et al. - Omni Agent Solutions

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

In re Knotel, Inc., et al.,

Debtors.1

Chapter 11 Case No. 21-10146 (MFW) Jointly Administered Re: D.I. 12, 13, 14, 73, 74, 75, 196, 198, 200, 202, 203, 219, 221, 222, 223, & 225

MOTION FOR LEAVE TO FILE DEBTORS’ REPLY IN SUPPORT OF OMNIBUS REJECTION MOTIONS

The above-captioned debtors and debtors in possession (the “Debtors”) respectfully

move for leave (the “Motion for Leave”) as follows:

RELIEF REQUESTED

1. By this Motion for Leave, the Debtors move this Court for leave to file the

omnibus reply (the “Reply”), attached hereto as Exhibit A, in support of the Debtors’ first, second,

and third omnibus rejection motions (D.I. 12, 13, and 14, respectively) (the “Rejection Motions”)2

and in response to informal comments received from and objections filed by certain counterparties

to the leases and contracts subject to the Rejection Motions.

1 A complete list of each of the Debtors in these chapter 11 cases may be obtained on the website of the Debtors’ claims and noticing agent at https://www.omniagentsolutions.com/knotel or, alternatively, via the Bankruptcy Court at https://ecf.deb.uscourts.gov/cgi-bin/login.pl with a Public Access to Court Electronic Records (“PACER”) account, which may be obtained at https://pacer.uscourts.gov. The location of Debtor Knotel, Inc.’s principal place of business and the Debtors’ service address in these chapter 11 cases is 5-9 Union Square West, New York, NY 10003.

2 Capitalized terms not defined herein are defined in the Rejection Motions.

Case 21-10146-MFW Doc 285 Filed 02/25/21 of 5

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JURISDICTION

2. The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157

and 1334. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2). Venue

is proper pursuant to 28 U.S.C. §§ 1408 and 1409.

3. Pursuant to rule 9013-1(f) of the Local Rules of Bankruptcy Practice and

Procedure of the United States Bankruptcy Court of the District of Delaware (the “Local Rules”),

the Debtors consent to the entry of a final order by the Court in connection with this Motion to the

extent it is later determined that the Court, absent consent of the parties, cannot enter final orders

or judgments in connection herewith consistent with Article III of the United States Constitution.

BACKGROUND

4. On January 31, 2021 (the “Petition Date”), the Debtors filed voluntary

petitions for relief under chapter 11 of the Bankruptcy Code, thereby commencing these chapter

11 cases.

5. On the Petition Date, the Debtors filed the Rejection Motions.

6. On February 8, 2021, the United States Trustee appointed an official

committee of unsecured creditors (D.I. 122) (the “Committee”).

7. The Debtors extended the objection deadline for the Rejection Motions for

the Committee and several landlords and contract counterparties to February 22, 2021 at 4:00 p.m.

(ET). The Debtors extended the U.S. Trustee’s deadline to object to the Rejection Motions to

February 24, 2021 at 10:00 a.m. (ET).

8. The hearing for the Court to consider the relief requested in the Rejection

Motions is scheduled for February 26, 2021 at 10:30 a.m. (ET) (the “Hearing”). As noted in the


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agenda for the Hearing, the Debtors received many informal comments to the Rejection Motions

and several parties filed formal objections to the Rejection Motions (the “Objections”).

BASIS FOR RELIEF REQUESTED

9. Local Rule 9006-1(d) states, “Reply papers . . . may be filed and, if filed,

shall be served so as to be received by 4:00 p.m. prevailing Eastern Time the day prior to the

deadline for filing the agenda.” Local Rule 9029-3(a) requires that agendas be filed by 12:00 p.m.

(ET) two business days prior to the hearing.

10. Pursuant to Local Rule 9029-3(a), the agenda for the Hearing was due on

February 24, 2021, at 12:00 p.m. (ET), which deadline was extended by the Court until 1:30 p.m.

(ET). As such, pursuant to Local Rule 9006-1(d), the Debtors had until February 23, 2021, at 4:00

p.m. (ET), to file any reply in support of the Rejection Motions.

11. The reply deadline was 24 hours after the extended objection deadline for

the Committee and various lease and contract counterparties. The filed Objections and informal

comments received raised a number of complex legal issues that took time to respond to and

attempt to resolve. The Debtors have been able to resolve many of the issues raised, but some

remain outstanding.

12. The Debtors respectfully submit that cause exists to grant the relief

requested by this Motion for Leave. As noted above, the Hearing is scheduled for February 26,

2021. Although the Debtors could simply present the information set forth in the Reply at the

Hearing, the Debtors submit that being able to review the Reply prior to the Hearing will aid the

Court in its consideration of the issues with regard to the Rejection Motions, and will allow the

Hearing to proceed more efficiently. The Reply will provide the Court with important factual

information, precedent, and legal authority in support of the Rejection Motions that will address


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the legal arguments set forth in the Objections. Further, given the extended objection deadlines the

Debtors offered out of both professional courtesy and a desire to resolve or at least narrow issues

consensually, and the number and nature of the issues ultimately raised in the objections, it was

impracticable for the Debtors to file the Reply sooner.

13. Additionally, no party will be prejudiced by the filing of the Reply, as the

filing of the Reply with this Motion for Leave provides the parties with time to review the Debtors’

arguments addressing the Objections prior to the Hearing and the Debtors noted their intent to file

the Reply on the agenda filed for the Hearing.

NOTICE

14. A copy of this Motion for Leave has been served upon the (a) parties who

were served the Rejection Motions and (b) the parties that filed the Objections.

CONCLUSION

WHEREFORE, the Debtors respectfully request entry of an order, substantially in

the form attached hereto as Exhibit B, granting the Debtors leave to file the Reply, and such other

and further relief as the Court deems just and proper.

(Remainder of Page Intentionally Left Blank)


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Dated: February 25, 2021 Wilmington, Delaware

MORRIS, NICHOLS, ARSHT & TUNNELL LLP /s/ Eric W. Moats Robert J. Dehney (No. 3578) Matthew B. Harvey (No. 5186) Matthew O. Talmo (No. 6333) Eric W. Moats (No. 6441) 1201 N. Market Street, 16th Floor P.O. Box 1347 Wilmington, Delaware 19899-1347 Telephone: (302) 658-9200 Facsimile: (302) 658-3989 Email: [email protected] [email protected] [email protected] [email protected] - and - Mark Shinderman (admitted pro hac vice) Daniel B. Denny (admitted pro hac vice) MILBANK LLP 2029 Century Park East, 33rd Floor Los Angeles, CA 90067 Telephone: (424) 386-4000 Facsimile: (213) 629-5063 Email: [email protected] [email protected] Counsel to the Debtors and Debtors in Possession


Exhibit A

Reply

Case 21-10146-MFW Doc 285-1 Filed 02/25/21 Page 1 of 53



Debtors.1

Chapter 11 Case No. 21-10146 (MFW) Jointly Administered Re: D.I. 12, 13, 14, 73, 74, 75, 196, 198, 200, 202, 203, 219, 221, 222, 223, & 225

DEBTORS’ REPLY IN SUPPORT OF OMNIBUS REJECTION MOTIONS

Knotel, Inc., and its affiliated debtors and debtors in possession (the “Debtors”)

submit this reply (the “Reply”) in further support of the Debtors’ first, second, and third omnibus

rejection motions (D.I. 12, 13, and 14, respectively) (the “Rejection Motions”)2 and in response to

informal comments received from and objections filed by certain counterparties to the leases and

contracts subject to the Rejection Motions, and respectfully state as follows:

PRELIMINARY STATEMENT

1. Section 365’s rejection power is intended to relieve a debtor of burdensome

contracts or leases. Courts review a debtor’s decision to reject under the business judgment

standard. No party has argued that the Debtors have failed to exercise sound business judgment

in rejecting the contracts and leases subject to the Rejection Motions.

1 A complete list of each of the Debtors in these chapter 11 cases may be obtained on the website of the

Debtors’ claims and noticing agent at https://www.omniagentsolutions.com/knotel or, alternatively, via the Bankruptcy Court at https://ecf.deb.uscourts.gov/cgi-bin/login.pl with a Public Access to Court Electronic Records (“PACER”) account, which may be obtained at https://pacer.uscourts.gov. The location of Debtor Knotel, Inc.’s principal place of business and the Debtors’ service address in these chapter 11 cases is 5-9 Union Square West, New York, NY 10003.

2 Capitalized terms not defined herein are defined in the Rejection Motions.


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2. Instead, most of the objections focus on the Debtors’ abandonment of

personal property located at the premises and ask the Court to require the Debtors to store, remove,

or dispose of such property. The objectors cite no authority for this extraordinary relief. Nor could

they because this Court has long held that the Bankruptcy Code does not require the Debtors to

remove or dispose of property left behind at a rejected location—no matter how burdensome on

the landlord removal may be. Likewise, this Court has long rejected claims of administrative

expense priority for the cost of such removal. The Court should decline the landlords’ unsupported

attempts to rewrite settled law.

3. Many of the landlords also urge the Court to declare that all personal

property that may remain at the premises—including property of third parties—is abandoned free

and clear of all interests, including those of third parties. Similarly, the landlords ask the Court to

exculpate them from any liability to third parties. But the landlords cite no legal authority for this

relief, apart from bare court orders.

4. Other landlords argue that the Debtors should not be afforded nunc pro tunc

relief. But while these parties recognize that nunc pro tunc relief requires a balancing of the

equities, they do not identify what hardship they will suffer if nunc pro tunc relief is granted.

Moreover, the Debtors communicated to each of these landlords prior to the Petition Date their

unequivocal intent to reject the applicable leases and encouraged the landlords to begin

immediately their efforts to re-let the premises.

5. Two landlords argue that the Debtors should not be afforded nunc pro tunc

relief because the Debtors’ “subtenants” allegedly continue to occupy the premises. This is not

the case. The Debtors’ customers are not parties to subleases; they are parties to services

agreements. The agreements generally do not confer a right of occupancy to specific premises and


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under certain circumstances allow the Debtors to relocate the customer to different premises. And,

contrary to the landlords’ statements in their objections, the Debtors notified the relevant

customers prepetition of the Debtors’ intent to surrender the premises to the landlord as of January

29, 2021, and immediately upon filing these cases moved to reject those customer contracts

effective the same date as rejection of the leases. Moreover, even if the Debtors’ customers were

subtenants with a right of possession (they are not), any right of possession ceases automatically

upon rejection of the prime lease. Accordingly, the Court should reject the landlords’ arguments

that nunc pro tunc relief is inappropriate based on allegations that alleged “subtenants” continue

to enjoy a right of possession notwithstanding rejection of the prime lease.

6. Finally, one of the Debtors’ customers has opposed rejection of its contract

unless and until the Debtors return what the customer describes as a “security deposit” pursuant to

a “lease.” In effect, the customer seeks a declaratory judgment on the parties’ relative rights in

property. This relief is procedurally improper and irrelevant in a summary rejection proceeding,

and any such determination must be sought by adversary proceeding.

REPLY

I. The Debtors’ abandonment of personal property at rejected premises is consistent with applicable law.

A. The Debtors are not responsible for removing or disposing of property left at the premises and a landlord’s cost of doing so is a prepetition claim.

7. The Debtors’ abandonment of personal property is consistent with

applicable law. In In re Unidigital, Inc., 262 B.R. 283 (Bankr. D. Del. 2001) (MFW), this Court

held that the responsibility and cost of removing abandoned personal property was the

responsibility of the landlord, not the debtor. In Unidigital, the landlord sought to require the

debtor to remove or pay for the removal of a 25-foot long, 30,000 pound industrial printer that had

to be disassembled with the help of licensed plumbers and electricians and removed piecemeal by


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crane through the building’s windows. Id. at 285. Additionally, removal of the printer required

disposal of chemicals and there was evidence of possible chemical seepage at the site. Id.

8. This Court rejected the landlord’s objection to abandonment and its claim

of administrative expense priority for the cost of removing and disposing of the printer and related

chemicals. Id. at 290. In doing so, the Court found that all claims associated with rejection of a

lease—including claims related to removal or disposal of property left behind at the premises—

are deemed prepetition claims. Id. at 288 (“[A]ll claims associated with the rejection of the lease

are deemed prepetition claims.”). As in Unidigital, this Court should reject landlords’ attempts to

compel the Debtors to bear the burden or cost of removing personal property that remains at the

rejected locations.

B. The landlords have not identified a basis for “free and clear” abandonment.

9. Several landlords request that the Court order the abandonment of property

remaining at the premises free and clear of liens, claims, encumbrances and other interests of both

the Debtors and third parties. The landlords cite no legal authority for this relief apart from bare

court orders.

10. Section 554 of the Bankruptcy Code permits a debtor to “abandon any

property of the estate that is burdensome to the estate or that is of inconsequential value and benefit

to the estate,” 11 U.S.C. § 554(a), but does not give a debtor authority to abandon the property free

and clear of all liens, claims, encumbrances and interests. Abandonment under section 554 of the

Bankruptcy Code is “to any person with a possessory interest in the property, including the debtor.”

In re Quanta Res. Corp., 739 F. 2d 912, 914 n.5 (3d Cir. 1984). “Abandonment was not intended

as a process to determine and resolve conflicts regarding who has title to the abandoned property.”

In re Pilz Compact Disc, Inc., 229 B.R. 603, 639 (Bankr. E.D. Pa. 1999) (quoting 3 Norton Bankr.

L. & Practice 2d § 53.1, at 53-2 to 53-4 (1997)). “The determination of competing claims to the


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abandoned property must be made either by the state courts after abandonment, or by adversary

proceeding procedure under Bankruptcy Rule 7001.” Id. Accordingly, when the debtor “has

control of the property, not title to the property . . . [section] 554 simply divests the [debtor] of that

control.” Id.

11. Through the Rejection Motions the Debtors are seeking to abandon personal

property that they owned or that was in their control as of the Petition Date. Though they are not

required to do so, for the benefit of landlords, the Debtors have obtained their secured lender’s

consent that such abandonment is free and clear of the lender’s liens, claims, or interests.

12. The objecting landlords seek a declaration from this Court that the Debtors

also are abandoning any property at the premises, including property of third parties, free and clear

of all competing interests, including interests of third parties. Nothing in sections 365 or 554 or

applicable case law requires the Debtors to do so. Moreover, the Debtors are not aware of—and

the landlords have not cited—any authority that supports the Court’s ability to grant the relief they

request.

C. The landlords have not identified a legal basis for exculpation.

13. The landlords request that the Court exculpate them from liability to third

parties related to the manner in which they remove and dispose of personal property. Exculpation

in chapter 11 cases generally is reserved for estate fiduciaries, and the landlords have not identified

any authority to expand exculpation to their circumstances.

D. The Debtors have expanded the proposed orders’ abandonment language in an effort to accommodate formal and informal landlord objections.

14. As discussed above, the Debtors believe their abandonment of personal

property complies with the Bankruptcy Code and relevant case law. Nevertheless, in an effort to

address formal and informal objections from landlords, the Debtors have revised the abandonment


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language of the proposed orders as follows to, among other things, (i) make clear that the Debtors’

abandonment is free and clear of the Debtors’ and their lender’s interests and (ii) preserve

landlords’ ability to assert claims related to abandonment of personal property:

The Debtors are authorized to and do hereby abandon all of their and their estates’ right, title, and interest in and to any Personal Property remaining on the premises formerly leased under the Specified Leases. Such abandoned Personal Property is free and clear of all liens, claims, encumbrances, and interests of the Debtors, their estates, and Digiatech, LLC (the Debtors’ pre- and postpetition secured lender). The rights of each counterparty to a Specified Lease to assert claims related to the disposition of the Personal Property are reserved as are the Debtors’ and all parties’ rights in connection with such claims, including without limitation, their rights to object to such claims.

The Debtors believe this language sufficiently addresses the requirements of sections 365 and 554

of the Bankruptcy Code and applicable case law. Indeed, a number of landlords who lodged

informal objections with the Debtors have accepted this language to address their concerns.

II. Nunc pro tunc rejection is warranted.

A. Acevedo does not limit nunc pro tunc rejection under section 365.

15. The Court should authorize rejection nunc pro tunc to the Petition Date. As

an initial matter, the Supreme Court’s recent ruling in Roman Catholic Archdiocese of San Juan,

Puerto Rico v. Acevedo Feliciano, 140 S.Ct. 696 (U.S. 2020) (“Acevedo”) does not prohibit nunc

pro tunc rejection orders. The issue in Acevedo was jurisdictional: whether a nunc pro tunc order

could create jurisdiction retroactive to a date when no jurisdiction existed. In Acevedo, a state

court action was removed to federal court, thus depriving the state court of jurisdiction under the

removal statute. See id. at 700 (stating that, after removal, the “state court loses all jurisdiction

over the case, and, being without jurisdiction, its subsequent proceedings and judgment are not

simply erroneous, but absolutely void.” (internal quotation and citation omitted)).

Notwithstanding that it lacked jurisdiction, the state court purported to issue orders after the


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removal was effectuated, and the orders were therefore void. See id. The case ultimately was

remanded, with the district court order stating that remand was effective “nunc pro tunc” to a date

prior to entry of the void state court orders. See id. The Supreme Court rejected this attempt to

create retroactive jurisdiction where none existed and affirmed that the orders were void because

the state court lacked jurisdiction. See id. at 701.

16. Though Acevedo is only one year old, bankruptcy courts have already

rejected its application to routine nunc pro tunc orders in other contexts such as relief from the

automatic stay. For example, in In re Merriman, 616 B.R. 381, 391 (B.A.P. 9th Cir. 2020), the

Ninth Circuit Bankruptcy Appellate Panel ruled that Acevedo did not prevent a bankruptcy court

from retroactively annulling the automatic stay. The Panel contrasted such relief with the nunc

pro tunc relief in Acevedo where the language of the removal statue explicitly forbade the result

the nunc pro tunc order purported to grant (conferring jurisdiction on the state court while the

action was pending in federal court). Id. at 393. “In contrast, § 362(d) does not purport to deprive

the bankruptcy court of jurisdiction; rather, it explicitly grants the court the power to modify the

stay to permit another court or entity to exercise control over an asset or claim.” Id.

17. Like section 362(d), section 365 of the Bankruptcy Code does not purport

to deprive the Court of jurisdiction. Rather, it explicitly grants the Court the power to approve of

a trustee or debtor in possession’s decision to assume or reject a lease or contract: “the trustee,

subject to the court’s approval, may assume or reject any executory contract or unexpired lease of

the debtor.” 11 U.S.C. § 365(d). Unlike certain other provisions of the Bankruptcy Code, there is

no temporal element to the Court’s approval of the trustee or DIP’s decision to reject. For example,

compare section 365’s language with section 363(b), which provides that the “trustee, after notice

and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of


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the estate . . . .” 11 U.S.C. § 363(b). Section 365 contains no such temporal limitation on the

effectiveness of a trustee or DIP’s action relative to court approval, and the landlords fail to cite

any authority extending Acevedo to nunc pro tunc relief under section 365.3

B. Nunc pro tunc relief is appropriate under the circumstances.

18. Nunc pro tunc relief is appropriate and warranted under the circumstances

of these cases. Courts in this district and elsewhere recognize that nunc pro tunc relief is

appropriate where the balance of the equities favor such relief. See In re Chi-Chi’s, Inc., 305 B.R.

396, 399 (Bankr. D. Del. 2004) (acknowledging that a bankruptcy court may approve a rejection

retroactive to the date the motion is filed after balancing the equities in the particular case); In re

Fleming Cos., Inc., 304 B.R. 58, 96 (Bankr. D. Del. 2003) (stating that rejection has been allowed

nunc pro tunc to the date of the motion or the date the premises were surrendered); see also In re

At Home Corp., 392 F.3d 1064, 1071 (9th Cir. 2004) (recognizing that rejection nunc pro tunc to

the date a motion was filed may be appropriate in certain circumstances); In re Thinking Machs.

Corp., 67 F.3d 1021, 1028 (1st Cir. 1995) (finding that, in the context of rejections of executory

contracts, “bankruptcy courts may enter retroactive orders of approval, and should do so when the

balance of equities preponderates in favor of such remediation”).

19. The landlords acknowledge receiving prepetition letters stating that Knotel

had, effective January 29, 2021, “irrevocably ceased operation of its workspace services business

at” the landlord’s location, and giving formal notice of Knotel’s “termination of the Lease and

surrender of [the] location.” The letter also stated that Knotel was simultaneously notifying its

customers at the location, vacating the premises, and abandoning remaining property at the

3 To be clear, the Debtors are not arguing that nunc pro tunc relief is unavailable under section 363(b), an issue

not before the Court.


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location. Additionally, Knotel stated that the landlord “should immediately begin efforts to relet

the premises and mitigate whatever damages this termination may have caused, and Knotel has no

objection to you doing so immediately.” The Debtors also surrendered the keys to the locations.

Two days later, on January 31, 2021, the Debtors commenced these cases and at the same time

moved immediately to reject the leases effective of even date. Accordingly, the Debtors expressed

their unequivocal and irrevocable intent to terminate, reject, surrender, and abandon the premises

and personal property remaining therein, and also acted immediately upon filing these cases to

effectuate rejection. Under these circumstances, nunc pro tunc relief is warranted and appropriate.

C. Purported “subtenant” occupancy issues do not affect the availability of nunc pro tunc relief.

20. Certain landlords also object to nunc pro tunc relief on the basis that the

Debtors’ “subtenants” allegedly continue to enjoy rights to occupy or possess the premises. As an

initial matter, the Debtors do not have subleases and subtenants. The Debtors’ relationships with

their customers are governed by services agreements and member terms and generally do not create

an unequivocal right of occupancy or possession to particular premises.4 Indeed, under certain

circumstances, the Debtors have the ability to relocate customers to a different location without

their consent upon reasonable notice. See Section 13(e) of Knotel, Inc. Customer Terms.

21. Judge Sontchi’s recent ruling in In re Town Sports International, LLC, Case

No. 20-12168 (CSS) (Bankr. D. Del. Nov. 25, 2020), Hr’g Tr. 19:10-23:14, is instructive.5 In that

case, the debtors sought to reject the lease of a gym location nunc pro tunc to the day of the filing

of the motion. The landlord objected to rejection and nunc pro tunc relief on the basis that the

4 A copy of the Knotel, Inc. Customer Terms is attached hereto as Exhibit A, and are accessible at

https://www.knotel.com/customerterms/.

5 A copy of the relevant section of the Town Sports transcript is attached hereto as Exhibit B.


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debtors had not surrendered the premises because a tanning salon business that the debtors had

licensed a portion of the premises to remained on the premises. Judge Sontchi rejected the

landlord’s argument, finding that “[t]he tanning salon [had] no possession – possessive rights as a

result of the license. They simply are there, not a lease, not a sublease.” Id. As such, Judge

Sontchi overruled the objection finding that the debtors had done all that was needed to adequately

vacate and surrender the premises for purposes of section 365 rejection, notwithstanding continued

possession by the tanning salon. Id. Judge Sontchi went on to find that “the party who should

bear the post-rejection burden of clearing the premises is the landlord.” Id. As in Town Sports,

the Debtors’ customers are not parties to a lease or sublease, and any continued possession by a

customer does not impact the effectiveness of the debtors vacating and surrendering the premises.

Judge Sontchi’s ruling that the landlord is the party bearing the cost of clearing the premises also

is fully consistent with this Court’s ruling and reasoning in Unidigital, discussed supra, where the

Court held that the landlord bears the expense of clearing the premises.

22. Moreover, the Debtors notified the relevant customers prepetition that the

Debtors were ceasing all operations at the location and surrendering the premises to the applicable

landlords. The Debtors also simultaneously moved to reject the relevant customer agreements on

the Petition Date when they moved to reject the leases.

23. But even assuming that the Debtors’ customers were subtenants (they are

not), subtenants have no continued right of use or occupancy or possession following rejection of

the prime lease. “A proper reading of section 365(h)(1)(A)(ii)’s reference to the subtenant’s ‘rights

under such [sub]lease’ and section 365(d)(4)’s surrender requirements show that section 365(h)

does not give the subtenant a meaningful election to remain in its former subtenancy when the

debtor has rejected the overlease first or simultaneously with the sublease.” In re The Great


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Atlantic & Pacific Tea Company, Inc., 544 B.R. 43, 53 (Bankr. S.D.N.Y. 2016). When a debtor

then abandons and surrenders the premises, such actions are “tantamount to termination as far as

the subtenant’s rights as lessee ‘under the sublease.’” Id. (emphasis added). “While section

365(h) gives a sublessee the right to maintain its possessory interest in a subleasehold when the

debtor has rejected the sublease, there is no real property to which the subleasehold attaches.” In

re Statler & Co., 99 B.R. 327, 331 (E.D. La. 1989) (emphasis in original). Because a debtor who

is rejecting a prime lease can no longer confer any right in real property, the subtenant is left

without any right of use or possession. See id.

24. The landlords’ reliance on Judge Gross’s unreported decision in In re

Amicus Wind Down Corp., 2012 WL 604143 (Bankr. D. Del. Feb. 24, 2012) as contrary authority

is unavailing because that case involved unique facts not present here. In Amicus, the debtors

sought, and the court entered, a rejection procedures order that allowed rejection to be effectuated

without further motion and prescribed the specific manner of relinquishing control of the premises

in order for rejection to be effective. Id. at *1. There was no dispute that the Amicus debtors failed

to comply with procedures order’s requirements for relinquishing control, and therefore failed to

meet a court-ordered precondition to the effectiveness of rejection. See id. at *2.

25. Put simply, the Debtors have rejected, terminated, and surrendered their

right to possession which is the relevant test for nunc pro tunc relief. Any subtenant that continues

to occupy the premises without the consent of the property owner does so as a trespasser.

Moreover, as with removal of abandoned property, nothing in section 365 requires the Debtors to

evict a subtenant in order for rejection of a lease to be effective.


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III. Disputes concerning interests in property require an adversary proceeding and cannot be determined in a summary rejection proceeding.

26. Under section 365 of the Bankruptcy Code, a motion to assume or reject

“should be considered a summary proceeding, intended to efficiently review the trustee’s or

debtor’s decisions to adhere to or reject a particular contract in the course of the swift

administration of the bankruptcy estate.” In re Orion Pictures Corp., 4 F.3d 1095, 1098 (2d Cir.

1993); see In re S.A. Holding Co., LLC, 357 B.R. 51, 56 (Bankr D.N.J. 2006) (same). “The Court’s

role in the assumption/rejection process is one of an ‘overseer of the wisdom with which the

bankruptcy estate’s property is being managed by the trustee or debtor-in-possession.’” In re

Vencor, Inc., 2003 WL 21026737 (Bankr. D. Del. Apr. 30, 2003) (quoting Orion, 4 F.3d at 1099).

A summary rejection proceeding “is not the time or place for prolonged discovery or a lengthy

trial with disputed issues.” Orion, 4 F.3d at 1098–99.

27. Moreover, Bankruptcy Rule 7001 requires an adversary proceeding “to

determine the validity, priority, or extent of a lien or other interest in property” or “obtain a

declaratory judgment relating” thereto. Fed. R. Bankr. P. 7001(2) & (9). Bankruptcy Rule 7001

is mandatory and establishes a right to specific due process guaranteed under the Fifth Amendment

to the United States Constitution. See, e.g., SLW Capital, LLC v. Mansaray-Ruffin (In re

Mansaray-Ruffin), 530 F.3d 230, 237 (3d Cir. 2008) (holding that a party’s due process rights were

violated where a party deemed a property interest invalid through a plan because a confirmation

hearing does not provide the same due process protections as an adversary proceeding); In re

Sabine Oil & Gas Corp., 547 B.R. 66, 73 (Bankr. S.D.N.Y. 2016) (determining that an adversary

proceeding, as opposed to motion practice under section 365 of the Bankruptcy Code, was required

to determine whether dedication provisions in the gas gathering contracts at issue were covenants

running with the land under applicable state law).


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28. Engine International, Inc., f/k/a ORC International, Inc. (“Engine”), through

its objection (D.I. 219) (the “Engine Objection”), improperly attempts to side step procedural

requirements and the summary nature of a rejection proceeding by asking the Court to issue a

declaratory judgment as to its and the estates’ relative rights in property (namely, a “Refundable

Services Retainer” or “RSR” paid to the Debtors under a services agreement with Engine, which

Engine incorrectly refers to as a “security deposit” under a “sublease”). The declaratory judgment

sought by Engine may only be pursued through an adversary proceeding, see Fed. R. Bankr. P.

7001(2) & (9), a fact that is conceded by Engine in its objection. See, Engine Objection, D.I. 219,

¶ 17 (“If the Debtors are not required to provide for the immediate return of the [Refundable

Services Retainer] in connection with an order approving rejection of the [Form], Engine would

be forced to seek stay relief and pursue an adversary proceeding to enforce its right to immediate

possession of the [Refundable Services Retainer].”). Engine’s only argument in support of its

request to bypass this statutory requirement is to state that ruling on the Refundable Services

Retainer now “fosters judicial economy.” But Engine provides no statutory language, case law,

or further facts to substantiate its argument. See Orion, 4 F.3d at 1098 (holding “it was error for

the bankruptcy court to decide a disputed factual issue between the parties to a contract” in the

context of a summary assumption or rejection proceeding).

IV. The proposed rejection orders preserve parties’ rights to assert that their lease or contract terminated prior to rejection.

29. Finally, certain counterparties have objected to rejection on the basis that

their lease or contract with the Debtors terminated prior to the proposed effective date of rejection,

arguing that the Debtors cannot reject a terminated contract. The Debtors do not disagree. But as

with interests in property or other substantive factual issues, a summary rejection proceeding is an

inappropriate forum to address such issues. The Debtors have revised the language of the proposed


14

form of order to make clear that no parties’ rights are prejudiced when it comes to this issue. A

redline of one of the proposed orders showing the revised language, along with other revisions

made to address informal comments the Debtors received to the Rejection Motions, is attached

hereto as Exhibit C.6 Accordingly, because no party will suffer prejudice, the Court should

overrule these objections.

SPECIFIC RESPONSES TO OBJECTIONS

30. Attached hereto as Exhibit D is a table identifying each filed objection and

the Debtors’ response thereto in addition to the foregoing. The table is incorporated herein by

reference.

RESERVATION OF RIGHTS

31. The Debtors reserve the right to raise additional arguments with respect to

the objections to the Rejection Motions prior to or at the hearing.

CONCLUSION

WHEREFORE, the Debtors respectfully request that the Court overrule the

objections and grant the relief requested in the Rejection Motions.

6 As the changes to the proposed order will be substantively identical for all the Rejection Motions, the Debtors

have only attached a redline of one of the proposed orders. Prior to the hearing the Debtors intend to file a notice of revised proposed form of order for each Rejection Motion.


15

Dated: February 25, 2021 Wilmington, Delaware

MORRIS, NICHOLS, ARSHT & TUNNELL LLP /s/ Matthew B. Harvey Robert J. Dehney (No. 3578) Matthew B. Harvey (No. 5186) Matthew O. Talmo (No. 6333) Eric W. Moats (No. 6441) 1201 N. Market Street, 16th Floor P.O. Box 1347 Wilmington, Delaware 19899-1347 Telephone: (302) 658-9200 Facsimile: (302) 658-3989 Email: [email protected] [email protected] [email protected] [email protected] - and - Mark Shinderman Daniel B. Denny MILBANK LLP 2029 Century Park East, 33rd Floor Los Angeles, CA 90067 Telephone: (424) 386-4000 Facsimile: (213) 629-5063 Email: [email protected] [email protected] Counsel to the Debtors and Debtors in Possession


Exhibit A

Knotel General Terms


Knotel, Inc. Customer Terms General Terms

General Terms Note: These General Terms are applicable to customers located

in the US. For customers located in other countries, please visit the your country’s

respective page: UK, Germany, Brazil, Canada, Netherlands, Ireland, and India.

Overview. These General Terms and Conditions (the “General Terms”)

describe your rights and obligations in connection with your receipt and use of

the Services (defined below) and are to be read in conjunction with the Order

Form you signed on or prior to the commencement of the Term (the “Order

Form”). These General Terms shall be effective as of the earlier of (i) the effective

date noted in your Order Form and (ii) the date on which you begin using the

Services or otherwise use the space described in your Order Form (the

“Premises” or “Workspace”). Terms used but not defined herein shall have the

meanings ascribed to them in the applicable Order Form and references herein

to “General Terms” shall be deemed to include your Order Form and, if

applicable, any Additional Services Agreement.

Please read these General Terms carefully, as they affect your legal rights.

Among other things, these General Terms include your agreement that

except for certain types of disputes described in the “Governing Law;

Arbitration and Class Action Waiver” section below, you agree that

disputes between you and us will be resolved by binding, individual

arbitration and you waive your right to participate in a class action lawsuit

or class-wide arbitration. If you have any questions about these General

Terms, please contact us at [[email protected]]. By using the Services, you

are agreeing to abide by and be bound by these General Terms.

1. References


https://www.knotel.com/uk-terms/

https://www.knotel.com/germany-terms/

https://www.knotel.com/brazil-terms/

https://www.knotel.com/canada-terms/

https://www.knotel.com/netherlands-terms/

https://www.knotel.com/ireland-terms/

https://www.knotel.com/india-terms/

As used in these General Terms:

“Knotel” means the Knotel location in which your Workspace is located (referred to herein

as your “Knotel”) and the various other “Knotel” locations in our portfolio.

“customers” means you and any other customers within our portfolio who also use services

provided to them by us.

“Services” means your access to and use of the services described in your Order Form and

under the heading “Services” in these General Terms and may also include (i) Host

community events, salons and meet-ups, (ii) customer discounts and privileges to preferred

Host vendors and partners, (iii) access to other Knotel locations world-wide, and (iv) certain

other related services and features we provide to our customers generally. For the avoidance

of doubt, “Services” do not include, and we are not involved in or liable for, the provision of

products or services by third parties (“Third Party Services”) that you may elect to purchase

in connection with ancillary offerings by us to all customers, such as group health insurance,

food delivery, telephone and fax, gym memberships or payroll services.

“you,” “your” and similar words in these General Terms mean the entity (or, in some cases,

individual) registering for Services through an applicable Order Form and agreeing to be

bound by these General Terms, and shall include your employees, consultants and other

personnel who use your Workspace on an ongoing basis (your “personnel”). If you are

entering into these General Terms on behalf of an entity, you represent and warrant that you

have all necessary right, authority and consent to bind such entity to these General Terms.

“we,” “our,” “us” or “Host” and similar words in these General Terms means to Knotel, Inc.

or such other Knotel, Inc. entity providing you the Services. We reserve the right to change

the legal entity that charges you for, and/or provides, the Services, and such entity may

depend on, among other things, the location of the Knotel in which your Workspace is

located.

2. Services

We shall perform the following Services for you during the term of your Order

Form (the “Term”):

a. We will make your Workspace available to you at the time and in the condition described

in your Order Form with any furniture and fixtures described therein. Any construction, build-

outs, alterations, improvements, additions, installations or other work relating to the

Workspace (“Construction”) described in your order form will be performed by or on behalf

of us. Unless specified otherwise in your Order Form, your Workspace does not include


additional storage spaces or access to server rooms. Any access to storage spaces or server

rooms requires the supervision of an authorized Host employee. In no event shall server or

HVAC rooms be used as storage spaces.

b. To the extent we make any space generally available to our customers and/or the public,

you will also have access to such Host- space, on a non-exclusive basis and on the same

terms as are generally offered, subject to any rules, regulations, capacity and/or access

restrictions imposed by Host for such space.

c. You will have access to your Workspace and Knotel (i) from 8:30am to 5:30pm on

Business Days in the time zone where your Knotel is located (“Business Hours”), with the

exception of days prior to or after local bank/government holidays, when Business Hours

may end earlier, and (ii) outside these hours from and after the time you request in writing,

and provide, a Key Fee. Any such access outside Business Hours may be subject to

applicable fees imposed by the owner of the specific Knotel for such off-hours access, which

may include fees for HVAC, elevator, electricity, and other systems servicing the Workspace

(“Building Fees”). Building Fees will be charged to your account as Additional Services

(defined below). “Business Days” are all weekdays, except local bank/government holidays,

that your Premise is generally open. Regular Business Hours and regular Business Days

may vary by Knotel location.

d. Basic office services (“Basic Services”), as generally provided to our customers, are

included as part of your Monthly Service Rate and thus are provided for no additional cost.

Basic Services include, without limitation, daily cleaning services, electricity for normal office

use, internet access as specified in your Order Form, heating and air conditioning (as

applicable) during Business Hours, water, pantry access/amenities such as tea and coffee,

basic kitchen and bathroom supplies, and any other Basic Services indicated in the Order

Form. Unless otherwise provided in the Order Form or in an Additional Services Agreement,

Basic Services do not include computer, printer, copier, phone line access, or Building Fees.

If you would like Additional Services, or to increase the scope of your Basic Services please

communicate your request to our Space Ops Manager.

e. Additional services and/or improvements as described in the Order Form or as may

otherwise be agreed-to between you and us (“Additional Services”) shall be provided in the

manner, and for the additional costs (if any), indicated in the Order Form or in a separate

agreement governing such Additional Services (the “Additional Services Agreement”), which

such Additional Services Agreement, and any additional terms governing such Additional

Services, shall be integrated into these General Terms. Unless otherwise indicated in the

Order Form or in an Additional Services Agreement, any Additional Services shall be

performed or facilitated by us.


3. Changes to the Services or these General Terms

The availability and scope of the Services, as well as the availability and scope

of any benefits we may offer in relation to Third Party Services, are subject to

change from time to time in our sole discretion. Without limiting the generality of

the foregoing, you acknowledge that your Knotel, and the Services we may offer

at any of the other Knotels, are also subject to change from time to time, though

such changes shall not have a materially adverse effect on the level of Service

as provided in your Order Form. From time to time, we may also make

modifications, deletions or additions to these General Terms and will provide you

with notice of changes to these General Terms or to Services, by emailing the

last email address provided by you. Most changes will be effective immediately

upon notice, except that changes with respect to Payments will be effective upon

your next billing cycle. Receipt of Services following notice of any such changes

with respect to Payments, and through the next Payment date, constitutes your

agreement to such changes.

4. Payments

a. Payments. Unless otherwise set forth in your Order Form or in an Additional Services

Agreement, the Monthly Service Rate, Refundable Services Retainer and, to the extent

applicable, any additional payment obligations (collectively, the “Payments”) shall be paid in

advance, on the first day of each month during the Term (the “Payment Date”), with such

payments to be made by bank wire or mailing by certified U.S. Mail to us at the following

address: 228 Park Ave S #90047, New York, NY 10003-1502, U.S., postmarked not later

than the first day of each month during the Term. Payments that are not paid by the

applicable Payment Date will be subject to late charges and accruing finance fees at the

highest rate allowed by law or $50 per day, whichever is lower. You are responsible for the

payment of the Payments in exchange for rendered Services regardless of Service outcome

or any disputes relating to the provision of Services

b. Refundable Services Retainer. You agree that you shall pay the Refundable Services

Retainer as security for your compliance with these General Terms. In the event you breach

the Terms (including failure to make any Payment when timely due or early termination of

the Term of your membership) or takes any other actions or omissions (including conducting

any unauthorized Construction) resulting in any claims, losses, damages, payments

(including legal fees), fines or penalties or other damage to us (“Damages”), we may use all

or any portion of the Refundable Services Retainer to cure such breach or for the payment

of any such Damages. If we do use all or any portion of the Refundable Services Retainer

in respect of such Damages, you shall promptly (or no later than thirty (30) days of our notice


to you) restore the Refundable Services Retainer to an amount equal to its original sum. For

the avoidance of doubt, you may be held liable (and do hereby authorize us to charge you)

for the repair cost for all damage to any Knotel and items therein caused by you, your

personnel, your guests or, where permitted, pets. Provided you have made all required

Payments in accordance with these General Terms, there are no deductions pursuant to this

paragraph and you have vacated the Workspace in good condition with all furniture and

fixtures in place, you will receive a full reimbursement of the Refundable Services Retainer

in a timely manner upon expiration of the Term. We will not be required to keep the

Refundable Services Retainer separate from our general accounts and shall have no

obligation or liability for payment of interest on the General Services Retainer. Nothing

contained in these General Terms shall be considered to limit or preclude the recovery by

us from you of the maximum amount allowed to be obtained as damages or otherwise by

any applicable law.

5. Term and Termination

The Term shall be defined in your Order Form. The Term may be terminated

(such date, the “Termination Date”) by us upon provision of the applicable notice

described in your Order Form (or, if your Order Form so provides, by you upon

provision of such applicable notice); provided, that, such applicable notice for

termination shall not be required in the event of (i) a material breach of these

General Terms (and such breach is not, or cannot be, cured), including with

respect to Payments, Guest Policy (defined below) and Community Guidelines

(defined below); (ii) a termination by us if you cease your business operations or

become the subject of a petition in bankruptcy or any other proceeding relating

to insolvency, receivership, administration, liquidation, or assignment for the

benefit of creditors; (iii) a termination by us upon your Change of Control that is

not for a Valid Business Purpose; (iv) a termination by us in connection with the

termination of an underlying Lease] or notice from a Landlord that the Services

may no longer be rendered; (v) a termination by us if you continue to use the

Workspace or otherwise receive Services beyond the Term; (vi) a termination by

you if any Landlord (or a designee thereof) succeeds to our rights under any

Lease but is unable to provide the Services in a reasonably comparable manner.

For purposes of the foregoing, “Change of Control” means: (i) a sale or other

transfer of all or substantially all of your assets, (ii) your acquisition by another

entity by means of merger, share purchase (whether from your or from your

capital stock), share exchange or other transaction or series of related

transactions, or (iii) a sale by your stockholders, in one transaction or series of

related transactions, of equity securities that represent, immediately prior to such


transaction or transactions, a majority by voting power of your equity securities

pursuant to an agreement approved by your Board of Directors (or other

governing body) and entered into by you, and (b) “Valid Business Purpose,” with

respect to a Change of Control means (i) such transaction is conducted for a valid

business purpose; (ii) the acquiring party or resulting entity will use the

Workspace for general office use, which use shall not be for any unlawful or

unpermitted purposes; (iii) the acquiring party or resulting entity does not, directly

or indirectly, engage in competitive activities with Host; (iv) the acquiring party or

resulting entity has a net worth that is sufficient to meet the obligations under the

Agreement; and (v) the acquiring or resulting entity agrees to be bound by the

terms of this Agreement to the same extent as if it were the original party therein.

In the event of a termination of the Term, on or before the Termination Date, (i)

you shall vacate and cease use of the Workspace, otherKnotels and the Host’s

platform and portfolio in all respects and (ii) you shall pay all Payments due and

payable for Services rendered by us as of the Termination Date.

You will remain liable for past due Payments, and we may exercise our rights to

collect due Payment, despite termination of the Term. Sections 4, 5, 6(a), 6(b),

6e, 8, 10, 14, 15c, 15d, 16, 17, 18 and 19 shall survive any termination or

expiration of these General Terms.

6. Security and Access

a. Key Fee. To the extent you have requested in writing (in the Order Form or otherwise),

and paid, a Key Fee, you shall receive the number of keys to the Knotel as requested. The

Key Fee, as applicable, shall be used to cover the cost of your initial keys The Key Fee shall

not be reimbursed upon the expiration or termination of the Term.

b. Access Devices. Don’t transfer your keycard, key or other access device or credentials

to anyone else, and don’t make any copies of any keys, keycards, or other means of entry

to any Workspace or Knotels (each, an “Access Device”). You are responsible for

maintaining the security of your Access Device. You must promptly notify us if you suspect

your Access Device has been compromised or if your Access Device has been lost. Access

Devices remain our property, and you must return them immediately upon termination or

expiration of your membership (or, with respect to any of your employees or service-

providers who maintain an Access Device, upon their termination of services to you). You

shall under no circumstances duplicate any keys or other Access Device issued by us, and

any such duplication shall immediately result in having your Access Device privileges

revoked. You may be charged a replacement fee for any lost or damaged Access Devices,


including our withholding all or any portion of your Refundable Services Retainer. Knotel

reserves the right to alter or change your Access Device at any time upon reasonable notice.

c. Security. You and your guests may be required to present a valid, government-issued

photo identification in order to gain access to any Knotel. For security purposes, we may

have security cameras onsite, which may record certain areas of our Knotels, including your

Workspace. We will only review footage to the extent necessary to investigate incidents,

including turning over any such footage to applicable law enforcement authorities.

d. Guest Policy. You are permitted to invite guests to the Workspace from time to time in

reasonable proportion to the size of your team. While guests do not have access to dedicated

desks, they may access Common Spaces and conference rooms in your Knotel when they

are reserved for meetings with you. Guests must be accompanied by you at all times and

you are responsible for the actions of your guests while they are in your Knotel (refer to the

Community Guidelines for unpermitted conduct). Note that guests are not permitted to

access other Knotels and you may not accept any payment or other remuneration from a

guest in exchange for any guest’s access to your Knotel. Notwithstanding the foregoing, you

shall not be permitted to host any “office hours,” salons or other Events without our prior

written consent. If you are occupying a shared floor and would like to invite a guest for a stay

exceeding five (5) days, please notify your Space Ops Manager at least one (1) week in

advance, but please note that you will be invoiced for an additional desk at your regular

monthly desk rate. The foregoing Guest Policy is subject to any further limitations on guest

access imposed by any Landlord.

e. Property. We are not responsible for any property you leave behind in any of our Knotels.

It is your responsibility to ensure that you have retrieved all of your personal items prior to

leaving. Prior to the Termination Date, you must remove all of your property from all Knotels.

After providing you with reasonable notice, we will be entitled to dispose of any property

remaining in any of our Knotels, and you waive any claims or demands regarding such

property or our handling of such property. You will be responsible for paying any fees

reasonably incurred by us regarding such removal.

f. Emergencies. You should develop an emergency action plan and fire evacuation

protocols for your Workspace. We will provide any such plans, protocols and other

information obtained by us from the Landlord.

g. Events. If you would like to host a gathering, workshop, office hours, salon or other

gathering that is open to anyone other than your personnel, or otherwise in which food or

alcohol will be served by a third party vendor at a Knotel (each, an “Event”), you must first

obtain our written consent. All requests related to hosting Events must be submitted in writing


to your Knotel Space Ops Manager at least 10 business days prior to such Event. Such

request must contain a short description of the Event, prospective number of attendees,

nature of food and drink service, and vendor contact information. In response, we may

require further information. You are responsible for obtaining a liquor license in connection

with any approved Events where alcohol is being served. Note that your request will be

subject to underlying building and lease restrictions, fire code specifications, and insurance

requirements. Notwithstanding the foregoing, we reserve the right to withhold consent for

any Event, and any guests shall be subject to the Knotel Events Policy.

7. Conference Rooms and Common Spaces

Conference rooms and other common spaces throughout the Knotel (i.e. spaces

available for general customer use other than the Workspace and other space

designated for exclusive use by our other customer) (together with the

“Conference Rooms,” the “Common Spaces”) are available for use as indicated

in your Order Form. You may use Common Spaces as needed during Business

Hours (and after Business Hours to the extent available for general customer

use) and in reasonable proportion to the size of your team (including any guests).

You may schedule Conference Rooms use via our booking system accessible

on https://rooms.knotel.com and Conference Rooms are to be accessed by you,

and to the extent we permit, your guests, starting from the time immediately prior

to your reserved time and ending at the time immediately following your reserved

time. Common Spaces are for temporary use and not as a place for continuous,

everyday work.

You are expected to clean up after yourself after use of Conference Rooms and

Common Spaces, including disposal of trash, removal of dishes, glasses and

cutlery, and, with respect to Conference Rooms, wiping the surface of conference

tables of crumbs, spills and stains. If we incur excess cleaning charges for your

failure to properly clean a Conference Room, the cost of such cleaning will be

passed down to you. For the avoidance of doubt, you shall abide by our

Community Guidelines with respect to use of Common Spaces.

8. Mail

Any mail or packages sent to you must reflect the floor number on which your

Workspace is located. While we may accept mail and deliveries on your behalf,

we shall not be responsible for the safeguarding or handling of any mail. We have

no obligation to store such mail or packages for more than 30 days of our receipt

or if we receive mail or packages after termination of your membership. We have


https://rooms.knotel.com/

no obligation to accept bulk or oversized mail or packages. Receipt of mail and

packages is subject to any security protocols and procedures in place in the

Building where your Workspace is located.

9. Signage

To the extent you are permitted to have your signage anywhere in your

Workspace or anywhere inside the Knotel, the signage shall be installed and

maintained by us. If you desire any update or change to the signage, you shall

inform us of such desired update or change and we shall perform such service.

Any such service update or change may be subject to additional fees.

10. Assignments and Subleases

Subject to the Guest Policy, you shall not be permitted to assign (by operation of

law or otherwise), encumber or otherwise transfer your rights under these

General Terms or any interest in the Services or otherwise permit others to

occupy all or any part of the Workspace (whether for desk space, mailing

privileges or otherwise) without our advance written consent. Your Change of

Control shall be considered such an assignment and any such written consent by

us shall not relieve you from any liability under these General Terms or from

obtaining our consent to any further assignment.

11. Technology

a. Intellectual Property of Knotel and Others. You must not directly or indirectly take, copy

or use any information or intellectual property belonging to us or to other customers or any

of their guests, including without limitation personal names, likenesses, voices, business

names, trademarks, service marks, logos, trade dress, other identifiers or other intellectual

property, or modified or altered versions of the same.

b. The Knotel App. We may at any time provide certain Services (e.g. reserving conference

rooms) through the Host web and mobile application (the “Knotel App”) onto your computer,

tablet, mobile device or other electronic equipment. You acknowledge that your refusal to

install such software may affect your ability to properly receive the Services you have

purchased. Your use of the Knotel App shall be subject to the Terms of Service.

c. Mobile Phones. As a condition to your use of your Workspace, we require that you

provide us with a valid up-to-date mobile phone number on which you can receive text

messages (“Mobile Number“). If your Mobile Number changes at any time, you must update


your Customer profile on www.knotel.com or through the Knotel App to reflect the same.

Your Mobile Number will not be shared with any third-parties other than Twilio, Inc. (or such

other service provider we engage to manage mobile communications), and will otherwise be

held in strict confidence by us. By providing us your Mobile Number, you agree that we may

send you text messages from time to time during the Term to alert you and other customers

of any weather, health, safety, transportation, or other disruptions or conditions that may

affect access to your Workspace, Knotels, or the Services. You also agree that we may also

use your Mobile Number to provide certain Services to you during the Term (“Mobile

Services“). To the extent any such Mobile Services require additional mobile verification or

agreement pursuant to applicable law, we will send you a text message containing such

verification or agreement before commencing such Mobile Services.

d. Privacy Policy. Any personal information you provide to us through use of the Knotel

App, the rendering of Services, or the use and occupancy of the Workspace shall be

governed by the Knotel Privacy Policy.

12. Community Guidelines; Other Customers.

a. Community Guidelines. You acknowledge your responsibility to conduct yourself

(and cause your personnel to conduct themselves) in a manner that does not disturb

other occupants of the Knotel or tenants in the Building in which your Knotel is

located. Specifically, you and your guests shall use your Workspace for general office

purposes in furtherance of the business described in your Order Form (and for no other

purpose) and you agree that you and your guests shall not: (i) play music or other cause

other noises in the Workspace to be heard outside the Workspace, (ii) cause equipment in

the Workspace to cause vibration or noise which is transmitted beyond the Workspace, (iii)

cause odors or fumes beyond the Workspace, (iv) cause your guests to loiter in the common

areas of the Building in which your Knotel is located, (v) take any actions that are obscene,

pornographic, lewd, or harassing of any other customers, employees or third party services

acting on behalf of Knotel, (vi) store trash or otherwise cause waste, (vii) use the Workspace

for the preparation of any food or beverage (except for vending machines or warming food

for your own use), (viii) stay overnight in your Knotel , or (ix) otherwise act in a manner that

is disruptive or unreasonable. You further agree that the Workspace shall not be used by

you or your guests in a “retail,” “medical,” or other nature involving frequent use by or visits

from customers of the public, or for any activities prohibited by law or for which you or your

guests are not authorized (including the downloading of music, software, movies or any other

activity that violates intellectual property or other laws). You acknowledge and agree that

your personnel and guests understand, and agree to abide by, the foregoing terms and that

you shall be strictly liable for the activities of your personnel and guests.


http://www.knotel.com/

You agree to manage your personnel in a safe and healthful workplace manner.

Accordingly, you agree to comply with all safety related training activities, and

any sexual harassment prevention training as required by applicable law.

These Community Guidelines are not meant to be exhaustive, and we reserve

the right to reasonably determine what conduct we consider to be a violation of

these Community Guidelines or improper use of your Workspace or the Services

rendered to you.

b. Other Customers. We do not control and are not responsible for the actions of other

customers or any third parties (including any pets). If a dispute arises between customers or

their invitees, guests or pets, we shall have no responsibility or obligation to participate,

mediate or indemnify any party.

c. Pets. Unless otherwise specified on your Order Form, you are not permitted to bring pets

into your Workspace. Service animals, as defined by the Americans with Disabilities Act

(ADA), are always permitted in Knotel spaces. In the event you would like to bring a service

animal onto the Workspace, we may request documentation or other information as

reasonably required by the Landlord in connection with your request.

13. Your Premises / Workspace

a. No Tenancy. You acknowledge that this is a revocable license for a limited use, and

nothing in these General Terms, or your Order Form shall constitute a leasehold interest or

tenancy or conveyance of any exclusive possessory interest in the Workspace. You shall

not permit any liens to be filed against the Workspace for any cause or reason. If any liens

are filed against the Workspace, you permit us to discharge the same without your consent

and seek reimbursement from you. Accordingly, we may exercise self-help to regain

exclusive control of the Workspace, including, without limitation, locking up the Workspace.

You understand and agree that no prior or subsequent court order or approval shall be

necessary in connection with such self-help or lock-out.

b. Furniture, Fixtures, Equipment Damages. Normal wear and tear excepted, you will be

responsible for the cost of all repairs or replacements to furniture, fixtures and equipment

(including workstations, pantry equipment and conference room furniture) in your Workspace

or otherwise used by you or your guests in a Knotel to the extent such repair or replacement

is the result of damages caused by you (including any pets) or your guests’ misuse,

negligence or willful misconduct.


c. Construction. You must not perform any Construction in or about your Workspace

without our prior written consent which consent may be withheld in our sole and absolute

discretion. In the event such consent is provided, (i) the Workspace shall be deemed to

include such Construction and, unless otherwise agreed to in writing by us, (ii) you shall bear

the full cost of (x) any Construction (including labor, and where applicable, additional fees

where unionized labor is required by the Landlord) and (y) in connection with the termination

of the Services or (if applicable) a Relocation, the removal of such Construction, including

any repairs to the Workspace or the Knotel caused by the Construction.

d. Improvements. From time to time it may be necessary for us to make certain non-

ordinary course modifications, improvements and alterations to your Workspace for

maintenance or other reasons (“Improvements”). We will give you at least five (5) Business

Days’ prior notice to any such Improvements, which shall be executed in a manner that

minimizes interference with the conduct of your business. In the event of any Improvements,

your Order Form shall be updated to reflect such modified Workspace, which, if requested

by you, and are in addition to any furnishing or Construction provided in your Order Form,

shall be subject to additional fees (including for costs of labor), and the term “Workspace”

as used therein and herein shall be deemed to refer to such improved Workspace.

e. Relocation. You acknowledge and agree that we have the right to relocate you to another

reasonably comparable premises in your or another Knotel (a “Relocation”) upon 10

Business Days’ prior notice if you are occupying a shared floor, or upon thirty (30) days’ prior

notice if you occupy the entire floor at your Knotel, which relocation shall be executed in a

manner that minimizes interference with the conduct of your business. In the event of any

Relocation, your Order Form shall be updated to reflect such relocated premises and the

term “Workspace” as used therein and herein shall be deemed to refer to such relocated

Workspace.

f. Our Right to Enter. For the avoidance of doubt, we shall at all times have a right to enter

your Workspace in connection with the Services. In addition, we may also enter your

Workspace at reasonable times and, to the extent possible, with reasonable prior notice, to

inspect your Workspace or to perform any work we deem either necessary or desirable,

including with respect to Improvements, or to show the Workspace to prospective customers.

14. Underlying Lease

a. Lease Modification or Termination. You acknowledge and agree that your right to

receive the Services and otherwise use the Workspace and the Knotel may be subject to an

underlying lease of the Knotel from an applicable landlord (the “Lease” and the “Landlord”).

We acknowledge and agree that our entry into the Order Form, and the provision of Services


to you is not in violation of any restrictions in the applicable Lease. The termination or

modification of the Lease may affect our ability to continue providing the Services and your

right to use the Workspace. In the event a Lease termination or modification affects our

ability to provide the Services (including your right to use the Workspace), the Services may

be modified in a commercially reasonable manner (which may include a Relocation to

reasonably comparable Workspace or terminated, in either case upon at least 10 Business

Days’ prior notice to you.

b. Attornment. If any Landlord (or a designee thereof) succeeds to our rights under any

Lease and continues to provide the Services in a reasonably comparable manner, then at

the request of the Landlord, you will attorn to the successor as the Host under these General

Terms and sign, acknowledge and deliver any instrument that the successor requests to

evidence the attornment. Upon such attornment, your Order Form and these General Terms

will continue in full force and effect as a direct arrangement between the successor and you.

If such successor requires any modifications of your Order Form or these General Terms

you agree that you will sign, acknowledge and deliver to such successor instruments in form

and substance reasonably requested by it providing for those modifications (provided they

do not materially adversely affect your rights hereunder).

c. Contact with Landlord. You do not have any direct rights from, or obligations to, the

Landlord, and agree that you will not request Landlord’s consent or approval directly with

respect to any matters relating to the Services, including with respect to any Construction,

Modification, Relocation, or requests for service animals or pets on the Workspace. All

consents, approvals, questions and other communications shall be sent directly to us in

accordance with these General Terms.

15. Advertisements, Endorsements, Testimonials, Use of Likeness

a. Advertisements. In using the Services, you may encounter advertisements from Third

Party Service Providers and our other business partners, which may be targeted to you

based on certain information you provide to us or that we collect based on your use of the

Services. The types and extent of advertising are subject to change. In consideration for us

granting you access to and use of the Services, you agree that we, such Third Party Service

Providers and our other business partners may provide you with such advertising from time

to time.

b. Endorsements and Testimonials. From time to time, we may also publish testimonials

by users and customers related to their experiences with the Services. These testimonials

are the users’ subjective opinions, and they represent individual results. We neither verify

them nor claim that they are typical results that others will generally achieve. Names,


locations, dates and other information may have been changed to protect the privacy of the

individuals involved. All other testimonials and endorsements of any type, format or nature

posted by users are not verified by us, and we make no warranty or representation as to

their accuracy. You should be cautious when relying on any testimonials or endorsements,

and you should assume the results described therein are not typical.

c. Photos of the Premises / Workspace. From time to time we may want to photograph,

video or otherwise record the various Knotels (and this may include your Workspace) to

support our marketing initiatives. In connection therewith, you grant us the right and

permission to film, tape, record and photograph your Workspace at reasonable times, and

with reasonable prior notice. We agree to coordinate with you in order to account for any

scheduling or privacy concerns.

d. Our Marketing Materials. In support of our marketing initiatives, including without

limitation, featured Customers on our website, email outreaches, and case studies

showcasing transformations of our spaces, we may include your name or logo in connection

therewith. If your name or logo is featured on any marketing collateral and you would like for

it to be removed, please contact [email protected] and we will honor your request.

e. Photography and Filming. If you would like to film or photograph within a Knotel, or

otherwise use a Knotel as a set or for any media projects, you must provide us with a written

request detailing the nature and scope of the project. All such requests will be considered

on a case-by-case basis, and as a condition to any filming or photography, you agree to

adhere to the terms set forth in our standard form Media Production Agreement.

16. Limitations of Liability; Insurance

a. Waiver and Release. To the fullest extent permitted by law, you, on your own behalf and

on behalf of your employees, agents, guests and invitees, waive any and all claims and

rights against us and our affiliates, parents, and successors and each of our and their

employees, assignees, officers, agents and directors (collectively, the “Knotel Parties”)

resulting from injury or damage to, or destruction, theft, or loss of, any property, person or

pet (collectively, “Claims”) and release the Knotel Parties from any such Claims. You shall

and hereby do waive any law of any jurisdiction, which says in substance: “A general release

does not extend to claims which the creditor does not know or suspect to exist in his favor

at the time of executing the release, which, if known by him must have materially affected

his settlement with the debtor.”

b. No Third Party Liability. We do not control and are not responsible for the actions of

other individuals or pets using the Services or at our Workspace. You should be aware that


mailto:[email protected]

other users or customers may not be who they claim to be. We do not perform background

checks on our users or customers nor do we guarantee that our users’ or customers’ profiles

are accurate. We do not endorse, support or verify the facts, opinions or recommendations

of our users or customers.

c. No Liability for Third Party Products / Services. The Services may provide you with

access to third party products or services. In no event will we be liable, directly or indirectly,

to anyone for any damage or loss relating to any use of such products, services or other

materials provided by a third party and not under our control, such as third party Internet

providers. You agree that our making available access to or discounts for any third party

services does not constitute provision or warranty of such third party services by us, and you

will look solely to the applicable third party for provision of the applicable third party services

and for compensation for any claims, damages, liabilities or losses you may incur in

connection with such third party services.

d. Limitation of Liability. To the extent permitted by law, the aggregate monetary liability

of any of the Knotel Parties to you or your employees, agents, guests or invitees for any

reason and for all causes of action, whether in contract, tort, breach of statutory duty, or

other legal or equitable theory will not exceed the total amounts paid by you to us under

these General Terms for the product or service from which the claim arose in the twelve (12)

months prior to the claim arising. None of the Knotel Parties will be liable under any cause

of action, for any indirect, special, incidental, consequential, reliance or punitive damages,

including loss of profits or business interruption, or for the cost of any substitute goods,

services or technology. You acknowledge and agree that you may not commence any action

or proceeding against any of the Knotel Parties, whether in contract, tort, breach of statutory

duty, or other legal or equitable theory, unless the action, suit, or proceeding is commenced

within one (1) year of the cause of action’s accrual.

For the avoidance of doubt, nothing in these General Terms will exclude our

liability for (a) death or personal injury caused by our negligence; (b) fraud or

fraudulent misrepresentation or (c) any breach of any implied terms which cannot

lawfully be excluded.

e. Disclaimer of Warranties and Implied Terms. The Services are provided “AS IS”. To

the extent permitted by law, we disclaim all warranties and terms, express or implied,

with respect to the Services, including warranties, terms or representations as to the

availability, operation, performance and/or use of our Services, or any other materials

on or accessed via the Services, including any warranties or terms of merchantability,

fitness for a particular purpose, title, non-infringement and any implied warranties,

terms or indemnification arising from course of dealing, course of performance or


usage in trade. In addition to the forgoing, will not be liable for failure to perform our

Service obligations if the failure results from an act of nature, the act of a national,

federal, state or local government authority, fire, explosion, accident, industrial

dispute or any other event beyond our reasonable control.

f. Exclusions. Some jurisdictions do not allow the exclusion of certain warranties or the

exclusion or limitation of liability for consequential or incidental damages, so the exclusions

and limitations above may not apply to you. In such event, such exclusions and limitations

shall apply to the maximum extent allowed under applicable law.

g. Insurance. As a condition to your use and occupancy of the Workspace, you will be

required to obtain customary general liability, umbrella and workers’ compensation

insurance coverage as specified in your Order Form.

17. Indemnification

a. Hold Harmless. You will indemnify, defend and hold harmless the Knotel Parties from

and against any and all claims, liabilities, damages and expenses (“Claims”) including

reasonable attorneys’ fees, resulting from any breach of these General Terms by you or your

employees or guests, or your or their invitees or pets or any of your or their actions or

omissions and Knotel will have sole control over the defense of any such Claims. You are

responsible for the actions of and all damages caused by all persons and pets that you or

your guests invite to enter any of the Workspace. You shall not make any settlement that

requires a material act or admission by any of the Knotel Parties, imposes any obligation

upon any of the Knotel Parties or does not contain a full and unconditional release of the

Knotel Parties, without our written consent. None of the Knotel Parties shall be liable for any

settlement made without its prior written consent.

b. Cooperation. From time to time, we may investigate any actual, alleged or potential

violations of these General Terms. You agree to cooperate fully in any of these inquiries.

You waive any and all rights against the Knotel Parties, and agree to hold them harmless in

connection with any claims relating to any action taken by us as part of our investigation.

Governing Law; Arbitration and Class Action Waiver

a. Governing Law. These General Terms and the transactions contemplated hereby shall

be governed by and construed under the law of the State of New York without regard to

conflicts of laws provisions thereof and without regard to the United Nations Convention on

Contracts for the International Sale of Goods or New York’s or any other implementation of

the Uniform Computer Information Transactions Act.


b. Venue. Except that either party may seek equitable or similar relief from any court of

competent jurisdiction, any dispute, controversy or claim arising out of or in relation to these

General Terms, or at law, or the breach, termination or invalidity of these General Terms,

that cannot be settled amicably by agreement of the parties to these General Terms shall be

finally settled in accordance with the arbitration rules of JAMS then in force, by one or more

arbitrators appointed in accordance with said rules. The place of arbitration shall be New

York, NY.

c. Proceedings; Judgment. The proceedings shall be confidential and in English. The

award rendered shall be final and binding on both parties. Judgment on the award may be

entered in any court of competent jurisdiction. In any action, suit or proceeding to enforce

rights under these General Terms, the prevailing party shall be entitled to recover, in addition

to any other relief awarded, the prevailing party’s reasonable attorneys’ fees and other fees,

costs and expenses of every kind in connection with the action, suit or proceeding, any

appeal or petition for review, the collection of any award or the enforcement of any order, as

determined by the arbitrator(s) or court, as applicable. These General Terms shall be

interpreted and construed in the English language, which is the language of the official text

of these General Terms.

d. Class Action Waiver. Any proceeding to resolve or litigate any dispute in any forum will

be conducted solely on an individual basis. Neither you nor we will seek to have any dispute

heard as a class action or in any other proceeding in which either party acts or proposes to

act in a representative capacity. No proceeding will be combined with another without the

prior written consent of all parties to all affected proceedings. You and we also agree not to

participate in claims brought in a private attorney general or representative capacity, or any

consolidated claims involving another person’s account, if we are a party to the proceeding.

You are giving up your right to participate as a class representative or class member on any

class claim you may have against us including any right to class arbitration or any

consolidation of individual arbitrations.

a. Enforceability. These General Terms and any feature-specific guidelines, terms or rules

that may be posted or provided to you constitute the entire agreement between us regarding

the Services and supersedes and merges any prior proposals, understandings and

contemporaneous communications, including previous Uniform License Agreement for

Hosted Workspace Services you may have entered into. If any provision of these General

Terms and/or any feature-specific guidelines, terms or rules that may be posted or provided

to you are held to be unenforceable, then that provision is to be interpreted either by

modifying it to the minimum extent necessary to make it enforceable (if permitted by law) or

disregarding it (if not). If an unenforceable provision is modified or disregarded in accordance

with this paragraph, the rest of these General Terms and/or any feature-specific guidelines,


terms or rules that may be posted or provided to you are to remain in effect as written, and

the unenforceable provision is to remain as written in any circumstances other than those in

which the provision is held to be unenforceable. The failure of either party to enforce its

rights under these General Terms at any time for any period will not be construed as a waiver

of such rights, and the exercise of one right or remedy will not be deemed a waiver of any

other right or remedy.

b. Nature of these General Terms. Notwithstanding anything in these General Terms to

the contrary, these General Terms in no way shall be construed as to grant you any title,

lease, easement, lien, partnership, joint venture, possession or related rights in our business,

your Workspace, any Knotel or anything contained in any Knotel. These General Terms

create no tenancy interest (including any security of tenure), leasehold estate, or other real

property interest. Neither party will in any way misrepresent our relationship.

c. Confidential Information. These General Terms, your Order Form and any information

provided by us in performance of the Services are agreed by you to be confidential,

proprietary and to constitute trade secrets belonging to us, and shall not be divulged or

otherwise made available by you to any third party, without our written consent.

You also agree to hold all Confidential Information (defined as information not generally

known to the public) of other customers in strict confidence and to take all reasonable

precautions to protect Confidential Information. You acknowledge that any disclosure or

unauthorized use of Confidential Information will constitute a material breach of these

General Terms and cause substantial harm to the injured party for which damages would

not be a fully adequate remedy. In the event of any such breach, we shall have, in addition

to other available remedies, the right to injunctive relief (without being required to post any

bond or security). We reserve the right at all times to disclose any information about you as

we deem necessary to satisfy any applicable law, regulation, legal process or governmental

request, or to edit, refuse to post or to remove any information or materials from its systems,

in whole or in part, in our sole discretion.

d. Contacting us. If you have any questions relating to these General Terms, please contact

us at [email protected]

Dated: October 22, 2018


mailto:[email protected]

Exhibit B

Town Sports Transcript


UNITED STATES BANKRUPTCY COURTDISTRICT OF DELAWARE

. Chapter 11IN RE: . . Case No. 20-12168(CSS)TOWN SPORTS INTERNATIONAL, . LLC, et al, . . 824 Market Street . Wilmington, Delaware 19801 Debtors. . . . . . . . . . . . . . . . . Monday, November 23, 2020

TRANSCRIPT OF TELEPHONIC HEARINGBEFORE THE HONORABLE CHRISTOPHER S. SONTCHI

CHIEF UNITED STATES BANKRUPTCY JUDGE

APPEARANCES VIA TELEPHONE:

For the Debtors: Sean T. Greecher, Esq. Allison Mielke, Esq.

YOUNG, CONAWAY, STARGATT & TAYLOR, LLP

Nicole L Greenblatt, Esq. Mark E. McKane, Esq. Joshua M. Altman, Esq. Derek I. Hunter, Esq. KIRKLAND & ELLIS, LLP

For the U.S. Trustee: David L. Buchbinder, Esq. OFFICE OF THE U.S. TRUSTEE

For the Official Committeeof Unsecured Creditors: Anthony De Leo, Esq.

Andrew Roth-Moore, Esq. COLE SCHOTZ, PC

(Appearances Continued)

Audio Operator: Electronically Recorded by CourtCall and ECRO

Transcription Company: Reliable 1007 N. Orange Street Wilmington, Delaware 19801 (302)654-8080 Email: [email protected]

Proceedings recorded by electronic sound recording,transcript produced by transcription service.

Case 20-12168-CSS Doc 705 Filed 11/25/20 Page 1 of 25Case 21-10146-MFW Doc 285-1 Filed 02/25/21 Page 37 of 53

19

1 However, it is not appropriate and it is not in the

2 interest of the estates and the other creditors to require

3 the debtors to take that action and to comply with

4 obligations under a lease that it has determined,

5 appropriately, you know, are not in the best interests of the

6 estates. Therefore, we continue to believe that the -- that

7 rejection is appropriate, that the debtors have put the

8 landlord in a position where it can proceed and take back its

9 property, and that is what is required under Section 365.

10 THE COURT: All right. Thank you, everybody, for

11 your comments.

12 So the law, generally speaking, on this is quite

13 clear and, indeed, black letter in this jurisdiction, which

14 is that nunc pro tunc is available, provided that a clear

15 notice of the rejection and evacuation of the lease, with no

16 intent or holdback to have the ability to come back is given,

17 access is turned over to the landlord. Subject to my

18 comments a little bit later about the license, that occurred

19 here.

20 Also, it's clear that property can be abandoned,

21 and of course a claim exists for the landlord for the cost

22 and expense associated with removing that property, subject

23 to a credit for whatever costs -- or whatever value they're

24 able to obtain for that equipment. And that's fine, but the

25 claim is an unsecured claim.


20

1 It's also clear that, in connection with subleases,

2 that rejection of the lease by the debtors constitutes

3 rejection by the sublease -- of the sublease -- excuse me.

4 And it is up to the landlord to either treat that sublease as

5 a holdover tenant or a trespasser and to take action

6 accordingly. The automatic stay in no way prohibits the

7 eviction of the sublessor -- or sublessor -- sublessee --

8 excuse me -- sublessee. So that's the law. So, if that's

9 the case, we just spent a lot of time dealing with a

10 situation that's crystal-clear.

11 So the only distinction here that's worth

12 discussing, in this present case, is the fact that there's a

13 tanning salon, which may be still operational. Although I

14 don't understand how they sent kids home from school, but let

15 tanning salons continue to operate, but I'm not the Mayor of

16 New York. But in any event, that there's a tanning salon

17 that doesn't have a sublease; it has a license. And does

18 that somehow change the analysis?

19 Also important -- or significant enough to discuss

20 is the fact that the license was not made with the consent or

21 knowledge of the landlord. So, when the landlord walked in,

22 if the entity did walk in, the day after they received notice

23 of the rejection, they would have found an empty gym area and

24 an operating, licensed tanning salon that they didn't know

25 existed. Okay.


21

1 What difference does that make, is the question, I

2 think, that would have us depart to the well established

3 existing law. And I think the answer is none.

4 The license between the debtor and the tanning

5 salon is not a real property transaction, does not provide

6 the license -- it doesn't provide the tanning salon -- I'm

7 going to get away from "licensor" and "licensee" because I

8 always mess it up. It doesn't prevent the tanning salon from

9 being evicted. The tanning salon has no possession --

10 possessive right as a result of the license. They simply are

11 there, not a lease, not a sublease.

12 So I think, actually, the protections of that

13 tanning salon are less than they normally would be if it was

14 a sublease. And as a result, the fact that they have less

15 protection can't somehow provide more burden on the debtor.

16 The reality is that the party who should bear the post-

17 rejection burden of clearing the premises of trespassers is

18 the landlord.

19 Now the landlord can't do that right now because of

20 coronavirus-related restrictions on evictions. And I'm

21 unclear whether this is an eviction, since there is no lease,

22 but I'm certainly no expert in New York State real property

23 law. But that is neither here, nor there with regard to the

24 debtors' obligations to reject the lease, leave the license

25 behind, get out from under, and give the landlord a claim.


22

1 All that is true. The fact that there's additional

2 administrative burden, again, should be borne in a rejection

3 scenario by the landlord, not by the -- not by the debtor.

4 So I see no difference whatsoever. And indeed, I

5 think the protections here for the tanning salon are less

6 than if it was a sublease. And the power for the landlord to

7 effect possession is greater than it would be if it was a

8 sublease. And if it's stopped from taking possession

9 tomorrow, it's a result of not the actions of the debtor, not

10 the actions of the tanning salon, not the actions of the

11 contracts, but the action of the Government in issuing

12 moratoriums on evictions because of the coronavirus crisis.

13 That, of course, is not -- there is nothing any of us can do

14 about that. And it may be a very appropriate public policy

15 decision, I offer no comment on that whatsoever.

16 So I am going to overrule the objection, allow

17 rejection of the lease nunc pro tunc to the day of notice.

18 And of course, the landlord is entitled to file a

19 claim. And you know, file an admin claim, if you want. I'm

20 not determining, one way or the other, today whether there is

21 an admin claim or not. This is more an issue of rejection.

22 And the Court will hear it at the appropriate time. If we're

23 going to have a hearing on the claim, we're going to need

24 evidence, not just lawyer testimony. But you have the right

25 to file a claim, go ahead and file a claim. You certainly


23

1 have a right to the costs of getting possession, the costs of

2 getting that -- getting all of that equipment out of there.

3 I assume it's gym equipment, it's bulky, it's heavy. That's

4 certainly not an easy thing to do. That's -- I'm 99.9

5 percent sure that's an unsecured claim, but I'm not making

6 that definitive decision today.

7 And with regard to eviction, again, I think that

8 goes to your claim. You can file a claim for the costs

9 associated with doing that, and we'll deal with that at a

10 proper time. But this in no way affects the ability for the

11 Court to provide for the abandonment and the nunc pro tunc

12 rejection.

13 And I know there's an order, but I don't know if it

14 can be signed.

15 MR. GREECHER: Thank you, Your Honor. I believe it

16 can. We will -- we'll upload the version that was filed.

17 The revision is consistent with the comments from other

18 parties who had informal objections. It also includes

19 (indiscernible)

20 THE COURT: I saw the blackline of November 19th,

21 right? That's the current version.

22 MR. GREECHER: Yes. Correct, Your Honor.

23 THE COURT: That's fine. That's good to go. So

24 just upload that. And unfortunately, Ms. Szymanski decided

25 to take vacation because of the holiday, so -- but Ms. Gadson


Exhibit C

Proposed Order Redline


IN THE UNITED STATES BANKRUPTCY COURTFOR THE DISTRICT OF DELAWARE

In re

Knotel, Inc., et al.,

Debtors.1

Chapter 11

Case No. 21-10146 (MFW)

Jointly Administered

Re: D.I. ___12

FIRST OMNIBUS ORDER (I) AUTHORIZING THE DEBTORS TO REJECT CERTAINEXECUTORY CONTRACTS AND UNEXPIRED LEASES NUNC PRO TUNC TO THE

PETITION DATE, (II) ABANDON ANY PERSONAL PROPERTY THAT REMAINS ATTHE LEASE PREMISES, AND (III) GRANTING RELATED RELIEF

Upon the motion (the “Motion”)2 of the above-captioned debtors and debtors in

possession (the “Debtors”), pursuant to sections 105(a) and 365 of the Bankruptcy Code and

Bankruptcy Rule 6006 and 9014, for entry of an order (this “Order”): (i) authorizing the Debtors

to reject certain executory contracts and unexpired leases set forth on Exhibit 1 attached hereto

(the “Specified Contracts and Leases”), (ii) authorizing the Debtors to abandon any personal

property of the Debtors, including, but not limited to, furniture, fixtures, and equipment

(collectively, the “Personal Property”) that remains at the premises of the Specified Leases, and

(iii) granting related relief; and upon consideration of the First Day Declaration; and due and

sufficient notice of the Motion having been given under the circumstances; and it appearing that

no other or further notice need be provided under the circumstances; and it appearing that the

1 A complete list of each of the Debtors in these chapter 11 cases may be obtained on the website of the Debtors’claims and noticing agent at https://www.omniagentsolutions.com/knotel or, alternatively, via the Bankruptcy Court at https://ecf.deb.uscourts.gov/cgi-bin/login.pl with a Public Access to Court Electronic Records (“PACER”) account, which may be obtained at https://pacer.uscourts.gov. The location of Debtor Knotel, Inc.’s principal place of business and the Debtors’ service address in these chapter 11 cases is 5-9 Union Square West, New York, NY 10003.

2 Capitalized terms not defined herein are defined in the Motion


relief requested by this Motion is in the best interests of the Debtors, their estates, their creditors

and other parties in interest; and after due deliberation and sufficient cause appearing therefor;

IT IS HEREBY ORDERED THAT:

The Motion is GRANTED as set forth herein.1.

Pursuant to sections 105(a) and 365(a) of the Bankruptcy Code, the2.

Specified Contracts and Leases identified on Exhibit 1 are hereby rejected by the Debtors,

effective as of January 31, 2021. The Specified Contracts shall be rejected solely to the extent the

counterparties to the Specified Contracts are not in material breach of their respective Specified

Contract.

Except as otherwise indicated on Exhibit 1, the rejection of each Specified3.

Lease included on Exhibit 1 shall constitute a rejection of all unexpired leases for the same

building location to which the Debtors and the counterparty to the Specified Lease are parties.

Pursuant to sections 105(a) and 554(a) of the Bankruptcy Code and4.

Bankruptcy Rule 6007, any Personal Property remaining on the premises of the Specified Leases

or in the possession of a counterparty to the Specified Leases as of January 31, 2021, is hereby

abandoned by the Debtors. The Debtors are authorized to and do hereby abandon all of their and

their estates’ right, title, and interest in and to any Personal Property remaining on the premises

formerly leased under the Specified Leases. Such abandoned Personal Property is free and clear

of all liens, claims, encumbrances, and interests of the Debtors, their estates, and Digiatech, LLC

(the Debtors’ pre- and postpetition secured lender). The rights of each counterparty to a

Specified Lease to assert claims related to the disposition of the Personal Property are reserved as

are the Debtors’ and all parties’ rights in connection with such claims, including without

limitation, their rights to object to such claims.

2


Notwithstanding the relief granted herein and any actions taken hereunder,5.

nothing in the Motion or this Order shall: (a) constitute an admission as to the validity, amount or

priority of any claim or lien against the Debtors or a promise or requirement to pay any claim; (b)

constitute a waiver of the Debtors’ rights to dispute any claim or assert any defenses or

counterclaims to such claim or against the applicable claim proponent; (c) constitute a waiver or

limitation of any claim, cause of action, right or defense of the Debtors, including any that exists

against any entity; (d) constitute a ratification or assumption of any agreement, contract or lease

under section 365 of the Bankruptcy Code; (e) constitute an admission or concession by the

Debtors that any lien is valid; or (f) prejudice the Debtors’ or other parties’ rights to assert that

any of the Specified Contracts and LeasesContract or Lease (i) areis or was not executory or

within the meaning of section 365 of the Bankruptcy Code or, (ii) have expired or have beenwas

terminated prior to rejection, or (iii) was materially breached prior to rejection, or (d) prohibit the

Debtors from seeking to reject any other executory contracts or leases.

The Motion complies with the requirements of Bankruptcy Rule 6006(f).6.

Notwithstanding Bankruptcy Rule 6004(h), this Order shall be effective7.

immediately and enforceable upon its entry, including the rejection of the Specified Contracts

and Leases granted herein which shall be rejected by the Debtors and the abandonment of the

Personal Property remaining on the premises of the Specified Leases, effective as of January 31,

2021.

This Court shall retain jurisdiction to hear and determine all matters8.

arising from or related to the implementation of this Order.

3


Dated: ______________, 2021Wilmington, Delaware

UNITED STATES BANKRUPTCY JUDGE

4


Exhibit D

Objection Response Table


Objection Relationship to Debtors

Issues Raised in Objection Response/Resolution

Source Media D.I. 196, filed 02/19/21

Landlord under Sublease

Alleges that the Sublease terminated prepetition and therefore cannot be rejected.

The proposed form of order has been revised to provide that it is without prejudice to counterparties’ rights to assert that the applicable contract or lease is or was not executory or that it expired or terminated prior to rejection.

Converse Inc. D.I. 198, filed 2/19/21

Landlord under Sublease

Alleges that the Sublease terminated prepetition and therefore cannot be rejected.

The proposed form of order has been revised to provide that it is without prejudice to counterparties’ rights to assert that the applicable contract or lease is or was not executory or that it expired or terminated prior to rejection.

AFIAA 45 WEST 45TH STREET, LLC D.I. 200, filed 2/19/21

Landlord Seeks to require the Debtors to store or dispose of personal property at the premises, or, in the alternative, exculpation for the landlord for actions taken in disposing of personal property of third parties.

The objection does not identify any legal basis to require the Debtors to store or dispose of personal property remaining at the premises. Moreover, as discussed in the reply, this Court has held that the Bankruptcy Code does not impose such burden on the Debtors. Similarly, the objection does not identify any legal basis for the Court to exculpate the landlord from claims of third parties.

Two Friends Realty LLC c/o MJ Orbach Associates Inc. and West 39-260 Realty LLC D.I. 202, filed 2/19/21

Landlord Seeks to require the Debtors to store or dispose of personal property at the premises, or, in the alternative, exculpation for the landlord for actions taken in disposing of personal property of third parties.



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DP 1550 Bryant, LLC, GC 555 Montgomery, LLC, DP550 LLC, and 300 Montgomery Associates D.I. 203, filed 2/19/21

Landlords Seeks language in the proposed order providing that landlords are authorized to enter into new lease agreements for the premises retroactive to January 31, 2021. Seeks language in the proposed order clarifying that landlords may enter into new lease agreements with any past or present customers of the Debtors. Asserts that any post-petition payments received from Debtors’ customers should be assigned to the landlords to reduce the landlords’ rent claims.

As provided in the Rejection Motions and the surrender notices mailed to landlords, the Debtors have unequivocally stated their intent to reject the Specified Leases and have encouraged the landlords to re-let the premises to mitigate their rejection damages. The Debtors are seeking nunc pro tunc relief retroactive to the Petition Date. Should the Court grant the requested relief, the landlords will be entitled to enter into new agreements with respect to the premises effective as of the Petition Date. For each leased location that the Debtors have determined rejection is appropriate, the Debtors have included the corresponding customer contract on the schedules to the Rejection Motions. Therefore, the Debtors will not continue to receive post-petition payments for services from customers at premises. The landlords cite case law providing that where a debtor seeks to reject a lease retroactively to the petition date, the landlord is entitled to compensation through an administrative claim for post-petition amounts received by the debtor from a subtenant. The Debtors’ customers are not subtenants and the Debtors’ services contracts with their customers generally do not create a right to occupancy. Even if the Debtors’ customers were subtenants, Debtors’ rejection of the Specified Leases and abandonment of the premises


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relinquished control of the premises back to the landlords and removed any real property interest they had in the premises. Such action effectively removed the Debtors from any contractual relationship between themselves and the landlords, or themselves and any subtenant.

Engine International, Inc., f/k/a ORC International, Inc. D.I. 219, filed 2/22/21

Customer Asserts that nunc pro tunc relief is inequitable and that the Court should order return of a Refundable Services Retainer as a condition to rejection and/or nunc pro tunc relief.

As discussed in the Reply, rejection is a summary proceeding to determine whether the Debtors have exercised sound business judgment in exiting a burdensome lease or contract. The objector does not contest the Debtors’ business decision to reject the customer agreement. The objector improperly seeks a declaratory judgment as to its and the estates’ relative rights in property (the Refundable Services Retainer). Such relief requires an adversary proceeding and is not properly considered in a summary rejection proceeding. The objector argues it is prejudiced by nunc pro tunc relief but fails to identify any prejudice.

The Fjeld Family Limited Partnership D.I. 221, 2/22/21

Landlord Requests relief from the automatic stay to take immediate possession of the premises. Requests that personal property remaining in the premises be

Relief from stay is unnecessary because the Debtors are rejecting the lease and the landlord is free to (and, indeed, encouraged) to retake possession of the premises.


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abandoned to the landlord subject to rights of third parties. Requests that the leases be deemed rejected effective February 26, 2021, and landlord has no administrative claim, but retains the right to assert an unsecured claim.

The proposed form of order provides for the abandonment of personal property consistent with the landlord’s request. The proposed form of order provides for rejection of the leases effective January 31, 2021, the date the Debtors unequivocally surrendered possession. Landlord is entitled file an unsecured claim.

156 Fifth Avenue Corp. and 91 Fifth Avenue Corp. D.I. 222, 2/22/21

Landlords Seeks to require the Debtors to store or dispose of personal property at the premises, or, in the alternative, exculpation for the landlord for actions taken in disposing of personal property of third parties.


Kilroy Realty 303, LLC, and REEP-OFC Corporate Point CA, LLC D.I. 223, 2/22/21

Landlords Asserts that nunc pro tunc relief to the Petition Date is inappropriate because Debtors have not effectively relinquished possession of the premises. Seeks a Court order abandoning property of third parties to the landlords free and clear of liens, claims, and interests of third parties, and exculpating the landlords for actions taken in

As provided in the Rejection Motions and the surrender notices mailed to landlords, the Debtors have unequivocally stated their intent to reject the Specified Leases and have encouraged the landlords to re-let the premises to mitigate their rejection damages. For each leased location that the Debtors have determined rejection is appropriate, the Debtors have included the corresponding customer contract on the schedules to the Rejection Motions.


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disposing of personal property of third parties.

The Debtors’ customers are not subtenants and the Debtors’ services contracts with their customers generally do not create a right to occupancy. Even if the Debtors’ customers were subtenants, Debtors’ rejection of the Specified Leases and abandonment of the premises relinquished control of the premises back to the landlords and removed any real property interest they had in the premises. Such action effectively removed the Debtors from any contractual relationship between themselves and the landlords, or themselves and any subtenant. The objection does not identify any legal basis for the Court to order the abandonment of nondebtor property free and clear of third-party interests or to exculpate the landlord from claims of third parties.

110 Greene Fee Owner LP and 590 Fifth Owner LLC D.I. 225, 2/22/21

Landlords Seeks a Court order abandoning property of third parties to the landlords free and clear of liens, claims, and interests of third parties, and exculpating the landlords for actions taken in disposing of personal property of third parties.

The objection does not identify any legal basis for the Court to order the abandonment of nondebtor property free and clear of third-party interests or to exculpate the landlord from claims of third parties.

Westfield 816-818 Mission Street LLC D.I. 230, 2/22/21

Landlord Joins in the objections of Kilroy Realty 303, LLC, and REEP-OFC Corporate Point CA, LLC (D.I. 223) and 110 Greene Fee Owner LP and 590 Fifth Owner LLC (D.I. 225)

See responses above with respect to objections of Kilroy Realty 303, LLC, and REEP-OFC Corporate Point CA, LLC (D.I. 223) and 110 Greene Fee Owner LP and 590 Fifth Owner LLC (D.I. 225)


Exhibit B

Proposed Order




Debtors.1

Chapter 11 Case No. 21-10146 (MFW) Jointly Administered Re: D.I. _____

ORDER GRANTING LEAVE TO FILE A REPLY

Upon consideration of the Debtors’ Motion For Leave to File Debtors’ Reply in Support

of Omnibus Rejection Motions (the “Motion for Leave”),2 it is HEREBY ORDERED THAT:

1. The Motion for Leave is GRANTED.

2. The Court will consider the Reply, and the Reply is deemed timely filed.

___________, 2021 Wilmington, Delaware

THE HONORABLE MARY F. WALRATH UNITED STATES BANKRUPTCY JUDGE

1 A complete list of each of the Debtors in these chapter 11 cases may be obtained on the website of the Debtors’ claims and noticing agent at https://www.omniagentsolutions.com/knotel or, alternatively, via the Bankruptcy Court at https://ecf.deb.uscourts.gov/cgi-bin/login.pl with a Public Access to Court Electronic Records (“PACER”) account, which may be obtained at https://pacer.uscourts.gov. The location of Debtor Knotel, Inc.’s principal place of business and the Debtors’ service address in these chapter 11 cases is 5-9 Union Square West, New York, NY 10003.

2 All capitalized terms used herein but not defined are defined in the Motion for Leave.


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