Opinion
Case No. 04-11235-WCH, Jointly Administered.
July 13, 2004.
A hearing having been held on July 7, 2004 on the Motion by Debtors for Authority to Conduct Sale of Liquor Licenses by Public Auction, Free and Clear of Liens, Claims, Encumbrances, and Interests (the "Motion"), a limited objection to the Motion having been filed by Boston Ventures Limited Partnership V, and an objection having been filed by Rumbleseats, Inc. and Roblin Corporation, due cause appearing therefore, it is hereby ORDERED that:
1. The Motion is approved, as modified pursuant to the terms of this order. The Debtors are authorized to sell the Liquor Licenses (as defined in the Motion) free and clear of all liens, claims, encumbrances, and interests, including any rights of first refusal, pursuant to 11 U.S.C. § 363(f). The terms and conditions of the sale and bidding are approved as set forth in the Motion.
2. Any and all liens held by the Debtors' creditors in the Liquor Licenses shall attach to the proceeds of the sale of such licenses with the same validity, priority, force, and effect that such liens had upon the Liquor Licenses prior to the closing on such sales.
3. The proceeds from the sale of the Liquor Licenses shall be segregated pending further Court order.
4. The objection to the Motion filed by Rumbleseats and Roblin is overruled. The oral motion made by Rumbleseats and Roblin for entry of a stay pending appeal is denied.
Cut-off Date: 07-13-2004
Based Upon: Accounting Date
Property: SMA Mall at SteamtownUnit Date Charge Type Balance Activity 0-30 Days Days Days Days Days STEAMTOWN MALL PARTNERS, LP INVOICE 4500 Perklomen Avenue Reading, PA 19606 (610) 370-3762 2003 COMMON AREA CHARGES STEAMTOWN MALL PARTNERS, LP INVOICE 4500 Perklomen Avenue Reading, PA 19606 (610) 370-3762 Tenant ID: 2004 Real Estate Taxes STEAMTOWN MALL PARTNERS, LP INVOICE 4500 Perklomen Avenue Reading, PA 19606 (610) 370-3762 Invoice Date Mall Mall Locale Invoice Type Tenant ID: 2004 Real Estate Taxes New monthly minimum Real Estate Tax payment $669.11 months: $669.11 STEAMTOWN MALL PARTNERS, _P INVOICE 4500 Perkiomen Avenue Reading, PA 19606 (610) 370-3782 2004 MINIMUM COMMON AREA CHARGES FOR THE PERIOD JAN-JULY 2004= 7 MONTHS AT AN ADDITIONAL 183.43= $1,284.01 AMOUNT DUE NOW FOR PRIOR MONTHS MINIMUM CAM: $1,284.01 Pre-Petition Amount Due Post-Petition Amount Due
Charge Summary Current Future Current Over 30 Over 60 Over 90 Over 120 Tenant: GroundPOST American Hospitality Concepts Lease: SMAGROUND(2) Last Payment Date: 06-16-2004 Check No.: 1378 Amount: 12,977.00 3-06 04-01-2004 OPEN CREDI .82- .82- 04-20-2004 CAMHVAC 19.14 19.14 04-20-2004 ELEC-TENAN 50.96 50.96 04-20-2004 MAPROMO 12.68 12.68 05-01-2004 CAMHVAC 8.03 8.03 05-01-2004 ELEC-TENAN 21.41 21.41 05-01-2004 MAPROMO 5.35 5.35 05-01-2004 MRENT 1,118.59 1,118.59 05-07-2004 SEWER 360.84 360.84 05-07-2004 WATER 593.87 593.07 06-01-2004 MRENT 1,153.38 1,153.38 07-01-2004 CAM 1,840.00 11,840.00 07-01-2004 CAMHVAC 424.77 424.77 07-01-2004 ELEC-TENAN 1,132.72 1,132.72 07-01-2004 MAPROMO 283.18 283.18 07-01-2004 MRENT 10,029.92 10,029.92 07-01-2004 RETAX 419.79 419.79 ______________ ____________ ___________ __________ __________ __________ ___________ Unit 3-06 Totals: 17,473.81 .00 14,130.38 1,153.38 2,190.87 .82- .00 ______________ ____________ ___________ __________ __________ __________ ___________ Lease SMAGROUND(2) Totals: 17,473.81 .00 14,130.38 1,153.38 2,190.87 .82- .00 ______________ ____________ ___________ __________ __________ __________ ___________ Tenant GroundPOST Totals: 17,473.81 .00 14,130.38 1,153.38 2,190.87 .82- .00 Tenant: GroundRou American Hospitality Concepts Lease: SMAGROUND(0) Last Payment Date: 05-21-2004 Check No.: 1275 Amount: 12,977.00 3-06 01-01-2004 MRENT 872.17 872.17 01-30-2004 HOLIDAY 3,233.91 3,233.91 02-01-2004 CAM 1,142.07 1,142.07 02-01-2004 CAMHVAC 258.67 258.67 02-01-2004 ELEC-TENAN 689.78 689.78 02-01-2004 MAPROMO 172.45 172.45 02-01-2004 MRENT 6,225.47 6,225.47 02-01-2004 RETAX 260.56 260.56 02-09-2004 RETAX 28.26 28.26 02-19-2004 SEWER 876.63 876.63 02-19-2004 WATER 1,291.44 1,291.44 04-20-2004 CAMHVAC 12.98 12.98 04-20-2004 ELEC-TENAN 34.68 34.68 04-20-2004 MAPROMO 8.72 8.72 05-07-2004 SEWER 424.01 424.01 05-07-2004 WATER 697.70 697.70 ______________ ____________ ___________ __________ __________ __________ ___________ Unit S-06 Totals: 16,229.50 .00 .00 .00 1,178.09 .00 15,051.41 ______________ ____________ ___________ __________ __________ __________ ___________ Lease SMAGROUND (0) Totals: 16,229.50 .00 .00 .00 1,178.09 .00 15,051.41 ______________ ____________ ___________ __________ __________ __________ ___________ Property SMA Totals: 33,703.31 .00 14,130.38 1,153.38 3,368.96 .82- 15,051.41 ============== ============ =========== ========== ========== ========== =========== Bill to: Invoice Date 7/6/04 Mall Steamtown American Hospitality Concepts, Inc. Mall Locale Scranton 35 Braintree Hill Office Park Invoice Type CAM Braintree, MA 02184 2003 Tenant ID: Ground Round — Mall at Steamtown ======================================= Your Floor Space × CAM Per Sq. Ft. × Occupancy Factor 5233 × 4.64 × 1,0000 = $24,281.12 2003- MONTHLY MIN CAM BILLED 1840 × 12 ($22,080.00) Balance of Common Area Charges due: $2,201.12 =========== Bill to: Invoice Date 7/6/04 Mall Steamtown American Hospitality Concepts, Inc. Mall Locale Scranton 35 Braintree Hill Office Park Invoice Type Real Estate Taxes Braintree, MA 02184 2004 Ground Round — Mall at Steamtown ======================================= Your Floor Space × Tax Per Sq. Ft. × Occupancy Factor 5233 × 2.497 × 1.0000 = $13,066.80 2003-2004 Taxes Billed on Account ($5,037.48) Balance of Real Estate Taxes due: $8,029.32 ========= Bill to: 7/6/04 Steamtown American Hospitality Concepts, Inc. Scranton 35 Braintree Hill Office Park Real Estate Taxes Braintree, MA 02184 2004-MONTHLY Ground Round — Mall at Steamtown ======================================= Your Floor Space × Tax Per Sq. Ft. × Occupancy Factor MONTHLY 5233 × 2.497 × 1.0000 = $13,066.80 $1,088.90 2003-2004 Taxes Billed on Account ($5,037.48) ($419.79) Additional amount due for the period Jan — July 04: 7 Please pay this amount: $4,683,77 =================== NOTE: YOUR NEW MINIMUM MONTHLY REAL ESTATE TAX PAYMENT IS: Bill to: Invoice Date 7/6/04 Mall Steamtown American Hospitality Concepts, Inc. Mall Locale Scranton 35 Braintree Hill Office Park Invoice Type CAM Braintree, MA 02184 2004 Tenant ID: Ground Round — Mall at Steamtown ================================ Your Floor Space X CAM Per Sq. Ft. X Occupancy Factor ANNUAL MONTHLY 5233 X 4.64 X 1.0000 = $24,281.12 $2,023.43 2003- MONTHLY MIN CAM BILLED 1840 X 12 ($22,080.00) ($1,840.00) NEW MONTHLY MINIMUM CAM CHARGE: $183.43 _________ _________ --------------------------------------- -------------------------------------------------------------------------------------- Prior Feb. 1 — 18 Total Feb. 19 — 29 March April May June July Total Minimum Rent -0.46 7,468.71 7,468.25 4,564.01 12,032.72 12,032.72 12,032.72 12,032.72 12,032.72 64,727.61 04 % Rent 0.00 2,319.15 2,319.15 1,417.20 2,255.63 2,255.63 2,255.63 2,255.63 2,255.63 12,695.35 04 % Rent -1,480.72 -919.08 -2,399.80 -561.64 -561.64 Taxes 0.00 3,356.11 3,356.11 2,050.86 5,406.97 4,911.54 4,911.54 4,911.54 4,911.54 27,103.99 Taxes -495.43 -307.51 -802.94 -187.92 -495.43 -683.35 Insurance 0.00 147.75 147.75 90.28 238.03 238.03 238.03 238.03 238.03 1,280.43 Energy 0.00 2,192.29 2,192.29 1,339.67 3,531.96 3,531.96 3,531.96 3,531.96 3,531.96 18,999.47 Compactor 0.00 111.50 111.50 68.13 179.63 179.63 179.63 179.63 179.63 966.28 CAE 0.00 1,854.55 1,854.55 1,133.28 2,987.83 2,987.83 2,987.83 2,987.83 2,987.83 16,072.43 HVAC 0.00 154.02 154.02 94.12 248.14 248.14 248.14 248.14 248.14 1,334.82 Sprinkler 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Mktg Fund -254.90 161.45 -93.45 98.66 260.11 260.11 260.11 260.11 260.11 1,399.21 Water 0.00 7,023.25 7,023.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Ins Adj 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Tax Adj -3,241.36 0.00 -3,241.36 0.00 0.00 -3,401.53 0.00 0.00 0.00 -3,401.53 Liq Damages 0.00 617.33 617.33 0.00 0.00 0.00 0.00 0.00 0.00 0.00 _________ _________ _________ ________ ________ _________ ________ ________ ________ _________ Total (5,472.87) 24,179.52 18,706.65 10,106.65 26,645.59 23,244.06 26,645.59 26,645.59 26,645.59 139,933.07 (9,328.00) (24,592.00) (24,592.00) (53,291.18) (21,664.50) _____________ $6,465.39 =============ORDER ON MOTION FOR ENTRY OF AN ORDER AUTHORIZING CONTINUED USE OF CASH COLLATERAL
A Motion by Debtors for Entry of an Order Authorizing Continued Use of Cash Collateral (the "Motion") having been filed on or about June 11, 2004, objections to the Motion having been filed by Boston Venture Limited Partnership V ("BV") and certain PACA Trust creditors, and a hearing on the Motion having been held on July 7, 2004, all parties in interest having been notified and due cause appearing therefore, it is hereby ORDERED that:
1. The Motion for continued use of cash collateral through August 13, 2004 is hereby approved, except as modified herein.
2. The Debtors and BV submitted a stipulation resolving the objection to the Motion.
3. The Debtors have agreed to establish a reserve in the amount of $95,000, representing the amount of PACA claims for which trust recognition has been sought, pending Court adjudication of the PACA claims asserted and the Debtors' objection to such claims. Based upon the establishment of such reserve, the objection by the PACA claimants to the Motion has been mooted.
4. A status hearing on the Debtors' objection to certain PACA claims (Holden Fruit Produce, Produce One, Ambrogi Food Distribution, V. Marchese, Inc., Sirna Sons, Inc., and Kegal Produce) has been scheduled for July 21, 2004 at 9:30 a.m.
SUPPLEMENT TO STEAMTOWN MALL PARTNERS, L.P. AND PCK DEVELOPMENT COMPANY, LLC'S OBJECTION TO MOTION BY DEBTORS IN POSSESSION FOR ENTRY OF AN ORDER APPROVING SETTLEMENT AGREEMENT AND ASSUMPTION, ASSIGNMENT, AND SALE OF FRANCHISE ASSETS AND CERTAIN LEASEHOLD INTERESTSSteamtown Mall Partners, L.P. ("Steamtown") and PCK Development Company, LLC ("PCK") (together hereinafter referred to as the "Objecting Landlords"), by and through their attorneys, Menter, Rudin Trivelpiece, P.C., respectfully submit this Supplement to the Objection to the above-captioned Motion (the "Motion") and state as follows:
Background
1. On July 2, 2004, the Objecting Landlords filed an Objection to the Motion on multiple grounds, including that the Debtors must cure all of their post-petition defaults under the Leases pursuant to Section 365(d)(3) of the Bankruptcy Code as a condition precedent to any assumption and assignment of the Leases. The Objecting Landlords supplement their. Objection to assert the accurate amounts of post-petition rent due under the Leases.
Capitalized terms not otherwise defined herein shall have the same meaning ascribed them in the Objection.
2. The cure amounts due under the Leases ("Cure Amounts") based on the Objecting Landlords' books and records are as follows: Landlord Pre-Petition Post-Petition Attorneys' Fees Total
This amount includes July 2004 rent, 2003 CAM reconciliation of $2,201.12, 2003-2004 real estate taxes of $8,029.32, additional real estate taxes of $4,683.77 for January through July 2004 and additional CAM charges of $1,284.01 for January through July 2004.
Wherefore, Steamtown Mall Partners, L.P. and PCK Development Company, LLC respectfully request this Court enter an Order denying the Motion, or alternatively, enter an Order granting the Motion based on the terms and conditions set forth in the Objection and this Supplement, and granting the Objecting Landlords such other and further relief as to this Court may seem just and proper.
ORDER PURSUANT TO SECTIONS 105(a), 363 AND 365 OF THE BANKRUPTCY CODE AND BANKRUPTCY RULE 9019 AUTHORIZING THE SETTLEMENT OF CERTAIN CLAIMS AND THE ASSUMPTION, ASSIGNMENT, AND SALE OF: (1) FRANCHISE ASSETS; (2) CERTAIN NON-RESIDENTIAL REAL PROPERTY LEASES; AND (3) RELATED PERSONAL PROPERTY AND ASSOCIATED ASSETSThis matter having come before the Court for hearing (the "Sale Hearing") on the Motion ("Motion for Order") of the Debtors, the Ground Round, Inc. and affiliates for Entry of an Order Approving a certain Settlement Agreement and Assumption, Assignment and Sale Agreement for Franchise Assets (the "Franchisee Agreement") among the Debtors the Independent Owners Cooperative, LLC ("IOC"), the Ground Round Franchise Council (the "Franchise Council"), and certain franchisees of Ground Round restaurants ("Participating Franchisees"), which Franchisee Agreement (1) resolves, among other issues, any claims that Franchisees may have arising from alleged breaches of the Franchise Agreements, (2) authorizes a sale of the Franchise Assets pursuant to the Franchisee Agreement to the IOC, (3) authorizes the assumption and assignment of certain leases defined as the Master Leases to the IOC or the franchisees who are subtenants under the Master Leases ("Franchisee Subtenants") and (4) authorizes the sale of certain leases to certain Participating Franchisees (the "New Restaurant Location Franchisees"), due notice having been given,
The remaining debtors are GRXR of Hagerstown, Inc. (04-11236-WCH); GRXR of Frederick, Inc. (04-11237-WCH); GRXR of Charles County, Inc. (04-11238-WCH); Ground Round of Baltimore, Inc. (04-11239-WCH); and American Hospitality Concepts, Inc. (04-11240-WCH).
The Court hereby FINDS, DETERMINES, AND CONCLUDES THAT:
A. The findings and conclusions set forth herein constitute the Court's findings of fact and conclusions of law pursuant to Fed.R.Bankr.Proc. 7052, made applicable to this proceeding pursuant to Fed.R.Bankr.Proc. 9014.
B. Notice given was appropriate and sufficient under the circumstances and in accordance with the Order of this Court.
C. To the extent any of the following findings of fact constitute conclusions of law, they are adopted as such. To the extent any of the following conclusions of law constitute findings of fact, they are adopted as such.
D. On April 22, 2004, the Court conducted a hearing with respect to the sale of the Franchise Assets. At that hearing, the Debtors sought an order authorizing the sale of the Franchise Assets to U.S. Restaurant Properties Operating, L.P. and USRP Holding Corp. (collectively, "USRP"). The Franchisees objected to the entry of the Order and asserted cure claims in excess of $40,000,000. As a result, the Order did not issue The Debtors commenced discovery with respect to the cure claims seeking to estimate the claims for the purpose of the sale to USRP. The Franchisees commenced discovery directed towards the financial soundness of the sale to USRP and other matters. In addition to the discovery, the Debtors and Franchisees have filed extensive memoranda of law relating to the amount and validity of the cure claims.
E. The Franchisees have offered to resolve the disputes concerning the amount of the cure claims and the sale of the Franchise Assets. The terms of the offer are set forth in the Franchisee Agreement annexed to the Motion for Order as Exhibit A.
F. The Franchisee Agreement provides, inter alia, that the IOC will purchase the Franchise Assets for four million eight hundred fifty thousand dollars ($4,850,000). In addition, two of the Participating Franchisees will purchase the New Restaurant Locations for 105% of the otherwise highest bid at Auction, for an aggregate purchase price of $672,000. The Franchisee Agreement further provides that the Participating Franchisees waive cure claims and objections to the sale so that if the sale to IOC does not close on or before July 23, 2004 (as a result of the IOC's default), the Debtors may sell the Franchise Assets and certain related assets free and clear of all claims, liens and other interests asserted by the Participating Franchisees to another person or entity.
G. The proposed settlement is fair and reasonable in light of the complexity of the disputes and the uncertainty surrounding the claims.
H. USRP was the high bidder for the Franchise Assets at Auction, having submitted an offer of $6,500,000 plus $758,750 for the purchase of nine (9) Company Restaurants. However, the USRP offer requires the Debtors to pay cure costs and to convey the Franchise Assets free and clear of liens and claims. The Debtor reserved the right to withdraw from the sale in the Debtors' sole discretion.
I. The Debtors have concluded in the exercise of reasonable business judgment that the modified offer submitted by IOC is the highest and best offer and should be accepted and the sale consummated.
J. Exigent circumstances and sound business reasons exist for the Debtors' sale of the Franchise Assets, the assumption and assignment of the Master Leases, and the New Restaurant Locations pursuant to the provisions of this Order. Consummation of the transactions contemplated thereby constitute the exercise by the Debtors of sound business judgment and such acts are in the best interests of the Debtors, their estates, and their creditors.
K. The purchase price to be realized by the Debtors pursuant to the provisions of this Order is fair and reasonable.
L. The transactions contemplated by this Order are undertaken by the Debtors and IOC, and the Franchisees purchasing New Restaurant Locations, at arm's length, without collusion and in good faith within the meaning of section 363(m) of the Bankruptcy Code, and such parties are entitled to the protections of section 363(m) of the Bankruptcy Code.
M. A sale of the Franchise Assets and the New Restaurant Locations other than free and clear of liens, claims, encumbrances, and interests would impact adversely on the Debtors' bankruptcy estates and would be of substantially less benefit to the estates of the Debtors.
For all of the foregoing and after due deliberation, the Court ORDERS, ADJUDGES, AND DECREES THAT:
1. The settlement between the Debtors and the IOC and the Participating Franchisees is fair, reasonable and in the best interest of the Estates and their creditors. The sale by the Debtors of the Franchise Assets to the IOC is under the totality of the circumstances the highest and best offer for the Franchise Assets. Accordingly, the Franchisee Agreement is approved subject to the terms of this Order and the Debtors are authorized to sell to the IOC the Franchise Assets in accordance with the Franchisee Agreement and this Order and to consummate the terms and conditions of the Franchisee Agreement with respect to the sale of the Franchisee Assets for the purchase price of four million eight hundred and fifty thousand dollars ($4,850,000).
2. Each Participating Franchisee shall forthwith deliver to the Debtors the Franchisee Signing Date Releases which Franchisee Signing Date Releases are effective and enforceable upon the entry of this order, subject to the terms of the Franchisee Signing Date Releases.
3. The Debtors are authorized to forthwith deliver to the Participating Franchisees, the Debtors Signing Date Release, which Release is effective and enforceable upon the entry of this order.
4. Because certain Landlords asserted they did not timely receive financial information from the IOC and Franchisee Subtenants as required by Section 3.2 of the Franchise Agreement, the IOC and the Franchisee Subtenants requested a continuance of the hearing with respect to the Debtors' assumption and assignment of those certain Master Leases described below. Accordingly, the Debtors are not authorized to assume and assign the below described Master Leases. A hearing on the Debtors' request to assume and assign those Master Leases shall be held on July 14, 2004 at 11:00 A.M. At the July 14th hearing, the Court will consider whether the evidence offered by the IOC and the subtenants as to their ability to provide adequate assurances of future performance under the Master Leases is sufficient to support the assumption and assignment of the Master Leases to the Franchisee Subtenants or the IOC and determine the amount of the cure claims, if any, due in connection with the assumption and assignment of the following Master Leases:
a. 54 Hazard Avenue, Enfield, CT 06082
b. 50 JFK Highway, Rte. 20, Dubuque, IA 52002
c. 1425 San Marnan Drive, Waterloo, IA 50702
d. 555 Concord Avenue, Cambridge, MA 02138
e. 1699 Worcester Road, Framingham, MA 01701
f. 111 Pond Street, Norwell, MA 02061
g. 2 Galleria Mall Drive, East Taunton, MA 02718
h. 17050 Laurel Park Drive, Livonia, MI 48154
i. 1051 Boardman, Jackson, MI 49202
j. 3939 Stadium Drive, Kalamazoo, MI 49008
k. 479 Montauk Highway, Bayshore, NY 11706
l. Hudson Valley Mall, 1300 Ulster Avenue, Kingston, NY 12404
m. 8562 Seneca Turnpike, New Hartford, NY 13413
n. 747 Fort Salonga Road, Northport, NY 11768
o. 4959 Nesconset Highway, Port Jefferson, NY 11776
p. 1305 Grape Street, Allentown-Whitehall Township, PA 18052
q. 10583 Perry Highway, Wexford, PA 15090
Without limiting the foregoing, none of the relief set forth in paragraphs 1, 9, 11, 12, 17, 24, 25, and 26 of this Order shall apply to such Master Leases pending the outcome of the July 14 hearing.
5. Because certain Landlords asserted they did not timely receive financial information from the IOC and New Restaurant Location Franchisees as required by Section 2.3 of the Franchisee Agreement the IOC and the New Restaurant Location Franchisees requested a continuance of the hearing with respect to the New Restaurant Locations described below. Accordingly, the Debtors are not authorized to assume and assign the below described New Restaurant Locations. A hearing on the Debtors' request to assume and assign those New Restaurant Locations shall be held on July 14, 2004 at 11:00 A.M. At the July 14th hearing, the Court will consider whether the evidence offered by the New Restaurant Location Franchisees as to their ability to provide adequate assurances of future performance under the leases for the New Restaurant Locations is sufficient to support an assumption and assignment of the New Restaurant Locations to the New Restaurant Location Franchisees, determine the amount of the cure claims, if any, due in connection with the assumption and assignment of the following New Restaurant Locations, and any other issues raised by Landlords for the New Restaurant Locations in the Objections heretofore filed:
a. Mall at Steamtown, Scranton, PA 18503
b. 2753 Milton Avenue, Janesville, WI 53545
c. 3708 Frederick Avenue, St. Joseph, MO 64506
d. Frederick Towne Mall, 1301 West Patrick Street, Suite #276, Route 40 West, Frederick, MD 21701
Without limiting the foregoing, none of the relief set forth in paragraphs 1, 9, 11, 12, 17, 24, 25, and 26 of this Order shall apply to such New Restaurant Locations pending the outcome of the July 14 hearing.
6. Notwithstanding the inability of the Debtors to assume and assign the above identified Master Leases and the New Restaurant Locations, each of the Franchisee Signing Date Releases is effective and enforceable in accordance with their terms and all claims, causes of action whether at law or equity, right to payment, claims for equitable remedies including but not limited to all claims for damages based on asserted monetary and nonmonetary defaults and claims for rescission are hereby released and withdrawn in accordance with the Franchisee Agreement, except as expressly otherwise provided in the Franchisee Signing Date Releases.
7. The Objections by the Participating Franchisees and the Franchise Council to the Sale of the Franchisee Assets are withdrawn and forever waived and released as to any future sale of the Franchisee Assets by the Debtors. If the IOC fails to close as a result of its default, the Debtors are authorized without further order of the Court to terminate the sale of the Franchise Assets to IOC and to sell the Franchise Assets to any third party free and clear of any and all liens, claims, or causes of action after notice and Court approval.
ADDITIONAL FINDINGS AND RULINGS REGARDING THE SALE OF THE FRANCHISE ASSETS
8. The Franchisee Agreement constitutes a valid and binding agreement of the Debtors and is enforceable against the Debtors and IOC and the Participating Franchisees in accordance with its terms. The Franchisee Agreement was properly entered into by the Debtors and the individual signing on behalf of the Debtors was authorized to sign by the proper corporate votes and applicable law.
9. Pursuant to section 363(b) of the Bankruptcy Code, the Debtors have the power and right to sell, assign, transfer, and deliver the Franchise Assets to IOC, and the Debtors are authorized and directed to sell the Franchise Assets to IOC upon the terms and subject to the conditions set forth in the Franchisee Agreement.
10. The Debtors and their representatives are hereby authorized and directed to take all actions and execute all documents and instruments that the Debtors, IOC or lenders reasonably deemed necessary or appropriate to implement and effectuate the transactions contemplated by the Franchisee Agreement and this Order, including without limitation a Bill of Sale in the form attached hereto and any assignment in the form recordable with the Patent and Trademark office and any assignments of franchise and other agreements. In connection with the closing, the Debtors, their agents and representatives are hereby authorized and directed to execute and deliver such corporate authority documents as the IOC and its lender may reasonably request. All other Persons are directed to execute, deliver, file or record, as applicable, any agreement, instrument or other document, and to take any action deemed by the Debtors, IOC and the New Restaurant Location Franchisees to be necessary or appropriate to implement or otherwise effectuate the terms of this Order, the Franchisee Agreement and the exhibits thereto, whether or not such agreement, instrument or other document is specifically referred to in this Order, the Franchisee Agreement or any exhibit thereto and without the need for further order of this Court.
11. Subject to the payment by IOC to the Debtors pursuant to sections 363 and 365(a) of the Bankruptcy Code of the Purchase Price provided for in the Franchisee Agreement, the sale of the Franchise Assets by the Debtors to IOC shall constitute a legal, valid, and effective transfer of the Franchise Assets and shall vest IOC with all right, title, and interest of the Debtors in and to the Franchise Assets, effective as of the Closing Date.
12. Pursuant to section 363(f) of the Bankruptcy Code, the sale of the Franchise Assets to IOC shall be free and clear of all liens, claims, encumbrances and interests whatsoever, whether known or unknown, other than any post-Closing Date obligations that accrue under any assumed executory contracts and unexpired leases and as provided in the Franchisee Agreement. IOC shall not be liable in any way for any claims (as defined in section 101(5) of the Bankruptcy Code) of any party, except as provided otherwise in the Franchisee Agreement. Except as provided otherwise in the Franchisee Agreement, any and all encumbrances on the Franchise Assets shall be transferred, affixed, and attached to the net proceeds of the sale, with the same validity, priority, force, and effect as such encumbrances had upon the Franchise Assets immediately prior to the Closing Date.
13. The sale of the Franchise Assets to IOC and the New Restaurant Location Franchisees under the Franchisee Agreement referred to in paragraph 20 herein will constitute transfers for reasonably equivalent value and fair consideration under the Bankruptcy Code and applicable state law.
14. IOC is hereby granted the protections provided to a good-faith purchaser under section 363(m) of the Bankruptcy Code.
15. All objections and responses concerning the Franchisee Agreement as relates to the sale of the Franchisee Assets are resolved in accordance with the terms of this Order and as set forth in the record of the Sale Hearing and to the extent any such objection or response was not otherwise withdrawn, waived, or settled, they are and all reservations and rights therein, are overruled and denied. However, nothing herein nor any transaction or act authorized hereby shall be deemed to be a determination of the Objections asserted by various Landlords nor prejudice in any way the position of such Landlords, with respect to the assumption and assignment of those Master Leases and New Restaurant Locations identified in paragraphs 4 and 5 above and all such Objections are expressly reserved for the hearing on July 14, 2004.
16. IOC has not assumed or otherwise become obligated for any of the Debtors' liabilities other than as set forth in the Franchisee Agreement, and nor has IOC purchased any assets of the Debtors other than the Franchise Assets identified in the Franchisee Agreement and related exhibits. Pursuant to sections 105(a) and 363 of the Bankruptcy Code, all persons are hereby enjoined from taking any action against IOC or any of their affiliates, directors, officers, or representatives to recover any claim (as defined in section 101(5) of the Bankruptcy Code) which such person has against the Debtors or otherwise in connection with the Franchise Assets, except for claims assumed by IOC and Franchise Sublessees (as defined herein) under the Franchisee Agreement.
17. As of the Closing Date, in accordance with sections 365(a) and 365(f)(1) of the Bankruptcy Code, all executory contracts and unexpired leases of the Debtors that are a component of the Franchise Assets, except those Franchise Agreements and related contracts which may be rejected pursuant to Section 6.4 of the Franchisee Agreement, shall be deemed assumed by the Debtors and, if applicable, assigned to IOC and/or the Franchisee Subtenants, notwithstanding any provision in such contracts or leases prohibiting such assignment or transfer. Those Franchise Agreements and related contracts rejected pursuant to Section 6.4 of the Franchisee Agreement shall be deemed rejected as of the Closing Date of the sale to IOC and such counterparties shall have 45 days after notice of rejection to file a claim, if any, for damages suffered as a result of the rejection of their Franchise Agreements or related contracts.
18. The Debtors are hereby authorized in accordance with section 3.2 of the Franchisee Agreement to assume those Master Leases identified in this paragraph 18 and to assign those Master Leases to the Franchisee Subtenant. The Franchise Subtenants shall promptly pay to the Landlord under such Master Leases all cure amounts due and owing.
a. 830 South Riverside, Iowa City, IA 52246
b. 4 Trader's Way, Salem, MA 01970
c. 2102 Maple Grove Road, Duluth, MN 55811
d. Garden City, NY (Tin Alley), 630 Stewart Avenue, Garden City, NY 11530
e. 128 Dolson Avenue, Middletown, NY 10940
f. Newburgh Regional Mall, 1401 Rte. 300, Newburgh, NY 12550
g. 1614 State Street, Schenectady, NY 12304
h. 880 Narrows Run Road, Coraopolis, PA 15108
i. Westmoreland Mall, 960 E. Pittsburgh Street, Greensburg, PA 15604
j. 500 Johnstown Galleria, Johnstown, PA 15904
19. All disputes respecting cure amounts due shall be determined by further order of this Court, which may be sought on an expedited basis by any affected landlord.
20. The New Restaurant Location Franchisees are deemed the successful bidder for the New Restaurant Locations identified in this paragraph 20, including tangible personal property on the premises, and any liquor license and related permits associated with the New Restaurant Locations.
a. 350 Laurel Mall, Hazelton, PA 18201
b. Valley Plaza Shopping Center, 1703 Massey and Wesel Blvd., Hagerstown, MD 21740
21. The Franchisee Subtenants and New Restaurant Location Franchisees identified in paragraphs 18 and 20 are deemed to have satisfied any requirements of adequate assurance of future performance as to the Master Leases and Restaurant Leases to be assumed and assigned pursuant to paragraphs 18 and 20 of this Order.
22. The Debtors shall be responsible for satisfying, and shall promptly pay, any cure claims associated with the assumption and assignment of the New Restaurant Locations under paragraph 20 above to the date of this order. All disputes respecting such cure amounts shall be determined by further order of this Court, which may be sought on an expedited basis by any affected landlord.
23. The assumption and assignment of assumed executory contracts and unexpired leases to the Franchisee Subtenants and New Restaurant Location Franchisees pursuant to paragraphs 18 and 20 of this Order shall not constitute a default or breach of any such executory contracts or unexpired leases pursuant to section 365(c)(3) of the Bankruptcy Code.
24. Upon the assumption and assignment of the Master Leases to the Franchisee Subtenants pursuant to paragraph 18, Franchise Subleases shall be cancelled.
25. With respect to the New Restaurant Locations identified in paragraph 20, provisions contained in any such New Restaurant Location real estate lease which prohibit, condition, or restrict the assignment of the New Restaurant Location real estate lease to assignees thereof, or that impose a fee or penalty or require profit sharing or payment of consideration upon any assignment or sublease of a New Restaurant Location real estate lease, are deemed unenforceable. The intended usage for each New Restaurant Location real estate lease is permitted under the applicable lease, is not prohibited by the New Restaurant Location real estate lease, and will not disrupt the tenant mix or balance in the shopping center or mall in which the New Restaurant Location real estate lease identified in paragraph 20 is located. Any extension or renewal options or other rights contained in a New Restaurant Location real estate lease identified in paragraph 20 which purport to be personal only to the Debtors or to a named entity in the New Restaurant Location real estate lease, or to be exercisable only by the Debtors or a named entity operating under a specific trade name, constitute unenforceable restrictions on assignment. Such extensions or renewal options or other rights are freely exercised to the fullest extent by the assignee thereof.
26. With respect to each New Restaurant Location real estate lease, any provision of the New Restaurant Location real estate lease in the nature of a restriction on the interruption of the operations at the New Restaurant Location real estate lease location, including, without limitation, any continuous operations provision or "going-dark" clause, or similar clause prohibiting the cessation of operations at the leased premises is unenforceable against the assignee thereof under Section 365(f)(1) of the Bankruptcy Code and with respect to a New Restaurant Location real estate lease, is not a valid restriction on use as contemplated under Section 365(b)(3)(C) of the Bankruptcy Code for a period of one hundred eighty (180) days following the Closing.
27. With respect to each New Restaurant Location real estate lease identified in paragraph 20, the assignee thereof is authorized to perform such non-structural alterations and remodeling to the extent necessary for its operations at the premises subject to the New Restaurant Location real estate lease identified in paragraph 20 and to replace and modify existing signage notwithstanding any provision in the New Restaurant Location real estate lease to the contrary.
28. This Order shall be effective and enforceable immediately upon entry and its provisions shall be self-executing, and the stay imposed by Bankruptcy Rule 6006(d) shall not apply to the relief approved herein.
29. To the extent permitted by the Franchisee Agreement, this Court shall retain jurisdiction to interpret and enforce the provisions of the Franchisee Agreement, the Bid Procedures Order, and this Order and further to hear and determine any and all disputes between the Debtors and/or the Counterparties, as the case may be, and any non-Debtor party to, among other things, any assumed executory contracts and unexpired leases concerning,inter alia, the Debtors' assumption and assignment thereof to IOC under the terms of this Order and the Franchisee Agreement; provided, however that in the event the Court abstains from exercising or declines to exercise such jurisdiction or is without jurisdiction with respect to the Franchisee Agreement, Bid Procedures Order, or this Order, such abstention, refusal, or lack of jurisdiction shall have no effect upon, and shall not control, prohibit, or limit the exercise of jurisdiction of any other court having competent jurisdiction with respect to any such matter.
30. The provisions of this Order are nonseverable and mutually dependent. This Order shall supersede any order previously issued by this Court that may be inconsistent herewith.
31. This Order shall inure to the benefit of and shall be binding upon the Debtors, IOC, Participating Franchisees, the New Restaurant Location Franchisees and their respective successors and assigns, including but not limited to any trustee, receiver, examiner or fiduciary that may be appointed in connection with this case or any other or other case involving the Debtors or their assets, whether under chapter 7 or chapter 11 of the Bankruptcy Code or otherwise.
32. The closing to IOC on the Franchise Assets and the Master Leases the Debtors are authorized pursuant to paragraph 18 to assume and assign shall occur within fifteen days after the date of entry of this order.
33. The closing on the sale of the New Restaurant Locations identified in paragraph 20 shall occur simultaneously with the sale of the Franchise Assets, provided, however, that the New Restaurant Location Franchisees may extend the closing date for some or all of such New Restaurant Locations for up to 45 days after the closing of the sale of Franchise Assets if IOC has paid the Purchase Price in full and the New Restaurant Location Franchisees have paid in advance the purchase price and the estimated carrying costs of the New Restaurant Locations for the extension period. The Closing on the Franchise Assets is not dependant upon a Closing on the New Restaurant Locations or the assumption and assignment of the Master Leases identified in paragraph 4. The IOC is obligated to close notwithstanding any failure by the Debtors' to obtain an order authorizing the assumption and assignment of the Master Leases or New Restaurant Locations or the failure to close the New Restaurant Locations.
34. All Franchisee Cure Claims, as to both Participating Franchisees and those Nonparticipating Franchisees who failed to file such claims or otherwise prosecute such claims are released or deemed waived except as to such Nonparticipating Franchisees who became Nonparticipating Franchisee by reason of the Debtors inability to assume and assign the Franchise Master Lease and the Debtors rejection of their Franchise Agreement.
SALE TO USRP
35. The Assumption, Assignment and Sale of Franchisee Assets Agreement by and among the Debtors and USRP is hereby terminated and the Debtors are directed to forthwith to return to USRP the USRP deposit without any deductions or setoffs and with any interest earned thereon.
AUTHORIZATION FOR RELEASE OF ESCROW FUNDS
36. Solely in connection with the Franchisee Agreement, Gadsby Hannah, LLP is hereby authorized and directed to release funds deposited by Global Development Enterprise, Inc. ("GDE") and held in escrow by Gadsby Hannah, LLP pursuant to a Letter of Intent to Acquire Certain Ground Round Restaurants dated December 19, 2003 and to disburse such funds to GDE or to the IOC if GDE so directs.
MODIFIED RELEASE OF MICHIGAN FRANCHISEES
37. The Franchisee Signing Date Release to be executed by Livonia GR, Inc., Jackson GR, Inc., and Kalamazoo GR, Inc. shall be delivered to the Debtors.
MODIFIED RELEASE AS TO MY THREE SONS HOSPITALITY, INC.
38. The Franchisee Signing Date Release and Franchisee Closing Date Release executed by My Three Sons Hospitality, Inc. ("Sons") shall be conditioned upon a closing of the sale of Franchise Assets to IOC. If the sale of Franchise Assets to IOC does not occur, the Debtors and Sons shall enter into a stipulation rejecting the Franchise Agreement and providing for mutual releases among Sons and the Releasees.