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Full title: Objection to (related document(s): 133 Motion to sell property free and clear of liens under Section 363(f) Fee amount $181, filed by Debtor Studio Movie Grill Holdings, LLC) filed by Cypress-Fairbanks ISD, Dallas County, Harris County et al., Lewisville ISD, Smith County, Tarrant County. (Spindler, Laurie)

Document posted on Jan 12, 2021 in the bankruptcy, 5 pages and 0 tables.

Bankrupt11 Summary (Automatically Generated)

Come now Dallas County, Harris County, Smith County, Tarrant County, Cypress-Fairbanks ISD and Lewisville ISD (collectively, the “Tax Authorities”), creditors and parties-in-interest, and file this, their Limited Objection to the Debtors’ Motion for (I) Entry of an Order Approving (A) Bid Procedures; (B) the Form and Manner of Notice; (C) the Procedures for Determining Cure Amounts for Executory Contracts and Unexpired Leases; and (II) Entry of an Order Approving (A) the Sale of Substantially All of the Debtors’ Assets Free and Clear of All Liens, Claims, Encumbrances and Interests; and (B) the Assumption and Assignment of Certain Contracts and Unexpired Leases (the “Motion”) and in support thereof would show the Court as follows: 1. Consequently, the Tax Authorities hereby notify the Debtors and all interested parties that they do not consent to the use of their cash collateral to pay any other party or creditor prior to full payment of the Tax Authorities’ senior, first priority, secured statutory perfected tax debt.The Tax Authorities request that any order approving the sale provides that: (i) the Tax Authorities’ liens attach to the gross sale proceeds with the same validity, priority and extent that they attached to the assets sold; (ii) in the event of the sale of the assets that secure the Tax Authorities’ claims, the Debtors shall pay year 2019 and 2020 ad valorem property taxes owed to the Tax Authorities with postpetition interest at the state statutory rate of 1% per month pursuant to 11 U.S.C. Sections 506(b) and 511 at the sale closing; (iii) the Debtors shall segregate funds in an amount sufficient to pay all ad valorem property taxes owed to the Tax Authorities for tax year 2021 as adequate protection of the liens that secure the taxes; and (iv) in the event of a credit bid, the Tax Authorities shall receive payment in full satisfaction of all liens against the property that secures their claims and that is subject to the credit bid at the sale closing. WHEREFORE, premises considered, the Tax Authorities respectfully request that the Court enter an order that provides that: (i) the Tax Authorities’ liens attach to the gross sale proceeds with the same validity, priority and extent that they attached to the assets sold; (ii) in the event of a sale of the assets that secure the Tax Authorities’ claims, the Debtors shall pay year 2019 and 2020 ad valorem property taxes owed to the Tax Authorities with postpetition interest at the state statutory rate of 1% per month pursuant to 11 U.S.C. Sections 506(b) and 511 at the sale closing; (iii) that the Debtors shall segregate funds in an amount sufficient to pay all ad valorem property taxes owed to the Tax Authorities for tax year 2021 as adequate protection of the liens that secure the taxes; (iv) in the event of a credit bid, the Tax Authorities shall receive payment in full satisfaction of all liens against the property that secures their claims and Objection to

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Laurie A. Spindler Linebarger Goggan Blair & Sampson, LLP 2777 N. Stemmons Fwy, Suite 1000 Dallas, Texas 75207 (214) 880-0089 Telephone (469) 221-5003 Facsimile Attorneys for Dallas County, Harris County, Smith County, Tarrant County, Cypress- Fairbanks ISD and Lewisville ISD IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION In re: § Chapter 11 § STUDIO MOVI E GRILL HOLDINGS, § Case No. 20-32633 LLC, et al., § § (Jointly Administered) Debtors. § TAX AUTHORITIES’ LIMITED OBJECTION TO DEBTORS’ MOTION FOR (I) ENTRY OF AN ORDER APPROVING (A) BID PROCEDURES; (B) THE FORM AND MANNER OF NOTICE; (C) THE PROCEDURES FOR DETERMINING CURE AMOUNTS FOR EXECUTORY CONTRACTS AND UNEXPIRED LEASES; AND (II) ENTRY OF AN ORDER APPROVING (A) THE SALE OF SUBSTANTIALLY ALL OF THE DEBTORS’ ASSETS FREE AND CLEAR OF ALL LIENS, CLAIMS, ENCUMBRANCES AND INTERESTS; AND (B) THE ASSUMPTION AND ASSIGNMENT OF CERTAIN CONTRACTS AND UNEXPIRED LEASES TO THE HONORABLE UNITED STATES BANKRUPTCY JUDGE: Come now Dallas County, Harris County, Smith County, Tarrant County, Cypress-Fairbanks ISD and Lewisville ISD (collectively, the “Tax Authorities”), creditors and parties-in-interest, and file this, their Limited Objection to the Debtors’ Motion for (I) Entry of an Order Approving (A) Bid Procedures; (B) the Form and Manner of Notice; (C) the Procedures for Determining Cure Amounts for Executory Contracts and Unexpired Leases; and (II) Entry of an Order Approving (A) the Sale of Substantially All of the Debtors’ Assets Free and Clear of All Liens, Claims, Encumbrances and Interests; and (B) the Assumption and Assignment of Certain

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Contracts and Unexpired Leases (the “Motion”) and in support thereof would show the Court as follows: 1. The Tax Authorities are the holders of prepetition claims against the Debtors for year 2019 and 2020 ad valorem real and business personal property taxes in the aggregate amount of $250,297.60. This amount does not include postpetition interest at the state statutory rate of 1% per month to which the Tax Authorities are entitled pursuant to 11 U.S.C. Sections 506(b) and 511. 2. As of January 1, 2021, the Tax Authorities are also the holders of administrative expense claims for year 2021 ad valorem property taxes. 3. The Tax Authorities hold unavoidable, perfected, pre-eminent liens against all of the Debtors’ owned or claimed property to secure their claims for prepetition and postpetition ad valorem property taxes pursuant to Texas Property Tax Code Sections 32.01 and 32.05 and 11 U.S.C. Section 362(b)(18).1 Pursuant to Sections 32.01 and 32.05 of the Texas Tax Code, the Tax Authorities’ liens, which attach on January 1 of the relevant tax year, are superior to all other liens or interests, regardless of the date any other liens or interests were perfected. In re Winn’s Stores, Inc., 177 B.R. 253 (Bankr. W.D. Tex. 1995); Central Appraisal District of Taylor County v. Dixie-Rose Jewels, Inc., 894 S.W.2d 841 (Tex. App.-Eastland 1995). Furthermore, the Tax Authorities’ liens are in solido liens that float and attach to all after-acquired property of the Debtors. In re Universal Seismic Associates, Inc., 288 F.3d 205 (5th Cir. 2002); City of Dallas v. Cornerstone Bank, N.A., 879 S.W.2d 264 (Tex. App.-Dallas 1994). 1 11 U.SC. Section 362(b)(18) allows for the creation or perfection of a statutory lien to secure post petition ad valorem property taxes. Objection to Sale Motion Page 2

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4. The Tax Authorities do not object to the sale of the Debtors’ assets. However, the Tax Authorities object to the payment of any proceeds from the sale of their collateral to any other parties or creditors prior to full payment of the Tax Authorities’ prepetition and administrative expense claims. 5. The Tax Authorities also object because their senior liens against the assets are not adequately protected. When the estate assets that secure the Tax Authorities’ claims are sold, the Tax Authorities’ liens transfer to the related sale proceeds and those proceeds become the Tax Authorities’ cash collateral. So long as the Tax Authorities remain unpaid, the Debtors may not distribute any cash proceeds from the Tax Authorities’ collateral to any other party or creditor because there is no way to adequately protect the Tax Authorities from the loss of their cash collateral absent a segregation of funds. There is no such provision mentioned in the Motion. In fact, the Motion requests authority to distribute a Partial Paydown2 to the Agent as of the closing date. (Motion ¶40 at 20.) Consequently, the Tax Authorities hereby notify the Debtors and all interested parties that they do not consent to the use of their cash collateral to pay any other party or creditor prior to full payment of the Tax Authorities’ senior, first priority, secured statutory perfected tax debt. 6. The Tax Authorities object to the Motion to the extent that the DIP Agent and the Pre-Petition Agent have the right to credit bid any portion up to the entire amount of their claims on any Assets constituting their collateral, absent a provision in the sale order that either provides that the DIP Agent and/or the Pre-Petition Agent take the property subject the Tax Authorities’ 2 All capitalized terms that are not defined herein have the same meaning as that ascribed to them in the Motion. Objection to Sale Motion Page 3

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liens or provides that the DIP Agent and/or Pre-Petition Agent must immediately satisfy the liens of the Tax Authorities’ whose collateral is affected by the credit bid. 7. The Tax Authorities request that any order approving the sale provides that: (i) the Tax Authorities’ liens attach to the gross sale proceeds with the same validity, priority and extent that they attached to the assets sold; (ii) in the event of the sale of the assets that secure the Tax Authorities’ claims, the Debtors shall pay year 2019 and 2020 ad valorem property taxes owed to the Tax Authorities with postpetition interest at the state statutory rate of 1% per month pursuant to 11 U.S.C. Sections 506(b) and 511 at the sale closing; (iii) the Debtors shall segregate funds in an amount sufficient to pay all ad valorem property taxes owed to the Tax Authorities for tax year 2021 as adequate protection of the liens that secure the taxes; and (iv) in the event of a credit bid, the Tax Authorities shall receive payment in full satisfaction of all liens against the property that secures their claims and that is subject to the credit bid at the sale closing. WHEREFORE, premises considered, the Tax Authorities respectfully request that the Court enter an order that provides that: (i) the Tax Authorities’ liens attach to the gross sale proceeds with the same validity, priority and extent that they attached to the assets sold; (ii) in the event of a sale of the assets that secure the Tax Authorities’ claims, the Debtors shall pay year 2019 and 2020 ad valorem property taxes owed to the Tax Authorities with postpetition interest at the state statutory rate of 1% per month pursuant to 11 U.S.C. Sections 506(b) and 511 at the sale closing; (iii) that the Debtors shall segregate funds in an amount sufficient to pay all ad valorem property taxes owed to the Tax Authorities for tax year 2021 as adequate protection of the liens that secure the taxes; (iv) in the event of a credit bid, the Tax Authorities shall receive payment in full satisfaction of all liens against the property that secures their claims and Objection to Sale Motion Page 4

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that is subject to the credit bid at the sale closing and (v) the Tax Authorities shall receive such other and further relief to which they may be justly entitled. Dated: January 13, 2021. Respectfully submitted, Linebarger Goggan Blair & Sampson, LLP 2777 N. Stemmons Fwy, Suite 1000 Dallas, TX 75201 Ph. No. (214) 880-0089 Direct (469) 221-5125 Fax No. (469) 221-5003 laurie.spindler@lgbs.com By: /s/Laurie A. Spindler ___________ Laurie A. Spindler SBN 24028720 ATTORNEYS FOR DALLAS COUNTY, HARRIS COUNTY, SMITH COUNTY, TARRANT COUNTY, CYPRESS- FAIRBANKS ISD AND LEWISVILLE ISD. CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the foregoing was served electronically through the Court’s electronic case filing system or via electronic mail upon Frank J. Wright, email: frank@fjwright.law; Jeffery M. Veteto, email: jeff@fjwright.law; William L. Wallander, email: bwallander@velaw.com; Bradley R. Foxman, email: bfoxman@velaw.com; John E. Mazey, email: jemazey@jonesday.com; Michael C. Schneidereit, email: mschneidereit@jonesday.com; Nicholas J. Morin, email: nmorin@jonesday.com; Jeffrey Pomerantz, email: jpomerantz@pszjlaw.com; Robert Feinstein, email: rfeinstein@pszjlaw.com; Steven Golden, email: sgolden@pszjlaw.com; Ryan Manns, email: ryan.manns@nortonrosefulbright.com and Lisa Lambert, email: lisa.l.lambert@usdoj.gov on this 13th day of January 2021. /s/ Laurie A. Spindler ____________ Laurie A. Spindler Objection to Sale Motion Page 5