banking Association Formerly Known as LaSalle National Bank, as Trustee for the Holders of Structured Asset Securities Corporation Multiclass Pass-through Certificates, Series 1996-CFL, under that Certain Pooling and Servicing Agreement Dated as of February 1, 1996 (the “Trustee”) to (I) Modify the Automatic Stay, (II) Compel the Rejection of a Non-Residential Real Property Lease and (III) Compel Payment of Post-Petition Rent and Mortgage Payments or Alternatively, Compel Adequate Protection Payments; and upon the Notice of Adequate Protection Agreement in Settlement of Motion served by the Debtors on August 30, 2002 (the “Notice”); and upon the record in these cases; and it appearing that the Debtors and the Trustee have entered into an Adequate Protection Agreement in settlement of the Motion; and it appearing that the resolution set forth in the Adequate Protection Agreement is in the best interest of the Debtors, their estates, creditors and interest holders and is a proper exercise of the Debtor’s business judgment; and upon the record herein; and after due deliberation thereon; and good and sufficient cause appearing therefor, it is hereby:
ORDER, ADJUDGED AND DECREED THAT
1. The Court hereby finds that the Motion and Notice were sufficient to afford reasonable notice of the material provision of the Adequate Protection Agreement and opportunity for a hearing thereon, and therefore, pursuant to the provisions of Federal Rule of Bankruptcy Procedure 4001 (d)(4), it is hereby ordered that the procedures prescribed in paragraphs (1), (2), and (3) of Rule 4001 (d) do not apply to this matter.
2. The Debtors’ decision to grant adequate protection to the Trustee in accordance with the terms and provisions of the Adequate Protection Agreement attached hereto as Exhibit A is reasonable and appropriate under the circumstances and such Adequate Protection Agreement is hereby approved.
3. The Debtors are authorized to take any and all actions necessary or desirable to perform the Debtors’ obligations and the transactions contemplated under the Adequate Protection Agreement.
4. In furtherance of the terms and provisions of the Adequate Protection Agreement, Big Beaver is hereby allowed a superpriority administrative expense claim, with priority over any and all administrative expenses of the kind specified in sections 503 (b) and 507 (b) of the Bankruptcy Code (the “Big Beaver Superpriority Claim”), in an amount equal to any and all post-petition payment obligations due from Kmart to Big Beaver under the Lease, less any amounts paid to the Trustee as adequate protection by Kmart on behalf of Big Beaver; provided, however, that the Big Beaver Superpriority Claim shall be (i) subject and subordinate to the liens, superpriority administrative expense claims, and other claims provided for in the order approving the Debtor’s debtor-in-possession financing facility entered on March 6, 2002 (as it may be amended from time to time), and (ii) accorded pari passu treatment together with any other superpriority administrative expense claims that may be allowed to Kmart’s affiliates.
5. Also in furtherance of the terms and provisions of the Adequate Protection Agreement, and as adequate protection of its liens and security interests, the Trustee is hereby granted a security interest in and to the Big Beaver Superpriority Claim to the same extent and priority as the Trustee’s security interest in and to the rents, income and profits arising form the Lease.
6. In the event of any conflict between the reservation of rights contained in paragraph J of the Adequate Protection Agreement (the “Reservation of Rights”) and any other provision of the Adequate Protection Agreement, the Reservation of Rights shall control. The Reservation of Rights shall be for the benefit of the statutory Committees appointed in these cases, the United States Trustee and any chapter 11 or chapter 7 trustee appointed in these or any successor cases in addition to the parties expressly listed in the Adequate Protection Agreement.
EXHIBIT A
(Adequate Protection Agreement) ADEQUATE PROTECTION AGREEMENT
This Adequate Protection Agreement (“Agreement”) is by and among Kmart Corporation (“Kmart”) and its affiliate Big Beaver of Florida Development LLC (“Big Beaver,” and collectively with Kmart, the “Debtors”) and LaSalle Bank National Association, a national banking association, formerly known as LaSalle National Bank, as Trustee for the Holders of Structured Asset Securities Corporation Multiclass Pass-Through Certificates, Series 1996-CFL, under that Certain Pooling and Servicing Agreement, dated as of February 1, 1996 (in such capacity, “Trustee”).
RECITAL
This Agreement is in resolution of the Trustee’s “Motion of LaSalle Hank National Association, a national banking association, formerly known as LaSalle National Bank, as Trustee for the Holders of Structured Asset Securities Corporation Multiclass Pass-Through Certificates, Series 1996-CFL, under that certain Pooling and Servicing Agreement, dated as of February 1, 1996 to (I) Modify the Automatic Stay, (II) Compel the Rejection of a Non-Residential Real Property Lease and (III) Compel Payment of Post-Petition Rent and Mortgage Payments or Alternatively, Compel Adequate Protection Payments” (the “Motion”).
AGREEMENT
A. Kmart Lease Payments to Big Beaver. Kmart will continue to accrue payments due under its lease with Big Beaver (the “Lease”) in the ordinary course of business and consistent with past practice. Subject to the approval of the Bankruptcy Court, Big Beaver will be allowed a superpriority administrative expense claim against Kmart, with priority over any and all administrative expenses of the kind specified in sections 503 (b) and 507 (b) of the Bankruptcy Code (the “Big Beaver Superpriority Claim”), in an amount equal to any and all post-petition payment obligations due from Kmart to Big Beaver under the Lease, less any amounts paid to the Trustee as adequate protection by Kmart on behalf of Big Beaver; provided, however, that the Big Beaver Superpriority Claim shall be (i) subject and subordinate to the liens, superpriority administrative expense claims, and other claims provided for in the order approving the Debtor’s debtor-in-possession financing facility entered on March 6, 2002 (as it may be amended from time to time), and (ii) accorded pari passu treatment together with any other superpriority administrative expense claims that may be allowed to Kmart’s affiliates. Subject to approval of the Bankruptcy Court, the Trustee will be granted a security interest in and to the Big Beaver Superpriority Claim to the same extent and priority as the Trustee’s security interest in and to the rents, income and profits arising from the Lease.
B. Periodic Adequate Protection Payments. Within three business days after the Bankruptcy Court’s Order approving this Agreement is entered, Big Beaver will make an adequate protection payment to the Trustee in the amount of $1,806,000. Thereafter, commencing October 5, 2002, Big Beaver will make monthly adequate protection payments in the amount of $258,000 to the Trustee on the fifth business day of each calendar month.
C. Trustee’s Treatment of Adequate Protection Payments. The Trustee shall use the adequate protection payments for the following purposes: (1) the Trustee may pay reasonable costs and expenses of servicing the debt and (2) the Trustee may make periodic payments to the Series 1996-CFL Pass-through Certificate holders (“Holders”) in the amounts contractually due to such Holders.[1a]
D. Default Interest and Late Fees. Subject to the immediately succeeding sentence, and notwithstanding anything in the Loan Documents to the contrary, the Trustee waives any right to assert that it is entitled under the Loan Documents to payment of any late fees or default interest in excess of $50,000.00 (which amount shall be allowed as part of the Trustee’s claim against Big Beaver to the extent permitted under Section 506 (b) of the Bankruptcy Code), from the petition date forward. The Trustee shall not seek payment for any late fees or default interest not waived in this paragraph prior to the earlier of (i) the effective date of a confirmed plan of reorganization of Big Beaver, such payment to be in accordance with said plan, (ii) the closing date of a sale of the Collateral (as defined in paragraph E below); (iii) conversion of Kmart or Big Beaver’s chapter 11 cases to chapter 7 of the Bankruptcy Code; or (iv) dismissal of Kmart or Big Beaver’s chapter 11 cases. Notwithstanding the first sentence of this paragraph D, in the event that either Kmart or Big Beaver defaults under this Agreement, the Trustee shall retain the right to assert that it is entitled to payment of all late fees and default interest accruing under the terms of the Loan Documents from and after the petition date until the date of approval of this Agreement, and any and all late fees and default interest accruing after default under this Agreement.
E. Reimbursement of Interest and Rcasonable Expenses/Collateral. The issue of whether the Trustee shall be entitled to reimbursement of interest, fees costs and charges under Section 506 (b) of the Bankruptcy Code, and the amount of such interest, fees, costs and charges is reserved until either (i) Big Beaver files a motion to sell the Trustee’s collateral, (ii) Big Beaver’s case is dismissed or convened to a case under Chapter 7 of the Bankruptcy Code, or (iii) Big Beaver files its plan of reorganization. For purposes of this Agreement, the Trustee’s collateral shall include all of the collateral described in the Loan Documents, including, but not limited to, insurance, sale or condemnation proceeds, the rents payable from Kmart to Rig Beaver under the Lease, and the Big Beaver Superpriority Claim (the “Collateral”).
F. Suspension of Adequate Protection Payments. Neither Big Beaver nor Kmart will be obligated to make further payments pursuant to the Agreement in the event that: (1) any individual Holder or the Trustee pursues any action inconsistent with or not permitted under this Agreement, or (2) any individual Holder or the Trustee files (or supports the filing or prosecution of): (a) any motion seeking any relief that would, if granted, create a default or event of default under the Debtors’ debtor-in-possession financing facility, including motions to appoint a trustee or an examiner; (b) pleadings in opposition to the Debtors’ motion to extend statutory time lines in these cases, including exclusivity; (c) pleadings in opposition to any aspect of the Debtors’ efforts to sell the Collateral including the process, results or allocation of proceeds relating thereto (except with respect to allocations among Holders), provided, however, that the Trustee shall retain all rights with respect to any such sale provided for in paragraph K hereof; or (d) any motion or adversary proceeding commenced by the Trustee seeking to compel relief against the Debtors without the Debtors prior consent (collectively, as to the matters referred to in subsection (1) and (2), “Adversary Actions”); provided, however, that, though Debtors will not be obligated to make further payment under this Agreement in the event of an Adversary Action, nothing herein shall prejudice the rights of the Trustee, if any, to pursue an Adversary Action, and provided further that Adversary Actions shall not include any action commenced by the Trustee to compel removal or payment of any valid mechanics’ liens on the property subject to the Lease or other costs and charges for which Kmart is responsible under the Lease that it is permitted to pay consistent with the provisions of the Bankruptcy Code and/or prior orders of this Court. Notwithstanding the foregoing, the Debtors obligations to make payments under this Agreement shall be reinstated (less any costs incurred by the Debtors relating thereto or as a result thereof) if an Adversary Action is dismissed or withdrawn prior to any hearing or relief being granted thereon.
G. Superpriority Claim. The Trustee shall receive a superpriority administrative expense claim in the Big Beaver Chapter 11 case, subject and subordinate to the liens, superpriority administrative expense claims, and other claims provided for in the order approving the Debtor’s debtor-in-possession financing facility entered on March 6, 2002, as it may be amended from time to time (the “Superpriority Claim”). The amount of the Superpriority Claim shall be. equivalent to the amount of any diminution in value of the Trustee’s interest in Big Beaver’s interest in the Collateral from and after the petition date, minus the aggregate amount of adequate protection payments made during the reorganization cases.
H. Insurance, Taxes and Assessments. Big Beaver and Kmart agree to keep in place insurance on the Collateral consistent with the Lease and Loan Documents; to maintain the Collateral in the condition required by the Lease and the Loan Documents without deferring maintenance; and to pay, when due, all taxes, assessments and similar charges.
I. Treatment of Rents. All rents paid by Kmart to Big Beaver (or owed to Big Beaver by Kmart) shall constitute the Trustee’s cash collateral and be subject to the assignment of rents made by Big Beaver to the Trustee. All net rent proceeds of the leases which constitute Collateral shall be included in any calculation of the value of the Collateral.
J. Reservation of Rights. Notwithstanding anything else to the contrary in this Agreement, the Trustee, the Debtors, and the Debtors’ Statutory Committees reserve all rights with respect to valuation matters and to final allocation of the Adequate Protection Payments to ultimately allowed proofs of claims (including the determination of whether the Trustee is an oversecured or undersecured creditor). The Debtors and the Debtors’ Statutory Committees also reserve all rights with respect to all proofs of claims filed by the Trustee in the Chapter 11 cases including, without limitation, to the reasonableness of costs and expenses included in such claims under Section 502
of the Bankruptcy Code. Nothing in this Agreement shall prejudice the rights of either the Debtors, the Debtors’ Staturory Committees or the Trustee in connection with the confirmation of any plan of reorganization prosecuted by the Debtors.
K. Sale of Collateral. In connection with the sale of the Collateral after the date hereof, any valid, perfected liens and security interests under the Loan Documents shall attach to the net proceeds of such disposition. The Debtors shall provide to the Trustee twenty days advance notice prior to conducting the sale hearing on any motion seeking approval to sell the Collateral and the Trustee shall have the right to credit bid at the auction of the Collateral to the extent specifically permitted in the Bankruptcy Code.
I. Information Requests/Access. The Debtors and the Trustee will respond to reasonable information requests from each other regarding collateral preservation matters. The Debtors shall allow full and immediate access to the Collateral by the Trustee or its agents so long as such request is reasonable and within ordinary business hours.
M. Termination. This Agreement shall terminate upon the earliest of( I) a default by the Debtors under this Agreement not cured after ten business days written notice from the Trustee, (2) conversion of either of the Debtors’ reorganization cases to Chapter 7 or the appointment of a trustee or an examiner with expanded powers to manage the Debtors’ property in either reorganization case, (3) substantial consummation of a reorganization plan for both Kmart and Big Beaver (provided, however, that the waiver of late fees and default interest set forth in paragraph D hereof shall survive provided that the Debtors are otherwise in compliance with the terms hereof), or (4) dismissal of either case. Claims under paragraph G (calculated through the date of termination) and the reservation of rights in paragraph J shall expressly survive any termination of this Agreement.
N. Court Approval/Withdrawal of Motion. This Agreement shall be effective only after approval by the Bankruptcy Court. In the event this Agreement does not become effective, nothing herein shall be deemed an admission against interest or a waiver or release of any claim or right. Upon approval of this Agreement by the Bankruptcy Court, the Motion shall be withdrawn without prejudice to the Trustee’s right to re-file the Motion in the event that either of the Debtors breaches this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
Kmart Corporation
By: ____________________________ Name: ____________________________ Its: ____________________________
Big Beaver of Florida Development LLC
By: __________________________ Name: __________________________ Its: __________________________
LaSalle Bank National Association, a national banking association, formerly known as LaSalle National Bank, as Trustee for the Holders of Structured Asset Securities Corporation Multiclass Pass-Through Certificates, Series 1996-CRL, under that Certain Pooling and Servicing Agreement, dated as of February 1, 1996
By: _____________________ Name: _____________________ Its: _____________________