No. 02-08699United States Bankruptcy Court, N.D. Illinois, Eastern Division.
January 8, 2003
TISHLER WALD, LTD, Chicago, IL, Kurt M. Carlson, Attorney For Comerica Leasing, a Division of Comerica Bank.
PIPER RUDNICK, Chicago, IL, Mark A. Berkoff, Marc I. Fenton, Attorneys for National Steel Corporation, and its wholly owned subsidiaries, Debtors and Debtors-In-Possession.
REED SMITH LLP, Philadelphia, PA, Claudia Z. Springer, Counsel to the Committee of Unsecured Creditors of National Steel Corp.
FINAL STIPULATION AND ORDER REGARDING MOTION BY COMERICA LEASING, A DIVISION OF COMERICA BANK FOR AN ORDER COMPELLING IMMEDIATE ASSUMPTION OR REJECTION OF EXECUTORY CONTRACT OR, IN THE ALTERNATIVE, GRANTING RELIEF FROM THE AUTOMATIC STAY TO PERMIT TERMINATION OF EXECUTORY CONTRACT OR FOR ADEQUATE PROTECTION
JOHN H. SQUIRES, United States Bankruptcy Judge
This Final Stipulation and Order is filed by: (i) Comerica Leasing, a Division of Comerica Bank (“Comerica”), creditor and party-in-interest in the above-captioned jointly administered Chapter 11 case; and (ii) NATIONAL STEEL CORPORATION (“National Steel”) and its wholly owned subsidiaries (collectively, the “Debtors”), debtors and debtors-in-possession in the above-captioned jointly administered Chapter 11 cases (the “Bankruptcy Case”). As and for the Final Stipulation and Order, Comerica and the Debtors stipulate and agree as follows:
1. Recitals.
1.1 On March 6, 2002 (the “Petition Date”), National Steel and certain of its wholly owned subsidiaries each filed voluntary chapter 11 petitions with this Court.
1.2 On the Petition Date and at the request of the Debtors, the Court entered an order authorizing the joint administration of the Debtors’ Chapter 11 cases.
1.3 Since the Petition Date, the Debtors continue to operate their businesses and manage their assets as debtors-in-possession pursuant to Bankruptcy Code §§ 1107 and 1108.
1.4 Comerica and National Steel are parties to two (2) equipment lease agreements (the “Comerica Contracts”), pursuant to which Comerica “leases” various equipment to National Steel (collectively the “Comerica Equipment”) as stated in the Comerica Motion.
1.5 National Steel’s regular monthly payments to Comerica under the Comerica Contracts are as follows:
(a) Under Comerica Lease Financing Agreement I dated April 1, 1999, $135,908.08 per month plus applicable sales and use taxes; and,
(b) Under Comerica Lease Financing Agreement 11 — dated April 9, 1999, $76,136.18 per month plus applicable sales and use taxes.
1.6. Since the Petition Date, the Debtors continue to possess and use the Comerica Equipment subject to the Comerica Contracts. The Comerica Equipment is subject to continual depreciation, wear and tear as a result of the passage of time and the Debtors’ continued possession and use of the equipment.
1.7. Debtors acknowledge that they did not make the monthly payments due Comerica wider the Comerica Contracts for the months of March, April and May, 2002 (“Missed Payments”).
1.8. On April 26, 2002 Comerica filed and served the “Motion byComerica Leasing, a Division of Comerica Bank. for an Order CompellingImmediate Assumption or Rejection of Exceutory Contract or, in theAlternative, Granting Relief From the Automatic Stay to PermitTermination of Executory Contract or for Adequate Protection.” (the “Comerica Motion”). On May 10, 2002 Debtors filed “Debtors’ Response inOpposition to Motion of Comerica Leasing, a Division of Comerica Bank, foran Order Compelling Immediate Assumption or Rejection of ExecutoryContract or, in the alternative, Granting Relief from the Automatic Stayto Permit Termination of Executory Contract or for Adequate Protection.”
On May 23. 2002, Comerica filed its “Reply Brief in Support of ComericaLeasing’s Motion to Lift Stay or for Adequate Protection.”
1.9. On June 18, 2002 at 8:30 a.m. the Comerica Motion was called for status, at which time the parties placed the principal provisions of an Interim Stipulation and Order on the record. The Unsecured Creditor’s Committee did not posit an objection at the bearing but reserved the right to review the written agreement. On June 26, 2002 the Court approved the interim Stipulation and Order. Successive Interim Stipulations and Orders were entered at each Omnibus hearing thereafter, without objection by any party in interest (the “Interim Orders”). The Debtors have been current on the adequate protection payments as provided therein since the entry of the Interim Orders.
1.10. The Debtors and Comerica agreed to continue the November 19, 2002 hearing on the Comerica Motion until the December 17, 2002 Omnibus Hearing to allow the Parties the time needed to negotiate the terms of a final consensual resolution of the issues raised in the Comerica Motion and to tender to the Court this Final Stipulation and Order. At the December 17, 2002 Omnibus hearing, the Parties advised the Court that this Final Stipulation and Order was being drafted and requested a January 3, 2003 date for the presentment of this Final Stipulation and Order. This Date has now been extended to January 8, 2003.
1.11. Good and sufficient cause has been shown for approval of this Final Stipulation and Order. Among other things, the approval of this Final Stipulation and Order will enable the Debtors to continue the operation of their businesses while avoiding further disputes over adequate protection in respect to Comerica. Accordingly, approval of this Final Stipulation and Order is in the best interests of the Debtors and their estates and creditors.
1.12. The Debtors and Comerica have negotiated this Final Stipulation and Order and the adequate protection requested hereunder in good faith and at arms length.
II. Operative Provisions.
2.0. The Recitals are hereby incorporated by reference as though restated verbatim.
2.1. The terms and conditions of this Final Stipulation and Order shall become effective only upon approval of this Final Stipulation and Order by the Bankruptcy Court.
2.2. The Debtors’ agreement to grant adequate protection as set forth below is reasonable and appropriate under the circumstances.
2.3. The Debtors are authorized to take any and all actions necessary or desirable to perform the Debtors’ obligations and the transactions contemplated by this Final Stipulation and Order.
2.4. Specifically, pursuant to sections 361 and 363 of the Bankruptcy Code, as and for adequate protection between Comerica and the Debtors, the parties stipulate and agree as follows:
a) As part of this Final Stipulation and Order, Comerica shall be irrevocably entitled to retain all pre-petition payments as well as all Interim Payments provided for under the terms of all prior Interim Orders. Comerica shall apply all such Pre-petition and Interim Payments to the appropriate pro rata percentages for principal and interest as provided for under the Comerica Contracts.
b) The value of the Comerica Equipment subject to the Comerica Contracts is $4,500,000 (the “Agreed Value”) as of November 15, 2002. The Agreed Value shall be reduced, dollar for dollar, by the Payments, as that term is defined herein, actually made from and after November 15. 2002 so that the Agreed Value shall at all times from and after November 15, 2002, and for all purposes, equal the actual cumulative outstanding balance reflected in the Payment Schedule (“Payment Schedule”) attached hereto and made part hereof as Exhibit “A”.
c) On or about December 17 2002, the Debtors shall tender a payment of $212,000, made subject to final execution of this Final Stipulation and Order, which payment shall be the final payment in this amount pursuant to the prior Interim Orders. Commencing January 15, 2003 and thereafter on the 15th of each subsequent month (unless the 15th falls on a weekend or holiday in which case on the next business day) the Debtors will pay Comerica $162,000 (the “Payment”) per the wire instructions previously provided to the Debtors, as provided for in the attached Payment Schedule, until the cumulative balance remaining due pursuant to the Payment Schedule is paid in full. If the cumulative balance due pursuant to the Payment Schedule has not been received by Comerica by the Effective Date of a Plan, then until payments totaling the cumulative balance of the Payment Schedule have been tendered by Debtors to Comerica, Debtors will continue to make Monthly Payments of $162,000. This Monthly Payment constitutes adequate protection for, among other things, the Debtors’ use of the Comerica Equipment. Comerica agrees that the Payments will be applied on the same pro rata basis toward principal and interest as is required under the Comerica Contracts.
d) At such time as the Debtors have tendered the cumulative balance of the Payment schedule to Comerica. then, in that event, and consistent with the Comerica Contracts and this Final Order, and barring any material and uncured defaults with the Comerica Contracts and this Final Stipulation and Order from and after the date of this Final Stipulation and Order (“Post Final Order Default”), then Debtors shall own the Comerica Equipment free and clear of any and all liens, claims and encumbrances, and shall not be obligated to make any further payments pursuant to the Comerica Contracts. Uncured defaults shall, for purposes of this Final Stipulation and Order, be defined to mean such defaults that continue to exist on the date subsequent to the greater of 15 days or such cure period provided by the Comerica Contracts, from the date of the written notice of such default directed to the Debtor’s present bankruptcy counsel. This Monthly Payment constitutes adequate protection for, among other things, the Debtors’ use of the Comerica Equipment. Comerica agrees that the Payments will be applied on the same pro rata basis toward principal and interest as is required under the Comerica Contracts.
e) All fees, including attorney fees, late charges, expenses and penalties (the “Prior Disputed Charges”) incurred by Comerica prior to the entry of this Final Stipulation and Order, aggregating approximately $150,000, are hereby waived. However, if there is a monthly payment default by Debtors on or prior to April 7, 2003 (which has not been cured by Debtors as provided for in this Final Stipulation and Order), then Comerica shall have the right to add the Prior Disputed Charges as well as its Post Final Stipulation and Order reasonable fees, costs and expenses to the balance of its claim and all parties in interest reserve their rights to object to the merits of said claim. However, such Prior Disputed Changes shall be treated as an unsecured claim.
f) Comerica agrees that it will not seek relief from the automatic stay or request additional adequate protection from the Debtors or their estates during the pendancy of these Bankruptcy Cases for any reason, including, but not limited to, the Missed Payments or for the Prior Disputed Charges. The parties agree, however, that in the event of a Post Final Order Default (which is not cured within the time limitations of this Final Stipulation and Order), then Comerica specifically reserves all of its rights to seek any and all relief allowed by the Bankruptcy Code and the Comerica Contracts. In the event of a Post Final Order Default, not cured within the time limitations of this Final Stipulation and Order, interest shall accrue at the rate of 7% per annum on the cumulative balance remaining due on the Payment Schedule from and after the last day with which the Debtors have to cure the Post Final Order Default. However, such default rate of interest shall not be treated as an administrative priority expense.
g) Comerica agrees that it shall support any Plan of Reorganization filed by the Debtors as long as the Debtors are in compliance with this Final Stipulation and Order. Debtors agree that as part of a Plan of Reorganization, there shall exist a provision which allows for the term of the Comerica Contracts to be extended until such time as the total Payments made by the Debtors equal the total cumulative outstanding balance of the Payment Schedule.
h) The parties further stipulate and agree that (i) the Debtors can, with 5 days written notice to Comerica and without further court order, return the Comerica Equipment at any time without penalty, but subject to the rights and remedies Comerica retains pursuant to the Comerica Contracts and the Bankruptcy Code. However, all Comerica’s reasonable costs, fees and expenses shall be treated as an unsecured claim; (ii) if the Comerica Equipment is returned and thereafter sold by Comerica in a commercially reasonable manner under the Uniform Commercial Code (“UCC”) for a price in excess of the outstanding cumulative balance reflected on the Payment Schedule, including all reasonable costs, fees and expenses associated with the turnover, delivery, transport, storage and sale of the Comerica Equipment, as provided by the Comerica Contracts, the excess proceeds shall be turned over to the Debtors; and (iii) if the Equipment is returned and sold in a commercially reasonable manner under the UCC for less than the difference between the outstanding cumulative balance reflected on the Payment Schedule and the amounts previously paid by the Debtors under this Paragraph 2.4, then Comerica may assert a claim for the deficiency, which shall not be treated as an administrative expense claim. The Debtor and any party in interest retains its right to object to the amount of any such deficiency claim filed by Comerica.
2.5. Except as otherwise expressly provided herein, this Final Stipulation and Order shall not modify, impair or prejudice any rights or remedies of Comerica or the Debtors. The parties reserve all of their respective rights, remedies, and/or defenses with respect to the Comerica Contracts and the Comerica Motion and this Court retains jurisdiction to enforce the terms of this Final Stipulation and Order.
2.6. Debtors shall continue to abide by all other terms and conditions of the Comerica Contracts governing their use, maintenance and care of the equipment, including but not limited to, keeping the equipment adequately maintained and adequately insured at all times with Comerica named as the loss payee.
2.7. The provisions of this Final Stipulation and Order shall not be modified or altered except by a subsequent writing executed by the parties with the same formality as this Final Stipulation and Order.
2.8. The persons signing on behalf of the Debtors and Comerica represent and warrant that they are authorized to execute this Final Stipulation and Order on behalf of their respective clients.
2.9 This Final Stipulation and Order disposes of all relief requested by Comerica in the Comerica Motion and supporting briefs and, therefore, the Comerica Motion shall be dismissed without prejudice.
3.0. This Final Stipulation and Order is dated and effective as of January 8, 2003.
“APPENDIX A”
Payment Amortization Report Customer: National Steel
Per Mo/Yr Payment
0 11/02 212,044.26 1 12/02 212,044.26
2002 12/02 424,088.52
2 1/03 162,000.00 3 2/03 162,000.00 4 3/03 162,000.00 5 4/03 162,000.00 6 5/03 162,000.00 7 6/03 162,000.00 8 7/03 162,000.00 9 8/03 162,000.00 10 9/03 162,000.00 11 10/03 162,000.00 12 11/03 162,000.00 13 12/03 162,000.00
2003 12/03 1,944,000.00
14 1/04 162,000.00 15 2/04 162,000.00 16 3/04 162,000.00 17 4/04 162,000.00 18 5/04 162,000.00 19 6/04 162,000.00 20 7/04 162,000.00 21 8/04 162,000.00 22 9/04 162,000.00 23 10/04 162,000.00 24 11/04 162,000.00 25 12/04 162,000.00
2004 12/04 1,944,000.00
26 1/05 162,000.00 27 2/05 25,911.48
2005 2/05 187,911.48
Totals 4,500,000.00