Case No. 02-B02474, (Jointly Administered)United States Bankruptcy Court, N.D. Illinois, Eastern Division.
January 27, 2003
ORDER IN FURTHERANCE OF DESIGNATION RIGHTS ORDER, PURSUANT TO 11 U.S.C. § 365 AND FED. R. BANKR. P. 6006, AUTHORIZING ASSUMPTION AND ASSIGNMENT OF LEASE FOR STORE NO. 3334 (LAVERNE, CALIFORNIA) TO THE VONS COMPANIES INC.
SUSAN PIERSON SOUDERBY, United States Bankruptcy Judge.
Upon the motion dated January 14, 2003 (the “Motion”), wherein Kmart Corporation (“Kmart”) and certain of its domestic subsidiaries and affiliates, debtors and debtors-in-possession in the above-captioned cases (collectively, the “Debtors”), moved this Court for entry of an order, pursuant to 11 U.S.C. § 365 and Rule 6006 of the Federal Rules of Bankruptcy Procedure and the Agreed Order Approving Designation Rights Agreement and Related Relief (the “DRA Order,” docket no. 4711) dated June 28, 2002, authorizing the Debtors to assume that certain unexpired nonresidential real property lease set forth on Schedule 1 attached hereto and other related documents and to assign their interests under the lease and related documents to The Vons Companies, Inc. (the “Assignee”) and upon any objection; it appearing to the Court that (i) it has jurisdiction over the matters raised in the Motion pursuant to 28 U.S.C. § 157 and 1334; (ii) this is a core proceeding pursuant to 28 U.S.C. § 157 (b)(2); (iii) the relief requested in the Motion is in the best interests of the Debtors, their estates and their creditors; (iv) proper and adequate notice of the Motion and the hearing thereon has been given and that no other or further notice is necessary; and (v) upon the record herein after due deliberation thereon, that the relief should be granted as set forth below,
AND IT APPEARING TO THE COURT:
a. On January 22, 2002 (the “Petition Date”), the Debtors filed a voluntary petition in this Court for reorganization relief under Chapter 11 of Title 11 of the United States Code, 11 U.S.C. § 101, et seq., as amended (the “Bankruptcy Code”). The Debtors continue to operate their businesses and manage their properties as debtors-in-possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code.
b. The Debtors are party to that certain unexpired lease of non-residential real property along with the subleases and reciprocal easement agreements set forth on Schedule 1 attached hereto, together with any and all easements, licenses, nondisturbance agreements and other similar agreements entered into by the Debtors which relate to their use and occupancy of the leased property (such leased properly the “Property”, and such documents, collectively, the “Real Property Lease”) between the Debtors and the landlord, or applicable third party, relating to the Property.
c. Pursuant to the DRA Order, this Court ratified the Debtors entering into the Designation Rights Agreement (the “DRA”) with The Vons Companies, Inc. (the “Purchaser”) pursuant to which the Purchaser purchased the Designation Rights (as defined in the DRA) for the Debtors’ leased property in LaVerne, California (Store No. 3334).
d. The Real Property Lease is the only lease subject to the DRA and the DRA Order. Pursuant to Articles II and XI of the DRA, the Debtors must assume and assign the Real Property Lease upon the Purchaser’s designation.
e. As required by the DRA Order, the Purchaser sent the Debtors a notice on January 3, 2003, supplemented on January 14, 2003 (the “Assignment Notice”) requesting the Debtors to file the Motion. The Assignment Notice contained (a) the identity of the proposed designee, (ii) the proposed use of the Property by the Designee and (iii) documentation from the designee relating to “adequate assurance of future performance” and (iv) a list of all affected parties (the “Affected Parties”) that the Purchaser determined should receive notice of the proposed assignment. All of the Affected Parties have been served with the Motion.
f. The Real Property Lease is an “unexpired lease” within the meaning of section 365(a) of the Bankruptcy Code and is subject to assumption or rejection. By the Motion, the Debtors desire to assume and assign the Real Property Lease to the Assignee.
g. The Debtors estimate that the amounts necessary to cure the defaults under the Real Property Lease are the amounts indicated on Schedule 2 to the Order (the “Cure Claims”).
h. The Debtors’ interests in the Real Property Lease have not been modified or amended, except as stated on Schedule 1 attached hereto, and no party to the Real Property Lease has alleged that there are any amendments or modifications other than those identified on Schedule 1 attached hereto.
i. Notwithstanding the existence of a dispute over the Cure Claims, if any, the Debtors are entitled to submit this Order for this Court’s consideration, approving the assumption and assignment to Assignee.
j. The assumption and assignment of the Real Property Lease is in the best interests of the Debtors, their estates, creditors and interest holders and is necessary to the Debtors’ prospects for a successful reorganization.
k. The conditions of Section 365(b)(1) of the Bankruptcy Code with respect to the assumption of an unexpired lease or executory contract have been satisfied in connection with the assumption of the Real Property Lease. in particular, the Debtors have provided the Landlord with adequate assurance of future performance pursuant to Section 365(b)(1)(C).
l. The Court has jurisdiction to hear and determine the Motion and to grant the relief requested in the Motion pursuant to 28 U.S.C. § 157 and 1334, and this proceeding is a “core proceeding” within the meaning of 28 U.S.C. § 157 (b)(2)(A).
m. Notice of the Hearing was adequate and sufficient under the circumstances of these chapter 11 cases and this proceeding and complied with the applicable requirements of the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure, as amended by any order of this Court.
ACCORDINGLY, IT IS HEREBY ORDERED THAT:
1. The Debtors are authorized to assume the Real Property Lease for the Property set forth on Schedule 1 attached hereto.
2. The Debtors are authorized to assign the Real Property Lease pursuant to the terms of that certain Assignment and Assumption of Lease, a form of which is attached hereto as Exhibit A (the “Assignment Agreement”).
3. The assumption and assignment of the Real Property Lease is effective as of the effective date of the Assignment Agreement (the “Assignment Date”) and the Assignee (as defined in the Assignment Agreement) shall be entitled to all of the protections afforded the Purchaser’s designee pursuant to the DRA Order, including but not limited to the suspension of the “Go Dark” provisions of the Leases provided in the DRA Order.
4. The cure claim for the Real Property Lease is the amount set forth in Schedule 2 attached hereto. The cure claim will be paid by the Debtors within three business days of the Assignment Date.
5. The failure of any party to:
(a) allege in these proceedings any pre-assumption and assignment default under the Real Property Lease not hereinabove enumerated;
(b) identify any amendment, modification or other agreement relating to or affecting the Real Property Lease, other than those listed on Schedule 1 hereto;
(c) assert any material waiver, failure to act, or act or statement contrary to that presented in the Motion by the Debtors, or
(d) assert any objection or defense to the entry of this Order shall forever bar and estop said party, its heirs, successors and assigns, and any predecessor in interest, of itself and anyone claiming by, through or under it or them, from asserting any claims based thereon in any subsequent cases, proceedings, or actions against the Debtors, the Purchaser, or the Assignee, in law or in equity in this or before any other court or tribunal, and any such claims(s) shall be and hereby are terminated, exonerated, barred, and adjudicated against such person.
6. Notice of the Hearing and Motion to the last known agent of a party in interest at the address provided for such agent in the documents by which that party’s interest was created is adequate and sufficient notice to such party in the event that a current notice address could not be otherwise located by the Debtors under the circumstances of these Chapter 11 cases and this proceeding. Such notice complies with the applicable requirements of the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure, as amended by any order of this Court.
7. Assignee is a good faith purchaser under section 363(m) of the Bankruptcy Code and, as such, the transactions contemplated herein are entitled to the full protections of section 363(m) of the Bankruptcy Code.
8. As of the Assignment Date, the Debtors shall be released and forever discharged of any and all obligations and claims under the Real Property Lease, without any further action by the Landlord or order of the Court.
9. The Debtors are authorized to deliver possession of the premises subject to the Real Property Lease to Assignee as set forth in the Assignment Agreement.
10. The Debtors are authorized to sell and assign the Real Property Lease to Assignee free and clear of all liens, claims and encumbrances (except as set forth in the Assignment Agreement) pursuant to section 363(f) of the Bankruptcy Code, with all such valid and enforceable liens, claims and encumbrances to attach to the proceeds of the assignment of the Real Property Lease, in the same relative priority as existed with respect to the Real Property Lease.
11. The Debtors and their respective officers, employees and agents, are authorized to perform all of their obligations, take whatever actions necessary, and issue, execute and deliver whatever documents may be necessary or appropriate to implement and effectuate the assumption and assignment of the Real Property Lease.
12. The Assignee shall have the benefits accruing to the Purchaser’s designee pursuant to the DRA Order.
13. Nothing in this Order shall be deemed to extend the time to assume or reject the Real Property Lease under section 365(d)(4) of the Bankruptcy Code.
14. The Court shall retain exclusive jurisdiction to resolve any dispute arising from or relating to the assumption and assignment authorized herein or this Order.
15. Notwithstanding anything herein to the contrary, any (i) written agreement of settlement of an objecting party to this Motion, or (ii) written agreement of settlement of an objecting party to the motion seeking the entry of the DRA Order with respect to the Real Property Lease, which are executed by such party and the Purchaser, and, if applicable, the Assignee, are (x) hereby approved and (y) shall govern and control to the extent inconsistent with this Order.
16. Notwithstanding Rule 6006(d) of the Federal Rules of Bankruptcy Procedure, this Order shall take effect immediately upon signature
Schedule 1 to Order
Section A Description of Real Property Lease
1. Lease dated October 22, 1975 between Kmart Corporation and LaVerne Butterfield, LLC concerning premises located at 160 East Foothill Boulevard, LaVerne, California
Section B Description of Subleases None. Section C Description of Reciprocal Easement Agreements
1. “Joint Access and Parking Lot Agreement,” recorded June 23, 1976, as instrument number 3917, as modified by “Modification of Joint Access and Parking Lot Agreement, “recorded August 3, 1992, as instrument number 92-1416359.
2. “Joint Access and Parking Lot Agreement,” recorded January 2, 1980, as instrument number 80-3418.
Schedule 2 to Order
Cure Claims
Exhibit A to Order
LEASE ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS LEASE ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Assignment”) is made as of this _________ day of__________________ 2003 between Kmart Corporation, a Michigan corporation, having its office at 3100 W. Big Beaver Road, Troy, Michigan 48084-3163 (“Assignor”) and The Vons Companies, Inc., a Michigan corporation, having its office at 618 Michillinda Avenue, Arcadia, California 91007-6300 (“Assignee”).
W I T N E S S E T H WHEREAS, Assignor entered into that certain lease more particularly described in Schedule 1 attached hereto and made a part hereof (as the same may have been amended, supplemented or extended from time to time, and together with any and all other leases and agreements affecting the Premises (hereinafter defined) including, without limitation, the subleases, if any, more particularly described on Schedule 2 attached hereto (collectively, the “Lease”), whereby Assignor leases from the landlord set forth in Schedule 1 certain real property more particularly described in Schedule 1 and in the Lease (the “Premises”);
WHEREAS, on January 22, 2002, Assignor and certain of its affiliates filed voluntary petitions for reorganization under Chapter 11 of title 11 of the United States Code, 11 U.S.C. § 101 et seq., as amended (the “Bankruptcy Code”), in the United States Bankruptcy Court for the Northern District of Illinois (the “Bankruptcy Court”); and
WHEREAS, on _________, 2002, Assignor and its affiliate debtors and debtors-in-possession flied the Motion (I) For an Order (A) Establishing Bidding Procedures in Connection with the Sale of Certain Leases, Including, Without Limitation, Termination Fee Provisions, (B) Approving the Form and Manner of Notice of Sales, (C) Approving Forms of Purchase Agreement and Termination Agreement, (D) Setting a Hearing Date to Consider Final Approval of the Sale, and (E) Granting Related Relief and (II) For an Order Approving he Sale of the Leases to he Successful Bidder at the Conclusion of the Sale Hearing (the “Motion”), which, among other provisions, provided for the mechanism for the sale of certain leasehold interests held by Assignor and its affiliates; and
WHEREAS, on ____________ 2002, pursuant to the Order (A) Establishing Bidding Procedures and Approving a Termination Fee in Connection with the Sale of Certain Leases, Including, Without Limitation, Termination Fee Provisions, (B) Approving the Form and Manner of Notice of Sale, (C) Approving Forms of Purchase Agreement and Termination Agreement. (D) Setting a Hearing Date to Consider Final Approval of the Sale, and (E) Granting Related Relief the parties entered into that certain Asset Purchase Agreement for the Purchase of certain Leasehold interests (the “Agreement”) which provided for this Assignment; and
WHEREAS, on July 24, 2002, the Bankruptcy Court approved the eAgreement and the parties entering into the Assignment; and
WHEREAS, subject to the terms of this Assignment, Assignor desires to assign and transfer all of its right, title and interest in the Lease and the estate created thereby to Assignee and Assignee desires to purchase and accept such assignment and assume all rights, duties and obligations of the Assignor under the Lease arising on and after the Assignment Date, as defined herein.
NOW THEREFORE, the parties hereto for and in consideration of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is conclusively acknowledged by the parties hereto, agree as follows:
1. Assumption of Lease. As of the Assignment Date. Assignor hereby assumes the Lease pursuant to 11 U.S.C. § 365.
2. Assignment of Lease. As of the Assignment Date, Assignor hereby assigns, transfers, and sets over unto Assignee, its successors and assigns, all of Assignor’s right, title and interest in, to and under the Lease including, without limitation, any security deposits thereunder.
3. Assumption of Leasehold Obligations. Assignee hereby accepts the foregoing assignment and covenants with Assignor, that, from and after the Assignment Date, Assignee and its successors and assigns hereby assume and agree to keep, perform, fulfill or cause to be performed all of the terms, covenants, conditions and obligations contained in the Lease, which, by the respective terms therein, are imposed upon Assignor, and Assignee hereby acknowledges that Assignor shall assume any and all repair, maintenance and/or restoration obligations with respect to the Premises including, without limitation, any obligation which arose prior to the Assignment Date.
4. Ratification of Lease. Assignor and Assignee hereby ratify, reaffirm and adopt and agree that the Lease shall be in full force and effect as to Assignee.
5. Indemnification. Assignee hereby agrees to indemnify, protect, defend and hold Assignor harmless from and against all claims, damages, losses, costs and expenses (including attorneys’ fees) arising in connection with the Lease and relating to the period subsequent to the Assignment Date.
6. Governing Law. This Assignment shall be governed by and construed in accordance with the laws of the state where the Premises are located.
7. Assignment Date. The “Assignment Date” shall mean the day and year first written above.
B. Counterparts. This Assignment may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument, and it shall constitute sufficient proof of the Agreement to present any copy, copies or facsimiles signed by the parties to be charged.
[Remainder of page intentionally left blank.] IN WITNESS WHEREOF, the parties hereto have duly executed this Assignment as of the day and year first written above.
ASSIGNOR ASSIGNEE
THE VONS COMPANIES, INC. a Michigan corporation
By: By: ___________ Name: Its Assistant Vice President Its:
By:_________________ Its Assistant Secretary
Form Approved