STIPULATION AND CONSENT ORDER FURTHER EXTENDING INTERIM AGREEMENT FOR USE OF CASH COLLATERAL, AUTHORIZING DEBTOR TO USE CASH COLLATERAL, AND GRANTING ADEQUATE PROTECTION (THROUGH NOVEMBER 17, 2012)
DAVID E. RICE, Bankruptcy Judge.
This matter originally came before the Court on the Emergency Motion for Authority to Use Cash Collateral and Grant Adequate Protection Therefor (the "Motion")(dkt. 4) filed by Swami Shree, LLC (the "Debtor"), together with agreements of the Debtor, S4H Hospitality LLC ("S4H" or the "Senior Creditor"), and First-Citizens Bank & Trust Company ("First Citizens" or the "Junior Creditor") concerning the Debtor's use of the cash collateral of the Senior Creditor and Junior Creditor (collectively, the "Secured Creditors"). On August 12, 2011, this Court entered a Consent Order Approving Interim Agreement for Use of Cash Collateral, Authorizing Debtor to Use Cash Collateral, and Granting Adequate Protection (the "Interim Order")(dkt. 27). The Interim Order covered the period through September 15, 2011. On September 8, 2011, this Court entered a Stipulation and Consent Order Extending Interim Agreement for Use of Cash Collateral, Authorizing Debtor to Use Cash Collateral, and Granting Adequate Protection (Through October 15, 2011)(the "Second Interim Order"). On October 5, 2011, this Court entered a Stipulation and Consent Order Further Extending Interim Agreement for Use of Cash Collateral, Authorizing Debtor to Use Cash Collateral, and Granting Adequate Protection (Through November 11, 2011)(the "Third Interim Order"). The Third Interim Order runs through November 11, 2011. On November 3, 2011 this Court entered a Stipulation and Consent Order Extending Interim Agreement for Use of Cash Collateral, Authorizing Debtor to Use Cash Collateral, and Granting Adequate Protection (through January 12, 2012) (the "Fourth Interim Order"). On January 13, 2012 this Court entered a Stipulation and Consent Order Extending Interim Agreement for Use of Cash Collateral, Authorizing Debtor to Use Cash Collateral, and Granting Adequate Protection (through February 17, 2012) (the "Fifth Interim Order"). On February 21, 2012 this Court entered a Stipulation and Consent Order Extending Interim Agreement for Use of Cash Collateral, Authorizing Debtor to Use Cash Collateral, and Granting Adequate Protection (through March 16, 2012) (the "Sixth Interim Order"). On March 16, 2012 this Court entered a Stipulation and Consent Order Extending Interim Agreement for Use of Cash Collateral, Authorizing Debtor to Use Cash Collateral, and Granting Adequate Protection (through May 15, 2012) (the "Seventh Interim Order"). On May 16, 2012 this Court entered a Stipulation and Consent Order Extending Interim Agreement for Use of Cash Collateral, Authorizing Debtor to Use Cash Collateral, and Granting Adequate Protection (through July 17, 2012) (the "Eighth Interim Order"). On September 4, 2012, 2012 this Court entered a Stipulation and Consent Order Extending Interim Agreement for Use of Cash Collateral, Authorizing Debtor to Use Cash Collateral, and Granting Adequate Protection (through October 17, 2012) (the "Ninth Interim Order").
The Debtor has a continuing need to use Cash Collateral to fund the operation of its business. To allow for the continued use of Cash Collateral, the Debtor and the S4H1 desire to enter into this Stipulation and Consent Order Extending Interim Agreement for Use of Cash Collateral, Authorizing Debtor to Use Cash Collateral, and Granting Adequate Protection (Through November 17, 2012)(the "Extension Order"). Except as set forth below, all terms set forth in the Interim Order, the Second Interim Order, the Third Interim Order, the Fourth Interim Order, the Fifth Interim Order, the Sixth Interim Order, the Seventh Interim Order, the Eighth Interim Order, and the Ninth Interim Order are hereby incorporated by reference into the Extension Order and shall remain in full force and effect through and including November 17, 2012. Except as expressly provided herein, no terms of the Interim Order are amended, altered or otherwise nullified.
The Debtor and the S4H hereby STIPULATE and AGREE as follows:
A. The Debtor filed its petition for relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") on August 4, 2011 (the "Petition Date"). Pursuant to sections 1107 and 1108 of the Bankruptcy Code, the Debtor remains in possession of its assets and has continued the operation and management of its business as a Debtor-in-Possession.
B. This Court has jurisdiction over the Motion pursuant to 28 U.S.C. § 1334. This is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A), (G), (M), and (O), involving matters concerning the use of cash collateral under section 363 of the Bankruptcy Code. Venue is proper in this district pursuant to 28 U.S.C. § 408.
C. The Debtor owns and operates a La Quinta franchised hotel, containing 70 suites and amenities, located at 304 Belle Hill Road, Elkton, Maryland 21921 (the "Property").
D. The Debtor represents that it requires the use of Cash Collateral and that the need for use of Cash Collateral is immediate and urgent. The Debtor further represents that the Budget (the "Budget"), attached as Exhibit 1, fairly and accurately states the Debtor's cash requirements for the period from October 17 through November 17, 2012 ("Specified Period"), and that without the use of the Cash Collateral during the Specified Period for the uses and purposes specified, serious and irreparable harm to the Debtor and its estate will likely occur.
E. The Debtor further represents that the relief requested in the Motion is necessary, essential, and appropriate for the continued operation of the Debtor's business and to preserve the value of its assets.
F. The Senior Creditor, S4H Hospitality, LLC and the Debtor have negotiated at arms' length and in good faith regarding the Debtor's use of Cash Collateral to fund the continued operation of the Debtor's businesses. The Senior Creditor has agreed to permit the Debtor to use its Cash Collateral for the Specified Period subject to the following terms and conditions set forth herein, and in doing so have acted in good faith:
1. The Debtor shall escrow the sum of $7,000.00 per month in August, September, and October to be applied to the PIP expenditure required by its franchisor.
A failure to satisfy the condition set forth above shall constitute an Event of Default as set forth in paragraph 12 of the Interim Order.
G. Good and sufficient cause has been shown that the entry of the Extension Order is in the best interests of the Debtor and its estate. Among other things, the entry of this Extension Order will minimize the disruption to the Debtor's business operations and will preserve the value of the Debtor's estate.
H. The terms and conditions governing the Debtor's use of Cash Collateral are fair and reasonable under the circumstances and reflect the Debtor's exercise of prudent business judgment consistent with their fiduciary duties.
I. Notice of the hearing on the Motion and the relief requested in the Motion has been given to all persons known to claim an interest in the Property, and the Cash Collateral affected by the Motion, including (i) the Office of the United States Trustee, (ii) the creditors holding the 20 largest unsecured claims against the Debtor, (iii) the Senior Lender, (iv) the Junior Creditor, and (v) the office of the Cecil County Treasurer.
J. The Debtor and S4H have further agreed that to the extent that the Debtor's cash flow during the Specified Period permits, notwithstanding the amount allocable for Property Tax set forth in the Budget, the Debtor is entitled to make additional payments to the Cecil County Treasurer on the accrued real property tax claim, without further order of this Court.
K. Debtor has further stipulated and agreed that cash shortfalls which are indicated by the budget, Exhibit 1, and which are made up by funds received from members of Debtor shall be conclusively treated as contributions of capital and not as loans.
Upon the foregoing and under the circumstances, the Court FINDS that: (a) adequate and sufficient notice of the Motion and an opportunity for a hearing have been given in accordance with the provisions of sections 102, 105, 361 and 363 of the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure, (b) the S4H and the Debtor have agreed to the terms of the Extension Order pursuant to Fed. R. Bankr. P. 4001(d) as a resolution of the issues raised by the Motion, and (c) no further notice relating to this proceeding is necessary or required.
Further, on the basis of and consistent with the foregoing, and good cause appearing to the Court:
IT IS HEREBY ORDERED that:
1. Authorization to Use Cash Collateral.
The Debtor is authorized to use Cash Collateral during the Specified Period, in the amounts, at the times, and for the purposes set forth in the Budget, subject to a five percent (5%) overall variance in the cumulative expenditures set forth in the Budget for the Specified Period. The Debtor shall use Cash Collateral only during the Specified Period and only in strict accordance with the category limits set forth in the Budget for the Specified Period plus the Property Tax Payment described above. The aggregate amount of Cash Collateral used during the Specified Period, aside from any supplemental Property Tax Payments, shall not exceed $93,400.58 subject to the five percent (5%) variance. The Debtor is prohibited from making any expenditures or disbursements except as specifically itemized in the Budget or as hereafter expressly authorized by the Senior Creditor, or as hereafter expressly authorized by an Order of this Court entered after notice to the Secured Creditors and an opportunity for a hearing.
2. Adequate Protection Payments to Senior Creditor.
As further adequate protection for the Senior Creditor during the Specified Period: (i) the Debtor shall pay to the Senior Creditor payments in the amount the amount of $15,000.00 on or before October 21, 2012 and on or before November 21, 2012. In addition, any cash shortfalls which are indicated by the budget, Exhibit 1, and which are made up by funds received from members of Debtor shall be conclusively treated as contributions of capital and not as loans
3. Notice Of Entry of Extension Order.
Within two business days of the entry of this Extension Order, the Debtor shall serve notice of entry of this Extension Order and notice of a final hearing, together with a copy of this Extension Order, on: (a) the parties having been given notice of the hearing on the Interim Order; (b) to counsel for the Secured Creditors; (c) to the twenty (20) largest unsecured trade creditors of the Debtor, (d) the Office of the United States Trustee, and (e) any other person which has filed a request for notice with the Court. The notice shall state that any party-in-interest objecting to the entry of a final order on the Motion shall file a written objection with the Clerk of the United States Bankruptcy Court for the District of Maryland (Baltimore Division) within the deadline set by this Court and contemporaneously serve the objection on counsel to the Debtor, counsel to the Secured Creditors and the Office United States Trustee.
4. Further Extensions of Extension Order.
Extensions of this Extension Order shall be permitted without a hearing subject to notice and no objection being raised.
